SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported):
NOVEMBER 24, 1996
PANENERGY CORP.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 1-8157 74-2150460
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
5400 Westheimer Court
P.O. Box 1642
Houston, Texas 77251-1642
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 713-627-5400
Item 5. Other Events.
On November 24, 1996, PanEnergy Corp., a Delaware corporation
("PanEnergy"), Duke Power Company, a North Carolina
corporation ("Duke"), and Duke Transaction Corporation, a newly
formed Delaware corporation wholly owned by Duke ("Duke
Transaction"), entered into an Agreement and Plan of Merger (the
"Merger Agreement") providing for a strategic business
combination of PanEnergy and Duke. Pursuant to the Merger
Agreement, Duke Transaction will be merged with and into
PanEnergy (the "Merger") and PanEnergy will become a wholly owned
subsidiary of Duke, which will change its name to "Duke Energy
Corporation." In the Merger, each outstanding share of Common
Stock, par value $1.00 per share, of PanEnergy will be converted
into the right to receive 1.0444 shares of Common Stock, without
par value, of Duke. Based on the number of shares of Common
Stock of PanEnergy outstanding on November 22, 1996, the
shareholders of PanEnergy will own approximately 44% of the
outstanding shares of Common Stock of Duke following the Merger.
Upon completion of the Merger, Richard B. Priory, currently
President and Chief Operating Officer of Duke, will become
Chairman and Chief Executive Officer of Duke Energy Corporation
("Duke Energy") and Paul M. Anderson, currently President and
Chief Executive Officer of PanEnergy, will become President and
Chief Operating Officer of Duke Energy and they will jointly
constitute the Office of the Chief Executive. The Board of
Directors of Duke Energy will be made up of 18 persons, eleven
from Duke and seven from PanEnergy. Duke Energy will be
headquartered in Charlotte, with Houston serving as the center
for PanEnergy's pipeline operations, trading and marketing
services and certain business development activities.
The Merger Agreement has been approved by the Boards of
Directors of PanEnergy and Duke. Consummation of the Merger is
subject to certain closing conditions, including approval by the
shareholders of PanEnergy and the approval by the shareholders of
Duke of an increase in Duke's authorized shares. PanEnergy and Duke
presently intend that the shareholders' meetings to
consider such approval will be held as early as practicable in
1997. Consummation of the Merger is also subject to receipt of a
favorable opinion of counsel that the Merger will qualify as a
tax-free reorganization, the effectiveness of a Registration
Statement to be filed by Duke in respect of its Common Stock to
be issued in the Merger and certain regulatory approvals or
filings, including approvals by or filings with the North
Carolina Utilities Commission, The Public Service Commission of
South Carolina and the Federal Energy Regulatory Commission and
the filing of the requisite notifications with the Federal Trade
Commission and the Department of Justice under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended, and the
expiration of applicable waiting periods thereunder. Duke and
PanEnergy have agreed to certain undertakings and limitations
regarding the conduct of their business prior to the closing of
the transaction, which they anticipate will occur in 1997.
The Merger Agreement provides for termination by either
PanEnergy or Duke if the Merger has not been consummated by June
30, 1998 or if shareholder approval is not obtained by PanEnergy at
its shareholders' meeting or by Duke at its shareholders'
meeting. The Merger Agreement may be terminated by PanEnergy
before the approval of PanEnergy's shareholders is obtained if
the Board of Directors of PanEnergy determines that such
termination is required by reason of an Alternative Proposal (as
defined in the Merger Agreement) being made. The Merger
Agreement may be terminated by Duke if the Board of Directors of
PanEnergy withdraws or modifies in a manner materially adverse to
Duke its approval or recommendation of the Merger Agreement or the Merger
or recommends an Alternative Proposal to PanEnergy's
shareholders. If an Alternative Proposal is made and the Merger
Agreement is terminated (x) pursuant to either of the provisions
described in the two preceding sentences, (y) because shareholder
approval is not obtained by PanEnergy at its shareholders'
meeting (or because such meeting has not been convened prior to
June 30, 1998) or (z) by Duke by reason of a breach of
representation or warranty or covenant, and in any such case the
Alternative Proposal has not been rejected by the Board of
Directors of PanEnergy and withdrawn, then PanEnergy will pay
Duke a $200 million fee.
The description of the Merger Agreement set forth herein
does not purport to be complete and is qualified in its entirety
by the provisions of the Merger Agreement, which is attached
hereto as Exhibit 2(b) and is incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
The following exhibits are filed herewith:
2(a). Agreement and Plan of Merger dated as of November
24, 1996 among Duke Power Company, Duke Transaction Corporation
and PanEnergy Corp.
2(b). Press release dated November 25, 1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
PANENERGY CORP.
Date: December 9, 1996 By: /s/ Carl B. King
Name: Carl B. King
Title: Senior Vice President
and General Counsel
Exhibit Index
Exhibit
Number Description
- --------- -----------
2(a). Agreement and Plan of Merger dated as of
November 24, 1996 among Duke Power Company,
Duke Transaction Corporation and PanEnergy Corp.
2(b). Press release dated November 25, 1996.
EXHIBIT 2(a)
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DUKE POWER COMPANY
AND
DUKE TRANSACTION CORPORATION
AND
PANENERGY CORP
DATED AS OF NOVEMBER 24, 1996
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TABLE OF CONTENTS
PAGE
ARTICLE 1
THE MERGER
1.1. The Merger......................................... 2
1.2. The Closing........................................ 2
1.3. Effective Time..................................... 2
ARTICLE 2
CERTIFICATE OF INCORPORATION AND
BY-LAWS OF THE SURVIVING CORPORATION
2.1. Certificate of Incorporation....................... 2
2.2. By-laws............................................ 3
ARTICLE 3
DIRECTORS AND OFFICERS OF THE
SURVIVING CORPORATION
3.1. Directors.......................................... 3
3.2. Officers........................................... 3
ARTICLE 4
EFFECT OF THE MERGER ON SECURITIES OF
MERGER SUB AND PANENERGY
4.1. Merger Sub Stock................................... 3
4.2. PanEnergy Securities............................... 3
4.3. Exchange of Certificates Representing
PanEnergy Common Stock........................... 5
4.4. Adjustment of Exchange Ratio....................... 8
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PANENERGY
5.1. Organization, Standing and Power................... 9
5.2. Capital Structure.................................. 9
5.3. Authority; No Violations; Consents and Approvals... 11
5.4. SEC Documents...................................... 13
5.5. Information Supplied............................... 14
5.6. Absence of Certain Changes or Events............... 15
5.7. No Undisclosed Material Liabilities................ 16
5.8. No Default......................................... 16
5.9. Compliance with Applicable Laws.................... 16
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5.10. Litigation......................................... 17
5.11. Tax Matters........................................ 17
5.12. Employee Benefits; Labor Matters................... 21
5.13. Environmental Matters.............................. 23
5.14. Insurance.......................................... 26
5.15. Contracts.......................................... 27
5.16. Regulatory Proceedings............................. 27
5.17. Regulation as a Utility............................ 27
5.18. Opinions of Financial Advisors..................... 28
5.19. Vote Required...................................... 28
5.20. Beneficial Ownership of Duke Common Stock.......... 28
5.21. Brokers............................................ 28
5.22. Article Seventh of the Restated Certificate
of Incorporation of PanEnergy and Section 203 of
the DGCL Not Applicable.......................... 28
5.23. Properties......................................... 28
5.24. Easements.......................................... 29
5.25. Futures Trading and Fixed Price Exposure........... 29
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF DUKE
6.1. Organization, Standing and Power................... 30
6.2. Capital Structure.................................. 30
6.3. Authority; No Violations; Consents and Approvals... 32
6.4. SEC Documents...................................... 34
6.5. Information Supplied............................... 35
6.6. Absence of Certain Changes or Events............... 36
6.7. No Undisclosed Material Liabilities................ 36
6.8. No Default......................................... 37
6.9. Compliance with Applicable Laws.................... 37
6.10. Litigation......................................... 37
6.11. Tax Matters........................................ 38
6.12. Employee Benefits; Labor Matters................... 42
6.13. Environmental Matters.............................. 43
6.14. Insurance.......................................... 44
6.15. Contracts.......................................... 45
6.16. Regulatory Proceedings............................. 45
6.17. Regulation as a Utility............................ 45
6.18. Opinions of Financial Advisors..................... 46
6.19. Vote Required...................................... 46
6.20. Beneficial Ownership of PanEnergy Common Stock..... 46
6.21. Brokers............................................ 46
6.22. Properties......................................... 46
6.23. Franchises, Licenses, Etc.......................... 47
6.24. Nuclear Operations................................. 48
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6.25. Duke/Louis Dreyfus L.L.C. ("D/LD") Obligations..... 48
6.26. Representations with Respect to Merger Sub......... 48
ARTICLE 7
CONDUCT OF BUSINESS PENDING THE MERGER
7.1. Conduct of Business of PanEnergy Pending the Merger 49
(a) Ordinary Course of Business................... 49
(b) Dividends; Changes in Stock................... 50
(c) Issuance of Securities........................ 50
(d) Capital Expenditures.......................... 50
(e) No Acquisitions............................... 51
(f) No Dispositions............................... 51
(g) No Dissolution, Etc........................... 51
(h) Certain Employee Matters...................... 51
(i) Indebtedness; Leases.......................... 52
(j) Governing Documents........................... 53
(k) Accounting.................................... 53
(l) Rate Matters.................................. 53
(m) Contracts..................................... 53
(n) Insurance..................................... 53
(o) Permits....................................... 53
(p) Discharge of Liabilities...................... 54
(q) 1935 Act...................................... 54
(r) Tax Matters................................... 54
(s) Tax Status.................................... 54
(t) Other Actions................................. 54
(u) Agreements.................................... 54
7.2. Conduct of Business of Duke Pending the Merger..... 54
(a) Ordinary Course of Business................... 55
(b) Dividends; Changes in Stock................... 55
(c) Issuance of Securities........................ 56
(d) Capital Expenditures.......................... 56
(e) No Acquisitions............................... 56
(f) No Dispositions............................... 57
(g) No Dissolution, Etc........................... 57
(h) Certain Employee Matters...................... 57
(i) Indebtedness; Leases.......................... 58
(j) Governing Documents........................... 58
(k) Accounting.................................... 58
(l) Rate Matters.................................. 59
(m) Contracts..................................... 59
(n) Insurance..................................... 59
(o) Permits....................................... 59
(p) Discharge of Liabilities...................... 59
(q) 1935 Act...................................... 60
(r) Tax Matters................................... 60
(s) Tax Status.................................... 60
(t) Other Actions................................. 60
(u) Agreements.................................... 60
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7.3. Transition Committee............................... 60
ARTICLE 8
COVENANTS
8.1. Alternative Proposals.............................. 60
8.2. Preparation of S-4 and the Joint Proxy Statement... 62
8.3. Letter of PanEnergy's Accountants.................. 62
8.4. Letter of Duke's Accountants....................... 62
8.5. Access to Information.............................. 63
8.6. PanEnergy Stockholders' Meeting.................... 63
8.7. Duke Shareholders' Meeting......................... 63
8.8. Regulatory and Other Approvals..................... 64
(a) HSR Act....................................... 64
(b) Other Regulatory Approvals.................... 64
(c) Other Approvals............................... 64
8.9. Agreements of Others............................... 64
8.10. Authorization for Shares and
Stock Exchange Listings.......................... 65
8.11. Indemnification; Directors' and Officers' Insurance 65
8.12. Public Announcements............................... 66
8.13. Other Actions...................................... 66
8.14. Cooperation; Notification.......................... 66
8.15. Governance......................................... 67
(a) Board of Directors of Duke.................... 67
(b) Committees of the Board of Directors of Duke.. 67
(c) Officers of Duke.............................. 67
(d) Office of the Chief Executive;
Executive Committee......................... 67
(e) Name; Corporate Headquarters.................. 68
8.16. Employment Agreements.............................. 68
8.17. Expenses........................................... 68
8.18. Pooling............................................ 68
8.19. Tax Matters........................................ 69
8.20. Employee Benefit Plans............................. 69
ARTICLE 9
CONDITIONS
9.1. Conditions to Each Party's Obligation
to Effect the Merger............................. 72
9.2. Conditions to Obligation of PanEnergy
to Effect the Merger............................. 73
9.3. Conditions to Obligation of Duke and
Merger Sub to Effect the Merger.................. 74
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ARTICLE 10
TERMINATION
10.1. Termination by Mutual Consent...................... 75
10.2. Termination by Either Duke or PanEnergy............ 75
10.3. Termination by PanEnergy........................... 76
10.4. Termination by Duke................................ 76
10.5. Effect of Termination and Abandonment.............. 76
10.6. Extension, Waiver.................................. 77
ARTICLE 11
GENERAL PROVISIONS
11.1. Nonsurvival of Representations,
Warranties and Agreements........................ 78
11.2. Notices............................................ 78
11.3. Assignment; Binding Effect......................... 79
11.4. Entire Agreement................................... 79
11.5. Amendment.......................................... 80
11.6. Governing Law...................................... 80
11.7. Counterparts....................................... 80
11.8. Headings........................................... 80
11.9. Interpretation..................................... 80
11.10. Waivers............................................ 80
11.11. Severability....................................... 81
11.12. Enforcement of Agreement........................... 81
11.13. Further Assurances................................. 81
11.14. Waiver of Jury Trial............................... 81
11.15. Certain Definitions................................ 82
EXHIBIT A FORM OF AFFILIATE LETTER
EXHIBIT B-1 FORM OF EMPLOYMENT AGREEMENT FOR PAUL M. ANDERSON
OF PANENERGY
EXHIBIT B-2 FORM OF EMPLOYMENT AGREEMENT FOR JAMES T. HACKETT
OF PANENERGY
EXHIBIT B-3 FORM OF EMPLOYMENT AGREEMENT FOR FRED J. FOWLER
OF PANENERGY
EXHIBIT B-4 FORM OF EMPLOYMENT AGREEMENT FOR L.B. GATEWOOD
OF PANENERGY
EXHIBIT B-5 FORM OF EMPLOYMENT AGREEMENT FOR JIM W. MOGG
OF PANENERGY
EXHIBIT B-6 FORM OF EMPLOYMENT AGREEMENT FOR BRUCE WILLIAMSON
OF PANENERGY
EXHIBIT C-1 FORM OF EMPLOYMENT AGREEMENT FOR RICHARD B. PRIORY
OF DUKE
EXHIBIT C-2 FORM OF EMPLOYMENT AGREEMENT FOR WILLIAM A. COLEY
OF DUKE
EXHIBIT C-3 FORM OF EMPLOYMENT AGREEMENT FOR RICHARD J. OSBORNE
OF DUKE
EXHIBIT C-4 FORM OF EMPLOYMENT AGREEMENT FOR RUTH G. SHAW
OF DUKE
EXHIBIT C-5 FORM OF EMPLOYMENT AGREEMENT FOR MICHAEL S. TUCKMAN
OF DUKE
EXHIBIT C-6 FORM OF EMPLOYMENT AGREEMENT FOR DAVID L. HAUSER
OF DUKE
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INDEX OF DEFINED TERMS
"1935 Act".....................................................27
"Agreement".....................................................1
"Alternative Proposal".........................................61
"Atomic Energy Act"............................................34
"Cash Balance Conversion"......................................70
"Certificate"...................................................4
"Closing Agreement"............................................19
"Closing Date"..................................................2
"Closing".......................................................2
"Code"..........................................................1
"Confidentiality Agreement"....................................63
"Continuation Period"..........................................69
"Convertible Notes".............................................5
"D/LD".........................................................48
"D&O Insurance"................................................65
"Delaware Courts"..............................................80
"DGCL"..........................................................2
"Duke 1995 Margin Threshold"...................................45
"Duke 1995 Revenue Threshold"..................................45
"Duke Benefit Plans"...........................................42
"Duke Capital Budget"..........................................55
"Duke Common Stock".............................................3
"Duke Director"................................................67
"Duke Disclosure Schedule".....................................30
"Duke Generating Stations".....................................47
"Duke Litigation"..............................................38
"Duke Orders"..................................................38
"Duke Permits".................................................37
"Duke Personnel"...............................................42
"Duke Preference Stock"........................................31
"Duke Preferred Stock A".......................................31
"Duke Preferred Stock".........................................30
"Duke Required Consents".......................................33
"Duke Required Statutory Approvals"............................34
"Duke SEC Documents"...........................................35
"Duke Stock Repurchase Program"................................36
"Duke Shareholders' Meeting"...................................13
"Duke Stock Plans".............................................31
"Duke Vote Matter".............................................32
"Duke"..........................................................1
"Easements"....................................................29
"Effective Time"................................................2
"Environmental Claims".........................................23
"Environmental Laws"...........................................23
"Environmental Permits"........................................25
"Environmental Subsidiary".....................................24
"ERISA"........................................................22
"Excess Shares Proceeds"........................................7
"Excess Shares".................................................7
"Exchange Act".................................................13
"Exchange Agent"................................................5
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"Exchange Fund".................................................5
"Exchange Ratio"................................................3
"FERC".........................................................13
"Final Order"..................................................73
"GAAP"..........................................................1
"Governmental Entity"..........................................13
"Hazardous Materials"..........................................24
"HSR Act"......................................................13
"IRS"..........................................................19
"Joint Proxy Statement"........................................13
"Joint Venture"................................................82
"Material Adverse Effect".......................................9
"Maximum Premium"..............................................65
"Merger Sub"....................................................1
"Merger"........................................................1
"Mobil Joint Venture"..........................................30
"Mortgage".....................................................46
"NCBCA"........................................................32
"NCUC".........................................................34
"Net PanEnergy Position".......................................29
"NP&L".........................................................45
"Nuclear Stations".............................................48
"NYSE"..........................................................7
"PanEnergy Benefit Plans"......................................22
"PanEnergy Business Unit"......................................27
"PanEnergy Business Unit's 1995 Margin Threshold"..............27
"PanEnergy Business Unit's 1995 Revenue Threshold".............27
"PanEnergy Common Stock"........................................3
"PanEnergy Director"...........................................67
"PanEnergy Disclosure Schedule".................................9
"PanEnergy DRIP"...............................................10
"PanEnergy Employees"..........................................69
"PanEnergy Litigation".........................................17
"PanEnergy Option"..............................................4
"PanEnergy Options".............................................4
"PanEnergy Orders".............................................17
"PanEnergy Permits"............................................16
"PanEnergy Personnel"..........................................21
"PanEnergy Pipeline Assets"....................................29
"PanEnergy Preferred Stock".....................................9
"PanEnergy Required Consents"..................................12
"PanEnergy Restricted Stock"....................................4
"PanEnergy SEC Documents"......................................14
"PanEnergy Stock Option Plan"...................................4
"PanEnergy Stock Option Plans"..................................4
"PanEnergy Stock Plans"........................................10
"PanEnergy Stockholders' Approval".............................11
"PanEnergy Stockholders' Meeting"..............................13
"PanEnergy".....................................................1
"Peat Marwick".................................................62
"Power Act"....................................................13
"PSCSC"........................................................34
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"Record Date"..................................................50
"Release"......................................................24
"Rule 145 Affiliates"..........................................65
"S-4"..........................................................14
"Securities Act"................................................7
"Significant Subsidiary".......................................82
"Stock Benefit Plans"..........................................71
"Subsidiary"...................................................82
"Subsidiary Capital Expenditures"..............................56
"Surviving Corporation".........................................2
"Tax Return"...................................................17
"Tax Ruling"...................................................19
"Taxes"........................................................17
"Transition Committee".........................................60
"Voting Debt"..................................................10
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
November 24, 1996, by and among Duke Power Company, a North
Carolina corporation ("Duke"), Duke Transaction Corporation, a
Delaware corporation and a wholly-owned subsidiary of Duke
("Merger Sub"), and PanEnergy Corp, a Delaware corporation
("PanEnergy").
RECITALS
WHEREAS, Duke and PanEnergy have each determined to engage
in a strategic business combination with the other;
WHEREAS, in furtherance thereof, the respective Boards of
Directors of Duke and PanEnergy have approved the merger (the
"Merger") of Merger Sub with and into PanEnergy whereby the
Common Stock of PanEnergy will be converted into and exchanged
for Common Stock of Duke and PanEnergy will become a wholly-owned
subsidiary of Duke, all pursuant to the terms and conditions set
forth in this Agreement;
WHEREAS, for federal income tax purposes, it is intended
that the Merger will be a reorganization of the type described in
Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), and the regulations thereunder;
WHEREAS, for accounting purposes, it is intended that the
transaction contemplated hereby shall be accounted for as a
pooling of interests under United States generally accepted
accounting principles ("GAAP");
WHEREAS, Duke and PanEnergy have each received fairness
opinions relating to the transactions contemplated hereby (as
more fully described herein); and
WHEREAS, Duke, Merger Sub and PanEnergy desire to make
certain representations, warranties and agreements in connection
with the Merger.
NOW, THEREFORE, in consideration of the foregoing, the
parties hereto hereby agree as follows:
<PAGE>
ARTICLE 1
THE MERGER
1.1. The Merger. Subject to the terms and conditions of
this Agreement, at the Effective Time (as defined in Section
1.3), Merger Sub shall be merged with and into PanEnergy in
accordance with this Agreement, and the separate corporate
existence of Merger Sub shall thereupon cease. PanEnergy shall
be the surviving corporation in the Merger (sometimes hereinafter
referred to as the "Surviving Corporation"). The Merger shall
have the effects specified in the Delaware General Corporation
Law (the "DGCL").
1.2. The Closing. Subject to the terms and conditions of
this Agreement, the closing of the Merger (the "Closing") shall
take place (a) at the offices of Dewey Ballantine, 1301 Avenue of
the Americas, New York, New York, at 10:00 a.m., local time, on
the second business day immediately following the day on which
the last to be fulfilled or waived of the conditions set forth in
Article 9 shall be fulfilled or waived in accordance herewith or
(b) at such other time, date or place as Duke and PanEnergy may
agree. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".
1.3. Effective Time. If all the conditions to the Merger
set forth in Article 9 shall have been fulfilled or waived in
accordance herewith and this Agreement shall not have been
terminated as provided in Article 10, the parties hereto shall
cause a Certificate of Merger meeting the requirements of Section
251 of the DGCL to be properly executed and filed in accordance
with such Section on the Closing Date. The Merger shall become
effective at the time of filing of the Certificate of Merger with
the Secretary of State of the State of Delaware in accordance
with the DGCL or at such later time which the parties hereto
shall have agreed upon and designated in such filing as the
effective time of the Merger (the "Effective Time").
ARTICLE 2
CERTIFICATE OF INCORPORATION AND
BY-LAWS OF THE SURVIVING CORPORATION
2.1. Certificate of Incorporation. The Certificate of
Incorporation of Merger Sub in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation of the
Surviving Corporation after the Effective Time (except that
Article 1 of such Certificate of Incorporation shall be amended
as of the Effective Time to read as follows: "The name of the
2
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Corporation is PanEnergy Corp."), until duly amended in
accordance with applicable law.
2.2. By-laws. The By-laws of Merger Sub in effect
immediately prior to the Effective Time shall be the By-laws of
the Surviving Corporation, until duly amended in accordance with
applicable law.
ARTICLE 3
DIRECTORS AND OFFICERS OF THE
SURVIVING CORPORATION
3.1. Directors. The directors of the Surviving Corporation
at the Effective Time shall be the directors of PanEnergy
immediately prior to the Effective Time together with such other
persons as Duke shall designate and until their successors are
duly appointed or elected in accordance with applicable law.
3.2. Officers. The officers of the Surviving Corporation at
the Effective Time shall be the officers of PanEnergy immediately
prior to the Effective Time together with such other persons as
Duke shall designate and until their successors are duly
appointed or elected in accordance with applicable law.
ARTICLE 4
EFFECT OF THE MERGER ON SECURITIES OF
MERGER SUB AND PANENERGY
4.1. Merger Sub Stock. At the Effective Time, each share of
Common Stock,$1.00 par value, of Merger Sub outstanding
immediately prior to the Effective Time shall be converted into
and exchanged for one validly issued, fully paid and
non-assessable share of Common Stock, $1.00 par value, of the
Surviving Corporation.
4.2. PanEnergy Securities. (a) At the Effective Time, each
share of Common Stock, par value $1.00 per share (the "PanEnergy
Common Stock"), of PanEnergy issued and outstanding immediately
prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be
converted into the right to receive 1.0444 shares of Common
Stock, without par value (the "Duke Common Stock"), of Duke (the
"Exchange Ratio").
(b) As a result of the Merger and without any action on the
part of the holder thereof, at the Effective Time all shares of
PanEnergy Common Stock shall cease to be
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outstanding and shall be cancelled and retired and shall cease to
exist, and each holder of shares of PanEnergy Common Stock shall
thereafter cease to have any rights with respect to such shares
of PanEnergy Common Stock, except the right to receive, without
interest, the Duke Common Stock and cash for fractional shares of
Duke Common Stock in accordance with Sections 4.3(b) and 4.3(e)
upon the surrender of a certificate (a "Certificate")
representing such shares of PanEnergy Common Stock.
(c) Each share of PanEnergy Common Stock issued and held in
PanEnergy's treasury or by any Subsidiary (as defined in Section
11.15) of PanEnergy at the Effective Time shall, by virtue of the
Merger, cease to be outstanding and shall be cancelled and
retired without payment of any consideration therefor.
(d) All options (individually, a "PanEnergy Option" and
collectively, the "PanEnergy Options") outstanding at the
Effective Time under any PanEnergy stock option plan
(individually, a "PanEnergy Stock Option Plan" and collectively,
the "PanEnergy Stock Option Plans") shall remain outstanding
following the Effective Time. At the Effective Time, such
PanEnergy Options shall, by virtue of the Merger and without any
further action on the part of PanEnergy or the holder of any such
PanEnergy Options, be assumed by Duke in such manner that Duke
(i) is a corporation "assuming a stock option in a transaction to
which Section 424(a) applied" within the meaning of Section 424
of the Code, or (ii) to the extent that Section 424 of the Code
does not apply to any such PanEnergy Options, would be such a
corporation were Section 424 of the Code applicable to such
PanEnergy Option. Each PanEnergy Option assumed by Duke shall be
exercisable upon the same terms and conditions as under the
applicable PanEnergy Stock Option Plan and the applicable option
agreement issued thereunder, except that (i) each such PanEnergy
Option shall be exercisable for that whole number of shares of
Duke Common Stock (rounded down to the nearest whole share) into
which the number of shares of PanEnergy Common Stock subject to
such PanEnergy Option immediately prior to the Effective Time
would be converted under this Section 4.2, and (ii) the option
price per share of Duke Common Stock shall be an amount equal to
the option price per share of PanEnergy Common Stock subject to
such PanEnergy Option in effect immediately prior to the
Effective Time divided by the Exchange Ratio (the option price
per share, as so determined, being rounded up to the nearest full
cent). No payment shall be made for fractional interests. Each
award of restricted PanEnergy Common Stock outstanding at the
Effective Time that is not vested before or at the Effective Time
(the "PanEnergy Restricted Stock") shall remain outstanding
following the Effective Time in accordance with
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the terms of any such award. At the Effective Time, such
PanEnergy Restricted Stock shall, by virtue of the Merger and
without any further action on the part of PanEnergy or the holder
of any such PanEnergy Restricted Stock, be assumed by Duke and
shall be adjusted to constitute an award of restricted Duke
Common Stock, upon the same terms and conditions as were
applicable under such PanEnergy Restricted Stock, except that it
shall consist of such number of shares of Duke Common Stock into
which such PanEnergy Restricted Stock is converted pursuant to
the Merger. At the Effective Time, Duke shall assume each
agreement relating to PanEnergy Stock Options and PanEnergy
Restricted Stock, each as amended pursuant to the foregoing. As
soon as practicable after the Effective Time, Duke shall deliver
to the holders of PanEnergy Stock Options and PanEnergy
Restricted Stock appropriate documentation setting forth such
holders' rights pursuant to the amended terms thereof, each as
assumed by Duke.
(e) The 9% Convertible Notes of PanEnergy due 1997-2004 (the
"Convertible Notes") shall remain outstanding following the
Effective Time, unless theretofore redeemed. At the Effective
Time, PanEnergy shall take such action as may be necessary so
that, after the Effective Time, the Convertible Notes outstanding
at the Effective Time, if any, shall be convertible in accordance
with their terms only for Duke Common Stock. Duke shall authorize
and reserve for issuance, or otherwise provide, a sufficient
number of shares of Duke Common Stock for delivery upon such
conversion of the then outstanding Convertible Notes.
4.3. Exchange of Certificates Representing PanEnergy Common
Stock. (a) As of the Effective Time, Duke shall deposit, or shall
cause to be deposited, with an exchange agent selected by Duke,
which shall be reasonably satisfactory to PanEnergy (the
"Exchange Agent"), for the benefit of the holders of shares of
PanEnergy Common Stock, for exchange in accordance with this
Article 4, certificates representing the shares of Duke Common
Stock (such certificates for shares of Duke Common Stock,
together with any dividends or distributions paid with respect
thereto relating to record dates for such dividends or
distributions after the Effective Time, being hereinafter
referred to as the "Exchange Fund") to be issued pursuant to
Section 4.2 and paid pursuant to this Section 4.3 in exchange for
outstanding shares of PanEnergy Common Stock.
(b) Promptly after the Effective Time, Duke shall cause the
Exchange Agent to mail to each holder of record of shares of
PanEnergy Common Stock (i) a letter of transmittal which shall
specify that delivery shall be effected, and risk of loss and
title to such shares of PanEnergy Common Stock shall pass, only
upon delivery of the
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Certificates representing such shares to the Exchange Agent and
which shall be in such form and have such other provisions as
Duke may reasonably specify and (ii) instructions for use in
effecting the surrender of such Certificates in exchange for
certificates representing shares of Duke Common Stock and cash in
lieu of fractional shares. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such letter of
transmittal, duly executed and completed in accordance with the
instructions thereto, the holder of the shares represented by
such Certificate shall be entitled to receive in exchange
therefor (x) a certificate representing that number of whole
shares of Duke Common Stock and (y) a check representing the
amount of cash in lieu of fractional shares, if any, and unpaid
dividends and distributions, if any, which such holder has the
right to receive in respect of the Certificate surrendered
pursuant to the provisions of this Article 4, less any required
withholding tax, and the shares represented by the Certificate so
surrendered shall forthwith be cancelled. No interest will be
paid or accrued on the cash in lieu of fractional shares and
unpaid dividends and distributions, if any, payable to holders of
shares of PanEnergy Common Stock. In the event of a transfer of
ownership of PanEnergy Common Stock which is not registered in
the transfer records of PanEnergy, a certificate representing the
proper number of shares of Duke Common Stock, together with a
check for the cash to be paid in lieu of fractional shares, may
be issued to such a transferee if the Certificate representing
such PanEnergy Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such
transfer and to evidence that any applicable stock transfer taxes
have been paid.
(c) Notwithstanding any other provisions of this Agreement,
no dividends or other distributions declared after the Effective
Time on Duke Common Stock shall be paid with respect to any
shares of PanEnergy Common Stock represented by a Certificate to
the holder of such Certificate until such Certificate is
surrendered for exchange as provided herein. Dividends and
distributions declared after the Effective Date in respect of
shares of Duke Common Stock that would be delivered by the
Exchange Agent in exchange for shares of PanEnergy Common Stock
upon surrender of the Certificates therefor shall be deposited
with the Exchange Agent for the benefit of the holders of such
Certificates until the unclaimed portion of the Exchange Fund is
returned to Duke in accordance with Section 4.3(f). Subject to
the effect of applicable laws, following surrender of any such
Certificate, there shall be paid to the holder of the
certificates representing whole shares of Duke Common Stock
issued in exchange therefor, without interest, (i) at the time of
such surrender, the amount of
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dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares
of Duke Common Stock, less the amount of any withholding taxes
which may be required thereon, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with
a record date after the Effective Time but prior to surrender and
a payment date subsequent to surrender payable with respect to
such whole shares of Duke Common Stock, less the amount of any
withholding taxes which may be required thereon.
(d) At or after the Effective Time, there shall be no
transfers on the stock transfer books of PanEnergy of the shares
of PanEnergy Common Stock which were outstanding immediately
prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they
shall be cancelled and exchanged for certificates for shares of
Duke Common Stock and cash in lieu of fractional shares, if any,
and unpaid dividends and distributions, if any, which such holder
has the right to receive in respect of the Certificates
surrendered in accordance with the procedures set forth in this
Article 4. Certificates surrendered for exchange by any person
constituting an "affiliate" of PanEnergy for purposes of Rule
145(c) under the Securities Act of 1933, as amended (the
"Securities Act"), shall not be exchanged until Duke has received
a written agreement from such person as provided in Section 8.9.
(e) No fractional shares of Duke Common Stock shall be
issued pursuant hereto. As promptly as possible following the
Effective Time, the Exchange Agent shall determine the excess of
(i) the number of full shares of Duke Common Stock delivered to
the Exchange Agent by Duke pursuant to Section 4.3(a) over (ii)
the number of full shares of Duke Common Stock to be distributed
to the holders of PanEnergy Common Stock pursuant to Section
4.3(b) (such excess being herein referred to as the "Excess
Shares"). As soon after the Effective Date as practicable, the
Exchange Agent, as agent for the holders of PanEnergy Common
Stock, shall sell the Excess Shares at the then prevailing prices
on the New York Stock Exchange (the "NYSE") through one or more
member firms of the NYSE in round lots to the extent practicable.
Duke shall pay, or cause to be paid, all commissions, transfer
taxes and other out-of-pocket transactions costs, including the
expenses and compensation of the Exchange Agent incurred in
connection with such sale of the Excess Shares. Until the
proceeds of such sale or sales have been distributed to the
holders of PanEnergy Common Stock, the Exchange Agent shall hold
such proceeds in trust for the holders of PanEnergy Common Stock.
The Exchange Agent shall determine the portion of the proceeds
from the sale of the Excess Shares (the "Excess Shares
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Proceeds") to which each holder of PanEnergy Common Stock is
entitled, if any, by multiplying the amount of the Excess Shares
Proceeds by a fraction, the numerator of which is the amount of
the fractional share interest to which such holder of PanEnergy
Common Stock is entitled, and the denominator of which is the
aggregate amount of fractional share interests to which all of
the holders of PanEnergy Common Stock are entitled. As soon as
practicable after the sale of the Excess Shares and the
determination of the amount of cash, if any, to be paid to each
holder of PanEnergy Common Stock in lieu of any fractional share
interests, the Exchange Agent shall distribute such amounts to
the holders of PanEnergy Common Stock entitled thereto and who
have theretofore delivered Certificates for PanEnergy Common
Stock pursuant to this Article 4.
(f) Any portion of the Exchange Fund (including the
proceeds of any investments thereof and any shares of Duke Common
Stock) that remains unclaimed by the former stockholders of
PanEnergy one year after the Effective Time shall be delivered to
Duke. Any former stockholders of PanEnergy who have not
theretofore complied with this Article 4 shall thereafter look
only to Duke for payment of their shares of Duke Common Stock,
cash in lieu of fractional shares and unpaid dividends and
distributions on the Duke Common Stock deliverable in respect of
each share of PanEnergy Common Stock such stockholder holds as
determined pursuant to this Agreement, in each case, without any
interest thereon.
(g) None of Duke, PanEnergy, the Surviving Corporation, the
Exchange Agent or any other person shall be liable to any former
holder of shares of PanEnergy Common Stock for any amount
properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(h) In the event any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact
by the person claiming such Certificate to be lost, stolen or
destroyed and, if required by Duke, the posting by such person of
a bond in such reasonable amount as Duke may direct as indemnity
against any claim that may be made against it or the Surviving
Corporation with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed
Certificate the shares of Duke Common Stock and cash in lieu of
fractional shares, and unpaid dividends and distributions on
shares of Duke Common Stock as provided in Section 4.3(c),
deliverable in respect thereof pursuant to this Agreement.
4.4. Adjustment of Exchange Ratio. In the event that,
subsequent to the date of this Agreement but prior to
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the Effective Time, the outstanding shares of Duke Common Stock
or PanEnergy Common Stock, respectively, shall have been changed
into a different number of shares or a different class as a
result of a stock split, reverse stock split, stock dividend,
subdivision, reclassification, split, combination, exchange,
recapitalization or other similar transaction, the Exchange Ratio
shall be appropriately adjusted.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PANENERGY
Except as set forth in the disclosure schedule dated as of
the date hereof and signed by an authorized officer of PanEnergy
and delivered to Duke by or on behalf of PanEnergy on or prior to
the date hereof (the "PanEnergy Disclosure Schedule") (each of
which exceptions shall specifically identify the relevant Section
hereof to which it relates), PanEnergy represents and warrants to
Duke as follows:
5.1. Organization, Standing and Power. Each of PanEnergy
and its Subsidiaries is a corporation or partnership duly
organized, validly existing and in good standing under the laws
of its state of incorporation or organization, has all requisite
power and authority to own, lease and operate its assets and
properties and to carry on its business as now being conducted,
and is duly qualified and in good standing to do business in each
jurisdiction in which the business it is conducting, or the
operation, ownership or leasing of its assets and properties,
makes such qualification necessary, other than in such
jurisdictions where the failure so to qualify would not have a
Material Adverse Effect on PanEnergy (as hereinafter defined).
As used in this Agreement a "Material Adverse Effect" shall mean,
in respect of PanEnergy, any effect or change that is, or is
reasonably likely to be, materially adverse to the business,
operations, assets, financial condition or results of operations
of PanEnergy and its Subsidiaries taken as a whole. PanEnergy
has heretofore made available to Duke complete and correct copies
of its Restated Certificate of Incorporation and By-laws and the
certificates of incorporation and by-laws (or similar governing
documents) of each of its Subsidiaries, in each case as in effect
at the date hereof.
5.2. Capital Structure. (a) The authorized capital stock of
PanEnergy consists of 300,000,000 shares of PanEnergy Common
Stock and 3,000,000 shares of preferred stock, par value $1.00
per share (the "PanEnergy Preferred Stock"). At the close of
business on October 31, 1996:
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(i) 151,066,410 shares of PanEnergy Common Stock and no shares of
PanEnergy Preferred Stock were issued and outstanding; (ii)
7,015,366 shares of PanEnergy Common Stock were reserved for
issuance pursuant to PanEnergy's stock option plans and programs
(collectively, the "PanEnergy Stock Plans"); (iii) no shares of
PanEnergy Common Stock were held by PanEnergy in its treasury or
by any Subsidiary of PanEnergy, except for shares of PanEnergy
Common Stock held in treasury for issuance pursuant to
PanEnergy's Dividend Reinvestment and Stock Purchase Plan
(together with any successor plan, the "PanEnergy DRIP"); and
(iv) no bonds, debentures, notes or other indebtedness having the
right to vote (or convertible into securities having the right to
vote on any matters on which its stockholders may vote) ("Voting
Debt") were issued or outstanding, except for the Convertible
Notes. Since October 31, 1996, except for changes resulting from
the exercise of stock options granted prior to the date hereof
pursuant to the PanEnergy Stock Plans, changes resulting from
issuances of PanEnergy Common Stock pursuant to the PanEnergy
DRIP and changes resulting from the conversion of Convertible
Notes (which exercises of stock options, issuances of PanEnergy
Common Stock and conversions of Convertible Notes are set forth,
as of November 15, 1996, in Section 5.2(a) of the PanEnergy
Disclosure Schedule), PanEnergy has not issued: (A) any
additional shares of capital stock, Voting Debt or other voting
securities or (B) any securities convertible into or exchangeable
for shares of capital stock, any Voting Debt or other voting
securities. The authorized capital stock of each wholly-owned
Subsidiary of PanEnergy and the percentage ownership interest of
PanEnergy and any other Subsidiary or Subsidiaries of PanEnergy
in any Subsidiary that is not wholly-owned, in each case as of
the date hereof, are set forth in Section 5.2(a) of the PanEnergy
Disclosure Schedule. All outstanding shares of PanEnergy Common
Stock and all outstanding shares of the capital stock of each
Subsidiary of PanEnergy are validly issued, fully paid and
nonassessable and are not subject to any preemptive rights.
Except as set forth in Section 5.2(a) of the PanEnergy Disclosure
Schedule, all outstanding shares of the capital stock of the
Subsidiaries of PanEnergy are owned by PanEnergy or wholly-owned
Subsidiaries of PanEnergy, free and clear of all liens, charges,
encumbrances, claims, security interests, equities and options of
any nature whatsoever. Except as set forth in Section 5.2(a) of
the PanEnergy Disclosure Schedule and except for the conversion
rights of the holders of the Convertible Notes, as of the date
hereof, there are no outstanding subscriptions, options,
warrants, calls, rights, commitments or agreements to which
PanEnergy or any Subsidiary of PanEnergy is a party or by which
PanEnergy or any Subsidiary of PanEnergy is bound, obligating
PanEnergy or any Subsidiary of PanEnergy to issue, deliver, sell,
purchase, redeem or acquire, or
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<PAGE>
cause to be issued, delivered, sold, purchased, redeemed or
acquired, any additional shares of capital stock, any Voting Debt
or other voting securities of PanEnergy or of any Subsidiary of
PanEnergy, or obligating PanEnergy or any Subsidiary of PanEnergy
to grant, extend or enter into any such option, warrant, call,
right, commitment or agreement. There are no stockholder
agreements, voting trusts, proxies or other agreements or
understandings to which PanEnergy or any Subsidiary of PanEnergy
is a party or by which PanEnergy or any Subsidiary of PanEnergy
is bound relating to the voting of any shares of the capital
stock of PanEnergy or any Subsidiary of PanEnergy by any person
other than PanEnergy or a Subsidiary of PanEnergy.
(b) Section 5.2(b) of the PanEnergy Disclosure Schedule
lists as of the date hereof all Subsidiaries of PanEnergy,
including the name of each Subsidiary, the state or jurisdiction
of its incorporation or organization, the states or jurisdictions
in which they are qualified or licensed to do business and
PanEnergy's interest therein.
(c) Section 5.2(c) of the PanEnergy Disclosure Schedule
lists as of the date hereof all Joint Ventures (as defined in
Section 11.15) of PanEnergy, including the name of each such
entity, the state or jurisdiction of its organization, the states
or jurisdictions in which they are qualified or licensed to do
business and PanEnergy's interest therein.
(d) The Shareholder Rights Protection Agreement dated as of
March 11, 1986, as amended, between PanEnergy and Continental
Stock Transfer & Trust Company, as successor Rights Agent, has
been terminated or has expired without any rights becoming
exercisable thereunder, and PanEnergy has not adopted any other
shareholder rights plan and will not do so prior to the Effective
Time.
5.3. Authority; No Violations; Consents and Approvals. (a)
The Board of Directors of PanEnergy has approved this Agreement,
the Merger and the other transactions contemplated hereby by the
unanimous vote of all of the directors present and has declared
this Agreement, the Merger and the other transactions
contemplated hereby to be in the best interests of the
stockholders of PanEnergy. The directors voting thereon have
advised PanEnergy and Duke that they intend to vote or cause to
be voted all of the shares of PanEnergy Common Stock beneficially
owned by them in favor of approval of the Merger and this
Agreement. PanEnergy has all requisite corporate power and
authority to enter into this Agreement and, subject to adoption
of this Agreement by the stockholders of PanEnergy in accordance
with the DGCL (the "PanEnergy Stockholders' Approval") and due
and timely
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receipt of all regulatory consents and approvals set forth in
Section 5.3(c) of the PanEnergy Disclosure Schedule, to
consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of PanEnergy, subject,
with respect to consummation of the Merger, to the PanEnergy
Stockholders' Approval and due and timely receipt of the
regulatory consents and approvals specified above. This
Agreement has been duly executed and delivered by PanEnergy and,
subject, with respect to consummation of the Merger, to the
PanEnergy Stockholders' Approval and due and timely receipt of
the regulatory consents and approvals specified above, and
assuming this Agreement constitutes the valid and binding
obligation of Duke and Merger Sub, constitutes a valid and
binding obligation of PanEnergy enforceable in accordance with
its terms, subject, as to enforceability, to bankruptcy,
insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to
general principles of equity.
(b) The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not, conflict with, or
result in any violation of, or default (with or without notice or
lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to
the loss of a material benefit under, or result in the creation
of any lien, security interest, charge or encumbrance upon any of
the properties or assets of PanEnergy, any of its Subsidiaries
or, to PanEnergy's knowledge, any of its Joint Ventures under,
any provision of (A) the Restated Certificate of Incorporation or
By-Laws of PanEnergy or the comparable charter or organizational
documents of any of its Subsidiaries or, to PanEnergy's
knowledge, any of its Joint Ventures, (B) subject to obtaining
the third-party consents set forth in Section 5.3(b) of the
PanEnergy Disclosure Schedule (the "PanEnergy Required
Consents"), any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to PanEnergy, any of
its Subsidiaries or, to PanEnergy's knowledge, any of its Joint
Ventures or any of their respective properties or assets or (C)
assuming the consents, approvals, authorizations or permits and
filings or notifications referred to in Section 5.3(c) are duly
and timely obtained or made and the PanEnergy Stockholders'
Approval has been obtained, any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to PanEnergy, any
of its Subsidiaries or, to PanEnergy's knowledge, any of its
Joint Ventures or any of their respective properties or assets,
other than, in the
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case of clause (B) or (C), any such conflicts, violations,
defaults, rights, liens, security interests, charges or
encumbrances that, individually or in the aggregate, would not
have a Material Adverse Effect on PanEnergy, materially impair
the ability of PanEnergy to perform its obligations hereunder or
prevent the consummation of any of the transactions contemplated
hereby.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from any
court, governmental, regulatory or administrative agency or
commission or other governmental authority or instrumentality,
domestic or foreign (a "Governmental Entity"), is required by or
with respect to PanEnergy, any of its Subsidiaries or, to
PanEnergy's knowledge, any of its Joint Ventures in connection
with the execution and delivery of this Agreement by PanEnergy or
the consummation by PanEnergy of the transactions contemplated
hereby, as to which the failure to obtain or make would have a
Material Adverse Effect on PanEnergy, would impair the ability of
PanEnergy to perform its obligations hereunder or would prevent
the consummation of any of the transactions contemplated hereby,
except for: (A) the filing of a premerger notification report by
PanEnergy under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), and the expiration or
termination of the applicable waiting period with respect
thereto; (B) the filing with the SEC of (x) a joint proxy
statement in preliminary and definitive form relating to the
meeting of PanEnergy's stockholders (the "PanEnergy Stockholders'
Meeting") and the meeting of Duke's shareholders (the "Duke
Shareholders' Meeting") to be held in connection with the Merger
(the "Joint Proxy Statement") and (y) such reports under Section
13(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and such other compliance with the Exchange Act
and the rules and regulations thereunder as may be required in
connection with this Agreement and the transactions contemplated
hereby; (C) the filing of a Certificate of Merger with the
Secretary of State of the State of Delaware; (D) such filings and
approvals as may be required by any applicable state securities
or "blue sky" laws; and (E) those consents, approvals, orders or
authorizations, registrations, declarations, filings and permits
set forth in Section 5.3(c) of the PanEnergy Disclosure Schedule.
5.4. SEC Documents. The filings required to be made by
PanEnergy and its Subsidiaries since December 31, 1993 under the
Securities Act of 1933, as amended (the "Securities Act"), the
Exchange Act, the Federal Power Act (the "Power Act") and
applicable state laws and regulations, if any, have been filed
with the SEC, the Federal Energy Regulatory Commission (the
"FERC") and the relevant state
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authorities, if any, as the case may be, and PanEnergy has
complied in all material respects with all applicable
requirements of such acts and the rules and regulations
thereunder, with such exceptions as would not in the aggregate
have a Material Adverse Effect on PanEnergy. PanEnergy has made
available to Duke a true and complete copy of each report,
schedule, registration statement, definitive proxy statement or
other document filed by PanEnergy or any of its Subsidiaries with
the SEC since December 31, 1993 (the "PanEnergy SEC Documents").
As of their respective dates, the PanEnergy SEC Documents
complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the
rules and regulations of the SEC thereunder applicable to such
PanEnergy SEC Documents, with such exceptions as would not in the
aggregate have a Material Adverse Effect on PanEnergy and none of
the PanEnergy SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading. The financial statements of PanEnergy included in
the PanEnergy SEC Documents complied as to form in all material
respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto,
were prepared in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated in
the notes thereto or, in the case of the unaudited statements, as
permitted by Rule 10-01 of Regulation S-X of the SEC) and fairly
present in accordance with applicable requirements of GAAP
(subject, in the case of the unaudited statements, to normal,
recurring adjustments, none of which will be material) the
consolidated financial position of PanEnergy and its consolidated
subsidiaries as of their respective dates and the consolidated
results of operations and the consolidated cash flows of
PanEnergy and its consolidated subsidiaries for the periods
presented therein.
5.5. Information Supplied. None of the information supplied
or to be supplied by PanEnergy for inclusion or incorporation by
reference in the Registration Statement on Form S-4 to be filed
with the SEC by Duke in connection with the issuance of shares of
Common Stock in the Merger (the "S-4") will, at the time the S-4
becomes effective under the Securities Act or at the Effective
Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and none
of the information supplied or to be supplied by PanEnergy and
included or incorporated by reference in the Joint Proxy
Statement will, at the date mailed to the stockholders of
PanEnergy and the shareholders of Duke or at
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the time of the meeting of such stockholders or shareholders to
be held in connection with the Merger or at the Effective Time,
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they are made, not misleading. If at
any time prior to the Effective Time any event with respect to
PanEnergy or any of its Subsidiaries, or with respect to other
information supplied by PanEnergy for inclusion in the Joint
Proxy Statement or the S-4, shall occur which is required to be
described in an amendment of, or a supplement to, the Joint Proxy
Statement or the S-4, such event shall be so described, and such
amendment or supplement shall be promptly filed with the SEC and,
as required by law, disseminated to the stockholders of
PanEnergy. The Joint Proxy Statement, insofar as it relates to
PanEnergy or its Subsidiaries or other information supplied by
PanEnergy for inclusion therein, will comply as to form in all
material respects with the provisions of the Exchange Act and the
rules and regulations thereunder.
5.6. Absence of Certain Changes or Events. Except as
disclosed in, or reflected in the financial statements included
in, the PanEnergy SEC Documents, or except as contemplated by
this Agreement, from December 31, 1995 through the date hereof,
each of PanEnergy, its Subsidiaries and, to PanEnergy's
knowledge, its Joint Ventures has conducted its business only in
the ordinary course of business consistent with past practice and
there has not been: (i) any declaration, setting aside or payment
of any dividend or other distribution (whether in cash, stock or
property) with respect to any shares of PanEnergy's capital
stock, except for regular quarterly cash dividends consistent
with past practice on PanEnergy Common Stock with usual record
and payment dates for such dividends; (ii) any repurchase,
redemption or other acquisition by PanEnergy or any Subsidiary of
PanEnergy of any outstanding shares of capital stock or other
equity securities of, or other ownership interests in, PanEnergy
or any Subsidiary of PanEnergy, except in accordance with the
terms of the PanEnergy Stock Plans, the PanEnergy Benefit Plans
(as defined in Section 5.12(a)) or the PanEnergy DRIP; (iii) any
material change in any method of accounting or accounting
practice by PanEnergy or any Subsidiary of PanEnergy; or (iv) any
other transaction, commitment, dispute or other event or
condition (financial or otherwise) of any character (whether or
not in the ordinary course of business) that could reasonably be
expected to have a Material Adverse Effect on PanEnergy. Since
November 24, 1995, PanEnergy has executed no confidentiality
agreement with any person in connection with its consideration of
acquiring all or a substantial part of PanEnergy or its
Significant Subsidiaries.
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5.7. No Undisclosed Material Liabilities. Except as
disclosed in the PanEnergy SEC Documents, as of the date hereof,
there are no liabilities or obligations of PanEnergy, any of its
Subsidiaries or, to PanEnergy's knowledge, any of its Joint
Ventures of any kind whatsoever, whether accrued, contingent or
otherwise, that would constitute, and there have been no events,
changes or effects with respect to PanEnergy, any of its
Subsidiaries or, to PanEnergy's knowledge, any of its Joint
Ventures, constituting or which are reasonably likely to
constitute, whether individually or in the aggregate, a Material
Adverse Effect on PanEnergy.
5.8. No Default. Neither PanEnergy nor any of its
Subsidiaries nor, to PanEnergy's knowledge, any of its Joint
Ventures is in default or violation (and no event has occurred
which, with notice or the lapse of time or both, would constitute
a default or violation) of any term, condition or provision of
(i) their respective charters, bylaws or other governing
documents, (ii) any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which PanEnergy,
any of its Subsidiaries or, to PanEnergy's knowledge, any of its
Joint Ventures is now a party or by which PanEnergy, any of its
Subsidiaries or, to PanEnergy's knowledge, any of its Joint
Ventures or any of their respective properties or assets may be
bound or (iii) any order, writ, injunction, decree, statute, rule
or regulation applicable to PanEnergy, any of its Subsidiaries
or, to PanEnergy's knowledge, any of its Joint Ventures, except
in the case of (ii) and (iii) for defaults or violations which in
the aggregate would not have a Material Adverse Effect on
PanEnergy.
5.9. Compliance with Applicable Laws. PanEnergy and its
Subsidiaries and, to PanEnergy's knowledge, its Joint Ventures
hold all permits, licenses, variances, exemptions, orders,
franchises, consents and approvals of all Governmental Entities
necessary for them to own, lease and operate their properties and
assets and to lawfully conduct their respective businesses (the
"PanEnergy Permits"), except where the failure so to hold would
not have a Material Adverse Effect on PanEnergy. PanEnergy and
its Subsidiaries and, to PanEnergy's knowledge, its Joint
Ventures are in compliance with the terms of the PanEnergy
Permits, except where the failure so to comply would not have a
Material Adverse Effect on PanEnergy. Except as disclosed in the
PanEnergy SEC Documents, the businesses of PanEnergy, its
Subsidiaries and, to PanEnergy's knowledge, its Joint Ventures
are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity, except for possible
violations which would not have a Material Adverse Effect on
PanEnergy. No action, proceeding, investigation or review of any
Governmental
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Entity with respect to PanEnergy, any of its Subsidiaries or, to
PanEnergy's knowledge, any of its Joint Ventures is pending, and,
to PanEnergy's knowledge, no investigation or review by any
Governmental Entity with respect to PanEnergy, any of its
Subsidiaries or any of its Joint Ventures is threatened which
would, or would be reasonably likely to, have a Material Adverse
Effect on PanEnergy.
5.10. Litigation. Except as disclosed in the PanEnergy SEC
Documents or as set forth in Section 5.10 of the PanEnergy
Disclosure Schedule, there is no suit, action or proceeding
pending, or, to the knowledge of PanEnergy, threatened against or
affecting PanEnergy, any of its Subsidiaries or any of its Joint
Ventures ("PanEnergy Litigation"), and PanEnergy, its
Subsidiaries and, to PanEnergy's knowledge, its Joint Ventures
have no knowledge of any facts that are likely to give rise to
any PanEnergy Litigation, that, individually or in the aggregate,
is reasonably likely to have a Material Adverse Effect on
PanEnergy or its ability to consummate the transactions
contemplated by this Agreement, nor are there any judgments,
decrees, injunctions, rules or orders of any Governmental Entity
or arbitrator outstanding against PanEnergy, any of its
Subsidiaries or, to PanEnergy's knowledge, any of its Joint
Ventures ("PanEnergy Orders") that are, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on
PanEnergy or its ability to consummate the transactions
contemplated by this Agreement.
5.11. Tax Matters. "Taxes", as used in this Agreement, means
any federal, state, county, local or foreign taxes, charges,
fees, levies, or other assessments, including, without
limitation, all net income, gross income, sales and use, ad
valorem, transfer, gains, profits, excise, franchise, real and
personal property, gross receipt, capital stock, production,
business and occupation, disability, employment, payroll,
license, estimated, stamp, custom duties, severance or
withholding taxes or charges imposed by any governmental entity,
whether foreign or domestic, and includes any additions to tax,
interest and penalties (civil or criminal), and any expenses
incurred in connection with the determination, settlement or
litigation of any liability for any of the foregoing. "Tax
Return", as used in this Agreement, means a report, return or
other information required to be supplied to a governmental
entity with respect to Taxes including, where permitted or
required, combined or consolidated returns for any group of
entities that includes PanEnergy or any of its Subsidiaries on
the one hand, or Duke or any of its Subsidiaries on the other
hand.
Except (i) as disclosed in Section 5.11 of the
PanEnergy Disclosure Schedule or (ii) where the failure of
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the following representations to be true would not, either
individually or in the aggregate, have a Material Adverse Effect
on PanEnergy:
(a) Filing of Timely Tax Returns. All material Tax Returns
required to be filed by PanEnergy and each of its Subsidiaries
under applicable law have been (and, as to Tax Returns not filed
as of the date hereof, will be) filed on a timely basis. All
such Tax Returns were and are in all material respects (and, as
to Tax Returns not filed as of the date hereof, will be) true,
complete and correct.
(b) Payment of Taxes. PanEnergy and each of its
Subsidiaries have, within the time and in the manner prescribed
by law, paid (and until the Closing Date will pay within the time
and in the manner prescribed by law) all material Taxes that are
currently due and payable except for those being contested in
good faith or for which adequate reserves have been established.
No written claim (and, to PanEnergy's knowledge, no other claim)
has ever been made by an authority in a jurisdiction where any of
PanEnergy and its Subsidiaries does not file Tax Returns that it
is or may be subject to taxation by that jurisdiction.
(c) Tax Reserves. Except as previously disclosed by
PanEnergy to Duke, PanEnergy and its Subsidiaries have
established (and until the Closing Date will maintain) on their
books and records (i) reserves adequate to pay all material Taxes
and all deficiencies in material Taxes asserted, proposed or
threatened against PanEnergy or its Subsidiaries and (ii)
reserves for deferred income taxes, in each case in accordance
with GAAP.
(d) Tax Liens. There are no Tax liens upon the assets of
PanEnergy or any of its Subsidiaries except liens for Taxes not
yet due.
(e) Withholding Taxes. PanEnergy and each of its
Subsidiaries have complied (and until the Closing Date will
comply) in all material respects with the provisions of the Code
relating to the withholding of Taxes, including, without
limitation, the withholding and reporting requirements under
Sections 1441 through 1464, 3401 through 3406, and 6041 through
6049 of the Code, as well as any similar provisions under any
other laws, and have, within the time and in the manner
prescribed by law, withheld from employee wages and paid over to
the proper governmental authorities all material amounts
required.
(f) Extensions of Time for Filing Tax Returns. Neither
PanEnergy nor any of its Subsidiaries has requested any extension
of time within which to file any Tax Return, which Tax Return has
not since been filed.
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(g) Waivers of Statute of Limitations. Neither PanEnergy
nor any of its Subsidiaries has executed any outstanding waivers
or comparable consents regarding the application of the statute
of limitations with respect to any Taxes or Tax Returns.
(h) Expiration of Statute of Limitations. The statute of
limitations for the assessment of all material Taxes has expired
for all applicable material Tax Returns of PanEnergy and each of
its Subsidiaries or those Tax Returns have been examined by the
appropriate taxing authorities for all periods through the date
hereof, and no deficiency for any material Taxes has been
proposed, asserted or assessed (or, to PanEnergy's knowledge,
threatened) against PanEnergy or any of its Subsidiaries that has
not been resolved and paid in full or previously disclosed by
PanEnergy to Duke.
(i) Audit, Administrative and Court Proceedings. No audits
or other administrative proceedings or court proceedings are
presently pending with regard to any material Taxes or material
Tax Returns of PanEnergy or any of its Subsidiaries. Neither
PanEnergy nor any of its Subsidiaries has any knowledge of any
threatened action, audit or administrative or court proceeding
with respect to any such Taxes or Tax Returns. Further, to the
best of the knowledge of PanEnergy, no state of facts exists or
has existed which would constitute grounds for the assessment of
any material liability for Taxes with respect to the periods
which have not been audited by the Internal Revenue Service (the
"IRS") or other taxing authority.
(j) Tax Rulings. Neither PanEnergy nor any of its
Subsidiaries has received a Tax Ruling (as defined below) or
entered into a Closing Agreement (as defined below) with any
taxing authority that would have a continuing material adverse
effect after the Closing Date. "Tax Ruling", as used in this
Agreement, shall mean a written ruling of a taxing authority
relating to Taxes. "Closing Agreement", as used in this
Agreement, shall mean a written and legally binding agreement
with a taxing authority relating to Taxes.
(k) Availability of Tax Returns. To the extent not
previously provided, as soon as practicable after the date
hereof, PanEnergy and its Subsidiaries will make available to
Duke complete and accurate copies of such of the following
materials as Duke may reasonably request: (i) material Tax
Returns, and any amendments thereto, filed by PanEnergy or any of
its Subsidiaries since January 1, 1994, (ii) audit reports
received from any taxing authority relating to any material Tax
Return filed by PanEnergy or any of its Subsidiaries and (iii)
Closing Agreements entered
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into by PanEnergy or any of its Subsidiaries with any taxing
authority.
(l) Tax Sharing Agreements. Neither PanEnergy nor any of
its Subsidiaries is a party to any Tax allocation or sharing
agreement with any person other than PanEnergy and its
Subsidiaries.
(m) Liability for Others. Neither PanEnergy nor any of its
Subsidiaries has any liability for Taxes of any person other than
PanEnergy and its Subsidiaries under Treasury Regulations Section
1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor, by contract or otherwise.
(n) Section 341(f). Neither PanEnergy nor any of its
Subsidiaries has filed (or will file prior to the Closing) a
consent pursuant to Section 341(f) of the Code or has agreed to
have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as that term is defined in Section
341(f)(4) of the Code) owned by PanEnergy or any of its
Subsidiaries.
(o) Section 168. No property of PanEnergy or any of its
Subsidiaries is property that PanEnergy or any such Subsidiary or
any party to this transaction is or will be required to treat as
being owned by another person pursuant to the provisions of
Section 168(f)(8) of the Code (as in effect prior to its
amendment by the Tax Reform Act of 1986) or is "tax-exempt use
property" within the meaning of Section 168 of the Code.
(p) Section 481 Adjustments. Neither PanEnergy nor any of
its Subsidiaries is required to include in income any adjustment
pursuant to Section 481(a) of the Code by reason of a voluntary
change in accounting method initiated by PanEnergy or any of its
Subsidiaries, and to the best of the knowledge of PanEnergy, the
IRS has not proposed any such adjustment or change in accounting
method.
(q) Tax-Exempt Interest. None of the assets of PanEnergy
or its Subsidiaries directly or indirectly secures any debt the
interest on which is tax exempt under Section 103(a) of the Code.
(r) Sections 6661 and 6662. All transactions that could
give rise to an understatement of federal income tax (within the
meaning of Section 6661 of the Code for Tax Returns filed on or
before December 31, 1989, and within the meaning of Section 6662
of the Code for tax returns filed after December 31, 1989) have
been adequately disclosed (or, with respect to Tax Returns not
yet filed will be adequately disclosed) on the Tax Returns of
PanEnergy and its
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Subsidiaries in accordance with Section 6661(b)(2)(B) of the Code
for Tax Returns filed on or prior to December 31, 1989, and in
accordance with Section 6662(d)(2)(B) of the Code for Tax Returns
filed after December 31, 1989.
(s) Section 280G. Neither PanEnergy nor any of its
Subsidiaries is a party to any agreement, contract, or
arrangement that could result, either directly or indirectly, on
account of the transactions contemplated hereunder, separately or
in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code (except
for such payments as may be payable pursuant to certain
provisions in contracts contemplated by Section 8.16 and/or as a
result of the accelerated vesting of awards of restricted
PanEnergy Common Stock and/or PanEnergy Options).
(t) Acquisition Indebtedness. No indebtedness of PanEnergy
or any of its Subsidiaries is "corporate acquisition
indebtedness" within the meaning of Section 279(b) of the Code.
(u) NOLs. As of September 30, 1996, PanEnergy and its
Subsidiaries had net operating loss carryovers available to
offset future income as set forth in Section 5.11(u) of the
PanEnergy Disclosure Schedule. Section 5.11(u) of the PanEnergy
Disclosure Schedule sets forth the amount of and year of
expiration of each company's net operating loss carryovers.
(v) Credit Carryover. As of September 30, 1996, PanEnergy
and its Subsidiaries had tax credit carryovers available to
offset future tax liability as set forth in Section 5.11(v) of
the PanEnergy Disclosure Schedule. Section 5.11(v) of the
PanEnergy Disclosure Schedule sets forth the amount and year of
expiration of each company's tax credit carryovers.
(w) The Merger. Neither PanEnergy nor any of its
Subsidiaries has taken any action or has any knowledge of any
fact or circumstance that would, or would be reasonably likely
to, adversely affect the status of the Merger as a reorganization
under Section 368(a) of the Code.
5.12. Employee Benefits; Labor Matters. (a) Except as
disclosed in the PanEnergy SEC documents, as set forth in Section
5.12(a) of the PanEnergy Disclosure Schedule or as would not have
a Material Adverse Effect on PanEnergy, (i) all employee benefit
plans, policies, practices, arrangements and programs maintained
for the benefit of the current or former employees or directors
of PanEnergy or any of its Subsidiaries ("PanEnergy Personnel")
that are sponsored, maintained or contributed to by
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PanEnergy or any of its Subsidiaries, or with respect to which
PanEnergy or any of its Subsidiaries has incurred or could be
reasonably expected to incur any liability, including without
limitation any such plan that is an "employee benefit plan" as
defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974 ("ERISA") ("PanEnergy Benefit Plans"), are
in compliance with all applicable requirements of law, including
ERISA and the Code, and have been administered and operated in
compliance with their terms, and (ii) neither PanEnergy nor any
of its Subsidiaries has any liabilities or obligations with
respect to any such PanEnergy Benefit Plans or any employee
benefit plan which is not a PanEnergy Benefit Plan because (x)
such plan has been terminated and/or (y) such plan is or was
maintained or contributed to by any entity (other than a
Subsidiary of PanEnergy) required to be aggregated with PanEnergy
pursuant to Section 414 of the Code or Section 4001(b) of ERISA,
whether accrued, contingent or otherwise, nor, to the knowledge
of PanEnergy, are any such liabilities or obligations expected to
be incurred.
(b) Except as set forth in Section 5.12(b) of the PanEnergy
Disclosure Schedule, the execution of, and performance of the
transactions contemplated in, this Agreement will not (either
alone or upon the occurrence of any additional or subsequent
events) constitute an event under any plan, policy, arrangement
or agreement, including but not limited to the PanEnergy Benefit
Plans, or any trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any
PanEnergy Personnel.
(c) Except as set forth in Schedule 5.12(c) of the
PanEnergy Disclosure Schedule, neither PanEnergy nor any of its
Subsidiaries is a party to any collective bargaining agreement or
other labor agreement with any union or labor organization, nor
does PanEnergy know of any activity or proceeding of any labor
organization (or representative thereof) or employee group to
represent or organize any PanEnergy Personnel. Except as set
forth in Section 5.12(c) of the PanEnergy Disclosure Schedule,
(i) there is no unfair labor practice, employment discrimination
or other complaint against PanEnergy pending, or, to the
knowledge of PanEnergy, threatened, which has or could reasonably
be expected to have, a Material Adverse Effect on PanEnergy and
(ii) there is no strike, dispute, slowdown, work stoppage or
lockout pending, or, to the knowledge of PanEnergy, threatened,
against or involving PanEnergy or any of its Subsidiaries which
has or could reasonably be expected to have, a Material Adverse
Effect on PanEnergy.
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5.13. Environmental Matters.
(a) Definitions. For purposes of this Agreement:
(i) "Environmental Claims" means, with respect to any
person, (x) any and all administrative, regulatory or judicial
actions, suits, injunctions, judgments, demands (including,
without limitation, demands or other notices pursuant to any
indemnification, contribution or similar agreement), demand
letters, directives, claims, complaints, orders, decrees, liens,
investigations, proceedings or notices of non-compliance or
violation or any other notice in writing by or from any person or
entity (including any Governmental Entity), or (y) any oral
information provided by a Governmental Entity that written action
of the type described in the foregoing clause is in process,
which (in case of either (x) or (y)) alleges potential liability
or any obligation to take any action or cease any action
(including, without limitation, potential liability for
enforcement, investigatory costs, monitoring costs, cleanup
costs, governmental response costs, removal costs, remedial
costs, response costs, corrective action, natural resources
damages, property damages, personal injuries or penalties)
arising out of, based on or resulting from (1) the presence, or
Release (as hereinafter defined) into the environment, of any
Hazardous Materials (as hereinafter defined) at any location,
whether or not owned, operated, occupied, leased or managed by
PanEnergy or any of its Environmental Subsidiaries (for purposes
of this Section 5.13) or by Duke or any of its Environmental
Subsidiaries (for purposes of Section 6.13) and (2) circumstances
or conditions forming the basis of any violation, or alleged
violation, of any Environmental Law (as hereinafter defined)
including, without limitation (in case of either (1) or (2)), any
and all claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from the presence or Release of any Hazardous Materials
at any location.
(ii) "Environmental Laws" means all foreign, federal, state
and local laws, statutes, rules, regulations, orders, codes,
directives and ordinances pertaining to: (A) the protection of
health, safety and the indoor or outdoor environment; (B) the
conservation, management, or use of natural resources and
wildlife; (C) the protection or use of surface water and ground
water; (D) the management, manufacture, possession, presence,
use, processing, generation, transportation, distribution,
treatment, storage, disposal, release, threatened release,
abatement, removal, remediation, or handling of, or exposure to,
any Hazardous Materials; or (E) pollution (including any
23
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Release or threatened Release of Hazardous Materials to indoor or
outdoor air, land surface or subsurface strata, surface water or
ground water); and includes, without limitation, the following
federal statutes (and their implementing regulations and the
analogous state statutes and regulations): the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act of
1986, 42 U.S.C. (S) 9601 et seq.; the Solid Waste Disposal Act,
as amended by the Resource Conservation and Recovery Act of 1976,
as amended by the Hazardous and Solid Waste Amendments of 1984,
42 U.S.C. (S) 6901 et seq.; the Federal Water Pollution Control
Act of 1972, as amended by the Clean Water Act of 1977, as
amended, 33 U.S.C. (S) 1251 et seq.; the Toxic Substances Control
Act of 1976, as amended, 15 U.S.C. (S) 2601 et seq.; the
Emergency Planning and Community Right-To-Know Act of 1986, 42
U.S.C. (S) 11001 et seq.; the Clean Air Act of 1966, as amended
by the Clean Air Act Amendments of 1990, 42 U.S.C. (S) 7401 et
seq.; the National Environmental Policy Act of 1970, as amended,
42 U.S.C. (S) 4321 et seq.; the Rivers and Harbors Act of 1899,
as amended, 33 U.S.C. (S) 401 et seq.; the Endangered Species Act
of 1973, as amended, 16 U.S.C. (S) 1531 et seq.; the Atomic
Energy Act, as amended, 42 U.S.C. (S) 2014 et seq.; the
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C.
(S) 651 et seq.; the Safe Drinking Water Act of 1974, as amended,
42 U.S.C. (S) 300(f) et seq.; and the Oil Pollution Act of 1990,
as amended, 33 U.S.C. (S) 2701 et seq.
(iii) "Hazardous Materials" means (x) any petroleum or
petroleum products, radioactive materials, asbestos in any form,
and transformers or other equipment that contain dielectric fluid
containing polychlorinated biphenyls, (y) any chemicals,
materials or substances which are now defined as or included in
the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted
hazardous wastes," "toxic substances" or "toxic pollutants," or
words of similar import, under any Environmental Law and (z) any
other chemical, material, substance or waste, exposure to which
is now prohibited, limited or regulated under any applicable
Environmental Law.
(iv) "Release" means any release or threatened release,
spill, emission, leaking, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or
outdoor environment, including, without limitation, the
atmosphere, soil, indoor air, subsurface, surface water,
groundwater or property.
(v) "Environmental Subsidiary" means any corporation or
other organization, whether incorporated or unincorporated, in
which a party to this Agreement
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directly or indirectly owns or controls securities or other
interests or any organization of which such party or any
subsidiary of such party is a general partner.
(b) Compliance. (i) Except as set forth in the PanEnergy
SEC Documents, PanEnergy and each of its Environmental
Subsidiaries and any real or personal property (including,
without limitation, any vessel) that any of them owns, operates,
occupies, leases or manages, in whole or in part, directly or
indirectly, are in compliance with all applicable Environmental
Laws, except where the failure to be so in compliance would not
be reasonably likely to have a Material Adverse Effect on
PanEnergy.
(ii) Except as set forth in the PanEnergy SEC Documents,
neither PanEnergy nor any of its Environmental Subsidiaries has
received any written communication from any person or
Governmental Entity that alleges that PanEnergy or any of its
Environmental Subsidiaries or any real or personal property
(including, without limitation, any vessel) that any of them
owns, operates, occupies, leases or manages, in whole or in part,
directly or indirectly, is not in compliance with applicable
Environmental Laws, except where the failure to be so in
compliance would not be reasonably likely to have a Material
Adverse Effect on PanEnergy.
(c) Environmental Permits. Except as set forth in the
PanEnergy SEC Documents, PanEnergy and each of its Environmental
Subsidiaries has obtained, and will maintain through the Closing
Date, all permits, consents, licenses, variances, certificates,
exemptions, orders, franchises, authorizations and approvals
required under any Environmental Law (collectively,
"Environmental Permits") necessary for the construction and
operation of their facilities (including, without limitation, any
vessel) and the conduct of their operations, and all such
Environmental Permits are in good standing or, where applicable,
an application or renewal application has been timely filed, is
pending and agency approval is expected to be obtained, and
PanEnergy and its Environmental Subsidiaries are in compliance
with all terms and conditions of all such Environmental Permits
and are not required to make any expenditure in order to obtain
or renew any Environmental Permits, except where the failure to
obtain or be in compliance with such Environmental Permits and
the requirement to make such expenditures would not be reasonably
likely to have a Material Adverse Effect on PanEnergy.
(d) Environmental Claims. Except as set forth in the
PanEnergy SEC Documents, there is no Environmental
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Claim pending or, to the knowledge of PanEnergy and its
Environmental Subsidiaries, threatened:
(i) against PanEnergy or any of its Environmental
Subsidiaries,
(ii) against any person or entity whose liability for, or
whose obligation to satisfy, any Environmental Claim PanEnergy or
any of its Environmental Subsidiaries has retained, assumed or
guaranteed, either contractually or by operation of law, or
(iii) against any real or personal property (including,
without limitation, any vessel) or operations that PanEnergy or
any of its Environmental Subsidiaries owns, operates, occupies,
leases or manages, in whole or in part, directly or indirectly,
that would be reasonably likely to have a Material Adverse Effect
on PanEnergy.
(e) Releases. Except as set forth in the PanEnergy SEC
Documents, and except for Releases of Hazardous Materials the
liability for which would not be reasonably likely to have a
Material Adverse Effect on PanEnergy, PanEnergy has no knowledge
of any Release of any Hazardous Materials that has occurred on,
at, from or to any of the real or personal property (including,
without limitation, any vessel) owned, operated, occupied, leased
or managed by PanEnergy or any Environmental Subsidiary of
PanEnergy or any predecessor of PanEnergy or any Environmental
Subsidiary of PanEnergy or any other property which requires
investigation, assessment, monitoring, remediation, response,
removal, corrective action, cleanup or any similar action under
Environmental Laws.
(f) Disclosure. PanEnergy has disclosed to Duke all
material facts that PanEnergy reasonably believes would be
reasonably likely to form the basis of a Material Adverse Effect
on PanEnergy arising from (x) the cost of pollution control
equipment currently required or known to be required in the
future, (y) investigation, assessment, monitoring, remediation,
response, removal, corrective action, cleanup, or remediation
costs and any related costs currently required or known to be
required in the future, or (z) any other environmental, health or
safety matter affecting PanEnergy or its Environmental
Subsidiaries.
5.14. Insurance. Except as set forth in Section 5.14 of the
PanEnergy Disclosure Schedule, each of PanEnergy and its
Subsidiaries is, and has been continuously since December 31,
1993, insured by reputable and financially responsible insurers
in such amounts and against such risks
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and losses as are customary for companies conducting their
respective businesses during such time period. Neither PanEnergy
nor any of its Subsidiaries has received any notice of
cancellation or termination with respect to any material
insurance policy thereof and neither PanEnergy nor any of its
Subsidiaries has received notice that any such policy is invalid
or unenforceable.
5.15. Contracts. PanEnergy has set forth in Section 5.15 of
the PanEnergy Disclosure Schedule a list of all contracts to
which PanEnergy or Texas Eastern Transmission Corporation,
Algonquin Gas Transmission Company, Panhandle Eastern Pipe Line
Company, Trunkline Gas Company, PanEnergy Field Services, Inc.,
or PanEnergy Trading and Market Services, L.L.C. (each a
"PanEnergy Business Unit") is a party as of the date hereof and
which, in the reasonable judgment of PanEnergy, is likely (on an
annualized basis) in the fiscal year ending December 31, 1996, to
(i) provide gross revenues in excess of the PanEnergy Business
Unit's 1995 Revenue Threshold, (ii) require payments in excess of
the PanEnergy Business Unit's 1995 Revenue Threshold, or (iii)
provide a contribution to the gross margin in excess of the
PanEnergy Business Unit's 1995 Margin Threshold. As used herein,
a "PanEnergy Business Unit's 1995 Revenue Threshold" means an
amount equal to 5% of such PanEnergy Business Unit's gross
revenues for the fiscal year ended December 31, 1995, and a
"PanEnergy Business Unit's 1995 Margin Threshold" means an amount
equal to 5% of such PanEnergy Business Unit's gross margin for
the fiscal year ended December 31, 1995.
5.16. Regulatory Proceedings. Except as set forth in the
PanEnergy SEC Documents or Section 5.16 of the PanEnergy
Disclosure Schedule, neither PanEnergy nor any of its
Subsidiaries nor, to PanEnergy's knowledge, any of its Joint
Ventures all or part of whose rates or services are regulated by
a Governmental Entity is a party to any proceeding before a court
or other Governmental Entity which is reasonably likely to result
in orders having a Material Adverse Effect on PanEnergy nor has
any such proceeding been noticed.
5.17. Regulation as a Utility. (a) Neither PanEnergy nor
any of its Subsidiaries or Joint Ventures is a "holding company,"
a "subsidiary company" or an "affiliate" of any public utility
company within the meaning of Section 2(a)(7), 2(a)(8) or
2(a)(11) of the Public Utility Holding Company Act of 1935, as
amended (the "1935 Act"), respectively, and none of PanEnergy or
any of its Subsidiaries or Joint Ventures is a "public utility
company" within the meaning of Section 2(a)(5) of the 1935 Act.
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(b) Neither PanEnergy nor any "subsidiary company" or
"affiliate" (as each such term is defined in the 1935 Act) of
PanEnergy is subject to regulation as a public utility or public
service company (or similar designation) by any state in the
United States or any foreign country.
5.18. Opinions of Financial Advisors. The Board of Directors
of PanEnergy has received the opinions of Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") and Lehman Brothers
("Lehman"), dated the date hereof, to the effect that, as of the
date hereof, the Exchange Ratio is fair from a financial point of
view to the holders of PanEnergy Common Stock.
5.19. Vote Required. The affirmative vote of the holders of
a majority of the outstanding shares of PanEnergy Common Stock is
the only vote of the holders of any class or series of capital
stock of PanEnergy necessary to approve this Agreement, the
Merger and the other transactions contemplated hereby.
5.20. Beneficial Ownership of Duke Common Stock. Neither
PanEnergy nor any of its Subsidiaries "beneficially owns" (as
defined in Rule 13d-3 under the Exchange Act) any outstanding
shares of Duke Common Stock.
5.21. Brokers. Except for the fees and expenses payable to
Merrill Lynch and Lehman, which fees are reflected in their
agreements with PanEnergy (copies of which have been delivered to
Duke), no broker, investment banker or other person is entitled
to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of PanEnergy.
5.22. Article Seventh of the Restated Certificate of
Incorporation of PanEnergy and Section 203 of the DGCL Not
Applicable. Neither the provisions of Article Seventh of
PanEnergy's Restated Certificate of Incorporation, nor the
provisions of Section 203 of the DGCL are applicable to this
Agreement, the Merger or any other transaction contemplated
hereby. No other "fair price", "moratorium", "control share
acquisition" or similar anti-takeover statute or regulation is
applicable to PanEnergy, the Merger or any other transaction
contemplated hereby.
5.23. Properties. Except for liens arising in the ordinary
course of business after the date hereof and properties and
assets disposed of in the ordinary course of business after the
date of the most recent balance sheet contained in PanEnergy's
most recent Report on Form 10-Q filed prior to the date hereof,
PanEnergy, its Subsidiaries and, to PanEnergy's knowledge, its
Joint Ventures have
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defensible title (or, with respect to pipelines, equipment and
other tangible personal property used in connection with
PanEnergy's pipeline operations (collectively, "PanEnergy
Pipeline Assets"), title to or interest in the applicable
PanEnergy Pipeline Asset sufficient to enable PanEnergy, its
Subsidiaries and, to PanEnergy's knowledge, its Joint Ventures to
conduct their business with respect thereto without material
interference as it is currently being conducted or as described
in the PanEnergy SEC Documents) on all their material properties
and assets, whether tangible or intangible, real, personal or
mixed, free and clear of all liens, except for liens disclosed in
the PanEnergy SEC Documents and liens the existence of which
would not have a Material Adverse Effect on PanEnergy.
5.24. Easements. The businesses of PanEnergy and each of its
Subsidiaries are being operated in a manner which does not
violate (in any manner which would, or which would be reasonably
likely to, have a Material Adverse Effect on PanEnergy) the terms
of any easements, rights of way, permits, servitudes, licenses,
leasehold estates and similar rights relating to real property
(collectively, "Easements") used by PanEnergy and each of its
Subsidiaries in such businesses. All Easements are valid and
enforceable, except as the enforceability thereof may be affected
by bankruptcy, insolvency or other laws of general applicability
affecting the rights of creditors generally or principles of
equity, and grant the rights purported to be granted thereby and
all rights necessary thereunder for the current operation of such
business where the failure of any such Easement to be valid and
enforceable or to grant the rights purported to be granted
thereby or necessary thereunder would have a Material Adverse
Effect on PanEnergy. There are no spacial gaps in the Easements
which would impair the conduct of such business in a manner which
would, or which would be reasonably likely to, have a Material
Adverse Effect on PanEnergy, and no part of PanEnergy Pipeline
Assets is located on property which is not owned in fee by
PanEnergy or a Subsidiary or subject to an Easement in favor of
PanEnergy or a Subsidiary, where the failure of such PanEnergy
Pipeline Assets to be so located would have a Material Adverse
Effect on PanEnergy.
5.25. Futures Trading and Fixed Price Exposure. The Risk
Management Committee of PanEnergy has established risk parameters
to restrict the level of risk that PanEnergy and its Subsidiaries
are authorized to take with respect to the net position resulting
from all physical commodity transactions, exchange traded futures
and options and over-the-counter derivative instruments (the "Net
PanEnergy Position") and monitors the compliance by PanEnergy and
its Subsidiaries with such risk parameters. The risk parameters
established by PanEnergy's Risk Management Committee on the
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date of this Agreement are set forth in Section 5.25 of the
PanEnergy Disclosure Schedule and may be modified only by
PanEnergy's Risk Management Committee. The Net PanEnergy
Position is within the risk parameters which have been
established by PanEnergy's Risk Management Committee. All
guaranties by PanEnergy or any of its Subsidiaries (other than
the Mobil Joint Venture) of indebtedness of the Mobil Joint
Venture are described in Section 5.25 of the PanEnergy Disclosure
Schedule. As used herein, "Mobil Joint Venture" means PanEnergy
Trading and Market Services, L.L.C. and PanEnergy Marketing
Canada Ltd.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF DUKE
Except as set forth in the disclosure schedule dated as of
the date hereof and signed by an authorized officer of Duke and
delivered to PanEnergy by or on behalf of Duke on or prior to the
date hereof (the "Duke Disclosure Schedule") (each of which
exceptions shall specifically identify the relevant Section
hereof to which it relates), Duke represents and warrants to
PanEnergy as follows:
6.1. Organization, Standing and Power. Each of Duke and its
Subsidiaries is a corporation or partnership duly organized,
validly existing and in good standing under the laws of its state
of incorporation or organization, has all requisite power and
authority to own, lease and operate its assets and properties and
to carry on its business as now being conducted, and is duly
qualified and in good standing to do business in each
jurisdiction in which the business it is conducting, or the
operation, ownership or leasing of its assets and properties,
makes such qualification necessary, other than in such
jurisdictions where the failure so to qualify would not have a
Material Adverse Effect on Duke. As used in this Agreement a
"Material Adverse Effect" shall mean, in respect of Duke, any
effect or change that is, or is reasonably likely to be,
materially adverse to the business, operations, assets, financial
condition or results of operations of Duke and its Subsidiaries
taken as a whole. Duke has heretofore made available to
PanEnergy complete and correct copies of its Restated Articles of
Incorporation and By-Laws and the certificates of incorporation
and bylaws (or similar governing documents) of each of its
Subsidiaries, in each case as in effect at the date hereof.
6.2. Capital Structure. (a) The authorized capital stock
of Duke consists of 300,000,000 shares of Duke Common Stock,
12,500,000 shares of Preferred Stock, par value $100 (the "Duke
Preferred Stock"), 10,000,000 shares
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of Preferred Stock A, par value $25 (the "Duke Preferred Stock
A"), and 1,500,000 shares of Preference Stock, $100 par value
(the "Duke Preference Stock"). At the close of business on
September 30, 1996: (A) 201,589,596 shares of Common Stock were
issued and outstanding; (B) 5,240,000 shares of Duke Preferred
Stock were issued and outstanding, consisting of 350,000 shares
of 4.50%, Series C; 350,000 shares of 5.72%, Series D; 350,000
shares of 6.72%, Series E; 850,000 shares of 7.50%, Series R;
600,000 shares of 7.85%, Series S; 130,000 shares of 6.20%,
Series T; 130,000 shares of 6.30%, Series U; 130,000 shares of
6.40%, Series V; 500,000 shares of 7.00%, Series W; 500,000
shares of 6.75%, Series X; 600,000 shares of 7.04%, Series Y; and
750,000 shares of Auction Series A; (C) 6,400,000 shares of Duke
Preferred Stock A were issued and outstanding, consisting of
1,600,000 shares of 7.72%, 1992 Series; 800,000 shares of 5.95%,
1992 Series B; 800,000 shares of 6.10%, 1992 Series C; 800,000
shares of 6.20%, 1992 Series D; and 2,400,000 shares of 6.375%,
1993 Series; (D) no shares of Duke Preference Stock were issued
and outstanding; (E) 2,000,000 shares of Duke Common Stock were
reserved for issuance pursuant to Duke's Stock Incentive Plan;
2,266,424 shares of Duke Common Stock were reserved for issuance
pursuant to Duke's Stock Purchase-Savings Program; 3,673,247
shares of Common Stock were reserved for issuance pursuant to
Duke's Employee Stock Ownership Plan; and 1,064,998 shares of
Duke Common Stock were reserved for issuance pursuant to Duke's
Stock Purchase and Dividend Reinvestment Plan (together with any
successor plans, the "Duke Stock Plans"); and (F) no Voting Debt
of Duke was outstanding. Since September 30, 1996, Duke has not
issued: (A) any additional shares of capital stock, any Voting
Debt or other voting securities or (B) any securities convertible
into or exchangeable for shares of capital stock, Voting Debt or
other voting securities. The authorized capital stock of each
wholly-owned Subsidiary of Duke and the number of shares of the
capital stock of each such Subsidiary that are issued and
outstanding as of the date hereof, are set forth in Section
6.2(a) of the Duke Disclosure Schedule. All outstanding shares
of Duke capital stock are, and the shares of Duke Common Stock
issued in accordance with this Agreement and upon exercise of the
PanEnergy Stock Options to be assumed by Duke pursuant to this
Agreement, will be, and all outstanding shares of the capital
stock of each Subsidiary are, validly issued, fully paid and
nonassessable and not subject to any preemptive rights. Except
as set forth in Section 6.2(a) of the Duke Disclosure Schedule,
all outstanding shares of the capital stock of the Subsidiaries
of Duke are owned by Duke or wholly-owned Subsidiaries of Duke,
free and clear of all liens, charges, encumbrances, claims,
security interests, equities and options of any nature
whatsoever. Except as set forth in Section 6.2(a) of the Duke
Disclosure Schedule, as of the date hereof, there
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are no outstanding subscriptions, options, warrants, calls,
rights, commitments or agreements to which Duke or any Subsidiary
of Duke is a party or by which Duke or any Subsidiary of Duke is
bound, obligating Duke or any Subsidiary of Duke to issue,
deliver, sell, purchase, redeem or acquire, or cause to be
issued, delivered, sold, purchased, redeemed or acquired, any
additional shares of capital stock, any Voting Debt or other
voting securities of Duke or of any Subsidiary of Duke or
obligating Duke or any Subsidiary of Duke to grant, extend or
enter into any such option, warrant, call, right, commitment or
agreement. There are no stockholder agreements, voting trusts,
proxies or other agreements or understandings to which Duke or
any Subsidiary of Duke is a party or by which Duke or any
Subsidiary of Duke is bound relating to the voting of any shares
of the capital stock of Duke or any Subsidiary of Duke by any
person other than Duke or a Subsidiary of Duke.
(b) Section 6.2(b) of the Duke Disclosure Schedule lists as
of the date hereof all Subsidiaries of Duke, including the name
of each Subsidiary, the state or jurisdiction of its
incorporation or organization, the states or jurisdictions in
which they are qualified or licensed to do business and Duke's
interest therein.
(c) Section 6.2(c) of the Duke Disclosure Schedule lists as
of the date hereof all Joint Ventures of Duke, including the name
of each such entity, the state or jurisdiction of its
organization, the states or jurisdictions in which they are
qualified or licensed to do business and Duke's interest therein.
6.3. Authority; No Violations; Consents and Approvals. (a)
The Board of Directors of Duke has approved this Agreement, the
Merger and the other transactions contemplated hereby by the
unanimous vote of all of the directors present, and has declared
this Agreement, the Merger and the other transactions
contemplated hereby to be in the best interests of the
shareholders of Duke. The directors have advised PanEnergy and
Duke that they intend to vote or cause to be voted all of the
shares of Duke Common Stock beneficially owned by them in favor
of approval of the Duke Vote Matter (as defined below). Duke has
all requisite corporate power and authority to enter into this
Agreement and, subject to approval of the amendment of the
Restated Articles of Incorporation of Duke for the purpose of
changing the name of Duke to Duke Energy Corporation and
increasing the number of authorized shares of Duke Common Stock
and subject to approval of the issuance of the shares of Duke
Common Stock that are to be issued in connection with the Merger
(together, sometimes herein called the "Duke Vote Matter") by the
shareholders of Duke in accordance with the North Carolina
Business Corporation Act ("NCBCA") and
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the NYSE listing requirements and subject to due and timely
receipt of all required federal and state regulatory consents and
approvals set forth in Section 6.3(c)(E), to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby, including, but not limited to, the issuance
of the Duke Common Stock pursuant to the Merger, have been duly
authorized by all necessary corporate action on the part of Duke,
subject to approval of the Duke Vote Matter by the shareholders
of Duke in accordance with the NCBCA and NYSE listing
requirements and subject to due and timely receipt of the
regulatory consents and approvals specified above. This
Agreement has been duly executed and delivered by Duke and,
subject, with respect to approval of the Duke Vote Matter by the
shareholders of Duke in accordance with the NCBCA and NYSE
listing requirements and subject to due and timely receipt of the
regulatory consents and approvals specified above, and assuming
this Agreement constitutes the valid and binding obligation of
PanEnergy, constitutes a valid and binding obligation of Duke
enforceable in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting
creditors' rights and to general principles of equity.
(b) The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not, conflict with, or
result in any violation of, or default (with or without notice or
lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to
the loss of a material benefit under, or result in the creation
of any lien, security interest, charge or encumbrance upon any of
the properties or assets of Duke, any of its Subsidiaries or, to
Duke's knowledge, any of its Joint Ventures under, any provision
of (A) the Restated Articles of Incorporation or By-Laws of Duke
or the comparable charter or organizational documents of any of
its Subsidiaries or, to Duke's knowledge, any of its Joint
Ventures, (B) subject to obtaining the third-party consents, if
any, set forth in Section 6.3(b) of the Duke Disclosure Schedule
(the "Duke Required Consents"), any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable
to Duke, any of its Subsidiaries or, to Duke's knowledge, any of
its Joint Ventures or any of their respective properties or
assets or (C) assuming the consents, approvals, authorizations or
permits and filings or notifications referred to in Section
6.3(c) are duly and timely obtained or made and the approval of
the Duke Vote Matter by the shareholders of Duke has been
obtained, any
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judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Duke, any of its Subsidiaries or, to
Duke's knowledge, any of its Joint Ventures or any of their
respective properties or assets, other than, in the case of
clause (B) or (C), any such conflicts, violations, defaults,
rights, liens, security interests, charges or encumbrances that,
individually or in the aggregate, would not have a Material
Adverse Effect on Duke, materially impair the ability of Duke to
perform its obligations hereunder or prevent the consummation of
any of the transactions contemplated hereby.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from any
Governmental Entity is required by or with respect to Duke, any
of its Subsidiaries or, to Duke's knowledge, any of its Joint
Ventures in connection with the execution and delivery of this
Agreement by Duke, or the consummation by Duke of the
transactions contemplated hereby, as to which the failure to
obtain or make would have a Material Adverse Effect on Duke,
would impair the ability of Duke to perform its obligations
hereunder or would prevent the consummation of any of the
transactions contemplated hereby, except for: (A) the filing of
a premerger notification report by Duke under the HSR Act and the
expiration or termination of the applicable waiting period with
respect thereto; (B) the filing with the SEC of the Joint Proxy
Statement, the S-4, such reports under Section 13(a) of the
Exchange Act and such other compliance with the Securities Act
and the Exchange Act and the rules and regulations thereunder as
may be required in connection with this Agreement and the
transactions contemplated hereby, and the obtaining from the SEC
of such orders as may be so required; (C) the filing of a
Certificate of Merger with the Secretary of State of the State of
Delaware; (D) such filings and approvals as may be required by
any applicable state securities or "blue sky" laws; and (E) any
required approvals of the North Carolina Utilities Commission
(the "NCUC"), The Public Service Commission of South Carolina
(the "PSCSC") and FERC (the "Duke Required Statutory Approvals").
6.4. SEC Documents. The filings required to be made by Duke
and its Subsidiaries since December 31, 1993 under the Securities
Act, the Exchange Act, the Power Act, the Atomic Energy Act of
1954, as amended (the "Atomic Energy Act"), the 1935 Act, and
applicable North Carolina and South Carolina laws and regulations
have been filed with the SEC, FERC, the Nuclear Regulatory
Commission, the NCUC and the PSCSC, as the case may be, and Duke
has complied in all material respects with all requirements of
such acts, laws and rules and regulations thereunder with such
exceptions as would not in the aggregate have a Material Adverse
Effect on Duke. Duke has made available to
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PanEnergy a true and complete copy of each report, schedule,
registration statement, definitive proxy statement or other
document filed by Duke or any of its Subsidiaries with the SEC
since December 31, 1993 (the "Duke SEC Documents"). As of their
respective dates, the Duke SEC Documents complied in all material
respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations
of the SEC thereunder applicable to such Duke SEC Documents, with
such exceptions as would not in the aggregate have a Material
Adverse Effect on Duke, and none of the Duke SEC Documents
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial
statements of Duke included in the Duke SEC Documents complied as
to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC
with respect thereto, were prepared in accordance with GAAP
applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Rule 10-01 of Regulation
S-X of the SEC) and fairly present in accordance with applicable
requirements of GAAP (subject, in the case of the unaudited
statements, to normal, recurring adjustments, none of which will
be material) the consolidated financial position of Duke and its
consolidated subsidiaries as of their respective dates and the
consolidated results of operations and the consolidated cash
flows of Duke and its consolidated subsidiaries for the periods
presented therein.
6.5. Information Supplied. None of the information supplied
or to be supplied by Duke for inclusion or incorporation by
reference in the S-4 will, at the time the S-4 becomes effective
under the Securities Act or at the Effective Time, contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading, and none of the information
supplied or to be supplied by Duke and included or incorporated
by reference in the Joint Proxy Statement will, at the date
mailed to the shareholders of Duke and the stockholders of
PanEnergy or at the time of the meeting of such shareholders or
stockholders to be held in connection with the Merger or at the
Effective Time, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. If
at any time prior to the Effective Time any event with respect to
Duke or any of its Subsidiaries, or with respect to other
information supplied by Duke for inclusion in the Joint Proxy
Statement
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or S-4, shall occur which is required to be described in an
amendment of, or a supplement to, the Joint Proxy Statement or
the S-4, such event shall be so described, and such amendment or
supplement shall be promptly filed with the SEC and, as required
by law, disseminated to the shareholders of Duke. The Joint
Proxy Statement, insofar as it relates to Duke or its
Subsidiaries or other information supplied by Duke for inclusion
therein, will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations
thereunder.
6.6. Absence of Certain Changes or Events. Except as
disclosed in, or reflected in the financial statements included
in, the Duke SEC Documents, or except as contemplated by this
Agreement, from December 31, 1995 through the date hereof , each
of Duke, its Subsidiaries, and, to Duke's knowledge, its Joint
Ventures has conducted its business only in the ordinary course
of business consistent with past practice and there has not been:
(i) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with
respect to (x) any shares of Duke's capital stock, except for
regular quarterly cash dividends consistent with past practice on
Duke Common Stock with usual record and payment dates for such
dividends, (y) any shares of Duke Preferred Stock, except for
regular cash dividends pursuant to the terms of such series of
Duke Preferred Stock with usual record and payment dates for such
dividends or (z) any shares of Duke Preferred Stock A, except for
regular cash dividends pursuant to the terms of such series of
Duke Preferred Stock with usual record and payment dates for such
dividends; (ii) any repurchase, redemption or other acquisition
by Duke or any Subsidiary of Duke of any outstanding shares of
capital stock or other equity securities of, or other ownership
interests in, Duke or any Subsidiary of Duke, except pursuant to
Duke's Common Stock repurchase program publicly announced by Duke
on March 12, 1996 (the "Duke Stock Repurchase Program") or in
accordance with the terms of the Duke Stock Plans or the Duke
Benefit Plans as defined in Section 6.12(a); (iii) any material
change in any method of accounting or accounting practice by Duke
or any Subsidiary of Duke; or (iv) any other transaction,
commitment, dispute or other event or condition (financial or
otherwise) of any character (whether or not in the ordinary
course of business) that could reasonably be expected to have a
Material Adverse Effect on Duke.
6.7. No Undisclosed Material Liabilities. Except as
disclosed in the Duke SEC Documents, as of the date hereof, there
are no liabilities or obligations of Duke, any of its
Subsidiaries or, to Duke's knowledge, any of its Joint Ventures
of any kind whatsoever, whether accrued, contingent or otherwise,
that would constitute, and there have been no events, changes or
effects with respect to
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Duke, any of its Subsidiaries or, to Duke's knowledge, any of its
Joint Ventures constituting or which are reasonably likely to
constitute, whether individually or in the aggregate, a Material
Adverse Effect on Duke.
6.8. No Default. Neither Duke, nor any of its Subsidiaries
nor, to Duke's knowledge, any of its Joint Ventures is in default
or violation (and no event has occurred which, with notice or the
lapse of time or both, would constitute a default or violation)
of any term, condition or provision of (i) their respective
charters, bylaws or other governing documents, (ii) any note,
bond, mortgage, indenture, license, agreement or other instrument
or obligation to which Duke, any of its Subsidiaries, or to
Duke's knowledge, any of its Joint Ventures is now a party or by
which Duke, any of its Subsidiaries or, to Duke's knowledge, any
of its Joint Ventures or any of their respective properties or
assets may be bound or (iii) any order, writ, injunction, decree,
statute, rule or regulation applicable to Duke, any of its
Subsidiaries or, to Duke's knowledge, any of its Joint Ventures,
except in the case of (ii) and (iii) for defaults or violations
which in the aggregate would not have a Material Adverse Effect
on Duke.
6.9. Compliance with Applicable Laws. Duke and its
Subsidiaries and, to Duke's knowledge, its Joint Ventures hold
all permits, licenses, variances, exemptions, orders, franchises,
consents and approvals of all Governmental Entities necessary for
them to own, lease and operate their properties and assets, and
to lawfully conduct their respective businesses (the "Duke
Permits"), except where the failure so to hold would not have a
Material Adverse Effect on Duke. Duke and its Subsidiaries and,
to Duke's knowledge, its Joint Ventures are in compliance with
the terms of the Duke Permits, except where the failure so to
comply would not have a Material Adverse Effect on Duke. Except
as disclosed in the Duke SEC Documents, the businesses of Duke,
its Subsidiaries and, to Duke's knowledge, its Joint Ventures are
not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity, except for possible
violations which would not have a Material Adverse Effect on
Duke. No action, proceeding, investigation or review of any
Governmental Entity with respect to Duke, any of its Subsidiaries
or, to Duke's knowledge, any of its Joint Ventures is pending,
and, to Duke's knowledge, no investigation or review by any
Governmental Entity with respect to Duke, any of its Subsidiaries
or any of its Joint Ventures is threatened which would, or would
be reasonably likely to, have a Material Adverse Effect on Duke.
6.10. Litigation. Except as disclosed in the Duke SEC
Documents or as set forth in Section 6.10 of the Duke
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Disclosure Schedule, there is no suit, action or proceeding
pending, or, to the knowledge of Duke, threatened against or
affecting Duke, any of its Subsidiaries, or any of its Joint
Ventures ("Duke Litigation") and Duke, its Subsidiaries and, to
Duke's knowledge, its Joint Ventures have no knowledge of any
facts that are likely to give rise to any Duke Litigation, that,
individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect on Duke or its ability to consummate the
transactions contemplated by this Agreement, nor are there any
judgments, decrees, injunctions, rules or orders of any
Governmental Entity or arbitrator outstanding against Duke, any
of its Subsidiaries or, to Duke's knowledge, any of its Joint
Ventures ("Duke Orders") that are, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on
Duke or its ability to consummate the transactions contemplated
by this Agreement.
6.11. Tax Matters.
Except (i) as disclosed in Section 6.11 of the Duke
Disclosure Schedule or (ii) where the failure of the following
representations to be true would not, either individually or in
the aggregate, have a Material Adverse Effect on Duke:
(a) Filing of Timely Tax Returns. All material Tax Returns
required to be filed by Duke and each of its Subsidiaries under
applicable law have been (and, as to Tax Returns not filed as of
the date hereof, will be) filed on a timely basis. All such Tax
Returns were and are in all material respects (and, as to Tax
Returns not filed as of the date hereof, will be) true, complete
and correct.
(b) Payment of Taxes. Duke and each of its Subsidiaries
have, within the time and in the manner prescribed by law, paid
(and until the Closing Date will pay within the time and in the
manner prescribed by law) all material Taxes that are currently
due and payable except for those being contested in good faith or
for which adequate reserves have been established. No written
claim (and, to Duke's knowledge, no other claim) has ever been
made by an authority in a jurisdiction where any of Duke and its
Subsidiaries does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction.
(c) Tax Reserves. Except as previously disclosed by Duke
to PanEnergy, Duke and its Subsidiaries have established (and
until the Closing Date will maintain) on their books and records
(i) reserves adequate to pay all material Taxes and all
deficiencies in material Taxes asserted, proposed or threatened
against Duke or its
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Subsidiaries and (ii) reserves for deferred income taxes, in each
case in accordance with GAAP.
(d) Tax Liens. There are no Tax liens upon the assets of
Duke or any of its Subsidiaries except liens for Taxes not yet
due.
(e) Withholding Taxes. Duke and each of its Subsidiaries
have complied (and until the Closing Date will comply) in all
material respects with the provisions of the Code relating to the
withholding of Taxes, including, without limitation, the
withholding and reporting requirements under Sections 1441
through 1464, 3401 through 3406, and 6041 through 6049 of the
Code, as well as any similar provisions under any other laws, and
have, within the time and in the manner prescribed by law,
withheld from employee wages and paid over to the proper
governmental authorities all material amounts required.
(f) Extensions of Time for Filing Tax Returns. Neither
Duke nor any of its Subsidiaries has requested any extension of
time within which to file any Tax Return, which Tax Return has
not since been filed.
(g) Waivers of Statute of Limitations. Neither Duke nor
any of its Subsidiaries has executed any outstanding waivers or
comparable consents regarding the application of the statute of
limitations with respect to any Taxes or Tax Returns.
(h) Expiration of Statute of Limitations. The statute of
limitations for the assessment of all material Taxes has expired
for all applicable material Tax Returns of Duke and each of its
Subsidiaries or those Tax Returns have been examined by the
appropriate taxing authorities for all periods through the date
hereof, and no deficiency for any material Taxes has been
proposed, asserted or assessed (or, to Duke's knowledge,
threatened) against Duke or any of its Subsidiaries that has not
been resolved and paid in full or previously disclosed by Duke to
PanEnergy.
(i) Audit, Administrative and Court Proceedings. No audits
or other administrative proceedings or court proceedings are
presently pending with regard to any material Taxes or material
Tax Returns of Duke or any of its Subsidiaries. Neither Duke nor
any of its Subsidiaries has any knowledge of any threatened
action, audit or administrative or court proceeding with respect
to any such Taxes or Tax Returns. Further, to the best of the
knowledge of Duke, no state of facts exists or has existed which
would constitute grounds for the assessment of any material
liability for Taxes with respect to the periods which have not
been audited by the IRS or other taxing authority.
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(j) Tax Rulings. Neither Duke nor any of its Subsidiaries
has received a Tax Ruling or entered into a Closing Agreement
with any taxing authority that would have a continuing material
adverse effect after the Closing Date.
(k) Availability of Tax Returns. To the extent not
previously provided, as soon as practicable after the date
hereof, Duke and its Subsidiaries will make available to
PanEnergy complete and accurate copies of such of the following
materials as PanEnergy may reasonably request: (i) material Tax
Returns, and any amendments thereto, filed by Duke or any of its
Subsidiaries since January 1, 1994, (ii) audit reports received
from any taxing authority relating to any material Tax Return
filed by Duke or any of its Subsidiaries and (iii) Closing
Agreements entered into by Duke or any of its Subsidiaries with
any taxing authority.
(l) Tax Sharing Agreements. Neither Duke nor any of its
Subsidiaries is a party to any Tax allocation or sharing
agreement with any person other than Duke and its Subsidiaries.
(m) Liability for Others. Neither Duke nor any of its
Subsidiaries has any liability for Taxes of any person other than
Duke and its Subsidiaries under Treasury Regulations Section
1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor, by contract or otherwise.
(n) Section 341(f). Neither Duke nor any of its
Subsidiaries has filed (or will file prior to the Closing) a
consent pursuant to Section 341(f) of the Code or has agreed to
have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as that term is defined in Section
341(f)(4) of the Code) owned by Duke or any of its Subsidiaries.
(o) Section 168. No property of Duke or any of its
Subsidiaries is property that Duke or any such Subsidiary or any
party to this transaction is or will be required to treat as
being owned by another person pursuant to the provisions of
Section 168(f)(8) of the Code (as in effect prior to its
amendment by the Tax Reform Act of 1986) or is "tax-exempt use
property" within the meaning of Section 168 of the Code.
(p) Section 481 Adjustments. Neither Duke nor any of its
Subsidiaries is required to include in income any adjustment
pursuant to Section 481(a) of the Code by reason of a voluntary
change in accounting method initiated by Duke or any of its
Subsidiaries, and to the best of the knowledge of Duke, the IRS
has not proposed any such adjustment or change in accounting
method.
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(q) Tax-Exempt Interest. None of the assets of Duke or its
Subsidiaries directly or indirectly secures any debt the interest
on which is tax exempt under Section 103(a) of the Code.
(r) Sections 6661 and 6662. All transactions that could
give rise to an understatement of federal income tax (within the
meaning of Section 6661 of the Code for Tax Returns filed on or
before December 31, 1989, and within the meaning of Section 6662
of the Code for tax returns filed after December 31, 1989) have
been adequately disclosed (or, with respect to Tax Returns not
yet filed will be adequately disclosed) on the Tax Returns of
Duke and its Subsidiaries in accordance with Section
6661(b)(2)(B) of the Code for Tax Returns filed on or prior to
December 31, 1989, and in accordance with Section 6662(d)(2)(B)
of the Code for Tax Returns filed after December 31, 1989.
(s) Section 280G. Neither Duke nor any of its Subsidiaries
is a party to any agreement, contract, or arrangement that could
result, either directly or indirectly, on account of the
transactions contemplated hereunder, separately or in the
aggregate, in the payment of any "excess parachute payments"
within the meaning of Section 280G of the Code (except for such
payments as may be payable pursuant to certain provisions in
contracts contemplated by Section 8.16).
(t) Acquisition Indebtedness. No indebtedness of Duke or
any of its Subsidiaries is "corporate acquisition indebtedness"
within the meaning of Section 279(b) of the Code.
(u) NOLs. As of September 30, 1996, Duke and its
Subsidiaries had net operating loss carryovers available to
offset future income as set forth in Section 6.11(u) of the Duke
Disclosure Schedule. Section 6.11(u) of the Duke Disclosure
Schedule sets forth the amount of and year of expiration of each
company's net operating loss carryovers.
(v) Credit Carryover. As of September 30, 1996, Duke and
its Subsidiaries had tax credit carryovers available to offset
future tax liability as set forth in Section 6.11(v) of the Duke
Disclosure Schedule. Section 6.11(v) of the Duke Disclosure
Schedule sets forth the amount and year of expiration of each
company's tax credit carryovers.
(w) The Merger. Neither Duke nor any of its Subsidiaries
has taken any action or has any knowledge of any fact or
circumstance that would, or would be reasonably likely to,
adversely affect the status of the Merger as a reorganization
under Section 368(a) of the Code.
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6.12. Employee Benefits; Labor Matters.
(a) Except as disclosed in the Duke SEC Documents, as set
forth in Section 6.12(a) of the Duke Disclosure Schedule, or as
would not have a Material Adverse Effect on Duke, (i) all
employee benefit plans, policies, practices, arrangements and
programs maintained for the benefit of the current or former
employees or directors of Duke or any of its Subsidiaries ("Duke
Personnel") that are sponsored, maintained or contributed to by
Duke or any of its Subsidiaries, or with respect to which Duke or
any of its Subsidiaries has incurred or could be reasonably
expected to incur any liability, including without limitation any
such plan that is an "employee benefit plan" as defined in
Section 3(3) of ERISA ("Duke Benefit Plans"), are in compliance
with all applicable requirements of law, including ERISA and the
Code, and have been administered and operated in compliance with
their terms, and (ii) neither Duke nor any of its Subsidiaries
has any liabilities or obligations with respect to any such Duke
Benefit Plans or any employee benefit plan which is not a Duke
Benefit Plan because (x) such plan has been terminated and/or (y)
such plan is or was maintained or contributed to by any entity
(other than a Subsidiary of Duke) required to be aggregated with
Duke pursuant to Section 414 of the Code or Section 4001(b) of
ERISA, whether accrued, contingent or otherwise, nor, to the
knowledge of Duke, are any such liabilities or obligations
expected to be incurred.
(b) Except as set forth in Section 6.12(b) of the Duke
Disclosure Schedule, the execution of, and performance of the
transactions contemplated in, this Agreement will not (either
alone or upon the occurrence of any additional or subsequent
events) constitute an event under any plan, policy, arrangement
or agreement, including but not limited to the Duke Benefit
Plans, or any trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any Duke
Personnel.
(c) Except as set forth in Schedule 6.12(c) of the Duke
Disclosure Schedule, neither Duke nor any of its Subsidiaries is
a party to any collective bargaining agreement or other labor
agreement with any union or labor organization, nor does Duke
know of any activity or proceeding of any labor organization (or
representative thereof) or employee group to represent or
organize any Duke Personnel. Except as set forth in Section
6.12(c) of the Duke Disclosure Schedule, (i) there is no unfair
labor practice, employment discrimination or other complaint
against Duke pending, or, to the knowledge of Duke,
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threatened, which has or could reasonably be expected to have a
Material Adverse Effect on Duke and (ii) there is no strike,
dispute, slowdown, work stoppage or lockout pending, or, to the
knowledge of Duke, threatened, against or involving Duke or any
of its Subsidiaries which has or could reasonably be expected to
have, a Material Adverse Effect on Duke.
6.13. Environmental Matters.
(a) Compliance. (i) Except as set forth in the Duke SEC
Documents, Duke and each of its Environmental Subsidiaries and
any real or personal property (including, without limitation, any
vessel) that any of them owns, operates, occupies, leases or
manages, in whole or in part, directly or indirectly, are in
compliance with all applicable Environmental Laws, except where
the failure to be so in compliance would not be reasonably likely
to have a Material Adverse Effect on Duke.
(ii) Except as set forth in the Duke SEC Documents, neither
Duke nor any of its Environmental Subsidiaries has received any
written communication from any person or Governmental Entity that
alleges that Duke or any of its Environmental Subsidiaries or any
real or personal property (including, without limitation, any
vessel) that any of them owns, operates, occupies, leases or
manages, in whole or in part, directly or indirectly, is not in
compliance with applicable Environmental Laws, except where the
failure to be so in compliance would not be reasonably likely to
have a Material Adverse Effect on Duke.
(b) Environmental Permits. Except as set forth in the Duke
SEC Documents, Duke and each of its Environmental Subsidiaries
has obtained, and will maintain through the Closing Date, all
Environmental Permits necessary for the construction and
operation of their facilities (including, without limitation, any
vessel) and the conduct of their operations, and all such
Environmental Permits are in good standing or, where applicable,
an application or renewal application has been timely filed, is
pending and agency approval is expected to be obtained, and Duke
and its Environmental Subsidiaries are in compliance with all
terms and conditions of all such Environmental Permits and are
not required to make any expenditure in order to obtain or renew
any Environmental Permits, except where the failure to obtain or
be in compliance with such Environmental Permits and the
requirement to make such expenditures would not be reasonably
likely to have a Material Adverse Effect on Duke.
(c) Environmental Claims. Except as set forth in the Duke
SEC Documents, there is no Environmental Claim
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pending or, to the knowledge of Duke and its Environmental
Subsidiaries, threatened:
(i) against Duke or any of its Environmental Subsidiaries,
(ii) against any person or entity whose liability for, or
whose obligation to satisfy, an Environmental Claim Duke or any
of its Environmental Subsidiaries has retained, assumed or
guaranteed, either contractually or by operation of law, or
(iii) against any real or personal property (including,
without limitation, any vessel) or operations that Duke or any of
its Environmental Subsidiaries owns, operates, occupies, leases
or manages, in whole or in part, directly or indirectly, that
would be reasonably likely to have a Material Adverse Effect on
Duke.
(d) Releases. Except as set forth in the Duke SEC
Documents, and except for Releases of Hazardous Materials the
liability for which would not be reasonably likely to have a
Material Adverse Effect on Duke, Duke has no knowledge of any
Release of any Hazardous Materials that has occurred on, at, from
or to any of the real or personal property (including, without
limitation, any vessel) owned, operated, occupied, leased or
managed by Duke or any Environmental Subsidiary of Duke or any
predecessor of Duke or any Environmental Subsidiary of Duke or
any other property which requires investigation, assessment,
monitoring, remediation, response, removal, corrective action,
cleanup or any similar action under Environmental Laws.
(e) Disclosure. Duke has disclosed to PanEnergy all
material facts that Duke reasonably believes would be reasonably
likely to form the basis of a Material Adverse Effect on Duke
arising from (x) the cost of pollution control equipment
currently required or known to be required in the future, (y)
investigation, assessment, monitoring, remediation, response,
removal, corrective action, cleanup, or remediation costs and any
related costs currently required or known to be required in the
future, or (z) any other environmental, health or safety matter
affecting Duke or its Environmental Subsidiaries.
6.14. Insurance. Each of Duke and its Subsidiaries is, and
has been continuously since December 31, 1993, insured by
reputable and financially responsible insurers in such amounts
and against such risks and losses as are customary for companies
conducting their respective
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businesses during such time period. Neither Duke nor any of its
Subsidiaries has received any notice of cancellation or
termination with respect to any material insurance policy thereof
and neither Duke nor any of its Subsidiaries has received notice
that any such policy is invalid or unenforceable.
6.15. Contracts. Duke has set forth in Section 6.15 of the
Duke Disclosure Schedule a list of all contracts to which Duke or
any of its Subsidiaries is a party as of the date hereof, and
which, in the reasonable judgment of Duke, is likely (on an
annualized basis) in the fiscal year ending December 31, 1996 to
(i) provide gross revenues in excess of the Duke 1995 Revenue
Threshold, (ii) require payments in excess of the Duke 1995
Revenue Threshold, or (iii) provide a contribution to the gross
margin in excess of the Duke 1995 Margin Threshold. As used
herein, "Duke 1995 Revenue Threshold" means an amount equal to 5%
of Duke's gross revenues for the fiscal year ended December 31,
1995, and "Duke 1995 Margin Threshold" means an amount equal to
5% of Duke's gross margin for the fiscal year ended December 31,
1995.
6.16. Regulatory Proceedings. Except as set forth in the
Duke SEC Documents, neither Duke nor any of its Subsidiaries nor,
to Duke's knowledge, any of its Joint Ventures, all or part of
whose rates or services are regulated by a Governmental Entity,
is a party to any proceeding before a court or other Governmental
Entity which is reasonably likely to result in orders having a
Material Adverse Effect on Duke nor has any such proceeding been
noticed.
6.17. Regulation as a Utility. (a) Duke is a public
utility holding company as defined in the 1935 Act exempt from
all provisions of the 1935 Act, except Section 9(a)(2), pursuant
to Section 3(a)(2) of the 1935 Act and is a "public utility
company" within the meaning of Section 2(a)(5) of the 1935 Act.
With the exception of Nantahala Power and Light Company ("NP&L"),
no Subsidiary or Joint Venture of Duke is a "public utility
holding company" or a "public utility company" within the meaning
of Section 2(a)(5) of the 1935 Act.
(b) Duke is regulated as a public utility in the States of
North Carolina and South Carolina and in no other states, and
NP&L is regulated as a public utility in the State of North
Carolina and in no other states. Except as set forth in Section
6.17(b) of the Duke Disclosure Schedule, neither Duke nor any
"subsidiary company" or "affiliate" (as each such term is defined
in the 1935 Act) of Duke is subject to regulation as a public
utility or public service company (or similar designation) by any
other state in the United States or any foreign country.
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6.18. Opinions of Financial Advisors. The Board of Directors
of Duke has received the opinions of Morgan Stanley & Co.
Incorporated ("Morgan Stanley") and Barr Devlin & Co.
Incorporated ("Barr Devlin"), dated the date hereof, to the
effect that, as of the date hereof, the Exchange Ratio is fair
from a financial point of view to Duke.
6.19. Vote Required. Approval by a majority of the votes
cast on the Duke Vote Matter by the holders of Duke Common Stock
(provided that the total vote cast represents a majority of the
outstanding shares of Duke Common Stock entitled to vote thereon)
is the only vote of the holders of any class or series of Duke
capital stock necessary to approve the Duke Vote Matter.
6.20. Beneficial Ownership of PanEnergy Common Stock.
Neither Duke nor any of its Subsidiaries "beneficially owns" (as
defined in Rule 13d-3 under the Exchange Act) any outstanding
shares of PanEnergy Common Stock.
6.21. Brokers. Except for the fees and expenses payable to
Morgan Stanley and Barr Devlin, which fees are reflected in their
agreements with Duke (copies of which have been delivered to
PanEnergy), no broker, investment banker or other person is
entitled to any broker's, finder's or other similar fee or
commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of
Duke.
6.22. Properties. (a) Duke has good title (fee simple in
the case of real property other than easements and rights of way)
to all properties reflected in the balance sheet contained in
Duke's most recent Report on Form 10-Q filed prior to the date
hereof, as owned by it and which have not been disposed of in the
ordinary course of business, which properties include all
properties owned at that date upon which the First and Refunding
Mortgage dated as of December 1, 1927 between Duke and The Chase
Manhattan Bank, as successor Trustee, as supplemented and amended
(the "Mortgage") purports to create a lien (except such as have
been released pursuant to the terms of the Mortgage), subject
only (i) to the lien of the Mortgage, (ii) to permitted
encumbrances as defined in the Mortgage, (iii) to minor
exceptions and defects which do not, in the aggregate, materially
interfere with the use by Duke of such properties for the
purposes for which they are held, materially detract from the
value of said properties or in any material way impair the
security afforded by the Mortgage, and (iv) in the case of Duke's
existing hydroelectric plants, to provisions of licenses issued
by FERC and to the provisions of the Power Act. All buildings,
and all fixtures, equipment and other property and assets, which
are
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material to the business of Duke and which are held under leases
by Duke are held under valid instruments enforceable by Duke in
accordance with their respective terms, except as the
enforceability thereof may be affected by bankruptcy, insolvency
or other laws of general applicability affecting the rights of
creditors generally or principles of equity.
(b) The electric generating stations of Duke (the "Duke
Generating Stations") have been maintained in good repair and
working order consistent with customary practice in the industry,
except where the failure so to maintain the Duke Generating
Stations would not, or would not be likely to, whether
individually or in the aggregate, have a Material Adverse Effect
on Duke. Duke has made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as may be
necessary so that the operations carried on in connection
therewith may be conducted at all times in accordance with
industry standards and all applicable legal requirements, except
where the failure so to repair, renew, replace, better or improve
the Duke Generating Stations would not, or would not be likely
to, whether individually or in the aggregate, have a Material
Adverse Effect on Duke. Duke has no knowledge of any conditions
existing in respect of the Duke Generating Stations which would
require Duke to incur any capital expenditures relating thereto
which are materially in excess of the amounts budgeted by Duke
(as reflected in existing budgets of Duke, copies of which were
delivered to PanEnergy) for maintenance, repair or renewal of the
Duke Generating Stations.
6.23. Franchises, Licenses, Etc. Duke holds valid and
subsisting franchises, licenses and permits in all communities
wherein it operates its properties, which are free from unduly
burdensome restrictions, are individually satisfactory and vest
in Duke adequate authority to operate its public utility system
therein, except that in a few municipalities Duke is operating
either without franchises or with franchises the validity of
which might possibly be called into question. The franchises,
licenses and permits relating to Duke's public utility business,
as a system, are satisfactory for the adequate conduct of the
business of Duke in the territory which it serves, the rights of
Duke to maintain transmission lines through unincorporated
communities and over public lands not located in incorporated
communities and over private rights of way are, as a system,
satisfactory for the adequate conduct of the business of Duke in
the territory which it serves, and, as a public utility
corporation operating under the laws of the States of North
Carolina and South Carolina, Duke has adequate rights to operate
its system.
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6.24. Nuclear Operations. Except as set forth in Section
6.24 of the Duke Disclosure Schedule, to the knowledge of Duke,
the operations of its Nuclear Steam Generating Stations ("Nuclear
Stations") are and have at all times been conducted in material
compliance with applicable health, safety, regulatory and other
legal requirements. To the knowledge of Duke, the Nuclear
Stations maintain emergency plans designed to respond to an
unplanned release therefrom of radioactive materials into the
environment and liability insurance to the extent required by
law, and such further insurance (other than liability insurance)
as is consistent with Duke's view of the risks inherent in the
operation of a nuclear power facility. To the knowledge of Duke,
plans for the decommissioning of each of the Nuclear Stations and
for the short-term storage of spent nuclear fuel conform with
applicable regulatory or other legal requirements, and such plans
have at all times been funded to the extent required by law,
which is consistent with Duke's reasonable budget projections for
such plans.
6.25. Duke/Louis Dreyfus L.L.C. ("D/LD") Obligations. The
exposure of Duke and its Subsidiaries with respect to D/LD's net
position resulting from all physical commodity transactions,
exchange traded futures and options and over- the-counter
derivative instruments is not, to Duke's knowledge, on the date
hereof, material to Duke and will not, after the date hereof,
result in a Material Adverse Effect on Duke.
6.26. Representations with Respect to Merger Sub. (a) Merger
Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Merger Sub was
formed solely for the purpose of engaging in the transactions
contemplated by this Agreement, has engaged in no other business
activities, has no obligations or liabilities, has no other
assets and has no subsidiaries.
(b) As of the date hereof, the authorized capital stock of
Merger Sub consists of 1,000 shares of common stock, par value
$1.00 per share, of Merger Sub, all of which are validly issued,
fully paid and nonassessable and are owned by Duke.
(c) Merger Sub has all requisite corporate power and
authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation by Merger Sub of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Merger Sub. This
Agreement has been duly executed and delivered by Merger Sub and,
assuming this Agreement constitutes the valid and binding
obligation of Duke and
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PanEnergy, constitutes a valid and binding obligation of Merger
Sub enforceable in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting
creditors' rights and to general principles of equity.
ARTICLE 7
CONDUCT OF BUSINESS PENDING THE MERGER
7.1. Conduct of Business of PanEnergy Pending the Merger.
During the period from the date of this Agreement and continuing
until the Effective Time, PanEnergy agrees as to itself and its
Subsidiaries that (except as expressly contemplated or permitted
by this Agreement, as provided in the PanEnergy Disclosure
Schedule (each of which exceptions shall specifically identify
the relevant Section hereof to which it relates) or to the extent
that Duke shall otherwise consent in writing):
(a) Ordinary Course of Business. Each of PanEnergy and its
Subsidiaries shall carry on its businesses (i) in the usual,
regular and ordinary course consistent with past practice or (ii)
in accordance with the capital budget and business plan of
PanEnergy and its Subsidiaries delivered by PanEnergy to Duke
prior to the date hereof (the "PanEnergy Capital Budget") and
shall use all commercially reasonable efforts to preserve intact
its present business organizations and goodwill, keep available
the services of its current officers and employees, endeavor to
preserve its relationships with customers, suppliers and others
having business dealings with it, maintain and keep its material
properties and assets in as good repair and condition as at
present, subject to ordinary wear and tear, and maintain supplies
and inventories in quantities consistent with past practice, and,
with respect to wholesale power and energy trading and
transactions, comply with the risk parameters established from
time to time by PanEnergy's Risk Management Committee, all to the
end that its goodwill and ongoing businesses shall not be
impaired in any material respect at the Effective Time.
Notwithstanding the foregoing, the risk parameters established by
PanEnergy's Risk Management Committee may be revised by PanEnergy
only after consultation by PanEnergy with Duke.
(b) Dividends; Changes in Stock. PanEnergy shall not, and
it shall not permit any of its Subsidiaries to: (i) declare or
pay any dividends on or make other distributions in respect of
any of its capital stock or any other interests specified in
Section 5.2 or set forth in Section 5.2 of the PanEnergy
Disclosure Schedule, except for
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the declaration and payment, with Record Dates and usual payment
dates, of regular quarterly cash dividends on PanEnergy Common
Stock not in excess, in any fiscal year, of the dividends for the
prior fiscal year increased at a rate consistent with past
practice, dividends payable by a Subsidiary of PanEnergy to
PanEnergy or to a wholly-owned Subsidiary of PanEnergy, or
dividends by a less than wholly-owned Subsidiary consistent with
past practice; (ii) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of or in substitution
for shares of its capital stock; or (iii) repurchase, redeem or
otherwise acquire, or permit any of its Subsidiaries to purchase,
redeem or otherwise acquire, any shares of its capital stock or
Voting Debt or other voting securities or any securities
convertible into, or any rights, warrants, calls, subscriptions
or options to acquire, shares of capital stock or Voting Debt or
other voting securities of PanEnergy or any of its Subsidiaries,
except (x) pursuant to the terms of the PanEnergy Stock Plans,
the PanEnergy Benefit Plans or the PanEnergy DRIP, as in effect
on the date hereof, in the ordinary course of business consistent
with past practice or (y) as required by the terms of any such
securities outstanding on the date hereof. As used herein,
"Record Date" means each February 15, May 15, August 15 or
November 15 (or, if such date is not a business day, the first
business day immediately following such date).
(c) Issuance of Securities. PanEnergy shall not, and it
shall not permit any of its Subsidiaries to, issue, deliver,
sell, pledge, dispose of or encumber, or authorize or propose to
issue, deliver, sell, pledge, dispose of or encumber, any shares
of its capital stock of any class, any Voting Debt or other
voting securities or any securities convertible into, or any
rights, warrants, calls, subscriptions or options to acquire, any
shares of capital stock, Voting Debt or other voting securities
or convertible securities of PanEnergy or any of its
Subsidiaries, other than: (i) the issuance of PanEnergy Common
Stock pursuant to stock grants or stock-based awards made in the
ordinary course of business consistent with past practice
pursuant to the PanEnergy Stock Plans or pursuant to the
PanEnergy DRIP, in each case in accordance with the present terms
of such plans, (ii) the issuance of PanEnergy Common Stock upon
conversion of any Convertible Notes, or (iii) the issuance of
capital stock of a Subsidiary of PanEnergy to PanEnergy or to a
wholly-owned Subsidiary of PanEnergy.
(d) Capital Expenditures. Except for capital expenditures
that PanEnergy or any of its Subsidiaries are required to make
under applicable law, PanEnergy shall not, nor shall PanEnergy
permit any of its Subsidiaries to, make capital expenditures
(including capital lease obligations)
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other than capital expenditures to repair or replace facilities
destroyed or damaged due to casualty or accident (whether or not
covered by insurance), in excess of such aggregate amount as is
set forth in the PanEnergy Capital Budget.
(e) No Acquisitions. Except for acquisitions resulting
from capital expenditures permitted pursuant to Section 7.1(d) or
as to which the total consideration is not in excess of $100
million individually (or in respect of a series of related
transactions) or $200 million in the aggregate, PanEnergy shall
not, and it shall not permit any of its Subsidiaries to, acquire
or agree to acquire by merging or consolidating with, or by
purchasing an equity interest in or a portion of the assets of,
or by any other manner, any business or any corporation,
partnership, association or other business organization or
division thereof. PanEnergy may not acquire any electric utility
assets or any retail gas assets or any properties relating
thereto unless (x) PanEnergy consults with Duke prior to any such
acquisition and (y) such acquisition will not, in the opinion of
Duke, violate the covenant contained in Section 7.1(q).
(f) No Dispositions. Other than dispositions as to which
the aggregate market value is not in excess of $50 million
individually (or in respect of a series of related transactions)
or $100 million in the aggregate (exclusive of like-kind
exchanges with respect to which the aggregate market value shall
not be in excess of $100 million), PanEnergy shall not, and it
shall not permit any of its Subsidiaries to, sell, lease (whether
such lease is an operating or capital lease), encumber or
otherwise dispose of, or agree to sell, lease, encumber or
otherwise dispose of, any of its assets.
(g) No Dissolution, Etc. PanEnergy shall not authorize,
recommend, propose or announce an intention to adopt a plan of
complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other
reorganization of PanEnergy or any of its Subsidiaries; provided
that nothing in this Section 7.1(g) shall preclude any such
transaction which involves only wholly-owned Subsidiaries of
PanEnergy or the transactions permitted by Section 7.1(f) hereof.
(h) Certain Employee Matters. Except as may be required by
applicable law or any agreement to which PanEnergy or any of its
Subsidiaries is a party on the date hereof or as expressly
contemplated by this Agreement or as set forth in Section 7.1(h)
of the PanEnergy Disclosure Schedule, PanEnergy shall not, nor
shall it permit any of its Subsidiaries to:
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(i) increase the amount of (or accelerate the payment or
vesting of) any benefit or amount payable under, any employee
benefit plan or any other contract, agreement, commitment,
arrangement, plan or policy providing for compensation or
benefits to any former, present or future director, officer or
employee of PanEnergy or any of its Subsidiaries and maintained
by, contributed to or entered into by, PanEnergy or any of its
Subsidiaries on or prior to the date hereof, including, without
limitation, any PanEnergy Benefit Plan outstanding on the date
hereof;
(ii) increase (or enter into any contract, agreement,
commitment or arrangement to increase in any manner) the
compensation or fringe benefits, or otherwise to extend, expand
or enhance the engagement, employment or any related rights, of
any former, present or future director, officer or employee of
PanEnergy or any of its Subsidiaries, except for (x) normal
increases in the ordinary course of business consistent with past
practice, provided that the overall compensation budget shall not
increase by more than 3.5% on an annual basis or (y) increases
required under applicable law; or
(iii) adopt, establish, enter into, implement or amend
any plan, policy, employment agreement, severance agreement, or
other contract, agreement or other arrangement providing for any
form of benefits or other compensation to any former, present or
future director, officer or employee of PanEnergy or any of its
Subsidiaries, other than in the ordinary course of business
consistent with past practice.
(i) Indebtedness; Leases. PanEnergy shall not, nor
shall PanEnergy permit any of its Subsidiaries to, (A) incur any
indebtedness for borrowed money or guarantee, or enter into a
"keepwell" or similar arrangement with respect to, any such
indebtedness (including, without limitation, issuances or sales
of any debt securities or warrants or rights to acquire any debt
securities of PanEnergy or any of its Subsidiaries), other than
(x) long-term indebtedness incurred in connection with the
refinancing of existing indebtedness either at its stated
maturity or at a lower cost of funds, (y) indebtedness between
PanEnergy or any of its Subsidiaries and another of its
Subsidiaries and (z) additional indebtedness in an amount not to
exceed $1.2 billion, or (B) enter into any material operating
lease or create any mortgages, liens, security interests or other
encumbrances on the property of PanEnergy or any of its
Subsidiaries in connection with any indebtedness thereof, except
with respect to indebtedness permitted pursuant to this Section
7.1(i). The amount of short-term indebtedness incurred by
PanEnergy and its
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Subsidiaries shall not exceed 75% of the committed facilities of
PanEnergy and its Subsidiaries.
(j) Governing Documents. Neither PanEnergy nor any of its
Subsidiaries shall amend or propose to amend its certificate of
incorporation or by-laws (or similar governing documents).
(k) Accounting. PanEnergy shall not, nor shall it permit
any of its Subsidiaries to, make any changes in their accounting
methods which would be required to be disclosed under the rules
and regulations of the SEC, except as required by law, rule,
regulation or GAAP.
(l) Rate Matters. Subject to applicable law and except for
non-material filings in the ordinary course of business
consistent with past practice, PanEnergy shall consult with Duke
prior to implementing any changes in its or any of its
Subsidiaries' rates or charges (other than pass-through or
tracking rate charges under existing tariffs or rate schedules),
standards of service or accounting or executing any agreement
with respect thereto that is otherwise permitted under this
Agreement and shall, and shall cause its Subsidiaries to, deliver
to Duke a copy of each such filing or agreement at least five
days prior to the filing or execution thereof so that Duke may
comment thereon. PanEnergy shall, and shall cause its
Subsidiaries to, make all such filings only in the ordinary
course of business consistent with past practice.
(m) Contracts. Except in the ordinary course of business
consistent with past practice, PanEnergy shall not, nor shall it
permit any of its Subsidiaries to, modify, amend or terminate any
material contract or agreement of the nature required to be
disclosed in Section 5.15 of the PanEnergy Disclosure Schedule
and to which it or any of its Subsidiaries is a party or waive,
release or assign any material rights or claims under any such
contract or agreement.
(n) Insurance. PanEnergy shall, and shall cause its
Subsidiaries to, maintain with financially responsible insurance
companies (or through self-insurance) insurance in such amounts
and against such risks and losses as are customary for companies
engaged in their respective businesses.
(o) Permits. PanEnergy shall, and shall cause its
Subsidiaries to, maintain in effect all existing PanEnergy
Permits (including Environmental Permits) which are material to
their respective operations.
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(p) Discharge of Liabilities. PanEnergy shall not, nor
shall it permit any of its Subsidiaries to, pay, discharge or
satisfy any material claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or
otherwise), other than (i) the payment, discharge or
satisfaction, in the ordinary course of business consistent with
past practice (which includes the payment of final and
unappealable judgments and the refinancing of existing
indebtedness for borrowed money either at its stated maturity or
at a lower cost of funds) as required by their terms, of
liabilities reflected or reserved against in, or contemplated by,
the most recent consolidated financial statements (or the notes
thereto) of PanEnergy included in the PanEnergy SEC Documents, or
incurred in the ordinary course of business consistent with past
practice and (ii) redemption of the Convertible Notes.
(q) 1935 Act. PanEnergy shall not, and shall not permit
any of its subsidiaries to, engage in any activities which would
cause a change in its status, or that of its subsidiaries, under
the 1935 Act, or that would impair the ability of Duke to
continue to claim an exemption as of right under Rule 2 of the
1935 Act following the Merger.
(r) Tax Matters. PanEnergy shall inform Duke regarding the
progress of any material claim, action, suit, litigation,
proceeding, arbitration, investigation, audit, or controversy
relating to Taxes and shall consult with Duke before entering
into any settlements or compromises with regard to such matters.
(s) Tax Status. PanEnergy shall not, and shall not permit
any of its Subsidiaries to, take any actions which would, or
would be reasonably likely to, adversely affect the status of the
Merger as a reorganization under Section 368(a) of the Code.
(t) Other Actions. PanEnergy shall not, and shall not
permit any of its Subsidiaries to, take or fail to take any
action which would reasonably be expected to prevent or
materially impede, interfere with or delay the Merger.
(u) Agreements. PanEnergy shall not, nor shall it permit
any of its Subsidiaries to, agree in writing or otherwise take
any action inconsistent with the foregoing.
7.2. Conduct of Business of Duke Pending the Merger. During
the period from the date of this Agreement and continuing until
the Effective Time, Duke agrees as to itself and its Subsidiaries
that (except as expressly contemplated or permitted by this
Agreement, as provided in the Duke Disclosure Schedule (each of
which exceptions shall specifically identify the relevant Section
hereof to which it relates) or to the extent that PanEnergy shall
otherwise consent in writing):
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(a) Ordinary Course of Business. Each of Duke and its
Subsidiaries shall carry on its businesses (i) in the usual,
regular and ordinary course consistent with past practice or (ii)
in accordance with the capital budget of Duke delivered by Duke
to PanEnergy prior to the date hereof (the "Duke Capital Budget")
and shall use all commercially reasonable efforts to preserve
intact its present business organizations and goodwill, keep
available the services of its current officers and employees,
endeavor to preserve its relationships with customers, suppliers
and others having business dealings with it, maintain and keep
its material properties and assets in as good repair and
condition as at present, subject to ordinary wear and tear, and
maintain supplies and inventories in quantities consistent with
past practice, and, with respect to wholesale power and energy
trading and transactions, comply with prudent policies, practices
and procedures with respect to risk management and trading
limitations, all to the end that its goodwill and ongoing
businesses shall not be impaired in any material respect at the
Effective Time.
(b) Dividends; Changes in Stock. Duke shall not, and it
shall not permit any of its Subsidiaries to: (i) declare or pay
any dividends on or make other distributions in respect of any of
its capital stock or any other interests specified in Section 6.2
or set forth in Section 6.2 of the Duke Disclosure Schedule,
except for (A) the declaration and payment, with Record Dates and
usual payment dates, of regular quarterly cash dividends on Duke
Common Stock of not more than, for such fiscal year or portion
thereof, the dividends for the prior fiscal year or portion
thereof increased at a rate consistent with past practice and not
less than, for such fiscal year or portion thereof, the dividends
for the prior fiscal year or portion thereof, except that (x) the
Duke Board of Directors in good faith in the reasonable exercise
of its business judgment may determine that dividends on Duke
Common Stock shall, as a consequence of the occurrence of
unforeseen circumstances or events, be, for such fiscal year or
portion thereof, less than the dividends for the prior fiscal
year or portion thereof and (y) any dividends on Duke Common
Stock shall not be in an amount prohibited by law; (B) the
declaration and payment of regular dividends on Duke Preferred
Stock pursuant to the terms of the relevant series and (C) the
declaration and payment of regular dividends on Duke Preferred
Stock A pursuant to the terms of the relevant series; (D)
dividends payable by a Subsidiary of Duke to Duke or to a
wholly-owned Subsidiary of Duke; or (E) dividends by a less than
wholly-owned Subsidiary consistent with past practice; (ii)
split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its
capital stock; or
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(iii) repurchase, redeem or otherwise acquire, or permit any of
its Subsidiaries to purchase, redeem or otherwise acquire, any
shares of its capital stock or Voting Debt or other voting
securities or any securities convertible into, or any rights,
warrants, calls, subscriptions or options to acquire, shares of
capital stock or Voting Debt or other voting securities of Duke
or any of its Subsidiaries, except (A) pursuant to the terms of
the Duke Stock Plans or the Duke Benefit Plans made in the
ordinary course of business consistent with past practice, (B)
pursuant to the terms of the Duke Stock Repurchase Program
(subject to Section 8.18) or (C) as required by the terms of any
such securities outstanding on the date hereof.
(c) Issuance of Securities. Duke shall not, and it shall
not permit any of its Subsidiaries to, issue, deliver, sell,
pledge, dispose of or encumber, or authorize or propose to issue,
deliver, sell, pledge, dispose of or encumber, any shares of its
capital stock of any class, any Voting Debt or other voting
securities or any securities convertible into, or any rights,
warrants, calls, subscriptions or options to acquire, any shares
of capital stock, Voting Debt or other voting securities or
convertible securities of Duke or any of its Subsidiaries, other
than: (i) the issuance of Duke Common Stock under the Duke Stock
Plans or (ii) the issuance of capital stock of a Subsidiary of
Duke to Duke or to a wholly-owned Subsidiary of Duke.
(d) Capital Expenditures. Except for capital expenditures
that Duke or any of its Subsidiaries are required to make under
applicable law and capital expenditures to repair or replace
facilities destroyed or damaged due to casualty or accident
(whether or not covered by insurance), (i) Duke shall not make
capital expenditures in excess of the aggregate amount of capital
expenditures set forth in the Duke Capital Budget, and (ii) Duke
shall not permit its Subsidiaries to make capital expenditures
("Subsidiary Capital Expenditures") in excess of $200 million
individually (or in respect of a series of related capital
expenditures) or $500 million in the aggregate.
(e) No Acquisitions. Except for acquisitions by Duke
resulting from capital expenditures permitted pursuant to Section
7.2(d) or as to which the total consideration is not in excess of
(i) $200 million individually (or in respect of a series of
related transactions) or (ii) $500 million in the aggregate
(reduced by the aggregate amount of Subsidiary Capital
Expenditures that are not acquisitions), Duke shall not, and it
shall not permit any of its Subsidiaries to, acquire or agree to
acquire by merging or consolidating with, or by purchasing an
equity interest in or a portion of the assets of, or by any other
manner, any business or any corporation, partnership, association
or other business organization or division thereof. Duke may not
acquire any electric utility assets or any retail gas assets or
any properties relating thereto unless (x) Duke consults with
PanEnergy prior to any such acquisition and
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(y) such acquisition will not, in the opinion of PanEnergy,
violate the covenant contained in Section 7.2(q).
(f) No Dispositions. Other than dispositions as to which
the aggregate market value is not in excess of $150 million
individually (or in respect of a series of related transactions)
or $200 million in the aggregate (exclusive of like-kind
exchanges with respect to which the aggregate market value shall
not be in excess of $200 million), Duke shall not, and it shall
not permit any of its Subsidiaries to, sell, lease (whether such
lease is an operating or capital lease), encumber or otherwise
dispose of, or agree to sell, lease, encumber or otherwise
dispose of, any of its assets.
(g) No Dissolution, Etc. Duke shall not authorize,
recommend, propose or announce an intention to adopt a plan of
complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other
reorganization of Duke or any of its Subsidiaries; provided that
nothing in this Section 7.2(g) shall preclude any such
transaction which involves only wholly- owned Subsidiaries of
Duke or the transactions permitted by Section 7.2(f) hereof.
(h) Certain Employee Matters. Except as may be required by
applicable law or any agreement to which Duke or any of its
Subsidiaries is a party on the date hereof or as expressly
contemplated by this Agreement or as set forth in Section 7.2(h)
of the Duke Disclosure Schedule, Duke shall not, nor shall it
permit any of its Subsidiaries to:
(i) increase the amount of (or accelerate the payment
or vesting of) any benefit or amount payable under, any employee
benefit plan or any other contract, agreement, commitment,
arrangement, plan or policy providing for compensation or
benefits to any former, present or future director, officer or
employee of Duke or any of its Subsidiaries and maintained by,
contributed to or entered into by, Duke or any of its
Subsidiaries on or prior to the date hereof, including, without
limitation, any Duke Benefit Plan outstanding on the date hereof,
other than in the ordinary course of business consistent with
past practice;
(ii) increase (or enter into any contract, agreement,
commitment or arrangement to increase in any manner) the
compensation or fringe benefits, or otherwise to extend, expand
or enhance the engagement, employment or any related rights, of
any former, present or future director, officer or employee of
Duke or any of its Subsidiaries, except for (i) normal increases
in the ordinary course of business consistent with past practice
that, in the aggregate, do not result in a material increase in
benefits
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or compensation expense to Duke or any of its Subsidiaries or
(ii) increases required under applicable law; or
(iii) adopt, establish, enter into, implement or amend
any plan, policy, employment agreement, severance agreement, or
other contract, agreement or other arrangement providing for any
form of benefits or other compensation to any former, present or
future director, officer or employee of Duke or any of its
Subsidiaries, other than in the ordinary course of business
consistent with past practice.
(i) Indebtedness; Leases. Duke shall not, nor shall Duke
permit any of its Subsidiaries to, (i) incur any indebtedness for
borrowed money or guarantee, or enter into a "keepwell" or
similar arrangement with respect to, any such indebtedness
(including, without limitation, issuances or sales of any debt
securities or warrants or rights to acquire any debt securities
of Duke or any of its Subsidiaries), other than (a) long-term
indebtedness incurred in connection with the refinancing of
existing indebtedness either at its stated maturity or at a lower
cost of funds, (b) indebtedness between Duke or any of its
Subsidiaries and another of its Subsidiaries and (c) additional
indebtedness in an amount not to exceed $2 billion, or (ii) enter
into any material operating lease or create any mortgages, liens,
security interests or other encumbrances on the property of Duke
or any of its Subsidiaries in connection with any indebtedness
thereof except with respect to indebtedness permitted by this
Section 7.2(i). The amount of short-term indebtedness incurred
shall not exceed 75% of the committed facilities of Duke and its
Subsidiaries.
(j) Governing Documents. Neither Duke nor any of its
Subsidiaries shall amend or propose to amend its certificate of
incorporation or by-laws (or similar governing documents), except
with respect to matters contemplated by this Agreement.
(k) Accounting. Duke shall not, nor shall it permit any of
its Subsidiaries to, make any changes in their accounting methods
which would be required to be disclosed under the rules and
regulations of the SEC, except as required by law, rule,
regulation or GAAP.
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(l) Rate Matters. Subject to applicable law and except for
non-material filings in the ordinary course of business
consistent with past practice, Duke shall consult with PanEnergy
prior to implementing any changes in its or any of its
Subsidiaries' rates or charges (other than pass-through or
tracking rate charges under existing tariffs or rate schedules),
standards of service or accounting or executing any agreement
with respect thereto that is otherwise permitted under this
Agreement and shall, and shall cause its Subsidiaries to, deliver
to Pan Energy a copy of each such filing or agreement at least
five days prior to the filing or execution thereof so that Pan
Energy may comment thereon. Duke shall, and shall cause its
Subsidiaries to, make all such filings only in the ordinary
course of business consistent with past practice.
(m) Contracts. Except in the ordinary course of business
consistent with past practice, Duke shall not, nor shall it
permit any of its Subsidiaries to, modify, amend or terminate any
material contract or agreement of the nature required to be
disclosed in Section 6.15 of the Duke Disclosure Schedule to
which it or any of its Subsidiaries is a party or waive, release
or assign any material rights or claims under any such contract
or agreement.
(n) Insurance. Duke shall, and shall cause its
Subsidiaries to, maintain with financially responsible insurance
companies (or through self-insurance) insurance in such amounts
and against such risks and losses as are customary for companies
engaged in their respective businesses.
(o) Permits. Duke shall, and shall cause its Subsidiaries
to, maintain in effect all existing Duke Permits (including
Environmental Permits) which are material to their respective
operations.
(p) Discharge of Liabilities. Duke shall not, nor shall it
permit any of its Subsidiaries to, pay, discharge or satisfy any
material claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction, in the ordinary course of
business consistent with past practice (which includes the
payment of final and unappealable judgments and the refinancing
of existing indebtedness for borrowed money either at its stated
maturity or at a lower cost of funds) as required by their terms,
of liabilities reflected or reserved against in, or contemplated
by, the most recent consolidated financial statements (or the
notes thereto) of Duke included in Duke SEC Documents, or
incurred in the ordinary course of business consistent with past
practice.
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(q) 1935 Act. Duke shall not, and shall not permit any of
its subsidiaries to, engage in any activities which would cause a
change in its status, or that of its subsidiaries, under the 1935
Act.
(r) Tax Matters. Duke shall inform PanEnergy regarding the
progress of any material claim, action, suit, litigation,
proceeding, arbitration, investigation, audit, or controversy
relating to Taxes and shall consult with PanEnergy before
entering into any settlements or compromises with regard to such
matters.
(s) Tax Status. Duke shall not, and shall not permit any
of its Subsidiaries to, take any actions which would, or would
be reasonably likely to, adversely affect the status of the
Merger as a reorganization under Section 368(a) of the Code.
(t) Other Actions. Duke shall not, and shall not permit
any of its Subsidiaries to, take or fail to take any other action
which would reasonably be expected to prevent or materially
impede, interfere with or delay the Merger.
(u) Agreements. Duke shall not, nor shall it permit any of
its Subsidiaries to, agree in writing or otherwise to take any
action inconsistent with the foregoing.
7.3. Transition Committee. A committee comprised of one
person designated by Duke and one person designated by PanEnergy
(the "Transition Committee") will be established as soon after
execution of this Agreement as is practicable to examine various
alternatives regarding the manner in which to best organize,
manage and integrate the businesses of Duke and PanEnergy after
the Effective Time. The person designated by Duke shall be the
senior member of the Transition Committee and shall coordinate
the day-to-day activities of the Transition Committee with the
concurrence of the person designated by PanEnergy to serve on the
Transition Committee. From time to time, the Transition
Committee shall report its findings to the Board of Directors of
each of Duke and PanEnergy.
ARTICLE 8
COVENANTS
8.1 Alternative Proposals. Prior to the Effective Time,
PanEnergy agrees (a) that neither it nor any of its Subsidiaries
shall, and it shall direct and use reasonable efforts to cause
its officers, directors, employees, agents and representatives
(including, without limitation, any investment banker, attorney
or accountant retained by it or any of its Subsidiaries or any of
the foregoing) not to initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any
proposal or offer (including, without limitation, any proposal or
offer to its stockholders) with respect to an Alternative
Proposal (as defined below) or engage in any negotiations
concerning, or provide any non-public information or data to, or
have any discussions with, any person relating to an Alternative
Proposal, or otherwise facilitate any effort or attempt to make
or implement an Alternative Proposal; (b) that it will
immediately cease and cause to be terminated any existing
activities, discussions
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or negotiations with any parties conducted heretofore with
respect to any of the foregoing, and it will take the necessary
steps to inform the individuals or entities referred to above of
the obligations undertaken in this Section 8.1; and (c) that it
will notify Duke immediately if any such inquiries or proposals
are received by, any such information is requested from, or any
such negotiations or discussions are sought to be initiated or
continued with, it; provided, however, that nothing contained in
this Section 8.1 shall prohibit the Board of Directors of
PanEnergy from (i) furnishing information (pursuant to a
confidentiality letter deemed appropriate by the Board of
Directors of PanEnergy) to or entering into discussions or
negotiations with, any person or entity that makes an unsolicited
bona fide proposal or offer to the stockholders of PanEnergy, to
acquire PanEnergy pursuant to a merger, consolidation, share
purchase, share exchange, purchase of a substantial portion of
assets, business combination or other similar transaction, if,
and only to the extent that, (A) the Board of Directors of
PanEnergy determines in good faith upon the advice of outside
counsel that such action is required for the Board of Directors
to comply with its fiduciary duties to stockholders imposed by
law, (B) prior to furnishing such information to, or entering
into discussions or negotiations with, such person or entity,
PanEnergy provides written notice to Duke of the identity of the
person or entity making the Alternative Proposal and that it
intends to furnish information to, or intends to enter into
discussions or negotiations with, such person or entity, (C)
PanEnergy keeps Duke informed on a timely basis of the status of
any such discussions or negotiations and all terms and conditions
thereof and promptly provides Duke with copies of any written
inquiries or proposals relating thereto, and (D) in the event
that the Board of Directors of PanEnergy determines to accept any
such Alternative Proposal (in accordance with subclause (A)
above), PanEnergy provides Duke with at least three days' prior
written notice thereof, during which time Duke may make, and in
such event, PanEnergy shall in good faith consider, a
counterproposal to such Alternative Proposal; and (ii) to the
extent applicable, complying with Rule 14e-2 promulgated under
the Exchange Act with regard to an Alternative Proposal. Nothing
in this Section 8.1 shall (x) permit PanEnergy to terminate this
Agreement (except as specifically provided in Article 10 hereof),
(y) permit PanEnergy to enter into any agreement with respect to
an Alternative Proposal during the term of this Agreement (it
being agreed that during the term of this Agreement, PanEnergy
shall not enter into any agreement with any person that provides
for, or in any way facilitates, an Alternative Proposal (other
than a confidentiality agreement deemed appropriate by the Board
of Directors of PanEnergy)), or (z) affect any other obligation
of PanEnergy under this Agreement. "Alternative Proposal"
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shall mean any merger, acquisition, consolidation,
reorganization, share exchange, tender offer, exchange offer or
similar transaction involving PanEnergy or any of PanEnergy's
Significant Subsidiaries, or any proposal or offer to acquire in
any manner, directly or indirectly, a substantial equity interest
in or a substantial portion of the assets of PanEnergy or any of
PanEnergy's Significant Subsidiaries. Nothing herein shall
prohibit a disposition permitted by Section 7.1(f) hereof.
8.2. Preparation of S-4 and the Joint Proxy Statement. As
promptly as practicable after the date hereof, Duke and PanEnergy
shall prepare and file with the SEC the Joint Proxy Statement and
Duke shall prepare and file with the SEC the S-4, in which the
Joint Proxy Statement will be included as part of a prospectus.
Each of Duke and PanEnergy shall use all reasonable efforts to
have the S-4 declared effective under the Securities Act as
promptly as practicable after such filing and to cause the Joint
Proxy Statement to be mailed to the shareholders of Duke and the
stockholders of PanEnergy at the earliest practicable date. Duke
shall use reasonable efforts to obtain all necessary
authorizations from state regulatory authorities, all necessary
authorizations under state securities laws or "blue sky" permits,
approvals and registrations in connection with the issuance of
Duke Common Stock in the Merger and upon the exercise of any
PanEnergy Stock Options assumed by Duke, and PanEnergy shall
furnish all information concerning PanEnergy and the holders of
PanEnergy Common Stock as may be reasonably requested in
connection with obtaining such permits, approvals and
registrations.
8.3. Letter of PanEnergy's Accountants. PanEnergy shall use
reasonable efforts to cause to be delivered to Duke a letter of
KPMG Peat Marwick LLP ("Peat Marwick"), PanEnergy's independent
public accountants, dated a date within two business days before
the date on which the S-4 shall become effective and addressed to
Duke and PanEnergy, in form and substance reasonably satisfactory
to Duke and customary in scope and substance for letters
delivered by independent public accountants in connection with
registration statements similar to the S-4.
8.4. Letter of Duke's Accountants. Duke shall use
reasonable efforts to cause to be delivered to PanEnergy a letter
of Deloitte & Touche LLP ("Deloitte & Touche"), Duke's
independent public accountants, dated a date within two business
days before the date on which the S-4 shall become effective and
addressed to Duke and PanEnergy, in form and substance reasonably
satisfactory to PanEnergy and customary in scope and substance
for letters delivered by
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independent public accountants in connection with registration
statements similar to the S-4.
8.5. Access to Information. To the extent permitted by law,
upon reasonable notice, Duke and PanEnergy each shall, and shall
cause each of their respective Subsidiaries to, afford to the
officers, employees, accountants, counsel and other
representatives of the other, access, during normal business
hours during the period prior to the Effective Time, to all of
its properties, books, contracts, commitments and records and,
during such period, each of Duke and PanEnergy shall (and shall
cause each of their respective Subsidiaries to) furnish promptly
to the other (a) a copy of each report, schedule, registration
statement and other document filed or received by it during such
period pursuant to SEC requirements and (b) all other information
concerning its business, properties and personnel as such other
party may reasonably request. Each of Duke and PanEnergy agrees
that it will not, and will cause its respective representatives
not to, use any information obtained pursuant to this Section 8.5
for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement. The Confidentiality Agreement
dated November 6, 1996 between Duke and PanEnergy (the
"Confidentiality Agreement") shall apply with respect to
information furnished thereunder or hereunder and any other
activities contemplated thereby or hereby.
8.6. PanEnergy Stockholders' Meeting. PanEnergy shall (i)
call a meeting of its stockholders to be held as promptly as
practicable after the date hereof for the purpose of voting upon
the adoption of this Agreement, (ii) through its Board of
Directors, recommend to its stockholders adoption of this
Agreement and not rescind such recommendation, (iii) use all
reasonable efforts to obtain adoption of this Agreement by its
stockholders and (iv) use all reasonable efforts to hold such
meeting as soon as practicable after the date upon which the S-4
becomes effective; provided, however, that nothing herein
obligates PanEnergy to take any action that would cause its Board
of Directors to act inconsistently with their fiduciary duties as
determined by the Board of Directors of PanEnergy in good faith
based on the advice of PanEnergy's outside counsel. The
PanEnergy Stockholders' Meeting shall be held on such date, as
soon as practicable after the date upon which the S-4 becomes
effective, as Duke and PanEnergy shall mutually determine, which
shall be the same date as the Duke Shareholders' Meeting.
8.7. Duke Shareholders' Meeting. Duke shall (i) call the
Duke Shareholders' Meeting to be held as promptly as practicable
after the date hereof for the purpose of voting upon the Duke
Vote Matter, (ii) through its Board of
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Directors, recommend to its shareholders approval of the Duke
Vote Matter and not rescind such recommendation, (iii) use all
reasonable efforts to obtain approval by its shareholders and
(iv) use all reasonable efforts to hold such meeting as soon as
practicable after the date upon which the S-4 becomes effective;
provided, however, that nothing herein obligates Duke to take any
action that would cause its Board of Directors to act
inconsistently with their fiduciary duties as determined by the
Board of Directors of Duke in good faith based on the advice of
Duke's outside counsel. The Duke Shareholders' Meeting shall be
held on such date, as soon as practicable after the date upon
which the S-4 becomes effective, as Duke and PanEnergy shall
mutually determine, which shall be the same date as the PanEnergy
Stockholders' Meeting.
8.8. Regulatory and Other Approvals.
(a) HSR Act. Duke and PanEnergy shall file or cause to be
filed with the Federal Trade Commission and the Department of
Justice any notifications required to be filed by them under the
HSR Act and the rules and regulations promulgated thereunder with
respect to the transactions contemplated hereby. Such parties
will use all commercially reasonable efforts to make such filings
promptly and to respond on a timely basis to any requests for
additional information made by either of such agencies.
(b) Other Regulatory Approvals. Duke and PanEnergy shall
cooperate and use all reasonable efforts to promptly prepare and
file all necessary documentation, to effect all necessary
applications, notices, petitions, filings and other documents,
and to use all commercially reasonable efforts to obtain (and
will cooperate with each other in obtaining) any consent,
acquiescence, authorization, order or approval of, or any
exemption or nonopposition by, any Governmental Entity required
to be obtained or made by Duke, PanEnergy or any of their
Subsidiaries in connection with the Merger or the taking of any
action contemplated thereby or by this Agreement, including,
without limitation, the Duke Required Statutory Approvals.
(c) Other Approvals. Duke and PanEnergy shall, and shall
cause each of their respective Subsidiaries to, take all
reasonable actions necessary to obtain (and will cooperate with
each other in obtaining) all Duke Required Consents and all
PanEnergy Required Consents, as the case may be.
8.9. Agreements of Others. At least 30 days prior to the
Closing Date, PanEnergy shall cause to be prepared and delivered
to Duke a list identifying all persons who, at
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the record date for the PanEnergy Stockholders' Meeting, may be
deemed to be "affiliates" of PanEnergy as that term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act (the
"Rule 145 Affiliates"). PanEnergy shall use all reasonable
efforts to cause each person who is identified as a Rule 145
Affiliate in such list to deliver to Duke, prior to the Closing
Date, a written agreement, in substantially the form attached
hereto as Exhibit A, that such Rule 145 Affiliate will not sell,
pledge, transfer or otherwise dispose of any shares of Duke
Common Stock issued to such Rule 145 Affiliate pursuant to the
Merger, except pursuant to an effective registration statement or
in compliance with Rule 145 or an exemption from the registration
requirements of the Securities Act.
8.10. Authorization for Shares and Stock Exchange Listings.
Prior to the Effective Time, Duke shall have taken all action
necessary to permit it to issue the number of shares of Duke
Common Stock required to be issued pursuant to Sections 4.2 and
4.3. Duke shall use all reasonable efforts to cause the shares
of Duke Common Stock to be issued in the Merger and the shares of
Duke Common Stock to be reserved for issuance upon exercise of
the PanEnergy Stock Options to be approved for listing on the
NYSE, subject to official notice of issuance, prior to the
Closing Date.
8.11. Indemnification; Directors' and Officers' Insurance.
The Surviving Corporation agrees that all rights to
indemnification for acts or omissions occurring prior to the
Effective Time existing as of the date hereof, in favor of the
current or former directors or officers of PanEnergy as provided
in its Restated Certificate of Incorporation or By-Laws, shall
survive the Merger and shall continue in full force and effect in
accordance with their terms from the Effective Time until the
expiration of the applicable statute of limitations with respect
to any claims against the current or former directors or officers
of PanEnergy arising out of such acts or omissions. Duke shall
cause to be maintained for a period of not less than six years
from the Effective Time PanEnergy's directors' and officers'
insurance and indemnification policy in effect as of the date
hereof, to the extent that it provides coverage for events
occurring prior to the Effective Time (the "D&O Insurance") for
all persons who are directors or officers of PanEnergy who are
covered persons under PanEnergy's D&O Insurance policies in
effect on the date hereof, so long as the annual premium therefor
would not be in excess of 200% of the last annual premium paid
prior to the date hereof (the "Maximum Premium"). If the
existing D&O Insurance expires, is terminated or canceled during
such six-year period, the Surviving Corporation shall use all
reasonable efforts to
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cause to be obtained as much D&O Insurance as can be obtained for
the remainder of such period for an annualized premium not in
excess of the Maximum Premium, on terms and conditions no less
advantageous to the covered persons than the existing D&O
Insurance.
8.12. Public Announcements. The initial press release
relating to this Agreement shall be a joint press release and
thereafter PanEnergy and Duke shall consult with each other, and
use reasonable efforts to agree upon the text of any press
release, before issuing any such press release or otherwise
making any public statements with respect to the transactions
contemplated by this Agreement, and shall not issue any such
press release or make any such public statement prior to such
consultation, except as may be required by applicable law or by
obligations pursuant to any listing agreement with any national
securities exchange or transaction reporting system.
8.13. Other Actions. Except as contemplated by this
Agreement, neither Duke nor PanEnergy shall, and neither shall
permit any of its respective Subsidiaries to, take or agree or
commit to take any action that is reasonably likely to result in
any of its respective representations or warranties hereunder
being untrue in any material respect or in any of the conditions
to the Merger set forth in Article 9 not being satisfied.
PanEnergy, Duke and Merger Sub shall perform such further acts
and execute such documents as may be reasonably required to
effect the Merger.
8.14. Cooperation; Notification. Duke and PanEnergy shall
confer on a regular basis with each other, report on operational
matters and promptly advise each other orally and in writing of
any change or event having, or which, insofar as can reasonably
be foreseen, could have, a Material Adverse Effect on Duke or a
Material Adverse Effect on PanEnergy, as the case may be. Duke
and PanEnergy shall promptly provide each other (or their
respective counsel) copies of all filings made by such party with
the SEC or any other Governmental Entity in connection with this
Agreement and the transactions contemplated hereby.
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8.15. Governance. (a) Board of Directors of Duke. Duke shall
take such action as may be necessary to cause the number of
directors comprising the full Board of Directors of Duke at the
Effective Time to be 18 persons, to be allocated as equally as
possible among the three classes of such Board of Directors,
eleven of whom shall be designated by Duke (each a "Duke
Director") and seven of whom shall be designated by PanEnergy
(each a "PanEnergy Director"). It is contemplated that one Duke
Director and one PanEnergy Director shall retire from the Duke
Board of Directors in April 1998 and that the number of directors
comprising the full Board of Directors of Duke shall thereafter
be 16. The Board of Directors of Duke at the Effective Time shall
consist of the Duke Directors designated by Duke and the
PanEnergy Directors designated by PanEnergy prior to the
Effective Time; provided, however, that if, prior to the
Effective Time, any such designee shall decline or be unable to
serve, Duke or PanEnergy, as the case may be, shall designate
another person to serve as a Duke Director or a PanEnergy
Director, as the case may be, in such person's stead.
(b) Committees of the Board of Directors of Duke. The Duke
Board of Directors shall take such action as is necessary to
cause the Chairman of each Committee of the Board of Directors of
Duke at the Effective Time to be a Duke Director. At the
Effective Time, the Management Committee of the Board of
Directors of Duke shall consist of Richard B. Priory, Steve C.
Griffith, Jr. and William A. Coley of Duke and Paul M. Anderson
of PanEnergy. At the Effective Time all other Committees of the
Board of Directors of Duke shall have two members designated by
PanEnergy.
(c) Officers of Duke. From the Effective Time, pursuant to
the terms hereof and the employment agreements referred to in
Section 8.16, Richard B. Priory shall hold the position of
Chairman of the Board and Chief Executive Officer of Duke and
Paul M. Anderson shall hold the position of President and Chief
Operating Officer of Duke; provided, however, that if, prior to
the Effective Time, Richard B. Priory shall decline or be unable
to serve as Chairman of the Board and Chief Executive Officer,
Duke shall designate another person to serve in his stead, and
if, prior to the Effective Time, Paul M. Anderson shall decline
or be unable to serve as President and Chief Operating Officer,
PanEnergy shall designate another person to serve in his stead.
From the Effective Time, all other officers of Duke shall be
determined by the Duke Board of Directors.
(d) Office of the Chief Executive; Executive Committee. At
the Effective Time, Duke shall establish an Office of the Chief
Executive which shall exercise executive management over Duke and
shall consist of the Chief Executive Officer of Duke and the
President and Chief Operating Officer of Duke. The final
decision-making authority in the Office of the Chief Executive
shall reside with the Chief Executive Officer of Duke. At the
Effective Time the Office of the Chief Executive shall appoint an
Executive Committee of senior executive officers of Duke and
PanEnergy which shall, in addition to the Chairman of the Board
and Chief Executive Officer of Duke and President and Chief
Operating Officer of Duke, consist of William A.
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Coley, Richard J. Osborne and Ruth G. Shaw of Duke and James T.
Hackett and Fred J. Fowler of PanEnergy.
(e) Name; Corporate Headquarters. The parties hereto
agree that, subject to the approval of the shareholders of Duke,
the name of Duke shall be changed to Duke Energy Corporation at
the Effective Time, that the headquarters of Duke Energy
Corporation shall be located in Charlotte, North Carolina, and
that Duke Energy Corporation shall maintain significant
operations in Houston, Texas.
8.16. Employment Agreements. Concurrently with the execution
and delivery of this Agreement, Duke and/or PanEnergy have
entered into employment agreements in the forms set forth in
Exhibits B1-B6 hereof with the persons listed in Section 8.16 of
the PanEnergy Disclosure Schedule and Duke has entered into
employment agreements in the forms set forth in Exhibits C1-C6
hereof with the persons listed in Section 8.16 of the Duke
Disclosure Schedule. Such employment agreements shall become
effective immediately at the Effective Time in accordance with
their terms.
8.17. Expenses. Subject to Section 10.5, whether or not the
Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses except
as expressly provided herein and except that (a) the filing fee
in connection with the filing of the Form S-4 or Joint Proxy
Statement with the SEC, (b) the filing fee under the HSR Act and
(c) the expenses incurred in connection with printing and mailing
the Form S-4 and the Joint Proxy Statement, shall be shared
equally by PanEnergy and Duke.
8.18. Pooling. No party hereto shall, nor shall any such
party permit any of its Subsidiaries to, take any actions which
would, or would be reasonably likely to, prevent Duke from
accounting for the Merger as a pooling of interests in accordance
with GAAP and applicable SEC regulations.
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8.19. Tax Matters.
(a) Tax-Exempt Status. No party shall, nor shall any party
permit any of its Subsidiaries to, take any action that would be
likely to jeopardize the qualification of outstanding revenue
bonds issued for the benefit of any party or any Subsidiary
thereof that qualify on the date hereof under Section 142(a) of
the Code as "exempt facility bonds" or as tax-exempt private
activity bonds under Section 103(b) of the Code or as tax-exempt
industrial development bonds under Section 103(b)(4) of the
Internal Revenue Code of 1954, as amended prior to the Tax Reform
Act of 1986.
(b) Other Tax Matters. Without the consent of the other
party (excluding Merger Sub), which consent shall not be
unreasonably withheld, no party or any of its Subsidiaries shall
(i) make or rescind any material express or deemed election
relating to Taxes, (ii) make a request for a Tax Ruling or enter
into a Closing Agreement with respect to any material Tax matter,
or (iii) with respect to any material Tax matter, change any of
its methods of reporting income or deductions for federal income
tax purposes from those employed in the preparation of its
federal income Tax Return for the taxable year ending December
31, 1995, except as may be required by applicable law.
8.20. Employee Benefit Plans.
(a) Maintenance of Benefits. For the period beginning at
the Effective Time and ending on the first anniversary of the
Effective Time (the "Continuation Period"), PanEnergy Employees
(as defined below) shall continue to receive active employee and
retiree benefits under the PanEnergy Benefit Plans (regardless of
any transfer of employment to Duke or any affiliate of Duke) on
substantially the same terms and conditions as were in effect
immediately before the Effective Time, provided that the
foregoing shall not prevent the amendment of any PanEnergy
Benefit Plan or the taking of other necessary actions to comply
with any applicable law or regulation, as necessary in order to
retain tax- qualified status where applicable, or as required by
any collective bargaining agreement; and provided, further, that
the foregoing shall not be construed to confer on any individual
a right to remain employed by PanEnergy or any of its affiliates.
"PanEnergy Employees" means individuals who are, as of the
Effective Time, employees of PanEnergy and its Subsidiaries or
former employees of PanEnergy and its Subsidiaries entitled to
present or future benefits according to the provisions of any
PanEnergy Benefit Plan as of the Effective Time. For purposes of
this Section 8.20, "affiliate" shall mean any corporation,
partnership or limited liability company controlled by,
controlling or under common control with PanEnergy and/or Duke,
as the context may require.
(b) Nonqualified Plans. Without limiting the generality of
the foregoing, during the Continuation Period: (i) PanEnergy's
executive benefit plans and programs as in effect at this
Effective Time shall continue in effect without any amendment
that could adversely affect PanEnergy
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Employees who are participants therein as of the Effective Time
(including without limitation any amendment that reduces the rate
at which benefits are accrued), (ii) PanEnergy Employees shall be
entitled to severance benefits in amounts and upon terms and
conditions no less favorable than those in effect for such
individuals as of the Effective Time, including without
limitation (A) any severance benefits under plans or policies
taking effect upon the Effective Time, and (B) outplacement
services consistent with the practice of PanEnergy before the
Effective Time. This paragraph (b) shall not apply with respect
to base salary, annual bonuses, stock options, restricted stock
and/or severance pay provided to any employee of PanEnergy who
has entered into an employment agreement in accordance with
Section 8.16 of this Agreement.
(c) Continuity of Benefits. Duke shall provide, or shall
cause PanEnergy or their respective affiliates to provide, that
(i) for all purposes under all employee benefit plans and
programs applicable to PanEnergy Employees at any time following
the Effective Time, all service by PanEnergy Employees with, and
all compensation of PanEnergy Employees from, PanEnergy or any of
its Subsidiaries before the Effective Time shall be treated in
the same manner as service with and compensation from Duke and
its Subsidiaries before the Effective Time for all purposes,
including without limitation eligibility to participate and
eligibility and grow-ins for, and accrual and vesting of,
benefits, rights and features, except to the extent such
treatment would result in a duplication of benefits, and (ii) for
purposes of any welfare benefit plan maintained by any of them
after the Effective Time, if any PanEnergy Employee transfers
from one such plan to another during a plan year, the second such
plan shall waive any waiting periods and limitations regarding
coverage for pre- existing conditions and recognize any
out-of-pocket expenses incurred by such PanEnergy Employee and
his or her eligible dependents during the portion of the plan
year before such transfer for purposes of determining their
deductibles and out-of-pocket maximums for the remainder of such
plan year. Notwithstanding the foregoing, in the event that at
any time after the Effective Time, PanEnergy Employees begin to
participate in any cash balance defined benefit pension plan (a
"Cash Balance Conversion"), the transition from the traditional
defined benefit pension plan in which they participated before
such Cash Balance Conversion shall be implemented using
methodologies designed so that such PanEnergy Employees
(considered as an aggregate population and not as individuals)
are treated in a manner not materially less favorable than
employees of Duke and its affiliates (other than PanEnergy and
its Subsidiaries) (also considered as an aggregate population and
not as individuals) are or were treated in any Cash Balance
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Conversion occurring after the date of this Agreement and before
or contemporaneously with the Cash Balance Conversion of such
PanEnergy Employees, even if the achievement of such treatment
would not comply with the requirements of clause (i) of the
preceding sentence.
(d) Stock Plans. With respect to each PanEnergy Benefit
Plan under which the delivery of PanEnergy Common Stock is
required upon payment of benefits, grant of awards or exercise of
options after the Effective Time (the "Stock Benefit Plans"),
Duke shall take or cause to be taken all corporate action
necessary or appropriate to (i) provide for the issuance or
purchase in the open market of Duke Common Stock rather than
PanEnergy Common Stock, as applicable, pursuant thereto, (ii)
reserve for issuance under such plan or otherwise provide a
sufficient number of shares of Duke Common Stock for delivery
upon payment of benefits, grant of awards or exercise of options
under such Stock Benefit Plans and (iii) as soon as practicable
after the Effective Time, file registration statements on Form
S-3 or Form S-8 or amendments on such forms to the Form S-4
Registration Statement, as the case may be (or any successor or
other appropriate forms), with respect to the shares of Duke
Common Stock subject to such Stock Benefit Plans to the extent
such registration statement is required under applicable law, and
Duke shall use all reasonable efforts to maintain the
effectiveness of such registration statements (and maintain the
current status of the prospectuses contained therein) for so long
as such benefits and grants remain payable and such options
remain outstanding.
(e) Severance Benefit Plan. At the Effective Time, the
provisions of the PanEnergy Change in Control Severance Benefits
Plan shall be in effect on terms and conditions that are not more
favorable to employees than those set forth in Section 8.20(e) of
the PanEnergy Disclosure Schedule.
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ARTICLE 9
CONDITIONS
9.1. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the
Merger shall be subject to the fulfillment at or prior to the
Closing Date of the following conditions:
(a) The PanEnergy Stockholders' Approval shall have been
obtained and the Duke Vote Matter shall have been approved by the
shareholders of Duke.
(b) The waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been
terminated.
(c) Neither of the parties hereto shall be subject to any
order or injunction of a court of competent jurisdiction which
prohibits the consummation of the transactions contemplated by
this Agreement. In the event any such order or injunction shall
have been issued, each party agrees to use all reasonable efforts
to have any such injunction lifted.
(d) The Form S-4 shall have become effective and shall be
effective at the Effective Time, and no stop order suspending
effectiveness of the Form S-4 shall have been issued, no action,
suit, proceeding or investigation by the SEC to suspend the
effectiveness thereof shall have been initiated and be
continuing, and all necessary approvals under state securities
laws relating to the issuance or trading of the Duke Common Stock
to be issued to PanEnergy stockholders in connection with the
Merger shall have been received.
(e) All consents, authorizations, orders, permits and
approvals of (or registrations, declarations or filings with) any
Governmental Entity required in connection with the execution,
delivery and performance of this Agreement shall have been
obtained or made pursuant to Final Orders as defined in Section
9.2(e), except for filings in connection with the Merger and any
other documents required to be filed after the Effective Time and
except where the failure to have obtained or made any such
consent, authorization, order, approval, filing or registration
would not have a Material Adverse Effect on Duke or the Surviving
Corporation following the Effective Time.
(f) PanEnergy shall have received from Peat Marwick and
Duke shall have received from Deloitte & Touche an opinion that
the Merger will be treated as a "pooling of interests" under
applicable accounting standards.
(g) The Duke Common Stock to be issued to PanEnergy
stockholders in connection with the Merger shall have been
approved for listing on the NYSE, subject only to official notice
of issuance.
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9.2. Conditions to Obligation of PanEnergy to Effect the
Merger. The obligation of PanEnergy to effect the Merger shall
be subject to the fulfillment at or prior to the Closing Date of
the following conditions:
(a) Duke shall have performed in all material respects its
agreements contained in this Agreement required to be performed
on or prior to the Closing Date, the representations and
warranties of Duke and Merger Sub contained in this Agreement and
in any document delivered in connection herewith shall be true
and correct as of the Closing Date, and PanEnergy shall have
received a certificate of the Chief Executive Officer and Chief
Financial Officer of Duke, dated the Closing Date, certifying to
such effect.
(b) PanEnergy shall have received an opinion of LeBoeuf,
Lamb, Greene & MacRae, L.L.P., special counsel to PanEnergy,
dated the Closing Date, addressed to PanEnergy and in form and
substance satisfactory to PanEnergy, which opinion may be based
on appropriate representations of Duke, PanEnergy and Merger Sub
which are in form and substance reasonably satisfactory to such
counsel, to the effect that the Merger will be treated as a
reorganization under Section 368(a) of the Code and that
PanEnergy and the stockholders of PanEnergy who exchange their
shares of PanEnergy Common Stock solely for Duke Common Stock in
the Merger will recognize no gain or loss for federal income tax
purposes as a result of the consummation of the Merger.
(c) PanEnergy shall have received a "comfort" letter from
Deloitte & Touche, dated the Closing Date, in form and substance
reasonably satisfactory to PanEnergy, in connection with the
procedures undertaken by them with respect to the financial
statements of Duke and its Subsidiaries contained in the Form S-4
and such other matters as are customarily included in comfort
letters relating to transactions similar to the Merger.
(d) From the date of this Agreement through the Effective
Time, there shall not have occurred any change in the financial
condition, business, properties or operations of Duke and its
Subsidiaries, taken as a whole, that would have or would be
reasonably likely to have a Material Adverse Effect on Duke.
(e) The Duke Required Statutory Approvals shall have been
obtained at or prior to the Effective Time pursuant to Final
Orders and no such Final Order shall have imposed terms or
conditions that would have a Material Adverse Effect on Duke or
the Surviving Corporation. As used in this Agreement, a "Final
Order" means any action by the relevant regulatory authority (i)
that has not been reversed, stayed, enjoined, set aside, annulled
or suspended, (ii) with respect to which any waiting period
prescribed by law before the transactions contemplated hereby may
be consummated has expired, (iii) as to which all conditions to
the consummation of such transactions prescribed by law,
regulation or order have been satisfied
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and (iv) as to which all opportunities for rehearing are
exhausted (whether or not any appeal thereof is pending).
(f) Duke Energy Marketing Corp., Duke Energy Corp., Louis
Dreyfus Energy Corp., and Louis Dreyfus Electric Power Inc. shall
have entered into that certain letter agreement dated November
24, 1996 among such parties (the "D/LD Agreement") and the other
agreements referred to therein, and the transactions contemplated
by paragraph (1) of the D/LD Agreement shall have been
consummated.
9.3. Conditions to Obligation of Duke and Merger Sub to
Effect the Merger. The obligations of Duke and Merger Sub to
effect the Merger shall be subject to the fulfillment at or prior
to the Closing Date of the following conditions:
(a) PanEnergy shall have performed in all material respects
its agreements contained in this Agreement required to be
performed on or prior to the Closing Date, the representations
and warranties of PanEnergy contained in this Agreement and in
any document delivered in connection herewith shall be true and
correct as of the Closing Date, and Duke shall have received a
certificate of the Chief Executive Officer and Chief Financial
Officer of PanEnergy, dated the Closing Date, certifying to such
effect.
(b) Duke shall have received a copy of the opinion of
LeBoeuf, Lamb, Greene & MacRae, L.L.P. referred to in Section
9.2(b) of this Agreement, which opinion shall be in form and
substance reasonably satisfactory to Duke.
(c) Duke shall have received a "comfort" letter from Peat
Marwick, dated the Closing Date, in form and substance reasonably
satisfactory to Duke, in connection with the procedures
undertaken by them with respect to the financial statements and
other financial information of PanEnergy and its Subsidiaries
contained in the Form S-4 and such other matters as are
customarily included in comfort letters relating to transactions
similar to the Merger.
(d) From the date of this Agreement through the Effective
Time, there shall not have occurred any change in the financial
condition, business, properties or operations of PanEnergy and
its Subsidiaries, taken as a whole, that would have or would be
reasonably likely to have a Material Adverse Effect on PanEnergy.
(e) The regulatory consents and approvals specified in
Section 5.3(c)(E) shall have been obtained at or prior to the
Effective Time pursuant to Final Orders and no such Final Order
shall have imposed terms or conditions
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that would have a Material Adverse Effect on Duke or the
Surviving Corporation.
ARTICLE 10
TERMINATION
10.1. Termination by Mutual Consent. This Agreement may be
terminated and the Merger may be abandoned at any time prior to
the Effective Time, whether before or after the date on which the
PanEnergy Stockholders' Approval has been obtained and whether
before or after the date on which the approval of the Duke Vote
Matter by the holders of Duke Common Stock has been obtained, by
the mutual written consent of Duke and PanEnergy.
10.2. Termination by Either Duke or PanEnergy. This
Agreement may be terminated and the Merger may be abandoned by
action of the Board of Directors of either Duke or PanEnergy if
(a) the Merger shall not have been consummated by June 30, 1998,
or (b) the PanEnergy Stockholders' Meeting shall not have been
convened prior to June 30, 1998 or the PanEnergy Stockholders'
Approval shall not have been obtained at the PanEnergy
Stockholders' Meeting or any adjournment thereof, or (c) the
approval of Duke's stockholders of the Duke Vote Matter shall not
have been obtained at the Duke Shareholders' Meeting or at any
adjournment thereof, or (d) a United States federal or state
court of competent jurisdiction or United States federal or state
governmental, regulatory or administrative agency or commission
shall have issued an order, decree or ruling or taken any other
action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement; provided, that the
party seeking to terminate this Agreement pursuant to this clause
(d) shall have used all reasonable efforts to remove such
injunction, order or decree; and provided, in the case of a
termination pursuant to clause (a) above, that the terminating
party shall not have breached in any material respect its
obligations under this Agreement in any manner that shall have
proximately contributed to the failure to consummate the Merger
by June 30, 1998.
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10.3. Termination by PanEnergy. This Agreement may be
terminated and the Merger may be abandoned at any time prior to
the Effective Time, if (a) before the date on which the PanEnergy
Stockholders' Approval is obtained, by action of the Board of
Directors of PanEnergy, in the exercise of its good faith
judgment as to fiduciary duties to its stockholders imposed by
law, as advised by outside counsel to PanEnergy, the Board of
Directors of PanEnergy determines that such termination is
required by reason of an Alternative Proposal being made;
provided, however, that PanEnergy shall (i) notify Duke promptly
of receipt of such Alternative Proposal and shall (ii) notify
Duke promptly of its intention to recommend such Alternative
Proposal to PanEnergy's stockholders, but in no event shall the
notice referred to in clause (ii) be given less than three days
prior to the earlier of the public announcement of such
recommendation or PanEnergy's termination of this Agreement, or
(b) there has been a breach by Duke or Merger Sub of any
representation or warranty contained in this Agreement which
would have or would be reasonably likely to have a Material
Adverse Effect on Duke, or (c) there has been a material breach
of any of the covenants or agreements set forth in this Agreement
on the part of Duke, which breach is not curable or, if curable,
is not cured within 30 days after written notice of such breach
is given by PanEnergy to Duke.
10.4. Termination by Duke. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the
Effective Time, before or after the approval by the shareholders
of Duke referred to in Section 9.1(a), by action of the Board of
Directors of Duke, if (a) the Board of Directors of PanEnergy
shall have withdrawn or modified in a manner materially adverse
to Duke its approval or recommendation of this Agreement or the
Merger or shall have recommended an Alternative Proposal to
PanEnergy stockholders, or (b) there has been a breach by
PanEnergy of any representation or warranty contained in this
Agreement which would have or would be reasonably likely to have
a Material Adverse Effect on PanEnergy, or (c) there has been a
material breach of any of the covenants or agreements set forth
in this Agreement on the part of PanEnergy, which breach is not
curable or, if curable, is not cured within 30 days after written
notice of such breach is given by Duke to PanEnergy.
10.5. Effect of Termination and Abandonment. (a) In the
event that (i) any person shall have made an Alternative
Proposal, (ii) this Agreement is terminated pursuant to Section
10.2(b), 10.3(a) or 10.4 and (iii) at the time of such
termination the Alternative Proposal shall not have been (A)
rejected by PanEnergy and its Board of Directors and (B)
withdrawn by the person making the Alternative Proposal, then
PanEnergy shall, on the day of such termination, pay to Duke a
fee of $200 million (exclusive of any expenses to be paid
pursuant to Section 8.17) in cash by wire transfer of immediately
available funds to an account designated by Duke.
(b) PanEnergy acknowledges that the agreements contained in
this Section 10.5 are an integral part of the
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transactions contemplated in this Agreement, and that, without
these agreements, Duke and Merger Sub would not enter into this
Agreement; accordingly, if PanEnergy fails to promptly pay the
amount due pursuant to this Section 10.5, and, in order to obtain
such payment, Duke or Merger Sub commences a suit or other legal
action taken to collect payment of the fee set forth in this
Section 10.5, PanEnergy shall pay to Duke its costs and expenses
(including attorneys' fees) in connection with such suit,
together with interest on the amount of the fee at the rate of 8%
from the date such fee was required to be paid.
In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article 10, all
obligations of the parties hereto shall terminate, except the
obligations of the parties pursuant to this Section 10.5 and
Section 8.17 and except for the provisions of Sections 11.3,
11.4, 11.6, 11.8, 11.9 and 11.11 through 11.15. Nothing herein
shall prejudice the ability of the non-breaching party from
seeking damages from any other party for any breach of this
Agreement, including without limitation, attorneys' fees and the
right to pursue any remedy at law or in equity.
10.6. Extension, Waiver. At any time prior to the Effective
Time, any party hereto, by action taken by its Board of
Directors, may, to the extent legally allowed, (a) extend the
time for the performance of any of the obligations or other acts
of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions for the
benefit of such party contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on
behalf of such party.
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ARTICLE 11
GENERAL PROVISIONS
11.1. Nonsurvival of Representations, Warranties and
Agreements. All representations, warranties and agreements in
this Agreement or in any instrument delivered pursuant to this
Agreement shall be deemed to the extent expressly provided herein
to be conditions to the Merger and shall not survive the Merger;
provided, however, that the agreements contained in Article 4,
Sections 8.11, 8.15, 8.16, 8.17 and 8.20 and this Article 11
shall survive the Merger.
11.2. Notices. Any notice required to be given hereunder
shall be sufficient if in writing, and sent by facsimile
transmission and by courier service (with proof of service), hand
delivery or certified or registered mail (return receipt
requested and first-class postage prepaid), addressed as follows:
If to Duke or Merger Sub:
Steve C. Griffith, Jr., Esq.
Duke Power Company
422 South Church Street
Charlotte, NC 28242
Facsimile: (704) 382-8137
With copies to:
John Spuches, Esq.
Morton A. Pierce, Esq.
Dewey Ballantine
1301 Avenue of the Americas
New York, NY 10019
Facsimile: (212) 259-6333
If to PanEnergy:
Carl B. King, Esq.
PanEnergy Corp
5400 Westheimer Court
Houston, TX 77251-1642
Facsimile: (713) 627-4691
With copies to:
Steven H. Davis, Esq.
Douglas W. Hawes, Esq.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, NY 10019
Facsimile: (212) 424-8500
and
Seth A. Kaplan, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Facsimile: (212) 403-2000
78
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or to such other address as any party shall specify by written
notice so given, and such notice shall be deemed to have been
delivered as of the date so telecommunicated, personally
delivered or mailed.
11.3. Assignment; Binding Effect. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of
law or otherwise) without the prior written consent of the other
parties, except that Merger Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations
hereunder to any newly formed, direct wholly-owned Subsidiary of
Duke, which Subsidiary would then be substituted for Merger Sub
for purposes of this Agreement. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors
and assigns. Notwithstanding anything contained in this
Agreement to the contrary, except for the provisions of Article 4
and Sections 8.11 and 8.16, nothing in this Agreement, expressed
or implied, is intended to confer on any person other than the
parties hereto or their respective heirs, successors, executors,
administrators and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
11.4. Entire Agreement. This Agreement, the Exhibits, the
PanEnergy Disclosure Schedule, the Duke Disclosure Schedule, the
Confidentiality Agreement and any agreements delivered by the
parties in connection herewith constitute the entire agreement
among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings among the
parties with respect thereto. No addition to or modification of
any provision of this Agreement shall be binding upon any party
hereto unless made in writing and signed by all parties hereto.
79
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11.5. Amendment. This Agreement may be amended by the
parties hereto, by action taken by their respective Boards of
Directors, at any time before or after approval of matters
presented in connection with the Merger by the stockholders of
PanEnergy and shareholders of Duke, but after any such
stockholder approval, no amendment shall be made which by law
requires the further approval of stockholders without obtaining
such further approval. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the
parties hereto.
11.6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware,
without regard to its rules of conflict of laws. Except as
prohibited by law, each of PanEnergy and Duke hereby irrevocably
and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the State of Delaware and of the
United States of America located in the State of Delaware (the
"Delaware Courts") for any litigation arising out of or relating
to this Agreement and the transactions contemplated hereby (and
agrees not to commence any litigation relating thereto except in
such courts), waives any objection to the laying of venue of any
such litigation in the Delaware Courts and agrees not to plead or
claim in any Delaware Court that such litigation brought therein
has been brought in an inconvenient forum.
11.7. Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all
of the parties hereto.
11.8. Headings. Headings of the Articles and Sections of
this Agreement are for the convenience of the parties only, and
shall be given no substantive or interpretive effect whatsoever.
11.9. Interpretation. In this Agreement, unless the context
otherwise requires, words describing the singular number shall
include the plural and vice versa, and words denoting any gender
shall include all genders and words denoting natural persons
shall include corporations and partnerships and vice versa.
11.10. Waivers. Except as provided in this Agreement, no
action taken pursuant to this Agreement, including, without
limitation, any investigation by or on behalf of any party, shall
be deemed to constitute a waiver by the party taking such action
of compliance with any representations, warranties, covenants or
agreements contained in this Agreement. The waiver by any party
hereto of a breach of any provision hereunder shall not operate
or be construed as a waiver of any prior or subsequent breach of
the same or any other provision hereunder.
80
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11.11. Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as
to that jurisdiction, be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of
the terms or provisions of this Agreement in any other
jurisdiction. If any provision of this Agreement is so broad as
to be unenforceable, the provision shall be interpreted to be
only so broad as is enforceable.
11.12. Enforcement of Agreement. The parties hereto agree
that irreparable damage would occur in the event that any of the
provisions of this Agreement was not performed in accordance with
its specific terms or was otherwise breached. It is accordingly
agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any Delaware
Court, this being in addition to any other remedy to which they
are entitled at law or in equity.
11.13. Further Assurances. Each party hereto shall execute
such further documents and instruments and take such further
actions as may reasonably be requested by any other party hereto
in order to consummate the transactions contemplated by this
Agreement in accordance with the terms hereof.
11.14. Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND
AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT
IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND
THEREFORE EACH SUCH PARTY TO THE EXTENT PERMITTED BY LAW HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH
SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH
PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 11.14.
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11.15. Certain Definitions. As used in this Agreement,
except as otherwise provided in Sections 5.13(a) and 6.13(a), the
word "Subsidiary" when used with respect to any party means any
corporation or other organization, whether incorporated or
unincorporated, of which such party directly or indirectly owns
or controls at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a
majority of the board of directors or others performing similar
functions with respect to such corporation or other organization,
or any organization of which such party is a general partner. As
used in this Agreement, the term "Significant Subsidiary" has the
meaning ascribed to it under Rule 405 under the Securities Act.
As used in this Agreement, the term "Joint Venture" means, with
respect to any person, any corporation or other entity (including
partnerships and other business associations and joint ventures)
in which such person or one or more of its Subsidiaries owns an
equity interest that is less than a majority of any class of the
outstanding voting securities or equity, other than equity
interests held for passive investment purposes that are less than
5% of any class of the outstanding voting securities or equity of
such entity.
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IN WITNESS WHEREOF, the parties have executed this
Agreement and caused the same to be duly delivered on their
behalf on the day and year first written above.
DUKE POWER COMPANY
ATTEST:
By: By:
Ellen T. Ruff William H. Grigg
Secretary Chairman of the Board and
Chief Executive Officer
DUKE TRANSACTION CORPORATION
ATTEST:
By: By:
Peter C. Buck Steve C. Griffith, Jr.
Secretary President
PANENERGY CORP
ATTEST:
By: By:
Robert W. Reed Paul M. Anderson
Secretary President and Chief
Executive Officer
83
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EXHIBIT A
TO AGREEMENT
AND PLAN OF
MERGER
FORM OF AFFILIATE LETTER
Duke Power Company
422 South Church Street
Charlotte, NC 28242
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may
be deemed to be an "affiliate" of PanEnergy Corp, a Delaware
corporation ("PanEnergy"), as the term "affiliate" is (i) defined
for purposes of paragraphs (c) and (d) of Rule 145 of the rules
and regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Act"), or (ii) used in and for
purposes of Accounting Series, Releases 130 and 135, as amended,
of the Commission. Pursuant to the terms of the Agreement and
Plan of Merger dated as of November 24, 1996 (the "Agreement"),
between Duke Power Company, a North Carolina corporation
("Duke"), Duke Transaction Corporation, a Delaware corporation
and a wholly-owned subsidiary of Duke ("Merger Sub"), and
PanEnergy, Merger Sub will be merged with and into PanEnergy (the
"Merger").
As a result of the Merger, I may receive shares of Common
Stock, without par value, of Duke (the "Duke Securities") in
exchange for shares owned by me of Common Stock, par value $1.00
per share, of PanEnergy.
I represent, warrant and covenant to Duke that in the event I
receive any Duke Securities as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of
the Duke Securities in violation of the Act or the Rules and
Regulations.
B. I have carefully read this letter and the Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise
dispose of the Duke Securities to the extent I felt necessary,
with my counsel or counsel for PanEnergy.
A-1
<PAGE>
C. I have been advised that the issuance of Duke Securities to
me pursuant to the Merger has been registered with the Commission
under the Act on a Registration Statement on Form S-4. However,
I have also been advised that, since at the time the Merger was
submitted for a vote of the stockholders of PanEnergy, I may be
deemed to have been an affiliate of PanEnergy and the
distribution by me of the Duke Securities has not been registered
under the Act, I may not sell, transfer or otherwise dispose of
the Duke Securities issued to me in the Merger unless (i) such
sale, transfer or other disposition has been registered under the
Act, (ii) such sale, transfer or other disposition is made in
conformity with Rule 145 promulgated by the Commission under the
Act, or (iii) in the opinion of counsel reasonably acceptable to
Duke, or pursuant to a "no action" letter obtained by the
undersigned from the staff of the Commission, such sale, transfer
or other disposition is otherwise exempt from registration under
the Act.
D. I understand that Duke is under no obligation to register
the sale, transfer or other disposition of the Duke Securities by
me or on my behalf under the Act or to take any other action
necessary in order to make compliance with an exemption from such
registration available.
E. I also understand that stop transfer instructions will be
given to Duke's transfer agents with respect to the Duke
Securities and that there will be placed on the certificates for
the Duke Securities issued to me, or any substitutions therefor,
a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE
SECURITIES ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY
THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH
THE TERMS OF AN AGREEMENT DATED ____________, BETWEEN THE
REGISTERED HOLDER HEREOF AND DUKE, A COPY OF WHICH AGREEMENT
IS ON FILE AT THE PRINCIPAL OFFICES OF DUKE."
F. I also understand that unless the transfer by me of my
Duke Securities has been registered under the Act or is a sale
made in conformity with the provisions of Rule 145, Duke reserves
the right to put the following legend on the certificates issued
to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES IN
A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE
SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN
ACQUIRED BY THE
A-2
<PAGE>
HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION
WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF
THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED
OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth in
paragraphs E and F above shall be removed by delivery of
substitute certificates without such legend if such legend is not
required for purposes of the Act or this Agreement. It is
understood and agreed that such legends and the stop orders
referred to above will be removed if (i) two years shall have
elapsed from the date the undersigned acquired the Duke
Securities received in the Merger and the provisions of Rule
145(d)(2) are then available to the undersigned, (ii) three years
shall have elapsed from the date the undersigned acquired the
Duke Securities received in the Merger and the provisions of Rule
145(d)(3) are then available to the undersigned, or (iii) Duke
has received either an opinion of counsel, which opinion and
counsel shall be reasonably satisfactory to Duke, or a "no
action" letter obtained by the undersigned from the staff of the
Commission, to the effect that the restrictions imposed by Rule
145 under the Act no longer apply to the undersigned.
I further represent to and covenant with Duke that I will not
sell, transfer or otherwise dispose of any Duke Securities
received by me in the Merger or any other shares of the capital
stock of Duke until after such time as financial results covering
at least 30 days of combined operations of PanEnergy and Duke
have been published by Duke, in the form of a quarterly earnings
report, an effective registration statement registered with the
Commission, a report to the Commission on Form 10-K, 10-Q or 8-K,
or any other public filing or announcement which includes such
combined results of operations. Duke shall notify the
"affiliates" of the publication of such results.
A-3
<PAGE>
Execution of this letter should not be considered an admission
on my part that I am an "affiliate" of PanEnergy as described in
the first paragraph of this letter or as a waiver of any rights I
may have to object to any claim that I am such an affiliate on or
after the date of this letter.
Very truly yours,
Name:
Accepted this_______ day of
____________, 199__ by
DUKE POWER COMPANY
By:
Name:
Title:
A-4
<PAGE>
EXHIBIT B-1
TO AGREEMENT AND
PLAN OF MERGER
FORM OF EMPLOYMENT AGREEMENT FOR
PAUL M. ANDERSON OF PANENERGY
AGREEMENT by and among PanEnergy Corp, a Delaware
corporation ("PanEnergy"), Duke Power Company, a North Carolina
corporation (the "Company"), and Paul M. Anderson (the
"Executive"), dated as of the 24th day of November, 1996.
The Board of Directors of PanEnergy (the "PanEnergy
Board") and the Board of Directors of the Company (the "Board"),
have determined that it is in the best interests of PanEnergy and
its shareholders and the Company and its shareholders to assure
that PanEnergy will have the continued dedication of the
Executive pending the merger of PanEnergy and Duke Transaction
Corporation, a Delaware corporation and a wholly-owned subsidiary
of the Company (the "Merger") pursuant to the Agreement and Plan
of Merger dated as of November 24, 1996 (the "Merger Agreement")
and to provide the surviving corporation after the Merger with
continuity of management. Therefore, in order to accomplish these
objectives, the Company's Board and the PanEnergy Board have
caused the Company and PanEnergy, respectively, to enter into
this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Effective Date. The "Effective Date" shall mean
the date on which the Effective Time of the Merger (as defined in
the Merger Agreement) occurs.
2. Employment Period. The Company hereby agrees to
employ the Executive, and the Executive hereby agrees to accept
employment with and remain in the employ of the Company subject
to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the second
anniversary thereof, or such later date as may be mutually agreed
upon by the Company and the Executive. Notwithstanding the
foregoing, the Executive's employment hereunder may be earlier
terminated, subject to Section 5 of this Agreement. The period
of time between the commencement and the termination of the
Executive's employment hereunder shall be referred to herein as
the "Employment Period."
3. Terms of Employment. (a) Position and Duties.
(i) During the Employment Period, (A) the Executive shall serve
as (x) Chief Operating Officer and
<PAGE>
President of the Company, reporting to Richard B. Priory, (y) a
member of the Company's Executive Committee, which Committee
shall have the responsibilities and shall be constituted as set
forth in Section 8.15(d) of the Merger Agreement, and (z) a
member of the Office of the Chief Executive Officer, which shall
be the senior policy-making body of the Company and which shall
be comprised solely of the Executive and the Chief Executive
Officer of the Company, and shall have such authority, duties
and responsibilities as are commensurate with such positions and
as may be consistent with such position as may be assigned to him
by the Board and (B) the Executive's services shall be performed
at offices of the Company in Houston, Texas, and Charlotte, North
Carolina (the "Office Locations"), and in no event shall the
Executive be required to reside on a permanent basis in North
Carolina, but he may elect to do so. Notwithstanding the
foregoing, the Company and the Executive may mutually agree to
such changes in the Executive's position, reporting or location
of employment as are in the best interests of the Company without
violating the provisions of this paragraph.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote substantially all of his
attention and time during normal business hours to the business
and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's best efforts to perform
faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement
for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement.
(b) Compensation. (i) Base Salary. During the
Employment Period, the Executive shall receive an annual base
salary ("Annual Base Salary") of no less than $ , payable
monthly. The Annual Base Salary shall be reviewed no more than
12 months after the last salary increase awarded to the Executive
prior to the Effective Date and thereafter at least annually.
Any increase in Annual Base Salary or any payment of Supplemental
Salary (as defined below) shall not serve to limit or reduce any
other obligation to the Executive under this Agreement. Annual
Base Salary shall not be reduced after any such increase and the
term Annual Base Salary as utilized in this Agreement shall refer
to Annual Base Salary as so increased. As used
B-1-2
<PAGE>
in this Agreement, the term "affiliated companies" shall include
any company controlled by, controlling or under common control
with the Company.
In the event that, pursuant to the provisions of Section
3(a)(i) hereof, the Executive becomes subject to North Carolina
income or employment taxes as a resident of the State of North
Carolina (a "Change of Residence"), then for each calendar year
that begins during the Employment Period that he is subject to
such taxes, the Executive shall receive a supplemental salary
payment (the "Supplemental Salary") such that after payment by
the Executive of all taxes, including, without limitation,
Federal and state income and employment taxes with respect to the
Executive's total compensation from the Company for such calendar
year (including, without limitation, the Supplemental Salary),
the Executive will retain an amount (the "After-Tax
Compensation") equal to the amount of After-Tax Compensation he
would have received had no Change of Residence occurred, as
determined by an independent tax advisor mutually agreed to by
the Company and the Executive (whose fees and expenses for making
such determination shall be paid by the Company).
(ii) Annual Bonus. In addition to Annual Base
Salary, for each fiscal year ending during the Employment Period
the Executive shall be eligible, based upon the Executive's
achievement of performance goals (set by the Compensation
Committee of the Board, in consultation with the Executive, at
levels substantially consistent with past practice) during such
fiscal year, to receive a bonus (the "Annual Bonus") at a target
level of not less than 70% of the Annual Base Salary (the "Target
Bonus Amount") with the opportunity, substantially consistent
with past practice, to earn in excess of such amount based upon
the attainment of agreed upon performance goals. Each such Annual
Bonus shall be paid no later than the last business day of the
third month of the fiscal year next following the fiscal year for
which the Annual Bonus is awarded (the "Last Payment Date").
(iii) Long-Term Incentive Compensation. During the
Employment Period, the Executive shall be entitled to participate
in all long-term incentive plans, practices, policies and
programs applicable generally to other peer executives of the
Company, provided that for each fiscal year ending during the
Employment Period, the Company shall, on the earlier (the "Award
Date") of (A) the date on which the Annual Bonus with respect to
such fiscal year is paid, if any and (B) the Last Payment Date,
grant the Executive either (1) stock options (each an "Option"
and collectively the "Option Award"), each to purchase one share
of the common stock of the Company at a price equal to Fair
B-1-3
<PAGE>
Market Value (as defined below) as of the Award Date, (2) shares
of restricted common stock of the Company (each a "Restricted
Share" and collectively the "Restricted Stock Award"), or (3)
both an Option Award and a Restricted Stock Award (a "Combination
Award"), in an amount such that the Aggregate Value (as defined
below) of the Option Award, the Restricted Stock Award or the
Combination Award, as applicable, on the Award Date is not less
than 100% of the sum of (x) the Annual Base Salary and (y) the
Target Bonus Amount for the fiscal year with respect to which the
Option Award, the Restricted Stock Award or the Combination
Award, as applicable, is made. Options granted as part of any
Option Award shall have a term of 10 years, and vest and become
exercisable ratably in three annual installments beginning on the
first anniversary of the Award Date, and Shares granted as part
of any Restricted Stock Award shall become free of all
restrictions (including, without limitation, with respect to
transferability) ratably in installments, each of which
installment shall occur on the date the Executive achieves one of
several performance goals (the "Restricted Stock Performance
Goals") whose number, level and content shall be set by the
Compensation Committee of the Board in consultation with the
Executive; provided, however, that the number, level and content
of the Restricted Stock Performance Goals shall be such that, in
the event the Executive achieves all the Restricted Stock
Performance Goals, one- third of the Restricted Stock Award shall
have become free of all restrictions on each of the first three
anniversaries of the Award Date. For the purposes of this
Agreement, "Fair Market Value" shall mean, as of any given date,
the closing price of the common stock of the Company on the New
York Stock Exchange Composite Transactions on such date as
reported in The Wall Street Journal (or, if there is no
reported sale on such date, on the last preceding date on which
any reported sale occurred). For the purposes of this Agreement,
"Aggregate Value" shall mean: with respect to an Option Award,
the product of (x) the number of Options awarded and (y) the
dollar value of each such Option according to the Black Sholes
option pricing model or such other option pricing model
acceptable to both the Company and the Executive; with respect to
a Restricted Stock Award, the product of (x) the number of Shares
awarded and (y) Fair Market Value (determined without regard to
the restrictions upon such Shares); and with respect to a
Combination Award, the sum of the respective Aggregate Values of
the Option Award and the Restricted Stock Award comprising the
Combination Award. Determinations of Aggregate Value shall be
made by Ernst & Young or by such other certified public
accounting firm or consulting firm reasonably acceptable to the
Executive as may be designated by the Company.
B-1-4
<PAGE>
(iv) Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate
in all savings and retirement plans, practices, policies and
programs on a basis no less favorable than that generally
applicable to peer executives of the Company.
(v) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's dependents, as the
case may be, shall be eligible for participation in and shall
receive all benefits under welfare benefit plans, practices,
policies and programs provided by the Company on a basis no less
favorable than that generally applicable to peer executives of
the Company.
(vi) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the Company's policies, including, without limitation, the
costs of travel between the Office Locations during the ordinary
course of business and reasonable costs of furnished
accommodations for the Executive in Charlotte, North Carolina. In
the event the Executive elects to relocate his principal
residence (as defined in Section 1034 of the Internal Revenue
Code of 1986, as amended (the "Code")) to North Carolina (the
"Relocation"), the Executive shall also be entitled to prompt
reimbursement for all costs reasonably incurred in connection
with such Relocation ("Relocation Costs"). Relocation Costs shall
include, without limitation, the amount of any short-term capital
loss or long-term capital loss (as defined in Section 1222 of the
Code) experienced by the Executive on the disposition during the
Employment Period of his principal residence in connection with
the Relocation.
(vii) Deferred Account. The Company shall establish an
unfunded deferred compensation account (the "Deferred Account")
for the Executive to which it shall credit the amounts set forth
in this Section 3(b)(vii). The Company shall pay the Executive a
cash lump sum equal to the entire balance in the Deferred Account
upon the later of (i) the termination of the Executive's
employment with the Company for any reason and (ii) the
Executive's 55th birthday; provided, that if the Executive dies
before his 55th birthday, then notwithstanding any other
provision of this Agreement, such balance shall be paid
immediately to the Executive's legal representatives.
There shall be credited to the Deferred Account, as of the
end of each calendar month during the period from the Effective
Date of this Agreement until the second anniversary thereof, (A)
the sum of $83,334 plus (B) interest on the balance in the
Deferred Account determined immediately before the end of such
calendar month, at a rate equal to the Company's cost of funds
during such calendar month;
B-1-5
<PAGE>
provided, that no further amounts described in clause (A) shall
be credited to the Deferred Account following the termination of
the Executive's employment by the Company for Cause (as defined
below). Any termination of the Executive's employment or of this
Agreement shall have no effect on the continuing operation of
this Section 3(b)(vii).
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with
the plans, policies, programs and practices of the Company on a
basis no less favorable than that generally applicable to peer
executives of the Company but in any event he shall be entitled
to no less than four weeks of vacation per year during the
Employment Period.
4. Termination of Employment. (a) Death or Disability.
The Executive's employment shall terminate automatically upon the
Executive's death during the Employment Period. If the
Disability of the Executive occurs during the Employment Period
(pursuant to the definition of Disability set forth below), the
Company may give to the Executive written notice, in accordance
with Section 11(b) of this Agreement, of its intention to
terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective
on the 60th day after receipt of such notice by the Executive
(the "Disability Effective Date"); provided that, within the 60
days after such receipt, the Executive shall not have returned to
substantially full time performance of the Executive's duties.
For purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the performance of the Executive's
duties with the Company on a full time basis for an aggregate of
120 out of any 180 consecutive business days as a result of
incapacity due to mental or physical illness which is determined
to be total and permanent by an independent physician selected by
the Company or its insurers and acceptable to the Executive or
the Executive's legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" shall mean the engaging by the
Executive in illegal conduct or gross misconduct which is
materially and demonstrably injurious to the Company. The
cessation of employment of the Executive shall not be deemed to
be for Cause unless and until there shall have been delivered to
the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held
for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together
with
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<PAGE>
counsel, to be heard before the Board), finding that, in the good
faith opinion of the Board, the Executive is guilty of the
conduct described above, and specifying the particulars thereof
in detail.
(c) By the Executive. The Executive's employment may be
terminated by the Executive for any reason during or at the end
of the Employment Period (a "Termination by the Executive").
(d) Notice of Termination. Any termination by the
Company for Cause, or any Termination by the Executive, shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 11(b) of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated and (iii)
if the Date of Termination (as defined below) is other than the
date of receipt of such notice, specifies the termination date
(which date shall be not more than 30 days after the giving of
such notice). The failure by the Executive or the Company to set
forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Cause shall not waive any right of
the Company hereunder or preclude the Company from asserting such
fact or circumstance in enforcing the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i)
if the Executive's employment is terminated by the Company for
Cause, or in the case of a Termination by the Executive, the date
of receipt of the Notice of Termination or any later date
specified therein that is within 30 days of such notice, as the
case may be, (ii) if the Executive's employment is terminated by
the Company other than for Cause or Disability, the Date of
Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's
employment is terminated by reason of death or Disability, the
Date of Termination shall be the date of death of the Executive
or the Disability Effective Date, as the case may be. 5.
Obligations of the Company upon Termination. (a) Termination by
the Executive; Other than for Cause, Death or Disability. If,
during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause or Disability or
there shall occur a Termination by the Executive:
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<PAGE>
(i) the Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the sum
of (1) the Executive's Annual Base Salary through the Date of
Termination to the extent not theretofore paid; (2) the product
of (x) the Target Bonus Amount and (y) a fraction, the numerator
of which is the number of days in the current fiscal year through
the Date of Termination, and the denominator of which is 365; (3)
any accrued vacation pay to the extent not theretofore paid; and
(4) the Executive's Supplemental Salary, if applicable, for
periods through the Date of Termination, to the extent not
theretofore paid (the sum of the amounts described in clauses
(1), (2), (3) and (4) shall be hereinafter referred to as the
"Accrued Obligations");
(ii) the Executive shall receive Retirement Benefits
(as defined below) from and after the Date of Termination on the
following basis: (A) if he has not reached the age of 55 as of
the Date of Termination, he shall be deemed, for purposes of all
determinations with respect to the Retirement Benefits, to have
attained the age of 55 as of the Date of Termination, and his
years of service shall be increased as if he had been employed
for an additional a number of years of service (and fractions
thereof) equal to the number of years (and fractions thereof)
from the Date of Termination through his 55th birthday; (B)
"Retirement Benefits" shall mean (x) qualified defined benefit
retirement benefits and excess or supplemental retirement
benefits, together with (y) retiree medical, long-term
disability, dental, accidental death and dismemberment and life
insurance benefits for the Executive and/or the Executive's
dependents, in each case in accordance with the plans,
programs, practices and policies as may be in effect at the Date
of Termination; provided, that in no event shall any such
benefits be less favorable than those that the Executive (and his
dependents, if applicable) would have received under PanEnergy's
qualified and nonqualified retirement plans and retiree medical
and other welfare benefit plans as in effect at the Effective
Time ("Current Plans"), if the Current Plans had remained in
effect without amendment as of the Date of Termination and the
Executive had been eligible to retire under the Current Plans as
of the Date of Termination; and (C) the Company may elect to
provide any or all of the Retirement Benefits (other than those
actually provided from qualified plans) through individual
arrangements or otherwise not through Company-sponsored plans, so
long as the net after-tax Retirement Benefits provided to the
Executive and his dependents are not less than they would have
enjoyed had they received such Retirement Benefits under
Company-sponsored plans; and
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<PAGE>
(iii) to the extent not theretofore paid or provided,
the Company shall timely pay or provide to the Executive any
other amounts or benefits required to be paid or provided or
which the Executive is eligible to receive with respect to the
Deferred Account or under any plan, program, policy or practice
or contract or agreement of the Company as of the Date of
Termination (such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated
by reason of the Executive's death during the Employment Period,
this Agreement shall terminate without further obligations to the
Executive's legal representatives under this Agreement, other
than for payment of Accrued Obligations and the timely payment or
provision of Other Benefits. Accrued Obligations shall be paid
to the Executive's estate or beneficiary, as applicable, in a
lump sum in cash within 30 days of the Date of Termination. The
term Other Benefits as utilized in this Section 5(b) shall
include death benefits as in effect on the date of the
Executive's death.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination.
(d) Cause. If the Executive's employment shall be
terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive
other than the obligation to pay to the Executive (x) his Annual
Base Salary through the Date of Termination, and (y) Other
Benefits, in each case to the extent theretofore unpaid.
6. Non-exclusivity of Rights. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided
by the Company or any of its affiliated companies and for which
the Executive may qualify, nor, subject to Section 11(f), shall
anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the
Company or any of its affiliated companies. Any rights that are
vested and any benefits that the Executive is otherwise entitled
to receive under any plan, policy, practice or program of or any
contract or agreement with the Company or any of its affiliated
companies at or subsequent to the Date of Termina-
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<PAGE>
tion shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly
modified by this Agreement.
7. Full Settlement. In no event shall the Executive be
obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and such amounts shall
not be reduced whether or not the Executive obtains other
employment. The Company agrees to pay as incurred, to the full
extent permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company, the Executive
or others of the validity or enforceability of, or liability
under, any provision of this Agreement or any guarantee of
performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this
Agreement); provided, however, that the foregoing shall not apply
in connection with any such contest in which the finder of fact
determines that the contest is frivolous or was brought by the
Executive in bad faith.
8. Certain Reduction of Payments by the Company. (a)
For purposes of this Section 8, (i) a "Payment" shall mean any
payment or distribution in the nature of compensation to or for
the benefit of the Executive, whether paid or payable pursuant to
this Agreement or otherwise; (ii) "Separation Payment" shall mean
a Payment paid or payable pursuant to this Agreement
(disregarding this Section); (iii) "Net After Tax Receipt" shall
mean the Present Value of a Payment net of all taxes imposed on
the Executive with respect thereto under Sections 1 and 4999 of
the Internal Revenue Code of 1986, as amended (the "Code"),
determined by applying the highest marginal rate under Section 1
of the Code which applied to the Executive's taxable income for
the immediately preceding taxable year; (iv) "Present Value"
shall mean such value determined in accordance with Section
280G(d)(4) of the Code; and (v) "Reduced Amount" shall mean the
greatest aggregate amount of Separation Payments which (a) is
less than the sum of all Separation Payments and (b) results in
aggregate Net After Tax Receipts which are equal to or greater
than the Net After Tax Receipts which would result if the
Executive were paid the sum of all Separation Payments. The
Company shall select a mutually agreeable nationally recognized
accounting firm (the "Accounting Firm") to make all necessary
determinations under this Section 8, in consultation with any
independent law firm of the Accounting Firm's choice.
(b) Anything in this Agreement to the contrary not
withstanding, in the event the Accounting Firm shall determine
that receipt of all Payments would subject the
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<PAGE>
Executive to tax under Section 4999 of the Code, it shall
determine whether some amount of Separation Payments would meet
the definition of a "Reduced Amount." If the Accounting Firm
determines that there is a Reduced Amount, the aggregate
Separation Payments shall be reduced to such Reduced Amount. All
fees payable to the Accounting Firm shall be paid solely by the
Company.
(c) If the Accounting Firm determines that aggregate
Separation Payments should be reduced to the Reduced Amount, the
Company shall promptly give the Executive notice to that effect
and a copy of the detailed calculation thereof, and the Executive
may then elect, in his sole discretion, which and how much of the
Separation Payments shall be eliminated or reduced (as long as
after such election the present value of the aggregate Separation
Payments equals the Reduced Amount), and shall advise the Company
in writing of his election within ten days of his receipt of
notice. If no such election is made by the Executive within such
ten-day period, the Company may elect which of such Separation
Payments shall be eliminated or reduced (as long as after such
election the present value of the aggregate Separation Payments
equals the Reduced Amount) and shall notify the Executive
promptly of such election. All determinations made by the
Accounting Firm under this Section shall be binding upon the
Company and the Executive and shall be made within 60 days of a
request for such determination by either the Executive or the
Company. As promptly as practicable following such determination,
the Company shall pay to or distribute for the benefit of the
Executive such Separation Payments as are then due to the
Executive under this Agreement and shall promptly pay to or
distribute for the benefit of the Executive in the future such
Separation Payments as become due to the Executive under this
Agreement.
(d) While it is the intention of the Company to reduce
the amounts payable or distributable to the Executive hereunder
only if the aggregate Net After Tax Receipts to an Executive
would thereby be increased, as a result of the uncertainty in the
application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is
possible that amounts will have been paid or distributed by the
Company to or for the benefit of the Executive pursuant to this
Agreement which should not have been so paid or distributed
("Overpayment") or that additional amounts which will have not
been paid or distributed by the Company to or for the benefit of
the Executive pursuant to this Agreement could have been so paid
or distributed ("Underpayment"), in each case, consistent with
the calculation of the Reduced Amount hereunder. In the event
that the Accounting Firm, based upon the assertion of a
deficiency by the Internal Revenue Service against the Company or
the Executive which deficiency the Accounting
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<PAGE>
Firm believes has a high probability of success, determines that
an Overpayment has been made, any such Overpayment paid or
distributed by the Company to or for the benefit of the Executive
shall be treated for all purposes as a loan to the Executive
which the Executive shall repay to the Company together with
interest at the applicable federal rate provided for in Section
7872(f)(2) of the Code; provided, however, that no such loan
shall be deemed to have been made and no amount shall be payable
by the Executive to the Company if and to the extent such deemed
loan and payment would not either reduce the amount on which the
Executive is subject to tax under Section 1 and Section 4999 of
the Code or generate a refund of such taxes. In the event that
the Accounting Firm, based upon controlling precedent or
substantial authority, determines that an Underpayment has
occurred, any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive together with
interest at the applicable federal rate provided for in Section
7872(f)(2) of the Code.
9. (a) Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or any
of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement).
The Executive shall not, at any time during his employment with
the Company or at any time thereafter, for any reason, in any
fashion, form or manner, either directly or indirectly,
communicate, divulge, copy or permit to be copied (without the
prior written consent of the Company or as may otherwise be
required by law or legal process or in order to enforce his
rights under this Agreement or as necessary to defend himself
against a claim asserted directly or indirectly by the Company or
any of its affiliated companies) any secret or confidential
information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses, in any
manner whatsoever, that is not otherwise publicly available, to,
or for the benefit of, any person, firm, corporation or other
entity, other than the Company and those designated by it or in
the course of his employment with the Company and its affiliated
companies. As used herein, the term "all secret or confidential
information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses" shall
include, without limitation, the Company's plans, strategies,
proposals to potential customers and/or partners, costs, prices,
proprietary systems for buying and selling, client and customer
lists, identity of prospects,
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<PAGE>
proprietary computer programs, policy or procedure manuals,
proprietary training and recruiting procedures, proprietary
accounting procedures, and the status and contents of the
Company's contracts with its suppliers, clients, customers or
prospects. The Executive further agrees to maintain in confidence
any confidential information of third parties received as a
result of his employment with the Company.
(b) Enforcement. In the event of a breach or threatened
breach of this Section 9, the Executive agrees that the Company
shall be entitled, in addition to any other remedies available to
it to specific performance and injunctive relief in a court of
appropriate jurisdiction to remedy any such breach or threatened
breach, and the Executive acknowledges that damages would be
inadequate and insufficient. In no event shall an asserted
violation of the provisions of this Section 9 constitute a basis
for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement.
(c) Survival. Any termination of the Executive's
employment or of this Agreement shall have no effect on the
continuing operation of this Section 9.
10. Successors. (a) This Agreement is personal to the
Executive and without the prior written consent of the Company
shall not be assignable by the Executive otherwise than by will
or the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had
taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
11. Miscellaneous. (a) This Agreement shall be governed
by and construed in accordance with the laws of the State of
Texas, without reference to principles of conflict of laws. The
captions of this Agreement are not part of the provisions hereof
and shall have no force or effect. This Agreement may not be
amended or modified otherwise than by a
B-1-13
<PAGE>
written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other
party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
Paul M. Anderson
2 East Bend Lane
Arlington Court
Houston, TX 77007
If to PanEnergy:
5400 Westheimer Court
Houston, TX 77056-5310
Attention: General Counsel
If to the Company:
422 South Church Street
Charlotte, NC 28242
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign taxes
as shall be required to be withheld pursuant to any applicable
law or regulation.
(e) Subject to Section 4(d) of this Agreement, the
Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder
shall not be deemed to be a waiver of such provision or right or
any other provision or right of this Agreement.
(f) This Agreement constitutes the entire agreement
between the parties and is intended to be an integration of all
agreements between the parties with respect to the Executive's
employment by the Company, the terms and
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<PAGE>
conditions of such employment or the termination of such
employment. Any and all prior agreements, understandings or
commitments between the Company and the Executive with respect to
any such matter, including but not limited to the Employment
Agreement between the Executive and PanEnergy dated March 1,
1991, are hereby superseded and revoked.
(g) The Company shall indemnify and hold the Executive
and his legal representatives harmless to the fullest extent
permitted by applicable law, from and against all judgments,
fines, penalties, excise taxes, amounts paid in settlement,
losses, expenses, costs, liabilities and legal fees if the
Executive is made, or threatened to be made a party to any
threatened or pending or completed action, suit, proceeding,
whether civil, criminal, administrative or investigative,
including an action by or in the right of the Company or any of
its affiliated companies to procure a judgment in its favor, by
reason of the fact that the Executive is or was serving in any
capacity at the request of the Company or any of affiliated
companies for any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise. The right to
indemnification provided, in this paragraph (g) shall not be
deemed exclusive of any other rights to which Executive may have
or hereafter be entitled under any law or the charter or by-laws
of the Company or any of its affiliated companies or otherwise,
both as to action in Executive's official capacity and as to
action in another capacity while holding such office, and shall
continue after Executive has ceased to be a director or officer
and shall inure to the benefit of Executive's heirs, executors
and administrators. Any reimbursement obligation arising
hereunder shall be satisfied on an as-incurred basis. In
addition, the Company agrees to continue to maintain customary
and appropriate directors and liability insurance during the
Employment Period and the Executive shall be entitled to the
protection of any such insurance policies on no less favorable a
basis than is provided to any other officer or director of the
Company or any of its affiliated companies.
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from their
respective Board of Directors, PanEnergy and the Company have
caused these presents to be executed in their respective names on
their respective behalfs, all as of the day and year first
above written.
Paul M. Anderson
PANENERGY CORP
By
DUKE POWER COMPANY
By
<PAGE>
EXHIBIT B-2
TO AGREEMENT AND
PLAN OF MERGER
FORM OF EMPLOYMENT AGREEMENT FOR
JAMES T. HACKETT OF PANENERGY
AGREEMENT by and between PanEnergy Corp, a Delaware
corporation (the "Company") and James T. Hackett (the
"Executive"), dated as of the 24th day of November, 1996.
The Board of Directors of the Company (the "Board"),
has determined that it is in the best interests of the Company
and its shareholders to assure that the Company will have the
continued dedication of the Executive pending the merger of the
Company and Duke Transaction Corporation, a Delaware corporation
and a wholly-owned subsidiary of Duke Power Company, a North
Carolina corporation (the "Merger") pursuant to the Agreement and
Plan of Merger dated as of November 24, 1996 (the "Merger
Agreement") and to provide the surviving corporation after the
Merger with continuity of management. Therefore, in order to
accomplish these objectives, the Board has caused the Company to
enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Effective Date. The "Effective Date" shall mean
the date on which the Effective Time of the Merger (as defined in
the Merger Agreement) occurs.
2. Employment Period. The Company hereby agrees to
employ the Executive, and the Executive hereby agrees to accept
employment with and remain in the employ of the Company subject
to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the second
anniversary thereof, or such later date as may be mutually agreed
upon by the Company and the Executive. Notwithstanding the
foregoing, the Executive's employment hereunder may be earlier
terminated, subject to Section 5 of this Agreement. The period
of time between the commencement and the termination of the
Executive's employment hereunder shall be referred to herein as
the "Employment Period."
3. Terms of Employment. (a) Position and Duties.
(i) During the Employment Period: (A) the Executive shall serve
as President of Duke Energy Services, which shall comprise all of
the non-regulated businesses of the Company other than real
estate and telecommunications, and as a member of the Executive
Committee of Duke Power
<PAGE>
Company, which Committee shall have the responsibilities and
shall be constituted as set forth in Section 8.15(d) of the
Merger Agreement, with such authority, duties and
responsibilities as are commensurate with such positions and as
may be consistent with such position as may be assigned to him
by the Board, provided, however, that in the event the Executive
determines in good faith that the terms and conditions of a
letter agreement between the Executive and Natural Gas
Clearinghouse, dated as of January 16, 1994 (the "Non-Compete
Agreement") (attached hereto as Exhibit A), preclude him from
assuming any such authority, duty and/or responsibility (each a
"Precluded Responsibility") for a period of time (the
"Non-Compete Period"), then the Precluded Responsibility or
Responsibilities shall not be assumed by the Executive until
immediately after the Non-Compete Period; (B) the Executive shall
report to Paul M. Anderson while Mr. Anderson is employed by Duke
Power Company; and (C) the Executive's services shall be
performed at offices of the Company in Houston, Texas.
Notwithstanding the foregoing, the Company and the Executive may
mutually agree to such changes in the Executive's position,
reporting or location of employment as are in the best interests
of the Company without violating the provisions of this
paragraph.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote substantially all of his
attention and time during normal business hours to the business
and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's best efforts to perform
faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement
for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement.
(b) Compensation. (i) Base Salary. During the
Employment Period, the Executive shall receive an annual base
salary ("Annual Base Salary"), payable monthly, at least equal to
the annual base salary paid or payable, including any base
salary which has been earned but deferred, to the Executive by
PanEnergy in respect of the twelve-month period immediately
preceding the Effective Date. During the Employment Period, the
Annual Base Salary shall be reviewed no more than 12 months after
the last salary increase awarded to the Executive prior to the
Effective Date and
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<PAGE>
thereafter at least annually. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation to the
Executive under this Agreement. Annual Base Salary shall not be
reduced after any such increase and the term Annual Base Salary
as utilized in this Agreement shall refer to Annual Base Salary
as so increased. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling
or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary,
for each fiscal year ending during the Employment Period the
Executive shall be eligible, based upon the Executive's
achievement of performance goals (set by the Compensation
Committee of the Board, in consultation with the Executive, at
levels substantially consistent with past practice) during such
fiscal year, to receive a bonus (the "Annual Bonus") at a target
level of not less than 55% of the Annual Base Salary (the "Target
Bonus Amount") with the opportunity, substantially consistent
with past practice, to earn in excess of such amount based upon
the attainment of agreed upon performance goals. Each such
Annual Bonus shall be paid no later than the last business day of
the third month of the fiscal year next following the fiscal year
for which the Annual Bonus is awarded (the "Last Payment Date").
(iii) Long-Term Incentive Compensation. During the
Employment Period, the Executive shall be entitled to participate
in all long-term incentive plans, practices, policies and
programs applicable generally to other peer executives of the
Company, provided that for each fiscal year ending during the
Employment Period, the Company shall, on the earlier (the "Award
Date") of (A) the date on which the Annual Bonus with respect to
such fiscal year is paid, if any and (B) the Last Payment Date,
grant the Executive either (1) stock options (each an "Option"
and collectively the "Option Award"), each to purchase one share
of the common stock of Duke Power Company at a price equal to
Fair Market Value (as defined below) as of the Award Date, (2)
shares of restricted common stock of Duke Power Company (each a
"Restricted Share" and collectively the "Restricted Stock
Award"), or (3) both an Option Award and a Restricted Stock Award
(a "Combination Award"), in an amount such that the Aggregate
Value (as defined below) of the Option Award, the Restricted
Stock Award or the Combination Award, as applicable, on the Award
Date is not less than 80% of the sum of (x) the Annual Base
Salary and (y) the Target Bonus Amount for the fiscal year with
respect to which the Option Award, the Restricted Stock Award or
the Combination Award, as applicable, is made. Options granted
as part of any Option Award shall have a term of 10 years, and
vest and become exercisable ratably in three annual installments
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<PAGE>
beginning on the first anniversary of the Award Date, and Shares
granted as part of any Restricted Stock Award shall become free
of all restrictions (including, without limitation, with respect
to transferability) ratably in installments, each of which
installment shall occur on the date the Executive achieves one of
several performance goals (the "Restricted Stock Performance
Goals") whose number, level and content shall be set by the
Compensation Committee of the Board in consultation with the
Executive; provided, however, that the number, level and content
of the Restricted Stock Performance Goals shall be such that, in
the event the Executive achieves all the Restricted Stock
Performance Goals, one-third of the Restricted Stock Award shall
have become free of all restrictions on each of the first three
anniversaries of the Award Date. For the purposes of this
Agreement, "Fair Market Value" shall mean, as of any given date,
the closing price of the common stock of Duke Power Company on
the New York Stock Exchange Composite Transactions on such date
as reported in The Wall Street Journal (or, if there is no
reported sale on such date, on the last preceding date on which
any reported sale occurred). For the purposes of this Agreement,
"Aggregate Value" shall mean: with respect to an Option Award,
the product of (x) the number of Options awarded and (y) the
dollar value of each such Option according to the Black Sholes
option pricing model or such other option pricing model
acceptable to both the Company and the Executive; with respect to
a Restricted Stock Award, the product of (x) the number of Shares
awarded and (y) Fair Market Value (determined without regard to
the restrictions upon such Shares); and with respect to a
Combination Award, the sum of the respective Aggregate Values of
the Option Award and the Restricted Stock Award comprising the
Combination Award. Determinations of Aggregate Value shall be
made by Ernst & Young or such other certified public accounting
firm or consulting firm reasonably acceptable to the Executive as
may be designated by the Company.
(iv) Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate
in all savings and retirement plans, practices, policies and
programs on a basis no less favorable than that generally
applicable to peer executives of the Company.
(v) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's dependents, as the
case may be, shall be eligible for participation in and shall
receive all benefits under welfare benefit plans, practices,
policies and programs provided by the Company on a basis no less
favorable than that generally applicable to peer executives of
the Company.
B-2-4
<PAGE>
(vi) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the Company's policies, including, without limitation, the
costs of travel between Houston, Texas and Charlotte, North
Carolina during the ordinary course of business.
(vii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with
the plans, policies, programs and practices of the Company on a
basis no less favorable than that generally applicable to peer
executives of the Company but in any event he shall be entitled
to no less than four weeks of vacation per year during the
Employment Period.
4. Termination of Employment. (a) Death or Disability.
The Executive's employment shall terminate automatically upon the
Executive's death during the Employment Period. If the
Disability of the Executive occurs during the Employment Period
(pursuant to the definition of Disability set forth below), the
Company may give to the Executive written notice, in accordance
with Section 11(b) of this Agreement, of its intention to
terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective
on the 60th day after receipt of such notice by the Executive
(the "Disability Effective Date"); provided that, within the 60
days after such receipt, the Executive shall not have returned to
substantially full time performance of the Executive's duties.
For purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the performance of the Executive's
duties with the Company on a full time basis for an aggregate of
120 out of any 180 consecutive business days as a result of
incapacity due to mental or physical illness which is determined
to be total and permanent by an independent physician selected by
the Company or its insurers and acceptable to the Executive or
the Executive's legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" shall mean the engaging by the
Executive in illegal conduct or gross misconduct which is
materially and demonstrably injurious to the Company. The
cessation of employment of the Executive shall not be deemed to
be for Cause unless and until there shall have been delivered to
the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held
for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together
with
B-2-5
<PAGE>
counsel, to be heard before the Board), finding that, in the good
faith opinion of the Board, the Executive is guilty of the
conduct described above, and specifying the particulars thereof
in detail.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent with the Executive's position (including
status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated
by Section 3(a) of this Agreement, or any other action
by the Company which results in a diminution in such
position, authority, duties or responsibilities,
excluding for these purposes (A) an isolated and
insubstantial action not taken in bad faith and which
is remedied by the Company promptly after receipt of
notice thereof given by the Executive and (B) any
action to which the Executive has given his written
consent;
(ii) any failure by the Company to comply with any of the
provisions of Section 3(b) of this Agreement, other
than an isolated and insubstantial failure not
occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given
by the Executive;
(iii) the Company's requiring the Executive without the
Executive's written consent to be based at any office
or location other than as provided in Section
3(a)(i)(B) hereof or the Company's requiring the
Executive to travel away from the Company's offices in
Houston, Texas and Charlotte, North Carolina on Company
business to a substantially greater extent than
required immediately prior to the Effective Date; or
(iv) any failure by the Company to comply with and satisfy
Section 10(c) of this Agreement.
(d) Notice of Termination. Any termination by the
Company for Cause, or by the Executive for Good Reason, shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 11(b) of this Agreement. In the
case of a Good Reason termination, such Notice of Termination
shall be given within 90 days of the occurrence of the event that
is claimed as serving the basis for the termination as a
condition of such claim being treated as a Good Reason
termination hereunder. For purposes of this Agreement, a "Notice
of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon,
(ii) to the extent applicable, sets forth in reasonable detail
the
B-2-6
<PAGE>
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than 30 days after
the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or
Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i)
if the Executive's employment is terminated by the Company for
Cause, or by the Executive for any reason (including Good
Reason), the date of receipt of the Notice of Termination or any
later date specified therein that is within 30 days of such
notice, as the case may be, (ii) if the Executive's employment is
terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the
Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may
be.
5. Obligations of the Company upon Termination. (a)
Good Reason; Other than for Cause, Death or Disability. If,
during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause or Disability or the
Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of
Termination the aggregate of the following
amounts:
A. the sum of (1) the Executive's Annual Base
Salary through the Date of Termination to the
extent not theretofore paid; (2) the product
of (x) the Target Bonus Amount and (y) a
fraction, the numerator of which is the
number of days in the current fiscal year
through the Date of Termination, and the
denominator of which is 365; and (3) any
accrued vacation pay to the extent not
theretofore paid (the sum of the amounts
described in clauses (1), (2), and (3) shall
be hereinafter referred to as the "Accrued
Obligations"); and
B-2-7
<PAGE>
B. the amount equal to the product of (1) three
and (2) the sum of (x) the Executive's Annual
Base Salary and (y) the Target Bonus Amount;
and
C. an amount equal to the excess of (a) the
actuarial equivalent of the benefit under the
Company's qualified defined benefit
retirement plan (the "Retirement Plan")
(utilizing actuarial assumptions in effect
under the Company's Retirement Plan as of the
Date of Termination), and any excess or
supplemental retirement plan in which the
Executive participates (together, the "SERP")
which the Executive would receive if the
Executive's employment continued for three
years after the Date of Termination assuming
for this purpose that all accrued benefits
are fully vested, and, assuming that the
Executive's compensation in each of the three
years is that required by Section 3(b)(i) and
Section 3(b)(ii), over (b) the actuarial
equivalent of the Executive's actual benefit
(paid or payable), if any, under the
Retirement Plan and the SERP as of the Date
of Termination;
(ii) for three years after the Executive's Date of
Termination, or such longer period as may be
provided by the terms of the appropriate plan,
program, practice or policy, the Company shall
continue the medical, long-term disability,
dental, accidental death and dismemberment and
life insurance benefits to the Executive and/or
the Executive's dependents at least equal to those
which would have been provided to them in
accordance with the plans, programs, practices and
policies in effect under Section 3(b)(v) of this
Agreement (the "Continuing Benefit Plans") as if
the Executive's employment had not been terminated
(either by permitting the Executive and/or the
Executive's dependents to participate in the
Continuing Benefit Plans, or by providing the
Executive and/or the Executive's dependents with
equivalent benefits outside the Continuing Benefit
Plans, as the Company may elect, so long as the
net after-tax benefit to them is the same as if
the Executive had remained an employee of the
Company participating in the Continuing Benefit
Plans); provided, however, that if the Executive
becomes reemployed with another employer and is
eligible to receive medical, long-term disability,
dental, accidental death and dismemberment or life
insurance benefits under another employer-provided
plan, the medical, long-term disability, dental,
accidental death and dismemberment and life
insurance benefits described herein shall be
secondary to those provided under such other plan
during such applicable period of eligibility. For
purposes of determining eligibility (but not the
time of commencement of benefits) of the Executive
for retiree benefits pursuant to the Continuing
Benefit Plans and any other welfare
B-2-8
<PAGE>
benefit plans, practices, policies and programs
provided by the Company and its affiliated
companies, the Executive shall be considered to
have remained employed until three years after the
Date of Termination and to have retired on the
last day of such period; and
(iii) to the extent not theretofore paid or provided,
the Company shall timely pay or provide to the
Executive any other amounts or benefits required
to be paid or provided or which the Executive is
eligible to receive under any plan, program,
policy or practice or contract or agreement of the
Company as of the Date of Termination (such other
amounts and benefits shall be hereinafter referred
to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated
by reason of the Executive's death during the Employment Period,
this Agreement shall terminate without further obligations to the
Executive's legal representatives under this Agreement, other
than for payment of Accrued Obligations and the timely payment or
provision of Other Benefits. Accrued Obligations shall be paid
to the Executive's estate or beneficiary, as applicable, in a
lump sum in cash within 30 days of the Date of Termination. The
term Other Benefits as utilized in this Section 5(b) shall
include death benefits as in effect on the date of the
Executive's death.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination.
(d) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause or the
Executive terminates his employment without Good Reason during
the Employment Period, this Agreement shall terminate without
further obligations to the Executive other than the obligation to
pay to the Executive (x) his Annual Base Salary through the Date
of Termination, and (y) Other Benefits, in each case to the
extent theretofore unpaid.
6. Non-exclusivity of Rights. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided
by the Company or any of its affiliated companies and for which
the Executive may qualify, nor, subject to Section 11(f), shall
anything herein limit or otherwise affect such rights as the
Executive may have under
B-2-9
<PAGE>
any contract or agreement with the Company or any of its
affiliated companies. Any rights that are vested and any benefits
that the Executive is otherwise entitled to receive under any
plan, policy, practice or program of or any contract or agreement
with the Company or any of its affiliated companies at or
subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program or
contract or agreement except as explicitly modified by this
Agreement.
7. Full Settlement. In no event shall the Executive be
obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided
in Section 5(a)(ii) of this Agreement, such amounts shall not be
reduced whether or not the Executive obtains other employment.
The Company agrees to pay as incurred, to the full extent
permitted by law, all legal fees and expenses which the Executive
may reasonably incur as a result of any contest (regardless of
the outcome thereof) by the Company, the Executive or others of
the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Executive
about the amount of any payment pursuant to this Agreement);
provided, however, that the foregoing shall not apply in
connection with any such contest in which the finder of fact
determines that the contest is frivolous or was brought by the
Executive in bad faith.
8. Certain Additional Payments by the Company (a)
Restricted Stock. The Executive may receive an additional
payment (the "Additional RS Payment") with respect to the 60,000
remaining unvested shares of PanEnergy Common Stock awarded to
him as part of a grant of 75,000 shares of restricted stock
pursuant to his employment letter dated November 28, 1995 (such
60,000 shares, the "1996 Restricted Stock"). The Additional RS
Payment shall be made in the event that it shall be determined
that the Restricted Stock, without regard to any other payment or
distribution by PanEnergy or the Company to or for the benefit of
the Executive, would be subject to the excise tax imposed by
Section 4999 of the Code or any interest or penalties would be
incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"). The
amount of the Additional RS Payment shall be the amount such
that, after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes),
including, without limitation, any income and employment taxes
(and any interest and penalties imposed with respect thereto)
("Taxes") and Excise Tax imposed upon the Additional RS
B-2-10
<PAGE>
Payment, the Executive would be in the same net after-tax
position with respect to the Restricted Stock had such Excise Tax
not been imposed.
(b) NRS Amount. Notwithstanding anything elsewhere in
this Agreement to the contrary, in the event that any payment or
distribution by PanEnergy or the Company to or for the benefit of
the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise), other than the 1996 Restricted Stock and Additional
RS Payment (the "Payments") would exceed 2.99 multiplied by the Executive's
"base amount" (as defined in Section 280G of the Code) (the
"Limitation"), the amount of the cash lump sum payable to him
pursuant to Section 5(a)(i) shall be reduced (but not below zero)
so that the total Parachute Value (as defined below) of the
Payments does not exceed the Limitation. In the event that the
foregoing reduction is insufficient for the total Parachute Value
of the Payments not to exceed the Limitation, other Payments made
pursuant to this Agreement shall be reduced (but not below zero),
in the order selected by the Executive, so that the total
Parachute Value shall not exceed the Limitation; provided, that
in no event shall Payments that are not made pursuant to this
Agreement be reduced pursuant to this Section 8. The Payments,
after any applicable reduction, are hereinafter referred to as
the "Reduced Payments," whether or not they are actually reduced.
The "Parachute Value" of any Payment means the dollar amount of
the "parachute payment" attributable thereto, determined in
accordance with Section 280G of the Code and the proposed
Treasury Regulations thereunder (or any final Treasury
Regulations thereunder that may hereafter be promulgated).
If the Reduced Payments are subject to the Excise Tax, the
Company shall pay the Executive an additional cash lump sum
payment (the "Additional Non-RS Payment") such that after paying
(i) all Excise Tax and interest and penalties imposed with
respect to such Excise Tax imposed upon the Reduced Payments, and
(ii) all Taxes imposed upon the Additional Non-RS Payment, the
Executive is in the same net after-tax position with respect to
the Reduced Payments as if the excise tax had not been imposed.
9. (a) Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or any
of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement).
The Executive shall not, at any time during his employment with
the Company or at any time thereafter, for any reason, in any
fashion, form or manner, either directly or indirectly,
communicate, divulge, copy or permit to be copied (without the
prior written consent of the Company or as may otherwise be
required by law or legal process or in order to enforce his
rights under this Agreement or as necessary to defend
B-2-11
<PAGE>
himself against a claim asserted directly or indirectly by the
Company or any of its affiliated companies) any secret or
confidential information, knowledge or data relating to the
Company or any of its affiliated companies, and their respective
businesses, in any manner whatsoever, that is not otherwise
publicly available, to, or for the benefit of, any person, firm,
corporation or other entity, other than the Company and those
designated by it or in the course of his employment with the
Company and its affiliated companies. As used herein, the term
"all secret or confidential information, knowledge or data
relating to the Company or any of its affiliated companies, and
their respective businesses" shall include, without limitation,
the Company's plans, strategies, proposals to potential customers
and/or partners, costs, prices, proprietary systems for buying
and selling, client and customer lists, identity of prospects,
proprietary computer programs, policy or procedure manuals,
proprietary training and recruiting procedures, proprietary
accounting procedures, and the status and contents of the
Company's contracts with its suppliers, clients, customers or
prospects. The Executive further agrees to maintain in
confidence any confidential information of third parties received
as a result of his employment with the Company.
(b) Enforcement. In the event of a breach or threatened
breach of this Section 9, the Executive agrees that the Company
shall be entitled, in addition to any other remedies available to
it to specific performance and injunctive relief in a court of
appropriate jurisdiction to remedy any such breach or threatened
breach, and the Executive acknowledges that damages would be
inadequate and insufficient. In no event shall an asserted
violation of the provisions of this Section 9 constitute a basis
for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement.
(c) Survival. Any termination of the Executive's
employment or of this Agreement shall have no effect on the
continuing operation of this Section 9.
10. Successors. (a) This Agreement is personal to the
Executive and without the prior written consent of the Company
shall not be assignable by the Executive otherwise than by will
or the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business
B-2-12
<PAGE>
and/or assets of the Company to assume expressly and agree to
perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any successor
to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or
otherwise.
11. Miscellaneous. (a) This Agreement shall be governed
by and construed in accordance with the laws of the State of
Texas, without reference to principles of conflict of laws. The
captions of this Agreement are not part of the provisions hereof
and shall have no force or effect. This Agreement may not be
amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and
legal representatives.
(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other
party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
James T. Hackett
3372 Delmonte Drive
Houston, TX 77019
If to the Company:
5400 Westheimer Court
Houston, TX 77056-5310
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign taxes
as shall be required to be withheld pursuant to any applicable
law or regulation.
(e) Subject to Section 4(d) of this Agreement, the
Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may
B-2-13
<PAGE>
have hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to
Section 4(c)(i)-(iv) of this Agreement, shall not be deemed to be
a waiver of such provision or right or any other provision or
right of this Agreement.
(f) This Agreement constitutes the entire agreement
between the parties and is intended to be an integration of all
agreements between the parties with respect to the Executive's
employment by the Company, the terms and conditions of such
employment or the termination of such employment. Any and all
prior agreements, understandings or commitments between the
Company and the Executive with respect to any such matter,
including but not limited to the Agreement between the Executive
and the Company dated December 19, 1995, are hereby superseded
and revoked.
(g) The Company shall indemnify and hold the Executive
and his legal representatives harmless to the fullest extent
permitted by applicable law, from and against all judgments,
fines, penalties, excise taxes, amounts paid in settlement,
losses, expenses, costs, liabilities and legal fees if the
Executive is made, or threatened to be made a party to any
threatened or pending or completed action, suit, proceeding,
whether civil, criminal, administrative or investigative,
including an action by or in the right of the Company or any of
its affiliated companies to procure a judgment in its favor, by
reason of the fact that the Executive is or was serving in any
capacity at the request of the Company or any of affiliated
companies for any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise. The right to
indemnification provided, in this paragraph (g) shall not be
deemed exclusive of any other rights to which Executive may have
or hereafter be entitled under any law or the charter or by-laws
of the Company or any of its affiliated companies or otherwise,
both as to action in Executive's official capacity and as to
action in another capacity while holding such office, and shall
continue after Executive has ceased to be a director or officer
and shall inure to the benefit of Executive's heirs, executors
and administrators. Any reimbursement obligation arising
hereunder shall be satisfied on an as-incurred basis. In
addition, the Company agrees to continue to maintain customary
and appropriate directors and liability insurance during the
Employment Period and the Executive shall be entitled to the
protection of any such insurance policies on no less favorable a
basis than is provided to any other officer or director of the
Company or any of its affiliated companies.
B-2-14
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its
Board of Directors, the Company has caused these presents to be
executed in its name on its behalf, all as of the day and year
first above written.
James T. Hackett
PANENERGY CORP
By
<PAGE>
EXHIBIT B-3
TO AGREEMENT AND
PLAN OF MERGER
FORM OF EMPLOYMENT AGREEMENT FOR
FRED. J. FOWLER OF PANENERGY
AGREEMENT by and between PanEnergy Corp, a Delaware
corporation (the "Company") and Fred J. Fowler (the "Executive"),
dated as of the 24th day of November, 1996.
The Board of Directors of the Company (the "Board"),
has determined that it is in the best interests of the Company
and its shareholders to assure that the Company will have the
continued dedication of the Executive pending the merger of the
Company and Duke Transaction Corporation, a Delaware corporation
and a wholly-owned subsidiary of Duke Power Company, a North
Carolina corporation (the "Merger") pursuant to the Agreement and
Plan of Merger dated as of November 24, 1996 (the "Merger
Agreement"), and to provide the surviving corporation after the
Merger with continuity of management. Therefore, in order to
accomplish these objectives, the Board has caused the Company to
enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Effective Date. The "Effective Date" shall mean
the date on which the Effective Time of the Merger (as defined in
the Merger Agreement) occurs.
2. Employment Period. The Company hereby agrees to
employ the Executive, and the Executive hereby agrees to accept
employment with and remain in the employ of the Company subject
to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the second
anniversary thereof, or such later date as may be mutually agreed
upon by the Company and the Executive. Notwithstanding the
foregoing, the Executive's employment hereunder may be earlier
terminated, subject to Section 5 of this Agreement. The period
of time between the commencement and the termination of the
Executive's employment hereunder shall be referred to herein as
the "Employment Period."
3. Terms of Employment. (a) Position and Duties.
(i) During the Employment Period, (A) the Executive shall serve
as President of Duke Energy Transmission Services and as a member
of the Executive Committee of Duke Power Company, which Committee
shall have the responsibilities and shall be constituted as set
forth in Section 8.15(d) of the Merger Agreement, with such au-
<PAGE>
thority, duties and responsibilities as are commensurate with
such positions and as may be consistent with such positions as
may be assigned to him by the Board, and (B) the Executive's
services shall be performed at offices of the Company in Houston,
Texas. Notwithstanding the foregoing, the Company and the
Executive may mutually agree to such changes in the Executive's
position, reporting or location of employment as are in the best
interests of the Company without violating the provisions of this
paragraph.
(ii) During the Employment Period, and excluding
any periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote substantially all of his
attention and time during normal business hours to the business
and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's best efforts to perform
faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement
for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement.
(b) Compensation. (i) Base Salary. During the
Employment Period, the Executive shall receive an annual base
salary ("Annual Base Salary"), payable monthly, at least equal to
the annual base salary paid or payable, including any base salary
which has been earned but deferred, to the Executive by PanEnergy
in respect of the twelve-month period immediately preceding the
Effective Date. During the Employment Period, the Annual Base
Salary shall be reviewed no more than 12 months after the last
salary increase awarded to the Executive prior to the Effective
Date and thereafter at least annually. Any increase in Annual
Base Salary or any payment of Supplemental Salary (as defined
below) shall not serve to limit or reduce any other obligation to
the Executive under this Agreement. Annual Base Salary shall not
be reduced after any such increase and the term Annual Base
Salary as utilized in this Agreement shall refer to Annual Base
Salary as so increased. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by,
controlling or under common control with the Company.
In the event that, pursuant to the provisions of
Section 3(a)(i) hereof, the Executive becomes subject to North
Carolina income or employment taxes as a resident of the State of
North Carolina (a "Change of Residence"), then
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for each calendar year that begins during the Employment Period
that he is subject to such taxes, the Executive shall receive a
supplemental salary payment (the "Supplemental Salary") such that
after payment by the Executive of all taxes, including, without
limitation, Federal and state income and employment taxes with
respect to the Executive's total compensation from the Company
for such calendar year (including, without limitation, the
Supplemental Salary), the Executive will retain an amount (the
"After-Tax Compensation") equal to the amount of After-Tax
Compensation he would have received had no Change of Residence
occurred, as determined by an independent tax advisor mutually
agreed to by the Company and the Executive (whose fees and
expenses for making such determination shall be paid by the
Company).
(ii) Annual Bonus. In addition to Annual Base
Salary, for each fiscal year ending during the Employment Period
the Executive shall be eligible, based upon the Executive's
achievement of performance goals (set by the Compensation
Committee of the Board, in consultation with the Executive, at
levels substantially consistent with past practice) during such
fiscal year, to receive a bonus (the "Annual Bonus") at a target
level of not less than 50% of the Annual Base Salary (the "Target
Bonus Amount") with the opportunity, substantially consistent
with past practice, to earn in excess of such amount based upon
the attainment of agreed upon performance goals. Each such Annual
Bonus shall be paid no later than the last business day of the
third month of the fiscal year next following the fiscal year for
which the Annual Bonus is awarded (the "Last Payment Date").
(iii) Long-Term Incentive Compensation. During
the Employment Period, the Executive shall be entitled to
participate in all long-term incentive plans, practices, policies
and programs applicable generally to other peer executives of the
Company, provided that for each fiscal year ending during the
Employment Period, the Company shall, on the earlier (the "Award
Date") of (A) the date on which the Annual Bonus with respect to
such fiscal year is paid, if any and (B) the Last Payment Date,
grant the Executive either (1) stock options (each an "Option"
and collectively the "Option Award"), each to purchase one share
of the common stock of Duke Power Company at a price equal to
Fair Market Value (as defined below) as of the Award Date, (2)
shares of restricted common stock of Duke Power Company (each a
"Restricted Share" and collectively the "Restricted Stock
Award"), or (3) both an Option Award and a Restricted Stock Award
(a "Combination Award"), in an amount such that the Aggregate
Value (as defined below) of the Option Award, the Restricted
Stock Award or the Combination Award, as applicable, on the Award
Date is not less than 55%
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of the sum of (x) the Annual Base Salary and (y) the Target Bonus
Amount for the fiscal year with respect to which the Option
Award, the Restricted Stock Award or the Combination Award, as
applicable, is made. Options granted as part of any Option Award
shall have a term of 10 years, and vest and become exercisable
ratably in three annual installments beginning on the first
anniversary of the Award Date, and Shares granted as part of any
Restricted Stock Award shall become free of all restrictions
(including, without limitation, with respect to transferability)
ratably in installments, each of which installment shall occur on
the date the Executive achieves one of several performance goals
(the "Restricted Stock Performance Goals") whose number, level
and content shall be set by the Compensation Committee of the
Board in consultation with the Executive; provided, however, that
the number, level and content of the Restricted Stock Performance
Goals shall be such that, in the event the Executive achieves all
the Restricted Stock Performance Goals, one- third of the
Restricted Stock Award shall have become free of all restrictions
on each of the first three anniversaries of the Award Date. For
the purposes of this Agreement, "Fair Market Value" shall mean,
as of any given date, the closing price of the common stock of
Duke Power Company on the New York Stock Exchange Composite
Transactions on such date as reported in The Wall Street Journal
(or, if there is no reported sale on such date, on the last
preceding date on which any reported sale occurred). For the
purposes of this Agreement, "Aggregate Value" shall mean: with
respect to an Option Award, the product of (x) the number of
Options awarded and (y) the dollar value of each such Option
according to the Black Sholes option pricing model or such other
option pricing model acceptable to both the Company and the
Executive; with respect to a Restricted Stock Award, the product
of (x) the number of Shares awarded and (y) Fair Market Value
(determined without regard to the restrictions upon such Shares);
and with respect to a Combination Award, the sum of the
respective Aggregate Values of the Option Award and the
Restricted Stock Award comprising the Combination Award.
Determinations of Aggregate Value shall be made by Ernst & Young
or such other certified public accounting firm or consulting firm
reasonably acceptable to the Executive as may be designated by
the Company.
(iv) Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate
in all savings and retirement plans, practices, policies and
programs on a basis no less favorable than that generally
applicable to peer executives of the Company.
(v) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's dependents, as the
case may be, shall be eligible for
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<PAGE>
participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the
Company on a basis no less favorable than that generally
applicable to peer executives of the Company.
(vi) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the Company's policies. In the event the Executive relocates
his principal residence (as defined in Section 1034 of the
Internal Revenue Code of 1986, as amended (the "Code")) to North
Carolina (the "Relocation"), the Executive shall also be entitled
to prompt reimbursement for all costs reasonably incurred in
connection with such Relocation ("Relocation Costs"). Relocation
Costs shall include, without limitation, the amount of any
short-term capital loss or long-term capital loss (as defined in
Section 1222 of the Code) experienced by the Executive on the
disposition during the Employment Period of his principal
residence in connection with the Relocation.
(vii) Vacation. During the Employment Period,
the Executive shall be entitled to paid vacation in accordance
with the plans, policies, programs and practices of the Company
on a basis no less favorable than that generally applicable to
peer executives of the Company but in any event he shall be
entitled to no less than four weeks of vacation per year during
the Employment Period.
4. Termination of Employment. (a) Death or Disability.
The Executive's employment shall terminate automatically upon the
Executive's death during the Employment Period. If the
Disability of the Executive occurs during the Employment Period
(pursuant to the definition of Disability set forth below), the
Company may give to the Executive written notice, in accordance
with Section 11(b) of this Agreement, of its intention to
terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective
on the 60th day after receipt of such notice by the Executive
(the "Disability Effective Date"); provided that, within the 60
days after such receipt, the Executive shall not have returned to
substantially full time performance of the Executive's duties.
For purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the performance of the Executive's
duties with the Company on a full time basis for an aggregate of
120 out of any 180 consecutive business days as a result of
incapacity due to mental or physical illness which is determined
to be total and permanent by an independent physician selected by
the Company or its insurers and acceptable to the Executive or
the Executive's legal representative.
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<PAGE>
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" shall mean the engaging by the
Executive in illegal conduct or gross misconduct which is
materially and demonstrably injurious to the Company. The
cessation of employment of the Executive shall not be deemed to
be for Cause unless and until there shall have been delivered to
the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held
for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the
good faith opinion of the Board, the Executive is guilty of the
conduct described above, and specifying the particulars thereof
in detail.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent with the Executive's position
(including status, offices, titles and reporting
requirements), authority, duties or
responsibilities as contemplated by Section 3(a)
of this Agreement, or any other action by the
Company which results in a diminution in such
position, authority, duties or responsibilities,
excluding for these purposes (A) an isolated and
insubstantial action not taken in bad faith and
which is remedied by the Company promptly after
receipt of notice thereof given by the Executive
and (B) any action to which the Executive has
given his written consent;
(ii) any failure by the Company to comply with any of
the provisions of Section 3(b) of this Agreement,
other than an isolated and insubstantial failure
not occurring in bad faith and which is remedied
by the Company promptly after receipt of notice
thereof given by the Executive;
(iii) the Company's requiring the Executive without the
Executive's written consent to be based at any
office or location other than as provided in
Section 3(a)(i)(B) hereof or the Company's
requiring the Executive to travel away from the
Company's offices in Houston, Texas and Charlotte,
North Carolina on Company business to a
substantially greater extent than required
immediately prior to the Effective Date; or
(iv) any failure by the Company to comply with and
satisfy Section 10(c) of this Agreement.
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<PAGE>
(d) Notice of Termination. Any termination by the
Company for Cause, or by the Executive for Good Reason, shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 11(b) of this Agreement. In the
case of a Good Reason termination, such Notice of Termination
shall be given within 90 days of the occurrence of the event that
is claimed as serving the basis for the termination as a
condition of such claim being treated as a Good Reason
termination hereunder. For purposes of this Agreement, a "Notice
of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon,
(ii) to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than 30 days after
the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or
Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i)
if the Executive's employment is terminated by the Company for
Cause, or by the Executive for any reason (including Good
Reason), the date of receipt of the Notice of Termination or any
later date specified therein that is within 30 days of such
notice, as the case may be, (ii) if the Executive's employment is
terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the
Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may
be.
5. Obligations of the Company upon Termination. (a)
Good Reason; Other than for Cause, Death or Disability. If,
during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause or Disability or the
Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the
aggregate of the following amounts:
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A. the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not
theretofore paid; (2) the product of (x) the
Target Bonus Amount and (y) a fraction, the
numerator of which is the number of days in the
current fiscal year through the Date of
Termination, and the denominator of which is 365;
(3) any accrued vacation pay to the extent not
theretofore paid; and (4) the Executive's
Supplemental Salary, if applicable, for periods
through the Date of Termination, to the extent not
theretofore paid (the sum of the amounts described
in clauses (1), (2), (3) and (4) shall be
hereinafter referred to as the "Accrued
Obligations"); and
B. the amount equal to the product of (1) two and (2)
the sum of (x) the Executive's Annual Base Salary
and (y) the Target Bonus Amount; and
C. an amount equal to the excess of (a) the actuarial
equivalent of the benefit under the Company's
qualified defined benefit retirement plan (the
"Retirement Plan") (utilizing actuarial
assumptions in effect under the Company's
Retirement Plan as of the Date of Termination),
and any excess or supplemental retirement plan in
which the Executive participates (together, the
"SERP") which the Executive would receive if the
Executive's employment continued for two years
after the Date of Termination assuming for this
purpose that all accrued benefits are fully
vested, and, assuming that the Executive's
compensation in each of the two years is that
required by Section 3(b)(i) and Section 3(b)(ii),
over (b) the actuarial equivalent of the
Executive's actual benefit (paid or payable), if
any, under the Retirement Plan and the SERP as of
the Date of Termination;
(ii) for two years after the Executive's Date of
Termination, or such longer period as may be provided by the
terms of the appropriate plan program, practice or policy, the
Company shall continue the medical, long-term disability, dental,
accidental death and dismemberment and life insurance benefits to
the Executive and/or the Executive's dependents at least equal to
those which would have been provided to them in accordance with
the plans, programs, practices and policies in effect under
Section 3(b)(v) of this Agreement (the "Continuing Benefit
Plans") as if the Executive's employment had not been terminated
(either by permitting the Executive and/or the Executive's
dependents to participate in the Continuing Benefit Plans, or by
providing the Executive and/or the Executive's dependents with
equivalent benefits outside the Continuing Benefit Plans, as the
Company may elect, so long as the
B-3-8
<PAGE>
net after-tax benefit to them is the same as if the Executive had
remained an employee of the Company participating in the
Continuing Benefit Plans); provided, however, that if the
Executive becomes reemployed with another employer and is
eligible to receive medical, long-term disability, dental,
accidental death and dismemberment or life insurance benefits
under another employer-provided plan, the medical, long-term
disability, dental, accidental death and dismemberment and life
insurance benefits described herein shall be secondary to those
provided under such other plan during such applicable period of
eligibility. For purposes of determining eligibility (but not
the time of commencement of benefits) of the Executive for
retiree benefits pursuant to the Continuing Benefit Plans and any
other welfare benefit plans, practices, policies and programs
provided by the Company and its affiliated companies, the
Executive shall be considered to have remained employed until two
years after the Date of Termination and to have retired on the
last day of such period; and
(iii) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to the
Executive any other amounts or benefits required to be paid or
provided or which the Executive is eligible to receive under any
plan, program, policy or practice or contract or agreement of the
Company as of the Date of Termination (such other amounts and
benefits shall be hereinafter referred to as the "Other
Benefits").
(b) Death. If the Executive's employment is terminated
by reason of the Executive's death during the Employment Period,
this Agreement shall terminate without further obligations to the
Executive's legal representatives under this Agreement, other
than for payment of Accrued Obligations and the timely payment or
provision of Other Benefits. Accrued Obligations shall be paid
to the Executive's estate or beneficiary, as applicable, in a
lump sum in cash within 30 days of the Date of Termination. The
term Other Benefits as utilized in this Section 5(b) shall
include death benefits as in effect on the date of the
Executive's death.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in
a lump sum in cash within 30 days of the Date of Termination.
(d) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause or the
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<PAGE>
Executive terminates his employment without Good Reason during
the Employment Period, this Agreement shall terminate without
further obligations to the Executive other than the obligation to
pay to the Executive (x) his Annual Base Salary through the Date
of Termination, and (y) Other Benefits, in each case to the
extent theretofore unpaid.
6. Non-exclusivity of Rights. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided
by the Company or any of its affiliated companies and for which
the Executive may qualify, nor, subject to Section 11(f), shall
anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the
Company or any of its affiliated companies. Any rights that are
vested and any benefits that the Executive is otherwise entitled
to receive under any plan, policy, practice or program of or any
contract or agreement with the Company or any of its affiliated
companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program
or contract or agreement except as explicitly modified by this
Agreement.
7. Full Settlement. In no event shall the Executive be
obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided
in Section 5(a)(ii) of this Agreement, such amounts shall not be
reduced whether or not the Executive obtains other employment.
The Company agrees to pay as incurred, to the full extent
permitted by law, all legal fees and expenses which the Executive
may reasonably incur as a result of any contest (regardless of
the outcome thereof) by the Company, the Executive or others of
the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Executive
about the amount of any payment pursuant to this Agreement);
provided, however, that the foregoing shall not apply in
connection with any such contest in which the finder of fact
determines that the contest is frivolous or was brought by the
Executive in bad faith.
8. Excise Tax Limit. Notwithstanding anything elsewhere
in this Agreement to the contrary, if any of the payments
provided for in this Agreement, together with any other payments
or benefits which the Executive has the right to receive from the
Company (or its affiliated companies), would constitute a
"parachute payment" (as defined in Section 280G(b)(2) of the
Code), the payments pursuant to this Agreement shall be reduced
so that the present value of the total amount received by the
Executive that would
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<PAGE>
constitute a "parachute payment" will be one dollar ($1.00) less
than three (3) times the Executive's base amount (as defined in
Section 280G of the Code) and so that no portion of the payments
or benefits received by the Executive shall be subject to the
excise tax imposed by Section 4999 of the Code. The
determination as to whether any reduction in the payments under
this Agreement pursuant to this Section 8 is necessary shall be
made by such nationally recognized accounting firm as shall be
mutually agreeable to the Company and the Executive, in
consultation with any independent law firm of such firm's choice,
and such determination shall be conclusive and binding on the
Executive and the Company. All fees and expenses of such
accounting firm to make such determination shall be paid by the
Company. If through error or otherwise the Executive should
receive payments under this Agreement or otherwise in excess of
one dollar ($1.00) less than three (3) times his base amount, the
Executive shall immediately repay such excess to the Company upon
notification that an overpayment has been made.
9. (a) Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or any
of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement).
The Executive shall not, at any time during his employment with
the Company or at any time thereafter, for any reason, in any
fashion, form or manner, either directly or indirectly,
communicate, divulge, copy or permit to be copied (without the
prior written consent of the Company or as may otherwise be
required by law or legal process or in order to enforce his
rights under this Agreement or as necessary to defend himself
against a claim asserted directly or indirectly by the Company or
any of its affiliated companies) any secret or confidential
information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses, in any
manner whatsoever, that is not otherwise publicly available, to,
or for the benefit of, any person, firm, corporation or other
entity, other than the Company and those designated by it or in
the course of his employment with the Company and its affiliated
companies. As used herein, the term "all secret or confidential
information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses" shall
include, without limitation, the Company's plans, strategies,
proposals to potential customers and/or partners, costs, prices,
proprietary systems for buying and
B-3-11
<PAGE>
selling, client and customer lists, identity of prospects,
proprietary computer programs, policy or procedure manuals,
proprietary training and recruiting procedures, proprietary
accounting procedures, and the status and contents of the
Company's contracts with its suppliers, clients, customers or
prospects. The Executive further agrees to maintain in confidence
any confidential information of third parties received as a
result of his employment with the Company.
(b) Enforcement. In the event of a breach or threatened
breach of this Section 9, the Executive agrees that the Company
shall be entitled, in addition to any other remedies available to
it to specific performance and injunctive relief in a court of
appropriate jurisdiction to remedy any such breach or threatened
breach, and the Executive acknowledges that damages would be
inadequate and insufficient. In no event shall an asserted
violation of the provisions of this Section 9 constitute a basis
for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement.
(c) Survival. Any termination of the Executive's
employment or of this Agreement shall have no effect on the
continuing operation of this Section 9.
10. Successors. (a) This Agreement is personal to the
Executive and without the prior written consent of the Company
shall not be assignable by the Executive otherwise than by will
or the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had
taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
11. Miscellaneous. (a) This Agreement shall be governed
by and construed in accordance with the laws of the State of
Texas, without reference to principles of conflict of laws. The
captions of this Agreement are not part of the provisions hereof
and shall have no force or effect. This Agreement may not be
amended or modified otherwise than by a
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<PAGE>
written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other
party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
Fred J. Fowler
11403 Bassdale
Houston, TX 77070
If to the Company:
5400 Westheimer Court
Houston, TX 77056-5310
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign taxes
as shall be required to be withheld pursuant to any applicable
law or regulation.
(e) Subject to Section 4(d) of this Agreement, the
Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section
4(c)(i)-(iv) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right
of this Agreement.
(f) This Agreement constitutes the entire agreement
between the parties and is intended to be an integration of all
agreements between the parties with respect to the Executive's
employment by the Company, the terms and conditions of such
employment or the termination of such employment. Any and all
prior agreements, understandings or commitments between the
Company and the Executive with respect to any such matter,
including but not limited to the Executive Severance Agreement
between the Executive and the
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<PAGE>
Company dated as of August 19, 1988, are hereby superseded and
revoked.
(g) The Company shall indemnify and hold the Executive
and his legal representatives harmless to the fullest extent
permitted by applicable law, from and against all judgments,
fines, penalties, excise taxes, amounts paid in settlement,
losses, expenses, costs, liabilities and legal fees if the
Executive is made, or threatened to be made a party to any
threatened or pending or completed action, suit, proceeding,
whether civil, criminal, administrative or investigative,
including an action by or in the right of the Company or any of
its affiliated companies to procure a judgment in its favor, by
reason of the fact that the Executive is or was serving in any
capacity at the request of the Company or any of affiliated
companies for any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise. The right to
indemnification provided, in this paragraph (g) shall not be
deemed exclusive of any other rights to which Executive may have
or hereafter be entitled under any law or the charter or by-laws
of the Company or any of its affiliated companies or otherwise,
both as to action in Executive's official capacity and as to
action in another capacity while holding such office, and shall
continue after Executive has ceased to be a director or officer
and shall inure to the benefit of Executive's heirs, executors
and administrators. Any reimbursement obligation arising
hereunder shall be satisfied on an as-incurred basis. In
addition, the Company agrees to continue to maintain customary
and appropriate directors and liability insurance during the
Employment Period and the Executive shall be entitled to the
protection of any such insurance policies on no less favorable a
basis than is provided to any other officer or director of the
Company or any of its affiliated companies.
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IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its
Board of Directors, the Company has caused these presents to be
executed in its name on its behalf, all as of the day and year
first above written.
____________________________________
Fred J. Fowler
PANENERGY CORP
By__________________________________
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EXHIBIT B-4
TO AGREEMENT AND
PLAN OF MERGER
FORM OF EMPLOYMENT AGREEMENT FOR
L.B. GATEWOOD OF PANENERGY
AGREEMENT by and between PanEnergy Corp, a Delaware
corporation (the "Company") and L. B. Gatewood (the "Executive"),
dated as of the 24th day of November, 1996.
The Board of Directors of the Company (the "Board"),
has determined that it is in the best interests of the Company
and its shareholders to assure that the Company will have the
continued dedication of the Executive pending the merger of the
Company and Duke Transaction Corporation, a Delaware corporation
and a wholly-owned subsidiary of Duke Power Company, a North
Carolina corporation (the "Merger") pursuant to the Agreement and
Plan of Merger dated as of November 24, 1996 (the "Merger
Agreement") and to provide the surviving corporation after the
Merger with continuity of management. Therefore, in order to
accomplish these objectives, the Board has caused the Company to
enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Effective Date. The "Effective Date" shall mean
the date on which the Effective Time of the Merger (as defined in
the Merger Agreement) occurs.
2. Employment Period. The Company hereby agrees to
employ the Executive, and the Executive hereby agrees to accept
employment with and remain in the employ of the Company subject
to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the second
anniversary thereof, or such later date as may be mutually agreed
upon by the Company and the Executive. Notwithstanding the
foregoing, the Executive's employment hereunder may be earlier
terminated, subject to Section 5 of this Agreement. The period
of time between the commencement and the termination of the
Executive's employment hereunder shall be referred to herein as
the "Employment Period."
3. Terms of Employment. (a) Position and Duties.
(i) During the Employment Period, (A) the Executive shall serve
as President and Chief Executive Officer of PanEnergy Trading and
Marketing Services, Inc., with such authority, duties and
responsibilities as are commensurate with such position and as
may be consistent with such position as may be assigned to him by
the Board,
<PAGE>
and (B) the Executive's services shall be performed at offices of
the Company in Houston, Texas. Notwithstanding the foregoing,
the Company and the Executive may mutually agree to such changes
in the Executive's position, reporting or location of employment
as are in the best interests of the Company without violating the
provisions of this paragraph.
(ii) During the Employment Period, and excluding
any periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote substantially all of his
attention and time during normal business hours to the business
and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's best efforts to perform
faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement
for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement.
(b) Compensation. (i) Base Salary. During the
Employment Period, the Executive shall receive an annual base
salary ("Annual Base Salary"), payable monthly, at least equal to
the annual base salary paid or payable, including any base salary
which has been earned but deferred, to the Executive by PanEnergy
in respect of the twelve-month period immediately preceding the
Effective Date. During the Employment Period, the Annual Base
Salary shall be reviewed no more than 12 months after the last
salary increase awarded to the Executive prior to the Effective
Date and thereafter at least annually. Any increase in Annual
Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term
Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased. As used in this Agreement,
the term "affiliated companies" shall include any company
controlled by, controlling or under common control with the
Company.
(ii) Annual Bonus. In addition to Annual Base
Salary, for each fiscal year ending during the Employment Period
the Executive shall be eligible, based upon the Executive's
achievement of performance goals (set by the Compensation
Committee of the Board, in consultation with the Executive, at
levels substantially consistent with past practice) during such
fiscal year, to receive a bonus
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<PAGE>
(the "Annual Bonus") at a target level of not less than 40% of
the Annual Base Salary (the "Target Bonus Amount") with the
opportunity, substantially consistent with past practice, to earn
in excess of such amount based upon the attainment of agreed upon
performance goals. Each such Annual Bonus shall be paid no later
than the last business day of the third month of the fiscal year
next following the fiscal year for which the Annual Bonus is
awarded (the "Last Payment Date").
(iii) Long-Term Incentive Compensation. During the
Employment Period, the Executive shall be entitled to participate
in all long-term incentive plans, practices, policies and
programs applicable generally to other peer executives of the
Company, provided that for each fiscal year ending during the
Employment Period, the Company shall, on the earlier (the "Award
Date") of (A) the date on which the Annual Bonus with respect to
such fiscal year is paid, if any and (B) the Last Payment Date,
grant the Executive either (1) stock options (each an "Option"
and collectively the "Option Award"), each to purchase one share
of the common stock of Duke Power Company at a price equal to
Fair Market Value (as defined below) as of the Award Date, (2)
shares of restricted common stock of Duke Power Company (each a
"Restricted Share" and collectively the "Restricted Stock
Award"), or (3) both an Option Award and a Restricted Stock Award
(a "Combination Award"), in an amount such that the Aggregate
Value (as defined below) of the Option Award, the Restricted
Stock Award or the Combination Award, as applicable, on the Award
Date is not less than 45% of the sum of (x) the Annual Base
Salary and (y) the Target Bonus Amount for the fiscal year with
respect to which the Option Award, the Restricted Stock Award or
the Combination Award, as applicable, is made. Options granted as
part of any Option Award shall have a term of 10 years, and vest
and become exercisable ratably in three annual installments
beginning on the first anniversary of the Award Date, and Shares
granted as part of any Restricted Stock Award shall become free
of all restrictions (including, without limitation, with respect
to transferability) ratably in installments, each of which
installment shall occur on the date the Executive achieves one of
several performance goals (the "Restricted Stock Performance
Goals") whose number, level and content shall be set by the
Compensation Committee of the Board in consultation with the
Executive; provided, however, that the number, level and content
of the Restricted Stock Performance Goals shall be such that, in
the event the Executive achieves all the Restricted Stock
Performance Goals, one-third of the Restricted Stock Award shall
have become free of all restrictions on each of the first three
anniversaries of the Award Date. For the purposes of this
Agreement, "Fair Market Value" shall mean, as of any given date,
the closing price of the common stock
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<PAGE>
of Duke Power Company on the New York Stock Exchange Composite
Transactions on such date as reported in The Wall Street Journal
(or, if there is no reported sale on such date, on the last
preceding date on which any reported sale occurred). For the
purposes of this Agreement, "Aggregate Value" shall mean: with
respect to an Option Award, the product of (x) the number of
Options awarded and (y) the dollar value of each such Option
according to the Black Sholes option pricing model or such other
option pricing model acceptable to both the Company and the
Executive; with respect to a Restricted Stock Award, the product
of (x) the number of Shares awarded and (y) Fair Market Value
(determined without regard to the restrictions upon such Shares);
and with respect to a Combination Award, the sum of the
respective Aggregate Values of the Option Award and the
Restricted Stock Award comprising the Combination Award.
Determinations of Aggregate Value shall be made by Ernst & Young
or such other certified public accounting firm or consulting firm
reasonably acceptable to the Executive as may be designated by
the Company.
(iv) Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate
in all savings and retirement plans, practices, policies and
programs on a basis no less favorable than that generally
applicable to peer executives of the Company.
(v) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's dependents, as the
case may be, shall be eligible for participation in and shall
receive all benefits under welfare benefit plans, practices,
policies and programs provided by the Company on a basis no less
favorable than that generally applicable to peer executives of
the Company.
(vi) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the Company's policies.
(vii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with
the plans, policies, programs and practices of the Company on a
basis no less favorable than that generally applicable to peer
executives of the Company but in any event he shall be entitled
to no less than four weeks of vacation per year during the
Employment Period.
4. Termination of Employment. (a) Death or Disability.
The Executive's employment shall terminate automatically upon the
Executive's death during the Employment Period. If the
Disability of the Executive occurs during the Employment Period
(pursuant to the
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<PAGE>
definition of Disability set forth below), the Company may give
to the Executive written notice, in accordance with Section 11(b)
of this Agreement, of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the
Company shall terminate effective on the 60th day after receipt
of such notice by the Executive (the "Disability Effective
Date"); provided that, within the 60 days after such receipt, the
Executive shall not have returned to substantially full time
performance of the Executive's duties. For purposes of this
Agreement, "Disability" shall mean the absence of the Executive
from the performance of the Executive's duties with the Company
on a full time basis for an aggregate of 120 out of any 180
consecutive business days as a result of incapacity due to mental
or physical illness which is determined to be total and permanent
by an independent physician selected by the Company or its
insurers and acceptable to the Executive or the Executive's legal
representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" shall mean the engaging by the
Executive in illegal conduct or gross misconduct which is
materially and demonstrably injurious to the Company. The
cessation of employment of the Executive shall not be deemed to
be for Cause unless and until there shall have been delivered to
the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held
for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the
good faith opinion of the Board, the Executive is guilty of the
conduct described above, and specifying the particulars thereof
in detail.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent with the Executive's position (including status,
offices, titles and reporting requirements), authority, duties
or responsibilities as contemplated by Section 3(a) of this
Agreement, or any other action by the Company which results in a
diminution in such position, authority, duties or
responsibilities, excluding for these purposes (A) an isolated
and insubstantial action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof
given by the Executive and (B)
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<PAGE>
any action to which the Executive has given his written consent;
(ii) any failure by the Company to comply with any of
the provisions of Section 3(b) of this Agreement, other than an
isolated and insubstantial failure not occurring in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(iii) the Company's requiring the Executive without the
Executive's written consent to be based at any office or location
other than as provided in Section 3(a)(i)(B) hereof or the
Company's requiring the Executive to travel on Company business
to a substantially greater extent than required immediately prior
to the Effective Date; or
(iv) any failure by the Company to comply with and
satisfy Section 10(c) of this Agreement.
(d) Notice of Termination. Any termination by the
Company for Cause, or by the Executive for Good Reason, shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 11(b) of this Agreement. In the
case of a Good Reason termination, such Notice of Termination
shall be given within 90 days of the occurrence of the event that
is claimed as serving the basis for the termination as a
condition of such claim being treated as a Good Reason
termination hereunder. For purposes of this Agreement, a "Notice
of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon,
(ii) to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than 30 days after
the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or
Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i)
if the Executive's employment is terminated by the Company for
Cause, or by the Executive for any reason (including Good
Reason), the date of receipt of the Notice of Termination or any
later date specified therein that is within 30 days of such
notice, as the case may be, (ii) if the Executive's employment is
terminated by the Company
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<PAGE>
other than for Cause or Disability, the Date of Termination shall
be the date on which the Company notifies the Executive of such
termination and (iii) if the Executive's employment is terminated
by reason of death or Disability, the Date of Termination shall
be the date of death of the Executive or the Disability Effective
Date, as the case may be.
5. Obligations of the Company upon Termination. (a)
Good Reason; Other than for Cause, Death or Disability. If,
during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause or Disability or the
Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the
aggregate of the following amounts:
A. the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not
theretofore paid; (2) the product of (x) the Target Bonus
Amount and (y) a fraction, the numerator of which is the
number of days in the current fiscal year through the Date
of Termination, and the denominator of which is 365; and (3)
any accrued vacation pay to the extent not theretofore paid
(the sum of the amounts described in clauses (1), (2), and
(3) shall be hereinafter referred to as the "Accrued
Obligations"); and
B. the amount equal to the product of (1) two and (2)
the sum of (x) the Executive's Annual Base Salary and (y)
the Target Bonus Amount; and
C. an amount equal to the excess of (a) the actuarial
equivalent of the benefit under the Company's qualified
defined benefit retirement plan (the "Retirement Plan")
(utilizing actuarial assumptions in effect under the
Company's Retirement Plan as of the Date of Termination),
any excess or supplemental retirement plan in which the
Executive participates (together, the "SERP"), and the
agreement between the Executive and PanEnergy, dated as of
November 14, 1996 (the "Retirement Agreement"), which the
Executive would receive if the Executive's employment
continued for two years after the Date of Termination
assuming for this purpose that all accrued benefits are
fully vested, and, assuming that the Executive's
compensation in each of the two years is that required by
Section 3(b)(i) and Section 3(b)(ii), over (b) the actuarial
equivalent of the Executive's actual benefit (paid or
payable), if any, under the
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<PAGE>
Retirement Plan, the SERP and the Retirement Agreement as of
the Date of Termination;
(ii) for two years after the Executive's Date of
Termination, or such longer period as may be provided by the
terms of the appropriate plan, program, practice or policy, the
Company shall continue the medical, long-term disability, dental,
accidental death and dismemberment and life insurance benefits to
the Executive and/or the Executive's dependents at least equal to
those which would have been provided to them in accordance with
the plans, programs, practices and policies in effect under
Section 3(b)(v) of this Agreement (the "Continuing Benefit
Plans") as if the Executive's employment had not been terminated
(either by permitting the Executive and/or the Executive's
dependents to participate in the Continuing Benefit Plans, or by
providing the Executive and/or the Executive's dependents with
equivalent benefits outside the Continuing Benefit Plans, as the
Company may elect, so long as the net after-tax benefit to them
is the same as if the Executive had remained an employee of the
Company participating in the Continuing Benefit Plans); provided,
however, that if the Executive becomes reemployed with another
employer and is eligible to receive medical, long-term
disability, dental, accidental death and dismemberment or life
insurance benefits under another employer-provided plan, the
medical, long-term disability, dental, accidental death and
dismemberment and life insurance benefits described herein shall
be secondary to those provided under such other plan during such
applicable period of eligibility. For purposes of determining
eligibility (but not the time of commencement of benefits) of the
Executive for retiree benefits pursuant to the Continuing Benefit
Plans and any other welfare benefit plans, practices, policies
and programs provided by the Company and its affiliated
companies, the Executive shall be considered to have remained
employed until two years after the Date of Termination and to
have retired in accordance with the procedure outlined in the
Retirement Agreement on the last day of such period; and
(iii) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to the
Executive any other amounts or benefits required to be paid or
provided or which the Executive is eligible to receive under any
plan, program, policy or practice or contract or agreement of the
Company as of the Date of Termination (such other amounts and
benefits shall be hereinafter referred to as the "Other
Benefits").
(b) Death. If the Executive's employment is terminated
by reason of the Executive's death during the Employment Period,
this Agreement shall terminate without
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<PAGE>
further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive's
estate or beneficiary, as applicable, in a lump sum in cash
within 30 days of the Date of Termination. The term Other
Benefits as utilized in this Section 5(b) shall include death
benefits as in effect on the date of the Executive's death.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination.
(d) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause or the
Executive terminates his employment without Good Reason during
the Employment Period, this Agreement shall terminate without
further obligations to the Executive other than the obligation to
pay to the Executive (x) his Annual Base Salary through the Date
of Termination, and (y) Other Benefits, in each case to the
extent theretofore unpaid.
6. Non-exclusivity of Rights. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided
by the Company or any of its affiliated companies and for which
the Executive may qualify, nor, subject to Section 11(f), shall
anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the
Company or any of its affiliated companies. Any rights that are
vested and any benefits that the Executive is otherwise entitled
to receive under any plan, policy, practice or program of or any
contract or agreement with the Company or any of its affiliated
companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program
or contract or agreement except as explicitly modified by this
Agreement.
7. Full Settlement. In no event shall the Executive be
obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided
in Section 5(a)(ii) of this Agreement, such amounts shall not be
reduced whether or not the Executive obtains other employment.
The Company agrees to pay as incurred, to the full extent
permitted by law, all
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<PAGE>
legal fees and expenses which the Executive may reasonably incur
as a result of any contest (regardless of the outcome thereof) by
the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount of any
payment pursuant to this Agreement); provided, however, that the
foregoing shall not apply in connection with any such contest in
which the finder of fact determines that the contest is frivolous
or was brought by the Executive in bad faith.
8. Excise Tax Limit. Notwithstanding anything elsewhere
in this Agreement to the contrary, if any of the payments
provided for in this Agreement, together with any other payments
or benefits which the Executive has the right to receive from the
Company (or its affiliated companies), would constitute a
"parachute payment" (as defined in Section 280G(b)(2) of the
Internal Revenue Code of 1986, as amended (the "Code")), the
payments pursuant to this Agreement shall be reduced so that the
present value of the total amount received by the Executive that
would constitute a "parachute payment" will be one dollar ($1.00)
less than three (3) times the Executive's base amount (as defined
in Section 280G of the Code) and so that no portion of the
payments or benefits received by the Executive shall be subject
to the excise tax imposed by Section 4999 of the Code. The
determination as to whether any reduction in the payments under
this Agreement pursuant to this Section 8 is necessary shall be
made by such nationally recognized accounting firm as shall be
mutually agreeable to the Company and the Executive, in
consultation with any independent law firm of such firm's choice,
and such determination shall be conclusive and binding on the
Executive and the Company. All fees and expenses of such
accounting firm to make such determination shall be paid by the
Company. If through error or otherwise the Executive should
receive payments under this Agreement or otherwise in excess of
one dollar ($1.00) less than three (3) times his base amount, the
Executive shall immediately repay such excess to the Company upon
notification that an overpayment has been made.
9. (a) Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or
any of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement).
The
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<PAGE>
Executive shall not, at any time during his employment with the
Company or at any time thereafter, for any reason, in any
fashion, form or manner, either directly or indirectly,
communicate, divulge, copy or permit to be copied (without the
prior written consent of the Company or as may otherwise be
required by law or legal process or in order to enforce his
rights under this Agreement or as necessary to defend himself
against a claim asserted directly or indirectly by the Company or
any of its affiliated companies) any secret or confidential
information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses, in any
manner whatsoever, that is not otherwise publicly available, to,
or for the benefit of, any person, firm, corporation or other
entity, other than the Company and those designated by it or in
the course of his employment with the Company and its affiliated
companies. As used herein, the term "all secret or confidential
information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses" shall
include, without limitation, the Company's plans, strategies,
proposals to potential customers and/or partners, costs, prices,
proprietary systems for buying and selling, client and customer
lists, identity of prospects, proprietary computer programs,
policy or procedure manuals, proprietary training and recruiting
procedures, proprietary accounting procedures, and the status and
contents of the Company's contracts with its suppliers, clients,
customers or prospects. The Executive further agrees to maintain
in confidence any confidential information of third parties
received as a result of his employment with the Company.
(b) Enforcement. In the event of a breach or threatened
breach of this Section 9, the Executive agrees that the Company
shall be entitled, in addition to any other remedies available to
it to specific performance and injunctive relief in a court of
appropriate jurisdiction to remedy any such breach or threatened
breach, and the Executive acknowledges that damages would be
inadequate and insufficient. In no event shall an asserted
violation of the provisions of this Section 9 constitute a basis
for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement.
(c) Survival. Any termination of the Executive's
employment or of this Agreement shall have no effect on the
continuing operation of this Section 9.
10. Successors. (a) This Agreement is personal to the
Executive and without the prior written consent of the Company
shall not be assignable by the Executive otherwise than by will
or the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by the Executive's
legal representatives.
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(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had
taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
11. Miscellaneous. (a) This Agreement shall be governed
by and construed in accordance with the laws of the State of
Texas, without reference to principles of conflict of laws. The
captions of this Agreement are not part of the provisions hereof
and shall have no force or effect. This Agreement may not be
amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and
legal representatives.
(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other
party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
L. B. Gatewood
3258 Hunters Glen
Missouri City, TX 77459
If to the Company:
5400 Westheimer Court
Houston, TX 77056-5310
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or
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foreign taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
(e) Subject to Section 4(d) of this Agreement, the
Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section
4(c)(i)-(iv) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right
of this Agreement.
(f) This Agreement constitutes the entire agreement
between the parties and is intended to be an integration of all
agreements between the parties with respect to the Executive's
employment by the Company, the terms and conditions of such
employment or the termination of such employment. Any and all
prior agreements, understandings or commitments between the
Company and the Executive with respect to any such matter,
including but not limited to the Executive Severance Agreement
between the Executive and the Company dated November 7, 1990, are
hereby superseded and revoked.
(g) The Company shall indemnify and hold the Executive
and his legal representatives harmless to the fullest extent
permitted by applicable law, from and against all judgments,
fines, penalties, excise taxes, amounts paid in settlement,
losses, expenses, costs, liabilities and legal fees if the
Executive is made, or threatened to be made a party to any
threatened or pending or completed action, suit, proceeding,
whether civil, criminal, administrative or investigative,
including an action by or in the right of the Company or any of
its affiliated companies to procure a judgment in its favor, by
reason of the fact that the Executive is or was serving in any
capacity at the request of the Company or any of affiliated
companies for any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise. The right to
indemnification provided, in this paragraph (g) shall not be
deemed exclusive of any other rights to which Executive may have
or hereafter be entitled under any law or the charter or by-laws
of the Company or any of its affiliated companies or otherwise,
both as to action in Executive's official capacity and as to
action in another capacity while holding such office, and shall
continue after Executive has ceased to be a director or officer
and shall inure to the benefit of Executive's heirs, executors
and administrators. Any reimbursement obligation arising
hereunder shall be satisfied on an as-incurred basis. In
addition, the Company agrees to continue to maintain customary
and appropriate directors and liability insurance during the
Employment
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Period and the Executive shall be entitled to the protection of
any such insurance policies on no less favorable a basis than is
provided to any other officer or director of the Company or any
of its affiliated companies.
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IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its
Board of Directors, the Company has caused these presents to be
executed in its name on its behalf, all as of the day and year
first above written.
________________________________
L. B. Gatewood
PANENERGY CORP
By ____________________________
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<PAGE>
EXHIBIT B-5
TO AGREEMENT AND
PLAN OF MERGER
FORM OF EMPLOYMENT AGREEMENT FOR
JIM W. MOGG OF PANENERGY
AGREEMENT by and between PanEnergy Corp, a Delaware
corporation (the "Company") and Jim W. Mogg (the "Executive"),
dated as of the 24th day of November, 1996.
The Board of Directors of the Company (the "Board"),
has determined that it is in the best interests of the Company
and its shareholders to assure that the Company will have the
continued dedication of the Executive pending the merger of the
Company and Duke Transaction Corporation, a Delaware corporation
and a wholly-owned subsidiary of Duke Power Company, a North
Carolina corporation (the "Merger") pursuant to the Agreement and
Plan of Merger dated as of November 24, 1996 (the "Merger
Agreement") and to provide the surviving corporation after the
Merger with continuity of management. Therefore, in order to
accomplish these objectives, the Board has caused the Company to
enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Effective Date. The "Effective Date" shall mean
the date on which the Effective Time of the Merger (as defined in
the Merger Agreement) occurs.
2. Employment Period. The Company hereby agrees to
employ the Executive, and the Executive hereby agrees to accept
employment with and remain in the employ of the Company subject
to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the second
anniversary thereof, or such later date as may be mutually agreed
upon by the Company and the Executive. Notwithstanding the
foregoing, the Executive's employment hereunder may be earlier
terminated, subject to Section 5 of this Agreement. The period
of time between the commencement and the termination of the
Executive's employment hereunder shall be referred to herein as
the "Employment Period."
3. Terms of Employment. (a) Position and Duties.
(i) During the Employment Period, (A) the Executive shall serve
as President and Chief Executive Officer of PanEnergy Field
Services, with such authority, duties and responsibilities as are
commensurate with such position and as may be consistent with
such position as may be assigned to him by the Board and (B) the
Executive's
<PAGE>
services shall be performed at offices of the Company in Denver,
Colorado. Notwithstanding the foregoing, the Company and the
Executive may mutually agree to such changes in the Executive's
position, reporting or location of employment as are in the best
interests of the Company without violating the provisions of this
paragraph.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote substantially all of his
attention and time during normal business hours to the business
and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's best efforts to perform
faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement
for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement.
(b) Compensation. (i) Base Salary. During the
Employment Period, the Executive shall receive an annual base
salary ("Annual Base Salary"), payable monthly, at least equal to
the annual base salary paid or payable, including any base salary
which has been earned but deferred, to the Executive by PanEnergy
in respect of the twelve-month period immediately preceding the
Effective Date. During the Employment Period, the Annual Base
Salary shall be reviewed no more than 12 months after the last
salary increase awarded to the Executive prior to the Effective
Date and thereafter at least annually. Any increase in Annual
Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term
Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased. As used in this Agreement,
the term "affiliated companies" shall include any company
controlled by, controlling or under common control with the
Company.
(ii) Annual Bonus. In addition to Annual Base Salary,
for each fiscal year ending during the Employment Period the
Executive shall be eligible, based upon the Executive's
achievement of performance goals (set by the Compensation
Committee of the Board, in consultation with the Executive, at
levels substantially consistent with past practice) during such
fiscal year, to receive a bonus (the "Annual Bonus") at a target
level of not less than 40%
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<PAGE>
of the Annual Base Salary (the "Target Bonus Amount") with the
opportunity, substantially consistent with past practice, to earn
in excess of such amount based upon the attainment of agreed upon
performance goals. Each such Annual Bonus shall be paid no later
than the last business day of the third month of the fiscal year
next following the fiscal year for which the Annual Bonus is
awarded (the "Last Payment Date").
(iii) Long-Term Incentive Compensation. During
the Employment Period, the Executive shall be entitled to
participate in all long-term incentive plans, practices, policies
and programs applicable generally to other peer executives of the
Company, provided that for each fiscal year ending during the
Employment Period, the Company shall, on the earlier (the "Award
Date") of (A) the date on which the Annual Bonus with respect to
such fiscal year is paid, if any and (B) the Last Payment Date,
grant the Executive either (1) stock options (each an "Option"
and collectively the "Option Award"), each to purchase one share
of the common stock of Duke Power Company at a price equal to
Fair Market Value (as defined below) as of the Award Date, (2)
shares of restricted common stock of Duke Power Company (each a
"Restricted Share" and collectively the "Restricted Stock
Award"), or (3) both an Option Award and a Restricted Stock Award
(a "Combination Award"), in an amount such that the Aggregate
Value (as defined below) of the Option Award, the Restricted
Stock Award or the Combination Award, as applicable, on the Award
Date is not less than 45% of the sum of (x) the Annual Base
Salary and (y) the Target Bonus Amount for the fiscal year with
respect to which the Option Award, the Restricted Stock Award or
the Combination Award, as applicable, is made. Options granted
as part of any Option Award shall have a term of 10 years, and
vest and become exercisable ratably in three annual installments
beginning on the first anniversary of the Award Date, and Shares
granted as part of any Restricted Stock Award shall become free
of all restrictions (including, without limitation, with respect
to transferability) ratably in installments, each of which
installment shall occur on the date the Executive achieves one of
several performance goals (the "Restricted Stock Performance
Goals") whose number, level and content shall be set by the
Compensation Committee of the Board in consultation with the
Executive; provided, however, that the number, level and content
of the Restricted Stock Performance Goals shall be such that, in
the event the Executive achieves all the Restricted Stock
Performance Goals, one-third of the Restricted Stock Award shall
have become free of all restrictions on each of the first three
anniversaries of the Award Date. For the purposes of this
Agreement, "Fair Market Value" shall mean, as of any given date,
the closing price of the common stock of Duke Power Company on
the New York Stock Exchange Composite
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<PAGE>
Transactions on such date as reported in The Wall Street Journal
(or, if there is no reported sale on such date, on the last
preceding date on which any reported sale occurred). For the
purposes of this Agreement, "Aggregate Value" shall mean: with
respect to an Option Award, the product of (x) the number of
Options awarded and (y) the dollar value of each such Option
according to the Black Sholes option pricing model or such other
option pricing model acceptable to both the Company and the
Executive; with respect to a Restricted Stock Award, the product
of (x) the number of Shares awarded and (y) Fair Market Value
(determined without regard to the restrictions upon such Shares);
and with respect to a Combination Award, the sum of the
respective Aggregate Values of the Option Award and the
Restricted Stock Award comprising the Combination Award.
Determinations of Aggregate Value shall be made by Ernst & Young
or such other certified public accounting firm or consulting firm
reasonably acceptable to the Executive as may be designated by
the Company.
(iv) Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate
in all savings and retirement plans, practices, policies and
programs on a basis no less favorable than that generally
applicable to peer executives of the Company.
(v) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's dependents, as the
case may be, shall be eligible for participation in and shall
receive all benefits under welfare benefit plans, practices,
policies and programs provided by the Company on a basis no less
favorable than that generally applicable to peer executives of
the Company.
(vi) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the Company's policies.
(vii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with
the plans, policies, programs and practices of the Company on a
basis no less favorable than that generally applicable to peer
executives of the Company but in any event he shall be entitled
to no less than four weeks of vacation per year during the
Employment Period.
4. Termination of Employment. (a) Death or Disability.
The Executive's employment shall terminate automatically upon the
Executive's death during the Employment Period. If the
Disability of the Executive occurs during the Employment Period
(pursuant to the definition of Disability set forth below), the
Company may give to the Execu-
B-5-4
<PAGE>
tive written notice, in accordance with Section 11(b) of this
Agreement, of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the
Company shall terminate effective on the 60th day after receipt
of such notice by the Executive (the "Disability Effective
Date"); provided that, within the 60 days after such receipt, the
Executive shall not have returned to substantially full time
performance of the Executive's duties. For purposes of this
Agreement, "Disability" shall mean the absence of the Executive
from the performance of the Executive's duties with the Company
on a full time basis for an aggregate of 120 out of any 180
consecutive business days as a result of incapacity due to mental
or physical illness which is determined to be total and permanent
by an independent physician selected by the Company or its
insurers and acceptable to the Executive or the Executive's legal
representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" shall mean the engaging by the
Executive in illegal conduct or gross misconduct which is
materially and demonstrably injurious to the Company. The
cessation of employment of the Executive shall not be deemed to
be for Cause unless and until there shall have been delivered to
the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held
for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the
good faith opinion of the Board, the Executive is guilty of the
conduct described above, and specifying the particulars thereof
in detail.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent with the Executive's position (including
status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by
Section 3(a) of this Agreement, or any other action by the
Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for these
purposes (A) an isolated and insubstantial action not taken
in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive and
(B) any action to which the Executive has given his written
consent;
B-5-5
<PAGE>
(ii) any failure by the Company to comply with any of
the provisions of Section 3(b) of this Agreement, other than
an isolated and insubstantial failure not occurring in bad
faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive without
the Executive's written consent to be based at any office or
location other than as provided in Section 3(a)(i)(B) hereof
or the Company's requiring the Executive to travel on
Company business to a substantially greater extent than
required immediately prior to the Effective Date; or
(iv) any failure by the Company to comply with and
satisfy Section 10(c) of this Agreement.
(d) Notice of Termination. Any termination by the
Company for Cause, or by the Executive for Good Reason, shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 11(b) of this Agreement. In the
case of a Good Reason termination, such Notice of Termination
shall be given within 90 days of the occurrence of the event that
is claimed as serving the basis for the termination as a
condition of such claim being treated as a Good Reason
termination hereunder. For purposes of this Agreement, a "Notice
of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon,
(ii) to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than 30 days after
the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or
Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i)
if the Executive's employment is terminated by the Company for
Cause, or by the Executive for any reason (including Good
Reason), the date of receipt of the Notice of Termination or any
later date specified therein that is within 30 days of such
notice, as the case may be, (ii) if the Executive's employment is
terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the
Executive's
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<PAGE>
employment is terminated by reason of death or Disability, the
Date of Termination shall be the date of death of the Executive
or the Disability Effective Date, as the case may be.
5. Obligations of the Company upon Termination. (a)
Good Reason; Other than for Cause, Death or Disability. If,
during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause or Disability or the
Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the
aggregate of the following amounts:
A. the sum of (1) the Executive's Annual Base
Salary through the Date of Termination to the extent
not theretofore paid; (2) the product of (x) the Target
Bonus Amount and (y) a fraction, the numerator of
which is the number of days in the current fiscal year
through the Date of Termination, and the denominator of
which is 365; and (3) any accrued vacation pay to the
extent not theretofore paid (the sum of the amounts
described in clauses (1), (2), and (3) shall be
hereinafter referred to as the "Accrued Obligations");
and
B. the amount equal to the product of (1) two and
(2) the sum of (x) the Executive's Annual Base Salary
and (y) the Target Bonus Amount; and
C. an amount equal to the excess of (a) the
actuarial equivalent of the benefit under the Company's
qualified defined benefit retirement plan (the
"Retirement Plan") (utilizing actuarial assumptions in
effect under the Company's Retirement Plan as of the
Date of Termination), any excess or supplemental
retirement plan in which the Executive participates
(together, the "SERP"), and the agreement between the
Executive and PanEnergy, dated as of May 25, 1995 (the
"Retirement Agreement"), which the Executive would
receive if the Executive's employment continued for two
years after the Date of Termination assuming for this
purpose that all accrued benefits are fully vested,
and, assuming that the Executive's compensation in each
of the two years is that required by Section 3(b)(i)
and Section 3(b)(ii), over (b) the actuarial equivalent
of the Executive's actual benefit (paid or payable), if
any, under the Retirement Plan, the SERP and the
Retirement Agreement as of the Date of Termination;
B-5-7
<PAGE>
(ii) for two years after the Executive's Date of
Termination, or such longer period as may be provided by the
terms of the appropriate plan, program, practice or policy, the
Company shall continue the medical, long-term disability, dental,
accidental death and dismemberment and life insurance benefits to
the Executive and/or the Executive's dependents at least equal to
those which would have been provided to them in accordance with
the plans, programs, practices and policies in effect under
Section 3(b)(v) of this Agreement (the "Continuing Benefit
Plans") as if the Executive's employment had not been terminated
(either by permitting the Executive and/or the Executive's
dependents to participate in the Continuing Benefit Plans, or by
providing the Executive and/or the Executive's dependents with
equivalent benefits outside the Continuing Benefit Plans, as the
Company may elect, so long as the net after-tax benefit to them
is the same as if the Executive had remained an employee of the
Company participating in the Continuing Benefit Plans); provided,
however, that if the Executive becomes reemployed with another
employer and is eligible to receive medical, long-term
disability, dental, accidental death and dismemberment or life
insurance benefits under another employer-provided plan, the
medical, long-term disability, dental, accidental death and
dismemberment and life insurance benefits described herein shall
be secondary to those provided under such other plan during such
applicable period of eligibility. For purposes of determining
eligibility (but not the time of commencement of benefits) of the
Executive for retiree benefits pursuant to the Continuing Benefit
Plans and any other welfare benefit plans, practices, policies
and programs provided by the Company and its affiliated
companies, the Executive shall be considered to have remained
employed until two years after the Date of Termination and to
have retired in accordance with the procedure outlined in the
Retirement Agreement on the last day of such period; and
(iii) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to the
Executive any other amounts or benefits required to be paid or
provided or which the Executive is eligible to receive under
any plan, program, policy or practice or contract or agreement of
the Company as of the Date of Termination (such other amounts
and benefits shall be hereinafter referred to as the "Other
Benefits").
(b) Death. If the Executive's employment is terminated
by reason of the Executive's death during the Employment Period,
this Agreement shall terminate without further obligations to the
Executive's legal representatives under this Agreement, other
than for payment of Accrued Obligations and the timely payment or
provision of Other
B-5-8
<PAGE>
Benefits. Accrued Obligations shall be paid to the Executive's
estate or beneficiary, as applicable, in a lump sum in cash
within 30 days of the Date of Termination. The term Other
Benefits as utilized in this Section 5(b) shall include death
benefits as in effect on the date of the Executive's death.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination.
(d) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause or the
Executive terminates his employment without Good Reason during
the Employment Period, this Agreement shall terminate without
further obligations to the Executive other than the obligation to
pay to the Executive (x) his Annual Base Salary through the Date
of Termination, and (y) Other Benefits, in each case to the
extent theretofore unpaid.
6. Non-exclusivity of Rights. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided
by the Company or any of its affiliated companies and for which
the Executive may qualify, nor, subject to Section 11(f), shall
anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the
Company or any of its affiliated companies. Any rights that are
vested and any benefits that the Executive is otherwise entitled
to receive under any plan, policy, practice or program of or any
contract or agreement with the Company or any of its affiliated
companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program
or contract or agreement except as explicitly modified by this
Agreement.
7. Full Settlement. In no event shall the Executive be
obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided
in Section 5(a)(ii) of this Agreement, such amounts shall not be
reduced whether or not the Executive obtains other employment.
The Company agrees to pay as incurred, to the full extent
permitted by law, all legal fees and expenses which the Executive
may reasonably incur as a result of any contest (regardless of
the outcome thereof) by the Company, the Executive or others of
the
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<PAGE>
validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive about the
amount of any payment pursuant to this Agreement); provided,
however, that the foregoing shall not apply in connection with
any such contest in which the finder of fact determines that the
contest is frivolous or was brought by the Executive in bad
faith.
8. Excise Tax Limit. Notwithstanding anything elsewhere
in this Agreement to the contrary, if any of the payments
provided for in this Agreement, together with any other payments
or benefits which the Executive has the right to receive from the
Company (or its affiliated companies), would constitute a
"parachute payment" (as defined in Section 280G(b)(2) of the
Internal Revenue Code of 1986, as amended (the "Code")), the
payments pursuant to this Agreement shall be reduced so that the
present value of the total amount received by the Executive that
would constitute a "parachute payment" will be one dollar ($1.00)
less than three (3) times the Executive's base amount (as defined
in Section 280G of the Code) and so that no portion of the
payments or benefits received by the Executive shall be subject
to the excise tax imposed by Section 4999 of the Code. The
determination as to whether any reduction in the payments under
this Agreement pursuant to this Section 8 is necessary shall be
made by such nationally recognized accounting firm as shall be
mutually agreeable to the Company and the Executive, in
consultation with any independent law firm of such firm's choice,
and such determination shall be conclusive and binding on the
Executive and the Company. All fees and expenses of such
accounting firm to make such determination shall be paid by the
Company. If through error or otherwise the Executive should
receive payments under this Agreement or otherwise in excess of
one dollar ($1.00) less than three (3) times his base amount, the
Executive shall immediately repay such excess to the Company upon
notification that an overpayment has been made.
9. (a) Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or
any of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement).
The Executive shall not, at any time during his employment with
the Company or at any time thereafter, for any reason, in any
fashion, form or manner, either directly or indirectly,
B-5-10
<PAGE>
communicate, divulge, copy or permit to be copied (without the
prior written consent of the Company or as may otherwise be
required by law or legal process or in order to enforce his
rights under this Agreement or as necessary to defend himself
against a claim asserted directly or indirectly by the Company or
any of its affiliated companies) any secret or confidential
information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses, in any
manner whatsoever, that is not otherwise publicly available, to,
or for the benefit of, any person, firm, corporation or other
entity, other than the Company and those designated by it or in
the course of his employment with the Company and its affiliated
companies. As used herein, the term "all secret or confidential
information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses" shall
include, without limitation, the Company's plans, strategies,
proposals to potential customers and/or partners, costs, prices,
proprietary systems for buying and selling, client and customer
lists, identity of prospects, proprietary computer programs,
policy or procedure manuals, proprietary training and recruiting
procedures, proprietary accounting procedures, and the status and
contents of the Company's contracts with its suppliers, clients,
customers or prospects. The Executive further agrees to maintain
in confidence any confidential information of third parties
received as a result of his employment with the Company.
(b) Enforcement. In the event of a breach or threatened
breach of this Section 9, the Executive agrees that the Company
shall be entitled, in addition to any other remedies available to
it to specific performance and injunctive relief in a court of
appropriate jurisdiction to remedy any such breach or threatened
breach, and the Executive acknowledges that damages would be
inadequate and insufficient. In no event shall an asserted
violation of the provisions of this Section 9 constitute a basis
for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement.
(c) Survival. Any termination of the Executive's
employment or of this Agreement shall have no effect on the
continuing operation of this Section 9.
10. Successors. (a) This Agreement is personal to the
Executive and without the prior written consent of the Company
shall not be assignable by the Executive otherwise than by will
or the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
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<PAGE>
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had
taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
11. Miscellaneous. (a) This Agreement shall be governed
by and construed in accordance with the laws of the State of
Colorado, without reference to principles of conflict of laws.
The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and
legal representatives.
(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other
party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
Jim W. Mogg
2329 Woodbury Lane
Evergreen, CO 80439
If to the Company:
5400 Westheimer Court
Houston, TX 77056-5310
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign taxes
as shall be required to be withheld pursuant to any applicable
law or regulation.
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(e) Subject to Section 4(d) of this Agreement, the
Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section
4(c)(i)-(iv) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right
of this Agreement.
(f) This Agreement constitutes the entire agreement
between the parties and is intended to be an integration of all
agreements between the parties with respect to the Executive's
employment by the Company, the terms and conditions of such
employment or the termination of such employment. Any and all
prior agreements, understandings or commitments between the
Company and the Executive with respect to any such matter are
hereby superseded and revoked.
(g) The Company shall indemnify and hold the Executive
and his legal representatives harmless to the fullest extent
permitted by applicable law, from and against all judgments,
fines, penalties, excise taxes, amounts paid in settlement,
losses, expenses, costs, liabilities and legal fees if the
Executive is made, or threatened to be made a party to any
threatened or pending or completed action, suit, proceeding,
whether civil, criminal, administrative or investigative,
including an action by or in the right of the Company or any of
its affiliated companies to procure a judgment in its favor, by
reason of the fact that the Executive is or was serving in any
capacity at the request of the Company or any of affiliated
companies for any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise. The right to
indemnification provided, in this paragraph (g) shall not be
deemed exclusive of any other rights to which Executive may have
or hereafter be entitled under any law or the charter or by-laws
of the Company or any of its affiliated companies or otherwise,
both as to action in Executive's official capacity and as to
action in another capacity while holding such office, and shall
continue after Executive has ceased to be a director or officer
and shall inure to the benefit of Executive's heirs, executors
and administrators. Any reimbursement obligation arising
hereunder shall be satisfied on an as-incurred basis. In
addition, the Company agrees to continue to maintain customary
and appropriate directors and liability insurance during the
Employment Period and the Executive shall be entitled to the
protection of any such insurance policies on no less favorable a
basis than is provided to any other officer or director of the
Company or any of its affiliated companies.
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<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its
Board of Directors, the Company has caused these presents to be
executed in its name on its behalf, all as of the day and year
first above written.
Jim W. Mogg
PANENERGY CORP
By
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<PAGE>
EXHIBIT B-6
TO AGREEMENT AND
PLAN OF MERGER
FORM OF EMPLOYMENT AGREEMENT FOR
BRUCE WILLIAMSON OF PANENERGY
AGREEMENT by and between PanEnergy Corp, a Delaware
corporation (the "Company") and Bruce Williamson (the
"Executive"), dated as of the 24th day of November, 1996.
The Board of Directors of the Company (the "Board"),
has determined that it is in the best interests of the Company
and its shareholders to assure that the Company will have the
continued dedication of the Executive pending the merger of the
Company and Duke Transaction Corporation, a Delaware corporation
and a wholly-owned subsidiary of Duke Power Company, a North
Carolina corporation (the "Merger") pursuant to the Agreement and
Plan of Merger dated as of November 24, 1996 (the "Merger
Agreement") and to provide the surviving corporation after the
Merger with continuity of management. Therefore, in order to
accomplish these objectives, the Board has caused the Company to
enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Effective Date. The "Effective Date" shall mean
the date on which the Effective Time of the Merger (as defined in
the Merger Agreement) occurs.
2. Employment Period. The Company hereby agrees to
employ the Executive, and the Executive hereby agrees to accept
employment with and remain in the employ of the Company subject
to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the second
anniversary thereof, or such later date as may be mutually agreed
upon by the Company and the Executive. Notwithstanding the
foregoing, the Executive's employment hereunder may be earlier
terminated, subject to Section 5 of this Agreement. The period
of time between the commencement and the termination of the
Executive's employment hereunder shall be referred to herein as
the "Employment Period."
3. Terms of Employment. (a) Position and Duties.
(i) During the Employment Period, (A) the Executive shall serve
as Vice President, Business Development for Duke Energy Services,
with such authority, duties and responsibilities as are
commensurate with such position and as may be consistent with
such position as may
<PAGE>
be assigned to him by the Board and (B) the Executive's services
shall be performed at offices of the Company in Houston, Texas.
Notwithstanding the foregoing, the Company and the Executive may
mutually agree to such changes in the Executive's position,
reporting or location of employment as are in the best interests
of the Company without violating the provisions of this
paragraph.
(ii) During the Employment Period, and excluding
any periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote substantially all of his
attention and time during normal business hours to the business
and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's best efforts to perform
faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement
for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement.
(b) Compensation. (i) Base Salary. During the
Employment Period, ------------ -----------
the Executive shall receive an
annual base salary ("Annual Base Salary"), payable monthly, at
least equal to the annual base salary paid or payable, including
any base salary which has been earned but deferred, to the
Executive by PanEnergy in respect of the twelve-month period
immediately preceding the Effective Date. During the Employment
Period, the Annual Base Salary shall be reviewed no more than 12
months after the last salary increase awarded to the Executive
prior to the Effective Date and thereafter at least annually.
Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this
Agreement. Annual Base Salary shall not be reduced after any
such increase and the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased. As
used in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling or under common
control with the Company.
(ii) Annual Bonus. In addition to Annual Base
Salary, for each fiscal year ending during the Employment Period
the Executive shall be eligible, based upon the Executive's
achievement of performance goals (set by the Compensation
Committee of the Board, in consultation with the Executive, at
levels substantially consistent with past practice) during such
fiscal year, to receive a bonus
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<PAGE>
(the "Annual Bonus") at a target level of not less than 35% of
the Annual Base Salary (the "Target Bonus Amount") with the
opportunity, substantially consistent with past practice, to earn
in excess of such amount based upon the attainment of agreed upon
performance goals. Each such Annual Bonus shall be paid no later
than the last business day of the third month of the fiscal year
next following the fiscal year for which the Annual Bonus is
awarded (the "Last Payment Date").
(iii) Long-Term Incentive Compensation. During
the Employment Period, the Executive shall be entitled to
participate in all long-term incentive plans, practices, policies
and programs applicable generally to other peer executives of the
Company, provided that for each fiscal year ending during the
Employment Period, the Company shall, on the earlier (the "Award
Date") of (A) the date on which the Annual Bonus with respect to
such fiscal year is paid, if any and (B) the Last Payment Date,
grant the Executive either (1) stock options (each an "Option"
and collectively the "Option Award"), each to purchase one share
of the common stock of Duke Power Company at a price equal to
Fair Market Value (as defined below) as of the Award Date, (2)
shares of restricted common stock of Duke Power Company (each a
"Restricted Share" and collectively the "Restricted Stock
Award"), or (3) both an Option Award and a Restricted Stock Award
(a "Combination Award"), in an amount such that the Aggregate
Value (as defined below) of the Option Award, the Restricted
Stock Award or the Combination Award, as applicable, on the Award
Date is not less than 40% of the sum of (x) the Annual Base
Salary and (y) the Target Bonus Amount for the fiscal year with
respect to which the Option Award, the Restricted Stock Award or
the Combination Award, as applicable, is made. Options granted
as part of any Option Award shall have a term of 10 years, and
vest and become exercisable ratably in three annual installments
beginning on the first anniversary of the Award Date, and Shares
granted as part of any Restricted Stock Award shall become free
of all restrictions (including, without limitation, with respect
to transferability) ratably in installments, each of which
installment shall occur on the date the Executive achieves one of
several performance goals (the "Restricted Stock Performance
Goals") whose number, level and content shall be set by the
Compensation Committee of the Board in consultation with the
Executive; provided, however, that the number, level and content
of the Restricted Stock Performance Goals shall be such that, in
the event the Executive achieves all the Restricted Stock
Performance Goals, one-third of the Restricted Stock Award shall
have become free of all restrictions on each of the first three
anniversaries of the Award Date. For the purposes of this
Agreement, "Fair Market Value" shall mean, as of any given date,
the closing price of the common stock
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<PAGE>
of Duke Power Company on the New York Stock Exchange Composite
Transactions on such date as reported in The Wall Street Journal
(or, if there is no reported sale on such date, on the last
preceding date on which any reported sale occurred). For the
purposes of this Agreement, "Aggregate Value" shall mean: with
respect to an Option Award, the product of (x) the number of
Options awarded and (y) the dollar value of each such Option
according to the Black Sholes option pricing model or such other
option pricing model acceptable to both the Company and the
Executive; with respect to a Restricted Stock Award, the product
of (x) the number of Shares awarded and (y) Fair Market Value
(determined without regard to the restrictions upon such Shares);
and with respect to a Combination Award, the sum of the
respective Aggregate Values of the Option Award and the
Restricted Stock Award comprising the Combination Award.
Determinations of Aggregate Value shall be made by Ernst & Young
or such other certified public accounting firm or consulting firm
reasonably acceptable to the Executive as may be designated by
the Company.
(iv) Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate
in all savings and retirement plans, practices, policies and
programs on a basis no less favorable than that generally
applicable to peer executives of the Company.
(v) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's dependents, as the
case may be, shall be eligible for participation in and shall
receive all benefits under welfare benefit plans, practices,
policies and programs provided by the Company on a basis no less
favorable than that generally applicable to peer executives of
the Company.
(vi) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the Company's policies.
(vii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with
the plans, policies, programs and practices of the Company on a
basis no less favorable than that generally applicable to peer
executives of the Company but in any event he shall be entitled
to no less than four weeks of vacation per year during the
Employment Period.
4. Termination of Employment. (a) Death or Disability.
The Executive's employment shall terminate automatically upon the
Executive's death during the Employment Period. If the
Disability of the Executive occurs during the Employment Period
(pursuant to the
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<PAGE>
definition of Disability set forth below), the Company may give
to the Executive written notice, in accordance with Section
11(b) of this Agreement, of its intention to terminate the
Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the 60th
day after receipt of such notice by the Executive (the
"Disability Effective Date"); provided that, within the 60 days
after such receipt, the Executive shall not have returned to
substantially full time performance of the Executive's duties.
For purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the performance of the Executive's
duties with the Company on a full time basis for an aggregate of
120 out of any 180 consecutive business days as a result of
incapacity due to mental or physical illness which is determined
to be total and permanent by an independent physician selected by
the Company or its insurers and acceptable to the Executive or
the Executive's legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" shall mean the engaging by the
Executive in illegal conduct or gross misconduct which is
materially and demonstrably injurious to the Company. The
cessation of employment of the Executive shall not be deemed to
be for Cause unless and until there shall have been delivered to
the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held
for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the
good faith opinion of the Board, the Executive is guilty of the
conduct described above, and specifying the particulars thereof
in detail.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent with the Executive's position (including
status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by
Section 3(a) of this Agreement, or any other action by the
Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for these
purposes (A) an isolated and insubstantial action not taken
in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive and
(B)
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<PAGE>
any action to which the Executive has given his written
consent;
(ii) any failure by the Company to comply with any of
the provisions of Section 3(b) of this Agreement, other than
an isolated and insubstantial failure not occurring in bad
faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive without the
Executive's written consent to be based at any office or
location other than as provided in Section 3(a)(i)(B) hereof
or the Company's requiring the Executive to travel on
Company business to a substantially greater extent than
required immediately prior to the Effective Date; or
(iv) any failure by the Company to comply with and
satisfy Section 10(c) of this Agreement.
(d) Notice of Termination. Any termination by the
Company for Cause, or by the Executive for Good Reason, shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 11(b) of this Agreement. In the
case of a Good Reason termination, such Notice of Termination
shall be given within 90 days of the occurrence of the event that
is claimed as serving the basis for the termination as a
condition of such claim being treated as a Good Reason
termination hereunder. For purposes of this Agreement, a "Notice
of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon,
(ii) to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than 30 days after
the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or
Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i)
if the Executive's employment is terminated by the Company for
Cause, or by the Executive for any reason (including Good
Reason), the date of receipt of the Notice of Termination or any
later date specified therein that is within 30 days of such
notice, as the case may be, (ii) if
B-6-6
<PAGE>
the Executive's employment is terminated by the Company other
than for Cause or Disability, the Date of Termination shall be
the date on which the Company notifies the Executive of such
termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the
Disability Effective Date, as the case may be.
5. Obligations of the Company upon Termination. (a)
Good Reason; Other than for Cause, Death or Disability. If,
during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause or Disability or the
Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the
aggregate of the following amounts:
A. the sum of (1) the Executive's Annual Base
Salary through the Date of Termination to the extent
not theretofore paid; (2) the product of (x) the Target
Bonus Amount and (y) a fraction, the numerator of which
is the number of days in the current fiscal year
through the Date of Termination, and the denominator of
which is 365; and (3) any accrued vacation pay to the
extent not theretofore paid (the sum of the amounts
described in clauses (1), (2), and (3) shall be
hereinafter referred to as the "Accrued Obligations");
and
B. the amount equal to the product of (1) two and
(2) the sum of (x) the Executive's Annual Base Salary
and (y) the Target Bonus Amount; and
C. an amount equal to the excess of (a) the
actuarial equivalent of the benefit under the Company's
qualified defined benefit retirement plan (the
"Retirement Plan") (utilizing actuarial assumptions in
effect under the Company's Retirement Plan as of the
Date of Termination), and any excess or supplemental
retirement plan in which the Executive participates
(together, the "SERP") which the Executive would
receive if the Executive's employment continued for two
years after the Date of Termination assuming for this
purpose that all accrued benefits are fully vested,
and, assuming that the Executive's compensation in each
of the two years is that required by Section 3(b)(i)
and Section 3(b)(ii), over (b) the actuarial equivalent
of the Executive's actual benefit (paid or payable), if
any, under the Retirement Plan and the SERP as of the
Date of Termination;
B-6-7
<PAGE>
(ii) for two years after the Executive's Date of
Termination, or such longer period as may be provided by the
terms of the appropriate plan, program, practice or policy, the
Company shall continue the medical, long-term disability, dental,
accidental death and dismemberment and life insurance benefits to
the Executive and/or the Executive's dependents at least equal to
those which would have been provided to them in accordance with
the plans, programs, practices and policies in effect under
Section 3(b)(v) of this Agreement (the "Continuing Benefit
Plans") as if the Executive's employment had not been terminated
(either by permitting the Executive and/or the Executive's
dependents to participate in the Continuing Benefit Plans, or by
providing the Executive and/or the Executive's dependents with
equivalent benefits outside the Continuing Benefit Plans, as the
Company may elect, so long as the net after-tax benefit to them
is the same as if the Executive had remained an employee of the
Company participating in the Continuing Benefit Plans); provided,
however, that if the Executive becomes reemployed with another
employer and is eligible to receive medical, long-term
disability, dental, accidental death and dismemberment or life
insurance benefits under another employer-provided plan, the
medical, long-term disability, dental, accidental death and
dismemberment and life insurance benefits described herein shall
be secondary to those provided under such other plan during such
applicable period of eligibility. For purposes of determining
eligibility (but not the time of commencement of benefits) of the
Executive for retiree benefits pursuant to the Continuing Benefit
Plans and any other welfare benefit plans, practices, policies
and programs provided by the Company and its affiliated
companies, the Executive shall be considered to have remained
employed until two years after the Date of Termination and to
have retired on the last day of such period; and
(iii) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to the
Executive any other amounts or benefits required to be paid or
provided or which the Executive is eligible to receive under any
plan, program, policy or practice or contract or agreement of the
Company as of the Date of Termination (such other amounts and
benefits shall be hereinafter referred to as the "Other
Benefits").
(b) Death. If the Executive's employment is terminated
by reason of the Executive's death during the Employment Period,
this Agreement shall terminate without further obligations to the
Executive's legal representatives under this Agreement, other
than for payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations shall be
paid to the
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<PAGE>
Executive's estate or beneficiary, as applicable, in a lump sum
in cash within 30 days of the Date of Termination. The term Other
Benefits as utilized in this Section 5(b) shall include death
benefits as in effect on the date of the Executive's death.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination.
(d) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause or the
Executive terminates his employment without Good Reason during
the Employment Period, this Agreement shall terminate without
further obligations to the Executive other than the obligation to
pay to the Executive (x) his Annual Base Salary through the Date
of Termination, and (y) Other Benefits, in each case to the
extent theretofore unpaid.
6. Non-exclusivity of Rights. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided
by the Company or any of its affiliated companies and for which
the Executive may qualify, nor, subject to Section 11(f), shall
anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the
Company or any of its affiliated companies. Any rights that are
vested and any benefits that the Executive is otherwise entitled
to receive under any plan, policy, practice or program of or any
contract or agreement with the Company or any of its affiliated
companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program
or contract or agreement except as explicitly modified by this
Agreement.
7. Full Settlement. In no event shall the Executive be
obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided
in Section 5(a)(ii) of this Agreement, such amounts shall not be
reduced whether or not the Executive obtains other employment.
The Company agrees to pay as incurred, to the full extent
permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company, the Executive
or others of the validity or enforceability of, or liability
under, any
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<PAGE>
provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Executive
about the amount of any payment pursuant to this Agreement);
provided, however, that the foregoing shall not apply in
connection with any such contest in which the finder of fact
determines that the contest is frivolous or was brought by the
Executive in bad faith.
8. Excise Tax Limit. Notwithstanding anything elsewhere
in this Agreement to the contrary, if any of the payments
provided for in this Agreement, together with any other payments
or benefits which the Executive has the right to receive from the
Company (or its affiliated companies), would constitute a
"parachute payment" (as defined in Section 280G(b)(2) of the
Internal Revenue Code of 1986, as amended (the "Code")), the
payments pursuant to this Agreement shall be reduced so that the
present value of the total amount received by the Executive that
would constitute a "parachute payment" will be one dollar ($1.00)
less than three (3) times the Executive's base amount (as defined
in Section 280G of the Code) and so that no portion of the
payments or benefits received by the Executive shall be subject
to the excise tax imposed by Section 4999 of the Code. The
determination as to whether any reduction in the payments under
this Agreement pursuant to this Section 8 is necessary shall be
made by such nationally recognized accounting firm as shall be
mutually agreeable to the Company and the Executive, in
consultation with any independent law firm of such firm's choice,
and such determination shall be conclusive and binding on the
Executive and the Company. All fees and expenses of such
accounting firm to make such determination shall be paid by the
Company. If through error or otherwise the Executive should
receive payments under this Agreement or otherwise in excess of
one dollar ($1.00) less than three (3) times his base amount, the
Executive shall immediately repay such excess to the Company upon
notification that an overpayment has been made.
9. (a) Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or any
of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement).
The Executive shall not, at any time during his employment with
the Company or at any time thereafter, for any reason, in any
fashion, form or manner, either directly or indirectly,
communicate, divulge, copy or permit to be copied (without
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<PAGE>
the prior written consent of the Company or as may otherwise be
required by law or legal process or in order to enforce his
rights under this Agreement or as necessary to defend himself
against a claim asserted directly or indirectly by the Company or
any of its affiliated companies) any secret or confidential
information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses, in any
manner whatsoever, that is not otherwise publicly available, to,
or for the benefit of, any person, firm, corporation or other
entity, other than the Company and those designated by it or in
the course of his employment with the Company and its affiliated
companies. As used herein, the term "all secret or confidential
information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses" shall
include, without limitation, the Company's plans, strategies,
proposals to potential customers and/or partners, costs, prices,
proprietary systems for buying and selling, client and customer
lists, identity of prospects, proprietary computer programs,
policy or procedure manuals, proprietary training and recruiting
procedures, proprietary accounting procedures, and the status and
contents of the Company's contracts with its suppliers, clients,
customers or prospects. The Executive further agrees to maintain
in confidence any confidential information of third parties
received as a result of his employment with the Company.
(b) Enforcement. In the event of a breach or threatened
breach of this Section 9, the Executive agrees that the Company
shall be entitled, in addition to any other remedies available to
it to specific performance and injunctive relief in a court of
appropriate jurisdiction to remedy any such breach or threatened
breach, and the Executive acknowledges that damages would be
inadequate and insufficient. In no event shall an asserted
violation of the provisions of this Section 9 constitute a basis
for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement.
(c) Survival. Any termination of the Executive's
employment or of this Agreement shall have no effect on the
continuing operation of this Section 9.
10. Successors. (a) This Agreement is personal to the
Executive and without the prior written consent of the Company
shall not be assignable by the Executive otherwise than by will
or the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
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(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had
taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
11. Miscellaneous. (a) This Agreement shall be governed
by and construed in accordance with the laws of the State of
Texas, without reference to principles of conflict of laws. The
captions of this Agreement are not part of the provisions hereof
and shall have no force or effect. This Agreement may not be
amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and
legal representatives.
(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other
party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
Bruce Williamson
12322 Moorecreek
Houston, TX 77070-2459
If to the Company:
5400 Westheimer Court
Houston, TX 77056-5310
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign taxes
as shall be required to be withheld pursuant to any applicable
law or regulation.
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<PAGE>
(e) Subject to Section 4(d) of this Agreement, the
Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section
4(c)(i)-(iv) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right
of this Agreement.
(f) This Agreement constitutes the entire agreement
between the parties and is intended to be an integration of all
agreements between the parties with respect to the Executive's
employment by the Company, the terms and conditions of such
employment or the termination of such employment. Any and all
prior agreements, understandings or commitments between the
Company and the Executive with respect to any such matter are
hereby superseded and revoked.
(g) The Company shall indemnify and hold the Executive
and his legal representatives harmless to the fullest extent
permitted by applicable law, from and against all judgments,
fines, penalties, excise taxes, amounts paid in settlement,
losses, expenses, costs, liabilities and legal fees if the
Executive is made, or threatened to be made a party to any
threatened or pending or completed action, suit, proceeding,
whether civil, criminal, administrative or investigative,
including an action by or in the right of the Company or any of
its affiliated companies to procure a judgment in its favor, by
reason of the fact that the Executive is or was serving in any
capacity at the request of the Company or any of affiliated
companies for any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise. The right to
indemnification provided, in this paragraph (g) shall not be
deemed exclusive of any other rights to which Executive may have
or hereafter be entitled under any law or the charter or by-laws
of the Company or any of its affiliated companies or otherwise,
both as to action in Executive's official capacity and as to
action in another capacity while holding such office, and shall
continue after Executive has ceased to be a director or officer
and shall inure to the benefit of Executive's heirs, executors
and administrators. Any reimbursement obligation arising
hereunder shall be satisfied on an as-incurred basis. In
addition, the Company agrees to continue to maintain customary
and appropriate directors and liability insurance during the
Employment Period and the Executive shall be entitled to the
protection of any such insurance policies on no less favorable a
basis than is provided to any other officer or director of the
Company or any of its affiliated companies.
B-6-13
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its
Board of Directors, the Company has caused these presents to be
executed in its name on its behalf, all as of the day and year
first above written.
Bruce Williamson
PANENERGY CORP
By
B-6-14
<PAGE>
EXHIBIT C-1
TO AGREEMENT AND
PLAN OF MERGER
FORM OF EMPLOYMENT AGREEMENT FOR
RICHARD B. PRIORY OF DUKE
AGREEMENT by and between Duke Power Company, a North
Carolina corporation (the "Company"), and Richard B. Priory (the
"Executive"), dated as of the 24th day of November, 1996.
The Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and
its shareholders to assure that the Company will have the
continued dedication of the Executive pending the merger of
PanEnergy Corp, a Delaware corporation, and Duke Transaction
Corporation, a Delaware corporation and a wholly-owned subsidiary
of the Company (the "Merger"), pursuant to the Agreement and Plan
of Merger dated as of November 24, 1996 (the "Merger Agreement")
and to provide the Company after the Merger with continuity of
management. Therefore, in order to accomplish these objectives,
the Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Effective Date. The "Effective Date" shall mean
the date on which the Effective Time of the Merger (as defined in
the Merger Agreement) occurs.
2. Employment Period. The Company hereby agrees to
employ the Executive, and the Executive hereby agrees to accept
employment with and remain in the employ of the Company subject
to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the second
anniversary thereof, or such later date as may be mutually agreed
upon by the Company and the Executive. Notwithstanding the
foregoing, the Executive's employment hereunder may be earlier
terminated, subject to Section 5 of this Agreement. The period
of time between the commencement and the termination of the
Executive's employment hereunder shall be referred to herein as
the "Employment Period."
3. Terms of Employment. (a) Position and Duties.
(i) During the Employment Period, (A) the Executive shall serve
as Chairman and Chief Executive Officer, with such authority,
duties and responsibilities as are commensurate with such
position and as may be consistent with such position.
Notwithstanding the foregoing, the Company and the Executive may
mutually agree to such changes in the Executive's position,
reporting or location of employment as are in the best interests
of the Company without violating the provisions of this
paragraph.
<PAGE>
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote substantially all of his
attention and time during normal business hours to the business
and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's best efforts to perform
faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement
for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement.
(b) Compensation. (i) Base Salary. During the
Employment Period, the Executive shall receive an annual base
salary ("Annual Base Salary"), payable monthly, at least equal to
the annual base salary paid or payable, including any base salary
which has been earned but deferred, to the Executive by the
Company in respect of the twelve-month period immediately
preceding the Effective Date. During the Employment Period, the
Annual Base Salary shall be reviewed no more than 12 months after
the last salary increase awarded to the Executive prior to the
Effective Date and thereafter at least annually. Any increase in
Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term
Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased.
(ii) Annual Bonus. In addition to Annual Base
Salary, for each fiscal year ending during the Employment Period
the Executive shall be eligible, based upon the Executive's
achievement of performance goals during such fiscal year, to
receive a bonus (the "Annual Bonus") with a target level not less
than the target level applicable to the Executive for the 1996
fiscal year under the Company's Executive Short Term Incentive
Plan (with such percentage, multiplied by the Executive's Annual
Base Salary, to represent the Executive's "Target Bonus Amount"
hereunder). The establishment of the performance goals, the
evaluation of the actual performance against such goals, and the
determination of the Annual Bonus actually payable to the
Executive shall be made by the Compensation Committee of the
Board acting in its sole discretion.
(iii) Long-Term Incentives. During the Employment
Period, the Executive shall be entitled to participate in all
long-term incentive plans, practices, policies and programs
applicable generally to peer executives of the Company, at such
levels as shall be determined in the sole discretion of the
Compensation Committee of the Board.
C-1-2
<PAGE>
(iv) Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate
in all savings and retirement plans, practices, policies and
programs on a basis no less favorable than that generally
applicable to peer executives of the Company.
(v) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's dependents, as the
case may be, shall be eligible for participation in and shall
receive all benefits under welfare benefit plans, practices,
policies and programs provided by the Company on a basis no less
favorable than that generally applicable to peer executives of
the Company.
(vi) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the Company's policies.
(vii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with
the plans, policies, programs and practices of the Company on a
basis no less favorable than that generally applicable to peer
executives of the Company but in any event he shall be entitled
to no less than four weeks of vacation per year during the
Employment Period.
4. Termination of Employment. (a) Death or
Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment
Period. If the Disability of the Executive occurs during the
Employment Period (pursuant to the definition of Disability set
forth below), the Company may give to the Executive written
notice, in accordance with Section 11(b) of this Agreement, of
its intention to terminate the Executive's employment. In such
event, the Executive's employment with the Company shall
terminate effective on the 60th day after receipt of such notice
by the Executive (the "Disability Effective Date"); provided
that, within the 60 days after such receipt, the Executive shall
not have returned to substantially full time performance of the
Executive's duties. For purposes of this Agreement, "Disability"
shall mean the absence of the Executive from the performance of
the Executive's duties with the Company on a full time basis for
an aggregate of 120 out of any 180 consecutive business days as a
result of incapacity due to mental or physical illness which is
determined to be total and permanent by an independent physician
selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" shall mean
C-1-3
<PAGE>
the engaging by the Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the
Company. The cessation of employment of the Executive shall not
be deemed to be for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice is provided to
the Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the
good faith opinion of the Board, the Executive is guilty of the
conduct described above, and specifying the particulars thereof
in detail.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent with the Executive's position (including
status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by
Section 3(a) of this Agreement, or any other action by the
Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for these
purposes (A) an isolated and insubstantial action not taken
in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive and
(B) any action to which the Executive has given his written
consent;
(ii) any failure by the Company to comply with any of
the provisions of Section 3(b) of this Agreement, other than
an isolated and insubstantial failure not occurring in bad
faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive; or
(iii) any failure by the Company to comply with and
satisfy Section 10(c) of this Agreement.
(d) Notice of Termination. Any termination by the
Company for Cause, or by the Executive for Good Reason, shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 11(b) of this Agreement. In the
case of a Good Reason termination, such Notice of Termination
shall be given within 90 days of the occurrence of the event that
is claimed as serving the basis for the termination as a
condition of such claim being treated as a Good Reason
termination hereunder. For purposes of this Agreement, a "Notice
of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon,
(ii) to
C-1-4
<PAGE>
the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and
(iii) if the Date of Termination (as defined below) is other than
the date of receipt of such notice, specifies the termination
date (which date shall be not more than 30 days after the giving
of such notice). The failure by the Executive or the Company to
set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively,
hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means
(i) if the Executive's employment is terminated by the Company
for Cause, or by the Executive for any reason (including Good
Reason), the date of receipt of the Notice of Termination or any
later date specified therein that is within 30 days of such
notice, as the case may be, (ii) if the Executive's employment is
terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the
Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may
be.
5. Obligations of the Company upon Termination. (a)
Good Reason; Other than for Cause, Death or Disability. If,
during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause or Disability or the
Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the
aggregate of the following amounts:
A. the sum of (1) the Executive's Annual Base
Salary through the Date of Termination to the extent
not theretofore paid; (2) the product of (x) the Target
Bonus Amount and (y) a fraction, the numerator of which
is the number of days in the current fiscal year
through the Date of Termination, and the denominator of
which is 365; and (3) any accrued vacation pay to the
extent not theretofore paid (the sum of the amounts
described in clauses (1), (2), and (3) shall be
hereinafter referred to as the "Accrued Obligations");
and
C-1-5
<PAGE>
B. the amount equal to the product of (1) three
and (2) the sum of (x) the Executive's Annual Base
Salary and (y) the Target Bonus Amount; and
(ii) for three years after the Executive's Date of
Termination, or such longer period as may be provided by the
terms of the appropriate plan, program, practice or policy,
the Company shall continue the medical, long-term
disability, dental, accidental death and dismemberment and
life insurance benefits to the Executive and/or the
Executive's dependents at least equal to those which would
have been provided to them in accordance with the plans,
programs, practices and policies in effect under Section
3(b)(v) of this Agreement (the "Continuing Benefit Plans")
as if the Executive's employment had not been terminated
(either by permitting the Executive and/or the Executive's
dependents to participate in the Continuing Benefit Plans,
or by providing the Executive and/or the Executive's
dependents with equivalent benefits outside the Continuing
Benefit Plans, as the Company may elect, so long as the net
after-tax benefit to them is the same as if the Executive
had remained an employee of the Company participating in the
Continuing Benefit Plans); provided, however, that if the
Executive becomes employed by another employer and is
eligible to receive medical, long-term disability, dental,
accidental death and dismemberment or life insurance
benefits under another employer-provided plan, the medical,
long-term disability, dental, accidental death and
dismemberment and life insurance benefits described herein
shall be secondary to those provided under such other plan
during such applicable period of eligibility. For purposes
of determining eligibility (but not the time of commencement
of benefits) of the Executive for retiree benefits pursuant
to the Continuing Benefit Plans and any other welfare
benefit plans, practices, policies and programs provided by
the Company and its affiliated companies, the Executive
shall be considered to have remained employed until three
years after the Date of Termination and to have retired on
the last day of such period; and
(iii) to the extent not theretofore paid or provided,
the Company shall timely pay or provide to the Executive any
other amounts or benefits required to be paid or provided or
which the Executive is eligible to receive under any plan,
program, policy or practice or contract or agreement of the
Company as of the Date of Termination (such other amounts
and benefits shall be hereinafter referred to as the "Other
Benefits").
(b) Death. If the Executive's employment is
terminated by reason of the Executive's death during the
C-1-6
<PAGE>
Employment Period, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days
of the Date of Termination. The term "Other Benefits" as
utilized in this Section 5(b) shall include death benefits as in
effect on the date of the Executive's death.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in
a lump sum in cash within 30 days of the Date of Termination.
(d) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause or the
Executive terminates his employment without Good Reason during
the Employment Period, this Agreement shall terminate without
further obligations to the Executive other than the obligation to
pay to the Executive (x) his Annual Base Salary through the Date
of Termination, and (y) Other Benefits, in each case to the
extent theretofore unpaid.
6. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's continuing or
future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and
for which the Executive may qualify, nor, subject to Section
11(f), shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement
with the Company or any of its affiliated companies. Any rights
that are vested and any benefits that the Executive is otherwise
entitled to receive under any plan, policy, practice or program
of, or any contract or agreement with, the Company or any of its
affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice
or program or contract or agreement, except as explicitly
modified by this Agreement. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by,
controlling or under common control with the Company.
7. Full Settlement. In no event shall the Executive
be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided
in Section 5(a)(ii) of this Agreement, such amounts shall not be
reduced whether or not
C-1-7
<PAGE>
the Executive obtains other employment. The Company agrees to
pay as incurred, to the full extent permitted by law, all legal
fees and expenses which the Executive may reasonably incur as a
result of any contest (regardless of the outcome thereof) by the
Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount of any
payment pursuant to this Agreement); provided, however, that the
foregoing shall not apply in connection with any such contest in
which the finder of fact determines that the contest is frivolous
or was brought by the Executive in bad faith.
8. Excise Tax Provision. Notwithstanding anything
elsewhere in this Agreement to the contrary, if any of the
payments or benefits provided for in this Agreement, together
with any other payments or benefits which the Executive has the
right to receive from the Company (or its affiliated companies),
would constitute a "parachute payment" (as defined in Section
280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code")), the Executive may elect (i) to have the payments or
benefits pursuant to this Agreement reduced so that the present
value of the total amount received by the Executive that would
constitute a "parachute payment" will be one dollar ($1.00) less
than three (3) times the Executive's base amount (as defined in
Section 280G of the Code) and so that no portion of the payments
or benefits received by the Executive would be subject to the
excise tax imposed by Section 4999 of the Code or (ii) to have no
such reduction described in Section 8(i) hereof. The foregoing
shall not affect the right of the Company to satisfy all tax
withholding requirements (including excise tax withholding
requirements) with respect to any payments or benefits provided
for in this Agreement in the event it shall determine that any
such payments or benefits would, regardless of the Executive's
election hereunder, be subject to the excise tax imposed by
Section 4999 of the Code.
9. (a) Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or any
of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement).
The Executive shall not, at any time during his employment with
the Company or at any time thereafter, for any reason, in any
fashion, form or manner, either directly or indirectly,
communicate, divulge, copy or permit to be copied (without the
prior written consent of the Company or as may otherwise
C-1-8
<PAGE>
be required by law or legal process or in order to enforce his
rights under this Agreement or as necessary to defend himself
against a claim asserted directly or indirectly by the Company or
any of its affiliated companies) any secret or confidential
information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses, in any
manner whatsoever, that is not otherwise publicly available, to,
or for the benefit of, any person, firm, corporation or other
entity, other than the Company and those designated by it or in
the course of his employment with the Company and its affiliated
companies. As used herein, the term "all secret or confidential
information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses" shall
include, without limitation, the Company's plans, strategies,
proposals to potential customers and/or partners, costs, prices,
proprietary systems for buying and selling, client and customer
lists, identity of prospects, proprietary computer programs,
policy or procedure manuals, proprietary training and recruiting
procedures, proprietary accounting procedures, and the status and
contents of the Company's contracts with its suppliers, clients,
customers or prospects. The Executive further agrees to maintain
in confidence any confidential information of third parties
received as a result of his employment with the Company.
(b) Enforcement. In the event of a breach or
threatened breach of this Section 9, the Executive agrees that
the Company shall be entitled, in addition to any other remedies
available to it to specific performance and injunctive relief in
a court of appropriate jurisdiction to remedy any such breach or
threatened breach, and the Executive acknowledges that damages
would be inadequate and insufficient. In no event shall an
asserted violation of the provisions of this Section 9 constitute
a basis for deferring or withholding any amounts otherwise
payable to the Executive under this Agreement.
(c) Survival. Any termination of the Executive's
employment or of this Agreement shall have no effect on the
continuing operation of this Section 9.
10. Successors. (a) This Agreement is personal to
the Executive and, without the prior written consent of the
Company, shall not be assignable by the Executive otherwise than
by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger,
C-1-9
<PAGE>
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and
agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if
no such succession had taken place. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law,
or otherwise.
11. Miscellaneous. (a) This Agreement shall be
governed by and construed in accordance with the laws of the
State of North Carolina, without reference to principles of
conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
C-1-10
<PAGE>
If to the Executive:
Richard B. Priory
3520 Providence Road
Charlotte, North Carolina 28211
If to the Company:
422 South Church Street
Charlotte, North Carolina 28242
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign taxes
as shall be required to be withheld pursuant to any applicable
law or regulation.
(e) Subject to Section 4(d) of this Agreement, the
Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section 4(c) of
this Agreement, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this
Agreement.
(f) This Agreement constitutes the entire agreement
between the parties and is intended to be an integration of all
agreements between the parties with respect to the Executive's
employment by the Company, the terms and conditions of such
employment or the termination of such employment. Any and all
prior agreements, understandings or commitments between the
Company and the Executive with respect to any such matter are
hereby superseded and revoked.
(g) The Company shall indemnify and hold the Executive
and his legal representatives harmless to the fullest extent
permitted by applicable law, from and against all judgments,
fines, penalties, excise taxes, amounts paid in settlement,
losses, expenses, costs, liabilities and legal fees if the
Executive is made, or threatened to be made a party to any
threatened or pending or completed action, suit, proceeding,
whether civil, criminal, administrative or investigative,
including an action by or
C-1-11
<PAGE>
in the right of the Company or any of its affiliated companies to
procure a judgment in its favor, by reason of the fact that the
Executive is or was serving in any capacity at the request of the
Company or any of affiliated companies for any other corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise. The right to indemnification provided in this
paragraph (g) shall not be deemed exclusive of any other rights
to which Executive may have or hereafter be entitled under any
law or the charter or by- laws of the Company or any of its
affiliated companies or otherwise, both as to action in
Executive's official capacity and as to action in another
capacity while holding such office, and shall continue after
Executive has ceased to be a director or officer and shall inure
to the benefit of Executive's heirs, executors and
administrators. Any reimbursement obligation arising hereunder
shall be satisfied on an as-incurred basis. In addition, the
Company agrees to continue to maintain customary and appropriate
directors and liability insurance during the Employment Period
and the Executive shall be entitled to the protection of any such
insurance policies on no less favorable a basis than is provided
to any other officer or director of the Company or any of its
affiliated companies.
C-1-12
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its
Board of Directors, the Company has caused these presents to be
executed in its name on its behalf, all as of the day and year
first above written.
Richard B. Priory
DUKE POWER COMPANY
By
C-1-13
<PAGE>
EXHIBIT C-2
TO AGREEMENT AND
PLAN OF MERGER
FORM OF EMPLOYMENT AGREEMENT FOR
WILLIAM A. COLEY OF DUKE
AGREEMENT by and between Duke Power Company, a North
Carolina corporation (the "Company"), and William A. Coley (the
"Executive"), dated as of the 24th day of November, 1996.
The Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and
its shareholders to assure that the Company will have the
continued dedication of the Executive pending the merger of
PanEnergy Corp, a Delaware corporation, and Duke Transaction
Corporation, a Delaware corporation and a wholly-owned subsidiary
of the Company (the "Merger"), pursuant to the Agreement and Plan
of Merger dated as of November 24, 1996 (the "Merger Agreement")
and to provide the Company after the Merger with continuity of
management. Therefore, in order to accomplish these objectives,
the Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Effective Date. The "Effective Date" shall mean
the date on which the Effective Time of the Merger (as defined in
the Merger Agreement) occurs.
2. Employment Period. The Company hereby agrees to
employ the Executive, and the Executive hereby agrees to accept
employment with and remain in the employ of the Company subject
to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the second
anniversary thereof, or such later date as may be mutually agreed
upon by the Company and the Executive. Notwithstanding the
foregoing, the Executive's employment hereunder may be earlier
terminated, subject to Section 5 of this Agreement. The period
of time between the commencement and the termination of the
Executive's employment hereunder shall be referred to herein as
the "Employment Period."
3. Terms of Employment. (a) Position and Duties.
(i) During the Employment Period, (A) the Executive shall serve
as President of Duke Power Company (the regulated electric
utility which on the Effective Date will become a division of
Duke Energy Corporation), with such authority, duties and
responsibilities as are commensurate with such position and as
may be consistent with such position. Notwithstanding the
foregoing, the Company and the Executive may mutually agree to
such changes in the Executive's position, reporting or location
of employment as are in the best interests of the Company without
violating the provisions of this paragraph.
<PAGE>
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote substantially all of his
attention and time during normal business hours to the business
and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's best efforts to perform
faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement
for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement.
(b) Compensation. (i) Base Salary. During the
Employment Period, the Executive shall receive an annual base
salary ("Annual Base Salary"), payable monthly, at least equal to
the annual base salary paid or payable, including any base salary
which has been earned but deferred, to the Executive by the
Company in respect of the twelve-month period immediately
preceding the Effective Date. During the Employment Period, the
Annual Base Salary shall be reviewed no more than 12 months after
the last salary increase awarded to the Executive prior to the
Effective Date and thereafter at least annually. Any increase in
Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term
Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased.
(ii) Annual Bonus. In addition to Annual Base Salary,
for each fiscal year ending during the Employment Period the
Executive shall be eligible, based upon the Executive's
achievement of performance goals during such fiscal year, to
receive a bonus (the "Annual Bonus") with a target level not less
than the target level applicable to the Executive for the 1996
fiscal year under the Company's Executive Short Term Incentive
Plan (with such percentage, multiplied by the Executive's Annual
Base Salary, to represent the Executive's "Target Bonus Amount"
hereunder). The establishment of the performance goals, the
evaluation of the actual performance against such goals, and the
determination of the Annual Bonus actually payable to the
Executive shall be made by the Compensation Committee of the
Board acting in its sole discretion.
(iii) Long-Term Incentives. During the Employment
Period, the Executive shall be entitled to participate in all
long-term incentive plans, practices, policies and programs
applicable generally to peer executives of the Company, at such
levels as shall be determined in the sole discretion of the
Compensation Committee of the Board.
C-2-2
<PAGE>
(iv) Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate
in all savings and retirement plans, practices, policies and
programs on a basis no less favorable than that generally
applicable to peer executives of the Company.
(v) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's dependents, as the
case may be, shall be eligible for participation in and shall
receive all benefits under welfare benefit plans, practices,
policies and programs provided by the Company on a basis no less
favorable than that generally applicable to peer executives of
the Company.
(vi) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the Company's policies.
(vii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with
the plans, policies, programs and practices of the Company on a
basis no less favorable than that generally applicable to peer
executives of the Company but in any event he shall be entitled
to no less than four weeks of vacation per year during the
Employment Period.
4. Termination of Employment. (a) Death or
Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment
Period. If the Disability of the Executive occurs during the
Employment Period (pursuant to the definition of Disability set
forth below), the Company may give to the Executive written
notice, in accordance with Section 11(b) of this Agreement, of
its intention to terminate the Executive's employment. In such
event, the Executive's employment with the Company shall
terminate effective on the 60th day after receipt of such notice
by the Executive (the "Disability Effective Date"); provided
that, within the 60 days after such receipt, the Executive shall
not have returned to substantially full time performance of the
Executive's duties. For purposes of this Agreement, "Disability"
shall mean the absence of the Executive from the performance of
the Executive's duties with the Company on a full time basis for
an aggregate of 120 out of any 180 consecutive business days as a
result of incapacity due to mental or physical illness which is
determined to be total and permanent by an independent physician
selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" shall mean
C-2-3
<PAGE>
the engaging by the Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the
Company. The cessation of employment of the Executive shall not
be deemed to be for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice is provided to
the Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the
good faith opinion of the Board, the Executive is guilty of the
conduct described above, and specifying the particulars thereof
in detail.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent with the Executive's position (including
status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by
Section 3(a) of this Agreement, or any other action by the
Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for these
purposes (A) an isolated and insubstantial action not taken
in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive and
(B) any action to which the Executive has given his written
consent;
(ii) any failure by the Company to comply with any of
the provisions of Section 3(b) of this Agreement, other than
an isolated and insubstantial failure not occurring in bad
faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive; or
(iii) any failure by the Company to comply with and
satisfy Section 10(c) of this Agreement.
(d) Notice of Termination. Any termination by the
Company for Cause, or by the Executive for Good Reason, shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 11(b) of this Agreement. In the
case of a Good Reason termination, such Notice of Termination
shall be given within 90 days of the occurrence of the event that
is claimed as serving the basis for the termination as a
condition of such claim being treated as a Good Reason
termination hereunder. For purposes of this Agreement, a "Notice
of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon,
(ii) to
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<PAGE>
the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and
(iii) if the Date of Termination (as defined below) is other than
the date of receipt of such notice, specifies the termination
date (which date shall be not more than 30 days after the giving
of such notice). The failure by the Executive or the Company to
set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively,
hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means
(i) if the Executive's employment is terminated by the Company
for Cause, or by the Executive for any reason (including Good
Reason), the date of receipt of the Notice of Termination or any
later date specified therein that is within 30 days of such
notice, as the case may be, (ii) if the Executive's employment is
terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the
Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may
be.
5. Obligations of the Company upon Termination. (a)
Good Reason; Other than for Cause, Death or Disability. If,
during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause or Disability or the
Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the
aggregate of the following amounts:
A. the sum of (1) the Executive's Annual Base
Salary through the Date of Termination to the extent not
theretofore paid; (2) the product of (x) the Target Bonus
Amount and (y) a fraction, the numerator of which is the
number of days in the current fiscal year through the Date
of Termination, and the denominator of which is 365; and (3)
any accrued vacation pay to the extent not theretofore paid
(the sum of the amounts described in clauses (1), (2), and
(3) shall be hereinafter referred to as the "Accrued
Obligations"); and
C-2-5
<PAGE>
B. the amount equal to the product of (1) three
and (2) the sum of (x) the Executive's Annual Base Salary
and (y) the Target Bonus Amount; and
(ii) for three years after the Executive's Date of
Termination, or such longer period as may be provided by the
terms of the appropriate plan, program, practice or policy,
the Company shall continue the medical, long-term
disability, dental, accidental death and dismemberment and
life insurance benefits to the Executive and/or the
Executive's dependents at least equal to those which would
have been provided to them in accordance with the plans,
programs, practices and policies in effect under Section
3(b)(v) of this Agreement (the "Continuing Benefit Plans")
as if the Executive's employment had not been terminated
(either by permitting the Executive and/or the Executive's
dependents to participate in the Continuing Benefit Plans,
or by providing the Executive and/or the Executive's
dependents with equivalent benefits outside the Continuing
Benefit Plans, as the Company may elect, so long as the net
after-tax benefit to them is the same as if the Executive
had remained an employee of the Company participating in the
Continuing Benefit Plans); provided, however, that if the
Executive becomes employed by another employer and is
eligible to receive medical, long-term disability, dental,
accidental death and dismemberment or life insurance
benefits under another employer-provided plan, the medical,
long-term disability, dental, accidental death and
dismemberment and life insurance benefits described herein
shall be secondary to those provided under such other plan
during such applicable period of eligibility. For purposes
of determining eligibility (but not the time of commencement
of benefits) of the Executive for retiree benefits pursuant
to the Continuing Benefit Plans and any other welfare
benefit plans, practices, policies and programs provided by
the Company and its affiliated companies, the Executive
shall be considered to have remained employed until three
years after the Date of Termination and to have retired on
the last day of such period; and
(iii) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to the
Executive any other amounts or benefits required to be paid
or provided or which the Executive is eligible to receive
under any plan, program, policy or practice or contract or
agreement of the Company as of the Date of Termination (such
other amounts and benefits shall be hereinafter referred to
as the "Other Benefits").
(b) Death. If the Executive's employment is
terminated by reason of the Executive's death during the
C-2-6
<PAGE>
Employment Period, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days
of the Date of Termination. The term "Other Benefits" as
utilized in this Section 5(b) shall include death benefits as in
effect on the date of the Executive's death.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in
a lump sum in cash within 30 days of the Date of Termination.
(d) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause or the
Executive terminates his employment without Good Reason during
the Employment Period, this Agreement shall terminate without
further obligations to the Executive other than the obligation to
pay to the Executive (x) his Annual Base Salary through the Date
of Termination, and (y) Other Benefits, in each case to the
extent theretofore unpaid.
6. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's continuing or
future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and
for which the Executive may qualify, nor, subject to Section
11(f), shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement
with the Company or any of its affiliated companies. Any rights
that are vested and any benefits that the Executive is otherwise
entitled to receive under any plan, policy, practice or program
of, or any contract or agreement with, the Company or any of its
affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice
or program or contract or agreement, except as explicitly
modified by this Agreement. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by,
controlling or under common control with the Company.
7. Full Settlement. In no event shall the Executive
be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided
in Section 5(a)(ii) of this Agreement, such amounts shall not be
reduced whether or not
C-2-7
<PAGE>
the Executive obtains other employment. The Company agrees to
pay as incurred, to the full extent permitted by law, all legal
fees and expenses which the Executive may reasonably incur as a
result of any contest (regardless of the outcome thereof) by the
Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount of any
payment pursuant to this Agreement); provided, however, that the
foregoing shall not apply in connection with any such contest in
which the finder of fact determines that the contest is frivolous
or was brought by the Executive in bad faith.
8. Excise Tax Provision. Notwithstanding anything
elsewhere in this Agreement to the contrary, if any of the
payments or benefits provided for in this Agreement, together
with any other payments or benefits which the Executive has the
right to receive from the Company (or its affiliated companies),
would constitute a "parachute payment" (as defined in Section
280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code")), the Executive may elect (i) to have the payments or
benefits pursuant to this Agreement reduced so that the present
value of the total amount received by the Executive that would
constitute a "parachute payment" will be one dollar ($1.00) less
than three (3) times the Executive's base amount (as defined in
Section 280G of the Code) and so that no portion of the payments
or benefits received by the Executive would be subject to the
excise tax imposed by Section 4999 of the Code or (ii) to have no
such reduction described in Section 8(i) hereof. The foregoing
shall not affect the right of the Company to satisfy all tax
withholding requirements (including excise tax withholding
requirements) with respect to any payments or benefits provided
for in this Agreement in the event it shall determine that any
such payments or benefits would, regardless of the Executive's
election hereunder, be subject to the excise tax imposed by
Section 4999 of the Code.
9. (a) Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or any
of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement).
The Executive shall not, at any time during his employment with
the Company or at any time thereafter, for any reason, in any
fashion, form or manner, either directly or indirectly,
communicate, divulge, copy or permit to be copied (without the
prior written consent of the Company or as may otherwise
C-2-8
<PAGE>
be required by law or legal process or in order to enforce his
rights under this Agreement or as necessary to defend himself
against a claim asserted directly or indirectly by the Company or
any of its affiliated companies) any secret or confidential
information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses, in any
manner whatsoever, that is not otherwise publicly available, to,
or for the benefit of, any person, firm, corporation or other
entity, other than the Company and those designated by it or in
the course of his employment with the Company and its affiliated
companies. As used herein, the term "all secret or confidential
information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses" shall
include, without limitation, the Company's plans, strategies,
proposals to potential customers and/or partners, costs, prices,
proprietary systems for buying and selling, client and customer
lists, identity of prospects, proprietary computer programs,
policy or procedure manuals, proprietary training and recruiting
procedures, proprietary accounting procedures, and the status and
contents of the Company's contracts with its suppliers, clients,
customers or prospects. The Executive further agrees to maintain
in confidence any confidential information of third parties
received as a result of his employment with the Company.
(b) Enforcement. In the event of a breach or
threatened breach of this Section 9, the Executive agrees that
the Company shall be entitled, in addition to any other remedies
available to it to specific performance and injunctive relief in
a court of appropriate jurisdiction to remedy any such breach or
threatened breach, and the Executive acknowledges that damages
would be inadequate and insufficient. In no event shall an
asserted violation of the provisions of this Section 9 constitute
a basis for deferring or withholding any amounts otherwise
payable to the Executive under this Agreement.
(c) Survival. Any termination of the Executive's
employment or of this Agreement shall have no effect on the
continuing operation of this Section 9.
10. Successors. (a) This Agreement is personal to
the Executive and, without the prior written consent of the
Company, shall not be assignable by the Executive otherwise than
by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger,
C-2-9
<PAGE>
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and
agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if
no such succession had taken place. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law,
or otherwise.
11. Miscellaneous. (a) This Agreement shall be
governed by and construed in accordance with the laws of the
State of North Carolina, without reference to principles of
conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
C-2-10
<PAGE>
If to the Executive:
William A. Coley
1231 Wareham Court
Charlotte, North Carolina 28207
If to the Company:
422 South Church Street
Charlotte, North Carolina 28242
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign taxes
as shall be required to be withheld pursuant to any applicable
law or regulation.
(e) Subject to Section 4(d) of this Agreement, the
Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section 4(c) of
this Agreement, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this
Agreement.
(f) This Agreement constitutes the entire agreement
between the parties and is intended to be an integration of all
agreements between the parties with respect to the Executive's
employment by the Company, the terms and conditions of such
employment or the termination of such employment. Any and all
prior agreements, understandings or commitments between the
Company and the Executive with respect to any such matter are
hereby superseded and revoked.
(g) The Company shall indemnify and hold the Executive
and his legal representatives harmless to the fullest extent
permitted by applicable law, from and against all judgments,
fines, penalties, excise taxes, amounts paid in settlement,
losses, expenses, costs, liabilities and legal fees if the
Executive is made, or threatened to be made a party to any
threatened or pending or completed action, suit, proceeding,
whether civil, criminal, administrative or investigative,
including an action by or
C-2-11
<PAGE>
in the right of the Company or any of its affiliated companies to
procure a judgment in its favor, by reason of the fact that the
Executive is or was serving in any capacity at the request of the
Company or any of affiliated companies for any other corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise. The right to indemnification provided in this
paragraph (g) shall not be deemed exclusive of any other rights
to which Executive may have or hereafter be entitled under any
law or the charter or by- laws of the Company or any of its
affiliated companies or otherwise, both as to action in
Executive's official capacity and as to action in another
capacity while holding such office, and shall continue after
Executive has ceased to be a director or officer and shall inure
to the benefit of Executive's heirs, executors and
administrators. Any reimbursement obligation arising hereunder
shall be satisfied on an as-incurred basis. In addition, the
Company agrees to continue to maintain customary and appropriate
directors and liability insurance during the Employment Period
and the Executive shall be entitled to the protection of any such
insurance policies on no less favorable a basis than is provided
to any other officer or director of the Company or any of its
affiliated companies.
C-2-12
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its
Board of Directors, the Company has caused these presents to be
executed in its name on its behalf, all as of the day and year
first above written.
William A. Coley
DUKE POWER COMPANY
By
C-2-13
<PAGE>
EXHIBIT C-3
TO AGREEMENT AND
PLAN OF MERGER
FORM OF EMPLOYMENT AGREEMENT FOR
RICHARD J. OSBORNE OF DUKE
AGREEMENT by and between Duke Power Company, a North
Carolina corporation (the "Company"), and Richard J. Osborne (the
"Executive"), dated as of the 24th day of November, 1996.
The Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and
its shareholders to assure that the Company will have the
continued dedication of the Executive pending the merger of
PanEnergy Corp, a Delaware corporation, and Duke Transaction
Corporation, a Delaware corporation and a wholly-owned subsidiary
of the Company (the "Merger"), pursuant to the Agreement and Plan
of Merger dated as of November 24, 1996 (the "Merger Agreement")
and to provide the Company after the Merger with continuity of
management. Therefore, in order to accomplish these objectives,
the Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Effective Date. The "Effective Date" shall mean the
date on which the Effective Time of the Merger (as defined in the
Merger Agreement) occurs.
2. Employment Period. The Company hereby agrees to employ
the Executive, and the Executive hereby agrees to accept
employment with and remain in the employ of the Company subject
to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the second
anniversary thereof, or such later date as may be mutually agreed
upon by the Company and the Executive. Notwithstanding the
foregoing, the Executive's employment hereunder may be earlier
terminated, subject to Section 5 of this Agreement. The period of
time between the commencement and the termination of the
Executive's employment hereunder shall be referred to herein as
the "Employment Period."
3. Terms of Employment. (a) Position and Duties. (i)
During the Employment Period, (A) the Executive shall serve as
Senior Vice President and Chief Financial Officer, with such
authority, duties and responsibilities as are commensurate with
such position and as may be consistent with such position.
Notwithstanding the foregoing, the Company and the Executive may
mutually agree to such changes in the Executive's position,
reporting or location of employment as are in the best interests
of the Company without violating the provisions of this
paragraph.
<PAGE>
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote substantially all of his
attention and time during normal business hours to the business
and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's best efforts to perform
faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement
for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement.
(b) Compensation. (i) Base Salary. During the Employment
Period, the Executive shall receive an annual base salary
("Annual Base Salary"), payable monthly, at least equal to the
annual base salary paid or payable, including any base salary
which has been earned but deferred, to the Executive by the
Company in respect of the twelve-month period immediately
preceding the Effective Date. During the Employment Period, the
Annual Base Salary shall be reviewed no more than 12 months after
the last salary increase awarded to the Executive prior to the
Effective Date and thereafter at least annually. Any increase in
Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term
Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased.
(ii) Annual Bonus. In addition to Annual Base Salary, for
each fiscal year ending during the Employment Period the
Executive shall be eligible, based upon the Executive's
achievement of performance goals during such fiscal year, to
receive a bonus (the "Annual Bonus") with a target level not less
than the target level applicable to the Executive for the 1996
fiscal year under the Company's Executive Short Term Incentive
Plan (with such percentage, multiplied by the Executive's Annual
Base Salary, to represent the Executive's "Target Bonus Amount"
hereunder). The establishment of the performance goals, the
evaluation of the actual performance against such goals, and the
determination of the Annual Bonus actually payable to the
Executive shall be made by the Compensation Committee of the
Board acting in its sole discretion.
(iii) Long-Term Incentives. During the Employment Period,
the Executive shall be entitled to participate in all long-term
incentive plans, practices, policies and programs applicable
generally to peer executives of the Company, at such levels as
shall be determined in the sole discretion of the Compensation
Committee of the Board.
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<PAGE>
(iv) Savings and Retirement Plans. During the Employment
Period, the Executive shall be entitled to participate in all
savings and retirement plans, practices, policies and programs on
a basis no less favorable than that generally applicable to peer
executives of the Company.
(v) Welfare Benefit Plans. During the Employment Period,
the Executive and/or the Executive's dependents, as the case may
be, shall be eligible for participation in and shall receive all
benefits under welfare benefit plans, practices, policies and
programs provided by the Company on a basis no less favorable
than that generally applicable to peer executives of the Company.
(vi) Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by the Executive in accordance with
the Company's policies.
(vii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with
the plans, policies, programs and practices of the Company on a
basis no less favorable than that generally applicable to peer
executives of the Company but in any event he shall be entitled
to no less than four weeks of vacation per year during the
Employment Period.
4. Termination of Employment. (a) Death or Disability.
The Executive's employment shall terminate automatically upon the
Executive's death during the Employment Period. If the
Disability of the Executive occurs during the Employment Period
(pursuant to the definition of Disability set forth below), the
Company may give to the Executive written notice, in accordance
with Section 11(b) of this Agreement, of its intention to
terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective
on the 60th day after receipt of such notice by the Executive
(the "Disability Effective Date"); provided that, within the 60
days after such receipt, the Executive shall not have returned to
substantially full time performance of the Executive's duties.
For purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the performance of the Executive's
duties with the Company on a full time basis for an aggregate of
120 out of any 180 consecutive business days as a result of
incapacity due to mental or physical illness which is determined
to be total and permanent by an independent physician selected by
the Company or its insurers and acceptable to the Executive or
the Executive's legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" shall mean
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the engaging by the Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the
Company. The cessation of employment of the Executive shall not
be deemed to be for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice is provided to
the Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the
good faith opinion of the Board, the Executive is guilty of the
conduct described above, and specifying the particulars thereof
in detail.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent with the Executive's position (including
status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by
Section 3(a) of this Agreement, or any other action by the
Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for these
purposes (A) an isolated and insubstantial action not taken
in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive and
(B) any action to which the Executive has given his written
consent;
(ii) any failure by the Company to comply with any of
the provisions of Section 3(b) of this Agreement, other than
an isolated and insubstantial failure not occurring in bad
faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive; or
(iii) any failure by the Company to comply with and
satisfy Section 10(c) of this Agreement.
(d) Notice of Termination. Any termination by the
Company for Cause, or by the Executive for Good Reason, shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 11(b) of this Agreement. In the
case of a Good Reason termination, such Notice of Termination
shall be given within 90 days of the occurrence of the event that
is claimed as serving the basis for the termination as a
condition of such claim being treated as a Good Reason
termination hereunder. For purposes of this Agreement, a "Notice
of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon,
(ii) to
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the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and
(iii) if the Date of Termination (as defined below) is other than
the date of receipt of such notice, specifies the termination
date (which date shall be not more than 30 days after the giving
of such notice). The failure by the Executive or the Company to
set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively,
hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means
(i) if the Executive's employment is terminated by the Company
for Cause, or by the Executive for any reason (including Good
Reason), the date of receipt of the Notice of Termination or any
later date specified therein that is within 30 days of such
notice, as the case may be, (ii) if the Executive's employment is
terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the
Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may
be.
5. Obligations of the Company upon Termination. (a)
Good Reason; Other than for Cause, Death or Disability. If,
during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause or Disability or the
Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the
aggregate of the following
amounts:
A. the sum of (1) the Executive's Annual Base
Salary through the Date of Termination to the extent
not theretofore paid; (2) the product of (x) the Target
Bonus Amount and (y) a fraction, the numerator of which
is the number of days in the current fiscal year
through the Date of Termination, and the denominator of
which is 365; and (3) any accrued vacation pay to the
extent not theretofore paid (the sum of the amounts
described in clauses (1), (2), and (3) shall be
hereinafter referred to as the "Accrued Obligations");
and
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B. the amount equal to the product of (1) three
and (2) the sum of (x) the Executive's Annual Base
Salary and (y) the Target Bonus Amount; and
(ii) for three years after the Executive's Date of
Termination, or such longer period as may be provided by the
terms of the appropriate plan, program, practice or policy,
the Company shall continue the medical, long-term
disability, dental, accidental death and dismemberment and
life insurance benefits to the Executive and/or the
Executive's dependents at least equal to those which would
have been provided to them in accordance with the plans,
programs, practices and policies in effect under Section
3(b)(v) of this Agreement (the "Continuing Benefit Plans")
as if the Executive's employment had not been terminated
(either by permitting the Executive and/or the Executive's
dependents to participate in the Continuing Benefit Plans,
or by providing the Executive and/or the Executive's
dependents with equivalent benefits outside the Continuing
Benefit Plans, as the Company may elect, so long as the net
after-tax benefit to them is the same as if the Executive
had remained an employee of the Company participating in the
Continuing Benefit Plans); provided, however, that if the
Executive becomes employed by another employer and is
eligible to receive medical, long-term disability, dental,
accidental death and dismemberment or life insurance
benefits under another employer-provided plan, the medical,
long-term disability, dental, accidental death and
dismemberment and life insurance benefits described herein
shall be secondary to those provided under such other plan
during such applicable period of eligibility. For purposes
of determining eligibility (but not the time of commencement
of benefits) of the Executive for retiree benefits pursuant
to the Continuing Benefit Plans and any other welfare
benefit plans, practices, policies and programs provided by
the Company and its affiliated companies, the Executive
shall be considered to have remained employed until three
years after the Date of Termination and to have retired on
the last day of such period; and
(iii) to the extent not theretofore paid or provided,
the Company shall timely pay or provide to the Executive any
other amounts or benefits required to be paid or provided or
which the Executive is eligible to receive under any plan,
program, policy or practice or contract or agreement of the
Company as of the Date of Termination (such other amounts
and benefits shall be hereinafter referred to as the "Other
Benefits").
(b) Death. If the Executive's employment is
terminated by reason of the Executive's death during the
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<PAGE>
Employment Period, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days
of the Date of Termination. The term "Other Benefits" as
utilized in this Section 5(b) shall include death benefits as in
effect on the date of the Executive's death.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in
a lump sum in cash within 30 days of the Date of Termination.
(d) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause or the
Executive terminates his employment without Good Reason during
the Employment Period, this Agreement shall terminate without
further obligations to the Executive other than the obligation to
pay to the Executive (x) his Annual Base Salary through the Date
of Termination, and (y) Other Benefits, in each case to the
extent theretofore unpaid.
6. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's continuing or
future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and
for which the Executive may qualify, nor, subject to Section
11(f), shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement
with the Company or any of its affiliated companies. Any rights
that are vested and any benefits that the Executive is otherwise
entitled to receive under any plan, policy, practice or program
of, or any contract or agreement with, the Company or any of its
affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice
or program or contract or agreement, except as explicitly
modified by this Agreement. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by,
controlling or under common control with the Company.
7. Full Settlement. In no event shall the Executive
be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided
in Section 5(a)(ii) of this Agreement, such amounts shall not be
reduced whether or not
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<PAGE>
the Executive obtains other employment. The Company agrees to
pay as incurred, to the full extent permitted by law, all legal
fees and expenses which the Executive may reasonably incur as a
result of any contest (regardless of the outcome thereof) by the
Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount of any
payment pursuant to this Agreement); provided, however, that the
foregoing shall not apply in connection with any such contest in
which the finder of fact determines that the contest is frivolous
or was brought by the Executive in bad faith.
8. Excise Tax Provision. Notwithstanding anything
elsewhere in this Agreement to the contrary, if any of the
payments or benefits provided for in this Agreement, together
with any other payments or benefits which the Executive has the
right to receive from the Company (or its affiliated companies),
would constitute a "parachute payment" (as defined in Section
280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code")), the Executive may elect (i) to have the payments or
benefits pursuant to this Agreement reduced so that the present
value of the total amount received by the Executive that would
constitute a "parachute payment" will be one dollar ($1.00) less
than three (3) times the Executive's base amount (as defined in
Section 280G of the Code) and so that no portion of the payments
or benefits received by the Executive would be subject to the
excise tax imposed by Section 4999 of the Code or (ii) to have no
such reduction described in Section 8(i) hereof. The foregoing
shall not affect the right of the Company to satisfy all tax
withholding requirements (including excise tax withholding
requirements) with respect to any payments or benefits provided
for in this Agreement in the event it shall determine that any
such payments or benefits would, regardless of the Executive's
election hereunder, be subject to the excise tax imposed by
Section 4999 of the Code.
9. (a) Confidential Information. The Executive
shall hold in a fiduciary capacity for the benefit of the Company
all secret or confidential information, knowledge or data
relating to the Company or any of its affiliated companies, and
their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or
any of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement).
The Executive shall not, at any time during his employment with
the Company or at any time thereafter, for any reason, in any
fashion, form or manner, either directly or indirectly,
communicate, divulge, copy or permit to be copied (without
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<PAGE>
the prior written consent of the Company or as may otherwise be
required by law or legal process or in order to enforce his
rights under this Agreement or as necessary to defend himself
against a claim asserted directly or indirectly by the Company or
any of its affiliated companies) any secret or confidential
information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses, in any
manner whatsoever, that is not otherwise publicly available, to,
or for the benefit of, any person, firm, corporation or other
entity, other than the Company and those designated by it or in
the course of his employment with the Company and its affiliated
companies. As used herein, the term "all secret or confidential
information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses" shall
include, without limitation, the Company's plans, strategies,
proposals to potential customers and/or partners, costs, prices,
proprietary systems for buying and selling, client and customer
lists, identity of prospects, proprietary computer programs,
policy or procedure manuals, proprietary training and recruiting
procedures, proprietary accounting procedures, and the status and
contents of the Company's contracts with its suppliers, clients,
customers or prospects. The Executive further agrees to maintain
in confidence any confidential information of third parties
received as a result of his employment with the Company.
(b) Enforcement. In the event of a breach or
threatened breach of this Section 9, the Executive agrees that
the Company shall be entitled, in addition to any other remedies
available to it to specific performance and injunctive relief in
a court of appropriate jurisdiction to remedy any such breach or
threatened breach, and the Executive acknowledges that damages
would be inadequate and insufficient. In no event shall an
asserted violation of the provisions of this Section 9 constitute
a basis for deferring or withholding any amounts otherwise
payable to the Executive under this Agreement.
(c) Survival. Any termination of the Executive's
employment or of this Agreement shall have no effect on the
continuing operation of this Section 9.
10. Successors. (a) This Agreement is personal to
the Executive and, without the prior written consent of the
Company, shall not be assignable by the Executive otherwise than
by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon the Company and its successors and assigns.
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<PAGE>
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had
taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
11. Miscellaneous. (a) This Agreement shall be
governed by and construed in accordance with the laws of the
State of North Carolina, without reference to principles of
conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
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<PAGE>
If to the Executive:
Richard J. Osborne
2025 Nolen Park Lane
Charlotte, North Carolina 28209
If to the Company:
422 South Church Street
Charlotte, North Carolina 28242
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign taxes
as shall be required to be withheld pursuant to any applicable
law or regulation.
(e) Subject to Section 4(d) of this Agreement, the
Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section 4(c) of
this Agreement, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this
Agreement.
(f) This Agreement constitutes the entire agreement
between the parties and is intended to be an integration of all
agreements between the parties with respect to the Executive's
employment by the Company, the terms and conditions of such
employment or the termination of such employment. Any and all
prior agreements, understandings or commitments between the
Company and the Executive with respect to any such matter are
hereby superseded and revoked.
(g) The Company shall indemnify and hold the Executive
and his legal representatives harmless to the fullest extent
permitted by applicable law, from and against all judgments,
fines, penalties, excise taxes, amounts paid in settlement,
losses, expenses, costs, liabilities and legal fees if the
Executive is made, or threatened to be made a party to any
threatened or pending or completed action, suit, proceeding,
whether civil, criminal, administrative or investigative,
including an action by or
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<PAGE>
in the right of the Company or any of its affiliated companies to
procure a judgment in its favor, by reason of the fact that the
Executive is or was serving in any capacity at the request of the
Company or any of affiliated companies for any other corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise. The right to indemnification provided in this
paragraph (g) shall not be deemed exclusive of any other rights
to which Executive may have or hereafter be entitled under any
law or the charter or by- laws of the Company or any of its
affiliated companies or otherwise, both as to action in
Executive's official capacity and as to action in another
capacity while holding such office, and shall continue after
Executive has ceased to be a director or officer and shall inure
to the benefit of Executive's heirs, executors and
administrators. Any reimbursement obligation arising hereunder
shall be satisfied on an as-incurred basis. In addition, the
Company agrees to continue to maintain customary and appropriate
directors and liability insurance during the Employment Period
and the Executive shall be entitled to the protection of any such
insurance policies on no less favorable a basis than is provided
to any other officer or director of the Company or any of its
affiliated companies.
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<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its
Board of Directors, the Company has caused these presents to be
executed in its name on its behalf, all as of the day and year
first above written.
Richard J. Osborne
DUKE POWER COMPANY
By
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<PAGE>
EXHIBIT C-4
TO AGREEMENT AND
PLAN OF MERGER
FORM OF EMPLOYMENT AGREEMENT FOR
RUTH G. SHAW OF DUKE
AGREEMENT by and between Duke Power Company, a North
Carolina corporation (the "Company"), and Ruth G. Shaw (the
"Executive"), dated as of the 24th day of November, 1996.
The Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and
its shareholders to assure that the Company will have the
continued dedication of the Executive pending the merger of
PanEnergy Corp, a Delaware corporation, and Duke Transaction
Corporation, a Delaware corporation and a wholly-owned subsidiary
of the Company (the "Merger"), pursuant to the Agreement and Plan
of Merger dated as of November 24, 1996 (the "Merger Agreement")
and to provide the Company after the Merger with continuity of
management. Therefore, in order to accomplish these objectives,
the Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Effective Date. The "Effective Date" shall mean
the date on which the Effective Time of the Merger (as defined in
the Merger Agreement) occurs.
2. Employment Period. The Company hereby agrees to
employ the Executive, and the Executive hereby agrees to accept
employment with and remain in the employ of the Company subject
to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the second
anniversary thereof, or such later date as may be mutually agreed
upon by the Company and the Executive. Notwithstanding the
foregoing, the Executive's employment hereunder may be earlier
terminated, subject to Section 5 of this Agreement. The period
of time between the commencement and the termination of the
Executive's employment hereunder shall be referred to herein as
the "Employment Period."
3. Terms of Employment. (a) Position and Duties.
(i) During the Employment Period, (A) the Executive shall serve
as Senior Vice President, Corporate Resources and Chief
Administrative Officer, with such authority, duties and
responsibilities as are commensurate with such position and as
may be consistent with such position. Notwithstanding the
foregoing, the Company and the Executive may mutually agree to
such changes in the Executive's position, reporting or location
of employment as are in the best interests of the Company without
violating the provisions of this paragraph.
<PAGE>
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote substantially all of her
attention and time during normal business hours to the business
and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's best efforts to perform
faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement
for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement.
(b) Compensation. (i) Base Salary. During the
Employment Period, the Executive shall receive an annual base
salary ("Annual Base Salary"), payable monthly, at least equal to
the annual base salary paid or payable, including any base salary
which has been earned but deferred, to the Executive by the
Company in respect of the twelve-month period immediately
preceding the Effective Date. During the Employment Period, the
Annual Base Salary shall be reviewed no more than 12 months after
the last salary increase awarded to the Executive prior to the
Effective Date and thereafter at least annually. Any increase in
Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term
Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased.
(ii) Annual Bonus. In addition to Annual Base Salary,
for each fiscal year ending during the Employment Period the
Executive shall be eligible, based upon the Executive's
achievement of performance goals during such fiscal year, to
receive a bonus (the "Annual Bonus") with a target level not less
than the target level applicable to the Executive for the 1996
fiscal year under the Company's Executive Short Term Incentive
Plan (with such percentage, multiplied by the Executive's Annual
Base Salary, to represent the Executive's "Target Bonus Amount"
hereunder). The establishment of the performance goals, the
evaluation of the actual performance against such goals, and the
determination of the Annual Bonus actually payable to the
Executive shall be made by the Compensation Committee of the
Board acting in its sole discretion.
(iii) Long-Term Incentives. During the Employment
Period, the Executive shall be entitled to participate in all
long-term incentive plans, practices, policies and programs
applicable generally to peer executives of the Company, at such
levels as shall be determined in the sole discretion of the
Compensation Committee of the Board.
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(iv) Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate
in all savings and retirement plans, practices, policies and
programs on a basis no less favorable than that generally
applicable to peer executives of the Company.
(v) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's dependents, as the
case may be, shall be eligible for participation in and shall
receive all benefits under welfare benefit plans, practices,
policies and programs provided by the Company on a basis no less
favorable than that generally applicable to peer executives of
the Company.
(vi) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the Company's policies.
(vii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with
the plans, policies, programs and practices of the Company on a
basis no less favorable than that generally applicable to peer
executives of the Company but in any event she shall be entitled
to no less than four weeks of vacation per year during the
Employment Period.
4. Termination of Employment. (a) Death or
Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment
Period. If the Disability of the Executive occurs during the
Employment Period (pursuant to the definition of Disability set
forth below), the Company may give to the Executive written
notice, in accordance with Section 11(b) of this Agreement, of
its intention to terminate the Executive's employment. In such
event, the Executive's employment with the Company shall
terminate effective on the 60th day after receipt of such notice
by the Executive (the "Disability Effective Date"); provided
that, within the 60 days after such receipt, the Executive shall
not have returned to substantially full time performance of the
Executive's duties. For purposes of this Agreement, "Disability"
shall mean the absence of the Executive from the performance of
the Executive's duties with the Company on a full time basis for
an aggregate of 120 out of any 180 consecutive business days as a
result of incapacity due to mental or physical illness which is
determined to be total and permanent by an independent physician
selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" shall mean
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the engaging by the Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the
Company. The cessation of employment of the Executive shall not
be deemed to be for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice is provided to
the Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the
good faith opinion of the Board, the Executive is guilty of the
conduct described above, and specifying the particulars thereof
in detail.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent with the Executive's position (including
status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by
Section 3(a) of this Agreement, or any other action by the
Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for these
purposes (A) an isolated and insubstantial action not taken
in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive and
(B) any action to which the Executive has given her written
consent;
(ii) any failure by the Company to comply with any of
the provisions of Section 3(b) of this Agreement, other than
an isolated and insubstantial failure not occurring in bad
faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive; or
(iii) any failure by the Company to comply with and
satisfy Section 10(c) of this Agreement.
(d) Notice of Termination. Any termination by the
Company for Cause, or by the Executive for Good Reason, shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 11(b) of this Agreement. In the
case of a Good Reason termination, such Notice of Termination
shall be given within 90 days of the occurrence of the event that
is claimed as serving the basis for the termination as a
condition of such claim being treated as a Good Reason
termination hereunder. For purposes of this Agreement, a "Notice
of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon,
(ii) to
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the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and
(iii) if the Date of Termination (as defined below) is other than
the date of receipt of such notice, specifies the termination
date (which date shall be not more than 30 days after the giving
of such notice). The failure by the Executive or the Company to
set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively,
hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means
(i) if the Executive's employment is terminated by the Company
for Cause, or by the Executive for any reason (including Good
Reason), the date of receipt of the Notice of Termination or any
later date specified therein that is within 30 days of such
notice, as the case may be, (ii) if the Executive's employment is
terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the
Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may
be.
5. Obligations of the Company upon Termination. (a)
Good Reason; Other than for Cause, Death or Disability. If,
during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause or Disability or the
Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a
lump sum in cash within 30 days after the Date of
Termination the aggregate of the following
amounts:
A. the sum of (1) the Executive's Annual Base
Salary through the Date of Termination to the extent
not theretofore paid; (2) the product of (x) the Target
Bonus Amount and (y) a fraction, the numerator of which
is the number of days in the current fiscal year
through the Date of Termination, and the denominator of
which is 365; and (3) any accrued vacation pay to the
extent not theretofore paid (the sum of the amounts
described in clauses (1), (2), and (3) shall be
hereinafter referred to as the "Accrued Obligations");
and
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B. the amount equal to the product of (1) three
and (2) the sum of (x) the Executive's Annual Base
Salary and (y) the Target Bonus Amount; and
(ii) for three years after the Executive's Date
of Termination, or such longer period as may be provided by
the terms of the appropriate plan, program, practice or
policy, the Company shall continue the medical, long-term
disability, dental, accidental death and dismemberment and
life insurance benefits to the Executive and/or the
Executive's dependents at least equal to those which would
have been provided to them in accordance with the plans,
programs, practices and policies in effect under Section
3(b)(v) of this Agreement (the "Continuing Benefit Plans")
as if the Executive's employment had not been terminated
(either by permitting the Executive and/or the Executive's
dependents to participate in the Continuing Benefit Plans,
or by providing the Executive and/or the Executive's
dependents with equivalent benefits outside the Continuing
Benefit Plans, as the Company may elect, so long as the net
after-tax benefit to them is the same as if the Executive
had remained an employee of the Company participating in the
Continuing Benefit Plans); provided, however, that if the
Executive becomes employed by another employer and is
eligible to receive medical, long-term disability, dental,
accidental death and dismemberment or life insurance
benefits under another employer-provided plan, the medical,
long-term disability, dental, accidental death and
dismemberment and life insurance benefits described herein
shall be secondary to those provided under such other plan
during such applicable period of eligibility. For purposes
of determining eligibility (but not the time of commencement
of benefits) of the Executive for retiree benefits pursuant
to the Continuing Benefit Plans and any other welfare
benefit plans, practices, policies and programs provided by
the Company and its affiliated companies, the Executive
shall be considered to have remained employed until three
years after the Date of Termination and to have retired on
the last day of such period; and
(iii) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to the
Executive any other amounts or benefits required to be paid
or provided or which the Executive is eligible to receive
under any plan, program, policy or practice or contract or
agreement of the Company as of the Date of Termination (such
other amounts and benefits shall be hereinafter referred to
as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by
reason of the Executive's death during the
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<PAGE>
Employment Period, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days
of the Date of Termination. The term "Other Benefits" as
utilized in this Section 5(b) shall include death benefits as in
effect on the date of the Executive's death.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the
Employment Period, this
Agreement shall terminate without further obligations to the
Executive, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive in a lump sum in cash
within 30 days of the Date of Termination.
(d) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause or the
Executive terminates her employment without Good Reason during
the Employment Period, this Agreement shall terminate without
further obligations to the Executive other than the obligation to
pay to the Executive (x) her Annual Base Salary through the Date
of Termination, and (y) Other Benefits, in each case to the
extent theretofore unpaid.
6. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's continuing or
future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and
for which the Executive may qualify, nor, subject to Section
11(f), shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement
with the Company or any of its affiliated companies. Any rights
that are vested and any benefits that the Executive is otherwise
entitled to receive under any plan, policy, practice or program
of, or any contract or agreement with, the Company or any of its
affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice
or program or contract or agreement, except as explicitly
modified by this Agreement. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by,
controlling or under common control with the Company.
7. Full Settlement. In no event shall the Executive
be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided
in Section 5(a)(ii) of this Agreement, such amounts shall not be
reduced whether or not
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the Executive obtains other employment. The Company agrees to
pay as incurred, to the full extent permitted by law, all legal
fees and expenses which the Executive may reasonably incur as a
result of any contest (regardless of the outcome thereof) by the
Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount of any
payment pursuant to this Agreement); provided, however, that the
foregoing shall not apply in connection with any such contest in
which the finder of fact determines that the contest is frivolous
or was brought by the Executive in bad faith.
8. Excise Tax Provision. Notwithstanding anything
elsewhere in this Agreement to the contrary, if any of the
payments or benefits provided for in this Agreement, together
with any other payments or benefits which the Executive has the
right to receive from the Company (or its affiliated companies),
would constitute a "parachute payment" (as defined in Section
280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code")), the Executive may elect (i) to have the payments or
benefits pursuant to this Agreement reduced so that the present
value of the total amount received by the Executive that would
constitute a "parachute payment" will be one dollar ($1.00) less
than three (3) times the Executive's base amount (as defined in
Section 280G of the Code) and so that no portion of the payments
or benefits received by the Executive would be subject to the
excise tax imposed by Section 4999 of the Code or (ii) to have no
such reduction described in Section 8(i) hereof. The foregoing
shall not affect the right of the Company to satisfy all tax
withholding requirements (including excise tax withholding
requirements) with respect to any payments or benefits provided
for in this Agreement in the event it shall determine that any
such payments or benefits would, regardless of the Executive's
election hereunder, be subject to the excise tax imposed by
Section 4999 of the Code.
9. (a) Confidential Information. The Executive
shall hold in a fiduciary capacity for the benefit of the Company
all secret or confidential information, knowledge or data
relating to the Company or any of its affiliated companies, and
their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or
any of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement).
The Executive shall not, at any time during her employment with
the Company or at any time thereafter, for any reason, in any
fashion, form or manner, either directly or indirectly,
communicate, divulge, copy or permit to be copied (without
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<PAGE>
the prior written consent of the Company or as may otherwise be
required by law or legal process or in order to enforce her
rights under this Agreement or as necessary to defend herself
against a claim asserted directly or indirectly by the Company or
any of its affiliated companies) any secret or confidential
information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses, in any
manner whatsoever, that is not otherwise publicly available, to,
or for the benefit of, any person, firm, corporation or other
entity, other than the Company and those designated by it or in
the course of her employment with the Company and its affiliated
companies. As used herein, the term "all secret or confidential
information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses" shall
include, without limitation, the Company's plans, strategies,
proposals to potential customers and/or partners, costs, prices,
proprietary systems for buying and selling, client and customer
lists, identity of prospects, proprietary computer programs,
policy or procedure manuals, proprietary training and recruiting
procedures, proprietary accounting procedures, and the status and
contents of the Company's contracts with its suppliers, clients,
customers or prospects. The Executive further agrees to maintain
in confidence any confidential information of third parties
received as a result of her employment with the Company.
(b) Enforcement. In the event of a breach or
threatened breach of this Section 9, the Executive agrees that
the Company shall be entitled, in addition to any other remedies
available to it to specific performance and injunctive relief in
a court of appropriate jurisdiction to remedy any such breach or
threatened breach, and the Executive acknowledges that damages
would be inadequate and insufficient. In no event shall an
asserted violation of the provisions of this Section 9 constitute
a basis for deferring or withholding any amounts otherwise
payable to the Executive under this Agreement.
(c) Survival. Any termination of the Executive's
employment or of this Agreement shall have no effect on the
continuing operation of this Section 9.
10. Successors. (a) This Agreement is personal to
the Executive and, without the prior written consent of the
Company, shall not be assignable by the Executive otherwise than
by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon the Company and its successors and assigns.
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<PAGE>
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had
taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
11. Miscellaneous. (a) This Agreement shall be
governed by and construed in accordance with the laws of the
State of North Carolina, without reference to principles of
conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
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<PAGE>
If to the Executive:
Ruth G. Shaw
P.O. Box 533
Davidson, North Carolina 28036
If to the Company:
422 South Church Street
Charlotte, North Carolina 28242
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign taxes
as shall be required to be withheld pursuant to any applicable
law or regulation.
(e) Subject to Section 4(d) of this Agreement, the
Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section 4(c) of
this Agreement, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this
Agreement.
(f) This Agreement constitutes the entire agreement
between the parties and is intended to be an integration of all
agreements between the parties with respect to the Executive's
employment by the Company, the terms and conditions of such
employment or the termination of such employment. Any and all
prior agreements, understandings or commitments between the
Company and the Executive with respect to any such matter are
hereby superseded and revoked.
(g) The Company shall indemnify and hold the Executive
and her legal representatives harmless to the fullest extent
permitted by applicable law, from and against all judgments,
fines, penalties, excise taxes, amounts paid in settlement,
losses, expenses, costs, liabilities and legal fees if the
Executive is made, or threatened to be made a party to any
threatened or pending or completed action, suit, proceeding,
whether civil, criminal, administrative or investigative,
including an action by or
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<PAGE>
in the right of the Company or any of its affiliated companies to
procure a judgment in its favor, by reason of the fact that the
Executive is or was serving in any capacity at the request of the
Company or any of affiliated companies for any other corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise. The right to indemnification provided in this
paragraph (g) shall not be deemed exclusive of any other rights
to which Executive may have or hereafter be entitled under any
law or the charter or by- laws of the Company or any of its
affiliated companies or otherwise, both as to action in
Executive's official capacity and as to action in another
capacity while holding such office, and shall continue after
Executive has ceased to be a director or officer and shall inure
to the benefit of Executive's heirs, executors and
administrators. Any reimbursement obligation arising hereunder
shall be satisfied on an as-incurred basis. In addition, the
Company agrees to continue to maintain customary and appropriate
directors and liability insurance during the Employment Period
and the Executive shall be entitled to the protection of any such
insurance policies on no less favorable a basis than is provided
to any other officer or director of the Company or any of its
affiliated companies.
C-4-12
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its
Board of Directors, the Company has caused these presents to be
executed in its name on its behalf, all as of the day and year
first above written.
Ruth G. Shaw
DUKE POWER COMPANY
By
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<PAGE>
EXHIBIT C-5
TO AGREEMENT AND
PLAN OF MERGER
FORM OF EMPLOYMENT AGREEMENT FOR
MICHAEL S. TUCKMAN OF DUKE
AGREEMENT by and between Duke Power Company, a North
Carolina corporation (the "Company"), and Michael S. Tuckman (the
"Executive"), dated as of the 24th day of November, 1996.
The Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and
its shareholders to assure that the Company will have the
continued dedication of the Executive pending the merger of
PanEnergy Corp, a Delaware corporation, and Duke Transaction
Corporation, a Delaware corporation and a wholly-owned subsidiary
of the Company (the "Merger"), pursuant to the Agreement and Plan
of Merger dated as of November 24, 1996 (the "Merger Agreement")
and to provide the Company after the Merger with continuity of
management. Therefore, in order to accomplish these objectives,
the Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Effective Date. The "Effective Date" shall mean
the date on which the Effective Time of the Merger (as defined in
the Merger Agreement) occurs.
2. Employment Period. The Company hereby agrees to
employ the Executive, and the Executive hereby agrees to accept
employment with and remain in the employ of the Company subject
to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the second
anniversary thereof, or such later date as may be mutually agreed
upon by the Company and the Executive. Notwithstanding the
foregoing, the Executive's employment hereunder may be earlier
terminated, subject to Section 5 of this Agreement. The period
of time between the commencement and the termination of the
Executive's employment hereunder shall be referred to herein as
the "Employment Period."
3. Terms of Employment. (a) Position and Duties.
(i) During the Employment Period, (A) the Executive shall serve
as Senior Vice President, Nuclear Generation, with such
authority, duties and responsibilities as are commensurate with
such position and as may be consistent with such position.
Notwithstanding the foregoing, the Company and the Executive may
mutually agree to such changes in the Executive's position,
reporting or location of employment as are in the best interests
of the Company without violating the provisions of this
paragraph.
<PAGE>
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote substantially all of his
attention and time during normal business hours to the business
and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's best efforts to perform
faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement
for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement.
(b) Compensation. (i) Base Salary. During the
Employment Period, the Executive shall receive an annual base
salary ("Annual Base Salary"), payable monthly, at least equal to
the annual base salary paid or payable, including any base salary
which has been earned but deferred, to the Executive by the
Company in respect of the twelve-month period immediately
preceding the Effective Date. During the Employment Period, the
Annual Base Salary shall be reviewed no more than 12 months after
the last salary increase awarded to the Executive prior to the
Effective Date and thereafter at least annually. Any increase in
Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term
Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased.
(ii) Annual Bonus. In addition to Annual Base Salary,
for each fiscal year ending during the Employment Period the
Executive shall be eligible, based upon the Executive's
achievement of performance goals during such fiscal year, to
receive a bonus (the "Annual Bonus") with a target level not less
than the target level applicable to the Executive for the 1996
fiscal year under the Company's Executive Short Term Incentive
Plan (with such percentage, multiplied by the Executive's Annual
Base Salary, to represent the Executive's "Target Bonus Amount"
hereunder). The establishment of the performance goals, the
evaluation of the actual performance against such goals, and the
determination of the Annual Bonus actually payable to the
Executive shall be made by the Compensation Committee of the
Board acting in its sole discretion.
(iii) Long-Term Incentives. During the Employment
Period, the Executive shall be entitled to participate in all
long-term incentive plans, practices, policies and programs
applicable generally to peer executives of the Company, at such
levels as shall be determined in the sole discretion of the
Compensation Committee of the Board.
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<PAGE>
(iv) Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate
in all savings and retirement plans, practices, policies and
programs on a basis no less favorable than that generally
applicable to peer executives of the Company.
(v) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's dependents, as the
case may be, shall be eligible for participation in and shall
receive all benefits under welfare benefit plans, practices,
policies and programs provided by the Company on a basis no less
favorable than that generally applicable to peer executives of
the Company.
(vi) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the Company's policies.
(vii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with
the plans, policies, programs and practices of the Company on a
basis no less favorable than that generally applicable to peer
executives of the Company but in any event he shall be entitled
to no less than four weeks of vacation per year during the
Employment Period.
4. Termination of Employment. (a) Death or
Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment
Period. If the Disability of the Executive occurs during the
Employment Period (pursuant to the definition of Disability set
forth below), the Company may give to the Executive written
notice, in accordance with Section 11(b) of this Agreement, of
its intention to terminate the Executive's employment. In such
event, the Executive's employment with the Company shall
terminate effective on the 60th day after receipt of such notice
by the Executive (the "Disability Effective Date"); provided
that, within the 60 days after such receipt, the Executive shall
not have returned to substantially full time performance of the
Executive's duties. For purposes of this Agreement, "Disability"
shall mean the absence of the Executive from the performance of
the Executive's duties with the Company on a full time basis for
an aggregate of 120 out of any 180 consecutive business days as a
result of incapacity due to mental or physical illness which is
determined to be total and permanent by an independent physician
selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" shall mean
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<PAGE>
the engaging by the Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the
Company. The cessation of employment of the Executive shall not
be deemed to be for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice is provided to
the Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the
good faith opinion of the Board, the Executive is guilty of the
conduct described above, and specifying the particulars thereof
in detail.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent with the Executive's position (including
status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by
Section 3(a) of this Agreement, or any other action by the
Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for these
purposes (A) an isolated and insubstantial action not taken
in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive and
(B) any action to which the Executive has given his written
consent;
(ii) any failure by the Company to comply with any of
the provisions of Section 3(b) of this Agreement, other than
an isolated and insubstantial failure not occurring in bad
faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive; or
(iii) any failure by the Company to comply with and
satisfy Section 10(c) of this Agreement.
(d) Notice of Termination. Any termination by the
Company for Cause, or by the Executive for Good Reason, shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 11(b) of this Agreement. In the
case of a Good Reason termination, such Notice of Termination
shall be given within 90 days of the occurrence of the event that
is claimed as serving the basis for the termination as a
condition of such claim being treated as a Good Reason
termination hereunder. For purposes of this Agreement, a "Notice
of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon,
(ii) to
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<PAGE>
the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and
(iii) if the Date of Termination (as defined below) is other than
the date of receipt of such notice, specifies the termination
date (which date shall be not more than 30 days after the giving
of such notice). The failure by the Executive or the Company to
set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively,
hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means
(i) if the Executive's employment is terminated by the Company
for Cause, or by the Executive for any reason (including Good
Reason), the date of receipt of the Notice of Termination or any
later date specified therein that is within 30 days of such
notice, as the case may be, (ii) if the Executive's employment is
terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the
Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may
be.
5. Obligations of the Company upon Termination. (a)
Good Reason; Other than for Cause, Death or Disability. If,
during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause or Disability or the
Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a
lump sum in cash within 30 days after the Date of
Termination the aggregate of the following amounts:
A. the sum of (1) the Executive's Annual Base
Salary through the Date of Termination to the extent
not theretofore paid; (2) the product of (x) the Target
Bonus Amount and (y) a fraction, the numerator of which
is the number of days in the current fiscal year
through the Date of Termination, and the denominator of
which is 365; and (3) any accrued vacation pay to the
extent not theretofore paid (the sum of the amounts
described in clauses (1), (2), and (3) shall be
hereinafter referred to as the "Accrued Obligations");
and
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<PAGE>
B. the amount equal to the product of (1) three
and (2) the sum of (x) the Executive's Annual Base
Salary and (y) the Target Bonus Amount; and
(ii) for three years after the Executive's Date
of Termination, or such longer period as may be provided by
the terms of the appropriate plan, program, practice or
policy, the Company shall continue the medical, long-term
disability, dental, accidental death and dismemberment and
life insurance benefits to the Executive and/or the
Executive's dependents at least equal to those which would
have been provided to them in accordance with the plans,
programs, practices and policies in effect under Section
3(b)(v) of this Agreement (the "Continuing Benefit Plans")
as if the Executive's employment had not been terminated
(either by permitting the Executive and/or the Executive's
dependents to participate in the Continuing Benefit Plans,
or by providing the Executive and/or the Executive's
dependents with equivalent benefits outside the Continuing
Benefit Plans, as the Company may elect, so long as the net
after-tax benefit to them is the same as if the Executive
had remained an employee of the Company participating in the
Continuing Benefit Plans); provided, however, that if the
Executive becomes employed by another employer and is
eligible to receive medical, long-term disability, dental,
accidental death and dismemberment or life insurance
benefits under another employer-provided plan, the medical,
long-term disability, dental, accidental death and
dismemberment and life insurance benefits described herein
shall be secondary to those provided under such other plan
during such applicable period of eligibility. For purposes
of determining eligibility (but not the time of commencement
of benefits) of the Executive for retiree benefits pursuant
to the Continuing Benefit Plans and any other welfare
benefit plans, practices, policies and programs provided by
the Company and its affiliated companies, the Executive
shall be considered to have remained employed until three
years after the Date of Termination and to have retired on
the last day of such period; and
(iii) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to the
Executive any other amounts or benefits required to be paid
or provided or which the Executive is eligible to receive
under any plan, program, policy or practice or contract or
agreement of the Company as of the Date of Termination (such
other amounts and benefits shall be hereinafter referred to
as the "Other Benefits").
(b) Death. If the Executive's employment is
terminated by reason of the Executive's death during the
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<PAGE>
Employment Period, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days
of the Date of Termination. The term "Other Benefits" as
utilized in this Section 5(b) shall include death benefits as in
effect on the date of the Executive's death.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in
a lump sum in cash within 30 days of the Date of Termination.
(d) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause or the
Executive terminates his employment without Good Reason during
the Employment Period, this Agreement shall terminate without
further obligations to the Executive other than the obligation to
pay to the Executive (x) his Annual Base Salary through the Date
of Termination, and (y) Other Benefits, in each case to the
extent theretofore unpaid.
6. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's continuing or
future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and
for which the Executive may qualify, nor, subject to Section
11(f), shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement
with the Company or any of its affiliated companies. Any rights
that are vested and any benefits that the Executive is otherwise
entitled to receive under any plan, policy, practice or program
of, or any contract or agreement with, the Company or any of its
affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice
or program or contract or agreement, except as explicitly
modified by this Agreement. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by,
controlling or under common control with the Company.
7. Full Settlement. In no event shall the Executive
be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided
in Section 5(a)(ii) of this Agreement, such amounts shall not be
reduced whether or not
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the Executive obtains other employment. The Company agrees to
pay as incurred, to the full extent permitted by law, all legal
fees and expenses which the Executive may reasonably incur as a
result of any contest (regardless of the outcome thereof) by the
Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount of any
payment pursuant to this Agreement); provided, however, that the
foregoing shall not apply in connection with any such contest in
which the finder of fact determines that the contest is frivolous
or was brought by the Executive in bad faith.
8. Excise Tax Provision. Notwithstanding anything
elsewhere in this Agreement to the contrary, if any of the
payments or benefits provided for in this Agreement, together
with any other payments or benefits which the Executive has the
right to receive from the Company (or its affiliated companies),
would constitute a "parachute payment" (as defined in Section
280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code")), the Executive may elect (i) to have the payments or
benefits pursuant to this Agreement reduced so that the present
value of the total amount received by the Executive that would
constitute a "parachute payment" will be one dollar ($1.00) less
than three (3) times the Executive's base amount (as defined in
Section 280G of the Code) and so that no portion of the payments
or benefits received by the Executive would be subject to the
excise tax imposed by Section 4999 of the Code or (ii) to have no
such reduction described in Section 8(i) hereof. The foregoing
shall not affect the right of the Company to satisfy all tax
withholding requirements (including excise tax withholding
requirements) with respect to any payments or benefits provided
for in this Agreement in the event it shall determine that any
such payments or benefits would, regardless of the Executive's
election hereunder, be subject to the excise tax imposed by
Section 4999 of the Code.
9. (a) Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or any
of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement).
The Executive shall not, at any time during his employment with
the Company or at any time thereafter, for any reason, in any
fashion, form or manner, either directly or indirectly,
communicate, divulge, copy or permit to be copied (without
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the prior written consent of the Company or as may otherwise be
required by law or legal process or in order to enforce his
rights under this Agreement or as necessary to defend himself
against a claim asserted directly or indirectly by the Company or
any of its affiliated companies) any secret or confidential
information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses, in any
manner whatsoever, that is not otherwise publicly available, to,
or for the benefit of, any person, firm, corporation or other
entity, other than the Company and those designated by it or in
the course of his employment with the Company and its affiliated
companies. As used herein, the term "all secret or confidential
information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses" shall
include, without limitation, the Company's plans, strategies,
proposals to potential customers and/or partners, costs, prices,
proprietary systems for buying and selling, client and customer
lists, identity of prospects, proprietary computer programs,
policy or procedure manuals, proprietary training and recruiting
procedures, proprietary accounting procedures, and the status and
contents of the Company's contracts with its suppliers, clients,
customers or prospects. The Executive further agrees to maintain
in confidence any confidential information of third parties
received as a result of his employment with the Company.
(b) Enforcement. In the event of a breach or
threatened breach of this Section 9, the Executive agrees that
the Company shall be entitled, in addition to any other remedies
available to it to specific performance and injunctive relief in
a court of appropriate jurisdiction to remedy any such breach or
threatened breach, and the Executive acknowledges that damages
would be inadequate and insufficient. In no event shall an
asserted violation of the provisions of this Section 9 constitute
a basis for deferring or withholding any amounts otherwise
payable to the Executive under this Agreement.
(c) Survival. Any termination of the Executive's
employment or of this Agreement shall have no effect on the
continuing operation of this Section 9.
10. Successors. (a) This Agreement is personal to
the Executive and, without the prior written consent of the
Company, shall not be assignable by the Executive otherwise than
by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon the Company and its successors and assigns.
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(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had
taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
11. Miscellaneous. (a) This Agreement shall be
governed by and construed in accordance with the laws of the
State of North Carolina, without reference to principles of
conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
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<PAGE>
If to the Executive:
Michael S. Tuckman
2416 Summerlake Road
Charlotte, North Carolina 28226
If to the Company:
422 South Church Street
Charlotte, North Carolina 28242
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign taxes
as shall be required to be withheld pursuant to any applicable
law or regulation.
(e) Subject to Section 4(d) of this Agreement, the
Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section 4(c) of
this Agreement, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this
Agreement.
(f) This Agreement constitutes the entire agreement
between the parties and is intended to be an integration of all
agreements between the parties with respect to the Executive's
employment by the Company, the terms and conditions of such
employment or the termination of such employment. Any and all
prior agreements, understandings or commitments between the
Company and the Executive with respect to any such matter are
hereby superseded and revoked.
(g) The Company shall indemnify and hold the Executive
and his legal representatives harmless to the fullest extent
permitted by applicable law, from and against all judgments,
fines, penalties, excise taxes, amounts paid in settlement,
losses, expenses, costs, liabilities and legal fees if the
Executive is made, or threatened to be made a party to any
threatened or pending or completed action, suit, proceeding,
whether civil, criminal, administrative or investigative,
including an action by or
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in the right of the Company or any of its affiliated companies to
procure a judgment in its favor, by reason of the fact that the
Executive is or was serving in any capacity at the request of the
Company or any of affiliated companies for any other corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise. The right to indemnification provided in this
paragraph (g) shall not be deemed exclusive of any other rights
to which Executive may have or hereafter be entitled under any
law or the charter or by- laws of the Company or any of its
affiliated companies or otherwise, both as to action in
Executive's official capacity and as to action in another
capacity while holding such office, and shall continue after
Executive has ceased to be a director or officer and shall inure
to the benefit of Executive's heirs, executors and
administrators. Any reimbursement obligation arising hereunder
shall be satisfied on an as-incurred basis. In addition, the
Company agrees to continue to maintain customary and appropriate
directors and liability insurance during the Employment Period
and the Executive shall be entitled to the protection of any such
insurance policies on no less favorable a basis than is provided
to any other officer or director of the Company or any of its
affiliated companies.
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IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its
Board of Directors, the Company has caused these presents to be
executed in its name on its behalf, all as of the day and year
first above written.
Michael S. Tuckman
DUKE POWER COMPANY
By
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<PAGE>
EXHIBIT C-6
TO AGREEMENT AND
PLAN OF MERGER
FORM OF EMPLOYMENT AGREEMENT FOR
DAVID L. HAUSER OF DUKE
AGREEMENT by and between Duke Power Company, a North
Carolina corporation (the "Company"), and David L. Hauser (the
"Executive"), dated as of the 24th day of November, 1996.
The Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and
its shareholders to assure that the Company will have the
continued dedication of the Executive pending the merger of
PanEnergy Corp, a Delaware corporation, and Duke Transaction
Corporation, a Delaware corporation and a wholly-owned subsidiary
of the Company (the "Merger"), pursuant to the Agreement and Plan
of Merger dated as of November 24, 1996 (the "Merger Agreement")
and to provide the Company after the Merger with continuity of
management. Therefore, in order to accomplish these objectives,
the Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Effective Date. The "Effective Date" shall mean
the date on which the Effective Time of the Merger (as defined in
the Merger Agreement) occurs.
2. Employment Period. The Company hereby agrees to
employ the Executive, and the Executive hereby agrees to accept
employment with and remain in the employ of the Company subject
to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the second
anniversary thereof, or such later date as may be mutually agreed
upon by the Company and the Executive. Notwithstanding the
foregoing, the Executive's employment hereunder may be earlier
terminated, subject to Section 5 of this Agreement. The period
of time between the commencement and the termination of the
Executive's employment hereunder shall be referred to herein as
the "Employment Period."
3. Terms of Employment. (a) Position and Duties.
(i) During the Employment Period, (A) the Executive shall serve
as Vice President, Procurement, Services and Materials, with such
authority, duties and responsibilities as are commensurate with
such position and as may be consistent with such position.
Notwithstanding the foregoing, the Company and the Executive may
mutually agree to such changes in the Executive's position,
reporting or location of employment as are in the best interests
of the Company without violating the provisions of this
paragraph.
<PAGE>
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote substantially all of his
attention and time during normal business hours to the business
and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's best efforts to perform
faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement
for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement.
(b) Compensation. (i) Base Salary. During the
Employment Period, the Executive shall receive an annual base
salary ("Annual Base Salary"), payable monthly, at least equal to
the annual base salary paid or payable, including any base salary
which has been earned but deferred, to the Executive by the
Company in respect of the twelve-month period immediately
preceding the Effective Date. During the Employment Period, the
Annual Base Salary shall be reviewed no more than 12 months after
the last salary increase awarded to the Executive prior to the
Effective Date and thereafter at least annually. Any increase in
Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term
Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased.
(ii) Annual Bonus. In addition to Annual Base Salary,
for each fiscal year ending during the Employment Period the
Executive shall be eligible, based upon the Executive's
achievement of performance goals during such fiscal year, to
receive a bonus (the "Annual Bonus") with a target level not less
than the target level applicable to the Executive for the 1996
fiscal year under the Company's Executive Short Term Incentive
Plan (with such percentage, multiplied by the Executive's Annual
Base Salary, to represent the Executive's "Target Bonus Amount"
hereunder). The establishment of the performance goals, the
evaluation of the actual performance against such goals, and the
determination of the Annual Bonus actually payable to the
Executive shall be made by the Compensation Committee of the
Board acting in its sole discretion.
(iii) Long-Term Incentives. During the Employment
Period, the Executive shall be entitled to participate in all
long-term incentive plans, practices, policies and programs
applicable generally to peer executives of the Company, at such
levels as shall be determined in the sole discretion of the
Compensation Committee of the Board.
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(iv) Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate
in all savings and retirement plans, practices, policies and
programs on a basis no less favorable than that generally
applicable to peer executives of the Company.
(v) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's dependents, as the
case may be, shall be eligible for participation in and shall
receive all benefits under welfare benefit plans, practices,
policies and programs provided by the Company on a basis no less
favorable than that generally applicable to peer executives of
the Company.
(vi) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the Company's policies.
(vii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with
the plans, policies, programs and practices of the Company on a
basis no less favorable than that generally applicable to peer
executives of the Company but in any event he shall be entitled
to no less than four weeks of vacation per year during the
Employment Period.
4. Termination of Employment. (a) Death or
Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment
Period. If the Disability of the Executive occurs during the
Employment Period (pursuant to the definition of Disability set
forth below), the Company may give to the Executive written
notice, in accordance with Section 11(b) of this Agreement, of
its intention to terminate the Executive's employment. In such
event, the Executive's employment with the Company shall
terminate effective on the 60th day after receipt of such notice
by the Executive (the "Disability Effective Date"); provided
that, within the 60 days after such receipt, the Executive shall
not have returned to substantially full time performance of the
Executive's duties. For purposes of this Agreement, "Disability"
shall mean the absence of the Executive from the performance of
the Executive's duties with the Company on a full time basis for
an aggregate of 120 out of any 180 consecutive business days as a
result of incapacity due to mental or physical illness which is
determined to be total and permanent by an independent physician
selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" shall mean
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<PAGE>
the engaging by the Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the
Company. The cessation of employment of the Executive shall not
be deemed to be for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice is provided to
the Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the
good faith opinion of the Board, the Executive is guilty of the
conduct described above, and specifying the particulars thereof
in detail.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent with the Executive's position (including
status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by
Section 3(a) of this Agreement, or any other action by the
Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for these
purposes (A) an isolated and insubstantial action not taken
in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive and
(B) any action to which the Executive has given his written
consent;
(ii) any failure by the Company to comply with any of
the provisions of Section 3(b) of this Agreement, other than
an isolated and insubstantial failure not occurring in bad
faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive; or
(iii) any failure by the Company to comply with and
satisfy Section 10(c) of this Agreement.
(d) Notice of Termination. Any termination by the
Company for Cause, or by the Executive for Good Reason, shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 11(b) of this Agreement. In the
case of a Good Reason termination, such Notice of Termination
shall be given within 90 days of the occurrence of the event that
is claimed as serving the basis for the termination as a
condition of such claim being treated as a Good Reason
termination hereunder. For purposes of this Agreement, a "Notice
of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon,
(ii) to
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<PAGE>
the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and
(iii) if the Date of Termination (as defined below) is other than
the date of receipt of such notice, specifies the termination
date (which date shall be not more than 30 days after the giving
of such notice). The failure by the Executive or the Company to
set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively,
hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means
(i) if the Executive's employment is terminated by the Company
for Cause, or by the Executive for any reason (including Good
Reason), the date of receipt of the Notice of Termination or any
later date specified therein that is within 30 days of such
notice, as the case may be, (ii) if the Executive's employment is
terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the
Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may
be.
5. Obligations of the Company upon Termination. (a)
Good Reason; Other than for Cause, Death or Disability. If,
during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause or Disability or the
Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the
aggregate of the following amounts:
A. the sum of (1) the Executive's Annual Base
Salary through the Date of Termination to the extent not
theretofore paid; (2) the product of (x) the Target Bonus
Amount and (y) a fraction, the numerator of which is the
number of days in the current fiscal year through the Date
of Termination, and the denominator of which is 365; and (3)
any accrued vacation pay to the extent not theretofore paid
(the sum of the amounts described in clauses (1), (2), and
(3) shall be hereinafter referred to as the "Accrued
Obligations"); and
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<PAGE>
B. the amount equal to the product of (1) two and
(2) the sum of (x) the Executive's Annual Base Salary and
(y) the Target Bonus Amount; and
(ii) for two years after the Executive's Date of
Termination, or such longer period as may be provided by the
terms of the appropriate plan, program, practice or policy,
the Company shall continue the medical, long-term
disability, dental, accidental death and dismemberment and
life insurance benefits to the Executive and/or the
Executive's dependents at least equal to those which would
have been provided to them in accordance with the plans,
programs, practices and policies in effect under Section
3(b)(v) of this Agreement (the "Continuing Benefit Plans")
as if the Executive's employment had not been terminated
(either by permitting the Executive and/or the Executive's
dependents to participate in the Continuing Benefit Plans,
or by providing the Executive and/or the Executive's
dependents with equivalent benefits outside the Continuing
Benefit Plans, as the Company may elect, so long as the net
after-tax benefit to them is the same as if the Executive
had remained an employee of the Company participating in the
Continuing Benefit Plans); provided, however, that if the
Executive becomes employed by another employer and is
eligible to receive medical, long-term disability, dental,
accidental death and dismemberment or life insurance
benefits under another employer-provided plan, the medical,
long-term disability, dental, accidental death and
dismemberment and life insurance benefits described herein
shall be secondary to those provided under such other plan
during such applicable period of eligibility. For purposes
of determining eligibility (but not the time of commencement
of benefits) of the Executive for retiree benefits pursuant
to the Continuing Benefit Plans and any other welfare
benefit plans, practices, policies and programs provided by
the Company and its affiliated companies, the Executive
shall be considered to have remained employed until two
years after the Date of Termination and to have retired on
the last day of such period; and
(iii) to the extent not theretofore paid or provided,
the Company shall timely pay or provide to the Executive any
other amounts or benefits required to be paid or provided or
which the Executive is eligible to receive under any plan,
program, policy or practice or contract or agreement of the
Company as of the Date of Termination (such other amounts
and benefits shall be hereinafter referred to as the "Other
Benefits").
(b) Death. If the Executive's employment is
terminated by reason of the Executive's death during the
Employment Period, this Agreement shall terminate without
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further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive's
estate or beneficiary, as applicable, in a lump sum in cash
within 30 days of the Date of Termination. The term "Other
Benefits" as utilized in this Section 5(b) shall include death
benefits as in effect on the date of the Executive's death.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in
a lump sum in cash within 30 days of the Date of Termination.
(d) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause or the
Executive terminates his employment without Good Reason during
the Employment Period, this Agreement shall terminate without
further obligations to the Executive other than the obligation to
pay to the Executive (x) his Annual Base Salary through the Date
of Termination, and (y) Other Benefits, in each case to the
extent theretofore unpaid.
6. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's continuing or
future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and
for which the Executive may qualify, nor, subject to Section
11(f), shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement
with the Company or any of its affiliated companies. Any rights
that are vested and any benefits that the Executive is otherwise
entitled to receive under any plan, policy, practice or program
of, or any contract or agreement with, the Company or any of its
affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice
or program or contract or agreement, except as explicitly
modified by this Agreement. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by,
controlling or under common control with the Company.
7. Full Settlement. In no event shall the Executive
be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided
in Section 5(a)(ii) of this Agreement, such amounts shall not be
reduced whether or not the Executive obtains other employment.
The Company agrees
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<PAGE>
to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur
as a result of any contest (regardless of the outcome thereof) by
the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount of any
payment pursuant to this Agreement); provided, however, that the
foregoing shall not apply in connection with any such contest in
which the finder of fact determines that the contest is frivolous
or was brought by the Executive in bad faith.
8. Excise Tax Limit. Notwithstanding anything
elsewhere in this Agreement to the contrary, if any of the
payments provided for in this Agreement, together with any other
payments or benefits which the Executive has the right to receive
from the Company (or its affiliated companies), would constitute
a "parachute payment" (as defined in Section 280G(b)(2) of the
Internal Revenue Code of 1986, as amended (the "Code")), the
payments pursuant to this Agreement shall be reduced so that the
present value of the total amount received by the Executive that
would constitute a "parachute payment" will be one dollar ($1.00)
less than three (3) times the Executive's base amount (as defined
in Section 280G of the Code) and so that no portion of the
payments or benefits received by the Executive shall be subject
to the excise tax imposed by Section 4999 of the Code. The
determination as to whether any reduction in the payments under
this Agreement pursuant to this Section 8 is necessary shall be
made by such nationally recognized accounting firm as shall be
mutually agreeable to the Company and the Executive, in
consultation with any independent law firm of such firm's choice,
and such determination shall be conclusive and binding on the
Executive and the Company. All fees and expenses of such
accounting firm to make such determination shall be paid by the
Company. If through error or otherwise the Executive should
receive payments under this Agreement or otherwise in excess of
one dollar ($1.00) less than three (3) times his base amount, the
Executive shall immediately repay such excess to the Company upon
notification that an overpayment has been made.
9. (a) Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or any
of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement).
The Executive shall not, at any time during his employment with
the
C-6-8
<PAGE>
Company or at any time thereafter, for any reason, in any
fashion, form or manner, either directly or indirectly,
communicate, divulge, copy or permit to be copied (without the
prior written consent of the Company or as may otherwise be
required by law or legal process or in order to enforce his
rights under this Agreement or as necessary to defend himself
against a claim asserted directly or indirectly by the Company or
any of its affiliated companies) any secret or confidential
information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses, in any
manner whatsoever, that is not otherwise publicly available, to,
or for the benefit of, any person, firm, corporation or other
entity, other than the Company and those designated by it or in
the course of his employment with the Company and its affiliated
companies. As used herein, the term "all secret or confidential
information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses" shall
include, without limitation, the Company's plans, strategies,
proposals to potential customers and/or partners, costs, prices,
proprietary systems for buying and selling, client and customer
lists, identity of prospects, proprietary computer programs,
policy or procedure manuals, proprietary training and recruiting
procedures, proprietary accounting procedures, and the status and
contents of the Company's contracts with its suppliers, clients,
customers or prospects. The Executive further agrees to maintain
in confidence any confidential information of third parties
received as a result of his employment with the Company.
(b) Enforcement. In the event of a breach or
threatened breach of this Section 9, the Executive agrees that
the Company shall be entitled, in addition to any other remedies
available to it to specific performance and injunctive relief in
a court of appropriate jurisdiction to remedy any such breach or
threatened breach, and the Executive acknowledges that damages
would be inadequate and insufficient. In no event shall an
asserted violation of the provisions of this Section 9 constitute
a basis for deferring or withholding any amounts otherwise
payable to the Executive under this Agreement.
(c) Survival. Any termination of the Executive's
employment or of this Agreement shall have no effect on the
continuing operation of this Section 9.
10. Successors. (a) This Agreement is personal to
the Executive and, without the prior written consent of the
Company, shall not be assignable by the Executive otherwise than
by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
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<PAGE>
(b) This Agreement shall inure to the benefit of and
be binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had
taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
11. Miscellaneous. (a) This Agreement shall be
governed by and construed in accordance with the laws of the
State of North Carolina, without reference to principles of
conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
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<PAGE>
If to the Executive:
David L. Hauser
513 Maymont Drive
Cramerton, North Carolina 28032
If to the Company:
422 South Church Street
Charlotte, North Carolina 28242
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign taxes
as shall be required to be withheld pursuant to any applicable
law or regulation.
(e) Subject to Section 4(d) of this Agreement, the
Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section 4(c) of
this Agreement, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this
Agreement.
(f) This Agreement constitutes the entire agreement
between the parties and is intended to be an integration of all
agreements between the parties with respect to the Executive's
employment by the Company, the terms and conditions of such
employment or the termination of such employment. Any and all
prior agreements, understandings or commitments between the
Company and the Executive with respect to any such matter are
hereby superseded and revoked.
(g) The Company shall indemnify and hold the Executive
and his legal representatives harmless to the fullest extent
permitted by applicable law, from and against all judgments,
fines, penalties, excise taxes, amounts paid in settlement,
losses, expenses, costs, liabilities and legal fees if the
Executive is made, or threatened to be made a party to any
threatened or pending or completed action, suit, proceeding,
whether civil, criminal, administrative or investigative,
including an action by or
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<PAGE>
in the right of the Company or any of its affiliated companies to
procure a judgment in its favor, by reason of the fact that the
Executive is or was serving in any capacity at the request of the
Company or any of affiliated companies for any other corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise. The right to indemnification provided in this
paragraph (g) shall not be deemed exclusive of any other rights
to which Executive may have or hereafter be entitled under any
law or the charter or by- laws of the Company or any of its
affiliated companies or otherwise, both as to action in
Executive's official capacity and as to action in another
capacity while holding such office, and shall continue after
Executive has ceased to be a director or officer and shall inure
to the benefit of Executive's heirs, executors and
administrators. Any reimbursement obligation arising hereunder
shall be satisfied on an as-incurred basis. In addition, the
Company agrees to continue to maintain customary and appropriate
directors and liability insurance during the Employment Period
and the Executive shall be entitled to the protection of any such
insurance policies on no less favorable a basis than is provided
to any other officer or director of the Company or any of its
affiliated companies.
C-6-12
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its
Board of Directors, the Company has caused these presents to be
executed in its name on its behalf, all as of the day and year
first above written.
David L. Hauser
DUKE POWER COMPANY
By
C-6-13
EXHIBIT 2(b)
FOR IMMEDIATE RELEASE
CONTACT FOR DUKE POWER COMPANY: CONTACT FOR PANENERGY CORP:
MEDIA: Joe Maher MEDIA: John Barnett
704/382-8323 713/627-4072
INVESTORS: Allen Stewart INVESTORS: Brad Porlier
704/382-5087 713/627-4600
DUKE POWER AND PANENERGY ANNOUNCE $23 BILLION MERGER
TO CREATE UNPARALLELED INTEGRATED ENERGY PROVIDER
CHARLOTTE, NC AND HOUSTON, TX (NOVEMBER 25, 1996) -- Duke Power
Company [NYSE: DUK] and PanEnergy Corp [NYSE: PEL] today
announced that their Boards of Directors have approved a
definitive merger agreement for a tax-free, stock-for-stock
transaction creating an integrated energy company with a total
market capitalization of approximately $23 billion ($17 billion
in equity and $6 billion in debt and preferred stock). Under the
agreement, each PanEnergy share would be converted into 1.0444
shares of Duke Power. Based upon Duke Power's closing price of
$47.875 on November 22, 1996, Duke Power will issue approximately
$7.7 billion in stock to PanEnergy stockholders to complete the
transaction. PanEnergy stockholders will own approximately 44
percent of the common stock of the company. The transaction will
be accounted for as a pooling of interests and is anticipated to
become accretive towards the end of the second year after the
completion of the transaction. At closing, Duke Power Company
will change its name to Duke Energy Corporation.
The proposed combination would create an unparalleled
integrated energy provider that unites Duke Power, one of the
nation's largest investor-owned electric utilities serving 1.8
million customers, with PanEnergy, one of the nation's leading
energy services companies handling over 15 percent of the natural
gas consumed in the United States.
Duke Power currently pays an indicated annual dividend of $2.12
per share. Accordingly, PanEnergy's shareholders will receive an
increase of $1.25 in dividends per share, based on the implied
exchange ratio, from PanEnergy's current indicated dividend of
$0.96 per share.
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William H. Grigg, chairman and chief executive officer of Duke
Power, said, "This strategic merger is about growth, opportunity
and creating value. Each of our companies has a recognized name
and a strong reputation in our industries. This combination
creates the preeminent provider of energy and energy services in
North America. Duke Power and PanEnergy share the vision that
customer choice is the driver of the energy services marketplace
of the future. In our dramatically changing industry, we need to
define ourselves by our customers' needs, not by our traditional
product offerings. Companies that are positioned to help their
customers find business solutions that optimize a broad array of
energy products and services at competitive prices will be
rewarded with satisfied shareholders, customers, and employees.
"We at Duke Power realized that the implementation of our
strategic goals required a partner who shares our vision," Mr.
Grigg continued. "We will continue to be committed to our core
electric business. However, both Duke Power and PanEnergy
realize that the convergence of the gas and electricity
industries means that a combined company would achieve distinct
advantages not available to either on a stand alone basis. The
combination brings together one of the largest and lowest-cost
investor-owned electric utilities in the country with PanEnergy,
North America's third largest marketer of natural gas, the
fourth-largest U.S. natural gas liquids producer and owner of one
of the nation's leading interstate natural gas pipeline networks.
Our companies are committed to forging a union based on
profitability, opportunity, efficiency and growth.
"In forming this partnership with PanEnergy, we have aligned
ourselves with a team of management and Board members that has
successfully navigated through a period of deregulation and
profound changes in the natural gas industry. The skills that
Mr. Anderson and his colleagues honed during that time will be
invaluable to us as we confront the challenges of deregulation in
the electric utility industry," Mr. Grigg concluded.
Paul M. Anderson, president and chief executive officer of
PanEnergy, said, "Over the last two years, PanEnergy has emerged
as a mega-marketer of natural gas with an expanding presence in
other energy forms. As the gas and electric markets have begun
to converge, we have recognized a need to align ourselves with an
electric partner. Duke Power is the acknowledged industry leader
in providing safe, reliable, responsive and economical service to
its customers. It is upon this bedrock that we will build a true
industry pacesetter in the field of energy services. Moreover,
Duke Power is recognized as having engineering and global power
asset management skills which rank it among the best. I cannot
imagine a better company for PanEnergy to join with in pursuing
its strategic vision. PanEnergy shareholders will have a
substantial ownership interest in a financially strong company
with excellent access to financial markets and a solid record of
earnings and dividend growth."
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"We expect the unregulated business segments to generate
significant incremental operating income for Duke Energy through
the marketing of energy products and services both nationally and
internationally," Mr. Anderson continued. "We estimate
incremental annual pre-tax income to be approximately $225
million by the year 2000. PanEnergy currently gathers and
processes 2.7 Trillion British thermal units (TBtu) of natural
gas and markets 7.2 TBtu each day. Combining this natural gas
business base with Duke Power's knowledge of the electric
generation business, its experience in serving electric
customers, and its customer base, Duke Energy will have marketing
expertise and market reach far beyond what either company could
achieve on its own."
"Duke Energy will have the ability to offer physical delivery
and management of both gas and electricity in multiple regions of
the country through PanEnergy's extensive pipeline system and
Duke Power's well-managed electric transmission grid," Mr.
Anderson continued. "These systems will be managed together in a
new energy transportation group giving Duke Energy the
flexibility required to better serve its customers and respond to
market forces. Owning diverse physical assets will enable us to
optimize the delivery of energy to our customers. The energy
services group will build upon the demonstrated success of each
company's existing energy marketing ventures: PanEnergy Trading
and Market Services, L.L.C. venture with Mobil Corporation and
the Duke Energy Group, Inc. power marketing venture with Louis
Dreyfus Electric Power."
"The combination of PanEnergy and Duke Power will capture the
opportunities that are developing in the new energy services
environment," said Dennis Hendrix, chairman of PanEnergy. "It
will create a platform to market, trade and arrange physical
delivery of energy products and services on a large scale to all
major market areas. The new company will also create expanded
opportunities in international markets, some of which are
currently served by Duke Power and PanEnergy. This will increase
our ability to serve more customers and offer them comprehensive
packages of energy resources and management services."
Richard B. Priory, president and chief operating officer of
Duke Power, said, "This is a compelling combination for
customers, shareholders and employees of Duke Power and
PanEnergy. Our customers will benefit from one-stop shopping for
the provision -- and management -- of their energy needs.
Shareholders will participate in the earnings and growth
opportunities created by a new market leader in energy services
that intends to build on a track record of sustained financial
strength. Our employees will share in the opportunity to be part
of a larger company, positioned for leadership in the emerging
energy services industry. The economic potential of this
transaction lies primarily in revenue enhancements and strategic
positioning, not cost cutting."
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"Our goal is to build a company that combines the best of both
worlds --building on Duke Power's superb reputation for
reliability and service and its deep roots in the Carolina
communities while taking the steps necessary to ensure that the
company will prosper in the era of regulatory change that we
believe is inevitable across the country and around the globe.
The merger of PanEnergy and Duke Power combines two powerful,
innovative companies eager to join forces to win in the energy
marketplace of the twenty-first century," Mr. Priory added.
Upon completion of the merger, Richard B. Priory, currently
president and chief operating officer of Duke Power, will become
chairman and chief executive officer of Duke Energy; Paul M.
Anderson, president and chief executive officer of PanEnergy,
will become president and chief operating officer of Duke Energy;
and William H. Grigg, currently chairman and chief executive
officer of Duke Power, will retire. Dennis Hendrix will step
down as chairman of PanEnergy effective with the merger and will
join Duke Energy's board. The board of directors of Duke Energy
will be made up of 18 members, eleven from Duke Power and seven
from PanEnergy. The company will be headquartered in Charlotte,
with Houston serving as the center for PanEnergy's pipeline
operations, trading and marketing services, and certain business
development activities.
After the completion of the merger, PanEnergy will be a wholly-
owned subsidiary of Duke Energy. Under the merger agreement,
there are no changes required with respect to either company's
public debt issues or the outstanding preferred stock of Duke
Power.
The merger is conditioned, among other things, upon the
approval of the holders of a majority of the PanEnergy common
shares outstanding and a majority of the Duke Power common shares
voting, and the completion of appropriate state and federal
regulatory procedures. The companies anticipate that the
regulatory procedures can be completed in less than 12 months.
Barr Devlin Associates and Morgan Stanley & Co. Incorporated
acted as financial advisors and provided fairness opinions to
Duke Power. Merrill Lynch & Co. and Lehman Brothers Inc. acted
as financial advisors and provided fairness opinions to
PanEnergy.
PanEnergy Corp -- one of North America's leading energy
services companies --operates more than 37,000 miles of natural
gas pipeline, delivering gas primarily to Northeast and Midwest
markets. The company is also one of the nation's largest natural
gas gatherers and processors and markets liquefied petroleum
gases and related energy services throughout the United States
and Canada. Through its recently formed venture with Mobil,
PanEnergy is one of the leading marketers of natural gas and
electricity in North America. The company also has other energy
interests worldwide.
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Duke Power is one of the nation's largest investor-owned
electric utilities. Headquartered in Charlotte, NC, it serves 1.8
million residential, commercial and industrial customers in a
20,000 square-mile service area in North Carolina and South
Carolina. The company operates a diversified generating system
consisting of three nuclear generating stations, eight coal-fired
generating stations and 38 hydroelectric plants. In addition to
its regulated activities, Duke Power also has several non-
regulated businesses whose services include electric power
facility development and management; real estate development;
energy and environmental engineering services; construction
services; merchandising; and telecommunications.
This press release includes forward looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Although
Duke Power believes that its expectations are based on reasonable
assumptions, it can give no assurance that its goals will be
achieved. Important factors that could cause actual results to
differ materially from those in the forward looking statements
herein include the pace of deregulation of retail natural gas and
electricity markets in the United States, federal and state
regulatory developments, the timing and extent of changes in
commodity prices for oil, gas, coal, electricity and interest
rates, the extent of success in connecting natural gas supplies
to gathering and processing systems and in connecting and
expanding gas and electric markets, the performance of electric
generation, pipeline and gas processing facilities,
decommissioning costs associated with nuclear generating
facilities, the timing and success of efforts to develop domestic
and international power, pipeline, gathering, processing and
other infrastructure projects and conditions of the capital
markets and equity markets during the periods covered by the
forward looking statements.
Note to Editors: Today's news release, along with other news
about Duke Power and PanEnergy, is available on the Internet at:
http:\\www.dukepower.com AND http://www.naturalgas.com/pec.
# # #
SATELLITE UPLINK FOR DUKE POWER/PANENERGY B-ROLL:
November 25, 1996
10:00 - 10:30 a.m. EST
and 1:30 - 2:00 p.m. EST
C-Band Galaxy 9; Transponder 6
If you have any technical questions or problems with the
satellite feed for Duke Power/PanEnergy B-roll, please call Emy
Nakase at 212/627-5622.
