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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): MARCH 10, 1997
PANENERGY CORP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE I-8157 74-2150460
(STATE OR OTHER (COMMISSION FILE NUMBER) (IRS EMPLOYER
JURISDICTION OF IDENTIFICATION NO.)
INCORPORATION)
5400 WESTHEIMER COURT 77251-1642
P.O. BOX 1642 (ZIP CODE)
HOUSTON, TEXAS
(ADDRESS OF PRINCIPAL
EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 713-627-5400
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ITEM 5. OTHER EVENTS
PanEnergy Corp ("PanEnergy") previously filed with the Securities and
Exchange Commission a Current Report on Form 8-K, dated December 10, 1996,
that, among other things, disclosed that PanEnergy and Duke Power Company
("Duke") had entered into a definitive Agreement and Plan of Merger (the
"Merger Agreement") among PanEnergy, Duke and Duke Transaction Corporation
("Duke Transaction").
The Merger Agreement provides that, among other things, Duke Transaction
will be merged with and into PanEnergy, with PanEnergy being the surviving
corporation and becoming a wholly-owned subsidiary of Duke ("Merger"). The
Merger is described in detail in a Registration Statement on Form S-4 (No.
333-23227) ("Registration Statement") filed by Duke with the Securities and
Exchange Commission on March 13, 1997 and declared effective by the Securities
and Exchange Commission as of 4:00 p.m. on that date. The Joint Proxy
Statement-Prospectus included in the Registration Statement was distributed to
PanEnergy's stockholders beginning on March 17, 1997 in connection with the
annual meeting of stockholders of PanEnergy scheduled to be held on April 24,
1997. Among other conditions to consummating the Merger, the Merger is
conditioned upon Duke receiving approval of The Public Service Commission of
South Carolina ("PSCSC") and the North Carolina Utilities Commission ("NCUC").
On March 18, 1997, the PSCSC unanimously approved the application of Duke
seeking approval of the Merger and the issuance of Duke's common stock
pursuant to the terms of the Merger Agreement. On that day, a hearing was also
held before the NCUC with respect to a similar application by Duke. In the
proceedings before the PSCSC and the NCUC, Duke agreed to various matters, one
being that Duke will not seek to increase its retail rates through the year
2000 except to reflect substantial financial impacts of governmental action
affecting the industry generally, or a segment thereof, including Duke, or
major expenditures attributable to force majeure events. A copy of Duke's
press release announcing the approval by the PSCSC is filed herewith as
Exhibit 2(b) and is incorporated by reference herein.
A copy of the Merger Agreement was filed with the Current Report on Form 8-K
by Duke, dated December 9, 1996, as Exhibit 2(b). The Merger Agreement as
amended and restated is filed herewith as Exhibit 2(a) and is incorporated by
reference herein.
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, as
amended and restated as of March 10, 1997, among Duke Power Company, Duke
Transaction Corporation and PanEnergy Corp.
2(b). Press Release of Duke dated March 19, 1997.
2
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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
(registrant)
By: /s/ Robert W. Reed
----------------------------------
ROBERT W. REED
Secretary
Dated: March 20, 1997
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
2(a) Agreement and Plan of Merger dated as of
November 24, 1996, as amended and restated as of
March 10, 1997, among Duke Power Company, Duke
Transaction Corporation and PanEnergy Corp.
2(b) Press Release of Duke dated March 19, 1997.
</TABLE>
4
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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,
AS AMENDED AND RESTATED
AS OF MARCH 10, 1997
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TABLE OF CONTENTS
<TABLE>
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ARTICLE 1
THE MERGER
1.1. The Merger...................................................... 1
1.2. The Closing..................................................... 1
1.3. Effective Time.................................................. 1
ARTICLE 2
CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE SURVIVING
CORPORATION
2.1. Certificate of Incorporation.................................... 2
2.2. By-laws......................................................... 2
ARTICLE 3
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
3.1. Directors....................................................... 2
3.2. Officers........................................................ 2
ARTICLE 4
EFFECT OF THE MERGER ON SECURITIES OF MERGER SUB AND PANENERGY
4.1. Merger Sub Stock................................................ 2
4.2. PanEnergy Securities............................................ 2
4.3. Exchange of Certificates Representing PanEnergy Common Stock.... 3
4.4. Adjustment of Exchange Ratio.................................... 5
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PANENERGY
5.1. Organization, Standing and Power................................ 5
5.2. Capital Structure............................................... 6
5.3. Authority; No Violations; Consents and Approvals................ 7
5.4. SEC Documents................................................... 8
5.5. Information Supplied............................................ 8
5.6. Absence of Certain Changes or Events............................ 9
5.7. No Undisclosed Material Liabilities............................. 9
5.8. No Default...................................................... 9
5.9. Compliance with Applicable Laws................................. 9
5.10. Litigation...................................................... 10
5.11. Tax Matters..................................................... 10
5.12. Employee Benefits; Labor Matters................................ 12
5.13. Environmental Matters........................................... 13
5.14. Insurance....................................................... 15
5.15. Contracts....................................................... 15
5.16. Regulatory Proceedings.......................................... 16
5.17. Regulation as a Utility......................................... 16
5.18. Opinions of Financial Advisors.................................. 16
5.19. Vote Required................................................... 16
5.20. Beneficial Ownership of Duke Common Stock....................... 16
</TABLE>
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5.21. Brokers........................................................... 16
5.22. Article Seventh of the Restated Certificate of Incorporation of
PanEnergy and Section 203 of the DGCL Not Applicable............. 16
5.23. Properties........................................................ 16
5.24. Easements......................................................... 17
5.25. Futures Trading and Fixed Price Exposure.......................... 17
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF DUKE
6.1. Organization, Standing and Power.................................. 17
6.2. Capital Structure................................................. 18
6.3. Authority; No Violations; Consents and Approvals.................. 19
6.4. SEC Documents..................................................... 20
6.5. Information Supplied.............................................. 20
6.6. Absence of Certain Changes or Events.............................. 20
6.7. No Undisclosed Material Liabilities............................... 21
6.8. No Default........................................................ 21
6.9. Compliance with Applicable Laws................................... 21
6.10. Litigation........................................................ 21
6.11. Tax Matters....................................................... 22
6.12. Employee Benefits; Labor Matters.................................. 24
6.13. Environmental Matters............................................. 25
6.14. Insurance......................................................... 26
6.15. Contracts......................................................... 26
6.16. Regulatory Proceedings............................................ 26
6.17. Regulation as a Utility........................................... 26
6.18. Opinions of Financial Advisors.................................... 26
6.19. Vote Required..................................................... 26
6.20. Beneficial Ownership of PanEnergy Common Stock.................... 26
6.21. Brokers........................................................... 26
6.22. Properties........................................................ 27
6.23. Franchises, Licenses, Etc......................................... 27
6.24. Nuclear Operations................................................ 27
6.25. Duke/Louis Dreyfus L.L.C. ("D/LD") Obligations.................... 28
6.26. Representations with Respect to Merger Sub........................ 28
ARTICLE 7
CONDUCT OF BUSINESS PENDING THE MERGER
7.1. Conduct of Business of PanEnergy Pending the Merger............... 28
(a)Ordinary Course of Business.................................... 28
(b)Dividends; Changes in Stock.................................... 28
(c)Issuance of Securities......................................... 29
(d)Capital Expenditures........................................... 29
(e)No Acquisitions................................................ 29
(f)No Dispositions................................................ 29
(g)No Dissolution, Etc............................................ 29
(h)Certain Employee Matters....................................... 29
(i)Indebtedness; Leases........................................... 30
(j)Governing Documents............................................ 30
</TABLE>
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<TABLE>
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<C> <S> <C>
(k)Accounting..................................................... 30
(l)Rate Matters................................................... 30
(m)Contracts...................................................... 30
(n)Insurance...................................................... 31
(o)Permits........................................................ 31
(p)Discharge of Liabilities....................................... 31
(q)1935 Act....................................................... 31
(r)Tax Matters.................................................... 31
(s)Tax Status..................................................... 31
(t)Other Actions.................................................. 31
(u)Agreements..................................................... 31
7.2. Conduct of Business of Duke Pending the Merger.................... 31
(a)Ordinary Course of Business.................................... 31
(b)Dividends; Changes in Stock.................................... 32
(c)Issuance of Securities......................................... 32
(d)Capital Expenditures........................................... 32
(e)No Acquisitions................................................ 32
(f)No Dispositions................................................ 32
(g)No Dissolution, Etc............................................ 33
(h)Certain Employee Matters....................................... 33
(i)Indebtedness; Leases........................................... 33
(j)Governing Documents............................................ 33
(k)Accounting..................................................... 33
(l)Rate Matters................................................... 34
(m)Contracts...................................................... 34
(n)Insurance...................................................... 34
(o)Permits........................................................ 34
(p)Discharge of Liabilities....................................... 34
(q)1935 Act....................................................... 34
(r)Tax Matters.................................................... 34
(s)Tax Status..................................................... 34
(t)Other Actions.................................................. 34
(u)Agreements..................................................... 34
7.3. Transition Committee.............................................. 34
ARTICLE 8
COVENANTS
8.1. Alternative Proposals............................................. 35
8.2. Preparation of S-4 and the Joint Proxy Statement.................. 35
8.3. Letter of PanEnergy's Accountants................................. 36
8.4. Letter of Duke's Accountants...................................... 36
8.5. Access to Information............................................. 36
8.6. PanEnergy Stockholders' Meeting................................... 36
8.7. Duke Shareholders' Meeting........................................ 36
8.8. Regulatory and Other Approvals.................................... 37
(a)HSR Act........................................................ 37
(b)Other Regulatory Approvals..................................... 37
(c)Other Approvals................................................ 37
8.9. Agreements of Others.............................................. 37
8.10. Authorization for Shares and Stock Exchange Listings.............. 37
</TABLE>
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8.11. Indemnification; Directors' and Officers' Insurance.............. 37
8.12. Public Announcements............................................. 38
8.13. Other Actions.................................................... 38
8.14. Cooperation; Notification........................................ 38
8.15. Governance....................................................... 38
(a)Board of Directors of Duke.................................... 38
(b)Committees of the Board of Directors of Duke.................. 38
(c)Officers of Duke.............................................. 38
(d)Office of the Chief Executive; Policy Committee............... 39
(e)Name; Corporate Headquarters.................................. 39
8.16. Employment Agreements............................................ 39
8.17. Expenses......................................................... 39
8.18. Pooling.......................................................... 39
8.19. Tax Matters...................................................... 39
8.20. Employee Benefit Plans........................................... 40
8.21. Transfer Taxes................................................... 41
ARTICLE 9
CONDITIONS
9.1. Conditions to Each Party's Obligation to Effect the Merger....... 41
9.2. Conditions to Obligation of PanEnergy to Effect the Merger....... 42
9.3. Conditions to Obligation of Duke and Merger Sub to Effect the
Merger........................................................... 43
ARTICLE 10
TERMINATION
10.1. Termination by Mutual Consent.................................... 43
10.2. Termination by Either Duke or PanEnergy.......................... 43
10.3. Termination by PanEnergy......................................... 44
10.4. Termination by Duke.............................................. 44
10.5. Effect of Termination and Abandonment............................ 44
10.6. Extension, Waiver................................................ 44
ARTICLE 11
GENERAL PROVISIONS
11.1. Nonsurvival of Representations, Warranties and Agreements........ 45
11.2. Notices.......................................................... 45
11.3. Assignment; Binding Effect....................................... 46
11.4. Entire Agreement................................................. 46
11.5. Amendment........................................................ 46
11.6. Governing Law.................................................... 46
11.7. Counterparts..................................................... 46
11.8. Headings......................................................... 46
11.9. Interpretation................................................... 46
11.10. Waivers.......................................................... 46
11.11. Severability..................................................... 47
11.12. Enforcement of Agreement......................................... 47
11.13. Further Assurances............................................... 47
11.14. Waiver of Jury Trial............................................. 47
11.15. Certain Definitions.............................................. 47
</TABLE>
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<TABLE>
<CAPTION>
EXHIBITS
<C> <S>
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
</TABLE>
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INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
"1935 Act".................................................................. 16
"Agreement"................................................................. 1
"Alternative Proposal"...................................................... 35
"Atomic Energy Act"......................................................... 20
"Cash Balance Conversion"................................................... 40
"Certificate"............................................................... 3
"Closing"................................................................... 1
"Closing Date".............................................................. 1
"Code"...................................................................... 1
"Confidentiality Agreement"................................................. 36
"Continuation Period"....................................................... 40
"Convertible Notes"......................................................... 3
"D/LD"...................................................................... 28
"D/LD Agreement"............................................................ 43
"D&O Insurance"............................................................. 38
"Delaware Courts"........................................................... 46
"DGCL"...................................................................... 1
"Duke"...................................................................... 1
"Duke 1995 Margin Threshold"................................................ 26
"Duke 1995 Revenue Threshold"............................................... 26
"Duke Benefit Plans"........................................................ 24
"Duke Capital Budget"....................................................... 31
"Duke Common Stock"......................................................... 2
"Duke Director"............................................................. 38
"Duke Disclosure Schedule".................................................. 17
"Duke Generating Stations".................................................. 27
"Duke Litigation"........................................................... 22
"Duke Orders"............................................................... 22
"Duke Permits".............................................................. 21
"Duke Personnel"............................................................ 24
"Duke Preference Stock"..................................................... 18
"Duke Preferred Stock"...................................................... 18
"Duke Preferred Stock A".................................................... 18
"Duke Required Consents".................................................... 19
"Duke Required Statutory Approvals"......................................... 20
"Duke SEC Documents"........................................................ 20
"Duke Shareholders' Meeting"................................................ 8
"Duke Stock Plans".......................................................... 18
"Duke Stock Repurchase Program"............................................. 21
"Duke Vote Matter".......................................................... 19
"Easements"................................................................. 17
"Effective Time"............................................................ 2
"Environmental Claims"...................................................... 13
"Environmental Laws"........................................................ 14
"Environmental Permits"..................................................... 15
"Environmental Subsidiary".................................................. 14
"ERISA"..................................................................... 13
"Exchange Act".............................................................. 8
"Exchange Agent"............................................................ 3
"Exchange Fund"............................................................. 3
</TABLE>
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<TABLE>
<S> <C>
"Exchange Ratio"............................................................ 2
"FERC"...................................................................... 8
"Final Order"............................................................... 42
"GAAP"...................................................................... 1
"Governmental Entity"....................................................... 8
"Hazardous Materials"....................................................... 14
"HSR Act"................................................................... 8
"IRS"....................................................................... 11
"Joint Proxy Statement"..................................................... 8
"Joint Venture"............................................................. 47
"Material Adverse Effect"................................................... 6
"Maximum Premium"........................................................... 38
"Merger".................................................................... 1
"Merger Sub"................................................................ 1
"Mobil Joint Venture"....................................................... 17
"Mortgage".................................................................. 27
"NCBCA"..................................................................... 19
"NCUC"...................................................................... 20
"Net PanEnergy Position".................................................... 17
"NP&L"...................................................................... 26
"Nuclear Stations".......................................................... 27
"NYSE"...................................................................... 5
"PanEnergy"................................................................. 1
"PanEnergy Benefit Plans"................................................... 13
"PanEnergy Business Unit"................................................... 15
"PanEnergy Business Unit's 1995 Margin Threshold"........................... 16
"PanEnergy Business Unit's 1995 Revenue Threshold".......................... 16
"PanEnergy Capital Budget".................................................. 28
"PanEnergy Common Stock".................................................... 2
"PanEnergy Director"........................................................ 38
"PanEnergy Disclosure Schedule"............................................. 5
"PanEnergy DRIP"............................................................ 6
"PanEnergy Employees"....................................................... 40
"PanEnergy Litigation"...................................................... 10
"PanEnergy Option".......................................................... 3
"PanEnergy Options"......................................................... 3
"PanEnergy Orders".......................................................... 10
"PanEnergy Permits"......................................................... 9
"PanEnergy Personnel"....................................................... 12
"PanEnergy Pipeline Assets"................................................. 17
"PanEnergy Preferred Stock"................................................. 6
"PanEnergy Required Consents"............................................... 7
"PanEnergy Restricted Stock"................................................ 3
"PanEnergy SEC Documents"................................................... 8
"PanEnergy Stock Option Plan"............................................... 3
"PanEnergy Stock Option Plans".............................................. 3
"PanEnergy Stock Plans"..................................................... 6
"PanEnergy Stockholders' Approval".......................................... 7
"PanEnergy Stockholders' Meeting"........................................... 8
"Power Act"................................................................. 8
"PSCSC"..................................................................... 20
"Record Date"............................................................... 29
</TABLE>
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<TABLE>
<S> <C>
"Release"................................................................... 14
"Rule 145 Affiliates"....................................................... 37
"S-4"....................................................................... 8
"Securities Act"............................................................ 4
"Significant Subsidiary".................................................... 47
"Special Dividend".......................................................... 41
"Stock Benefit Plans"....................................................... 41
"Subsidiary"................................................................ 47
"Subsidiary Capital Expenditures"........................................... 32
"Surviving Corporation"..................................................... 1
"Tax Return"................................................................ 10
"Tax Ruling"................................................................ 11
"Taxes"..................................................................... 10
"Transfer Taxes"............................................................ 41
"Transition Committee"...................................................... 34
"Voting Debt"............................................................... 6
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of November 24,
1996, as amended and restated as of March 10, 1997, 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);
WHEREAS, Duke, Merger Sub and PanEnergy desire to make certain
representations, warranties and agreements in connection with the Merger;
WHEREAS, this Agreement amends and restates the Agreement and Plan of Merger
among the parties hereto dated as of November 24, 1996; and
WHEREAS, it is the intent of the parties hereto, notwithstanding such
amendment and restatement, that this Agreement continue to speak as of
November 24, 1996 unless otherwise expressly provided herein and that "the
date hereof" shall mean November 24, 1996 when used in this Agreement.
NOW, THEREFORE, in consideration of the foregoing, the parties hereto hereby
agree as follows:
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
1
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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
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 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
2
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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 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 such shares of PanEnergy Restricted Stock shall be
exchanged for shares of restricted Duke Common Stock in accordance with
Sections 4.2(a) and 4.2(b) hereof, upon the same terms and conditions as were
applicable under such PanEnergy Restricted Stock. 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 Senior Subordinated Notes Due December 15, 2004 of
PanEnergy (the "Convertible Notes") shall remain outstanding following the
Effective Time, unless prepaid or converted in accordance with the terms
thereof. 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 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 (which shall act as exchange agent) (or any agent
appointed by Duke and reasonably satisfactory to PanEnergy acting in such
capacity in Duke's stead) (in each case, the "Exchange Agent"), for the
benefit of the holders of shares of PanEnergy Common Stock, shall keep on
deposit, for exchange in accordance with this Article 4, certificates
representing the shares of Duke Common Stock and cash in lieu of fractional
shares (such cash and such certificates, 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
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Fund") to be issued pursuant to Section 4.2 and paid pursuant to this Section
4.3 in exchange for Certificates representing outstanding shares of PanEnergy
Common Stock.
(b) As soon as practicable after the Effective Time, the Exchange Agent
shall mail to each holder of record of a Certificate or Certificates which
immediately prior to the Effective Time represented outstanding shares of
PanEnergy Common Stock which were converted into the right to receive shares
of Duke Common Stock pursuant to Section 4.2(a) hereof, (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 Certificates representing such shares to the Exchange Agent
and which shall be in such form and have such other provisions as the Exchange
Agent may reasonably specify and (ii) instructions for 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, and such other documents as the Exchange Agent shall
require, 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. Subject to applicable law, 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 and dividends or distributions which such transferee is
entitled to receive pursuant to Sections 4.3(c) and (e), 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 or made after the Effective Time on Duke Common
Stock with a record date after the Effective Time 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. Any dividends and distributions 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 applicable
law, 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 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, nor shall any other shares of PanEnergy Common Stock owned by any
such person be converted into shares of Duke Common Stock, until Duke has
received a written agreement from such person as provided in Section 8.9.
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(e) No fractional shares of Duke Common Stock shall be issued upon the
surrender for exchange of Certificates. Any holder of a Certificate who would
otherwise be entitled to a fractional share of Duke Common Stock shall be
entitled to receive a cash payment in lieu of such fractional share in an
amount equal to the product of such fraction multiplied by the average of the
closing price per share of Duke Common Stock on the New York Stock Exchange
Composite Transactions Tape for the ten business days prior to and including
the last business day on which PanEnergy Common Stock was traded on the New
York Stock Exchange ("NYSE"), without any interest thereon.
(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 former holders of PanEnergy Common Stock one year after the
Effective Time shall be delivered by the Exchange Agent from the Exchange Fund
to Duke. Any holders of unsurrendered Certificates 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,
subject to applicable law, in respect of the shares 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
(which may be Duke in such capacity) 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
hereof but prior to 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,
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
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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: (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 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.
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(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 holders of PanEnergy
Common Stock. 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 adoption of this
Agreement. PanEnergy has all requisite corporate power and authority to enter
into this Agreement and, subject to adoption of this Agreement by the holders
of PanEnergy Common Stock in accordance with the DGCL (the "PanEnergy
Stockholders' Approval") and due and timely 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 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
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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 holders of
PanEnergy Common Stock (the "PanEnergy Stockholders' Meeting") and the meeting
of holders of Duke Common Stock (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 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 holders of PanEnergy
Common Stock and the holders of Duke Common Stock or at the time of the
meetings of such holders to be
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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 holders of PanEnergy Common
Stock. 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.
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
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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 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 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.
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(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.
(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 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.
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(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 due (without regard to extensions) on or before
December 31, 1989, and within the meaning of Section 6662 of the Code for Tax
Returns due (without regard to extensions) 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 Subsidiaries in
accordance with Section 6661(b)(2)(B) of the Code for Tax Returns due (without
regard to extensions) on or prior to December 31, 1989, and in accordance with
Section 6662(d)(2)(B) of the Code for Tax Returns due (without regard to
extensions) 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
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Personnel") that are sponsored, maintained or contributed to by 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.
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.
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(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 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
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,
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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 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 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
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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.
(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 Inc. ("Lehman"), dated
November 24, 1996, to the effect that, as of November 24, 1996, 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 in favor of adopting this
Agreement 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 defensible title (or, with respect to pipelines,
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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
date hereof 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
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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 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 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.
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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 holders of
Duke Common Stock. 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 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 holders of Duke Common
Stock in accordance with the North Carolina Business Corporation Act ("NCBCA")
and 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 holders of Duke Common Stock 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 holders of Duke Common Stock 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 holders of Duke Common
Stock has been obtained, any 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
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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
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 holders of Duke Common Stock
and the holders of PanEnergy Common Stock or at the time of the meetings of
such holders 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 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 holders of Duke Common Stock.
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
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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 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 Disclosure Schedule, there is no suit,
action or proceeding pending, or, to the knowledge of Duke,
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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 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.
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(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.
(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.
(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 due (without regard to extensions) on or before
December 31, 1989, and within the meaning of Section 6662 of the Code for Tax
Returns due (without regard to extensions) 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 due (without
regard to extensions) on or prior to December 31, 1989, and in accordance with
Section 6662(d)(2)(B) of the Code for Tax Returns due (without regard to
extensions) 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,
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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.
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, 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.
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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 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.
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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 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.
6.18. Opinions of Financial Advisors. The Board of Directors of Duke has
received (i) the opinion of Barr Devlin & Co. Incorporated ("Barr Devlin"),
dated November 24, 1996, to the effect that, as of November 24, 1996, the
Exchange Ratio is fair from a financial point of view to the holders of Duke
Common Stock and (ii) the opinion of Morgan Stanley & Co. Incorporated
("Morgan Stanley"), dated November 24, 1996, to the effect that, as of
November 24, 1996, 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 Barr Devlin and
Morgan Stanley, 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.
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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 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.
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.
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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 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 hereof 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 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-
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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) 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
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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:
(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 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.
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(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.
(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) prepayment 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 hereof 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):
(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.
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(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 (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 (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
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(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 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 PanEnergy a copy of each such filing or agreement
at least five days prior to the filing or execution thereof so that PanEnergy
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.
(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
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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 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" 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
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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 holders of Duke Common Stock and the holders of
PanEnergy Common Stock 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
which is no earlier than two business days before, and no later than, 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
which is no earlier than two business days before, and no later than, 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 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 the PanEnergy
Stockholders' Meeting 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 the holders of PanEnergy Common
Stock the adoption of this Agreement and not rescind such recommendation,
(iii) use all reasonable efforts to have the holders of PanEnergy Common Stock
adopt this Agreement 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
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its Board of Directors, recommend to the holders of Duke Common Stock the
approval of the Duke Vote Matter and not rescind such recommendation, (iii)
use all reasonable efforts to obtain approval of the Duke Vote Matter by the
holders of Duke Common Stock 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 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
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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 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.
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 if the
Merger has been consummated prior to such time and that the number of
directors comprising the full Board of Directors of Duke shall thereafter be
16, except as may be otherwise subsequently determined by the Duke Board of
Directors in accordance with applicable law and the Articles of Incorporation
and By-Laws of Duke. 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 the members of the Board of Directors of
Duke who are officers of Duke. 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
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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; Policy 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 a Policy 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. 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 holders of Duke Common Stock, 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 and 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.
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
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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 the Effective Time shall continue in effect without
any amendment that could adversely affect PanEnergy 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 Conversion occurring
after the date hereof and before or contemporaneously with the Cash
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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.
8.21. Transfer Taxes. On or before the Closing Date, the Board of Directors
of PanEnergy shall declare a special dividend (the "Special Dividend") to the
holders of PanEnergy Common Stock in an amount equal to the amount of any New
York State Real Estate Transfer Tax and New York City Real Property Transfer
Tax and any similar real property transfer taxes imposed on the holders of
PanEnergy Common Stock by any other State of the United States (and any
penalties and interest with respect to such taxes) (the "Transfer Taxes"),
which become payable in connection with the Merger. In satisfaction of the
Special Dividend, PanEnergy shall pay the Transfer Taxes on behalf of the
holders of PanEnergy Common Stock. PanEnergy and Duke shall cooperate in the
preparation, execution and filing of any required returns with respect to such
Transfer Taxes (including returns on behalf of the holders of PanEnergy Common
Stock) and in the determination of the portion of the consideration allocable
to the PanEnergy real property in New York State and New York City (or in any
other jurisdiction, if applicable). The Joint Proxy Statement shall provide
that the holders of PanEnergy Common Stock shall be deemed to have (i)
authorized PanEnergy to prepare, execute and file any Tax Returns relating to
Transfer Taxes and pay any Transfer Taxes arising in connection with the
Merger, in each case, on behalf of such holders, and (ii) agreed to be bound
by the values and allocations established by PanEnergy and Duke in the
preparation of any return with respect to the Transfer Taxes, if applicable.
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 holders of Duke Common
Stock.
(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.
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(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 holders of PanEnergy Common Stock 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 holders of PanEnergy Common
Stock in connection with the Merger shall have been approved for listing on
the NYSE, subject only to official notice of issuance.
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 Duke, Merger
Sub and PanEnergy will each be a party to that reorganization within the
meaning of Section 368(b) of the Code.
(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 hereof 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 and (iv) as to which all opportunities for rehearing
are exhausted (whether or not any appeal thereof is pending).
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(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 hereof 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
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 by the holders of Duke Common Stock
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 holders of Duke Common Stock 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 the holders of PanEnergy Common
Stock, 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 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% per annum
from the date such fee was required to be paid.
(c) 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
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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.
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
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.
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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.
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
holders of PanEnergy Common Stock and the holders of Duke Common Stock, but
after any such approval, no amendment shall be made which by law requires the
further approval of such holders 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.
46
<PAGE>
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.
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.
47
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf as of the 10th day of March, 1997.
Attest: DUKE POWER COMPANY
/s/ Ellen T. Ruff /s/ William H. Grigg
By: _________________________________ By: _________________________________
Ellen T. Ruff William H. Grigg
Secretary Chairman of the Board and
Chief Executive Officer
Attest: DUKE TRANSACTION CORPORATION
/s/ Peter C. Buck /s/ Steve C. Griffith, Jr.
By: _________________________________ By: _________________________________
Peter C. Buck Steve C. Griffith, Jr.
Secretary President
Attest: PANENERGY CORP
/s/ Robert W. Reed /s/ Paul M. Anderson
By: _________________________________ By: _________________________________
Robert W. Reed Paul M. Anderson
Secretary President and Chief
Executive Officer
48
<PAGE>
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 as amended and restated as of March 10, 1997 (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 (the "PanEnergy Common
Stock").
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.
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 Agreement was submitted for a
vote of the holders of PanEnergy Common Stock, 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 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:
A-1
<PAGE>
"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 a sale is 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 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 and this
Agreement. It is understood and agreed that such legends and the stop orders
referred to above will be removed if (i) the applicable holding period shall
have elapsed in accordance with the provisions of Rule 145 with respect to the
Duke Securities received by me in the Merger or (ii) Duke has received either
an opinion of counsel, which opinion of 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-2
<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-3
<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
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
<PAGE>
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 $700,000, 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 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
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
B-1-2
<PAGE>
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 in 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.
(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; 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
B-1-3
<PAGE>
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 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:
B-1-4
<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
(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.
B-1-5
<PAGE>
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
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 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
B-1-6
<PAGE>
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 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, 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
B-1-7
<PAGE>
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 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.
B-1-8
<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 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
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 its 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 the 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 the
Executive's official capacity and as to action in another capacity while
holding such office, and shall continue after the Executive has ceased to be a
director or officer and shall inure to the benefit of the 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.
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 __________________________________
B-1-9
<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 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
<PAGE>
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 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 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 in 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 in 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
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<PAGE>
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, 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 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:
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<PAGE>
(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 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
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
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)
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<PAGE>
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. 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 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 the total Parachute Value (as defined below) of
any payments or distributions 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 the 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
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<PAGE>
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 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 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
B-2-7
<PAGE>
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
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 its affiliated companies for any other
corporation, partnership,
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<PAGE>
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 the 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 the Executive's
official capacity and as to action in another capacity while holding such
office, and shall continue after the Executive has ceased to be a director or
officer and shall inure to the benefit of the 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.
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 __________________________________
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<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 authority,
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
<PAGE>
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 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% 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
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<PAGE>
Agreement, "Fair Market Value" shall mean, as of any given date, the closing
price of the common stock of Duke Power Company in 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. 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.
(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
B-3-3
<PAGE>
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.
(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:
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(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; (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 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.
B-3-5
<PAGE>
(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 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 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,
B-3-6
<PAGE>
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.
(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:
Fred J. Fowler
11403 Bassdale
Houston, TX 77070
B-3-7
<PAGE>
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 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 its 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 the 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 the
Executive's official capacity and as to action in another capacity while
holding such office, and shall continue after the Executive has ceased to be a
director or officer and shall inure to the benefit of the 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.
_____________________________________
Fred J. Fowler
PANENERGY CORP
By __________________________________
B-3-9
<PAGE>
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, 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
<PAGE>
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% 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 in 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 in 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.
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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 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;
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(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 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
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payable), if any, under the 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 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
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<PAGE>
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 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 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.
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<PAGE>
(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 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 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, 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 its 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 the 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 the
Executive's official capacity and as to action in another capacity while
holding such office, and shall continue after the Executive has ceased to be a
director or officer and shall inure to the benefit of the 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.
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
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
<PAGE>
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% 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 in 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.
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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 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;
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(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 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;
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(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 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.
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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 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 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
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<PAGE>
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 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.
(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
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<PAGE>
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 its 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 the 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 the
Executive's official capacity and as to action in another capacity while
holding such office, and shall continue after the Executive has ceased to be a
director or officer and shall inure to the benefit of the 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.
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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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 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
<PAGE>
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 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 of Duke Power Company in 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.
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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 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;
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(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 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;
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(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 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.
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<PAGE>
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 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 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
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<PAGE>
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 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.
(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
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<PAGE>
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 its 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 the 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 the
Executive's official capacity and as to action in another capacity while
holding such office, and shall continue after the Executive has ceased to be a
director or officer and shall inure to the benefit of the 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.
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 __________________________________
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<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.
(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
<PAGE>
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.
(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 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
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<PAGE>
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 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
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<PAGE>
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) 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 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
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<PAGE>
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 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 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.
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<PAGE>
(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 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:
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.
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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) 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 its 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 the 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 the
Executive's official capacity and as to action in another capacity while
holding such office, and shall continue after the Executive has ceased to be a
director or officer and shall inure to the benefit of the 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.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and,
pursuant to the authorization from the Board, 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 __________________________________
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<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.
(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,
<PAGE>
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.
(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 the engaging by the Executive in illegal conduct or gross misconduct
which is materially and demonstrably injurious to the Company. The cessation
of employment
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<PAGE>
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 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,
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<PAGE>
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) 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 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
C-2-4
<PAGE>
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 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 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
C-2-5
<PAGE>
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 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:
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.
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<PAGE>
(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 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 its 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 the 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 the
Executive's official capacity and as to action in another capacity while
holding such office, and shall continue after the Executive has ceased to be a
director or officer and shall inure to the benefit of the 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.
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 __________________________________
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<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.
(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
<PAGE>
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.
(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 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
C-3-2
<PAGE>
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 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-3-3
<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 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
C-3-4
<PAGE>
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 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 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.
C-3-5
<PAGE>
(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 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:
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
C-3-6
<PAGE>
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 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 its 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 the 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 the
Executive's official capacity and as to action in another capacity while
holding such office, and shall continue after the Executive has ceased to be a
director or officer and shall inure to the benefit of the 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.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and,
pursuant to the authorization from the Board, 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.
(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
<PAGE>
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.
(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 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
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<PAGE>
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 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
C-4-3
<PAGE>
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) 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 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
C-4-4
<PAGE>
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 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 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.
C-4-5
<PAGE>
(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 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:
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.
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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) 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 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 its 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 the 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 the
Executive's official capacity and as to action in another capacity while
holding such office, and shall continue after the Executive has ceased to be a
director or officer and shall inure to the benefit of the 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.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and,
pursuant to the authorization from the Board, 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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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.
(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
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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.
(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 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
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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 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
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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) 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 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
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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 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 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.
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(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 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:
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.
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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) 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 its 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 the 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 the
Executive's official capacity and as to action in another capacity while
holding such office, and shall continue after the Executive has ceased to be a
director or officer and shall inure to the benefit of the 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.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and,
pursuant to the authorization from the Board, 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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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.
(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
<PAGE>
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.
(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 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
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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 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
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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
(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 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
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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 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 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
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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 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:
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.
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(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 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 its 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 the 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 the
Executive's official capacity and as to action in another capacity while
holding such office, and shall continue after the Executive has ceased to be a
director or officer and shall inure to the benefit of the 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.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and,
pursuant to the authorization from the Board, 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 __________________________________
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EXHIBIT 2(b)
March 19, 1997 CONTACT: Randy Wheeless
Office: 704/382-8379
24-Hour: 704/594-0681
PanEnergy Corp
John P. Barnett
Office: 713/627-4072
DUKE/PANENERGY MERGER APPROVED IN SOUTH CAROLINA; DUKE
RETAIL RATES MAY BE CAPPED THROUGH YEAR 2000
CHARLOTTE, N.C.--The Public Service Commission of South Carolina on Tuesday
unanimously approved the proposed $7.7 billion merger between Duke Power and
Houston-based PanEnergy Corp. Also on Tuesday, hearings on the merger were
held before the North Carolina Utilities Commission in Raleigh.
In conjunction with the hearings, Duke Power signed a stipulation to certain
conditions concerning the Merger. One condition is that Duke Power will not
seek to raise retail rates to customers through the year 2000.
Duke may adjust rates with regulatory approval to reflect a substantial
impact on the company, such as governmental action affecting the industry, or
a major storm that causes extensive financial damage. Not affected by the
agreement will be Duke Power's annual fuel clause adjustment--by which the
commissions modify rates slightly to accurately reflect fuel costs incurred by
the company.
Besides the two states, other approvals needed for the merger include the
Federal Energy Regulatory Commission and the shareholders of both companies.
Annual shareholder meetings for both companies are scheduled for April 24.
At the meetings, PanEnergy's stockholders will vote on the proposed merger and
Duke's shareholders will vote on issuing common stock in the proposed merger,
amending its charter to increase the authorized amount of common stock and to
change the company's name to Duke Energy Corporation. On Monday March 17, the
two companies began mailing a joint proxy statement-prospectus to shareholders
containing details on the merger and soliciting shareholder approval.
Under the terms of the proposed merger, each outstanding share of PanEnergy
common stock would be converted into 1.0444 shares of Duke Power stock upon
receipt of necessary regulatory and shareholder approvals.
Duke Power is one of the nation's largest investor-owned electric utilities,
serving 1.8 million customers in North Carolina and South Carolina.
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.
