SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (x(Amendment No. )
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( ) Soliciting Material Pursuant to (section mark)Section 240.14a-11(c) or (section mark)Section 240.14a-12
Duke Power CompanyDUKE ENERGY CORPORATION
(Name of Registrant as Specified In Itsin its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, If Other Thanif other than Registrant)
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DUKE POWER COMPANY
422 SOUTH CHURCH STREET
CHARLOTTE, NORTH CAROLINA 28242
W. H. GRIGG
(Duke Energy Duke Energy Corporation
logo) 422 South Church Street
P.O. Box 1244
Charlotte, NC 28201-1244
R.B. PRIORY
Chairman of the Board
March 18, 199616, 1998
Dear Shareholder:
It is my pleasureYou are cordially invited to invite you to ourattend the annual shareholders meeting, which
will be held on Thursday, April 25, 1996,16, 1998, at 10 a.m., in the PeaceO. J. Miller
Auditorium in the Energy Center, for
the Performing Arts, 101 West Broad526 South Church Street, Greenville, SouthCharlotte, North
Carolina. This markswill be our first annual meeting as Duke Energy Corporation. It
will provide a good opportunity for us to report to you our progress following
the first time in many years that we have heldsuccessful completion of the meeting in a location
other thanmerger of Duke Power Company and PanEnergy
Corp, as well as to outline for you our Company headquarters.goals for 1998.
During the meeting, we will elect fourfive Class III directors to three-year
terms expiring in 2001, two Class II directors to one-year terms expiring in
1999 and one Class III director to a two-year term expiring in 2000. Also, we
will act upon the ratification of the appointment of auditors, act upon a
proposal to approve the 1998 Long-Term Incentive Plan of the Corporation, act
upon a Stockproposal to approve the Short-Term Incentive Plan for members of the
CompanyCorporation's Policy Committee and transact any other business that may come
before the meeting. The accompanying proxy statement contains further
information about all of these matters.
On behalf of the entire Board of Directors, I would like to express our
sincere appreciation to James V. Johnson,Buck Mickel, who will retire from the Board at the
annual meeting at age 72, concluding fourteenconclude twenty-two years of
valued service to the Company.Corporation with his retirement from the Board of
Directors at the meeting.
The Board of Directors and I hope you can attend the meeting, in Greenville,
and look
forward to seeing you. Even ifWhether or not you planexpect to attend, please sign and date
the enclosed form of proxy and return it promptly in the accompanying envelope
to ensure that your signedshares will be represented. If you attend the meeting, you
may withdraw any proxy as soon as possible.previously given and vote your shares in person.
Sincerely,
(Signature of W.H. Grigg)/s/ R. B. Priory
DUKE POWER COMPANYENERGY CORPORATION
422 SOUTH CHURCH STREET
P.O. BOX 1244
CHARLOTTE, NORTH CAROLINA 2824228201-1244
NOTICE OF 19961998 ANNUAL MEETING OF SHAREHOLDERS
March 18, 199616, 1998
To the ShareholdersHolders of Common Stock of
DUKE POWER COMPANY:ENERGY CORPORATION:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of Duke
Power CompanyEnergy Corporation (the "Corporation") will be held in O. J. Miller Auditorium
in the PeaceEnergy Center, for the Performing Arts, 101 West
Broad526 South Church Street, Greenville, SouthCharlotte, North Carolina, on
Thursday, April 25, 1996,16, 1998, at 10 a.m., for the following purposes:
(1) to elect fourfive directors who will constituteto Class I, two directors to Class II and
one director to Class III of the Board of Directors;
(2) to ratify the appointment of auditors;
(3) to act upon a proposal to approve the Duke Power Company StockEnergy Corporation 1998
Long-Term Incentive Plan;
(4) to act upon a proposal to approve the Duke Energy Corporation
Policy Committee Short-Term Incentive Plan; and
(4)(5) to transact such other business as may come before the meeting or
any adjournment or adjournments thereof.meeting.
The Board of Directors has fixed the close of business on March 1, 1996February 27, 1998
as the record date for the meeting.
It is important that your shares be represented at the meeting regardless
of the number of shares you may hold. Please complete, sign and date the
enclosed form of proxy and return it promptly in the enclosed envelope which
requires no postage if mailed within the United States.
By Order of the Board of Directors
W. EDWARD POE, JR.
SECRETARY
DUKE ENERGY CORPORATION
PROXY STATEMENT
This proxy statement, with the accompanying proxy card, is first being
mailed to holders of Common Stock on or about March 16, 1998 and is furnished in
connection with the solicitation of proxies by the Board of Directors of the
Corporation to be used at the annual meeting of shareholders to be held on April
16, 1998.
PROXIES; REVOCATION OF PROXIES
The accompanying form of proxy may be used by a holder of Common Stock
whether or not such holder attends the meeting in person. The proxy may be
revoked by such holder at any time prior to its use at the meeting. There is no
specific procedure or requirement under the Corporation's Restated Articles of
Incorporation, By-Laws or North Carolina law with respect to how proxies may be
revoked. All shares represented by valid proxies received pursuant to this
solicitation, and not revoked before such proxies are exercised, will be voted
in the manner specified therein. If no directions are given, the proxies will be
voted FOR the proposed slate of directors (Proposal 1); FOR the ratification of
the appointment of auditors (Proposal 2); FOR the proposal to approve the Duke
Energy Corporation 1998 Long-Term Incentive Plan (Proposal 3); FOR the proposal
to approve the Duke Energy Corporation Policy Committee Short-Term Incentive
Plan (Proposal 4); and AT THE DISCRETION OF THE PERSONS NAMED IN SUCH PROXIES ON
ANY OTHER MATTER THAT MAY COME BEFORE THE MEETING.
COST OF PROXY SOLICITATION
The entire cost of soliciting the proxies from holders of Common Stock will
be borne by the Corporation. In addition to the solicitation of the proxies by
mail, the Corporation will request banks, brokers and other record holders to
send proxies and proxy material to the beneficial owners of Common Stock and
secure their voting instructions. The Corporation will reimburse such record
holders for their reasonable expenses in so doing. The Corporation has also made
arrangements with Georgeson & Company, Inc. to assist it in soliciting proxies
and has agreed to pay $17,500 plus expenses for such services. If necessary, the
Corporation may also use several of its officers and regular employees, who will
not be specially compensated, to solicit proxies from holders of Common Stock,
either personally or by telephone, telegram, facsimile, special delivery letter
or by other means.
RECORD DATE; QUORUM; VOTING RIGHTS
The Board of Directors has fixed February 27, 1998, as the record date (the
"Record Date") for determination of shareholders whoholders of Common Stock entitled to notice
of and to vote at the meeting. Accordingly, only holders of record of Common
Stock at the close of business on the Record Date will be entitled to notice of
and to vote at the meeting. Each shareholder is requested to date, sign and return the accompanying
proxy in the enclosed return envelope, to which no postage need be affixed if
mailed in the United States.
By orderThe number of the Board of Directors,
ELLEN T. RUFF
SECRETARY
DUKE POWER COMPANY
422 SOUTH CHURCH STREET
CHARLOTTE, NORTH CAROLINA 28242
PROXY STATEMENT
This proxy statement is furnished to the shareholders of Duke Power Company
(the Company) in connection with the solicitation of proxies to be used in
voting at the annual meeting of shareholders to be held on April 25, 1996. Only
holders of recordoutstanding shares of Common Stock
entitled to vote at the closemeeting is 360,149,391. In order to establish a quorum
for the meeting, a majority of business on March 1, 1996the votes entitled to be cast must be either
present in person or represented by valid proxy. Abstentions and broker
non-votes will be counted for purposes of determining whether a quorum exists at
the meeting.
Each share of Common Stock entitled to vote at the meeting entitles its
holder to one vote. Directors will be elected by a plurality of the votes cast
by the holders of Common Stock entitled to vote at the meeting. On such date, there were outstanding
204,859,339 shares"Plurality"
means that the individuals who receive the largest number of votes cast are
elected as directors up to the maximum number of directors to be chosen at the
meeting. Approval by a majority of the votes cast by holders of Common Stock is
required to approve Proposals 2, 3 and 4. Any shares not voted, whether by
abstention or broker non-vote, will not be counted as votes cast for purposes of
determining whether Proposals 2, 3 and 4 have received sufficient votes for
approval, nor will any abstentions or broker non-votes be counted in the
election of directors.
MULTIPLE COPIES OF ANNUAL REPORT TO SHAREHOLDERS
The Corporation's Annual Report to Shareholders has been mailed to all
shareholders. The Annual Report is not to be regarded as proxy soliciting
material. If more than one copy of the Annual Report is sent to your address and
you wish to reduce the number of Annual Reports you receive and save the
Corporation the cost of producing and mailing these reports, the Corporation
will discontinue the mailing of reports if you mark the appropriate box on each
shareproxy card for which you do not wish to receive an Annual Report. Mailing of
which entitlesdividends, dividend reinvestment and stock purchase statements, proxy materials
and special notices will not be affected by your election to discontinue
duplicate mailings of the Annual Report.
At least one account must continue to receive an Annual Report. To
discontinue or resume the mailing of an Annual Report to an account,
shareholders of record may also call the Investor Relations Department at (800)
488-3853.
If you own Common Stock through a bank, broker or other nominee and receive
more than one Annual Report of the Corporation, contact the holder of record to
one vote.eliminate duplicate mailings.
ADVANCE NOTICE PROCEDURES
Under the Corporation's By-Laws, nominations for director may be made only
by the Board of Directors or by a shareholder entitled to vote who has delivered
notice to the Corporation not less than 90 nor more than 120 days prior to the
first anniversary of the preceding year's annual meeting.
The enclosed proxy is solicited on behalfCorporation's By-Laws also provide that no business may be brought
before an annual meeting except as specified in the notice of the meeting or as
otherwise brought before the meeting by or at the direction of the Board of
Directors or by a shareholder entitled to vote who has delivered notice to the
Corporation (containing certain information specified in the By-Laws) within the
time limits described above for delivering notice of a nomination for the
election of a director. These requirements apply to any matter that a
shareholder wishes to raise at an annual meeting other than pursuant to the
procedures under Rule 14a-8 of the Company. Such proxy material was first forwardedSecurities and Exchange Commission ("SEC").
A copy of the full text of the By-Law provisions discussed above may be
obtained by writing to the shareholders on or about
March 18, 1996. Any shareholder giving a proxy may revoke it at any time prior
to its use at the meeting.
The Company will bear the costSecretary of the solicitation of proxies including the
charges and expenses of brokerage firms and others for forwarding solicitation
material to beneficial owners of shares of the Common Stock of the Company. In
addition to the use of the mails, proxies may be solicited by personal
interview, telephone or telegraph. Additionally, the Company has retained
Georgeson & Co. to solicit proxies in the same manner, at an anticipated cost to
the Company of approximately $12,500.Corporation, Post Office Box 1244,
Charlotte, North Carolina 28201-1244.
ELECTION OF DIRECTORS
(PROPOSAL 1)
The Company'sCorporation's Restated Articles of Incorporation provide that the Board
of Directors shallis to be divided into three classes, as nearly equal in size as
possible. Each year the directors of one class are elected to serve terms of
three years.
FourFive persons have been nominated by the Board of Directors for election as
directors to Class III at this annualthe meeting, to serve three-year terms and until their
successors are duly elected and qualified. The Class I nominees are G. Alex
Bernhardt,Ann Maynard
Gray, Dennis R. Hendrix, Harold S. Hook, W. A. Coley, W. H. GriggJohnson and Max Lennon.Russell M. Robinson,
II. All of the Class III nominees are currently Class III directors with the
exception of Mr. Bernhardt,Ms. Gray, who presently serves asis currently a Class III director. In addition, the
Board of Directors has nominated for election by the shareholders to their
current classes each other director butappointed as a director at the effective
time of the merger of the Corporation and PanEnergy Corp ("PanEnergy").
Accordingly, Paul M. Anderson and Leo E. Linbeck, Jr. have been nominated for
election as directors to Class II, with terms expiring in 1999, and William T.
Esrey has been nominated to serve in
Class II in order to balance as nearly as possible the number of directors in
each class. James V. Johnson will retire as a director to Class II director at the
expiration of his currentIII, with a term on April 25, 1996.expiring in
2000.
Votes (other than votes withheld) will be cast pursuant to the accompanying
proxy for the election of the nominees listed unless, by reason of death or
other unexpected occurrence, one or more of such nominees shall not be available
for election. In that event, it is intended that such votes will be cast for
such substitute nominee or nominees as may be determined by the persons named in
such proxy. The Board of Directors has no reason to believe that any of the
nominees listed will not be available for election as a director.
Directors are elected by a plurality of the votes cast by the holders of
the Common Stock of the Company at a meeting at which a quorum is present.
"Plurality" means that the individuals who receive the largest number of votes
cast are elected as directors up to the maximum number of directors to be chosen
at the meeting. Consequently, any shares not voted (whether by abstention,
broker nonvote or otherwise) have no impact in the election of directors except
to the extent the failure to vote for an individual results in another
individual receiving a larger number of votes.2
CLASS II
NOMINEES FOR ELECTION TO THE BOARD OFAS DIRECTORS
CLASS I NOMINEES
(TERM EXPIRING IN 1999)2001)
- --------------------------- ANN MAYNARD GRAY, VICE PRESIDENT, ABC, INC. AND FORMER PRESIDENT, DIVERSIFIED PUBLISHING
(Photo) G. ALEX BERNHARDT, PRESIDENTGROUP OF ABC, INC., TELEVISION, RADIO AND CHIEF EXECUTIVE OFFICER, BERNHARDT FURNITURE COMPANY,
FURNITURE MANUFACTURERS
Mr. Bernhardt, 52,PUBLISHING
Ms. Gray, 53, was electedappointed a director in June 1997 upon the merger of the Corporation and
PanEnergy. She had been a director of PanEnergy since 1994. She serves on the Audit and
Corporate Performance Review Committees. She was President, Diversified Publishing Group of
ABC, Inc. from 1991 until 1997, and has been a Corporate Vice President of ABC, Inc. and its
predecessors since 1979. She is a director of Cyprus Amax Minerals Company.
- --------------------------- DENNIS R. HENDRIX, RETIRED CHAIRMAN OF THE BOARD, PANENERGY CORP
(Photo) Mr. Hendrix, 58, was appointed a director in June 1997 upon the merger of the Corporation and
PanEnergy. He had been a director of PanEnergy since 1990. He serves on the Corporate
Performance Review Committee. He has been associated with Bernhardt Furniture Company of
Lenoir, North Carolina, since 1965.and Nominating Committees. He was namedChairman of the Board of PanEnergy from
1990 to 1997; Chief Executive Officer of PanEnergy from 1990 to 1995; and President andof
PanEnergy from 1990 to 1993. He served as a director in 1976.of Panhandle Eastern Pipe Line Company
("PEPL") and Texas Eastern Transmission Corporation ("TETCO") from 1990 to 1997; Chairman of
the Board of PEPL and TETCO from 1990 to 1994; and President of TETCO from 1990 to 1994. He
is a director of Robert Talbott,Allied Waste Industries, Inc., National Power, PLC and First Union Corporation.Newfield Exploration
Company.
- --------------------------- HAROLD S. HOOK, CONSULTANT, RETIRED CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF AMERICAN GENERAL
(Photo) CORPORATION, DIVERSIFIED FINANCIAL SERVICES
Mr. Hook, 67, was appointed a director in June 1997 upon the merger of the Corporation and
PanEnergy. He had been a director of PanEnergy since 1978. He serves on the Corporate
Performance Review and Finance Committees. Mr. Hook retired from American General Corporation
in 1997 after more than 18 years as Chairman and Chief Executive Officer. He serves as a
trustee
of Davidson College and a member of the North Carolina Governor's Business Council. He
is a director emeritus of the American Furniture Manufacturers Association.
(Photo) W. A. COLEY, PRESIDENT, ASSOCIATED ENTERPRISES GROUP, DUKE POWER COMPANY
Mr. Coley, 52, joined the Company in 1966 and was elected a director in 1990. He was
named Vice President, Operation, in 1984; Vice President, Central Division, in 1986;
Senior Vice President, Power Delivery, in 1988; Senior Vice President, Customer Group,
in 1990; Executive Vice President, Customer Group, in 1991 and was appointed to his
present position in 1994. He serves on the Management, Corporate Performance Review,
Retirement Plan and Stock Purchase-Savings Program Committees. He is a director of Carolina Pad and Paper Company, and serves on the Boards of Trustees of Charlotte Latin
School, Queens College, Union Theological Seminary and Presbyterian Hospital.
(Photo) W. H. GRIGG, CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER, DUKE POWER COMPANY
Mr. Grigg, 63, joined the Company in 1963, was named Vice President and General Counsel
in 1971 and became a director in 1972. He was elected Senior Vice President, Legal and
Finance, in 1975; Executive Vice President, Finance and Administration, in 1982;
Executive Vice President, Customer Group, in 1988; and Vice Chairman of the Board in
1991. He was named Chairman of the Board, President and Chief Executive Officer in April
1994, and Chairman of the Board and Chief Executive Officer in July 1994. He serves on
the Nominating, Finance, Retirement Plan and Stock Purchase-Savings Program Committees
and as Chairman of the Management Committee. He is a director of Hatteras Income
Securities, Inc., Nations Fund, Inc., the Research Triangle Foundation and the
Associated Electric and Gas Insurers, Ltd., and is a trustee of Johnson C. Smith
University.
2
(Photo) MAX LENNON, PRESIDENT, MARS HILL COLLEGE, MARS HILL, NORTH CAROLINA
Dr. Lennon, 55, was elected a director in 1988 and is Chairman of the Audit Committee.
He assumed his present position in early 1996, after serving as President of Eastern
Foods, Inc. from 1994 through 1995. He was previously involved in higher education from
1966 to 1994, his last tenure being at Clemson University where he served as President
for eight years. He is a director of First UnionChase Manhattan Corporation, and Delta Woodside
Industries, Inc.
DIRECTORS CONTINUING IN OFFICE
(Photo) CRANDALL C. BOWLES, EXECUTIVE VICE PRESIDENT, SPRINGS INDUSTRIES, INC., HOME
FURNISHINGS, FINISHED FABRICS AND INDUSTRIAL TEXTILES COMPANY
Mrs. Bowles, 48, was elected a director in 1988 and serves on the Compensation and
Finance Committees. Prior to attaining her current position in 1992, she served as
President of The Springs Company for ten years. She is a director of SpringsChase Manhattan Bank, Cooper Industries, Inc.
and Wachovia Corporation. She is a Class III director with a term expiring in 1997.
(Photo) ROBERT J. BROWN, CHAIRMAN AND PRESIDENT, B&C ASSOCIATES, INC., MARKETING RESEARCH AND
PUBLIC RELATIONS FIRM
Mr. Brown, 61, was elected a director in 1994 and serves on the Audit Committee. He
founded B&C Associates, Inc., High Point, North Carolina, in 1960 and served as its
President from 1960 until 1968 and its Chairman and President from 1973 to the present.
From 1968 until 1973, Mr. Brown was a Special Assistant to the President of the United
States, with oversight responsibility for community relations, civil rights, emergency
preparedness and day care. He is a director of First Union Corporation, Pacific National
Financial Group, Sonoco Products Company and North Carolina Citizens for Business and
Industry. He is a Class III director with a term expiring in 1997.
3
(Photo) STEVE C. GRIFFITH, JR., VICE CHAIRMAN OF THE BOARD AND GENERAL COUNSEL, DUKE POWER
COMPANY
Mr. Griffith, 62, joined the Company in 1964 as Assistant General Counsel, was named
Secretary and Associate General Counsel in 1971 and was appointed General Counsel in
1975. He was named a Vice President in 1977 and a Senior Vice President in 1982, at
which time he was elected a director. He was named an Executive Vice President in 1991
and assumed his present position in July 1994. Mr. Griffith serves on the Management,
Retirement Plan and Stock Purchase-Savings Program Committees. He is a Fellow of the
American Bar Foundation and a member of the American Bar Association, the North Carolina
State Bar and the South Carolina Bar. He also serves on the Board of Governors of the
Research Triangle Institute and the boards of the Charlotte Center for Urban Ministry,
the Arts & Science Council and the Mint Museum of Art. He is a Class I director with a
term expiring in 1998.
(Photo) PAUL H. HENSON, CHAIRMAN, KANSAS CITY SOUTHERN INDUSTRIES, INC., HOLDING COMPANY FOR
RAILROAD OPERATIONS AND FINANCIAL SERVICES
Mr. Henson, 70, was elected a director in 1976. He is Chairman of the Corporate
Performance Review Committee and also serves on the Nominating and Compensation
Committees. He became Chairman of the Board of Kansas City Southern Industries, Inc. in
1990 following his retirement as Chairman of Sprint Corporation.
He is a director of
Armco Inc. and Kansas City Southern Industries, Inc. He is a Class I director with a
term expiring in 1998.
(Photo) GEORGE DEAN JOHNSON, JR., PRESIDENT AND CHIEF EXECUTIVE OFFICER, EXTENDED STAY AMERICA,
DEVELOPMENT, OWNERSHIP AND MANAGEMENT OF EXTENDED-STAY LODGING FACILITIES
Mr. Johnson, 53, was elected a director in 1986. He is Chairman of the Finance Committee
and also serves on the Nominating Committee. Mr. Johnson began his legal career in 1967
when he joined Johnson, Smith, Hibbard and Wildman. He was General Partner of WJB Video,
a Blockbuster Video franchisee, from 1987 to 1993, and served as President of the
Domestic Consumer Division of Blockbuster Entertainment Corporation from 1993 until
1995. He assumed the position of President and Chief Executive Officer of Extended Stay
America in 1995. He is also Chairman of Johnson Development Associates, Inc. and a
director of Viacom, Inc., Extended Stay America and Republic Industries, Inc. He also
serves as Chairman of the Board of Trustees of Converse College. He is a Class III
director with a term expiring in 1997.
4
(Photo)- --------------------------- W. W. JOHNSON, CHAIRMAN OF THE EXECUTIVE COMMITTEE, NATIONSBANK CORPORATION
(Photo) Mr. Johnson, 65,67, was elected a director in 1984. He is Chairman of the NominatingCompensation Committee
and also serves on the Finance Committee. He is Chairman of the Executive Committee of
NationsBank Corporation. Mr. Johnson was since 1980, Chairman of the Board and Chief Executive Officer of
Bankers Trust of South Carolina which mergedfrom 1980 until its merger in January 1986 with NationsBank
Corporation in January 1986. He is a director of NationsBank Corporation,
ALLTEL Corporation and The Liberty Corporation. He is a Class I director with a term
expiring in 1998.
(Photo) JAMES G. MARTIN, VICE PRESIDENT, DEVELOPMENT AND CHAIRMAN, RESEARCH DEVELOPMENT BOARD,
CHARLOTTE-MECKLENBURG HOSPITAL AUTHORITY
Mr. Martin, 60, was elected a director in 1994 and serves on the Corporate Performance
Review Committee. Since January 1993, he has been Chairman of the Research Development
Board of the Charlotte-Mecklenburg Hospital Authority, located at Carolinas Medical
Center, Charlotte, North Carolina. He was named Vice President, Development in 1995. He
served as Governor of the State of North Carolina from 1985 to 1993 and was a member of
the United States House of Representatives, representing the Ninth District of North
Carolina, from 1972 until 1984. Mr. Martin is currently a director of J. A. Jones, Inc.,
Carolina Freight Corporation and Meadowbrook Healthcare Services, Inc. He is Chairman of
the Global TransPark Foundation, Inc. and a member of the University of North Carolina
Board of Governors. He is a Class III director with a term expiring in 1997.
(Photo) BUCK MICKEL, RETIRED VICE CHAIRMAN, FLUOR CORPORATION
Mr. Mickel, 70, was elected a director in 1976. He is Chairman of the Compensation
Committee and also serves on the Corporate Performance Review Committee. He had been
associated with Daniel International since 1947 and served as its Chairman from 1974 to
1987. He served as President and later Vice Chairman of Fluor Corporation from 1977
until his retirement in 1987. He is a director of Emergent Group, FluorNationsBank Corporation, Monsanto Company,ALLTEL Corporation and The Liberty
Corporation, NationsBank Corporation, Delta Woodside
Industries, Inc., RSI Holdings, Inc., Textile Hall Corporation and Insignia Financial
Group, Inc. He is a life trustee of Clemson University and Converse College. He is a
Class I director with a term expiring in 1998.Corporation.
53
(Photo) R. B. PRIORY, PRESIDENT AND CHIEF OPERATING OFFICER, DUKE POWER COMPANY
Mr. Priory, 49, joined the Company in 1976 as a Design Engineer and was elected a
director in 1990. He was named Vice President, Design Engineering, in 1984; Senior Vice
President, Generation and Information Services, in 1988; Executive Vice President, Power
Generation Group, in 1991 and was appointed to his present position in July 1994. He
serves on the Management, Finance, Retirement Plan and Stock Purchase-Savings Program
Committees. He is President of Claiborne Energy Services, Inc., and is a director of J.
A. Jones Applied Research Corp. He serves on the boards of the Charlotte-Mecklenburg
Education Foundation, the North Carolina Chapter of The Nature Conservancy and the North
Carolina State University Engineering Foundation. He is also a member of the Board of
Visitors of the University of North Carolina at Charlotte and a member of the National
Academy of Engineering. He is a Class III director with a term expiring in 1997.
(Photo)- --------------------------- RUSSELL M. ROBINSON, II, ATTORNEY, ROBINSON BRADSHAW & HINSON, P.A.
(Photo) Mr. Robinson, 64,66, was elected a director in 1995 and serves on the Audit Committee.and Corporate
Performance Review Committees. He has been engaged in the practice of law since 1956, and is
the author of ROBINSON ON NORTH CAROLINA CORPORATION LAW. He is a director of Cadmus
Communications Corporation and Caraustar Industries, Inc. and also serves as a member of the
American Law Institute and a Fellow of the American Bar Foundation. He is Chairman of the Board of Trustees of
the University of North Carolina at Charlotte, a member of the
Board of Visitors of Duke University Law School, a trustee of The Duke Endowment and a
director of the Presbyterian Hospital Foundation.
CLASS II NOMINEES
(TERM EXPIRING IN 1999)
- --------------------------- PAUL M. ANDERSON, PRESIDENT AND CHIEF OPERATING OFFICER, DUKE ENERGY CORPORATION
(Photo) Mr. Anderson, 52, became President and Chief Operating Officer and a director in June 1997
upon the merger of the Corporation and PanEnergy. He had been a director of PanEnergy since
1992. He serves on the Management and Finance Committees. He was named Executive Vice
President of PanEnergy in 1991, President in 1993 and Chief Executive Officer in 1995. He
also served as President and Chief Executive Officer of PEPL from 1991 to 1994, became a
director in 1991 and was named Chairman of the Board in 1994. Mr. Anderson became a director
of TETCO in 1991 and Chairman of the Board in 1994. Previously, he was Vice President,
Finance and Chief Financial Officer of Inland Steel Industries, Inc. from 1990 to 1991. Mr.
Anderson is a director of Temple-Inland, Inc., Kerr-McGee Corporation and Texas Eastern
Products Pipeline Company ("TEPPCO"), a wholly owned indirect subsidiary of the Corporation
and the general partner of TEPPCO Partners, L.P., a publicly traded master limited
partnership.
- --------------------------- LEO E. LINBECK, JR., CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, LINBECK CORPORATION,
(Photo) HOLDING COMPANY OF FIVE CONSTRUCTION-RELATED FIRMS
Mr. Linbeck, 64, was appointed a director in June 1997 upon the merger of the Corporation and
PanEnergy. He had been a director of PanEnergy since 1986. He serves on the Audit and
Compensation Committees. He assumed his present position with Linbeck Corporation in 1990
after serving as Chairman, President and Chief Executive Officer of Linbeck Construction
Corporation from 1975 to 1990. He serves as a director of Daniel Industries, Inc. and as a
director and trustee of 33 investment companies managed by John Hancock Advisers, Inc.
4
CLASS III NOMINEE
(TERM EXPIRING IN 2000)
- --------------------------- WILLIAM T. ESREY, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, SPRINT CORPORATION, A DIVERSIFIED
(Photo) TELECOMMUNICATIONS HOLDING COMPANY
Mr. Esrey, 58, was appointed a director in June 1997 upon the merger of the Corporation and
PanEnergy. He had been a director of PanEnergy since 1985. He serves on the Compensation and
Nominating Committees. He has served as Chairman of Sprint Corporation since 1990 and as its
Chief Executive Officer since 1985. He was President of Sprint Corporation from 1985 to 1996.
He is a director of Sprint Corporation, Equitable Life Assurance Society of the United
States, General Mills, Inc. and Everen Capital Corporation.
DIRECTORS CONTINUING IN OFFICE
- --------------------------- G. ALEX BERNHARDT, SR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER, BERNHARDT FURNITURE COMPANY,
(Photo) FURNITURE MANUFACTURER
Mr. Bernhardt, 54, was elected a director in 1991. He is Chairman of the Corporate
Performance Review Committee and serves on the Finance Committee. He has been associated with
Bernhardt Furniture Company of Lenoir, North Carolina, since 1965. He was named President and
a director in 1976 and became Chairman and Chief Executive Officer in 1996. He is a director
of Robert Talbott, Inc. and First Union Corporation. He serves as a trustee of Davidson
College and a member of the North Carolina Governor's Business Council. He is a director
emeritus and past President of the American Furniture Manufacturers Association. He is a
Class III director with a term expiring in 1998.1999.
- --------------------------- ROBERT J. BROWN, CHAIRMAN AND PRESIDENT, B&C ASSOCIATES, INC., MARKETING RESEARCH AND PUBLIC
(Photo) RELATIONS FIRM
Mr. Brown, 63, was elected a director in 1994 and serves on the Audit and Corporate
Performance Review Committees. He founded B&C Associates, Inc., High Point, North Carolina,
in 1960, served as its President from 1960 until 1968 and has been its Chairman and President
since 1973. From 1968 until 1973, Mr. Brown was a Special Assistant to the President of the
United States, with oversight responsibility for community relations, civil rights, emergency
preparedness and day care. He is a director of First Union Corporation, Sonoco Products
Company, Republic Industries, Inc. and North Carolina Citizens for Business and Industry. He
is a Class III director with a term expiring in 2000.
5
- --------------------------- WILLIAM A. COLEY, GROUP PRESIDENT, DUKE POWER, ELECTRIC OPERATIONS OF DUKE ENERGY CORPORATION
(Photo) Mr. Coley, 54, joined the Corporation in 1966 and was elected a director in 1990. He was
named Vice President, Operation, in 1984; Vice President, Central Division, in 1986; Senior
Vice President, Power Delivery, in 1988; Senior Vice President, Customer Group, in 1990;
Executive Vice President, Customer Group, in 1991; President, Associated Enterprises Group,
in 1994 and was appointed to his present position in June 1997. He serves on the Management
Committee. He is a director of Carolina Pad and Paper Company and the North Carolina Board of
SouthTrust Bank. He also serves on the Boards of Trustees of the Lynnwood Foundation, Queens
College, Union Theological Seminary, Presbyterian Healthcare Systems, United Way of the
Central Carolinas and the Charlotte Chamber of Commerce and is on the Institutional Advisory
Board and the Engineering Advisory Board of the Georgia Institute of Technology. He is a
Class II director with a term expiring in 1999.
- --------------------------- GEORGE DEAN JOHNSON, JR., PRESIDENT AND CHIEF EXECUTIVE OFFICER, EXTENDED STAY AMERICA,
(Photo) DEVELOPMENT, OWNERSHIP AND MANAGEMENT OF EXTENDED-STAY LODGING FACILITIES
Mr. Johnson, 55, was elected a director in 1986. He is Chairman of the Finance Committee and
also serves on the Compensation Committee. Mr. Johnson began his legal career in 1967 when he
joined Johnson, Smith, Hibbard and Wildman as an attorney. He was General Partner of WJB
Video, a Blockbuster Video franchisee, from 1987 to 1993, and served as President of the
Domestic Consumer Division of Blockbuster Entertainment Corporation from 1993 until 1995. He
was a co-founder of Extended Stay America and has served as its President and Chief Executive
Officer since 1995. He is Chairman of Johnson Development Associates, Inc. Mr. Johnson is
also Chairman of the Board of Allrenco, Inc. and a director of Florida Panthers Holdings,
Inc., Extended Stay America and Republic Industries, Inc. He also serves on the Board of
Trustees of Converse College. He is a Class III director with a term expiring in 2000.
- --------------------------- MAX LENNON, PRESIDENT, MARS HILL COLLEGE, MARS HILL, NORTH CAROLINA
(Photo) Dr. Lennon, 57, was elected a director in 1988. He is Chairman of the Audit Committee and
also serves on the Nominating Committee. He assumed his present position as President of Mars
Hill College in 1996, after serving as President of Eastern Foods, Inc. from 1994 through
1995. He was previously involved in higher education from 1966 to 1994, his last tenure being
at Clemson University where he served as President for eight years. He is a director of Delta
Woodside Industries, Inc. He is a Class II director with a term expiring in 1999.
6
COMMON STOCK
- --------------------------- JAMES G. MARTIN, PH.D., VICE PRESIDENT, RESEARCH, CAROLINAS HEALTHCARE SYSTEM
(Photo) Mr. Martin, 62, was elected a director in 1994. He is Chairman of the Nominating Committee
and also serves on the Compensation Committee. Since January 1993, he has been Chairman of
the Research Development Board of the Carolinas HealthCare System located at Carolinas
Medical Center, Charlotte, North Carolina. He was named to his present position in 1995. He
served as Governor of the State of North Carolina from 1985 to 1993 and was a member of the
United States House of Representatives, representing the Ninth District of North Carolina,
from 1972 to 1984. Mr. Martin is currently a director of J. A. Jones, Inc., Palomar Medical
Technologies, Inc., Entropy, Inc., Reprogenesis, Inc. and Family Dollar Stores, Inc. He is
Chairman of the Global TransPark Foundation, Inc. and a Trustee of Davidson College and Wake
Forest University. He is a Class III director with a term expiring in 2000.
- --------------------------- RICHARD B. PRIORY, CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER, DUKE ENERGY CORPORATION
(Photo) Mr. Priory, 51, became Chairman of the Board and Chief Executive Officer in June 1997 upon
the merger of the Corporation and PanEnergy. He was elected a director in 1990. He joined the
Corporation in 1976 as a Design Engineer; was named Vice President, Design Engineering, in
1984; Senior Vice President, Generation and Information Services, in 1988; Executive Vice
President, Power Generation Group, in 1991 and President and Chief Operating Officer in 1994.
He is Chairman of the Management Committee and serves on the Finance and Nominating
Committees. He is a director of Dana Corporation, J. A. Jones Applied Research Corp. and
NationsBank Corporation. He serves on the boards of the Edison Electric Institute, the
Association of Edison Illuminating Companies and the Institute of Nuclear Power Operations.
He is a member of The National Petroleum Council and The Business Roundtable. Mr. Priory is
also a member of the National Academy of Engineering. He is a Class III director with a term
expiring in 2000.
7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERSNOMINEES, DIRECTORS AND MANAGEMENT
As of March 4, 1996,EXECUTIVE OFFICERS
The Duke Endowment, 100 North Tryon Street, Charlotte,
North Carolina 28202, beneficially owned 12,674,464 shares, or approximately
6.2%, oftable below sets forth the outstanding Common Stock of the Company. The Duke Endowment is a
common law trust administered by fifteen trustees, who also constitute all of
the trustees of the Doris Duke Trust, 1515 Mockingbird Lane, Charlotte, North
Carolina 28209, another common law trust, which, as of March 4, 1996,
beneficially owned 1,302,132 shares, comprising less than 1% of the outstanding
Common Stock of the Company. Russell M. Robinson, II, a director of the Company,
is a trustee of both The Duke Endowment and the Doris Duke Trust.
Set forth below is the number of sharesbeneficial ownership of Common Stock of the Company
beneficially owned by the directors, the Chief Executive Officer, the othereach
director, each nominee for director, each executive officers namedofficer whose name appears
in the Summary Compensation Table,"Summary Compensation" table below ("Named Executive Officer") and theby
directors and executive officers of the Corporation as a group, on February 1, 1996:as of December
31, 1997. In addition to the Common Stock, the Corporation also has outstanding
nine series of Preferred Stock and four series of Preferred Stock A. As of
December 31, 1997, no director, nominee for director or executive officer of the
Corporation was the beneficial owner of any shares of the Corporation's
Preferred Stock or Preferred Stock A.
SHARES BENEFICIALLY RIGHT TO TOTAL SHARES
NAME SHARESOF INDIVIDUAL OR IDENTITY OF GROUP OWNED (1) ACQUIRE (2) BENEFICIALLY OWNED
- --------------------------------------- ------------------- ----------- ------------------
Paul M. Anderson3 76,011 360,194 436,205
G. Alex Bernhardt, 2,239(1)
Crandall C. Bowles 6,208(1)Sr.4 4,640 4,640
Robert J. Brown 449(1)
W.Brown4 2,005 2,005
William A. Coley 17,013(2)(3)
Steve C. Griffith, Jr. 43,069(2)Coley3,5 19,093 19,093
William T. Esrey4 2,762 13,574 16,336
Ann Maynard Gray4 2,881 8,354 11,235
W. H. Grigg 40,046(2)
Paul H. Henson 2,954(1)Grigg7 1,565 1,565
James T. Hackett3 68,126 57,442 125,568
Dennis R. Hendrix4 257,431 257,431
Harold S. Hook4 10,418 13,574 23,992
George Dean Johnson, Jr. 4,409(1)
James V. Johnson 5,794(1)
NAME SHARES
Jr.4,6 27,464 27,464
W. W. Johnson 11,872(1)Johnson4 16,076 16,076
Max Lennon 1,622(1)Lennon4 4,729 4,729
Leo E. Linbeck, Jr.4 4,830 13,574 18,404
James G. Martin 351(1)Martin4 2,130 2,130
Buck Mickel 67,774(1)(4)Mickel4,8 72,572 72,572
Richard J. Osborne 6,643(2)
R.Osborne3 7,348 7,348
Richard B. Priory 10,532(2)Priory3 11,761 11,761
Russell M. Robinson, II 13,977,265(1)(5)II4,9 10,708,969 10,708,969
Directors and executive officers as a
group (17(23 persons) 14,200,439(1)(2)(3)(4)(5)3,4,5,6,8,9 11,334,474 525,526 11,860,000
No person listed- ---------------
(1) Determined in accordance with Rule 13d-3 under the table beneficially owned more than one percentSecurities Exchange Act
of 1934. Individuals may disclaim beneficial ownership for other purposes.
Unless otherwise indicated in a footnote, the named individual or family
member possesses sole voting power and sole investment power with respect to
shares of Common Stock of the Company outstanding on February 1, 1996 with the exception
of Mr. Robinson, who beneficially owned 6.8% of such stock on that date largely
because of the attribution to him of the sharesshown as owned by The Duke Endowment andsuch person.
(2) Represents shares which the Doris Duke Trust. The directors and executive officersindividual has a right to acquire within 60 days
after December 31, 1997 through exercise of stock options assumed by the
Corporation.
(3) Includes full shares credited to the participant's account under employee
benefit plans as a group
beneficially owned 6.9% of such stock on that date.
(1)December 31, 1997.
(4) Includes full shares held in trust under the arrangement for directors
described under the caption "Executive Compensation -- Directors' Fees."Compensation of Directors."
(2)(5) Includes full shares credited to the participant's account under the Stock
Purchase-Savings Program for Employees, as of December 31, 1995.
(3) Includes 1,1001,411 shares owned by Mr. Coley's wife and 245 shares held as
custodian for his son.wife. Beneficial ownership of all
such shares is disclaimed.
(4)(6) Includes 22,609 shares held in a limited partnership controlled by Mr.
Johnson.
(7) Mr. Grigg also owns 13,900 shares of Common Stock units under the
Corporation's Executive Savings Plan.
(8) Includes 60,000 shares owned by The Daniel Foundation of South Carolina, a
charitable foundation located in Greenville, South Carolina, of whichCarolina. Mr. Mickel, who is a
trustee. Beneficialtrustee of the Foundation, with shared voting and investment power,
expressly disclaims beneficial ownership of such shares is expressly
disclaimed.
(5)shares.
(9) Includes 12,674,4649,404,721 shares owned by The Duke Endowment and 1,302,132 shares
owned by the Doris Duke Trust. Mr. Robinson, who is a trustee of each of
such entities, with shared voting and investment power, expressly disclaims
beneficial ownership of the shares owned by them.
7such trusts.
No person listed in the table beneficially owned more than 1% of the Common
Stock outstanding on December 31, 1997, with the exception of Russell M.
Robinson, II, who beneficially owned 10,708,969 shares of such stock on that
date
8
largely because of the attribution to him of 9,404,721 shares owned by The Duke
Endowment and 1,302,132 shares owned by the Doris Duke Trust, shares he is
deemed to beneficially own in his capacities as a trustee of The Duke Endowment
and a trustee of the Doris Duke Trust, respectively. The directors and executive
officers as a group beneficially owned less than 1% of such stock (not including
the shares owned by such trusts) on that date.
The following table shows the number of units of limited partnership
interests in TEPPCO Partners, L.P., a publicly traded master limited partnership
of which Texas Eastern Products Pipeline Company, an indirect wholly owned
subsidiary of the Corporation, is the general partner, which were beneficially
owned on December 31, 1997 by a director, nominee for director, Named Executive
Officer, or executive officer of the Corporation. None of such persons had the
right to acquire units within 60 days after December 31, 1997. As of December
31, 1997, the number of units beneficially owned by directors and executive
officers of the Corporation as a group (18,500 units) did not exceed 1% of the
then outstanding units.
UNITS BENEFICIALLY
NAME OWNED
- ------------------- ------------------
Paul M. Anderson 2,000
Dennis R. Hendrix 14,500
Harold S. Hook 2,000
EXECUTIVE COMPENSATION
BelowSet forth below is information regarding compensation to the current Chief
Executive Officer, the prior Chief Executive Officer and the other four most
highly compensated executive officers of the Corporation for services to the
CompanyCorporation for the years ended December 31, 1995, 19941997, 1996 and 1993.1995.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------ ------------
OTHER ANNUAL LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) (1) COMPENSATION($) PAYOUTS($)
COMPENSATION($) (2)- --------------------------------------------- ---- --------- ------------ --------------- ------------
W.Richard B. Priory 1997 671,933 297,339 59,652 397,013
Chairman of the Board and 1996 476,509 107,215 14,144 124,362
Chief Executive Officer 1995 423,445 149,407 9,716 130,275
William H. Grigg 1997 825,900 259,000 43,016 705,408
Chairman of the Board and 1996 695,000 218,925 56,760 188,123
Chief Executive Officer(1) 1995 636,667 312,704 48,098 204,392
163,720
Chairman and 1994 558,500 103,496 74,292 180,019 138,030
Chief Executive Officer 1993 411,500 111,347 6,987 87,267
S. C. Griffith, Jr. 1995 369,565 122,834 19,064 145,800 83,549
Vice Chairman 1994 342,850 63,078 16,323 135,081 73,618
and General Counsel 1993 322,015 88,880 7,034 60,737
R. B. Priory 1995 423,445 149,407 9,716 130,275 20,945Paul M. Anderson 1997 373,864 225,000 5,257 0
President and
Chief 1994 348,425 63,078 8,110 118,125 14,299
Operating Officer 1993 287,250 78,885 1,172 11,224
W.Officer(2)
William A. Coley 1997 387,392 190,407 14,302 281,959
Group President, 1996 378,947 300,723 43,734 124,362
Duke Power 1995 380,110 208,360 9,997 130,275
44,809James T. Hackett 1997 211,364 207,000 2,960 0
Group President,
Associated 1994 339,975 63,078 13,069 118,125 42,478
Enterprises Group 1993 287,250 79,057 4,710 33,018
R.Energy Services(2)
Richard J. Osborne 1997 299,322 72,085 36,284 171,774
Executive Vice President 1996 253,200 47,931 3,448 61,272
and Chief Financial Officer 1995 250,800 57,504 1,873 70,763
13,591
Senior
ALL OTHER
NAME AND PRINCIPAL POSITION COMPENSATION($)(3)
- --------------------------------------------- ------------------
Richard B. Priory 99,165
Chairman of the Board and 31,254
Chief Executive Officer 20,945
William H. Grigg 292,036
Chairman of the Board and 182,606
Chief Executive Officer(1) 163,720
Paul M. Anderson 698,475
President and
Chief Operating Officer(2)
William A. Coley 95,180
Group President, 53,594
Duke Power 44,809
James T. Hackett 59,607
Group President,
Energy Services(2)
Richard J. Osborne 32,516
Executive Vice President 15,932
and 1994 225,735 28,606 1,572 65,453 7,367 Chief Financial Officer 1993 187,520 43,994 95 9,60313,591
- ---------------
(1) Bonus amounts listed for 1993 consistW. H. Grigg resigned as Chairman of the sum of payments madeBoard and Chief Executive Officer in
June 1997 immediately prior to eachthe merger of the listed officers underCorporation and PanEnergy.
(2) Amounts shown for P. M. Anderson and J. T. Hackett relate to the Executive Long-Term Incentive Plan and the
Employee Incentive Plan. Bonus amounts listed for 1995 and 1994 consist of
compensation under the Executive Short-Term Incentive Plan.
(2) "Allperiod from
June 18, 1997 to December 31, 1997.
(3) All Other Compensation"Compensation Column includes the following for 1995:1997:
(i) Amounts contributed to the Stock Purchase-Savings ProgramRetirement Savings Plan for Employees as
follows: R. B. Priory, $7,150; W. H. Grigg, $7,118; S. C. Griffith, Jr.,
$6,904; R. B. Priory, $4,780;$7,150; W. A. Coley,
$6,139; and$7,150; R. J. Osborne, $4,774.$7,150.
9
(ii) Amounts earned by foregoing vacation pursuant to the Vacation Banking
Plan as follows: W. H. Grigg, $36,923; S. C. Griffith, Jr., $20,305;
R. B. Priory, $0; W. A. Coley, $20,305; and R. J. Osborne, $4,615.
(iii) Amounts accrued under a make-whole arrangement under the Supplementary Defined ContributionExecutive
Savings Plan designed to maintain the overall integrity of the
employee benefit plans as follows: R. B. Priory, $45,413; W. H.
Grigg, $25,309; S. C. Griffith, Jr., $11,581; R. B. Priory, $10,057;$50,135; W. A. Coley, $11,879; and$31,787; R. J. Osborne, $3,456.$12,607.
(iii) Amounts contributed to the Employees' Savings Plan of PanEnergy as
follows: P. M. Anderson, $5,225; J. T. Hackett, $3,520.
(iv) Amounts accrued under a make-whole arrangement under the Key
Employees' Deferred Compensation Plan of PanEnergy designed to
maintain the overall integrity of the employee benefit plans as
follows: P. M. Anderson, $93,303; J. T. Hackett, $50,699.
(v) Above-market interest earned on account balances in the Compensation
DeferralExecutive
Savings Plan, Supplemental Account as follows;follows: R. B. Priory, $7,080;
W. H. Grigg, $49,686; S. C. Griffith, Jr.,
$31,405; R. B. Priory, $1,358; W.A.$114,457; W. A. Coley, $1,181; and$9,408; R. J. Osborne, $746.
8
(v)$3,661.
(vi) Above-market interest earned on account balances in the Key
Employees' Deferred Compensation Plan of PanEnergy as follows: P. M.
Anderson, $4,285; J. T. Hackett, $18.
(vii) Economic value of life insurance coverage provided under the Life
Insurance Planlife
insurance plans as follows: R. B. Priory, $15,967; W. H. Grigg,
$27,161; S. C. Griffith, Jr.,
$7,859; R. B. Priory, $1,135;$40,146; P. M. Anderson, $2,000; W. A. Coley, $2,427; and$4,073; J. T. Hackett,
$358; R. J. Osborne, $0.
(vi)$1,898.
(viii) The cost to the CompanyCorporation of supplemental life insurance coverage
under the Supplemental Insurance Plan as follows: R. B. Priory,
$10,531, W. H. Grigg, $15,690; S.
C. Griffith, Jr., $4,773; R. B. Priory, $3,465;$18,201; W. A. Coley, $2,701;
and R. J. Osborne, $0.
(vii)$3,859.
(ix) The economic benefit of split-dollar life insurance coverage pursuant
to the Estate Conservation Plan as follows: R. B. Priory, $224; W. H.
Grigg, $1,833; S.
C. Griffith, Jr., $722; R. B. Priory, $150;$3,101; W. A. Coley, $177;$282.
(x) Pursuant to the employment agreement described in "Employment
Contracts and R.
J. Osborne, $0.Termination of Employment and Change-in-Control
Arrangements" below, $83,334 is deferred monthly for P. M. Anderson
for a period of two years beginning in June 1997. For the period June
through December 1997, $583,338 was deferred under such agreement.
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
The following table sets forth estimated future payoutspayments to the executives
named inNamed Executive
Officers under the Summary Compensation Table under theDuke Power Executive Long-Term Incentive Plan for the performance periodperiods
beginning in 1995.1997. Awards are based upon the Company'sCorporation's total shareholder
return during the performance period as compared with that of the companies
comprisinglisted in the S&P Electric Utility Index. The table assumes that total
shareholder return will beis attained at the threshold (or minimum) performance level.
The actualThere is no award, however, will be $0 if total shareholder return is less than the 33rd
percentile as compared toof the companies comprisinglisted in the S&P Electric Utility Index. PayoutPayment of
the threshold, target and maximum amounts will be madeis estimated for performance at or above the
33rd, 55th and 75th percentiles, respectively.
The Compensation Committee of the Board of Directors terminated the Duke
Power Executive Long-Term Incentive Plan as of December 31, 1997 and elected to
pay prorated awards to reflect the period of time between the beginning of the
performance period and such date. The awards were originally granted based on a
three-year performance period. Estimated payments in the table below are
prorated to reflect such termination. (See "Compensation Committee Report on
Executive Compensation -- LONG-TERM INCENTIVE COMPENSATION").
ESTIMATED FUTURE PAYOUTSPAYMENTS
-------------------------------------
NAME PERFORMANCE OR OTHER PERIOD UNTIL UNDER NON-STOCK PRICE-BASED PLAN
NAME MATURATION OR PAYOUT THRESHOLD($) TARGET($) MAXIMUM($)
- ------------------------------------- ------------------ ------------ ------- ----------
W. H. Grigg (1) 1/1/95-12/97-12/31/97 176,000 352,000 528,000
S. C. Griffith, Jr. 1/1/95-12/31/97 70,392 140,784 211,176
R.67,222 134,444 201,667
Richard B. Priory (2) 1/1/95-12/97-12/31/97 85,620 171,240 256,860
W.41,875 83,750 125,625
William A. Coley 1/1/95-12/97-12/31/97 70,392 140,784 211,176
R.25,376 50,753 76,129
Richard J. Osborne 1/1/95-12/97-12/31/97 42,000 84,000 126,00016,324 32,648 48,972
- ---------------
(1) Award projection is prorated to reflect Mr. Grigg's retirement.
(2) Award projection is adjusted to reflect Mr. Priory's promotion to Chairman
of the Board and Chief Executive Officer.
EXERCISES OF STOCK OPTIONS IN 1997 AND YEAR-END OPTION VALUES
The following table shows aggregate exercises of options during the fiscal
year ended December 31, 1997, by the Named Executive Officers, and the aggregate
fiscal year-end value of the unexercised options held by them. The value
assigned to each unexercised, "in-the-money" stock option is based on the
positive spread between the exercise price of such
10
stock option and the fair market value ("FMV") of the Corporation's Common Stock
on December 31, 1997, which was $55.4375. The FMV is the average of the high and
low prices of a share of the Corporation's Common Stock on that date as reported
on the New York Stock Exchange Composite Transactions Tape. The ultimate value
of a stock option will be dependent on the market value of the underlying shares
on a future date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY
SHARES YEAR-END OPTIONS AT FISCAL YEAR-
ACQUIRED ON VALUE EXERCISABLE/ END EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE($)
- -------------------------- ----------- -------- --------------------- -----------------------
Paul M. Anderson -- -- 334,084/78,330 10,940,662/883,045
James T. Hackett -- -- 52,220/15,666 1,501,195/176,609
-----------------------------------
Note: Future exercisability of currently unexercisable stock
options depends on the grantee remaining employed by the
Corporation throughout the vesting period of the options,
subject to provisions applicable at retirement, death or
total disability. The unexercisable options vest and become
exercisable on the following schedule, although all unvested
options will fully vest and become exercisable upon a change
in control (as defined in the applicable option agreement)
of the Corporation.
UNEXERCISABLE OPTIONS HELD UNEXERCISABLE OPTIONS HELD
VESTING DATE BY PAUL M. ANDERSON BY JAMES T. HACKETT
- ----------------- -------------------------- --------------------------
January 22, 1998 26,110 5,222
January 22, 1999 26,110 5,222
January 22, 2000 26,110 5,222
RETIREMENT PLAN INFORMATION
The Company has an Employees' Retirement Plan (the Retirement Plan)Executive officers and a
Supplemental Retirement Plan (the Supplemental Plan) (collectively, the
Retirement Plans) forother employees of the CompanyCorporation who were
employees of the Corporation prior to the merger of the Corporation and
certain of its subsidiaries.
The Supplemental Plan will provide certain officers with retirement benefits
which they otherwise would have received underPanEnergy participate in a noncontributory, qualified pension plan known as the
Retirement Plan formula but
which may not be paid to them under the Retirement Plan due to limitations on
benefits imposed by the Internal Revenue Code or occasioned through operationCash Balance Plan. In addition, selected managers who were employees
of the Retirement Plan andCorporation prior to the Compensation Deferral Plan.
In general, employees who have attained age 21merger are eligible to participate in a
noncontributory, nonqualified pension plan known as the Retirement Plans. InExecutive Cash Balance
Plan. A portion of the eventbenefits earned in the Executive Cash Balance Plan is
attributable to compensation in excess of retirement atthe Internal Revenue Service
compensation limit ($160,000 for 1997) or after age 65, an
eligible employee with 30 years of creditable service will, in general, be
entitled to payments from the Retirement Plans which, when added to such
employee's primary Social Security benefits, will provide such employee for life
with total annual retirement benefits ranging from 61% to 88% of highest average
annual compensation during any 60 consecutive month period of creditable
service.deferred compensation. Benefits are also provided under
the Retirement PlansCash Balance Plan and the Executive Cash Balance Plan are based
on base pay, short-term incentives and lump-sum merit increases. The Retirement
Cash Balance Plan excludes deferred compensation.
For eligible employees, the Corporation makes an allocation to employees'
accounts at the end of each month in the eventwhich an employee is actively employed and
receives pay for services. The Corporation's monthly allocations are equal to a
percentage of early retirement at or afteran eligible employee's monthly base salary. The percentage
received depends on age 55 with 10and completed years of creditable service or with
30 yearsat the beginning of creditable service regardlessthe
year, as shown below:
MONTHLY ALLOCATION
AGE AND SERVICE PERCENTAGE
- ----------------------------------------------------------------------------- ------------------
34 or less................................................................... 4%
35 to 49..................................................................... 5%
50 to 64..................................................................... 6%
65 or more................................................................... 7%
In addition to the basic monthly allocation percentage, an employee will
receive a monthly allocation of 4% for any portion of eligible compensation
above the Social Security taxable wage base ($68,400 as of 1998).
Employee accounts also earn monthly interest credits. The amount of the
interest credit is adjusted quarterly and equals the yield on 30-year U.S.
Treasury Bonds during the third week of the last month of the previous quarter,
subject to a minimum rate of 4% per year and a maximum rate of 9% per year.
11
The Retirement Cash Balance Plan and the Executive Cash Balance Plan became
effective on January 1, 1997. Prior to such date, eligible employees were
covered under the Corporation's Employees' Retirement Plan, Supplemental
Retirement Plan and Supplemental Security Plan. To account for the transition in
pension plans, each employee account was given an initial opening balance
determined under the predecessor plan on the basis of age and credited service.
In addition, during 1997 W. H. Grigg and Richard B. Priory received as one-time
supplementary contributions to their Supplemental Accounts in the eventExecutive Cash
Balance Plan allocations of retirement
for
9
disability. Surviving spouse benefits are available on an elective basis with
the participant bearing a portion$100,000 and $400,000, respectively.
The years of the incremental cost.
Employees who do not retirecredited service under the Retirement Cash Balance Plan but whose employment
terminates after they have completedas of
December 31, 1997 for the Named Executive Officers were: William A. Coley, 31;
Richard B. Priory, 21; and Richard J. Osborne, 22. Assuming that such officers
continue in their present positions at least five vesting credit years have
vested rightstheir present salaries until retirement
at age 65, their estimated annual pensions in benefits accrueda single life annuity form under
the Retirement Cash Balance Plan and the Executive Cash Balance Plan
attributable to such salaries would be: William A. Coley, $373,738; Richard B.
Priory, $520,606; and Richard J. Osborne, $227,655. Such estimates are
calculated assuming that cash balances are credited with interest at 7% per
annum and using a future Social Security taxable wage base equal to $68,400. In
connection with his retirement in 1997, W. H. Grigg took a lump sum distribution
consisting of the entire balance in his Retirement Cash Balance Plan account.
His estimated annual pension under the Executive Cash Balance Plan, using the
foregoing calculation, would be $284,318.
Certain of the executive officers and other employees of the Corporation
who were employees of PanEnergy prior to their termination date.the merger of the Corporation and
PanEnergy participate in the PanEnergy qualified retirement plan. PanEnergy's
qualified retirement plan provides, with respect to participants employed by
certain participating subsidiary companies, benefits, expressed in the form of a
single life annuity commencing at normal retirement date of age 65, or, if
later, the fifth anniversary of participation in the retirement plan, based on a
final average pay benefit formula that, in part, uses average pay for the
highest 60 months out of the last 120 months of employment, which considers the
regular compensation of the participant, including overtime payments, bonus
payments, and some forms of deferred compensation. The Retirement Plan is wholly paidPanEnergy qualified
retirement plan also provides, with respect to participants employed by certain
other participating subsidiary companies of PanEnergy, benefits, expressed in
the form of a cash balance, based on a benefit formula that uses annual regular
compensation accruals and interest accruals. In addition to providing certain
death benefits, the PanEnergy qualified retirement plan permits participants who
meet certain eligibility requirements to commence final average pay benefit
formula benefit payments as early as age 55 and with less than full actuarial
reductions for by the Company and participating
subsidiaries, which have established a trust with a bank as trustee to which
contributions are made from time to time by the Company and participating
subsidiaries and from which theearly commencement.
Qualified retirement plan benefits under the Retirement PlanPanEnergy qualified retirement
plan may be subject to statutory limitations if the participant receives
compensation in excess of a maximum, is covered by other qualified plans, if
benefits are paid. The
Supplemental Plan is administeredpaid before Social Security retirement age, if the participant has
less than ten years of plan participation, or if benefits are paid in a more
valuable form than a single life annuity. When qualified plan benefits are
limited by statute, nonqualified plans restore certain benefits for participants
covered by the Company and the benefits thereunder are
payable from the Company's general funds.nonqualified plans to a level which would have been available if
such statutory limits did not exist.
The following table below shows the estimated annual pension benefits payable upon retirement (atat age 65)65 under
the Retirement Plans to persons in specified
remunerationPanEnergy qualified and years-of-service classifications, allowing for reasonable
increases in existingnonqualified retirement plans at various levels of
final average compensation levels. The benefits listed in the table are
not subject to any deduction for Social Security benefits or other offset
amounts.and assuming various years of benefit accrual
service:
PANENERGY PENSION PLAN TABLE
YEARS OF SERVICE
--------------------------------------------
REMUNERATION 15 20 25 30 35
- ----------------------------------------- ---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS)
$100,000........................................................
$ 26,000 $ 35,000 $ 44,000 $ 52,000
150,000........................................................ 40,000 54,000 67,000 81,000
200,000........................................................ 55,000 73,000 91,000 109,000
250,000........................................................ 69,000 92,000 115,000 138,000
300,000........................................................ 83,000 111,000 139,000 166,000
350,000........................................................ 97,000 130,000 162,000 195,000
400,000........................................................ 112,000 149,000 186,000 223,000
450,000........................................................ 126,000 168,000 210,000 252,000
500,000........................................................ 140,000 187,000 234,000 280,000
550,000........................................................ 154,000 206,000 257,000 309,000
600,000........................................................ 169,000 225,000 281,000 337,000
650,000........................................................ 183,000 244,000 305,000 366,000
700,000........................................................ 197,000 263,000 329,000 394,000
750,000........................................................ 211,000 282,000 352,000 423,000
800,000........................................................ 226,000 301,000 376,000 451,000600,000................................ $142 $189 $237 $284 $331
800,000............................... 190 253 317 380 443
1,000,000............................... 238 317 397 476 555
1,200,000............................... 286 381 477 572 667
1,400,000............................... 334 445 557 668 779
(1) Compensation covered by the Retirement Plans in 1995, 1994 and 1993The years of benefit accrual service for each Named Executive Officer who
is eligible to receive benefits under the PanEnergy plans described above are as
follows: Paul M. Anderson, 19, and James T. Hackett, 2. Covered compensation,
which consists of salary and bonus for the full 1997 fiscal year, is
approximately $1,141,500 for Mr. Anderson and approximately $810,950 for Mr.
Hackett.
12
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors is currently comprised
of W.W. Johnson, William T. Esrey, George Dean Johnson, Jr., Leo E. Linbeck, Jr.
and James G. Martin. None of the present or former members of the Compensation
Committee was at any time during 1997 or at any other time an officer or
employee of the Corporation.
No executive officer listed inof the SummaryCorporation serves as a member of the board of
directors or compensation committee of any entity which has one or more
executive officers serving as a member of the Corporation's Board of Directors
or the Compensation Table is equal to the
amount shown as salary under such table.
(2) The number of years of service credited under the Retirement Plan at
December 31, 1995 was 30 for W. H. Grigg, 30 for S. C. Griffith, Jr., 19 for
R. B. Priory, 30 for W. A. Coley and 20 for R. J. Osborne. The maximum
number of years of service for benefits is 30.
(3) Amounts shown above represent estimated 50% joint and survivor annuity
benefits calculated by the Social Security integration formula.
10
Committee.
------------------------
Notwithstanding anything to the contrary set forth in any of the
Company'sCorporation's previous filings under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that might
incorporate future filings, including this Proxy Statement,proxy statement in whole or in part,
the following reportCompensation Committee Report on Executive Compensation and the
Performance Graph on page 14immediately following such Report shall not be incorporated by
reference into any such filings.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company, under the supervision of the Compensation Committee of the Board of Directors, has developed and implementedwhich is composed
exclusively of nonemployee directors, is responsible for the Corporation's
executive compensation programs which
seek to provide a direct relationship betweenprograms. The following is the report of the Compensation
Committee on compensation provided topolicies regarding executive officers and corporate performance.
COMPENSATION PHILOSOPHYthe basis of
compensation actions it has taken.
The Company has a pay policy of setting total cash compensation for its
entire workforce between the 50th and 75th percentilesobjective of the marketplace.
ConsistentCorporation's executive compensation programs is to
offer compensation opportunities that attract and retain talented executive
officers and key employees and that motivate such employees to enhance
shareholder value. Base pay, annual incentives and long-term incentives are
structured to deliver competitive pay opportunities, reward individual
performance and encourage executives to manage from the perspective of owners
with this policy, itan equity stake in the Corporation. The executive compensation programs are
intended to provide total compensation (consisting of base salaries, annual cash
incentive opportunities and long-term incentive opportunities) that is
competitive with the philosophymedian total compensation offered other executives employed
by companies of similar size, complexity and lines of business. To determine
competitive compensation levels, the Compensation Committee considers data from
surveys, proxy statements and independent compensation consultants. The
attainment of corporate, business group and, in some instances, individual
performance goals determines the payouts from the annual incentive compensation
plans. Long-term incentive compensation awards are designed to link a
significant portion of total pay directly to long-term financial performance and
creation of shareholder value.
To underscore the importance of linking executive and shareholder
interests, the Board of Directors to
set total compensation opportunities for its executive officers between the 50th
and 75th percentile. The "marketplace"has adopted stock ownership guidelines for
executive officers has been defined
asand other members of senior management. The target level of
ownership of Common Stock (or Common Stock equivalents) for the group of electric utilities comprising the Standard & Poor's ("S&P")
Electric Utility Index.
Total cash compensation for executive officers consists of base salary,
which is subject to annual merit increases, and incentives, which are awarded
through the Executive Short-Term Incentive Plan and the Executive Long-Term
Incentive Plan. The use of incentives is intended to result in a direct
relationship between total compensation and corporate performance. Opportunity
to receive compensation beyond the 50th percentileChairman of the
marketplace is
provided through incentives, based on corporate performance. Similarly,
compensation can fall below the 50th percentile if corporate performance
measures are not achievedBoard and incentives are not paid. The Company's goal is to
create a competitive compensation program that will attract and retain quality
leadership and link compensation directly to corporate performance.
In January 1996, the Board of Directors adopted a new compensation plan,
the Stock Incentive Plan, which the Company is submitting for shareholder
approval. See page 16. No awards have been made under that Plan.
COMPENSATION PROCESS
In the early part of each year the Compensation Committee reviews the
compensation of the Company's executive officers (other than the Chief Executive
Officer) with the Chief Executive Officer and sets the compensationPresident and Chief Operating Officer
under such guidelines is three times annual salary. The target level for other
officers who are members of the executive officers forCorporation's Policy Committee, including
Messrs. Hackett, Coley and Osborne, is two times annual salary. Each employee
subject to the guidelines is expected to achieve the ownership target within a
period of five years, commencing on the later of January 1, 1997, or the date
upon which the employee became subject to the guidelines. Common Stock held in
an executive's 401(k) plan account, Common Stock equivalents earned through
non-qualified deferred compensation programs and any Common Stock beneficially
owned outside such yearprograms are included in determining compliance with modifications as it deems appropriate. The
review is based on performance evaluations of the
individual executive officers
and on a comparison of their compensation with compensation and financial
performance data from the S&P Electric Utility Index companies, using
information provided in surveys such as the Edison Electric Institute Executive
Compensation Survey.
The Compensation Committee also reviews the compensation of the Chief
Executive Officer with assistance from the Company's human resources staff. It
recommends adjustments as appropriate, based on competitive compensation data
from the S&P Electric Utility Index companies, the Committee's assessment of the
Chief Executive Officer's performance and its expectation as to his future
contributions in leading the Company. The Committee's recommendation on
compensation for the Chief Executive Officer is considered and acted upon by the
Board of Directors, with inside directors neither present nor participating.
11
The Board of Directors has recommended approval by the shareholders of the
Stock Incentive Plan, as described beginning on page 16 of this Proxy Statement.
Subject to shareholder approval of the Plan, the Compensation Committee may
choose to make awards under the Plan which would qualify for deductibility underguidelines.
COMPLIANCE WITH SECTION 162(M) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code. The Company has no current plansCode imposes a limitation on the
Corporation's ability to qualify otherdeduct from income tax annual compensation in excess of
$1 million paid to itscertain employees, generally the chief executive officer and
the four other most highly compensated executive officers. The Compensation
Committee intends to structure compensation that rewards performance while
preserving maximum deductibility of all compensation awards. Towards this end,
the Board of Directors has recommended that the shareholders approve the
Corporation's 1998 Long-Term Incentive Plan and Policy Committee Short-Term
Incentive Plan to allow future grants of stock options and other performance
awards to satisfy the requirements for exemption from Section 162(m). It is not
anticipated that compensation realized by any executive officer under programs
now in effect will result in a material loss of tax deductions.
13
BASE SALARIES
Salaries for executive officers for deductibility
under such section.
1995 COMPENSATION SUMMARY
INCREASES IN BASE SALARY
Increases in base salary were granted in February 1995 toare reviewed annually and established by
the executive
officers named in the Summary Compensation Table and were based on individual
performance for the 1994 performance period, as measured under the Company's job
performance evaluation program. Increases variedCommittee based upon job responsibilities, level of experience,
individual performance and the individual's compensation relative to the competitive marketplace. Beginning in 1995, meritdata obtained from surveys, consultants
and staff research. Base pay increases were no longer subject to
adjustment based upon attainmentapproved effective March 1, 1997 for
certain executive officers, including Messrs. Grigg, Priory, Coley and Osborne,
in accordance with these criteria. Increases were also approved for Mr. Priory
and Mr. Osborne when they assumed additional responsibilities effective with the
merger of corporate performance measures, although
corporatethe Corporation and unit performance continue to be factorsPanEnergy.
SHORT-TERM INCENTIVE COMPENSATION
In 1997, the Compensation Committee administered two annual incentive plans
that permitted the granting of cash awards. Executive officers who were
participants in evaluating individual
performance. This change resulted from the introduction of theDuke Power Executive Short-Term Incentive Plan which now providescontinued to
earn incentive pay under that plan for the direct link between level of
compensation and the attainment of corporate and unit performance measures.
Messrs. Griffith, Priory, Coley and Osborne received increases in base
salary ranging from 7.79% to 21.53%. Each of these increases reflects comparison
of full-year 1995 salary compensation with full-year 1994 amounts. Thus, the
percentage increases in base salary reflect the impact of increases in base
salary levels during the course of 1994 due to officer promotions, as well as
the impact of 1995 merit increases.
Chief Executive Officer Grigg received a salary of $636,667 in 1995,
representing a 14.00% increase over his 1994 base salary. In recommending such
increase to the Board, the Compensation Committee considered Mr. Grigg's
individual performance and competitive compensation levelsentire year; executive officers who
were participants in the marketplace.
The percentage increase in Mr. Grigg's salary also reflects both his promotion
in April 1994 as well as his 1995 merit increase.
SHORT-TERM INCENTIVE COMPENSATION
Short-termPanEnergy Annual Cash Bonus Plan at the beginning of
the year continued to earn incentive awards were madepay under that plan through year end.
Awards under the Duke Power Executive Short-Term Incentive Plan and were
based oncalculated pursuant to a pre-established awards formula and the
achievementthat rewarded attainment of certain corporate
and business unit measures.goals finalized in early 1997. Those measures varygoals varied according to
the position held by the executive officer and provide additional
alignment with business unit performance.officer. Minimum, target and maximum
performance levels arewere established, for determining awards. 1995 awards were
calculated with respectand participants could receive up to base salaries as established in February 1995.
Messrs. Grigg, Griffith and Priory were members150%
of the Company's Management
Committee in 1995 for purposes of determining awardstheir short-term incentive targets. Key measures under the Plan, with their
awards being based on the achievement of certain corporate measures and aplan for named
executives included return on equity, threshold of 12.65%. The corporate measures, target performance levels
and respective weights of the corporate measures were:
(i) return on equity of 13.15% (60%);
(ii) total cost per kilowatt hour delivered,
of 5.54 cents (20%); and
(iii) corporate safety level of 255 recordable incidents reported for
the year (20%).
The Company, including the Associated Enterprises Group, achieved a return
on equity of 15.07% in 1995, thereby exceeding the maximum level of 13.75%
specified in the Plan with respect to awards for Messrs. Grigg, Griffith and Priory. The Company's total cost per kilowatt hour delivered was 5.51 cents,
bettering the target
12
performance level of 5.54 cents. The Company also exceeded the corporate safety
target performance level in that only 246 recordable incidents were reported in
1995. Accordingly, Messrs. Griffith and Priory received awards of 34.90% of
their base salaries. Chief Executive Officer Grigg received an award of
$312,704, constituting 48.86% of his base salary.
Mr. Coley, who is Presidentafter-tax net profit of the former Associated EnterprisesEnterprise
Group and also a
memberwhich held all of the Company's Management Committee, received annon-regulated businesses of the Corporation prior to
the merger of the Corporation and PanEnergy. In addition to these measures, Mr.
Osborne's award thatcalculation included consideration of certain business unit
measures. A portion of Mr. Coley's award was based on the level of achievement of After-tax Net Profitcertain
after-tax net profit measures for four key business units
of the Associated Enterprises Group, with each being weighted at 25%. The
After-tax Net Profit for two of the four business units, Crescent Resources,
Inc. and Duke/Fluor Daniel, exceeded the maximum performance level; the
After-tax Net Profit for the third business unit, the Duke Energy Group, did not
attain the minimum performance level; and the After-tax Net Profit for the
fourth business unit, Duke Engineering and Services, Inc., exceeded the target
performance level, resulting in Mr. Coley receiving an award of 26.57% of his
base salary.Enterprise Group. Mr. Coley was
also eligible for an additional award based on the
1995 Total After-tax Net Profitstotal net profits of the
Associated EnterprisesEnterprise Group as a whole.
Accordingly, sinceAwards under the Associated Enterprises Group exceededPanEnergy Annual Cash Bonus Plan were determined on the
maximum
performance level in respectbasis of Total After-tax Net Profits, Mr. Coley received
an additional awarda combination of 32.63%business unit and corporate earnings before interest
and income taxes ("EBIT") and individual objectives. Each of his base salary.
Mr. Osborne was a memberthese components
determined one half of the Company's Senior Vice President group for
purposes of determining awardsexecutives' bonus. Messrs. Anderson and Hackett
received incentive pay under the Plan. Accordingly, his award wasplan of 91.6% and 97.78% of target,
respectively, based upon corporate performance and the executives' individual
achievements.
Effective January 1, 1998, all key employees will participate in
consolidated incentive plans with awards based on increases in earnings per
share, on EBIT and on the three corporate measures listedindividual accountabilities of such executives for
achieving growth objectives. The annual cash incentive compensation opportunity
for members of the Policy Committee, including Messrs. Priory, Anderson,
Hackett, Coley and Osborne, will be determined solely by the Corporation's
success in (i), (ii) and (iii) above, which
together were weighted 50%achieving earnings per share growth as set forth in the Policy
Committee Short-Term Incentive Plan being submitted for purposes of his award, together with business
unit measures weighted another 50%. Mr. Osborne received an award of 23.96% of
his base salary.shareholder approval at
the annual meeting.
LONG-TERM INCENTIVE COMPENSATION
Long-term incentive awards were made throughIn 1997, executive officers who participated in the Duke Power Executive
Long-Term Incentive Plan usingcontinued to earn incentive compensation under that
plan for the entire year. The plan included a pre-established awards formula
based on total shareholder return over a three-year period as compared to the
performance of a peer group comprisedconsisting of companies in the S&P Electric Utility
Index. "Total shareholder return" iswas calculated by dividingas the sum of the change in the
market price of the Company's Common Stock over the three-year performance period plus
dividends paid over that period divided by the price of the Company's Common Stock at the
beginning of the performance period. For any award to have been made, this
figure had to exceedThe minimum performance level for awards
was the 33rd percentile of the peer group, which wasgroup; the
minimum performance level established by the Compensation Committee. The target performance level was the
55th percentile of the peer group and the maximum performance level was the 75th
percentile.percentile of the peer group. The Company exceededCorporation performed slightly under the
maximumtarget performance level by achieving total shareholder return at the 96th52nd
percentile of the peer group for the 19931995 through 19951997 performance period. As a
result, Messrs. Griffith, Priory, Coley and Osborne received awards under the Planplan ranging
from 37.50%32.61% to 45.00%39.6% of their respective February 1995 base salaries as establishedsalaries.
Consistent with its decision to restructure the executive compensation
program of the Corporation and, in particular, to make long-term incentive
compensation entirely contingent upon increases in the market value of the
Common Stock, the Compensation Committee elected to terminate outstanding award
opportunities under the Duke Power Executive Long-Term Incentive Plan that had
been granted in 1996 for the three-year performance period from 1996 through
1998 and outstanding award opportunities that had been granted in 1997 for the
three-year performance period from 1997 through 1999. Awards were calculated at
the greater of the target or actual performance level, and prorated to reflect
the period of time between the date of the award and December 31, 1997.
Accordingly, Mr. Priory received 29.89% of his 1996 base salary for the
14
1996-1998 period and 15.83% of his 1997 base salary for the 1997-1999 period.
Messrs. Osborne and Coley received 23.92% and 27.33%, respectively, of their
1996 base salary for the 1996-1998 period and 11.67% and 13.33%, respectively,
of their 1997 base salary for the 1997-1999 period.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
At its February 1993.1997 meeting, the Compensation Committee reviewed an
analysis of total compensation available to chief executive officers in Duke
Power's competitive marketplace. At that meeting, the Compensation Committee
elected to make a 14.3% upward adjustment to Mr. Grigg's salary.
Prior to the merger of the Corporation and PanEnergy, the Compensation
Committee commissioned its compensation consultant to prepare an independent
report regarding the level of compensation for the Chief Executive Officer Grigg receivedof
the Corporation, considering in particular the size of the Corporation, its
complexity and the markets in which the Corporation will compete for executive
talent. Based upon its analysis of the consultant's report, at its June 1997
meeting, the Compensation Committee adjusted Mr. Priory's annual base salary to
$810,000 and adjusted his annual short-term incentive target to 100% of base
salary beginning in 1998. Also based upon its analysis of the consultant's
report, the Compensation Committee expects that it will grant Mr. Priory an
award of 49.37%nonqualified stock options to purchase 500,000 shares of his baseCommon Stock,
subject to and effective upon shareholder approval of the Duke Energy
Corporation 1998 Long-Term Incentive Plan. (See "Employment Contracts and
Termination of Employment and Change-in-Control Arrangements" and "Approval of
the Duke Energy Corporation Long-Term Incentive Plan -- 1998 Plan Benefits.")
The Compensation Committee believes that such an award would put in place a
mechanism which will result in meaningful rewards for substantial improvements
in shareholder value. The Compensation Committee does not contemplate additional
awards of stock options to Mr. Priory in the foreseeable future, but will
consider such additional awards as, from time to time, it deems appropriate.
It is the Compensation Committee's intention that, taken together, the
components of Mr. Priory's pay, including salary, alsoshort-term incentive
opportunity and annualized long-term incentive award value, result in
compensation which approximates the 50th percentile of the market when incentive
plan performance expectations are met and for compensation as established in February 1993.high as the 75th
percentile of the market when results exceed expectations.
This report has been provided by the Compensation Committee.
BUCK MICKEL,W. W. JOHNSON, Chairman
CRANDALL C. BOWLES
PAUL H. HENSON
13WILLIAM T. ESREY
GEORGE DEAN JOHNSON, JR.
LEO E. LINBECK, JR.
JAMES G. MARTIN
15
PERFORMANCE GRAPH
Note: The stock price performance shown on the graph below is not
necessarily indicative of future price performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG DUKE POWER COMPANY,THE CORPORATION, S&P 500 INDEX,
S&P UTILITIES INDEX AND S&P ELECTRIC UTILITY INDEX
(The performance graph(Performance Graph appears here. The plot points are listed inSee the table below.below for plot points.)
1990 1991 1992 1993 1994 1995
Duke Power Co. $100 $121 $131 $161 $152 $199
S & P 500 Index $100 $130 $140 $155 $157 $215
S & P Electric Utility
Index $100 $130 $138 $155 $135 $177
Assumes $100 invested on Dec. 31, 19901992
in Duke Power Common Stock, S&P 500 Index,
S&P Utilities Index, and S&P Electrics.
Assumes reinvestment of dividends.
1992 1993 1994 1995 1996 1997
Duke $100 $122 $116 $150 $153 $190
S&P 500 Index $100 $110 $111 $153 $187 $249
S&P Utilities $100 $114 $104 $147 $151 $187
S&P Electrics $100 $113 $ 98 $127 $127 $158
The performance graph in the Corporation's proxy statement distributed in
connection with the annual meeting of shareholders in 1997 used the S&P Electric
Utility Index. Assumes reinvestment of
dividends.
DIRECTORS' FEES
Directors who are not employeesIndex as the required comparative industry index, rather than the S&P
Utilities Index used in the above performance graph. Because the merger of the
CompanyCorporation and PanEnergy created an integrated energy company with both
electric and natural gas operations, as well as energy services, the Corporation
believes that a performance comparison with a peer group of electric and gas
utilities, such as the S&P Utilities Index, which comprises 37 electric and/or
gas utility companies, provides a more appropriate comparison than an index
consisting solely of electric utilities. Total return for the S&P Electric
Utility Index is shown in the above performance graph for comparison.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Corporation entered into employment agreements dated as of November 24,
1996 with Messrs. Priory, Coley, Osborne, Anderson and Hackett, which became
effective on June 18, 1997 (the "Effective Time") and which remain in effect for
a two-year period from the Effective Time or such longer period as may be
mutually agreed upon by the parties to such agreements (the "Employment
Period"). The employment agreements were amended in October 1997 (as amended,
the "Employment Agreements"). In October 1997 the Corporation and the employees
mutually agreed to short- and long-term incentive opportunities pursuant to the
terms of the Employment Agreements. The principal terms and conditions of the
Employment Agreements are described below.
The Employment Agreements for Richard B. Priory, William A. Coley and
Richard J. Osborne provide for an annual base salary that is at least equal to
the executive's annual base salary for the twelve-month period prior to the
Effective Time (i.e., Messrs. Priory, Coley and Osborne were paid $476,509,
$378,947, $253,200, respectively, as base salary in 1996). The Employment
Agreements also provide for an annual bonus opportunity of 100% for Mr. Priory
and 60% for each of Messrs. Coley and Osborne under the terms of the Duke Energy
Corporation Policy Committee Short-Term Incentive Plan calculated as a
percentage of annual base salary. Each executive will be entitled to participate
in all long-term incentive plans, savings, retirement, welfare benefit plans on
the same basis as other peer executives of the Corporation. The Employment
Agreements
16
also provide that Messrs. Priory, Coley and Osborne will receive nonqualified
stock options to purchase 500,000, 200,000 and 100,000 shares of Common Stock,
respectively. Such options will be issued under the Duke Energy Corporation 1998
Long-Term Incentive Plan, which is subject to shareholder approval. In the event
the executive's employment is terminated for "Good Reason" by the executive or
without "Cause" by the Corporation (both as defined in the Employment
Agreements), the executive will be entitled to receive a lump-sum severance
payment equal to the product of three times the executive's annual base salary
and target bonus. In addition, for three years following the executive's date of
termination for "Good Reason" or without "Cause" by the Corporation, the
executive will be entitled to continued coverage under the medical, life
insurance and other welfare benefit plans of the Corporation. In the event that
any of the payments or benefits provided for in the relevant Employment
Agreement would constitute a "parachute payment" (as defined in section
280G(b)(2) of the Internal Revenue Code), the executive is entitled to elect to
reduce such payments or benefits so that the excise tax imposed by section 4999
of the Internal Revenue Code would not apply. Each of the Priory, Coley and
Osborne Employment Agreements contains a restrictive covenant that prohibits the
executive from disclosing or using certain confidential information while
employed by the Corporation and at any time thereafter.
The Employment Agreement of Paul M. Anderson provides that Mr. Anderson
will serve as Chief Operating Officer and President of the Corporation, a member
of the Office of the Chief Executive Officer and a member of the Corporation's
Policy Committee, a committee of senior executive managers designated by the
Office of the Chief Executive Officer. The Anderson Employment Agreement further
provides that during the Employment Period Mr. Anderson will receive an annual
base salary of no less than $700,000, an annual bonus opportunity set at a
target level of no less than 90% of Mr. Anderson's base salary claimed under the
terms of the Duke Energy Corporation Policy Committee Short-Term Incentive Plan,
and a supplementary salary payment in the event that Mr. Anderson becomes
subject to North Carolina taxes such that the amount of Mr. Anderson's after-tax
compensation is no less than the amount he would have received absent the
imposition of North Carolina taxes. In addition, Mr. Anderson will be entitled
to receive 400,000 nonqualified stock options. Such options will be issued under
the Duke Energy Corporation 1998 Long-Term Incentive Plan, which is subject to
shareholder approval. Pursuant to the Anderson Employment Agreement, the
Corporation will also provide Mr. Anderson with deferred compensation payable
upon the later of Mr. Anderson's termination of employment or his attainment of
the age of 55, accruing at a monthly rate of $83,334, plus interest, for each of
the twenty-four months following the Effective Time. The Anderson Employment
Agreement prohibits Mr. Anderson from disclosing or using certain confidential
information while employed by the Corporation and at any time thereafter. If Mr.
Anderson's employment terminates before the end of the Employment Period (except
in the case of termination for "Cause" or "Disability" as defined in the
Employment Agreement), Mr. Anderson will be entitled to the following: (i) a
lump-sum payment aggregating accrued obligations (such as unpaid salary and a
pro-rata portion of his target bonus opportunity) to Mr. Anderson, and (ii)
retirement benefits, including qualified defined benefit retirement benefits,
excess or supplemental retirement benefits, and welfare benefits, as if Mr.
Anderson had reached early retirement age as of the date of termination of his
employment. In the event that compensation payments to Mr. Anderson would
subject him to excise tax under section 4999 of the Internal Revenue Code, the
Corporation will reduce such payments if and to the extent it would maximize Mr.
Anderson's after-tax compensation.
The Employment Agreement of James T. Hackett provides that Mr. Hackett will
serve as Group President, Energy Services, the division that comprises all
non-regulated energy business units of the Corporation, and as a member of the
Policy Committee during the Employment Period. The Hackett Employment Agreement
further provides that during the Employment Period Mr. Hackett will receive a
base salary at least equal to the base salary he received for the twelve-month
period prior to the Effective Time (i.e., $372,916) and an annual bonus
opportunity set at a target level of no less than 70% of Mr. Hackett's base
salary and earned under the terms of the Duke Energy Corporation Policy
Committee Short-Term Incentive Plan. Mr. Hackett is also entitled to receive
250,000 stock options. Such options will be issued under the Duke Energy
Corporation 1998 Long-Term Incentive Plan, which is subject to shareholder
approval. The Hackett Employment Agreement prohibits Mr. Hackett from disclosing
or using certain confidential information while employed by the Corporation and
at any time thereafter. If, during the Employment Period, the Corporation
terminates Mr. Hackett's employment for any reason other than "Cause" or
"Disability" (as defined in the Employment Agreement), or Mr. Hackett terminates
his employment for "Good Reason" (as defined in the Employment Agreement), Mr.
Hackett will be entitled to the following: (i) a lump-sum payment aggregating
(a) accrued obligations (such as unpaid salary and a pro-rata portion of his
target bonus opportunity) to Mr. Hackett, (b) an amount equal to three times Mr.
Hackett's most recent annual compensation (including target bonus opportunity),
and (c) an amount equal to the excess of (1) the actuarial present value of the
retirement benefits that Mr. Hackett would receive assuming he continued
employment with PanEnergy for three years over (2) the actuarial present value
of Mr. Hackett's actual retirement benefits, and (ii) continued employee welfare
benefits for three years. With respect to any payments, other than the payments
related to restricted stock granted to Mr. Hackett pursuant to a 1995 agreement
(the "Restricted Stock"), that would subject Mr. Hackett to excise tax under
section 4999 of the Internal Revenue Code, the
17
Corporation has agreed to (a) reduce such payments so that payments to Mr.
Hackett do not exceed the amount which would be characterized as a "parachute
payment" under section 280G of the Internal Revenue Code and (b) if, after such
reduction, payments to Mr. Hackett remain subject to the excise tax under
section 4999 of the Internal Revenue Code, make a payment to Mr. Hackett such
that after the payment of all income and excise taxes, Mr. Hackett will be in
the same after-tax position as if no excise tax under section 4999 had been
imposed. If it is determined that the Restricted Stock, without regard to any
other payments, would be subject to the excise tax under section 4999 of the
Internal Revenue Code, the Corporation will make a payment to Mr. Hackett such
that after the payment of all income and excise taxes, Mr. Hackett will be in
the same after-tax position as if no excise tax under section 4999 had been
imposed.
COMPENSATION OF DIRECTORS
Effective upon the merger of the Corporation and PanEnergy, the fixed
annual retainer for nonemployee directors was increased from $30,000 to $40,000.
At the same time, annual compensation for serving as the Chairman of $24,000 andthe Audit,
Compensation, Nominating, Corporate Performance Review or Finance Committees was
increased from $3,500 to $4,000. In addition, nonemployee directors receive a
fee of $1,000 for attendance at each meeting of the Board of Directors, each
committee meeting and other functions of the CompanyCorporation requiring their
presence, together with expenses of attendance.
In
addition, eachA nonemployee director may elect to receive 50% of the Chairmen of the Audit, Compensation, Nominating, Corporate
Performance Reviewhis or her retainer and Finance Committees received annual compensation of
$3,500. A portion of the
attendance fees for each nonemployee director is placedin the form of Common Stock or may defer such portion by having
it held in trust for the director's benefit and invested in Common Stock of the Company
at
market price. An additional portion of annual compensation or attendance
fees, atThe director may elect to receive the optionremaining 50% of such
director,compensation in cash or may be
14
placed in trust. Uponelect to defer, until termination of service on the
Board of Directors, that portion in trust as shares of Common Stock or in an
investment account that is credited with interest based upon the interest paid
on 30-year U.S. Treasury Bonds.
Each January and July that a nonemployee director continues to serve on the
Board of Directors, such director is credited with 100 shares of Common Stock to
be held in trust. Each director who previously served as a PanEnergy director
was also credited with an amount of shares of Common Stock, to be similarly held
in trust, based upon the benefit that such director had accrued under a
PanEnergy directors' retirement plan that was terminated upon the merger of the
Corporation and PanEnergy.
In general, shares of Common Stock held in trust, and income thereon, will
then receivenot become distributable until the nonemployee director terminates service on
the Board of Directors. Dividends will be converted into additional shares held
in trust at fair market value on the dividend payment date. When a nonemployee
director terminates service on the Board of Directors, shares held in trust for
his or her benefitaccount will be distributed to the director on the basis of the
distribution schedule chosen by such director.
Upon completing ten years of service on the Board of Directors, each
director becomes eligible to participate in the Directors' Charitable Giving
Program. Under this program, the Corporation will make, upon the director's
death, donations of up to $1,000,000 to charitable organizations selected by the
trusteedirector. A director may request that the Corporation make donations under this
program during the director's lifetime, in which case the maximum donation will
be reduced on a net present value basis. The Corporation maintains life
insurance policies upon eligible directors to fund donations under the program.
Eligible directors include only those who were members of the trust, including shares
purchased with reinvested dividends.Board of Directors
on February 18, 1998, and certain former directors who previously qualified for
benefits.
Nonemployee directors also participateare subject to stock ownership guidelines that became
effective on January 1, 1997. The guidelines require nonemployee directors to
build and maintain holdings of Common Stock (or Common Stock equivalents) equal
in retirement and compensation deferral plans which are intendedmarket value to provide
benefits substantially similar to those afforded by the Company to directors who
are employees.
In September 1995, the Board approved an increase ofthree times the annual retainer to
$30,000 per year, effective January 1, 1996.($120,000). Nonemployee
directors must attain this ownership level within five years from the date of
implementation of the guidelines, or from the commencement of their service on
the Board of Directors, if after the implementation date.
INFORMATION REGARDING THE BOARD OF DIRECTORS
The Board of Directors of the Company had a total of sevennine meetings during 1995.1997. No director attended
fewer than 75% of the totalaggregate of suchthe meetings of the Board meetingsof Directors held
during the period for which he or she was a director and the meetings of the
committees upon which he or she served during the period for which he or she was
a director, with the exception of Paul H. Henson, who
attended 64% of such meetings.director.
Among its standing committees the CompanyCorporation has a Management Committee,
an Audit Committee, a Compensation Committee, a Nominating Committee, a
Corporate Performance Review Committee and a Finance Committee.
18
The Management Committee consists of Richard B. Priory, Paul M. Anderson
and William A. Coley. This Committee may exercise all of the authority of the
Board of Directors except with respect to certain actions specified in the
Corporation's By-Laws.
The Audit Committee consists of Robert J. Brown, James V. Johnson,Ann Maynard Gray, Max
Lennon, Leo E. Linbeck, Jr. and Russell M. Robinson, II. This Committee
recommends to the Board of Directors the engagement of the independent auditors
for the Company,Corporation, determines the scope of the auditing of the books and
accounts of the Company,Corporation, reviews the reports submitted by the auditors, examines
procedures employed in connection with the Company'sCorporation's internal audit program
and makes recommendations to the Board of Directors as may be appropriate. There were sixThe
Committee held seven meetings of this Committee
during 1995.1997.
The Compensation Committee consists of Crandall C. Bowles, Paul H. HensonWilliam T. Esrey, George Dean
Johnson, Jr., W. W. Johnson, Leo E. Linbeck, Jr. and Buck Mickel.James G. Martin. This
Committee sets the salaries and other compensation of all employees of the
CompanyCorporation except the Chairman of the Board, Vice Chairman of the Board, President and any other officers
the Board of Directors may designate whose salaries are at a monthly rate at or
above a level as determined from time to time by the Board of Directors. This
Committee makes recommendations to the Board of Directors regarding the salary
of the Chairman of the Board Vice
Chairman of the Board and any President for consideration and action by
the Board of Directors, without the presence or participation of those directors
who are also employees of the Company.Corporation. The Committee also makes
recommendations to the Board of Directors regarding the compensation of
nonemployee directors. There wereThe Committee held eight meetings of this
Committee during 1995.1997.
The Nominating Committee recommends to the Board of Directors the size and
composition of the Board of Directors within the limits set forth in the
Corporation's Restated Articles of Incorporation and By-Laws and recommends
persons to be considered as successors to the Chief Executive Officer. The
Nominating Committee will consider nominees for the Board of Directors recommended by
shareholders. Recommendations by
shareholders should be forwarded to the Secretary of the Company and should
identify the nominee by name and provide pertinent information concerning his or
her background and experience. A shareholder recommendation must be received at
least ninety days prior to the date of the annual meeting of shareholders. The
Nominating Committee, consisting of W. H. Grigg, Paul H. Henson, George Dean
Johnson, Jr.William T. Esrey, Dennis R. Hendrix,
Max Lennon, James G. Martin and W. W. Johnson,Richard B. Priory, met oncetwice in 1995.1997.
The Corporate Performance Review Committee consists of G. Alex Bernhardt,
William A. Coley, Paul H. Henson, James G. MartinSr., Robert J. Brown, Ann Maynard Gray, Dennis R. Hendrix, Harold S. Hook and
Buck Mickel. The Corporate
Performance ReviewRussell M. Robinson, II. This Committee monitors and makes recommendations for
improving the overall performance of the Company,Corporation, and, at the policy level,
determines the adequacy of and support for the Company'sCorporation's emphasis on
continuous improvement. The Committee met sixseven times during 1995.
15
1997.
The Finance Committee consists of Crandall C. Bowles, W. H. Grigg,Paul M. Anderson, G. Alex Bernhardt, Sr.,
Harold S. Hook, George Dean Johnson, Jr., W. W. Johnson and Richard B. Priory.
This Committee directsreviews the financial and fiscal affairs of the CompanyCorporation and
makes recommendations to the Board of Directors regarding the Corporation's
dividend, financing and fiscal policiespolicies. The Committee met seven times during
1997.
In February 1998, the Corporation adopted a policy stating that members of
the Company. ThereBoard of Directors are to submit their resignation as a matter of course
upon a change in employment or other significant change in their professional
roles and responsibilities, with the exception of the normal retirement of those
individuals who were six meetingsmembers of thisthe Board of Directors on the date the policy
was adopted. The Nominating Committee during 1995.will determine whether any such
resignation will be accepted. It is expected that acceptance of any such
resignation will be effective as of the end of the term of the director
tendering the resignation.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The Corporation has had business relationships and engaged in certain
transactions with affiliated parties. It is the policy of the Corporation to
engage in transactions with related parties only on terms that, in the opinion
of the Corporation, are no less favorable to the Corporation than could be
obtained from unrelated parties.
During 1995,1997, the CompanyCorporation retained the law firm of Robinson, Bradshaw &
Hinson, P.A., of which Russell M. Robinson, II, a director of the Corporation,
is a shareholder, in connection with a number of small matters. Legal feesFees for legal
services paid by the CompanyCorporation to the law firm in 19951997 represented less than
five percent5% of such firm's gross revenues for the year.
In October 1995, CLT Development Corp., a subsidiary of the Company,
entered into a joint venture arrangement with Charter Properties, Inc. for the
development of an apartment complex near Charlotte. CLT Development Corp. is a
60 percent member in the venture, whose total development costs are expected to
be up to $4,250,000. Crandall C. Bowles, a director of the Company, is a
director of Charter Properties, Inc. and its parent, The Springs Company, a
family-owned corporation.19
RATIFICATION OF APPOINTMENT OF AUDITORS
(PROPOSAL 2)
The Board of Directors, upon recommendation of the Audit Committee, has
reappointed, subject to shareholder ratification, the firm of Deloitte & Touche
LLP, certified public accountants, as independent auditors to make an
examination of the accounts of the CompanyCorporation for the year 1996.1998. If the
shareholders do not ratify this appointment, other certified public accountants
will be considered by the Board of Directors upon recommendation of the Audit
Committee.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
A representative of Deloitte & Touche LLP will, as in prior years, attend
the annual meeting and will have the opportunity to make a statement and be
available to respond to appropriate questions.
APPROVAL OF STOCKTHE DUKE ENERGY CORPORATION
1998 LONG-TERM INCENTIVE PLAN
(PROPOSAL 3)
The following is a description of the Duke Power Company StockEnergy Corporation 1998
Long-Term Incentive Plan (the "Plan""1998 Plan"), which was adopted by the Board of
Directors of the Company on January
30, 1996.February 18, 1998. If approved by the shareholders as proposed
herein, the 1998 Plan will allow the Compensation Committeegrant of incentive awards to employees of
the Corporation and its subsidiaries and to nonemployee members of the Board or another committee appointedof
Directors. The 1998 Plan provides for the grant of stock options, including both
incentive stock options and nonqualified stock options, as well as stock
appreciation rights, restricted stock, performance awards, phantom stock, and
dividend equivalents, as described below. The purpose of the 1998 Plan is to
promote the interests of the Corporation and its shareholders by strengthening
the Board (the "Committee")Corporation's ability to make variousattract, motivate and retain employees and
directors and to provide an additional incentive for employees and directors to
promote the financial success and growth of the Corporation. The 1998 Plan is
designed to allow for the grant of certain types of awards that conform to officers and key
employeesthe
requirements for tax deductible "performance-based" compensation under section
162(m) of the Company and its subsidiaries.Internal Revenue Code, as discussed under "Compliance with Section
162(m) of the Internal Revenue Code" in the section of this proxy statement
entitled "Compensation Committee Report on Executive Compensation."
The full text of the 1998 Plan was filed electronically with the SEC with
this proxy statement. A brief description of the material features of the 1998
Plan is set forth below, but is qualified by reference to the full text thereof.
1998 PLAN BENEFITS. As of the date of this proxy statement, no awards have
been made under the Plan, nor has any determination been1998 Plan. The table below sets forth all determinations
made as of the date of this proxy statement as to any recipient of anyfuture award orrecipients and
the size or type of any award.such awards under the 1998 Plan. It is anticipated that the
Compensation Committee will grant the awards set forth below under the 1998 Plan
on the date of the annual meeting, subject to shareholder approval of the 1998
Plan. With respect to the Named Executive Officers, the awards are to be made
pursuant to the employment agreements described in "Employment Contracts and
Termination of Employment and Change-in-Control Arrangements." No awards to
non-executive officer employees under the 1998 Plan are anticipated during 1998.
NUMBER
OF STOCK
NAME OPTIONS
- -------------------------------------- ---------
Richard B. Priory 500,000
Paul M. Anderson 400,000
William A. Coley 200,000
James T. Hackett 250,000
Richard J. Osborne 100,000
All Executive Officers as a Group (9) 1,900,000
Currently, approximately 1501,000 persons are eligibleexpected to participatebe considered by the
Committee for participation in the 1998 Plan. The number of persons eligible to
participate in the 1998 Plan and the number of grantees may vary from year to
year.
RESERVATION OF SHARES. The Plan is reproduced in its entirety in Appendix ACorporation has reserved, subject to this Proxy
Statement, and all capitalized terms used but not defined in the following
description are used as defined in the Plan. The following description is
qualified in all respects by reference to the full Plan document.
Approval of this proposal requires the affirmative vote of a majorityshareholder
approval of the Company's1998 Plan, 15,000,000 shares of Common Stock present, or represented, and entitled to
vote atfor issuance under
the annual meeting. Shares voted for the proposal and shares represented
by returned proxies1998 Plan, provided that do not contain instructions to vote against the
proposal or to abstain from voting will be counted as shares cast for the
proposal. Shares will be counted as cast against the proposal if the
16
shares are voted either against the proposal or to abstain from voting. Broker
nonvotes will not change the number of votes cast for or against the proposal
and will not be treated as shares present or represented at the meeting.
ELIGIBILITY, DURATION AND OBJECTIVES
The Plan permits the grant of Nonqualified Stock Options, Incentive Stock
Options, Stock Appreciation Rights, Restricted Stock, Restricted Units,
Performance Shares and Performance Units. Officers and key employees of the
Company and its subsidiaries ("Key Employees") are eligible to participate in
the Plan.
Subject to approval by the Company's shareholders, the Plan will become
effective as of April 25, 1996 (the "Effective Date") and will remain in effect
until allno more than 1,500,000 shares of Common Stock may
be issued pursuant to all awards of restricted stock, performance awards or
phantom stock under the 1998 Plan. The shares of Common Stock to be issued under
the 1998 Plan shall be made available from authorized but unissued shares of
Common Stock. If any shares of Common Stock that are the subject of an award are
not issued and cease to be issuable for
20
any reason, such shares will no longer be charged against such maximum share
limitation and may again be made subject to awards under the 1998 Plan. In the
event of certain corporate reorganizations, recapitalizations, or other
specified corporate transactions affecting the Corporation or the Common Stock,
proportionate adjustments may be made to the number of shares available for
grant under the 1998 Plan, the applicable maximum share limitations under the
1998 Plan, and the number of shares and prices under outstanding awards at the
time of the Company ("Shares"event.
ADMINISTRATION. The 1998 Plan will be administered by the Compensation
Committee, or such other committee or subcommittee of the Board of Directors
designated for such purpose (the "Committee"). Subject to the limitations set
forth in the 1998 Plan, the Committee has the authority to determine the persons
to whom awards are granted, the types of awards to be granted, the time at which
awards will be granted, the number of shares, units or other rights subject to
iteach award, the exercise, base or purchase price of an award (if any), the time
or times at which the award will become vested, exercisable or payable, and the
duration of the award. The Committee may provide for the acceleration of the
vesting or exercise period of an award at any time prior to its termination or
upon the occurrence of specified events. With the consent of the affected
participant, the Committee has the authority to cancel and replace awards
previously granted with new awards for the same or a different number of shares
and for the same or different exercise or base price and may amend the terms of
any outstanding award, provided that the Committee shall not have the authority
to reduce the exercise or base price of an award by amendment or cancellation
and substitution of an existing award without approval of the Corporation's
shareholders. With respect to awards granted under the 1998 Plan to nonemployee
members of the Board of Directors, all rights, powers and authorities vested in
the Committee under the 1998 Plan shall instead be exercised by the Board of
Directors.
ELIGIBILITY. All employees of the Corporation and its subsidiaries and all
nonemployee members of the Board of Directors are eligible to be granted awards
under the 1998 Plan, as selected from time to time by the Committee in its sole
discretion.
STOCK OPTIONS. The 1998 Plan authorizes the grant of nonqualified stock
options and incentive stock options. Nonqualified stock options may be granted
to employees and nonemployee directors. Incentive stock options may only be
granted to employees. The exercise price of an option may be determined by the
Committee, provided that the exercise price per share of an option may not be
less than the fair market value of a share of Common Stock on the date of grant.
The value of Common Stock (determined at the time of grant) that may be subject
to incentive stock options that become exercisable by any one employee in any
one year is limited to $100,000. The maximum term of stock options granted under
the 1998 Plan is ten years from the date of grant. The Committee shall determine
the extent to which an option shall become and/or remain exercisable in the
event of termination of employment or service of a participant under certain
circumstances, including retirement, death or disability, subject to certain
limitations for incentive stock options. Under the 1998 Plan, the exercise price
of an option is payable by the participant in cash, or, in the discretion of the
Committee, in shares of Common Stock, or by any other method approved of by the
Committee. The maximum number of shares of Common Stock that may be granted
under stock options to any one participant during any calendar year shall be
limited to 1,000,000 shares. Nonqualified stock options granted under the 1998
Plan are intended to qualify for exemption under section 162(m) of the Internal
Revenue Code. To the extent permitted by the Committee, nonqualified stock
options may be transferred to members of a participant's immediate family, to
certain other entities which are owned or controlled by members of a
participant's immediate family, or to any persons or entities approved of in
advance by the Committee.
STOCK APPRECIATION RIGHTS. The 1998 Plan authorizes the Committee to grant
awards of stock appreciation rights. A stock appreciation right may be granted
either in tandem with an option or without relationship to an option. A stock
appreciation right entitles the holder, upon exercise, to receive a payment
based on the difference between the base price of the stock appreciation right
and the fair market value of a share of Common Stock on the date of exercise,
multiplied by the number of shares as to which such stock appreciation right
will have been purchasedexercised. A stock appreciation right granted in tandem with an
option will have a base price per share equal to the per share exercise price of
the option, will be exercisable only at such time or acquiredtimes as the related option
is exercisable and will expire no later than the time when the related option
expires. Exercise of the option or the stock appreciation right as to a number
of shares results in accordance with the Plan. However,cancellation of the same number of shares under the
tandem right. A stock appreciation right granted without relationship to an
option will be exercisable as determined by the Committee, but in no event after
ten years from the date of grant. The base price assigned to a stock
appreciation right granted without relationship to an option shall not be less
than 100% of the fair market value of a share of Common Stock on the date of
grant. The maximum number of shares of Common Stock that may an Award be subject to stock
appreciation rights granted to any one participant during any calendar year
shall be limited to 1,000,000 shares. Stock appreciation rights are payable in
cash, in shares of Common Stock, or in a combination of cash and shares of
Common Stock, in the discretion of the Committee. Stock appreciation rights
granted under the 1998 Plan on or after April 25, 2006.
The objectivesare intended to qualify for exemption under section
162(m) of the Internal Revenue Code.
21
PERFORMANCE AWARDS. The 1998 Plan authorizes the Committee to grant
performance awards, which are to optimizeunits denominated on the profitability and growthdate of grant either in
shares of Common Stock ("performance shares") or in specified dollar amounts
("performance units"). Performance awards are payable upon the achievement of
performance criteria established by the Committee at the beginning of the
Company through incentivesperformance period, which are consistent withmay not exceed ten years from the Company's
objectives and which linkdate of grant. At
the intereststime of Participants to thosegrant, the Committee establishes the number of units, the duration
of the Company's shareholders;performance period or periods, the applicable performance criteria, and,
in the case of performance units, the target unit value or range of unit values
for the performance awards. At the end of the performance period, the Committee
determines the payment to provide Participants with an incentive for excellencebe made based on the extent to which the performance
goals have been achieved. Performance awards are payable in individual performance;cash, in shares of
Common Stock, or in a combination of cash and to promote teamwork among Participants.shares of Common Stock, in the
discretion of the Committee.
The Plan
is furtherCommittee may grant performance awards that are intended to provide flexibility to the Company in its ability to
motivate, attract, and retain the services of Participants who make significant
contributions to the Company's success and to allow Participants to share in the
success of the Company.
The Plan is designed to allow the Committee the opportunity to grant
certain types of Awards that are exempt from the limitations of Sectionqualify for
exemption under section 162(m) of the Internal Revenue Code, of 1986, as amended (the "Code"). Under Section
162(m), the Company is not entitled to a federal income tax deduction for
compensation in excess of $1 million paid in any year to its chief executive
officer and its four other most highly compensated executive officers, subject
to certain exceptions. Compensation that qualifies as "performance-based" under
Section 162(m) is exempt from this limitation. The applicable conditions of this
exemption include, among others, a requirement that the shareholders of the
Company approve the material terms of the Plan. Options and SARs granted under
the Plan are designed to satisfy the requirements for the performance-based
exemption. Performance Shares and Performance Units, as well as
Restricted Stock
and Restricted Units,performance awards that are based onnot intended to so qualify. The performance criteria
for a section 162(m) qualified award, which may relate to the performance measures described belowCorporation, any
subsidiary or any business unit, and may be granted by the Committee in a manner that meets the requirements for the
performance-based exemption, as the Committee deems advisable in its discretion.
The Compensation Committee may, however, grant Awardsmeasured on an absolute or take other actions
under the Plan that would not qualify for the performance-based exemption under
Section 162(m).
ADMINISTRATION
The Plan willrelative
to peer group basis, shall be administered by the Committee, which (unless otherwise
determined by the Board) is intendedlimited to satisfy the "disinterested
administration" regulations of Rule 16b-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act") and the "outside director" provisions of
Section 162 (m) of the Code. The members of the Committee will be appointed from
time to time by, and will serve at the discretion of, the Board of Directors.
Except as limited by law and subject to the provisions of the Plan, the
Committee will select Key Employees to participate in the Plan; determine the
sizes and types of Awards; determine the terms and conditions of Awards in a
manner consistent with the Plan; construe and interpret the Plan and any
agreement or instrument entered into under the Plan; establish, amend, or waive
rules and regulations for the Plan's administration; and amend the terms and
conditions of any outstanding Award to the extent such terms and conditions are
within the discretion
17
of the Committee as provided in the Plan. Further, the Committee will make such
other determinations as may be necessary or advisable in the administration of
the Plan.
SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
Subject to adjustment as described below, up to 2,000,000 Shares may be
issued or transferred to Participants under the Plan. The maximum aggregate
number of Shares and Share equivalent units that may be granted during any
fiscal year of the Company to any one Participant under Options, Freestanding
SARs, Restricted Stock, Restricted Units or Performance Shares will be 100,000
Shares. This limit will apply regardless of whether such compensation is paid in
Shares or in cash. The maximum aggregate amount of compensation payable in
respect of Awards of Performance Units made during any fiscal year of the
Company to any one Participant will be $1,500,000, which limit shall apply
regardless of whether the compensation is paid in cash or in Shares (valued at
Fair Market Value at the applicable valuation date for payment of the award).
If any Award is canceled, terminates, expires, or lapses for any reason,
any Shares subject to such Award will again be available for grant under the
Plan, except that such Shares will still be counted for purposes of the
individual yearly Share award limit described above.
In the event of any change in corporate capitalization, such as a stock
split, or a corporate transaction, such as a merger, consolidation, separation,
or other distribution of stock or property of the Company including a spin-off,
or any reorganization, or any partial or complete liquidation of the Company, an
adjustment may be made in the number and class of Shares which may be delivered
under the Plan, in the number and class of and/or price of Shares subject to
outstanding Awards, and in the individual yearly Award limits set forth above,
as may be determined to be appropriate and equitable by the Committee, in its
sole discretion, to prevent dilution or enlargement of rights.
The approval of the North Carolina Utilities Commission and The Public
Service Commission of South Carolina is required for issuance of the Shares
under the Plan.
STOCK OPTIONS
The Committee may grant Incentive Stock Options and/or Nonqualified Stock
Options under the Plan. Each Option grant will be evidenced by an Award
Agreement specifying the Option Price, the duration of the Option, the number of
Shares to which the Option pertains, and such other provisions as the Committee
determines. The Option Price will be at least equal to 100% of the Fair Market
Value of a Share on the date the Option is granted. Each Option will expire as
the Committee determines at the time of grant; provided, however, that no Option
will be exercisable later than the tenth anniversary date of its grant. The
Committee may grant dividend equivalents with respect to Options granted, which
may be paid in cash or in Shares at the discretion of the Committee.
The Option Price will be payable to the Company in full at the time of
exercise, either: (a) in cash or its equivalent, or (b) if permitted in the
governing Award Agreement, by tendering previously acquired Shares having an
aggregate Fair Market Value at the time of exercise equal to the Option Price,
or (c) if permitted in the governing Award Agreement, by a combination of (a)
and (b). The Committee may also allow "cashless exercise" as permitted by law
and may authorize Company loans to Participants in connection with Option
exercises. Each Award Agreement will set forth the extent to which the
Participant will have the right to exercise the Option following termination of
the Participant's employment.
18
STOCK APPRECIATION RIGHTS
The Committee may grant Freestanding SARs, Tandem SARs, and/or any
combination of these forms of SAR under the Plan. The grant price of a
Freestanding SAR will equal the Fair Market Value of a Share on the date of
grant of the SAR. A Freestanding SAR may be exercised upon whatever terms and
conditions the Committee, in its sole discretion, imposes. The grant price of a
Tandem SAR will equal the Option Price of the related Option. A Tandem SAR may
be exercised for all or part of the Shares subject to the related Option upon
the surrender of the right to exercise the equivalent portion of the related
Option. A Tandem SAR may be exercised only with respect to the Shares for which
its related Option is then exercisable. Each SAR grant will be evidenced by an
Award Agreement that will specify the grant price, the term of the SAR, and such
other provisions as the Committee determines. The term of an SAR granted under
the Plan will be determined by the Committee, in its sole discretion; provided,
however, that such term will not exceed ten years.
Upon exercise of an SAR, a Participant will be entitled to receive payment
from the Company in an amount determined by multiplying the difference between
the Fair Market Value of a Share on the date of exercise of the SAR over the
grant price specified in the Award Agreement by the number of Shares with
respect to which the SAR is exercised. At the discretion of the Committee, the
payment may be in cash, in Shares of equivalent value, or in some combination
thereof. Each Award Agreement will set forth the extent to which the Participant
will have the right to exercise the SAR following termination of the
Participant's employment.
RESTRICTED STOCK AND RESTRICTED UNITS
The Committee may grant Restricted Stock and/or Restricted Units under the
Plan. Each Restricted Stock or Restricted Unit grant will be evidenced by an
Award Agreement that will specify the Period(s) of Restriction, the number of
Shares (in the case of Restricted Stock) or Share equivalent units (in the case
of Restricted Units) granted, and such other provisions as the Committee will
determine. Except as provided in the Plan, Shares of Restricted Stock or
Restricted Units may not be sold, transferred, pledged, assigned, or otherwise
alienated until the end of the applicable Period of Restriction or upon earlier
satisfaction of other conditions governing the Award. The Committee will impose
such other conditions or restrictions on any Restricted Stock or Restricted
Units granted pursuant to the Plan as it may deem advisable.
The Company will retain the certificates representing Shares of Restricted
Stock in the Company's possession until such time as all conditions and/or
restrictions applicable to such Shares have been satisfied. Restricted Units
will not be evidenced by stock certificates. During the Period of Restriction,
Participants holding Restricted Stock may exercise full voting rights with
respect to those Shares and Participants holding Restricted Stock or Restricted
Units will be credited with regular cash dividends or dividend equivalents, as
the case may be, paid with respect to the underlying Shares or Share equivalent
units while they are so held. Dividends and other distributions may be paid upon
such terms as the Committee establishes. Each Award Agreement will set forth the
extent to which the Participant has the right to retain unvested Restricted
Stock or Restricted Units following termination of the Participant's employment
with the Company. Such provisions will be determined in the sole discretion of
the Committee, and may reflect distinctions based on the reasons for termination
of employment; provided, however, that except in cases of terminations resulting
from a Change in Control and terminations by reason of death or Disability, the
vesting of Restricted Stock or Restricted Units which are designed to qualify
for the performance-based exemption under Section 162(m) of the Code will not be
accelerated.
PERFORMANCE UNITS AND PERFORMANCE SHARES
The Committee may grant Performance Units and/or Performance Shares under
the Plan. Each Performance Unit will have an initial value that is established
by the Committee at the time of grant. Each Performance Share
19
will have an initial value equal to the Fair Market Value of a Share on the date
of grant. The Committee will set performance periods and performance objectives
in its discretion which, depending on the extent to which they are met, will
determine the number and/or value of Performance Units or Performance Shares
that will be paid out to the Participant. The Committee may pay earned
Performance Units or Performance Shares in cash, in Shares or in a combination
thereof. Shares may be paid subject to any restrictions deemed appropriate by
the Committee.
Unless otherwise set forth in the Award Agreement, in the event the
employment of a Participant is terminated by reason of death, Disability, or
Retirement during a Performance Period, the Participant will receive a payout of
the Performance Units or Performance Shares which is prorated as specified in
the Award Agreement. In the event that a Participant's employment terminates
during the applicable Performance Period for any reason other than death,
Disability or Retirement, all Performance Units or Performance Shares will be
forfeited, unless otherwise specified in the Award Agreement.
The performance measure(s) to be used to determine the level of payout or
vesting with respect to Awards designed to qualify for the performance-based
exception under Section 162(m) of the Code will be chosen from among the
following:(i) total shareholder return, (absolute or peer-group comparative);(ii)
stock price increase, (absolute or peer-group comparative); dividend payout as a
percentage of net income;(iii) return on equity;equity, (iv) return on capital;capital, (v)
earnings per share, (vi) earnings before interest and taxes, (vii) cash flow
including(including operating cash flow, free cash flow, discounted cash flow return on
investment, and cash flow in excess of costcosts of capital; economic value added
(income in excess of capital costs);capital) and (viii) cost per
kilowatt hour (absolutekWh. The maximum amount of compensation that may be payable in any one calendar
year to any one participant designated to receive a performance unit award
intended to qualify under section 162(m) is $2.5 million. The maximum number of
stock units that may be subject to performance share awards intended to qualify
under section 162(m) granted to any one participant in any one calendar year is
200,000 units.
RESTRICTED STOCK AWARDS. The 1998 Plan authorizes the Committee to make
awards of restricted stock. An award of restricted stock represents shares of
Common Stock that are issued subject to such restrictions on transfer and on
incidents of ownership and such forfeiture conditions as the Committee deems
appropriate. The restrictions imposed upon an award of restricted stock will
lapse in accordance with the vesting requirements specified by the Committee in
the award agreement. Such vesting requirements may be based on the continued
employment of the participant for a specified time period or peer-group comparative); market share; and customer satisfaction as measuredon the attainment
of specified business goals or performance criteria established by surveys.the
Committee. The Committee may, adjust determinationsin connection with an award of restricted stock,
require the payment of a specified purchase price. Subject to the transfer
restrictions and forfeiture restrictions relating to the restricted stock award,
the participant will otherwise have the rights of a shareholder of the
degreeCorporation, including all voting and dividend rights, during the period of
attainmentrestriction unless the Committee determines otherwise at the time of the pre-established performance objectives; provided, however,grant.
The Committee may grant awards of restricted stock that Awards which are designedintended to
qualify for exemption under section 162(m) of the performance-based exceptionInternal Revenue Code, as well
as awards that are not intended to so qualify. An award of restricted stock that
is intended to qualify for exemption under section 162(m) shall have its vesting
requirements limited to the performance criteria described above under the
heading "PERFORMANCE AWARDS." The maximum number of shares of Common Stock that
may not be adjustedsubject to increaseawards of restricted stock intended to qualify under section
162(m) granted to any one participant during any calendar year shall be limited
to 200,000 shares.
PHANTOM STOCK. The 1998 Plan authorizes the compensationCommittee to grant awards of
phantom stock. An award of phantom stock gives the participant the right to
receive payment at the end of a fixed vesting period based on the value of a
share of Common Stock at the time of vesting. No vesting period shall exceed ten
years from the date of grant. Phantom stock units are subject to such
restrictions and conditions to payment as the Committee determines are
appropriate. An award of phantom stock may be granted, at the discretion of the
Committee, together with an award of dividend equivalent rights for the same
number of shares covered thereby. Phantom stock awards are payable in cash or in
shares of Common Stock having an equivalent fair market value on the applicable
vesting dates, or in a combination thereof, in the discretion of the Committee.
DIVIDEND EQUIVALENTS. The 1998 Plan authorizes the Committee to grant
awards of dividend equivalents. Dividend equivalent awards entitle the holder to
a Participant.
AMENDMENT, MODIFICATION, AND TERMINATIONright to receive cash payments determined by reference to dividends declared
on the Common Stock during the term of the award, which shall not exceed ten
years from the date of grant. Dividend equivalent awards may be granted on a
stand-alone basis or in tandem with other awards under the 1998 Plan. Dividend
equivalent awards granted on a tandem basis with other awards shall expire at
the time the underlying award is exercised, otherwise becomes payable, or
expires. Dividend equivalent awards are payable in cash or in shares of Common
Stock, as determined by the Committee.
CHANGE IN CONTROL. The BoardCommittee may amend, modify or terminate the Plan as it deems advisable;
provided, however, that no amendment which requires shareholder approval in
orderprovide for the Plan to continue to comply with Rule 16b-3effect of a "change in
control" (as defined in the 1998 Plan) upon an award granted under the Exchange Act
will be effective unless1998
Plan. Such provisions may include (i) the amendment is approved byacceleration or extension of time
periods for purposes of exercising, vesting in, or realizing gain from an award,
(ii) the Company's
shareholders. No termination, amendment,waiver or modification of performance or other
22
conditions related to payment or other rights under an award, (iii) providing
for the cash settlement of an award, or (iv) such other modification or
adjustment to an award as the Committee deems appropriate.
TERM AND AMENDMENT. The 1998 Plan has a term of ten years, subject to
earlier termination or amendment by the Board of Directors. The Board of
Directors may adversely affectamend the 1998 Plan at any time, except that shareholder approval
is required for amendments that would change the persons eligible to participate
in any material way any Award previously grantedthe 1998 Plan, increase the number of shares of Common Stock reserved for
issuance under the 1998 Plan, allow the grant of options at an exercise price
below fair market value, or allow the repricing of options without the written consent of the Participant holding such Award.
The Committee may make adjustments in the terms and conditions of, and the
criteria included in, Awards in recognition of unusual or nonrecurring events
affecting the Company or of changes in applicable laws, regulations, or
accounting principles, if the Committee determines that such adjustments are
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, subject to the
requirements of Code Section 162(m) in the case of Awards designed to qualify
for the performance-based exception.
OTHER
Upon the occurrence of a Change in Control (as defined in Section 2.5 of
the Plan), unless otherwise specifically prohibited under applicable laws or by
the rules and regulations of any governing governmental agencies or national
securities exchanges:
(a) Any and all outstanding Options and SARs granted under the Plan
will become immediately exercisable and remain exercisable throughout their
entire term;
20
(b) Any Periods of Restriction and other restrictions imposed on
Restricted Stock or Restricted Units will lapse; except that vesting
associated with Restricted Stock or Restricted Units which is conditioned
upon the achievement of performance conditions will be determined in the
manner applicable to Performance Units and Performance Shares, as set forth
in (c) hereof.
(c) Except as otherwise provided in the Award Agreement, with certain
exceptions, the vesting of all Performance Units and Performance Shares
will be accelerated as of the effective date of the Change in Control, and
there will be paid out in cash to Participants a pro rata amount based upon
an assumed achievement of all relevant performance objectives at target
levels and upon the length of time within the Performance Period which has
elapsed prior to the effective date of the Change in Control. In the event,
however, the Committee determines that actual performance to the effective
date of the Change in Control exceeds target levels, the prorated payouts
will be made at levels commensurate with such actual performance based upon
the length of time within the Performance Period which has elapsed prior to
the effective date of the Change in Control.
Notwithstanding any other provision of the Plan or of any Award Agreement,
the Change-in-Control provisions of the Plan may not be terminated, amended, or
modified on or after the effective date of a Change in Control to affect
adversely any Award previously granted under the Plan without the prior written
consent of the Participant with respect to the Participant's outstanding Awards.
Committee and Board members will be indemnified and held harmless by the
Company against and from any loss or expense imposed upon or reasonably incurred
by them in connection with the Plan.shareholder
approval.
FEDERAL INCOME TAX CONSEQUENCESCONSEQUENCES. The following is a general description of
the federal income tax consequences to Participantsparticipants and the CompanyCorporation relating
to Optionsoptions and other Awardsawards that may be granted under the 1998 Plan. This
discussion does not purport to cover all tax consequences relating to Optionsoptions
and other Awards.awards.
A Participantparticipant will not recognize income upon the grant of a Nonqualified
Stock Optionnonqualified
stock option to purchase Shares.shares of Common Stock. Upon exercise of the Option,option,
the Participantparticipant will recognize ordinary compensation income equal to the excess
of the Fair
Market Valuefair market value of the Sharesshares of Common Stock on the date the Optionoption is
exercised over the exercise price for such Shares.shares. The tax basis of the Shares in the hands of the
Participant will equal the exercise price paid for the Shares plus the amount of
ordinary compensation income the Participant recognizes upon exercise of the
Option, and the holding period for the Shares will commence on the day the
Option is exercised. A Participant who sells any of such Shares will recognize
capital gain or loss measured by the difference between the tax basis of the
Shares and the amount realized on the sale. Such gain or loss will be long term
if the Shares are held for more than one year after exercise. The CompanyCorporation will be
entitled to a deduction equal to the amount of ordinary compensation income
recognized by the Participant.participant. The deduction will be allowed at the same time
the Participantparticipant recognizes the income.
A Participantparticipant will not recognize income upon the grant of an Incentive
Stock Optionincentive
stock option to purchase Sharesshares of Common Stock and will not recognize income
upon exercise of the Option,option, provided such Participantthe participant was an employee of the
CompanyCorporation or a Subsidiarysubsidiary at all times from the date of grant until three
months prior to exercise. Generally, the amount by which the Fair Market Value of the Shares on
the date of exercise exceeds the exercise price will be includable for purposes
of determining any alternative minimum taxable income of a Participant in the
year the Shares are sold. Where a Participantparticipant who has exercised an Incentive
Stock Optionincentive
stock option sells the Sharesshares of Common Stock acquired upon exercise more than
two years after the grant date and more than one year after exercise, long-term capital
gain or loss will be recognized equal to the difference between the sales price
and the exercise price. A Participantparticipant who sells such 21
Sharesshares of Common Stock
within two years after the grant date or within one year after exercise will
recognize ordinary compensation income in an amount equal to the lesser of the
difference between (a) the exercise price and the Fair Market Valuefair market value of such
Sharesshares on the date of exercise, or (b) the exercise price and the sales
proceeds. Any remaining gain or loss will be treated as a capital gain or loss.
The CompanyCorporation will be entitled to a deduction equal to the amount of ordinary
compensation income recognized by the optionee in this case. The deduction will
be allowable at the same time the Participantparticipant recognizes the income.
The current federal income tax consequences of other Awardsawards authorized
under the 1998 Plan are generally in accordance with the following: SARsstock
appreciation rights are taxed
and deductible by the Companysubject to taxation in substantially the same manner as
Nonqualified
Stock Options; Restricted Stocknonqualified stock options; restricted stock subject to a substantial risk of
forfeiture results in income recognition equal to the excess of the Fair Market Valuefair market value
of the Sharesshares of Common Stock over the purchase price (if any) only at the time
the restrictions lapse (unless the recipient elects to accelerate recognition as
of the date of grant); Restricted Units, Performance Shares, Performance Unitsperformance awards, phantom stock and dividend
equivalents are generally are subject to tax at the time of payment. In each of the
foregoing cases, the CompanyCorporation will generally have (ata corresponding deduction
at the same time the Participantparticipant recognizes income) a corresponding deduction.income.
The closing price of the Company'sCorporation's Common Stock on the New York Stock
Exchange on March 12, 1996,9, 1998 was $47.75$56.75 per share.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
APPROVAL OF THE DUKE ENERGY CORPORATION
POLICY COMMITTEE SHORT-TERM INCENTIVE PLAN
(PROPOSAL 4)
The Duke Energy Corporation Policy Committee Short-Term Incentive Plan (the
"Policy Committee Plan") is designed to advance the interests of the Corporation
by rewarding members of the Policy Committee (currently numbering eight) when
performance-based financial objectives are achieved. The Policy Committee Plan
will be administered by the Compensation Committee of the Board of Directors of
the Corporation. Awards may be granted only to members of the Policy Committee.
The full text of the Policy Committee Plan was filed electronically with
the SEC with this proxy statement. A brief description of the material features
of the Policy Committee Plan is set forth below, but is qualified by reference
to the full text thereof.
DESCRIPTION OF POLICY COMMITTEE PLAN. Prior to the commencement of each
fiscal year, the Compensation Committee will establish performance targets for
the Corporation and corresponding target awards for each participant for such
fiscal
23
year. The performance targets will be expressed as specified levels of earnings
per share of the Corporation's Common Stock for such fiscal year. The earnings
per share of the Corporation's Common Stock is the sole performance criterion
under the Policy Committee Plan. Awards will be payable in cash, and the
aggregate amount of all payments to any participant will not exceed $1,500,000
for any annual performance period.
As soon as practicable after the close of a performance period, the
Compensation Committee will certify in writing the extent to which the
performance targets have been achieved. If any targets have been achieved, the
Compensation Committee will determine for each participant the amount of the
award that has been earned, based on a pre-determined formula. The Compensation
Committee may reduce the amount of any such award based upon the Compensation
Committee's assessment of individual performance. The Compensation Committee may
permit participants to elect to defer payment of all or part of any awards.
The Policy Committee Plan is intended to satisfy the requirements of
section 162(m) of the Internal Revenue Code, which allows a federal income tax
deduction for performance-based incentive compensation.
The Policy Committee Plan will continue in effect until terminated by the
Board of Directors. The Compensation Committee, however, retains the right to
amend or modify the Policy Committee Plan as it deems advisable. No such
amendment or modification will be effective without Board of Director or
shareholder approval if such approval is required to comply with the
requirements for performance-based compensation under section 162(m) of the
Internal Revenue Code.
POLICY COMMITTEE PLAN BENEFITS. The Compensation Committee has granted
target awards under the Policy Committee Plan in the following target amounts,
subject to shareholder approval of the Policy Committee Plan:
NAME OR IDENTITY OF GROUP DOLLAR VALUE ($)
- -------------------------------------------------------------- ----------------
Richard B. Priory 810,000
Paul M. Anderson 630,000
William A. Coley 228,000
James T. Hackett 280,000
Richard J. Osborne 194,400
All Eligible Executive Officers as a Group (8) 2,758,000
The actual amounts of the awards may be more or less than the amounts of
such target awards, depending upon the extent to which earnings per share of the
Corporation's Common Stock differ from the earnings per share performance
target.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
OTHER BUSINESS
The BoardMATTERS
On the date this proxy statement went to press, management did not know of
Directors ofany other matters to be brought before the Company knows of nomeeting other matter tothan those described in
this proxy statement. If any matters come before the meeting. However, if any matter requiring a vote ofmeeting that are not
specifically set forth on the shareholders
should arise,proxy card and in this proxy statement, it is the
intention of the persons named in the enclosed form of
proxy card to vote such proxythereon in accordance
with their best judgment.
PROPOSALS FOR 19971999 ANNUAL MEETING
ShareholderShareholders who intend to present proposals intended to be presented at the 1997 annual meeting in 1999,
and who wish to have such proposals included in the Corporation's proxy
statement for that meeting, must be certain that such proposals are received by
the CompanySecretary of the Corporation by November 19, 199616, 1998. Such proposals must meet
the requirements set forth in the rules and regulations of the SEC in order to
be eligible for possible inclusion in the proxy material relatingstatement for the 1999 annual meeting.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the Corporation's knowledge, based on information furnished to such meeting.it and
contained in the reports filed pursuant to Rule 16a-3 of the Exchange Act, as
well as any written representations that no other reports were required, all
applicable Section 16(a) filing requirements were complied with during the year
ended December 31, 1997, except that George Dean Johnson, Jr., a director of the
Corporation, failed to timely report a transfer of shares of Common Stock to a
trust of which he was the beneficiary.
24
ANNUAL REPORT ON FORM 10-K
A COPY OF THE COMPANY'SCORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1995,1997, WHICH IS REQUIRED TO BE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION,SEC, WILL BE MADE
AVAILABLE TO SHAREHOLDERSHOLDERS OF COMMON STOCK TO WHOM THIS PROXY STATEMENT IS MAILED,
WITHOUT CHARGE, UPON WRITTEN REQUEST TO ALLEN STEWART,THE INVESTOR RELATIONS DEPARTMENT, DUKE
POWER COMPANY,ENERGY CORPORATION, P.O. BOX 1005, CHARLOTTE, NORTH CAROLINA 28201-1005.
Whether or not you plan to attend the meeting, please mark, sign, date and
promptly return the enclosed proxy in the enclosed envelope. No postage is
required for mailing in the United States.
By orderOrder of the Board of Directors
ELLEN T. RUFFW. EDWARD POE, JR.
Charlotte, North Carolina SECRETARY
March 18, 1996 SECRETARY
2216, 1998
25
APPENDIX(Duke Energy Logo)
EXHIBIT A
STOCKDUKE ENERGY CORPORATION
1998 LONG-TERM INCENTIVE PLAN
Duke Power Company
CONTENTS
PAGE
Article 1. Establishment, Objectives, and Duration........................................................ A-1
Article 2. Definitions.................................................................................... A-1
Article 3. Administration................................................................................. A-4
Article 4. Shares Subject to the Plan and Maximum Awards.................................................. A-4
Article 5. Eligibility and Participation.................................................................. A-5
Article 6. Stock Options.................................................................................. A-5
Article 7. Stock Appreciation Rights...................................................................... A-7
Article 8. Restricted Stock and Restricted Units.......................................................... A-8
Article 9. Performance Units and Performance Shares....................................................... A-9
Article 10. Performance Measures.......................................................................... A-10
Article 11. Beneficiary Designation....................................................................... A-11
Article 12. Deferrals..................................................................................... A-11
Article 13. Rights of Employees........................................................................... A-11
Article 14. Change in Control............................................................................. A-11
Article 15. Amendment, Modification, and Termination...................................................... A-12
Article 16. Withholding................................................................................... A-13
Article 17. Indemnification............................................................................... A-13
Article 18. Successors.................................................................................... A-13
Article 19. Legal Construction............................................................................ A-13
DUKE POWER COMPANY
STOCK INCENTIVE PLAN
ARTICLE 1. ESTABLISHMENT, OBJECTIVES, AND DURATION
1.1 ESTABLISHMENTPURPOSE OF THE PLAN. Duke Power Company, a North Carolina
corporation (hereinafter referred to as the "Company"), hereby establishes an
incentive compensation plan to be known as the "Duke Power Company Stock
Incentive Plan" (hereinafter referred to as the "Plan"), as set forth in this
document.PLAN
The Plan permits the grant of Nonqualified Stock Options, Incentive
Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Units,
Performance Shares and Performance Units.
Subject to approval by the Company's stockholders, the Plan shall become
effective as of April 25, 1996 (the "Effective Date") and shall remain in effect
as provided in Section 1.3 hereof.
1.2 OBJECTIVES OF THE PLAN. The objectivespurpose of the Duke Energy Corporation 1998 Long-Term Incentive
Plan areis to optimizepromote the profitabilityinterests of the Corporation and its shareholders by
strengthening the Corporation's ability to attract, motivate and retain
employees and directors of the Corporation upon whose judgment, initiative and
efforts the financial success and growth of the Company through incentives which are consistent
with the Company's objectives and which link the interests of Participants to
thosebusiness of the Company's stockholders;Corporation
largely depend, and to provide Participants with an additional incentive for excellence in individual performance;employees and
todirectors through stock ownership and other rights that promote teamwork among
Participants.
The Plan is further intended to provide flexibility toand recognize
the Company in its
ability to motivate, attract, and retain the services of Participants who make
significant contributions to the Company'sfinancial success and to allow Participants to
share in the successgrowth of the Company.
1.3 DURATION OF THE PLAN. The Plan shall commence on the Effective Date, as
described in Section 1.1 hereof, and shall remain in effect, subject to the
right of the Board of Directors to amend or terminate the Plan at any time
pursuant to Article 15 hereof, until all Shares subject to it pursuant to
Article 4 shall have been purchased or acquired according to the Plan's
provisions. However, in no event may an Award be granted under the Plan on or
after April 25, 2006.
ARTICLECorporation.
2. DEFINITIONS
WheneverWherever the following capitalized terms are used in thethis Plan the following termsthey
shall have the meanings set
forth below, and when the meaning is intended, the initial letterspecified below:
(a) "Award" means an award of the word
shall be capitalized:
2.1 "AWARD" means, individually or collectively, a grant under this Plan of
Nonqualifiedan Option, Restricted Stock, Options, Incentive Stock Options, Stock
Appreciation Rights,
RestrictedRight, Performance Award, Phantom Stock Restricted Units, Performance Shares or Performance Units.
2.2 "AWARD AGREEMENT"Dividend Equivalent
granted under the Plan.
(b) "Award Agreement" means an agreement entered into bybetween the
CompanyCorporation and a Participant setting forth the terms and provisions applicable toconditions of an Award
or
Awards granted under this Plan to sucha Participant.
2.3 "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.
2.4 "BOARD" or "BOARD OF DIRECTORS"(c) "Board" means the Board of Directors of the Company.
2.5 "CHANGE IN CONTROL"Corporation.
(d) "Change in Control" shall have the meaning specified in Section 12
hereof.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" means the Compensation Committee of the CompanyBoard, or such
other committee or subcommittee of the Board appointed by the Board to
administer the Plan from time to time.
(g) "Common Stock" means the common stock of the Corporation, without
par value.
(h) "Corporation" means Duke Energy Corporation, a North Carolina
corporation.
(i) "Date of Grant" means the date on which an Award under the Plan is
made by the Committee, or such later date as the Committee may specify that the
Award becomes effective.
(j) "Effective Date" means the Effective Date of this Plan, as defined
in Section 15.1 hereof.
(k) "Dividend Equivalent" means an Award under Section 11 hereof
entitling the Participant to receive payments with respect to dividends declared
on the Common Stock.
(l) "Eligible Person" means any person who is an Employee or an
Independent Director.
(m) "Employee" means any person who is an employee of the Corporation
or any Subsidiary; provided, however, that with respect to Incentive Stock
Options, "Employee" means any person who is considered an employee of the
Corporation or any Subsidiary for purposes of Treasury Regulation ss.
1.421-7(h).
(n) "Fair Market Value" of a share of Common Stock as of a given date
means the closing sales price of the Common Stock on the New York Stock Exchange
as reflected on the composite index on the trading day immediately preceding the
date as of which Fair Market Value is to be determined or, in the absence of any
reported sales of Common Stock on such date, on the first preceding date on
which any such sale shall have been reported. If Common Stock is not listed on
the New York Stock Exchange on the date as of which Fair Market Value is to be
determined, the Committee shall determine in good faith the Fair Market Value in
whatever manner it considers appropriate.
(o) "Independent Director" means a member of the Board who is not an
employee of the Corporation or any Subsidiary.
(p) "Incentive Stock Option" means an option to purchase Common Stock
that is intended to qualify as an incentive stock option under section 422 of
the Code and the Treasury Regulations thereunder.
(q) "Nonqualified Stock Option" means an option to purchase Common
Stock that is not an Incentive Stock Option.
(r) "Option" means an Incentive Stock Option or a Nonqualified Stock
Option granted under Section 6 hereof.
(s) "Participant" means any Eligible Person who holds an outstanding
Award under the Plan.
(t) "Phantom Stock" means an Award under Section 10 hereof entitling a
Participant to a payment at the end of a vesting period of a unit value based on
the Fair Market Value of a share of Common Stock.
(u) "Plan" means the Duke Energy Corporation 1998 Long-Term Incentive
Plan as set forth herein, as it may be amended from time to time.
2
(v) "Performance Award" means an Award made under Section 9 hereof
entitling a Participant to a payment based on the Fair Market Value of Common
Stock (a "Performance Share") or based on specified dollar units (a "Performance
Unit") at the end of a performance period if certain conditions established by
the Committee are satisfied.
(w) "Restricted Stock" means an Award under Section 8 hereof entitling
a Participant to shares of Common Stock that are nontransferable and subject to
forfeiture until specific conditions established by the Committee are satisfied.
(x) "Section 162(m)" means section 162(m) of the Code and the Treasury
Regulations thereunder.
(y) "Section 162(m) Participant" means any Participant who, in the sole
judgment of the Committee, could be treated as a "covered employee" under
Section 162(m) at the time income may be recognized by such Participant in
connection with an Award that is intended to qualify for exemption under Section
162(m).
(z) "Stock Appreciation Right" or "SAR" means an Award under Section 7
hereof entitling a Participant to receive an amount, representing the difference
between the base price per share of the right and the Fair Market Value of a
share of Common Stock on the date of exercise.
(aa) "Subsidiary" means an entity that is wholly owned, directly or
indirectly, by the Corporation, or any other affiliate of the Corporation that
is so designated, from time to time, by the Committee, provided, however, that
with respect to Incentive Stock Options, the term "Subsidiary" shall not include
any entity that does not qualify within the meaning of Section 424(f) of the
Code as a "subsidiary corporation" with respect to the Corporation.
3. SHARES OF COMMON STOCK SUBJECT TO THE PLAN
3.1. Number of Shares. Subject to the following provisions of this
Section 3, the aggregate number of shares of Common Stock that may be issued
pursuant to all Awards under the Plan is 15,000,000 shares of Common Stock;
provided, however, that no more than 1,5000,000 shares of Common Stock may be
issued pursuant to all Awards of Restricted Stock, Performance Awards or Phantom
Stock under the Plan. The shares of Common Stock to be delivered under the Plan
will be made available from authorized but unissued shares of Common Stock. If
any share of Common Stock that is the subject of an Award is not issued and
ceases to be issuable for any reason, or is forfeited, cancelled or returned to
the Corporation for failure to satisfy vesting requirements or upon the
occurrence of other forfeiture events, such share of Common Stock will no longer
be charged against the foregoing maximum share limitations and may again be made
subject to Awards under the Plan pursuant to such limitations.
3.2. Adjustments. If there shall occur any recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other
distribution with respect to the
3
shares of Common Stock, or any similar corporate transaction or event in respect
of the Common Stock, then the Committee shall, in the manner and to the extent
that it deems appropriate and equitable to the Participants and consistent with
the terms of this Plan, cause a proportionate adjustment to be made in (i) the
maximum numbers and kind of shares provided in Section 3.1 hereof, (ii) the
maximum numbers and kind of shares set forth in Sections 6.1, 7.1, 8.2 and 9.4
hereof, (iii) the number and kind of shares of Common Stock, share units, or
other rights subject to the then-outstanding Awards, (iv) the price for each
share or unit or other right subject to then outstanding Awards without change
in the aggregate purchase price or value as to which such Awards remain
exercisable or subject to restrictions, (v) the performance targets or goals
appropriate to any outstanding Performance Awards (subject to such limitations
as appropriate for Awards intended to qualify for exemption under Section
162(m)) or (vi) any other terms of an Award that are affected by the event.
Notwithstanding the foregoing, in the case of Incentive Stock Options, any such
adjustments shall be made in a manner consistent with the requirements of
section 424(a) of the Code.
4. ADMINISTRATION OF THE PLAN
4.1. Committee Members. Except as provided in Section 4.4 hereof, the
Plan will be administered by the Committee which, to the extent deemed necessary
or appropriate by the Board, will consist of two or more persons who satisfy the
requirements for a "nonemployee director" under Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 and/or the requirements for an "outside
director" under Section 162(m). The Committee may exercise such powers and
authority as may be necessary or appropriate for the Committee to carry out its
functions as described in the Plan. No member of the Committee will be liable
for any action or determination made in good faith by the Committee with respect
to the Plan or any Award under it.
4.2. Discretionary Authority. Subject to the express limitations of the
Plan, the Committee has authority in its discretion to determine the Eligible
Persons to whom, and the time or times at which, Awards may be granted, the
number of shares, units or other rights subject to each Award, the exercise,
base or purchase price of an Award (if any), the time or times at which an Award
will become vested, exercisable or payable, the performance criteria,
performance goals and other conditions of an Award, and the duration of the
Award. The Committee also has discretionary authority to interpret the Plan, to
make all factual determinations under the Plan, and to determine the terms and
provisions of the respective Award Agreements and to make all other
determinations necessary or advisable for Plan administration. The Committee has
authority to prescribe, amend, and rescind rules and regulations relating to the
Plan. All interpretations, determinations, and actions by the Committee will be
final, conclusive, and binding upon all parties.
4.3. Changes to Awards. The Committee shall have the authority to
effect, at any time and from time to time, with the consent of the affected
Participants, (i) the cancellation of any or all outstanding Awards and the
grant in substitution therefor of new Awards covering the same or different
numbers of shares of Common Stock and having an
4
exercise or base price which may be the same as or different than the exercise
or base price of the cancelled Awards or (ii) the amendment of the terms of any
and all outstanding Awards; provided, however, that the Committee shall not have
the authority to reduce the exercise or base price of an Award by amendment or
cancellation and substitution of an existing Award without the approval of the
Corporation's shareholders. The Committee may in its discretion accelerate the
vesting or exercisability of an Award at any time or on the basis of any
specified event.
4.4. Delegation of Authority. The Committee shall have the right, from
time to time, to delegate to one or more officers of the Corporation the
authority of the Committee to grant and determine the terms and conditions of
Awards under the Plan, subject to such limitations as the Committee shall
determine; provided, however, that no such authority may be delegated with
respect to Awards made to any member of the Board or any Section 162 (m)
Participant.
4.5. Awards to Independent Directors. An Award to an Independent
Director under the Plan shall be approved by the Board. With respect to Awards
to Independent Directors, all rights, powers and authorities vested in the
Committee under the Plan shall instead be exercised by the Board, and all
provisions of the Plan relating to the Committee shall be interpreted in a
manner consistent with the foregoing by treating any such reference as a
reference to the Board for such purpose.
5. ELIGIBILITY AND AWARDS
All Eligible Persons are eligible to be designated by the Committee to
receive an Award under the Plan. The Committee has authority, in its sole
discretion, to determine and designate from time to time those Eligible Persons
who are to be granted Awards, the types of Awards to be granted and the number
of shares or units subject to the Awards that are granted under the Plan. Each
Award will be evidenced by an Award Agreement as described in Section 13 hereof
between the Corporation and the Participant that shall include the terms and
conditions consistent with the Plan as the Committee may determine.
6. STOCK OPTIONS
6.1. Grant of Option. An Option may be granted to any Eligible Person
selected by the Committee; provided, however, that only Employees shall be
eligible for Awards of Incentive Stock Options. Each Option shall be designated,
at the discretion of the Committee, as an Incentive Stock Option or a
Nonqualified Stock Option. The maximum number of shares of Common Stock that may
be granted under Options to any one Participant during any calendar year shall
be limited to 1,000,000 shares (subject to adjustment as provided in Section 3.2
hereof).
5
6.2. Exercise Price. The exercise price of the Option shall be
determined by the Committee; provided, however, that the exercise price per
share of an Option shall not be less than 100 percent of the Fair Market Value
per share of the Common Stock on the Date of Grant.
6.3. Vesting; Term of Option. The Committee, in its sole discretion,
shall prescribe in the Award Agreement the time or times at which, or the
conditions upon which, an Option or portion thereof shall become vested and
exercisable, and may accelerate the exercisability of any Option at any time. An
Option may become vested and exercisable upon a Participant's retirement, death,
disability, Change in Control or other event, to the extent provided in an Award
Agreement. The period during which a vested Option may be exercised shall be ten
years from the Date of Grant, unless a shorter exercise period is specified by
the Committee in an Award Agreement, and subject to such limitations as may
apply under an Award Agreement relating to the termination of a Participant's
employment or other service with the Corporation or any Subsidiary.
6.4. Option Exercise; Withholding. Subject to such terms and conditions
as shall be specified in an Award Agreement, an Option may be exercised in whole
or in part at any time during the term thereof by written notice to the
Corporation together with payment of the aggregate exercise price therefor.
Payment of the exercise price shall be made (i) in cash or by cash equivalent,
(ii) at the discretion of the Committee, in shares of Common Stock acceptable to
the Committee, valued at the Fair Market Value of such shares on the date of
exercise, (iii) at the discretion of the Committee, by a delivery of a notice
that the Participant has placed a market sell order (or similar instruction)
with a broker with respect to shares of Common Stock then issuable upon exercise
of the Option, and that the broker has been directed to pay a sufficient portion
of the net proceeds of the sale to the Corporation in satisfaction of the Option
exercise price (conditioned upon the payment of such net proceeds), (iv) at the
discretion of the Committee, by a combination of the methods described above or
(v) by such other method as may be approved by the Committee and set forth in
the Award Agreement. In addition to and at the time of payment of the exercise
price, the Participant shall pay to the Corporation the full amount of any and
all applicable income tax and employment tax amounts required to be withheld in
connection with such exercise, payable under one or more of the methods
described above for the payment of the exercise price of the Options as may be
approved by the Committee.
6.5. Limited Transferability. Solely to the extent permitted by the
Committee in an Award Agreement and subject to such terms and conditions as the
Committee shall specify, a Nonqualified Stock Option (but not an Incentive Stock
Option) may be transferred to members of the Participant's immediate family (as
determined by the Committee) or to trusts, partnerships or corporations whose
beneficiaries, members or owners are members of the Participant's immediate
family, and/or to such other persons or entities as may be approved by the
Committee in advance and set forth in an Award Agreement, in each case subject
to the condition that the Committee be satisfied that such transfer is being
made for estate or tax planning purposes or for gratuitous or donative purposes,
without consideration (other than nominal consideration) being received
6
therefor. Except to the extent permitted by the Committee in accordance with the
foregoing, an Option shall be nontransferable otherwise than by will or by the
laws of descent and distribution, and shall be exercisable during the lifetime
of a Participant only by such Participant.
6.6. Additional Rules for Incentive Stock Options.
(a) Annual Limits. No Incentive Stock Option shall be granted to a
Participant as a result of which the aggregate fair market value (determined as
of the Date of Grant) of the stock with respect to which Incentive Stock Options
are exercisable for the first time in any calendar year under the Plan, and any
other stock option plans of the Corporation, any Subsidiary or any parent
corporation, would exceed $100,000, determined in accordance with section 422(d)
of the Code. This limitation shall be applied by taking options into account in
the order in which granted.
(b) Termination of Employment. An Award Agreement for an Incentive
Stock Option may provide that such Option may be exercised not later than 3
months following termination of employment of the Participant with the
Corporation and all Subsidiaries, subject to special rules relating to death and
disability, as and to the extent determined by the Committee to be appropriate
with regard to the requirements of section 422 of the Code and Treasury
Regulations thereunder.
(c) Other Terms and Conditions; Nontransferability. Any Incentive Stock
Option granted hereunder shall contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as are deemed necessary or desirable
by the Committee, which terms, together with the terms of this Plan, shall be
intended and interpreted to cause such Incentive Stock Option to qualify as an
"incentive stock option" under section 422 of the Code. Such terms shall
include, if applicable, limitations on Incentive Stock Options granted to
ten-percent owners of the Corporation. An Award Agreement for an Incentive Stock
Option may provide that such Option shall be treated as a Nonqualified Stock
Option to the extent that certain requirements applicable to "incentive stock
options" under the Code shall not be satisfied. An Incentive Stock Option shall
by its terms be nontransferable otherwise than by will or by the laws of descent
and distribution, and shall be exercisable during the lifetime of a Participant
only by such Participant.
(d) Disqualifying Dispositions. If shares of Common Stock acquired by
exercise of an Incentive Stock Option are disposed of within two years following
the Date of Grant or one year following the transfer of such shares to the
Participant upon exercise, the Participant shall, promptly following such
disposition, notify the Corporation in writing of the date and terms of such
disposition and provide such other information regarding the disposition as the
Committee may reasonably require.
7. STOCK APPRECIATION RIGHTS
7.1. Grant of SARs. A Stock Appreciation Right granted to a Participant
is an Award in the form of a right to receive, upon surrender of the right, but
without other
7
payment, an amount based on appreciation in the Fair Market Value of the Common
Stock over a base price established for the Award, exercisable at such time or
times and upon conditions as may be approved by the Committee. The maximum
number of shares of Common Stock that may be subject to SARs granted to any one
Participant during any calendar year shall be limited to 1,000,000 shares
(subject to adjustment as provided in Section 3.2 hereof).
7.2. Tandem SARs. A Stock Appreciation Right may be granted in
connection with an Option, either at the time of grant or at any time thereafter
during the term of the Option. An SAR granted in connection with an Option will
entitle the holder, upon exercise, to surrender such Option or any portion
thereof to the extent unexercised, with respect to the number of shares as to
which such SAR is exercised, and to receive payment of an amount computed as
described in Section 7.4 hereof. Such Option will, to the extent and when
surrendered, cease to be exercisable. An SAR granted in connection with an
Option hereunder will have a base price per share equal to the per share
exercise price of the Option, will be exercisable at such time or times, and
only to the extent, that a related Option is exercisable, and will expire no
later than the related Option expires.
7.3. Freestanding SARs. A Stock Appreciation Right may be granted
without relationship to an Option and, in such case, will be exercisable as
determined by the Committee, but in no event after 10 years from the Date of
Grant. The base price of an SAR granted without relationship to an Option shall
be determined by the Committee in its sole discretion; provided, however, that
the base price per share of a freestanding SAR shall not be less than 100
percent of the Fair Market Value of the Common Stock on the Date of Grant.
7.4. Payment of SARs. An SAR will entitle the holder, upon exercise of
the SAR, to receive payment of an amount determined by multiplying: (i) the
excess of the Fair Market Value of a share of Common Stock on the date of
exercise of the SAR over the base price of such SAR, by (ii) the number of
shares as to which such SAR will have been exercised. Payment of the amount
determined under the foregoing may be made, in the discretion of the Committee,
in cash, in shares of Common Stock valued at their Fair Market Value on the date
of exercise, or in a combination of cash and shares of Common Stock.
8. RESTRICTED STOCK
8.1. Grants of Restricted Stock. An Award of Restricted Stock to a
Participant represents shares of Common Stock that are issued subject to such
restrictions on transfer and other incidents of ownership and such forfeiture
conditions as the Committee may determine. The Committee may, in connection with
an Award of Restricted Stock, require the payment of a specified purchase price.
The Committee may grant Awards of Restricted Stock that are intended to qualify
for exemption under Section 162(m), as well as Awards of Restricted Stock that
are not intended to so qualify.
8
8.2. Vesting Requirements. The restrictions imposed on an Award of
Restricted Stock shall lapse in accordance with the vesting requirements
specified by the Committee in the Award Agreement. Such vesting requirements may
be based on the continued employment of the Participant with the Corporation or
its Subsidiaries for a specified time period or periods, provided that any such
restriction shall not be scheduled to lapse in its entirety earlier than the
first anniversary of the Date of Grant. Such vesting requirements may also be
based on the attainment of specified business goals or measures established by
the Committee in its sole discretion. In the case of any Award of Restricted
Stock that is intended to qualify for exemption under Section 162(m), the
vesting requirements shall be limited to the performance criteria identified in
Section 9.3 below, and the terms of the Award shall otherwise comply with the
Section 162(m) requirements described in Section 9.4 hereof; provided, however,
that the maximum number of shares of Common Stock that may be subject to an
Award of Restricted Stock granted to a Section 162(m) Participant during any one
calendar year shall be separately limited to 200,000 shares (subject to
adjustment as provided in Section 3.2 hereof).
8.3. Restrictions. Shares of Restricted Stock may not be transferred,
assigned or subject to any encumbrance, pledge or charge until all applicable
restrictions are removed or expire or unless otherwise allowed by the Committee.
The Committee may require the Participant to enter into an escrow agreement
providing that the certificates representing Restricted Stock granted or sold
pursuant to the Plan will remain in the physical custody of an escrow holder
until all restrictions are removed or expire. Failure to satisfy any applicable
restrictions shall result in the subject shares of Restricted Stock being
forfeited and returned to the Corporation, with any purchase price paid by the
Participant to be refunded, unless otherwise provided by the Committee. The
Committee may require that certificates representing Restricted Stock granted
under the Plan bear a legend making appropriate reference to the restrictions
imposed.
8.4. Rights as Shareholder. Subject to the foregoing provisions of this
Section 8 and the applicable Award Agreement, the Participant will have all
rights of a shareholder with respect to shares of Restricted Stock granted to
him, including the right to vote the shares and receive all dividends and other
distributions paid or made with respect thereto, unless the Committee determines
otherwise at the time the Restricted Stock is granted, as set forth in the Award
Agreement.
8.5. Section 83(b) Election. The Committee may provide in an Award
Agreement that the Award of Restricted Stock is conditioned upon the Participant
refraining from making an election with respect to the Award under section 83(b)
of the Code. Irrespective of whether an Award is so conditioned, if a
Participant makes an election pursuant to section 83(b) of the Code with respect
to an Award of Restricted Stock, the Participant shall be required to promptly
file a copy of such election with the Corporation.
9
9. PERFORMANCE AWARDS
9.1. Grant of Performance Awards. The Committee may grant Performance
Awards under the Plan, which shall be represented by units denominated on the
Date of Grant either in shares of Common Stock (Performance Shares) or in
specified dollar amounts (Performance Units). The Committee may grant
Performance Awards that are intended to qualify for exemption under Section
162(m), as well as Performance Awards that are not intended to so qualify. At
the time a Performance Award is granted, the Committee shall determine, in its
sole discretion, one or more performance periods and performance goals to be
achieved during the applicable performance periods, as well as such other
restrictions and conditions as the Committee deems appropriate. In the case of
Performance Units, the Committee shall also determine a target unit value or a
range of unit values for each Award. No performance period shall exceed ten
years from the Date of Grant. The performance goals applicable to a Performance
Award grant may be subject to such later revisions as the Committee shall deem
appropriate to reflect significant unforeseen events such as changes in law,
accounting practices or unusual or nonrecurring items or occurrences. Any such
adjustments shall be subject to such limitations as the Committee deems
appropriate in the case of a Performance Award granted to a Section 162(m)
Participant that is intended to qualify for exemption under Section 162(m).
9.2. Payment of Performance Awards. At the end of the performance
period, the Committee shall determine the extent to which performance goals have
been attained or a degree of achievement between minimum and maximum levels in
order to establish the level of payment to be made, if any, and shall determine
if payment is to be made in the form of cash or shares of Common Stock (valued
at their Fair Market Value at the time of payment) or a combination of cash and
shares of Common Stock. Payments of Performance Awards shall generally be made
as soon as practicable following the end of the performance period.
9.3. Performance Criteria. The performance criteria upon which the
payment or vesting of a Performance Award intended to qualify for exemption
under Section 162(m) may be based shall be limited to the following business
measures, which may be applied with respect to the Corporation, any Subsidiary
or any business unit, and which may be measured on an absolute or relative to
peer-group basis: (i) total shareholder return, (ii) stock price increase, (iii)
return on equity, (iv) return on capital, (v) earnings per share, (vi) EBIT
(earnings before interest and taxes) (vii) cash flow (including operating cash
flow, free cash flow, discounted cash flow return on investment, and cash flow
in excess of costs of capital) and (viii) cost per kWh. In the case of
Performance Awards that are not intended to qualify for exemption under Section
162(m), the Committee shall designate performance criteria from among the
foregoing or such other business criteria as it shall determine it its sole
discretion.
9.4. Section 162(m) Requirements. In the case of a Performance Award
granted to a Section 162(m) Participant that is intended to comply with the
requirements for exemption under Section 162(m), the Committee shall make all
determinations necessary to establish a Performance Award within 90 days of the
beginning of the
10
performance period (or such other time period required under Section 162(m)),
including, without limitation, the designation of the Section 162(m)
Participants to whom Performance Awards are made, the performance criteria or
criterion applicable to the Award and the performance goals that relate to such
criteria, and the dollar amounts or number of shares of Common Stock payable
upon achieving the applicable performance goals. As and to the extent required
by Section 162(m), the terms of a Performance Award granted to a Section 162(m)
Participant must state, in terms of an objective formula or standard, the method
of computing the amount of compensation payable to the Section 162(m)
Participant, and must preclude discretion to increase the amount of compensation
payable that would otherwise be due under the terms of the Award. The maximum
amount of compensation that may be payable to a Section 162(m) Participant
during any one calendar year under a Performance Unit Award shall be $2.5
million. The maximum number of Common Stock units that may be subject to a
Performance Share Award granted to a Section 162(m) Participant during any one
calendar year shall be 200,000 share units (subject to adjustment as provided in
Section 3.2 hereof).
10. PHANTOM STOCK
10.1. Grant of Phantom Stock. Phantom Stock is an Award to a
Participant of a number of hypothetical share units with respect to shares of
Common Stock, with an initial value based on the Fair Market Value of the Common
Stock on the Date of Grant. Phantom Stock shall be subject to such restrictions
and conditions as the Committee shall determine. On the Date of Grant, the
Committee shall determine, in its sole discretion, the installment or other
vesting period of the Phantom Stock and the maximum value of the Phantom Stock,
if any. No vesting period shall exceed 10 years from the Date of Grant. An Award
of Phantom Stock may be granted, at the discretion of the Committee, together
with an Award of Dividend Equivalent rights for the same number of shares
covered thereby.
10.2. Payment of Phantom Stock. Upon the vesting date or dates
applicable to Phantom Stock granted to a Participant, an amount equal to the
Fair Market Value of one share of Common Stock upon such vesting dates (subject
to any applicable maximum value) shall be paid with respect to such Phantom
Stock unit granted to the Participant. Payment may be made, at the discretion of
the Committee, in cash or in shares of Common Stock valued at their Fair Market
Value on the applicable vesting dates, or in a combination thereof.
11. DIVIDEND EQUIVALENTS
11.1. Grant of Dividend Equivalents. A Dividend Equivalent granted to a
Participant is an Award in the form of a right to receive cash payments
determined by reference to dividends declared on the Common Stock from time to
time during the term of the Award, which shall not exceed 10 years from the Date
of Grant. Dividend Equivalents may be granted on a stand-alone basis or in
tandem with other Awards. Dividend Equivalents granted on a tandem basis shall
expire at the time the underlying Award is exercised or otherwise becomes
payable to the Participant, or expires.
11
11.2. Payment of Dividend Equivalents. Dividend Equivalent Awards shall
be payable in cash or in shares of Common Stock, valued at their Fair Market
Value on either the date the related dividends are declared or the Dividend
Equivalents are paid to a Participant, as determined by the Committee. Dividend
Equivalents shall be payable to a Participant as soon as practicable following
the time dividends are declared and paid with respect to the Common Stock, or at
such later date as the Committee shall specify in the Award Agreement. Dividend
Equivalents granted with respect to Options intended to qualify for exemption
under Section 162(m) shall be payable regardless of whether the Option is
exercised.
12. CHANGE IN CONTROL
12.1. Effect of Change in Control. The Committee may, in an Award
Agreement, provide for the effect of a Change in Control on an Award. Such
provisions may include any one or more of the following: (i) the acceleration or
extension of time periods for purposes of exercising, vesting in, or realizing
gain from any Award, (ii) the waiver or modification of performance or other
conditions related to the payment or other rights under an Award; (iii)
provision for the cash settlement of an Award for an equivalent cash value, as
determined by the Committee, or (iv) such other modification or adjustment to an
Award as the Committee deems appropriate to maintain and protect the rights and
interests of Participants upon or following a Change in Control.
12.2. Definition of Change in Control. For purposes hereof, a "Change
in Control" shall be deemed to have occurred (asupon:
(i) an acquisition subsequent to the Effective Date hereof by
any individual, entity or group (within the meaning of a particular day, as specified by the Board) upon the occurrence of any event
described in this Section 2.5 as constituting a Change in Control.
A Change in Control will be deemed to have occurred as13(d)(3)
or 14(d)(2) of the first day any
one (1)Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty
percent (30%) or more of either (A) the following paragraphs shall have been satisfied:
A-1
(a) Any Person (other than the Companythen outstanding shares of
Common Stock or a trustee or other fiduciary
holding securities under an employee benefit plan of the Company,
or a corporation owned directly or indirectly by the stockholders
of the Company in substantially the same proportions as their
ownership of stock of the Company) becomes the Beneficial Owner,
directly or indirectly, of securities of the Company, representing
more than twenty-five percent (25%) of(B) the combined voting power of the Company's then outstanding
securities;voting securities of the Corporation entitled to vote generally in the
election of directors (the "Outstanding Corporation Voting
Securities"); excluding, however, the following: (1) any acquisition
directly from the Corporation, other than an acquisition by virtue of
the exercise of a conversion privilege unless the security being so
converted was itself acquired directly from the Corporation, (2) any
acquisition by the Corporation and (3) any acquisition by an employee
benefit plan (or related trust) sponsored or (b) Duringmaintained by the
Corporation or any Subsidiary;
(ii) during any period of two (2) consecutive years (not
including any period prior to the Effective Date), individuals who at
the beginning of such period constitute the Board (and any new
Directors,directors whose election by the Board or nomination for
12
election by the Company's stockholdersCorporation's shareholders was approved by a vote of at least
two-thirds ( 2/(2/3) of the Directorsdirectors then still in office who either were Directorsdirectors
at the beginning of the period or whose election or nomination for election was
so approved) cease for any reason (except for death, Disabilitydisability or voluntary
Retirement )retirement) to constitute a majority thereof;
or
(c) The stockholders(iii) the approval by the shareholders of the Company approve: (i) a planCorporation of complete
liquidation of the Company; or (ii) an agreement for the sale or
disposition of all or substantially all the Company's assets; or
(iii) a
merger, consolidation, reorganization or reorganization ofsimilar corporate transaction,
whether or not the Company
with or involving any otherCorporation is the surviving corporation in such
transaction, other than a merger, consolidation, or reorganization that
would result in the voting securities of the CompanyCorporation outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity) at least seventy-fivefifty percent (75%(50%) of the combined voting
power of the voting securities of the CompanyCorporation (or such surviving
entity) outstanding immediately after such merger, consolidation, or
reorganization.
However, in no event shall a Change in Control be deemed to have occurred,
with respect to a Participant, if that Participant is "part of a purchasing
group" which consummatesreorganization;
(iv) the Change-in-Control transaction. The Participant
shall be deemed "part of a purchasing group" for purposesapproval by the shareholders of the preceding
sentence ifCorporation of
(A) the Participant is an equity participantsale or has agreed to become an
equity participant in the purchasing companyother disposition of all or group (except for (i) passive
ownership of less than three percent (3%)substantially all of the
voting equity securitiesassets of the purchasing companyCorporation or (ii) ownership of equity participation in the purchasing
company(B) a complete liquidation or group which is otherwise deemed not to be significant, as determined
prior to the Change in Control by a majoritydissolution
of the nonemployee continuing
Directors).
2.6 "CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
2.7 "COMMITTEE" means, as specified in Article 3 herein, the Compensation
Committee of the BoardCorporation; or
such other Committee as may be appointed(v) adoption by the Board of a resolution to administer the Plan.
2.8 "COMPANY" means Duke Power Company, a North Carolina corporation, andeffect that
any successor thereto as provided in Article 18 herein.
2.9 "DIRECTOR" means any individual who is a memberperson has acquired effective control of the Board of
Directorsbusiness and affairs
of the Company.
2.10 "DISABILITY" shall have the meaning ascribed to such term in the
Participant's governing long-term disability plan.
2.11 "EFFECTIVE DATE" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.12 "EXCHANGE ACT" means the Securities Exchange ActCorporation.
13. AWARD AGREEMENTS
13.1. Form of 1934, as amended
from time to time, or any successor act thereto.
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2.13 "FAIR MARKET VALUE" means the closing sale price of the relevant
security on the composite tape of New York Stock Exchange issues or, if there is
no such sale on the relevant date, then on the last previous day on which a sale
was reported.
2.14 "FREESTANDING SAR" means an SAR that is granted independently of any
Options, as described in Article 7 herein.
2.15 "INCENTIVE STOCK OPTION" or "ISO" means an option to purchase Shares
granted under Article 6 herein which is designated as an Incentive Stock Option
and which is intended to meet the requirements of Code Section 422.
2.16 "INSIDER" shall mean an individual who is, on the relevant date, an
officer, director or ten percent (10%) beneficial owner of any class of the
Company's equity securities that is registered pursuant to Section 12 of the
Exchange Act, all as defined under Section 16 of the Exchange Act.
2.17 "KEY EMPLOYEE" means any officer or key employee of the Company or any
of its Subsidiaries. Directors who are not employed by the Company or its
Subsidiaries shall not be considered Key EmployeesAgreement. Each Award under this Plan.
2.18 "NONEMPLOYEE DIRECTOR" means an individual who is a member of the
Board of Directors of the Company but who is not an employee of the Company or
any of its Subsidiaries.
2.19 "NONQUALIFIED STOCK OPTION" or "NQSO" means an option to purchase
Shares granted under Article 6 herein and which is not intended to meet the
requirements of Code Section 422.
2.20 "OPTION" means an Incentive Stock Option or a Nonqualified Stock
Option, as described in Article 6 herein.
2.21 "OPTION PRICE" means the price at which a Share may be purchased by a
Participant pursuant to an Option.
2.22 "PARTICIPANT" means a Key Employee who has outstanding an Award
granted under the Plan. The term "Participant" shall not include Nonemployee
Directors.
2.23 "PERFORMANCE-BASED EXCEPTION" means the performance-based exception
from the tax deductibility limitations of Code Section 162(m).
2.24 "PERFORMANCE SHARE" means an Award granted to a Participant, as
described in Article 9 herein.
2.25 "PERFORMANCE UNIT" means an Award granted to a Participant, as
described in Article 9 herein.
2.26 "PERIOD OF RESTRICTION" means the period during which the transfer of
Shares of Restricted Stock/Units is limited in some way (based on the passage of
time, the achievement of performance objectives, or upon the occurrence of other
events as determined by the Committee, at its discretion), and the Restricted
Stock/Units are not vested.
2.27 "PERSON" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) thereof.
2.28 "RESTRICTED STOCK" means a contingent grant of stock awarded to a
Participant pursuant to Article 8 herein.
2.29 "RESTRICTED UNIT" means an Award granted to a Participant as described
in Article 8 herein.
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2.30 "RETIREMENT" shall have the meaning ascribed to such term in the
Company's tax-qualified defined benefit retirement plan.
2.31 "SHARES" means the shares of Common Stock of the Company.
2.32 "STOCK APPRECIATION RIGHT" or "SAR" means an Award, granted alone or
in connection with a related Option, designated as an SAR, pursuant to the terms
of Article 7 herein.
2.33 "SUBSIDIARY" means any corporation in which the Company owns directly
or indirectly through its Subsidiaries, at least 50% of the total combined
voting power of all classes of stock, or any other entity (including but not
limited to partnerships and joint ventures) in which the Company owns directly
or indirectly at least 50% of the total combined equity thereof.
2.34 "TANDEM SAR" means an SAR that is granted in connection with a related
Option pursuant to Article 7 herein, the exercise of which shall require
forfeiture of the right to purchase a Share under the related Option (and when a
Share is purchased under the Option, the Tandem SAR shall similarly be
canceled).
ARTICLE 3. ADMINISTRATION
3.1 THE COMMITTEE. The Plan shall be administered by the Compensation
Committee of the Board, or by any other Committee appointed by the Board, which
Committee (unless otherwise determined by the Board) shall satisfy the
"disinterested administration" regulations of Rule 16b-3 under the Exchange Act
and the "outside director" provisions of Code Section 162(m), or any successor
regulations or provisions. The members of the Committee shall be appointed from
time to time by, and shall serve at the discretion of, the Board of Directors.
3.2 AUTHORITY OF THE COMMITTEE. Except as limited by law and subject to the
provisions herein, the Committee shall have full power to select Key Employees
who shall participate in the Plan; determine the sizes and types of Awards;
determine the terms and conditions of Awards in a manner consistent with the
Plan; construe and interpret the Plan and any agreement or instrument entered
into under the Plan; establish, amend, or waive rules and regulations for the
Plan's administration; and (subject to the provisions of Article 15 herein)
amend the terms and conditions of any outstanding Award to the extent such terms
and conditions are within the discretion of the Committee as provided in the
Plan. Further, the Committee shall make all other determinations which may be
necessary or advisable for the administration of the Plan. As permitted by law
and consistent with Section 3.1, the Committee may delegate its authority as
identified herein.
3.3 DECISIONS BINDING. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan shall be final, conclusive and
binding on all persons, including the Company, its stockholders, employees,
Participants, and their estates and beneficiaries.
ARTICLE 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
4.1 NUMBER OF SHARES AVAILABLE FOR GRANTS. Subject to adjustment as
provided in Section 4.3 herein, the number of Shares that may be issued or
transferred to Participants under the Plan shall be two million (2,000,000).
The following rules shall apply to grants of Awards under the Plan:
(a) SHARE-BASED AWARDS. The maximum number of Shares and Share
equivalent units that may be granted during any fiscal year of the
Company, to any one Participant, under Options, Freestanding SARs,
Restricted Stock, Restricted Units or Performance Shares, shall be
one hundred thousand
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(100,000) Shares (on an aggregate basis for all such types of
Awards), which limit shall apply regardless of whether such
compensation is paid in Shares or in cash.
(b) CASH-BASED AWARDS. The maximum aggregate amount of compensation
payable in respect of Awards of Performance Units made during any
fiscal year of the Company to any one Participant shall be one
million five hundred thousand dollars ($1,500,000), which limit
shall apply regardless of whether the compensation is paid in cash
or in Shares (valued at Fair Market Value at the applicable
valuation date for payment of the Award).
4.2 LAPSED AWARDS. If any Award granted under this Plan is canceled,
terminates, expires, or lapses for any reason, any Shares subject to such Award
again shall be available for the grant of an Award under the Plan (other than
for purposes of subsection 4.1(a) above.)
4.3 ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation or other distribution of stock or
property of the Company, including a spin-off, or any reorganization (whether or
not such reorganization comes within the definition of such term in Code Section
368) or any partial or complete liquidation of the Company, such adjustment
shall be made in the number and class of Shares which may be delivered under
Section 4.1, in the number and class of and/or price of Shares subject to
outstanding Awards granted under the Plan, and in the Award limits set forth in
subsections 4.1(a) and 4.1(b), as may be determined to be appropriate and
equitable by the Committee, in its sole discretion, to prevent dilution or
enlargement of rights; provided, however, that the number of Shares subject to
any Award shall always be a whole number. The provisions of this Section shall
be subject to the requirements of Code Section 162(m) in the case of Awards that
are designed to qualify for the Performance-Based Exception.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 ELIGIBILITY. Persons eligible to participate in this Plan consist of
all Key Employees, including Key Employees who are members of the Board.
5.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all Key Employees, those to whom
Awards shall be granted and shall determine the nature and amount of each Award.
ARTICLE 6. STOCK OPTIONS
6.1 GRANT OF OPTIONS. Subject to the terms and provisions of the Plan,
Options may be granted to Participants in such number, and upon such terms, and
at any time and from time to time as shall be determined by the Committee.
6.2 AWARD AGREEMENT. Each Option grant shall be evidenced
by an Award Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Committee shall determine. The Award Agreement also shall specify whether the
Option is intended to be an ISO within the meaning of Code Section 422, or an
NQSO whose grant is intended not to fall under the provisions of Code Section
422.
6.3 OPTION PRICE. The Option Price for each grant of an Option under this
Plan shall be at least equal to one hundred percent (100%) of the Fair Market
Value ofin a Share on the date the Option is granted.
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6.4 DURATION OF OPTIONS. Each Option granted to a Key Employee shall expire
at such time as the Committee shall determine at the time of grant; provided,
however, that no Option shall be exercisable later than the tenth (10th)
anniversary date of its grant.
6.5 DIVIDEND EQUIVALENTS. The Committee may grant dividend equivalents in
connection with Options granted under this Plan. Such dividend equivalents may
be payable in cash or in Shares, upon such terms as the Committee, in its sole
discretion, deems appropriate.
6.6 EXERCISE OF OPTIONS. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each Award or for each Participant.
6.7 PAYMENT. Options granted under this Article 6 shall be exercisedform approved by the delivery of a written notice of exercise to the Company,Committee setting forth the
number of Sharesshares of Common Stock, units or other rights (as applicable) subject
to the Award, the exercise, base or purchase price (if any) of the Award, the
time or times at which an Award will become vested, exercisable or payable, the
duration of the Award and, in the case of Performance Awards, the applicable
performance criteria and goals. The Award Agreement shall also set forth other
material terms and conditions applicable to the Award as determined by the
Committee consistent with the limitations of this Plan. Award Agreements
evidencing Awards intended to qualify for exemption under Section 162(m) shall
contain such terms and conditions as may be necessary to meet the applicable
requirements of Section 162(m). Award Agreements evidencing Incentive Stock
Options shall contain such terms and conditions as may be necessary to meet the
applicable provisions of section 422 of the Code.
13.2. Termination of Service. The Award Agreements may include
provisions describing the treatment of an Award in the event of the retirement,
disability, death or other termination of a Participant's employment with or
other services to the Corporation and all Subsidiaries, such as provisions
relating to the vesting, exercisability, acceleration, forfeiture or
cancellation of the Award in these circumstances, including any such provisions
as may be appropriate for Incentive Stock Options as described in Section 6.6(b)
hereof.
13.3. Forfeiture Events. The Committee may specify in an Award
Agreement that the Participant's rights, payments and benefits with respect to
which the Option is to be exercised,
accompanied by full payment for the Shares.
The Option Price upon exercise of any Optionan Award shall be payable to the
Company in full either: (a) in cash or its equivalent, or (b) if permitted in
the governing Award Agreement, by tendering previously acquired Shares having an
aggregate Fair Market Value at the time of exercise equal to the total Option
Price or (c) if permitted in the governing Award Agreement, by a combination of
(a) and (b).
The Committee also may allow cashless exercise as permitted under Federal
Reserve Board's Regulation T, subject to
13
reduction, cancellation, forfeiture or recoupment upon the occurrence of certain
specified events, in addition to any otherwise applicable securities law restrictions,vesting or by anyperformance
conditions of an Award. Such events shall include, but shall not be limited to,
termination of employment for cause, violation of material Corporation or
Subsidiary policies, breach of noncompetition, confidentiality or other
means which the Committee determines to be consistent with the
Plan's purpose and applicable law. In addition, the Committeerestrictive covenants that may authorize
loans by the Company to Participants in connection with Option exercises, upon
such terms and subject to such limits that the Committee, in its sole
discretion, deems appropriate.
As soon as practicable after receipt of a written notification of exercise
and full payment, the Company shall deliverapply to the Participant, inor other conduct by the
Participant's name, Share certificates in an appropriate amount based upon the
number of Shares purchased under the Option(s) less Shares withheld to satisfy
withholding tax obligations.
6.8 RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose such
restrictions on any Shares acquired pursuantParticipant that is detrimental to the exercisebusiness or reputation of the Corporation
or any Subsidiary.
13.4. Contract Rights; Amendment. Any obligation of the Corporation to
any Participant with respect to an Option
grantedAward shall be based solely upon contractual
obligations created by an Award Agreement. No Award shall be enforceable until
the Award Agreement has been signed on behalf of the Corporation by its
authorized representative and signed by the Participant and returned to the
Corporation. By executing the Award Agreement, a Participant shall be deemed to
have accepted and consented to the terms of this Plan and any action taken in
good faith under this Article 6 asPlan by and within the Committee deems necessary or advisable,
including, without limitation, restrictions under applicable Federal securities
laws, under the requirements of any stock exchange or market upon which such
Shares are then listed and/or traded, and under any blue sky or state securities
laws applicable to such Shares.
6.9 TERMINATION OF EMPLOYMENT. Each Participant's Option Award Agreement
shall set forth the extent to which the Participant shall have the right to
exercise the Option following termination of the Participant's employment with
the Company or a Subsidiary. Such provisions shall be determined in the sole discretion of the Committee, shallthe
Board or their delegates. Award Agreements covering outstanding Awards may be
includedamended or modified by the Committee in any manner that may be permitted for the
grant of Awards under the Plan, subject to the consent of the Participant to the
extent provided in the Award Agreement entered
into with each Participant, need not be uniform among all Options issued
pursuant to this Article 6, and may reflect distinctions based on the reasons
for termination of employment.
6.10 NONTRANSFERABILITY OF OPTIONS.
(a) INCENTIVE STOCK OPTIONS.Agreement.
14. GENERAL PROVISIONS
14.1. No ISO grantedAssignment or Transfer; Beneficiaries. Except as provided in
Section 6.5 hereof, Awards under the Plan mayshall not be sold, transferred, pledged, assigned,assignable or
otherwise alienated or
hypothecated, other thantransferable, except by will or by the laws of descent and distribution. Further, all ISOs granted todistribution, and
during the lifetime of a Participant under the PlanAward shall be exercisable during his or her lifetimeexercised only by such
Participant.
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(b) NONQUALIFIED STOCK OPTIONS. Except as otherwise provided in a
Participant's Award Agreement, no NQSO granted under this Article
6 may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than by willParticipant or by his guardian or legal representative. Notwithstanding the
laws of
descent and distribution. Further, except as otherwise providedforegoing, the Committee may provide in
a Participant's Award Agreement, all NQSOs granted to a
Participant under this Article 6 shall be exercisable during his
or her lifetime only by such Participant.
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1 GRANT OF SARS. Subject to the terms and conditions of the Plan, SARs
may be granted to Participants at any time and from time to time as shall be
determined by the Committee. The Committee may grant Freestanding SARs, Tandem
SARs, or any combination of these forms of SAR.
The Committee shall have sole discretion in determining the number of SARs
granted to each Participant (subject to Article 4 herein) and, consistent with
the provisions of the Plan, in determining the terms and conditions pertaining
to such SARs.
The grant price of a Freestanding SAR shall equal the Fair Market Value of
a Share on the date of grant of the SAR. The grant price of Tandem SARs shall
equal the Option Price of the related Option.
7.2 EXERCISE OF TANDEM SARS. Tandem SARs may be exercised for all or part
of the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.
7.3 EXERCISE OF FREESTANDING SARS. Freestanding SARs may be exercised upon
whatever terms and conditions the Committee, in its sole discretion, imposes
upon them.
7.4 AWARD AGREEMENT. Each SAR grant shall be evidenced by an Award Agreement that shall specify the grant price, the term of the SAR, and such
other provisions as the Committee shall determine.
7.5 TERM OF SARS. The term of an SAR granted under the Plan shall be
determined by the Committee, in its sole discretion; provided, however, that
such term shall not exceed ten (10) years.
7.6 PAYMENT OF SAR AMOUNT. Upon exercise of an SAR, a Participant shall be
entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The difference between the Fair Market Value of a Share on the
date of exercise of the SAR over the grant price specified in the
Award Agreement; by
(b) The number of Shares with respect to which the SAR is exercised.
At the sole discretion of the Committee, the payment upon SAR exercise may
be in cash, in Shares of equivalent value, or in some combination thereof.
7.7 SECTION 16 REQUIREMENTS. Notwithstanding any other provision of the
Plan, the Committee may impose such conditions on exercise of an SAR (including,
without limitation, the right of the Committee to limit the time of exercise to
specified periods) as may be required to satisfy the requirements of Rule 16b-3
of the Exchange Act or any successor rule.
7.8 TERMINATION OF EMPLOYMENT. Each SAR Award Agreement shall set forth the
extent to which the
Participant shall have the right to exercisedesignate a beneficiary or beneficiaries who
shall be entitled to any rights, payments or other specified under an Award
following the SAR
following terminationParticipant's death.
14.2. Deferrals of Payment. The Committee may permit a Participant to
defer the receipt of payment of cash or delivery of shares of Common Stock that
would otherwise be due to the Participant by virtue of the Participant's employmentexercise of a right
or the satisfaction of vesting or other conditions with respect to an Award. If
any such deferral is to be permitted by the Company or a
Subsidiary. Such provisions shall be determined in the sole discretion ofCommittee, the Committee shall
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establish the rules and procedures relating to such deferral, including, without
limitation, the period of time in advance of payment when an election to defer
may be includedmade, the time period of the deferral and the events that would result in
payment of the Award Agreement entered into with Participants, need not be
uniform among all SARs issued pursuantdeferred amount, the interest or other earnings attributable to
the Plan,deferral and may reflect distinctions
based on the reasons for terminationmethod of employment.
7.9 NONTRANSFERABILITY OF SARS. Except as otherwise provided in a
Participant's Award Agreement, no SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, except as
otherwise provided in a Participant's Award Agreement, all SARs granted to a
Participant under the Plan shall be exercisable during his or her lifetime only
by such Participant.
ARTICLE 8. RESTRICTED STOCK AND RESTRICTED UNITS
8.1 GRANT OF RESTRICTED STOCK/UNITS. Subjectfunding, if any, attributable to the terms and provisionsdeferred
amount.
14.3. Rights as Shareholder. A Participant shall have no rights as a
holder of the Plan, the Committee, atCommon Stock with respect to any time and from time to time, may grant Restricted
Stock and/or Restricted Units to Participants in such amounts as the Committee
shall determine. Each grant of Restricted Stock shall be represented by the
number of Shares to which the Award relates. Each grant of Restricted Units
shall be represented by the number of Share equivalent units to which the Award
relates.
8.2 AWARD AGREEMENT. Each Restricted Stock/Unit grant shall be evidencedunissued securities covered by an
Award Agreement that shall specifyuntil the Period(s)date the Participant becomes the holder of Restriction, the numberrecord of Shares or Share equivalent units granted, and such other provisions as the
Committee shall determine.
8.3 TRANSFERABILITY.these
securities. Except as provided in this Article 8,Section 3.2 hereof, no adjustment or other
provision shall be made for dividends or other
14
shareholder rights, except to the Restricted
Stock/Units granted herein may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated until the end of the applicable Period of
Restriction established by the Committee and as specified inextent that the Award Agreement provides for
Dividend Equivalents, dividend payments or upon earlier satisfactionsimilar economic benefits.
14.4. Employment or Service. Nothing in the Plan, in the grant of any
other conditions, as specified byAward or in any Award Agreement shall confer upon any Eligible Person the Committee in its sole discretion and as set forthright
to continue in the capacity in which he is employed by or otherwise serves the
Corporation or any Subsidiary.
14.5. Securities Laws. No shares of Common Stock will be issued or
transferred pursuant to an Award Agreement.
All rights with respectunless and until all then applicable
requirements imposed by federal and state securities and other laws, rules and
regulations and by any regulatory agencies having jurisdiction, and by any stock
exchanges upon which the Common Stock may be listed, have been fully met. As a
condition precedent to Restricted Stock/Units grantedthe issuance of shares pursuant to athe grant or exercise
of an Award, the Corporation may require the Participant under
the Plan shall be available only to take any reasonable
action to meet such Participant during his or her lifetime.
8.4 OTHER RESTRICTIONS. Subject to Article 11 herein, therequirements. The Committee shallmay impose such other conditions and/or restrictions on
any Restricted Stock/Units
granted pursuant toshares of Common Stock issuable under the Plan as it may deem advisable,
including, without limitation, restrictions basedunder the Securities Act of 1933, as
amended, under the requirements of any stock exchange upon the achievement of specific performance
objectives (Company-wide, business unit, and/or individual), time-based
restrictions on vesting following the attainmentwhich such shares of
the performance objectives,
and/same class are then listed, and under any blue sky or restrictions under applicable Federal or stateother securities laws.
The Company shall retain the certificates representing Shares of Restricted
Stock in the Company's possession until such time as all conditions and/or
restrictionslaws
applicable to such Sharesshares.
14.6. Tax Withholding. The Participant shall be responsible for payment
of any taxes or similar charges required by law to be withheld from an Award or
an amount paid in satisfaction of an Award, which shall be paid by the
Participant on or prior to the payment or other event that results in taxable
income in respect of an Award. The Award Agreement shall specify the manner in
which the withholding obligation shall be satisfied with respect to the
particular type of Award.
14.7. Unfunded Plan. The adoption of this Plan and any setting aside of
cash amounts or shares of Common Stock by the Corporation with which to
discharge its obligations hereunder shall not be deemed to create a trust or
other funded arrangement. The benefits provided under this Plan shall be a
general, unsecured obligation of the Corporation payable solely from the general
assets of the Corporation, and neither a Participant nor the Participant's
permitted transferees or estate shall have been satisfied.
8.5 PAYMENT OF AWARDS. Exceptany interest in any assets of the
Corporation by virtue of this Plan, except as otherwise provideda general unsecured creditor of
the Corporation. Notwithstanding the foregoing, the Corporation shall have the
right to implement or set aside funds in this Article 8, (i)
Shares covered by each Restricted Stock grant madea grantor trust subject to the claims
of the Corporation's creditors to discharge its obligations under the Plan.
14.8. Other Compensation and Benefit Plans. The adoption of the Plan
shall become
freely transferablenot affect any other stock incentive or other compensation plans in effect
for the Corporation or any Subsidiary, nor shall the Plan preclude the
Corporation from establishing any other forms of stock incentive or other
compensation for employees of the Corporation or any Subsidiary. The amount of
any compensation deemed to be received by Participant pursuant to an Award shall
not constitute compensation with respect to which any other employee benefits of
such Participant are determined, including, without limitation,
15
benefits under any bonus, pension, profit sharing, life insurance or salary
continuation plan, except as otherwise specifically provided by the terms of
such plan.
14.9. Plan Binding on Successors. The Plan shall be binding upon the
Corporation, its successors and assigns, and the Participant, afterhis executor,
administrator and permitted transferees and beneficiaries.
14.10. Construction and Interpretation. Whenever used herein, nouns in
the last daysingular shall include the plural, and the masculine pronoun shall include
the feminine gender. Headings of Articles and Sections hereof are inserted for
convenience and reference and constitute no part of the applicable
PeriodPlan.
14.11. Severability. If any provision of Restrictionthe Plan or any Award
Agreement shall be determined to be illegal or unenforceable by any court of law
in any jurisdiction, the remaining provisions hereof and (ii) Share equivalent units coveredthereof shall be
severable and enforceable in accordance with their terms, and all provisions
shall remain enforceable in any other jurisdiction.
14.12. Governing Law. The validity and construction of this Plan and of
the Award Agreements shall be governed by each Restricted
Unit grant made underthe laws of the State of North
Carolina.
15. EFFECTIVE DATE, TERMINATION AND AMENDMENT
15.1. Effective Date; Shareholder Approval. The Effective Date of the
Plan shall be paid outthe date following adoption of the Plan by the Board on which the
Plan is approved by the shareholders of the Corporation. At the sole discretion
of the Board, in order to comply with the Participantrequirements of Section 162(m) for
certain types of Awards under the Plan, the performance criteria set forth in
cash
promptlySection 9.3 shall be reapproved by the shareholders of the Corporation no later
than the first shareholder meeting that occurs in the fifth calendar year
following the last daycalendar year of the applicable Periodinitial shareholder approval of Restriction, based
on the Fair Market Value of a Sharesuch
performance criteria.
15.2. Termination. The Plan shall terminate on the date immediately
preceding the date
of such payment.
8.6 VOTING RIGHTS. During the Period of Restriction, Participants holding
Shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares.
8.7 DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of Restriction,
Participants holding Shares of Restricted Stock/Units granted hereunder shall be
credited with regular cash dividends or dividend equivalents paid with respect
to the underlying Shares or Share equivalent units while they are so held. Such
dividends may
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be paid currently, accrued as contingent cash obligations, or converted into
additional Shares or units of Restricted Stock/Units, upon such terms as the
Committee establishes.
The Committee may apply any restrictions to the crediting and payment of
dividends and other distributions that the Committee deems advisable. Without
limiting the generalitytenth anniversary of the preceding sentence, if the grant or vesting of
Restricted Stock/Units is designed to qualify for the Performance-Based
Exception, the Committee may apply any restrictions it deems appropriate to the
payment of dividends declared with respect to such Restricted Stock/Units, such
that the dividends and/or the Restricted Stock/Units maintain eligibility for
the Performance-Based Exception.
8.8 TERMINATION OF EMPLOYMENT. Each Award Agreement shall set forth the
extent to which the Participant shall have the right to retain unvested
Restricted Stock/Units following termination of the Participant's employment
with the Company or a Subsidiary. Such provisions shall be determined in the
sole discretion of the Committee, shall be included in the Award Agreement
entered into with each Participant, need not be uniform among all Awards of
Restricted Stock/Units issued pursuant todate the Plan and may reflect distinctions
based on the reasons for termination of employment; provided, however, that
except in cases of terminations resulting from a Change in Control and
terminations by reason of death or Disability, the vesting of Restricted
Stock/Units which are designed to qualify for the Performance-Based Exception
shall not be accelerated.
ARTICLE 9. PERFORMANCE UNITS AND PERFORMANCE SHARES
9.1 GRANT OF PERFORMANCE UNITS/SHARES. Subject to the terms of the Plan,
Performance Units and/or Performance Shares may be granted to Participants in
such amounts and upon such terms, and at any time and from time to time, as
shall be determinedis adopted by the Committee.
9.2 VALUE OF PERFORMANCE UNITS/SHARES. Each Performance Unit shall have an
initial value that is established by the Committee at the time of grant. Each
Performance Share shall have an initial value equal to the Fair Market Value of
a Share on the date of grant.Board.
The Committee shall set performance objectives in
its discretion which, depending on the extent to which they are met, will
determine the number and/or value of Performance Units/Shares that will be paid
out to the Participant. For purposes of this Article 9, the time period during
which the performance objectives must be met shall be called a "Performance
Period" and shall be set by the Committee in its discretion.
9.3 EARNING OF PERFORMANCE UNITS/SHARES. Subject to the terms of this Plan,
after the applicable Performance Period has ended, the holder of Performance
Units/Shares shall be entitled to receive payout on the number and value of
Performance Units/Shares earned by the Participant over the Performance Period,
to be determined as a function of the extent to which the corresponding
performance objectives have been achieved.
9.4 AWARD AGREEMENT. Each grant of Performance Units and/or Performance
Shares shall be evidenced by an Award Agreement which shall specify the material
terms and conditions of the Award, and such other provisions as the Committee
shall determine.
9.5 FORM AND TIMING OF PAYMENT OF PERFORMANCE UNITS/SHARES. Payment of
earned Performance Units/Shares shall be made within seventy-five (75) calendar
days following the close of the applicable Performance Period in a manner
designated by the Compensation Committee, in its sole discretion. Subject to the
terms of this Plan, the Committee, in its sole discretion,Board may, pay earned
Performance Units/Shares in the form of cash or in Shares (or in a combination
thereof). Such Shares may be paid subject to any restrictions deemed appropriate
by the Committee.
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9.6 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR RETIREMENT.
Unless determined otherwise by the Committee and set forth in the Participant's
Award Agreement, in the event the employment of a Participant is terminated by
reason of death, Disability, or Retirement during a Performance Period, the
Participant shall receive a payout of the Performance Units/Shares which is
prorated, as specified by the Committee in its discretion in the Award
Agreement. Payment of earned Performance Units/Shares shall be made at a time
specified by the Committee in its sole discretion and set forth inat any earlier date, terminate the
Participant's Award Agreement.
9.7 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. InPlan. Notwithstanding the event that a
Participant's employment terminates during a Performance Period for any reason
other than those reasons set forth in Section 9.6 herein, all Performance
Units/Shares shall be forfeited by the Participant to the Company, unless
determined otherwise by the Committee in the Participant's Award Agreement.
9.8 NONTRANSFERABILITY. Except as otherwise provided in a Participant's
Award Agreement, Performance Units/Shares may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
lawsforegoing, no termination of descent and distribution. Further, except as otherwise provided in a
Participant's Award Agreement, a Participant's rights under the Plan shall be
exercisable duringin any
manner affect any Award theretofore granted without the Participant's lifetime only byconsent of the
Participant or the Participant's legal representative.
ARTICLE 10. PERFORMANCE MEASURES
Unless and until the Committee proposes for shareholder approval and the
Company's shareholders approve a change in the general performance measures set
forth in this Article 10, the attainment of which may determine the degree of
payout and/or vesting with respect to Awards which are designed to qualify for
the Performance-Based Exception, the performance measure(s) to be used for
purposes of such grants shall be chosen from among the following alternatives:
(a) Total shareholder return (absolute or peer-group comparative)
(b) Stock price increase (absolute or peer-group comparative)
(c) Dividend payout as percentage of net income
(d) Return on equity
(e) Return on capital
(f) Cash flow, including operating cash flow, free cash flow,
discounted cash flow return on investment, and cash flow in
excess of cost of capital
(g) Economic value added (income in excess of capital costs)
(h) Cost per kWh (absolute or peer-group comparative)
(i) Market share
(j) Customer satisfaction as measured by survey instruments
The Committee shall have the discretion to adjust the determinationspermitted transferee of the degree of attainment of the pre-established performance objectives; provided,
however, that Awards which are designed to qualify for the Performance-Based
Exception may not be adjusted upward (the Committee shall retain the discretion
to adjust such Awards downward), except to the extent permitted under Code
Section 162(m) to reflect accounting changes or other events.
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In the event that Code Section 162(m) or applicable tax and/or securities
laws change to permit Committee discretion to alter the governing performance
measures without obtaining shareholder approval of such changes, the Committee
shall have sole discretion to make such changes without obtaining shareholder
approval. In addition, in the event that the Committee determines that it is
advisable to grant Awards which shall not qualify for the Performance-Based
Exception, the Committee may make such grants without satisfying the
requirements of Code Section 162(m).
ARTICLE 11. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of the death of the
Participant before he or she receives any or all of such benefit. Each such
designation shall revoke all prior designations by the same Participant, shall
be in a form prescribed by the Committee, and will be effective only when filed
by the Participant in writing with the Company during the Participant's
lifetime. In the absence of any such designation, benefits remaining unpaid at
the Participant's death shall be paid to the Participant's estate.
ARTICLE 12. DEFERRALSAward.
15.3. Amendment. The Committee may permit or require a Participant to defer such
Participant's receipt of the payment of cash or the delivery of Shares that
would otherwise be due to such Participant by virtue of the exercise of an
Option or SAR, the lapse or waiver of restrictions with respect to Restricted
Stock/Units, or the satisfaction of any requirements or objectives with respect
to Performance Units/Shares. If any such deferral election is permitted or
required, the Committee shall, in its sole discretion, establish rules and
procedures for such deferrals.
ARTICLE 13. RIGHTS OF EMPLOYEES
13.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit in any
way the right of the Company or any Subsidiary to terminate any Participant's
employment at any time, or confer upon any Participant any right to continue in
the employ of the Company or such Subsidiary.
13.2 PARTICIPATION. No Key Employee shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be selected to
receive a future Award.
ARTICLE 14. CHANGE IN CONTROL
14.1 TREATMENT OF OUTSTANDING AWARDS. Upon the occurrence of a Change in
Control, unless otherwise specifically prohibited under applicable laws, or by
the rules and regulations of any governing governmental agencies or national
securities exchanges:
(a) Any and all outstanding Options and SARs granted hereunder shall
become immediately exercisable, and shall remain exercisable
throughout their entire term;
(b) Any Periods of Restriction and restrictions imposed on Restricted
Stock/Units shall lapse; provided, however, that the degree of
vesting associated with Restricted Stock/Units which has been
conditioned upon the achievement of performance conditions
pursuant to Section 8.4 herein shall be determined in the manner
set forth in Section 14.1(c) herein;
(c) Except as otherwise provided in the Award Agreement, the vesting
of all Performance Units and Performance Shares shall be
accelerated as of the effective date of the Change in Control, and
there shall be paid out in cash to Participants within thirty (30)
days following the effective date of the
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Change in Control a pro rata amount based upon an assumed
achievement of all relevant performance objectives at target
levels, and upon the length of time within the Performance Period
which has elapsed prior to the effective date of the Change in
Control; provided, however, that in the event the Committee
determines that actual performance to the effective date of the
Change in Control exceeds target levels, the prorated payouts
shall be made at levels commensurate with such actual performance
(determined by extrapolating such actual performance to the end of
the Performance Period), based upon the length of time within the
Performance Period which has elapsed prior to the effective date
of the Change in Control; and provided, further, that there shall
not be an accelerated payout with respect to Awards of Performance
Units or Performance Shares which qualify as "derivative
securities" under Section 16 of the Exchange Act which were
granted less than six (6) months prior to the effective date of
the Change in Control.
14.2 TERMINATION, AMENDMENT, AND MODIFICATIONS OF CHANGE-IN-CONTROL
PROVISIONS. Notwithstanding any other provision of this Plan or any Award
Agreement provision, the provisions of this Article 14 may not be terminated,
amended, or modified on or after the effective date of a Change in Control to
affect adversely any Award theretofore granted under the Plan without the prior
written consent of the Participant with respect to said Participant's
outstanding Awards.
ARTICLE 15. AMENDMENT, MODIFICATION, AND TERMINATION
15.1 AMENDMENT, MODIFICATION, AND TERMINATION. Subject to Section 14.2
herein, the Board may at any time and from time to time alter,and in
any respect, amend or modify or
terminate the Plan in whole or in part;Plan; provided, however, that no amendment
which requires shareholder approval in order for the Plan to continue to comply
with Rule 16b-3 under the Exchange Act, or any successor rule, shall be
effective unless such amendment shall be approved by the requisite vote of
shareholders of the Company entitled to vote thereon.
The Committee shall not have the authority to cancel outstanding Awards and
issue substitute Awards in replacement thereof.
15.2 ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR
NONRECURRING EVENTS. The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in
Section 4.3 hereof) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting principles,
whenever the Committee determines that such adjustments are appropriate in order
to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, subject to the requirements of
Code Section 162(m) for the Performance-Based Exception in the case of Awards
designed to qualify for the Performance-Based Exception.
15.3 AWARDS PREVIOUSLY GRANTED. No termination, amendment or
modification of the Plan shall adversely affect in any material way any Award previously
grantedbe effective without the consent of the
Corporation's shareholders that would (i) change the class of Eligible Persons
under the Plan, (ii) increase the number of shares of Common Stock reserved for
issuance under the Plan or for certain types of Awards under Section 3.1 hereof,
or (iii) allow the grant of Options at an exercise price below Fair Market
Value, or allow the repricing of Options without shareholder approval. In
addition, the Board may seek the approval of any amendment or modification by
the Corporation's shareholders to the extent it deems necessary or advisable in
its sole
16
discretion for purposes of compliance with Section 162(m) or section 422 of the
Code, the listing requirements of the New York Stock Exchange or for any other
purpose. No amendment or modification of the Plan shall in any manner affect any
Award theretofore granted without the written consent of the Participant holdingor the
permitted transferee of the Award.
---------------------------------------------------
EXHIBIT B
DUKE ENERGY CORPORATION
POLICY COMMITTEE
SHORT-TERM INCENTIVE PLAN
ARTICLE I
General
SECTION 1.1 PURPOSE. The purpose of the Duke Energy Corporation Policy
Committee Short-Term Incentive Plan (the "Plan") is to benefit and advance the
interests of Duke Energy Corporation, a North Carolina corporation (the
"Corporation"), by rewarding selected senior executives of the Corporation and
its subsidiaries for their contributions to the Corporation's financial success
and thereby motivate them to continue to make such Award.
15.4 COMPLIANCE WITH CODEcontributions in the future
by granting annual performance-based awards (individually, "Award").
SECTION 162(M)1.2 ADMINISTRATION OF THE PLAN. The Plan shall be administered
by a committee ("Committee") which shall adopt such rules as it may deem
appropriate in order to carry out the purpose of the Plan. The Committee shall
be the Compensation Committee of the Corporation's Board of Directors ("Board")
(or such subcommittee as may be appointed by the Board) except that (i) the
number of directors on the Committee shall not be less than three (3) and (ii)
each member of the Committee shall be an "outside director" within the meaning
of Section 162(m)(4) of the Internal Revenue Code of 1986, as amended (the
"Code"). AtAll questions of interpretation, administration and application of the
Plan shall be determined by a majority of the members of the Committee then in
office, except that the Committee may authorize any one or more of its members,
or any officer of the Corporation, to execute and deliver documents on behalf of
the Committee. The determination of such majority shall be final and binding in
all times when Codematters relating to the Plan. The Committee shall have authority to
determine the terms and conditions of the Awards granted to eligible persons
specified in Section 1.3 below ("Participants").
SECTION 1.3 ELIGIBLE PERSONS. Awards may be granted only to employees
of the Corporation or one of its subsidiaries who serve on the Policy Committee
of the Corporation. An individual shall not be deemed an employee for purposes
of the Plan unless such individual receives compensation from either the
Corporation or one of its subsidiaries for services performed as an employee of
the Corporation or any of its subsidiaries.
ARTICLE II
Awards
SECTION 2.1 AWARDS. The Committee may grant Awards to eligible
employees with respect to each fiscal year of the Corporation, subject to the
terms and condition set forth in the Plan.
SECTION 2.2 TERMS OF AWARDS. Prior to the commencement of each fiscal
year of the Corporation (or by March 31, 1998, in the case of the fiscal year
ending December 31, 1998), the Committee shall establish (i) performance targets
("Performance Targets") for the Corporation for such fiscal year ("Performance
Period") and (ii) target awards ("Target Awards") that correspond to the
Performance Targets, for each eligible employee to whom an Award for the
Performance Period is granted ("Participant"). Such Performance Targets shall be
expressed as specified levels of Earnings Per Share. For purposes of the Plan,
"Earnings Per Share" for any Performance Period means earnings per share of the
Corporation's common stock, as reported by the Corporation in its consolidated
financial statements for the fiscal year of the Corporation in question.
SECTION 2.3 LIMITATION ON AWARDS. The aggregate amount of all Awards to
any Participant for any Performance Period shall not exceed one and one-half
million dollars ($1,500,000.00).
SECTION 2.4 DETERMINATION OF AWARD. The Committee shall, promptly after
the date on which the necessary financial or other information for a particular
Performance Period becomes available, certify in writing whether any Performance
Target has been achieved, and, if so, the highest Performance Target that has
been achieved, all in the manner required by Section 162(m) isof the Code. If any
Performance Target has been achieved, the Awards, determined for each
Participant with reference to the Target Award that corresponds to the highest
Performance Target achieved, for such Performance Period shall have been earned
except that the Committee may, in its sole discretion, reduce the amount of any
Award to reflect the Committee's assessment of the Participant's individual
performance, to reflect the failure of the Participant to remain in the
continuous employ of the Corporation or its subsidiaries throughout the
applicable Performance Period, or for any other reason. Such Awards shall become
payable in cash as promptly as practicable thereafter. Notwithstanding the
foregoing, the Committee, in its sole discretion, may permit a Participant to
elect to defer payment of all Awards granted under this Plan shall complyor any portion of the Award the Participant might
earn for a Performance Period, by filing such written form as the Corporation
may prescribe with the requirementsCorporation at least 15 days prior to the commencement of
Code Section 162(m); provided, however, thatthe Performance Period (or by March 31, 1998, in the case of the Performance
Period ending December 31, 1998), all on such terms and conditions as the
Committee may establish from time to time.
ARTICLE III
Miscellaneous
SECTION 3.1 NO RIGHTS TO AWARDS OR CONTINUED EMPLOYMENT. No employee
shall have any claim or right to receive Awards under the Plan. Neither the Plan
nor any action taken hereunder shall be construed as giving any employee any
right to be retained by the Corporation or any of its subsidiaries.
SECTION 3.2 RESTRICTION ON TRANSFER, BENEFICIARY. Awards (or interests
therein) to a
2
Participant or amounts payable with respect to a Participant under the Plan are
not subject to assignment or alienation, whether voluntary or involuntary.
Notwithstanding the foregoing, a Participant may designate a beneficiary or
beneficiaries to receive, in the event of the Committee determines that such compliance is not desiredParticipant's death, any amounts
remaining to be paid with respect to the Participant under the Plan. The
Participant shall have the right to revoke any Awardsuch designation and to
redesignate a beneficiary or Awards available for grantbeneficiaries. To be effective, any such
designation, revocation or redesignation must be in such written form as the
Corporation may prescribe and must be received by the Corporation prior to the
Participant's death. If a Participant dies without effectively designating a
beneficiary or if all designated beneficiaries predecease the Participant, any
amounts remaining to the be paid with respect to the Participant under the Plan,
then compliance with Code
Section 162(m) will notshall be required. In addition, inpaid to the event that changes are
made to Code Section 162(m) to permit greater flexibility with respect to any
Award or Awards available under the Plan, the Committee may, subject to this
Article 15, make any adjustments it deems appropriate.
A-12
ARTICLE 16. WITHHOLDING
16.1Participant's estate.
SECTION 3.3 TAX WITHHOLDING. The CompanyCorporation or a subsidiary thereof,
as appropriate, shall have the power and the right to deduct or withhold, or requirefrom all payments made under the
Plan to a Participant or to remit to the Company, an amount
sufficient to satisfya Participant's beneficiary or beneficiaries any
Federal, state andor local taxes domestic or foreign,
required by law or regulation to be withheld with respect to
such payments
SECTION 3.4 NO RESTRICTION ON RIGHT OF CORPORATION TO EFFECT CHANGES.
The Plan shall not affect in any taxable event
arising as a result of this Plan.
16.2 SHARE WITHHOLDING. With respect to withholding required uponway the exercise of Optionsright or SARs, upon the lapse of restrictions on Restricted Stock,
or upon any other taxable event arising as a result of Awards granted hereunder,
the Company may satisfy the withholding requirement, in whole or in part, by
withholding Shares having a Fair Market Value (determined on the date the
Participant recognizes taxable income on the Award) equal to the withholding tax
which is required to be collected on the transaction. The Participant may elect,
subject to the approvalpower of the Committee,CORPORATION or
its shareholders to delivermake or authorize any recapitalization, reorganization,
merger, acquisition, divestiture, consolidation, spin off, combination,
liquidation, dissolution, sale of assets, or other similar corporate transaction
or event involving the necessary funds to
satisfy the withholding obligation to the Company, in which case there will be
no reduction in the Shares otherwise distributable to the Participant.
ARTICLE 17. INDEMNIFICATION
Each person who isCORPORATION or shall have been a member of the Committee,subsidiary or of the
Board, shall be indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in a settlement approved
by the Company, or paid by him or her in satisfaction of any judgment in any
such action, suit, or proceeding against him or her, provided he or she shall
give the Company an opportunity, at its own expense, to handle and defend the
same before he or she undertakes to handle and defend it on his or her own
behalf. The foregoing right of indemnification shall not be exclusivedivision thereof of any
other event or series of events, whether of a similar character or otherwise.
SECTION 3.5 SOURCE OF PAYMENTS. The CORPORATION shall not have any
obligation to establish any separate fund or trust or other segregation of
assets to provide for payments under the Plan. To the extent any person acquires
any rights to receive payments hereunder from the CORPORATION, such rights shall
be no greater than those of indemnification to whichan unsecured creditor.
SECTION 3.6 TERMINATION AND AMENDMENT. The Plan shall continue in
effect until terminated by the Board. The Committee may at any time amend or
otherwise modify the Plan in such personsrespects as it deems advisable; provided,
however, no such amendment or modification may be entitledeffective without Board
approval or CORPORATION shareholder approval if such approval is necessary to
comply with the requirements for qualified performance-based compensation under
the
Company's Articles of Incorporation or By-Laws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
ARTICLE 18. SUCCESSORS
All obligationsSection 162(m) of the Company under the Plan or any Award Agreement with
respect to Awards granted hereunder shall be binding on any successor to the
Company, whether the existence of such successor is the result of a direct or
indirect purchase of all or substantially all of the business and/or assets of
the Company, or a merger, consolidation, or otherwise.
ARTICLE 19. LEGAL CONSTRUCTION
19.1 GENDER AND NUMBER. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
19.2 SEVERABILITY. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of theCode.
SECTION 3.7 GOVERNMENTAL REGULATIONS. The Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
19.3 REQUIREMENTS OF LAW. The granting ofall Awards
and the issuance of Share
and/or cash payouts under the Planhereunder, shall be subject to all applicable laws,
rules and regulations of
governmental or other authorities.
SECTION 3.8 HEADINGS. The headings of sections and to such approvals bysubsections herein
are include solely for convenience of reference and shall not affect the meaning
of any governmental agencies or
national securities exchanges as may be required.
A-13
19.4 SECURITIES LAW COMPLIANCE. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 under the Exchange Act, or any successor rule. To the extent any provision of the plan or action byprovisions of the Committee fails to so comply, it shall be deemed
null and void, to the extent permitted by law and deemed advisable by the
Committee. The exceptions to the transferability and exercisability restrictions
specified in Sections 6.10(b), 7.9 and 9.8 herein shall not apply to Awards
whose grant is intended to be exempt under Rule 16b-3 and meet the requirements
of Rule 16b-3(d) (1) (ii) or any applicable successor rule.
19.5Plan.
3
SECTION 3.9 GOVERNING LAW. To the extent not preempted by Federal law, theThe Plan and all agreementsrights and Awards hereunder
shall be construed in accordance with and governed by the laws of the State of
North Carolina.
A-14
(Duke Power Citizenship Service logo appears here)
************************************************************************
APPENDIX
(FormSECTION 3.10 EFFECTIVE DATE. The Plan shall be effective as of proxy for general shareholders)
Duke Power Company (Map appears here)January
1, 1998; provided, however, that it shall be a condition to the effectiveness of
the Plan, and any Awards hereunder, that the shareholders of the CORPORATION
approve the adoption of the Plan at the 1998 Annual Meeting of ShareholdersShareholders.
Such approval shall meet the requirements of Section 162(m) of the Code and the
regulations thereunder. If such approval is not obtained, then the Plan and any
Award hereunder shall be void AB INITIO.
4
============================================================================
APPENDIX
TO PARTICIPANTS IN THE PANENERGY EMPLOYEES' SAVINGS PLAN (ESP), EMPLOYEES' STOCK
OWNERSHIP PLAN (ESOP) AND/OR TAX CREDIT EMPLOYEE STOCK OWNERSHIP PLAN (TRASOP):
As a participant in the ESP, ESOP, and/or TRASOP, you have the right with
respect to the shares credited to your plan account to direct voting of those
shares on the issues presented at Duke Energy's 1998 Annual Shareholder Meeting,
to be held April 25, 199616 in Charlotte, N.C.
I encourage you to read the enclosed Proxy Statement and to complete the
attached proxy to direct the voting of those shares credited to your plan
account or accounts. Any unvoted shares will be voted by the respective plan
trustee in the same proportion as the voted shares for each respective plan.
Even though you may have returned a proxy for shares owned outside the plan or
plans, you are encouraged to exercise your rights by completing and returning
the enclosed proxy. Participants who wish to vote their ESP, ESOP and/or TRASOP
shares separately may contact Duke Energy Investor Relations at 10:00 a.m.
Peace Center(800)488-3853.
Sincerely,
R.B. Priory
Chairman of the Board
and Chief Executive Office
Directors recommend a vote "For" Items 1, 2, 3, and 4
1. Election of five directors who will constitute Class I of the Board of
Directors, two directors to continue in Class II and one director to continue in
Class III.
To vote your shares for all director nominees, or to withhold voting for
all nominees, mark the Performing Arts
101 West Broad Street
Greenville, SCappropriate box. If you do not wish your shares
voted for a particular director nominee, mark the "For*" box and enter
name(s) of the exceptions in the space provided.
Withhold
For For* Authority
[ ] [ ] [ ]
- ---------------------------------- ----------------------
- --------------------------------- ------------------------
- --------------------------------- -----------------------
2. Ratification of appointment of auditors.
For Against Abstain
[ ] [ ] [ ]
3. Approval of the Duke Energy Corporation 1998 Long-Term Incentive Plan.
For Against Abstain
[ ] [ ] [ ]
4. Approval of the Duke Energy Corporation Policy Committee Short-Term Incentive
Plan.
For Against Abstain
[ ] [ ] [ ]
SHARES HELD AS OF FEBRUARY 27, 1998:
If you plan to attend the meeting, please mark: [ ]
If you do not wish to receive an Annual Report for this
account, please mark: [ ]
Sign here as name(s) ________________________
appears above X _____________________ Date ,1998
-----------------
PLEASE SIGN THIS PROXY AND RETURN IT PROMPTLY WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING. If signing for a corporation or partnership or as agent, attorney
or fiduciary, indicate the capacity in which you are signing. Each joint owner
should sign. If you do attend the meeting and decide to vote by ballot, such
vote will supersede this proxy.
DUKE POWER COMPANYENERGY CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints W.H. Grigg,R.B.Priory, R.J. Osborne and Ellen T. Ruff,W. Edward Poe, Jr.,
and each of them, proxies, with the powers the undersigned would possess if
personally present, and with full power of substitution, to vote all shares of
Common Stock of Duke Power CompanyEnergy Corporation of the undersigned at the annual meeting
of shareholders to be held in the PeaceEnergy Center, for the Performing Arts, 101
West Broad526 South Church Street,
Greenville, SouthCharlotte, North Carolina, on April 25, 1996,16, 1998, and at any adjournment thereof,
upon all subjects that may come before the meeting, including the matters
described in the proxy statement furnished herewith, subject to any directions
indicated on the reverse side of this card. IF NO DIRECTIONS ARE GIVEN, THE
INDIVIDUALS DESIGNATED ABOVE WILL VOTE FOR THE ELECTION OF ALL CLASS II DIRECTOR
NOMINEES, IN ACCORD WITH THE DIRECTORS' RECOMMENDATIONRECOMMENDATIONS ON THE OTHER SUBJECTS
LISTED ON THE REVERSE OF THIS CARD AND AT THEIR DISCRETION ON ANY OTHER MATTER
THAT MAY COME BEFORE THE MEETING.
Your vote for the election of Class II directors may be indicated on the reverse.
Nominees are G. Alex Bernhardt,Paul M. Anderson, William A. Coley, William H. GriggT. Esrey, Ann M. Gray, Dennis R. Hendrix,
Harold S. Hook, W.W. Johnson, Leo E. Linbeck, Jr. and Max Lennon.
If you do notRussell M. Robinson, II.
Please sign on reverse and return a proxy, or attendpromptly in the meeting, your shares
cannot be voted.
PLEASE SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.enclosed
return envelope.
DEAR SHAREHOLDER:
It's my pleasureI hope you will plan to invitejoin me and your fellow shareholders at Duke Energy's
annual meeting, which begins at 10:00 a.m., Thursday, April 16, in the O.J.
Miller Auditorium. located in the Energy Center, 526 South Church St.,
Charlotte, North Carolina.
Shareholders will be asked to vote on the election of eight directors, the
ratification of appointment of auditors and the approval of corporate and
executive incentive plans. I encourage you to Duke Power'sread your Proxy Statement and then
mark, sign, date and return your completed form of proxy as soon as possible.
This will be our first annual meeting of shareholders which begins at 10 a.m., Thursday, April 25, 1996, at the Peace Center for
the Performing Arts, 101 West Broad Street, Greenville, S.C.
Please plan to attend this year's meeting to learn more about your Company's
performance in 1995 and the outlook for the year ahead. Whether or not you
are able to join us in Greenville, please read your proxy
statement and return your completed ballot as soon as possible.
Thank you for your support.Duke Energy
Corporation. I hope to see you personally at the Peace
Center on April 25.16 in Charlotte.
Sincerely,
W.H. GriggR.B. Priory
Chairman of the Board
and Chief Executive Officer
Directors recommend a vote "For" Items A, B,1, 2, 3, and C
A.4
1. Election of the fourfive directors who will constitute Class III of the Board of
Directors. (pages 1-6)Directors, two directors to continue in Class II and one director to
continue in Class III.
To vote your shares for all director nominees, or to withhold voting for
all nominees, mark the appropriate box. If you do not wish your shares
voted for a particular director nominee, mark the "For*" box and enter
the name(s) of the exception(s)exceptions in the space provided.
B.Withhold
For For* Authority
[ ] [ ] [ ]
2. Ratification of Auditors. (page 16)
C. Approvalappointment of the Duke Power Company Stock Incentive Plan. (pages 16-22)
If you plan to attend the meeting, please indicate on the ballot below
and see reverse for additional information. This detachable portion may
be presented for admission to the meeting.
(2 arrows pointing down)BEFORE MAILING, PLEASE DETACH THIS
PORTION.(2 arrows pointing down)
Withhold
A. For All For* Authority B.auditors.
For Against Abstain
[ ] [ ] [ ]
[ ] [ ] [ ]
*Except for3. Approval of the following:
C.Duke Energy Corporation 1998 Long-Term Incentive Plan.
For Against Abstain
[ ] [ ] [ ]
4. Approval of the Duke Energy Corporation Policy Committee Short-Term Incentive
Plan.
For Against Abstain
[ ] [ ] [ ]
SHARES HELD AS OF FEBRUARY 27, 1998: ______________
If you plan to attend the meeting, please mark: [ ]
SHARES HELD AS OF MARCH 1, 1996
Shares Account NumberIf you do not wish to receive an Annual Report for
this account, please mark: [ ]
Sign here as name(s) __________________________
appears above X ________________________ Date , 1996
Please sign this proxy and return it promptly whether or not you
plan to attend the meeting.,1998
-----------------
PLEASE SIGN THIS PROXY AND RETURN IT PROMPTLY WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING. If signing for a corporation or partnership or as agent, attorney
or fiduciary, indicate the capacity in which you are signing. Each joint owner
should sign. If you do attend the meeting and decide to vote by ballot, such
vote will supersede this proxy.
(FormDuke Energy Corporation
Annual Meeting of proxy for participants in Stock Purchase-Savings Program)Shareholders
April 16, 1998 at 10:00 a.m.
Energy Center - O.J. Miller Auditorium
526 South Church Street
Charlotte, N.C.
(map of Energy Center location appears here)
DUKE POWER COMPANYENERGY CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints W.H. Grigg,R.B.Priory, R.J. Osborne and Ellen T. Ruff,W. Edward Poe, Jr.,
and each of them, proxies, with the powers the undersigned would possess if
personally present, and with full power of substitution, to vote all shares of
Common Stock of Duke Power CompanyEnergy Corporation of the undersigned at the annual meeting
of shareholders to be held in the PeaceEnergy Center, for the Performing Arts, 101
West Broad526 South Church Street,
Greenville, SouthCharlotte, North Carolina, on April 25, 1996,16, 1998, and at any adjournment thereof,
upon all subjects that may come before the meeting, including the matters
described in the proxy statement furnished herewith, subject to any directions
indicated on the reverse side of this card. IF NO DIRECTIONS ARE GIVEN, THE
INDIVIDUALS DESIGNATED ABOVE WILL VOTE FOR THE ELECTION OF ALL CLASS II DIRECTOR
NOMINEES, IN ACCORD WITH THE DIRECTORS' RECOMMENDATIONRECOMMENDATIONS ON THE OTHER SUBJECTS
LISTED ON THE REVERSE OF THIS CARD AND AT THEIR DISCRETION ON ANY OTHER MATTER
THAT MAY COME BEFORE THE MEETING.
Your vote for the election of Class II directors may be indicated on the reverse.
Nominees are G. Alex Bernhardt,Paul M. Anderson, William A. Coley, William H. GriggT. Esrey, Ann M. Gray, Dennis R. Hendrix,
Harold S. Hook, W.W. Johnson, Leo E. Linbeck, Jr. and Max Lennon.
If you do not take advantage ofRussell M. Robinson, II.
Please sign on reverse and return promptly in the opportunity to vote your shares, your
Stock Purchase-Savings Program shares will voted according to the rules of
the New York Stock Exchange in a manner which may not reflect your wishes.
PLEASE SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.enclosed
return envelope.
TO PARTICIPANTS OFIN THE DUKE POWER COMPANY STOCK PURCHASE-SAVINGS PROGRAM:
You are receiving the enclosed proxy material asENERGY CORPORATION RETIREMENT SAVINGS PLAN:
As a participant in the Duke Power's
Stock Purchase-Savings Program. YouEnergy Corporation Retirement Savings Plan, you
have the right as beneficial owner ofwith respect to the shares credited to your plan account to
direct the voting of those shares on any issues presented at Duke Power's 1996 annual shareholders' meeting onEnergy's 1998
Annual Shareholder Meeting, to be held April 2516 in Greenville, S.C.Charlotte, N.C.
I encourage you to read the enclosed Proxy Statement and to complete the
attached proxy to direct the voting of those shares credited to your plan
account. If you doelect not complete andto return thisa completed proxy, shares held in your Stock
Purchase-Savings Programplan
account will be voted under New York Stock
Exchange rules andby the plan trustee acting in its discretion. Even though
you may not reflect your wishes. I encouragehave returned a proxy for shares owned outside the plan, you are
encouraged to exercise your voting rights as a shareholder by completing and returning the attached proxy, even though you may have already returned another proxy
for any other shares you own.enclosed
proxy.
Sincerely,
W.H. GriggR.B. Priory
Chairman of the Board
and Chief Executive Officer
Directors recommend a vote "For" Items A, B,1, 2, 3, and C
A.4
1. Election of the fourfive directors who will constitute Class III of the Board of
Directors. (pages 1-6)Directors, two directors to continue in Class II and one director to
continue in Class III.
To vote your shares for all director nominees, or to withhold voting for
all nominees, mark the appropriate box. If you do not wish your shares
voted for a particular director nominee, mark the "For*" box and enter
the name(s) of the exception(s)exceptions in the space provided.
B.Withhold
For For* Authority
[ ] [ ] [ ]
2. Ratification of Auditors. (page 16)
C. Approvalappointment of the Duke Power Company Stock Incentive Plan. (pages 16-22)
(2 arrows pointing down)BEFORE MAILING, PLEASE DETACH THIS
PORTION.(2 arrows pointing down)
Withhold
A. For All For* Authority B.auditors.
For Against Abstain
[ ] [ ] [ ]
[ ] [ ] [ ]
*Except for3. Approval of the following:
C.Duke Energy Corporation 1998 Long-Term Incentive Plan.
For Against Abstain
[ ] [ ] [ ]
4. Approval of the Duke Energy Corporation Policy Committee Short-Term Incentive
Plan.
For Against Abstain
[ ] [ ] [ ]
SHARES HELD AS OF FEBRUARY 27, 1998: ______________
If you plan to attend the meeting, please mark: [ ]
SHARES HELD AS OF MARCH 1, 1996
Shares Account NumberIf you do not wish to receive an Annual Report for
this account, please mark: [ ]
Sign here as name(s) _____________________________
appears above X __________________________ Date , 1996
Please sign this proxy and return it promptly whether or not you
plan to attend the meeting.,1998
-----------------
PLEASE SIGN THIS PROXY AND RETURN IT PROMPTLY WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING. If signing for a corporation or partnership or as agent, attorney
or fiduciary, indicate the capacity in which you are signing. Each joint owner
should sign. If you do attend the meeting and decide to vote by ballot, such
vote will supersede this proxy.
(Form of proxy for participants in Employee Stock Ownership Plan)
DUKE POWER COMPANYENERGY CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints W.H. Grigg,R.B.Priory, R.J. Osborne and Ellen T. Ruff,W. Edward
Poe, Jr., and each of them, proxies, with the powers the undersigned would
possess if personally present, and with full power of substitution, to vote all
shares of Common Stock of Duke Power CompanyEnergy Corporation of the undersigned at the
annual meeting of shareholders to be held in the PeaceEnergy Center, for the Performing Arts, 101
West Broad526 South Church
Street, Greenville, SouthCharlotte, North Carolina, on April 25, 1996,16, 1998, and at any adjournment
thereof, upon all subjects that may come before the meeting, including the
matters described in the proxy statement furnished herewith, subject to any
directions indicated on the reverse side of this card. IF NO DIRECTIONS ARE
GIVEN, THE INDIVIDUALS DESIGNATED ABOVE WILL VOTE FOR THE ELECTION OF ALL
CLASS II DIRECTOR NOMINEES, IN ACCORD WITH THE DIRECTORS' RECOMMENDATIONRECOMMENDATIONS ON THE OTHER
SUBJECTS LISTED ON THE REVERSE OF THIS CARD AND AT THEIR DISCRETION ON ANY OTHER
MATTER THAT MAY COME BEFORE THE MEETING.
Your vote for the election of Class II directors may be indicated on the
reverse. Nominees are G. Alex Bernhardt,Paul M. Anderson, William A. Coley, William H. GriggT. Esrey, Ann M. Gray, Dennis R.
Hendrix, Harold S. Hook, W.W. Johnson, Leo E. Linbeck, Jr. and Max Lennon.
If you do not take advantage ofRussell M.
Robinson, II.
Please sign on reverse and return promptly in the opportunity to vote your shares, your
Employeeenclosed
return envelope.
TO PARTICIPANTS IN THE EMPLOYEES' STOCK OWNERSHIP PLAN:
As a participant in the Duke Energy Corporation Employees' Stock Ownership Plan,
shares will not be voted.
PLEASE SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
TO PARTICIPANTS OF THE DUKE POWER COMPANY EMPLOYEE STOCK OWNERSHIP PLAN:
You are receiving the enclosed proxy material as a participant in Duke Power's
Employee Stock Ownership Plan. Youyou have the right as beneficial owner ofwith respect to the shares credited to your plan account to
direct the voting of those shares on any issues presented at Duke Power's 1996 annual shareholders' meeting onEnergy's 1998
Annual Shareholder Meeting, to be held April 2516 in Greenville, S.C.Charlotte, N.C.
I encourage you to read the enclosed Proxy Statement and to complete the
attached proxy to direct the voting of those shares credited to your plan
account. If you doelect not complete andto return thisa completed proxy, shares held in your Employee
Stock Ownership Planplan
account will not be voted. I encouragevoted by the plan trustee acting in its discretion. Even though
you may have returned a proxy for shares owned outside the plan, you are
encouraged to exercise your voting rights as a shareholder by completing and returning the attached proxy, even though you may have already returned another proxy
for any other shares you own.enclosed
proxy.
Sincerely,
W.H. GriggR.B. Priory
Chairman of the Board
and Chief Executive Officer
Directors recommend a vote "For" Items A, B,1, 2, 3, and C
A.4
1. Election of the fourfive directors who will constitute Class III of the Board of
Directors. (pages 1-6)Directors, two directors to continue in Class II and one director to
continue in Class III.
To vote your shares for all director nominees, or to withhold voting for
all nominees, mark the appropriate box. If you do not wish your shares
voted for a particular director nominee, mark the "For*" box and enter
the name(s) of the exception(s)exceptions in the space provided.
B.Withhold
For For* Authority
[ ] [ ] [ ]
2. Ratification of Auditors. (page 16)
C. Approvalappointment of the Duke Power Company Stock Incentive Plan. (pages 16-22)
(2 arrows pointing down)BEFORE MAILING, PLEASE DETACH THIS
PORTION.(2 arrows pointing down)
Withhold
A. For All For* Authority B.auditors.
For Against Abstain
[ ] [ ] [ ]
[ ] [ ] [ ]
*Except for3. Approval of the following:
C.Duke Energy Corporation 1998 Long-Term Incentive Plan.
For Against Abstain
[ ] [ ] [ ]
4. Approval of the Duke Energy Corporation Policy Committee Short-Term Incentive
Plan.
For Against Abstain
[ ] [ ] [ ]
SHARES HELD AS OF FEBRUARY 27, 1998:
If you plan to attend the meeting, please mark: [ ]
SHARES HELD AS OF MARCH 1, 1996If you do not wish to receive an Annual Report for
this account, please mark: [ ]
Sign here as name(s) __________________________
appears above X ________________________ Date , 1996
Please sign this proxy and return it promptly whether or not you
plan to attend the meeting.,1998
-----------------
PLEASE SIGN THIS PROXY AND RETURN IT PROMPTLY WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING. If signing for a corporation or partnership or as agent, attorney
or fiduciary, indicate the capacity in which you are signing. Each joint owner
should sign. If you do attend the meeting and decide to vote by ballot, such
vote will supersede this proxy.
DUKE ENERGY CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints R.B.Priory, R.J. Osborne and W. Edward Poe, Jr.,
and each of them, proxies, with the powers the undersigned would possess if
personally present, and with full power of substitution, to vote all shares of
Common Stock of Duke Energy Corporation of the undersigned at the annual meeting
of shareholders to be held in the Energy Center, 526 South Church Street,
Charlotte, North Carolina, on April 16, 1998, and at any adjournment thereof,
upon all subjects that may come before the meeting, including the matters
described in the proxy statement furnished herewith, subject to any directions
indicated on the reverse side of this card. IF NO DIRECTIONS ARE GIVEN, THE
INDIVIDUALS DESIGNATED ABOVE WILL VOTE FOR THE ELECTION OF ALL DIRECTOR
NOMINEES, IN ACCORD WITH THE DIRECTORS' RECOMMENDATIONS ON THE OTHER SUBJECTS
LISTED ON THE REVERSE OF THIS CARD AND AT THEIR DISCRETION ON ANY OTHER MATTER
THAT MAY COME BEFORE THE MEETING.
Your vote for the election of directors may be indicated on the reverse.
Nominees are Paul M. Anderson, William T. Esrey, Ann M. Gray, Dennis R. Hendrix,
Harold S. Hook, W.W. Johnson, Leo E. Linbeck, Jr. and Russell M. Robinson, II.
Please sign on reverse and return promptly in the enclosed
return envelope.