<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Piedmont Natural Gas Company, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
---------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
<PAGE> 2
PIEDMONT NATURAL GAS
COMPANY, INC.
1915 REXFORD ROAD/POST OFFICE BOX 33068
CHARLOTTE, NORTH CAROLINA 28233
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AND
PROXY STATEMENT
ANNUAL MEETING
FEBRUARY 23, 2001
YOUR VOTE IS IMPORTANT
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURN IT
IN THE ENCLOSED ENVELOPE (TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED IN THE
UNITED STATES). PLEASE SEE ON THE FIRST PAGE OF THIS PROXY THE ALTERNATIVE
VOTING METHODS USING THE INTERNET AND TELEPHONE.
<PAGE> 3
PIEDMONT NATURAL GAS COMPANY, INC.
1915 REXFORD ROAD
POST OFFICE BOX 33068
CHARLOTTE, NORTH CAROLINA 28233
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 23, 2001
The Annual Meeting of Shareholders of Piedmont Natural Gas Company, Inc.
(the "Company"), will be held at the Executive Offices of the Company, 1915
Rexford Road, Charlotte, North Carolina, on February 23, 2001, at 9:30 a.m.,
EST, for the following purposes:
1. To elect four Directors, each to serve for a term of three years
(Proposal A); and
2. To ratify the selection by the Board of Directors of the firm of
Deloitte & Touche LLP as independent auditors of the Company for the
current fiscal year (Proposal B); and
3. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on January 11, 2001,
as the record date for the determination of shareholders entitled to notice of
and to vote at the Meeting. Accordingly, only holders of Common Stock of record
on such date will be entitled to vote at the Meeting.
Whether or not you plan to attend the Annual Meeting, please complete,
sign, date and return the enclosed proxy promptly in the accompanying reply
envelope. If your shares are registered directly with our transfer agent,
American Stock Transfer & Trust Company, you may vote either via the Internet or
by calling the transfer agent. Specific instructions to be followed by any
registered shareholder interested in voting via the Internet or telephone are
set forth on the enclosed proxy card. If your shares are held in a bank or
brokerage account, you may be eligible to vote your proxy electronically or by
telephone. Please refer to the enclosed voting form for instructions.
By order of the Board of Directors,
Martin C. Ruegsegger
Vice President, Corporate Counsel and
Secretary
January 23, 2001
THE FORM OF PROXY IS ENCLOSED TO ENABLE YOU TO VOTE YOUR SHARES AT THE MEETING.
YOU ARE URGED, REGARDLESS OF THE NUMBER OF SHARES YOU HOLD, TO COMPLETE, SIGN,
DATE AND RETURN THE PROXY PROMPTLY. A RETURN ENVELOPE, WHICH REQUIRES NO POSTAGE
IF MAILED IN THE UNITED STATES, IS ENCLOSED FOR YOUR CONVENIENCE.
<PAGE> 4
PIEDMONT NATURAL GAS COMPANY, INC.
1915 REXFORD ROAD
POST OFFICE BOX 33068
CHARLOTTE, NORTH CAROLINA 28233
PROXY STATEMENT
The following information is furnished in connection with the Annual
Meeting of Shareholders (the "Meeting") of Piedmont Natural Gas Company, Inc.
(the "Company"), to be held at the Company's executive offices in Charlotte,
North Carolina, on February 23, 2001, and was first mailed to shareholders on or
about January 23, 2001. The notice is set forth on the front page of this Proxy
Statement. The Company's principal executive offices are located at 1915 Rexford
Road, Charlotte, North Carolina 28211, and its telephone number is 704-364-3120.
The proxy accompanying this Proxy Statement is solicited by the Board of
Directors of the Company. The cost of soliciting proxies will be borne by the
Company. In addition to solicitation by mail, proxies may be solicited by
Directors, officers and employees of the Company, personally or by telephone or
facsimile, none of whom will be separately compensated for such activities. The
Company has retained W.F. Doring & Co. to assist in the solicitation of proxies
in the same manner for an estimated fee of $4,000, plus reimbursement of
out-of-pocket expenses. Arrangements may also be made with brokerage houses and
other custodians, nominees and fiduciaries who are record holders of shares of
Common Stock for the forwarding of proxy materials to the beneficial owners of
such shares, and the Company will reimburse them for their expenses.
The Company had issued and outstanding on January 11, 2001, 32,003,458
shares of Common Stock, which shares constitute the only class of stock which is
entitled to notice of and to vote at the Meeting. Only holders of Common Stock
of record at the close of business on January 11, 2001, will be entitled to
notice of and to vote at the Meeting, one vote for each share of stock.
The holders of a majority of the outstanding shares of Common Stock present
in person or represented by proxy at the Meeting will constitute a quorum. Since
many shareholders cannot attend the Meeting, it is necessary that a large number
be represented by proxy. The Board has accordingly designated proxyholders to
represent those shareholders who cannot be present in person and who desire to
be so represented.
The presence of a shareholder at the Meeting will not automatically revoke
such shareholder's proxy. However, shareholders who sign proxies have the right
to revoke them at any time before they are voted by filing with the Vice
President, Corporate Counsel and Secretary of the Company an instrument revoking
the proxy or a duly executed proxy bearing a later date or by attending the
Meeting and voting in person.
Shareholders whose shares are registered directly with our transfer agent,
American Stock Transfer & Trust Company, may vote either via the Internet or by
calling American Stock Transfer & Trust Company. Specific instructions to be
followed by any registered shareholder interested in voting via the Internet or
telephone are shown on the enclosed proxy card. The Internet and telephone
voting procedures are designed to authenticate the shareholder's identity and to
allow shareholders to vote their shares and confirm that their instructions have
been properly recorded.
If your shares are registered in the name of a bank or brokerage firm, you
may be eligible to vote your shares electronically via the Internet or by
telephone. A large number of banks and brokerage firms are participating in the
ADP Investor Communication Services online program. This program provides
eligible shareholders who receive a paper copy of the annual report and proxy
statement the opportunity to vote via the
<PAGE> 5
Internet or by telephone. If the entity holding your shares is participating in
ADP's program, your voting form will provide instructions. If your voting form
does not reference Internet or telephone information, please complete and return
the paper proxy card in the self-addressed, postage-paid envelope provided.
We are offering you the option to receive future proxy materials via the
Internet. If you would like to receive future Company proxy statements and
annual reports electronically, please visit www.investpower.com to enroll.
Please reference the Company number and account number on the front portion of
your proxy card. Receiving future annual reports and proxy statements via the
Internet will be simpler for you, will save the Company money and is friendlier
to the environment. If you have a computer with Internet access, we hope you
will follow the instructions and sign up.
Thank you for your support of Piedmont Natural Gas Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth each person or entity known by management to
own of record or beneficially more than 5% of the outstanding Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND ADDRESS OF NATURE OF PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
-------------- ------------------- -------------------- ----------
<S> <C> <C> <C>
Common Stock................... Cincinnati Financial Corporation 1,888,600(1) 5.9%
6200 South Gilmore Road
Fairfield, Ohio 45014
</TABLE>
---------------
(1) According to a Schedule 13G filed with the Securities and Exchange
Commission on February 11, 1998, and based upon information provided to the
Company by an executive officer of Cincinnati Financial Corporation,
Cincinnati Financial Corporation exercises sole voting and sole dispositive
power over the shares.
PURPOSES OF THE MEETING
At the Meeting, the shareholders will consider and vote upon the following
matters:
1. The election of four Directors, each of whom would serve for a term
of three years or until their successors are duly elected and qualified
(Proposal A);
2. The ratification of the action of the Board in selecting Deloitte &
Touche LLP as independent auditors of the Company for the current fiscal
year (Proposal B); and
3. Such other business as may properly come before the Meeting or any
adjournment(s) thereof.
The enclosed form of proxy provides a means for any shareholder to direct
the proxyholders to vote for all nominees for election to the Board or to
withhold authority to vote for any one or more or all of the nominees. A
shareholder may also vote for or against or may abstain from voting on Proposal
B.
If the enclosed proxy is properly marked, signed, dated and returned, and
not revoked, it will be voted in accordance with the instructions thereon. If no
instructions are given, the proxy will be voted for the nominees named herein
for election to the Board and for the ratification of the selection by the Board
of independent
2
<PAGE> 6
auditors for the current fiscal year. Should other matters properly come before
the Meeting, the proxyholders will vote the proxies thereon in accordance with
their best judgment.
Abstentions and broker non-votes will be counted for purposes of
determining whether a quorum is present at the Meeting. With respect to election
of Directors and ratification of auditors, abstentions and broker non-votes will
not affect the election results, so long as a quorum is present.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT EACH SHAREHOLDER VOTE
FOR EACH PROPOSAL.
PROPOSAL A
ELECTION OF DIRECTORS
The By-Laws of the Company provide that the Board of Directors shall
consist of such number of directors as shall be fixed from time to time by
resolution of the Board, but shall not be less than nine. The Articles of
Incorporation divide the Board into three classes, designated Class I, Class II
and Class III, with one class standing for election each year for a three-year
term. The Articles provide that each class shall consist as nearly as possible
of one-third of the total number of directors constituting the entire Board.
Jerry W. Amos, John H. Maxheim and Walter S. Montgomery, Jr., whose terms
expire at the Meeting, are again standing for election for three-year terms. Sam
J. DiGiovanni, whose term expires in 2003, is resigning from the Board effective
with the Meeting in accordance with the retirement policy of the Board.
Effective July 1, 2000, the Board elected D. Hayes Clement as a Director in
Class III until consideration for election as a Director by the shareholders at
the Meeting. All nominees, with the exception of Mr. Clement, have been
previously elected by the shareholders. In accordance with the policy of the
Board, Mr. Montgomery has agreed to resign from the Board effective at the 2002
Annual Meeting of shareholders since he will have attained the age of 72.
In the absence of instructions to the contrary, it is intended that the
shares covered by the accompanying proxy will be voted for the election of these
persons as directors in Class III to serve three-year terms expiring in 2004.
The election of directors requires a plurality of the votes cast at the Meeting.
If all nominees are elected, the Board will consist of eleven members.
The Board does not know of any nominee or nominees who will be unable or
unwilling to serve, but if any of them should be unable to serve, the proxies
will be voted under discretionary authority for a substitute or substitutes
designated by the Board, unless appropriate action has been taken to provide for
a lesser number of directors.
3
<PAGE> 7
The following sets forth certain information concerning each person
nominated for election as a Director and each person whose term of office as a
Director will continue after the Meeting:
<TABLE>
<CAPTION>
DIRECTOR OF THE BUSINESS EXPERIENCE DURING PAST
NAME COMPANY SINCE FIVE YEARS AND OTHER INFORMATION
---- --------------- --------------------------------
<S> <C> <C>
NOMINEES FOR ELECTION AS DIRECTORS FOR TERMS EXPIRING IN 2004:
Jerry W. Amos........................ 1978 Age 62. Partner in the law firm of Amos,
Jeffries & Robinson, L.L.P., Charlotte and
Greensboro, North Carolina, and General Counsel
to the Company.
D. Hayes Clement..................... 2000 Age 65. Former Partner of Arthur Andersen LLP
(certified public accountants), Greensboro,
North Carolina.
John H. Maxheim...................... 1979 Age 66. Chairman of the Board of the Company,
Charlotte, North Carolina. Mr. Maxheim retired
as Chief Executive Officer of the Company on
March 1, 2000. Prior to 1999, Mr. Maxheim was
also President of the Company. Mr. Maxheim is
also a director of Conso Products Company.
Walter S. Montgomery, Jr............. 1973 Age 71. Chairman of the Board and Chief
Executive Officer of Spartan International
(textile manufacturer), Spartanburg, South
Carolina. Mr. Montgomery is also a director of
Allendale Insurance Company (Advisory Board) and
Montgomery Industries.
DIRECTORS CONTINUING IN OFFICE UNTIL 2002:
Muriel W. Helms...................... 1993 Age 59. Partner, Greater Carolinas Real Estate
Services, Inc., Charlotte, North Carolina. From
1990 to 1997, Ms. Helms was President of the
Charlotte Area of Prudential Carolinas Realty.
Ned R. McWherter..................... 1995 Age 70. Former Governor of the State of
Tennessee, Dresden, Tennessee. Mr. McWherter is
also a director of Coca-Cola Bottling Co.
Consolidated and SunTrust Bank.
Donald S. Russell, Jr................ 1966 Age 62. Attorney at Law, Columbia, South
Carolina. Mr. Russell is also a director of
Jefferson-Pilot Corporation.
John E. Simkins...................... 1966 Age 62. Consultant, Baltimore, Maryland. Prior
to 2000, Mr. Simkins was the Assistant to the
Director, Information Technology and
Communications Division, Maryland Department of
Public Safety and Correctional Services,
Baltimore, Maryland. From March 1996 through
April 1997, Mr. Simkins was Deputy State
Director, Maryland Small Business Development
Center Network.
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
DIRECTOR OF THE BUSINESS EXPERIENCE DURING PAST
NAME COMPANY SINCE FIVE YEARS AND OTHER INFORMATION
---- --------------- --------------------------------
<S> <C> <C>
DIRECTORS CONTINUING IN OFFICE UNTIL 2003:
C.M. Butler III...................... 1991 Age 57. Attorney and consultant in financial and
regulatory affairs, Houston, Texas.
John W. Harris....................... 1997 Age 53. President of Lincoln Harris LLC
(commercial real estate and investment
management), Charlotte, North Carolina. Mr.
Harris is also a director of Virginia Power
Company and US LEC.
Ware F. Schiefer..................... 1999 Age 63. President and Chief Executive Officer of
the Company, Charlotte, North Carolina. From
1999 to 2000, Mr. Schiefer was President and
Chief Operating Officer of the Company. Prior to
1999, Mr. Schiefer was Executive Vice President
of the Company. Mr. Schiefer is also a director
of Heritage Holdings, Inc.
</TABLE>
INFORMATION REGARDING THE BOARD OF DIRECTORS
ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
During the fiscal year ended October 31, 2000, the Board held four
meetings. All Directors except Mr. Russell attended 75% or more of the aggregate
number of meetings of the Board and committees of the Board on which they
served.
COMMITTEES OF THE BOARD
The Board has several standing committees, including an Audit Committee, a
Compensation Committee and a Directors and Corporate Governance Committee.
The members of the Audit Committee are Sam J. DiGiovanni (Chairman), C. M.
Butler III, D. Hayes Clement and John E. Simkins. The Committee met three times
during the fiscal year. The Audit Committee recommends to the Board the
engagement of the independent auditors, reviews the arrangements for and scope
of the audit, reviews internal auditing procedures and the adequacy of internal
controls, and reviews the reports submitted by the independent auditors.
During 2000, the Board of Directors adopted and approved a charter for the
Audit Committee. A copy of the charter is attached hereto as Appendix A.
The members of the Compensation Committee are John W. Harris (Chairman), D.
Hayes Clement, Sam J. DiGiovanni, and Walter S. Montgomery, Jr. The Committee
met once during the fiscal year. The Compensation Committee oversees
compensation policies and programs, including the Employee Salary Administration
Plan and the Executive Long-Term Incentive Plan. It also recommends to the Board
the salaries and other compensation of elected officers and Directors and
reviews executive development and management succession plans.
The members of the Directors and Corporate Governance Committee are Ned R.
McWherter (Chairman), Jerry W. Amos, John H. Maxheim, John W. Harris and Donald
S. Russell, Jr. The Committee
5
<PAGE> 9
met three times during the fiscal year. This Committee recommends to the Board
nominees to fill vacancies on the Board as they occur and recommends candidates
for election as directors at annual meetings of shareholders. The Committee will
consider nominees recommended by shareholders upon submission in writing to the
Vice President, Corporate Counsel and Secretary of the Company of the names of
such nominees, together with their qualifications for service and evidence of
their willingness to serve. Such nominations to the Board must be made at least
sixty days prior to the shareholders' meeting at which the election of directors
will take place.
DIRECTORS' COMPENSATION
Directors who are not employees of the Company or its affiliated companies
are paid an annual retainer for Board service of $24,000, an attendance fee of
$750 for each Board meeting attended and an attendance fee of $500 for each
committee meeting attended, in addition to reimbursement for expenses incurred
in attending such meetings. If a Director elects to invest any of his or her
director fees in the Dividend Reinvestment and Stock Purchase Plan (the "DRIP"),
the Company will match 25% of such fees for investment in the DRIP. Directors
who are employees receive no additional compensation for their services as
Directors.
A non-employee Director who retires from the Board at any age with more
than ten continuous years on the Board or who is at least 72 years of age if
such Director has served on the Board less than ten continuous years, is
entitled to receive on retirement from the Board, an annual retirement benefit
equal to the annual retainer fee in effect at the time of his or her retirement.
This retirement benefit will continue for the life of the Director. Should a
non-employee Director die before ten years have elapsed from the retirement date
of that Director from the Board, a retirement benefit shall be paid to the
Director's designated beneficiary(s) in an amount equal to the annual retainer
fee in effect at the time of the Director's retirement for the remaining portion
of the ten-year period following the retirement date of that Director from the
Board. Should a non-employee Director die while serving on the Board, the
Director's previously designated beneficiary(s) shall be paid ten times the
annual retainer fee that is in effect at the date of such Director's death.
In the event of a change in control or a potential change in control, a
non-employee Director shall be entitled to receive the benefits listed in the
previous paragraph above had the Director retired on the date immediately
preceding the change in control or potential change in control without regard to
the number of years served, or a lump sum cash amount equal to 150% of the net
present value of such retirement benefits.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
John H. Maxheim, who formerly served as Chief Executive Officer of the
Company, has entered into an agreement with the Company to provide advice and
assistance to the Chief Executive Officer and the Board of Directors on a
variety of matters. This agreement was effective March 1, 2000, and shall end on
February 28, 2003, unless terminated sooner as provided in the agreement;
provided, however, that no cancellation by the Company for any reason other than
for cause will terminate the requirement to pay the annual fees for three years.
For such services, Mr. Maxheim receives annual compensation of $195,000,
reimbursement of reasonable travel and other out-of-pocket expenses incurred in
connection with his services, office space and secretarial services at the
Company's offices.
Amos, Jeffries & Robinson, L.L.P., a limited liability partnership,
received $658,771 for legal services performed for the Company during the 2000
fiscal year. This law firm is expected to continue to perform such services
during the current fiscal year. Jerry W. Amos, a Director and General Counsel to
the Company, is a
6
<PAGE> 10
partner in this law firm. Transactions involving this law firm and the Company
were made in the ordinary course of business and, in the opinion of management,
were on substantially the same terms to the Company as those prevailing at the
time from unrelated parties for comparable transactions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF
THE NOMINEES AS DIRECTORS FOR THE TERMS STATED.
PROPOSAL B
SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, upon recommendation of the Audit Committee, has
selected Deloitte & Touche LLP, independent auditors, to serve as the
independent auditors of the Company for the fiscal year ending October 31, 2001.
Deloitte & Touche LLP has acted as the independent auditors of the Company since
1951. Although not required to submit this selection to the shareholders for
ratification, the Directors believe it is desirable that an expression of
shareholder opinion be solicited.
Representatives of Deloitte & Touche LLP are expected to be present at the
Meeting. They will have an opportunity to make a statement if they desire to do
so and are expected to be available to respond to appropriate questions.
If a majority of the shares of Common Stock represented at the Meeting is
voted against ratification of the selection of Deloitte & Touche LLP, the
selection of independent auditors will be reconsidered by the Board.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION
OF THE SELECTION OF DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
7
<PAGE> 11
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the number of shares of Common Stock
beneficially owned, as of December 8, 2000, by each Director, each officer named
in the Summary Compensation Table and all Directors and officers as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1) CLASS(2)
------------------------ -------------------------- ----------
<S> <C> <C>
DIRECTORS
Jerry W. Amos............................................ 69,915(3)(4) --
C. M. Butler III......................................... 2,400 --
D. Hayes Clement......................................... 972(3) --
Sam J. DiGiovanni........................................ 8,839(3)(5) --
John W. Harris........................................... 7,427(3) --
Muriel W. Helms.......................................... 7,540(3)(6) --
John H. Maxheim.......................................... 166,718(3) --
Ned R. McWherter......................................... 10,000 --
Walter S. Montgomery, Jr. ............................... 67,488(3)(8) --
Donald S. Russell, Jr. .................................. 70,624 --
Ware F. Schiefer......................................... 38,210(7) --
John E. Simkins.......................................... 2,709 --
OFFICERS
David J. Dzuricky........................................ 9,152(3) --
Ray B. Killough.......................................... 34,837(3)(7) --
Richard A. Linville...................................... 1,335 --
Thomas E. Skains......................................... 8,215 --
All Directors and Officers of the Company as a Group
(32)................................................... 679,522(3)(7) --
</TABLE>
---------------
(1) Unless otherwise indicated, each person listed has sole voting and
investment power.
(2) No person listed in the table beneficially owned more than 1% of the
outstanding Common Stock as of December 8, 2000. The number of shares
beneficially owned by all Directors and officers as a group represents less
than 3% of the outstanding Common Stock.
(3) The number of shares shown includes those credited to participants' accounts
under the DRIP.
(4) Includes 95 shares held by Mr. Amos' grandson, a minor, of which Mr. Amos is
custodian of the shares.
(5) Includes 4,909 shares held by Mr. DiGiovanni's spouse.
(6) Includes 93 shares held in trust by Ms. Helms for the benefit of
grandchildren of Ms. Helms and 423 shares held by Ms. Helms' spouse.
(7) The number of shares shown includes those credited to participants' accounts
under the Employee Stock Ownership Plan.
(8) Includes 1,544 shares held in trust of which Mr. Montgomery is a co-trustee,
87 shares held in trust for the benefit of Mr. Montgomery, and 51,222 shares
of which Mr. Montgomery shares voting power as a trustee of the Rose and
Walter S. Montgomery, Sr. Foundation.
8
<PAGE> 12
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following Summary Compensation Table sets forth a summary of the
compensation paid to the Company's former Chief Executive Officer, the current
Chief Executive Officer and the four other most highly compensated executive
officers in the three fiscal years ended October 31, 2000, 1999 and 1998:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION PAYOUTS
--------------------------- ------------
OTHER ANNUAL LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) COMPENSATION(2) PAYOUTS COMPENSATION(3)
--------------------------- ---- --------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
John H. Maxheim............................ 2000 $175,000 $ 70,744 $483,544 $ 32,529
Chairman of the Board and 1999 516,346 186,281 500,643 211,315
Retired Chief Executive Officer * 1998 472,115 99,200 486,420 139,389
Ware F. Schiefer........................... 2000 332,462 54,860 168,906 91,574
President and Chief Executive Officer 1999 278,750 52,204 174,900 61,395
1998 237,308 38,236 169,899 52,560
Thomas E. Skains........................... 2000 227,154 38,591 110,702 12,483
Senior Vice President--Marketing and 1999 223,038 41,170 114,642 11,495
Supply Services 1998 202,115 28,092 111,385 10,937
Ray B. Killough............................ 2000 224,231 39,900 108,853 20,163
Senior Vice President--Operations 1999 220,577 42,327 112,728 18,682
1998 202,308 29,107 109,526 15,369
David J. Dzuricky.......................... 2000 221,846 36,618 94,095 26,028
Senior Vice President and 1999 215,577 38,598 97,449 24,379
Chief Financial Officer 1998 194,692 25,595 94,649 21,258
Richard A. Linville........................ 2000 154,077 20,346 -- 31,038
Vice President--Human Resources 1999 149,308 19,215 -- 29,807
1998 134,615 74,036 -- 26,796
</TABLE>
---------------
* Mr. Maxheim retired as Chief Executive Officer effective March 1, 2000.
(1) Due to the timing of bi-weekly pay period ending dates, the amounts for 1999
include 27 pay periods rather than the normal 26 pay periods.
(2) The amount in 2000 for Mr. Maxheim includes $28,060 of payments of dividend
equivalents on units awarded, but not yet distributed, under the Executive
Long-Term Incentive Plan and $21,936, including assumed income tax
liabilities, for the gift of a company vehicle upon the occasion of his
retirement. The amounts in 2000 for all other listed officers are solely for
dividend equivalents.
(3) These amounts for 2000 consist of the following:
<TABLE>
<CAPTION>
Maxheim Schiefer Skains Killough Dzuricky Linville
------- -------- ------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Insurance premiums plus assumed income tax
liabilities under the Supplemental Executive
Benefit Plan (SEBP).............................. $27,625 $67,964 $7,233 $14,913 $20,778 $25,714
Salary continuation accruals under the SEBP........ -- 18,360 -- -- -- --
Company contributions to the Salary Investment
Plan............................................. 4,904 5,250 5,250 5,250 5,250 5,324
</TABLE>
9
<PAGE> 13
EMPLOYMENT CONTRACTS AND TERMINATION, SEVERANCE AND CHANGE-OF-CONTROL
ARRANGEMENTS
On December 1, 1999, Mr. Schiefer entered into a two-year employment
agreement with the Company, effective December 1, 1999 (the "Commencement
Date"), at an initial base salary of $288,000 per annum. Mr. Schiefer's base
salary may be increased from time to time to reflect the duties required of him.
In reviewing his base salary, the Board of Directors considers the overall
performance of Mr. Schiefer, the service Mr. Schiefer renders to the Company and
its subsidiaries, and changes in the cost of living. Mr. Schiefer is also
entitled to participate in any plan relating to incentive compensation, stock
options, stock purchase, pension, thrift, profit-sharing, group life insurance,
medical coverage, disability coverage, education, or other retirement or
employee benefits that the Company has adopted, or may from time to time adopt,
for the benefit of its executive employees and for employees generally. Mr.
Schiefer is also entitled to such customary fringe benefits, vacation and sick
leave as are consistent with the normal practices and established policies of
the Company.
The agreement is automatically extended to a full one-year period on each
successive day during the term of the agreement, unless written notice is given
that the agreement shall not be extended or the agreement is terminated due to a
change in control (as defined in the Severance Agreement described below) of the
Company, upon the death or total permanent disability of Mr. Schiefer, upon
sixty days' written notice of termination at any time by Mr. Schiefer, or upon
notice by the Board of Directors. The agreement shall not extend beyond the date
on which Mr. Schiefer reaches 65 years of age. The agreement contains a
noncompetition provision.
Effective December 1, 1999, David J. Dzuricky, Ray B. Killough and Thomas
E. Skains, senior executive officers of the Company, entered into employment
agreements (the "Employment Agreements") with the Company. The Board had
previously determined that the continued retention of the services of these
officers on a long-term basis was in the best interest of the Company in that it
promoted the stability of senior management and it enabled the Company to retain
the services of a well-qualified officer with extensive contacts in the natural
gas industry.
The term of employment under the Employment Agreements is for a one-year
period commencing December 1, 1999. All such Employment Agreements shall
automatically be extended to a full one-year period on each successive day
during the term of each Employment Agreement. If written notice from the Company
or the officer is delivered to the other party advising the other party that the
Employment Agreement is not to be further extended, then the Employment
Agreement is terminated on the first anniversary of the date of notice. No
extension shall allow the Employment Agreements to extend beyond the date on
which the officer reaches 65 years of age.
Each officer's base salary may be increased from time to time by the Board
as reflected by the duties required of the officer. Each Employment Agreement
contains a covenant not to compete with the Company or its subsidiaries for the
term of the Employment Agreement without prior written consent of the Company.
Each Employment Agreement shall be terminated upon the death or permanent
disability of the officer. Pursuant to the terms of each Employment Agreement,
compensation shall continue to be paid through the end of the month in which the
officer died. In the case of permanent disability, if the officer is absent from
the full-time performance of his duties for six months, the Company shall
terminate the officer after thirty days notice.
10
<PAGE> 14
Each of the four senior executive officers has also entered into a
Severance Agreement with the Company. If such officer is terminated following a
Change in Control, other than (i) by the Company for cause, (ii) by reason of
death or disability, or (iii) by the officer without good reason, including
retirement from the Company by the officer, then the Company shall pay the
officer a lump sum severance payment, in cash, equal to three times the
officer's annual compensation prior to the officer's termination of employment
date (the "Date of Termination"). Furthermore, for a three-year period following
the Date of Termination, the Company shall arrange to provide the officer and
their dependents life, disability, accident and health insurance benefits
substantially similar to those provided to the officer and their dependents
immediately prior to the Date of Termination.
RETIREMENT PLAN
The Company maintains a defined benefit plan (the "Retirement Plan") which
covers all full-time employees upon attainment of age 21 and completion of one
year of service, or attainment of age 30. The full cost of the Retirement Plan
is paid by the Company. Benefits under the Retirement Plan become fully vested
prior to normal retirement age upon the completion of five years of service, and
are determined by a step-rate formula which utilizes the participant's covered
compensation, final average earnings and credited years of service.
In the event of retirement at or after age 65, the average Retirement Plan
participant with maximum credited service of 35 years is, in general, entitled
to an annual pension for life in an amount which, when added to primary Social
Security benefits, will equal approximately 75% of the participant's average
annual compensation during the five consecutive years of the last ten years
prior to retirement during which the participant received his or her highest
compensation. Benefits are also provided under the Retirement Plan in the event
of early retirement at or after age 55 with ten years of credited service and in
the event of retirement for disability.
The Retirement Plan provides for fixed benefits computed on an actuarial
basis for all covered employees. The amount of the contribution, payment or
accrual by the Company with respect to a specified person under the Retirement
Plan cannot readily be separately or individually calculated. The Company was
not permitted by law to make a deductible contribution to the Retirement Plan
during the 2000 Plan year, as it was determined by actuaries that the Retirement
Plan met the definition of "fully funded" under Section 214(c)(6) of the Tax
Code.
Based upon current remuneration of the individuals named in the Summary
Compensation Table and their expected credited years of service at normal
retirement age (65) (except for Mr. Maxheim who has retired), the estimated
annual retirement benefits payable upon retirement to each of the named
individuals and their credited years of service as of October 31, 2000, are as
follows: Mr. Schiefer, $87,888, 35 years; Mr. Dzuricky $76,943, five years; Mr.
Killough, $86,940, 27 years; Mr. Linville, $55,905, three years, and Mr. Skains
$79,751, five years.
11
<PAGE> 15
The amounts shown in the following table are those payable in the event of
retirement at age 65 on December 31, 2000. The table illustrates the estimated
normal annual retirement benefits payable under the Retirement Plan for the
specified remuneration and years of service classifications. The amounts shown
do not reflect reductions that would result from joint and survivor elections.
<TABLE>
<CAPTION>
ANNUAL BENEFITS UPON RETIREMENT
WITH YEARS OF SERVICE INDICATED
--------------------------------
FINAL AVERAGE ANNUAL EARNINGS 15 25 35
----------------------------- -------- --------- ---------
<S> <C> <C> <C>
$150,000.................................................... $52,301 $ 73,046 $ 79,669
200,000.................................................... 66,131 97,623 107,957
250,000.................................................... 73,451 113,904 127,341
300,000.................................................... 73,451 113,904 127,341
350,000.................................................... 73,451 113,904 127,341
400,000.................................................... 73,451 113,904 127,341
450,000.................................................... 73,451 113,904 127,341
</TABLE>
The Employee Retirement Income Security Act of 1974 places certain
limitations on benefits which may be paid under qualified plans. Current law
limits the amount payable in 2000 under a defined benefit plan to $135,000 and
limits compensation used in 2000 for determining benefits to $170,000 per year.
12
<PAGE> 16
COMPARISONS OF CUMULATIVE TOTAL SHAREHOLDER RETURNS
The following performance graph compares the Company's cumulative total
shareholder return from October 31, 1995 through October 31, 2000 (a five-year
period), to that of the Standard & Poor's Natural Gas index, an index of natural
gas utility companies (the "S&P Natural Gas"), and to that of the Standard &
Poor's 500 Stock Index, a broad market index (the "S&P 500"). The graph also
includes the A. G. Edwards Large Natural Gas Distribution Index (the "LDC Peer
Group") that will replace the Standard & Poor's 500 Natural Gas index. The LDC
Peer Group index includes large natural gas distribution companies that are more
representative of the Company's peers in the natural gas distribution industry
than those included in the S&P Natural Gas index.
The graph assumes that the value of an investment in Common Stock and in
each index was $100 on October 31, 1995, and that all dividends were reinvested.
Stock price performances shown on the graph are not indicative of future price
performances.
COMPARISONS OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
VALUE OF $100 INVESTED AT OCTOBER 31, 1995
<TABLE>
<CAPTION>
S & P NATURAL GAS
LDC PEER GROUP (1) (2) (PREVIOUS PEER
PIEDMONT S & P 500 (NEW PEER GROUP) GROUP)
-------- --------- ------------------ ------------------
<S> <C> <C> <C> <C>
1995 100 100 100 100
1996 117 124 125 146
1997 140 164 144 163
1998 181 200 161 186
1999 173 251 163 241
2000 174 266 162 378
</TABLE>
(1) LDC Peer Group -- The following companies are included: AGL
Resources, Inc., Atmos Energy Corporation, New Jersey Resources,
NICOR, Inc., Northwest Natural Gas Company,
13
<PAGE> 17
Peoples Energy Corporation, Piedmont Natural Gas Company, Southwest
Gas Corporation, Vectren Corporation, and Washington Gas Light
Company.
(2) S&P Natural Gas Index -- The following companies were included in
the previous peer group: Coastal Corporation, Dynegy, Incorporated,
El Paso Energy, Enron Corporation, Keyspan Corporation, NICOR, Inc.,
Nisource, Inc., ONEOK, Peoples Energy Corporation, Sempra Energy,
and Williams Companies, Inc.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors provides overall
guidance in the development of executive compensation programs, including the
Employee Salary Administration Plan and the Executive Long-Term Incentive Plan.
During 2000, the Committee was composed of four outside directors. The Committee
reviews the Performance Management Program for salaried employees, the chief
executive officer's compensation level and other officer compensation levels. In
addition, the Committee evaluates the performance of management and considers
management succession and related matters. To assist the Committee in its review
and evaluations, independent compensation consultants are periodically retained
to confirm the competitiveness of the Company's compensation policies and
practices. During 2000, The Hay Group conducted a comprehensive review of the
Company's pay practices for management positions.
The goals of the Compensation Committee are to create compensation packages
for officers and key managers which will attract and retain persons of
outstanding ability and to reward those officers and key managers for superior
corporate performance as measured by financial results and strategic
achievements. This provides a greater incentive for the officers and key
managers to make material contributions to the success of the Company,
shareholder value and the service provided to customers.
Executive compensation for 2000 was comprised primarily of two elements:
base salary and long-term incentive awards. The relative levels of base salary
for officers are designed to reflect each officer's scope of responsibility and
accountability. To determine the necessary amounts of base salary to attract and
retain top quality management, the Compensation Committee reviews salary and
other compensation arrangements in effect at comparable natural gas distribution
companies as well as a large number of other companies. The compensation policy
of the Company is that a substantial portion of the annual compensation of each
officer relates to and must be contingent upon the performance of the Company,
as well as the individual contribution of each officer. Therefore, a material
portion of an officer's compensation is "at risk" through long-term incentive
compensation. Target levels, depending upon management responsibilities, can
amount to approximately 30-50% of average annual salary compensation. Over time,
the compensation policy continues to place less emphasis on base salary and
greater emphasis on variable, performance-related long-term incentive
compensation. The goal of this policy is to further align the interests of
management with the interests of shareholders.
Regarding base salary compensation, the compensation for each of the five
highest paid officers for 2000 was reviewed and was found to be reasonable as
compared with executives in similarly situated positions in peer group companies
in view of the Company's performance and the contribution of those officers to
established performance standards.
The "at risk" component of the policy has been implemented through adoption
of an executive long-term incentive plan. The Board of Directors and
shareholders first approved such a plan in 1986. In 1996, the Board adopted a
substantially similar executive long-term incentive plan approved by
shareholders in 1997. Under
14
<PAGE> 18
this plan, the Board may award units (consisting of a combination of shares of
Common Stock and cash) to eligible participants. Depending upon the levels of
financial performance achieved by the Company during a performance period,
distribution of those awards may be made. The plan requires that a minimum
threshold be achieved in order for any award to be distributed.
In 1998, under the executive long-term incentive plan, the Board of
Directors, at the recommendation of the Compensation Committee, adopted a
five-year performance period program that is currently in effect where the
financial performance target is a 6% compounded, average increase in net
after-tax earnings. If this target is achieved, a distribution of the units may
be granted by the Board to eligible participants and distributed over a
three-year period. If performance exceeds targeted performance goals, up to 120%
of the units may be distributed as determined by the Board of Directors.
The general executive compensation policies described above also apply to
the recommendations made by the Compensation Committee and approved by the Board
(excluding Mr. Schiefer) with respect to the 2000 compensation for Mr. Schiefer
as President and Chief Executive Officer. The 2000 base salary of $342,000 for
Mr. Schiefer was based in part on the terms of his employment agreement with the
Company dated December 1, 1999, as described in the Company's proxy statement,
and on performance of his duties and responsibilities. Mr. Schiefer is also
eligible for awards of units under the Executive Long-Term Incentive Plan.
Submitted by the Compensation Committee
John W. Harris, Chairman
D. Hayes Clement
Sam J. DiGiovanni
Walter S. Montgomery, Jr.
AUDIT COMMITTEE REPORT
The following is the report of the Audit Committee with respect to the
Company's audited financial statements for the fiscal year ended October 31,
2000. The information contained in this report shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
future filing under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporates it by reference in such filing.
The Audit Committee of the Board of Directors assists the Board in
fulfilling its oversight responsibilities by reviewing the audit process, the
financial information which will be provided to shareholders and others and the
systems of internal controls which management has established. During 2000, the
Committee was composed of four outside directors, each of whom is independent of
the management of the Company. All members of the Audit Committee are
financially literate and the Chairman of the Audit Committee has accounting or
related financial management expertise.
Following the end of the 2000 fiscal year, the Audit Committee reviewed and
discussed the audited financial statements with management. The Audit Committee
also discussed with Deloitte & Touche LLP, the independent auditors of the
Company, the matters required to be discussed by SAS 61. The Audit
15
<PAGE> 19
Committee also received the written disclosures and a letter from Deloitte &
Touche LLP as required by Independence Standards Board Standard No. 1, and has
discussed with Deloitte & Touche LLP the independent accountants' independence.
Based upon the review and discussions referred to in the foregoing, the
Audit Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the year
ended October 31, 2000.
Sam J. DiGiovanni, Chairman
C. M. Butler III
D. Hayes Clement
John E. Simkins
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors,
executive officers and any persons holding more than ten percent of the
Company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in their ownership to the
Securities and Exchange Commission ("SEC"). Specific due dates have been
established by the SEC, and the Company is required to disclose in this proxy
statement any failure to file by those dates. Based upon (i) the copies of
Section 16(a) reports that the Company received from such persons for their 2000
fiscal year transactions and (ii) the written representations received from one
or more of such persons that no annual Form 5 reports were required to be filed
by them for the 2000 fiscal year, the Company believes that there has been
compliance with all Section 16(a) filing requirements applicable to such
officers, directors and ten percent beneficial owners for such fiscal year.
PROPOSALS FOR 2002 ANNUAL MEETING OF SHAREHOLDERS
Any shareholder proposal intended to be presented at the 2002 Annual
Meeting of Shareholders must be received by the Vice President, Corporate
Counsel and Secretary at the Company's executive offices no later than September
24, 2001, in order to be considered for inclusion in the Proxy Statement for
such meeting.
OTHER BUSINESS
The Board and management do not know of any other matters to be presented
at the Meeting. If other matters do properly come before the Meeting, it is
intended that the persons named in the accompanying form of proxy will vote the
proxies in accordance with their best judgment. The form of proxy confers
discretionary authority to take action with respect to any additional matters
that may come before the Meeting.
16
<PAGE> 20
MISCELLANEOUS
The Annual Report of the Company for the 2000 fiscal year, which includes
audited financial statements, is being mailed along with this Proxy Statement;
however, it is not intended that the Annual Report be a part of the Proxy
Statement or a solicitation of proxies.
Upon written request of a shareholder, the Company will provide, without
charge, a copy of its Annual Report on Form 10-K for the fiscal year, including
financial statements and schedules thereto, required to be filed with the SEC.
Requests should be directed to: Martin C. Ruegsegger, Vice President, Corporate
Counsel and Secretary, Piedmont Natural Gas Company, Inc., Post Office Box
33068, Charlotte, North Carolina 28233.
Shareholders are respectfully urged to complete, sign, date and return the
accompanying form of proxy in the enclosed envelope. In the alternative to
completing this form of proxy, you are urged to enter your vote instruction by
telephone or via the Internet as explained on the form of proxy enclosed with
this Proxy Statement. Your prompt response will be appreciated.
By order of the Board of Directors,
Martin C. Ruegsegger
Vice President, Corporate Counsel and
Secretary
January 23, 2001
17
<PAGE> 21
APPENDIX A
CHARTER OF THE AUDIT COMMITTEE
OF
THE BOARD OF DIRECTORS
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its responsibility for oversight of the quality and
integrity of the accounting, auditing and reporting practices of the Company and
other such duties as directed by the Board. It is the responsibility of the
Audit Committee to maintain free and open means of communication between the
directors, the Company's independent auditors, the Company's internal auditors,
and the financial management of the Company.
1. COMPOSITION OF COMMITTEE.
The Audit Committee shall consist of three (3) or more "Independent
Directors" selected by the Board from among its members. For the purposes of
this paragraph, an "Independent Director" means a director who has no
relationship to the Company that may interfere with the exercise of his or her
independence from management of the Company and who is not subject to the
following restrictions:
(a) Employees. A director who is an employee (including non-employee
executive officers) of the Company or any of its affiliates may not serve
on the Audit Committee until three years following the termination of his
or her employment.
(b) Business Relationship. A director (i) who is a partner,
controlling shareholder, or executive officer of an organization that has a
business relationship with the Company, or (ii) who has a direct business
relationship with the Company (e.g., a consultant) may serve on the Audit
Committee only if the Company's Board of Directors, after considering the
materiality of the relationship to the Company, to the director, and, if
applicable, to the organization with which the director is affiliated,
determines in its business judgment that the relationship does not
interfere with the director's exercise of independent judgment. "Business
relationships" can include commercial, industrial, banking, consulting,
legal, accounting and other relationships. A director can have this
relationship directly with the Company, or the director can be a partner,
officer or employee of an organization that has such a relationship. The
director may serve on the Audit Committee without the above-referenced
Board of Directors' determination after three years following the
termination of, as applicable, either (1) the relationship between the
organization with which the director is affiliated and the Company, (2) the
relationship between the director and his or her partnership status,
shareholder interest or executive officer position, or (3) the direct
business relationship between the director and the Company.
(c) Cross Compensation Committee Link. A director who is employed as
an executive of another corporation where any of the Company's executives
serves on that corporation's compensation committee may not serve on the
Audit Committee.
(d) Immediate Family. A director who is an "Immediate Family" member
of an individual who is an executive officer of the Company or any of its
affiliates cannot serve on the Audit Committee until three years following
the termination of such employment relationship. "Immediate Family" means a
person's spouse, parents, children, siblings, mothers-in-law and
fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, and
anyone (other than employees) who shares such person's home.
A-1
<PAGE> 22
Notwithstanding the above, one director who is no longer an employee or who
is an Immediate Family member of a former executive officer of the company or
its affiliates, but is not considered independent pursuant to these provisions
due to the three-year restriction period, may be appointed, under exceptional
and limited circumstances, to the Audit Committee if the Company's board of
directors determines in its business judgment that membership on the Committee
by the individual is required by the best interests of the corporation and its
shareholders, and the Company discloses, in the next annual proxy statement
subsequent to such determination, the nature of the relationship and the reasons
for that determination.
Each member of the Audit Committee shall be "Financially Literate" or must
become Financially Literate within a reasonable period of time after his or her
appointment to the Audit Committee. "Financially Literate" shall mean the
possession of general knowledge of financial, accounting and auditing matters.
At least one member of the Audit Committee must have accounting or related
"Financial Management Expertise." Unless the Board of the Directors determines
otherwise, a member shall be deemed to have accounting or related Financial
Management Expertise if he or she has at any time (a) been a certified public
accountant or (b) served as a chief executive officer, chief financial officer,
treasurer, controller or a similar position with a publicly traded corporation.
A member who is not deemed to have Financial Management Expertise by the
preceding sentence may nevertheless satisfy the requirement to have accounting
or related Financial Management Expertise if the Board of Directors so
determines in the exercise of its business judgment.
2. COMMITTEE GOVERNANCE AND MEETINGS.
The Board shall designate the chair of the Audit Committee. The Audit
Committee may determine its own rules of procedure. The Audit Committee shall
meet at least twice annually, or more frequently as circumstances dictate.
3. SCOPE OF RESPONSIBILITIES.
In recognition of the fact that the outside auditors for the Company are
ultimately accountable to the Board of Directors and the Audit Committee, the
Audit Committee and the Board of Directors have the ultimate authority and
responsibility to select, evaluate and, where appropriate, replace the outside
auditor (or to nominate the outside auditor to be proposed for shareholder
approval or ratification in any proxy statement). In addition, the Audit
Committee is responsible for (a) ensuring that the outside auditors submit on a
periodic basis to the Audit Committee a formal written statement delineating all
relationships between the auditors and the Company and (b) actively engaging in
a dialogue with the outside auditors with respect to any disclosed relationships
or services that may impact the objectivity and independence of the outside
auditors and for recommending that the Board of Directors take appropriate
action in response to the outside auditors' report to satisfy itself of the
outside auditors' independence.
To fulfill its responsibilities and duties, the Audit Committee shall:
(1) Recommend the selection (and, if appropriate, the replacement) of
the Company's independent auditors for approval by the Board of Directors;
(2) Review the degree of independence of the Company's independent
auditors by discussing all significant relationships between the auditors
and the Company and ensure that the independent auditors submit on a
periodic basis a formal written statement delineating all relationships
between such independent auditors and the Company;
A-2
<PAGE> 23
(3) Review the performance of the Company's independent auditors and
review and, if appropriate, approve the fees and compensation to be paid to
such independent auditors;
(4) Require the independent auditors to discuss with the Audit
Committee their judgments about the quality of the Company's present and
proposed accounting principles and financial disclosure practices;
(5) Review with the independent auditors the performance of the
Company's internal auditors and financial and accounting personnel and the
adequacy and effectiveness of the accounting and financial controls of the
corporation;
(6) Review the internal audit function of the Company, including the
independence and authority of its reporting obligations, the proposed audit
plans for the coming year, and the coordination of such plans with the
independent auditors;
(7) Keep advised, through consultation with the General Counsel to the
Company, the financial officers of the Company and the Company's
independent auditors, as to the programs being followed by the Company's
management to comply with applicable law, to deal with related party
transactions and to avoid conflicts of interest;
(8) Review and reassess the adequacy of the Audit Committee's charter
on an annual basis and, if appropriate, submit any proposed amendments
thereto to the Board of Directors for its consideration;
(9) Provide the Audit Committee Report required by the Rules and
Regulations of the Securities and Exchange Commission to be inserted in the
Company's proxy statement at least once every three years.(1)
(10) Provide the written affirmations required by the New York Stock
Exchange.(2)
(11) Review with management and the independent auditors the company's
quarterly financial information prior to the Company's filing of Form 10-Q.
This review may be performed by the Committee or its chairperson;
Perform any other activities consistent with this Charter, the Company's By-laws
and governing law, as the Committee or the Board deems necessary or appropriate.
---------------
(1) Item 306 of Regulation S-K promulgated under the Securities Exchange
Act of 1934 requires the report to state whether:
(1) The Audit Committee has reviewed and discussed the audited
financial statements with management;
(2) The Audit Committee has discussed with the independent auditors
the matters required to be discussed by SAS 61 (Codification of Statements
on Auditing Standards, AU sec. 380), as may be modified or supplemented;
(3) The Audit Committee has received the written disclosures and the
letter from the independent accountants required by Independence Standards
Board Standard No. 1 (Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees), as may be modified or
supplemented, and has discussed with the independent accountant the
independent accountant's independence; and
A-3
<PAGE> 24
(4) Based on the review and discussions referred to in paragraphs (1)
through (3) above, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in the
Company's Annual Report on Form 10-K (17 CFR 249.310) for the last fiscal
year for filing with the Commission.
Item 306 also requires that the name of each member of the Company's Audit
Committee appear below the required disclosure.
The Company is also required to disclose in its proxy statements whether the
Board of Directors has adopted a written charter for the Audit Committee, and if
so, to include a copy of the charter as an appendix to the Company's proxy
statements at least once every three years. The Company must also disclose
whether the members of the Audit Committee are "independent."
(2) The rules of the New York Stock Exchange provide that with respect to
any subsequent changes to the composition of the audit committee, and otherwise
approximately once each year, each company should provide the Exchange written
confirmation regarding:
"(1) any determination that the company's Board of Directors has made
regarding the independence of directors pursuant to any of the
subparagraphs above;
(2) the financial literacy of the audit committee members;
(3) the determination that at least one of the audit committee
members has accounting or related financial management expertise; and
(4) the annual review and reassessment of the adequacy of the audit
committee charter."
A-4
<PAGE> 25
PIEDMONT NATURAL GAS COMPANY, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS ON FEBRUARY 23, 2001
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
AS AN ALTERNATIVE TO COMPLETING THIS FORM, YOU MAY ENTER YOUR VOTE INSTRUCTION
BY TELEPHONE AT 1-800-PROXIES, OR VIA THE INTERNET AT WWW.VOTEPROXY.COM AND
FOLLOW THE SIMPLE INSTRUCTIONS.
The undersigned hereby appoints John H. Maxheim, Walter S. Montgomery, Jr.,
and Ware F. Schiefer and each of them, with full power of substitution and power
to act alone, as proxies to vote all the shares of Common Stock which the
undersigned would be entitled to vote if personally present and acting at the
Annual Meeting of Shareholders of Piedmont Natural Gas Company, Inc., to be held
February 23, 2001, and at any adjournment or adjournments thereof, as follows:
The Board of Directors recommends a vote FOR the following proposals:
A. ELECTION OF DIRECTORS
<TABLE>
<S> <C>
[ ] FOR the nominees listed below [ ] WITHHOLD AUTHORITY to vote for all
(except as indicated to the contrary below) nominees listed below
</TABLE>
Jerry W. Amos, D. Hayes Clement, John H. Maxheim and Walter S. Montgomery, Jr.
(To withhold authority to vote for any individual nominee, write that nominee's
name in the space provided below.)
--------------------------------------------------------------------------------
B. RATIFICATION OF SELECTION OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on the reverse side)
(Continued from other side)
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting. This proxy when properly
executed will be voted as directed herein by the undersigned shareholder. If no
direction is made, this proxy will be voted for proposals A and B.
Dated: , 2001
------------------
------------------------------
Signature of Shareholder
------------------------------
Signature (if held jointly)
Please sign exactly as name
appears hereon, date and
return in the enclosed
business reply envelope. Joint
owners should each sign
personally. Corporation
proxies should be signed by an
authorized officer. Executors,
administrators, trustees,
etc., should so indicate when
signing.
TELEPHONE VOTE AT
1-800-PROXIES OR
INTERNET VOTE AT
WWW.VOTEPROXY.COM
