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DUKE ENERGY CORPORATION
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[DUKE LOGO]
Duke[Duke Energy CorporationLogo]
Proxy
Statement
and notice of
2001 Annual Meeting
[Duke Energy Logo]
526 South Church Street
Charlotte, NC 28202-1904
R.B. PRIORY28202-1802
March 19, 2001
Dear Shareholder:
I am pleased to invite you to our annual meeting to be held on April 26, 2001 in
the O. J. Miller Auditorium located in our Charlotte headquarters building. We
will discuss our performance in 2000 and our goals for 2001 and respond to any
questions you may have. Enclosed with this proxy statement are your proxy card
and voting instructions and the 2000 annual report.
As in the past, we are offering you the opportunity to cast your vote by
telephone or online via the Internet. Whether you choose to vote by proxy card,
telephone or Internet, it would help if you would vote as soon as possible.
I look forward to seeing you at the annual meeting.
Sincerely,
R. B. Priory
Chairman of the Board, President
and Chief Executive Officer
[Duke Energy Logo]
526 South Church Street
Charlotte, NC 28202-1802
Notice of Annual Meeting of Shareholders
April 26, 2001
March 12, 1999
Dear Shareholder:
You are cordially invited to attend19, 2001
We will hold the annual meeting of shareholders meeting, which
will be heldof Duke Energy Corporation on
Thursday, April 15, 1999,26, 2001 at 1010:00 a.m. in the O. J. Miller Auditorium in the
Energy Center located at 526 South Church Street in Charlotte, North Carolina.
This meeting will provide a good opportunity for us to report to you
our progress during 1998, as well as to outline for you our goals for 1999.
During the meeting, we will elect four Class II directors to three-year
terms expiring in 2002. Also, we will act upon a proposal to amend the
Corporation's ArticlesThe purpose of Incorporation to increase the amount of authorized
Common Stock, act upon the ratification of the appointment of auditors, act
upon a shareholder proposal and transact any other business that may come
before the meeting. The accompanying proxy statement contains further
information about all of these matters.
The Board of Directors and I hope you can attend the meeting, and look
forward to seeing you. Whether or not you expect to attend, please sign and
date the enclosed form of proxy and return it promptly in the accompanying
envelope to ensure that your shares will be represented. If you attend the
meeting, you may withdraw any previously given proxy and vote your shares in
person.
Sincerely,
/s/ R.B. PRIORY
DUKE ENERGY CORPORATION
526 SOUTH CHURCH STREET
CHARLOTTE, NORTH CAROLINA 28202-1904
NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS
March 12, 1999
To the Holders of Common Stock of
DUKE ENERGY CORPORATION:
NOTICE IS HEREBY GIVEN that the annual meeting is to consider and take action on the
following:
1. Election of shareholdersthree nominees as Class I directors.
2. Ratification of Deloitte & Touche LLP as Duke Energy Corporation (the "Corporation") will be held in O. J. Miller Auditorium
in the Energy Center, 526 South Church Street, Charlotte, North Carolina, on
Thursday, April 15, 1999, at 10 a.m.,Energy's independent
auditors for the following purposes:
(1) to elect four directors to Class II of the Board of Directors;
(2) to act upon a2001.
3. A proposal to amend the Articles of Incorporation to increase the amount
of authorized Common Stock from 500,000,0001,000,000,000 to 1,000,000,000;
(3)2,000,000,000 shares.
4. A proposal to ratifyamend the appointment of auditors;
(4)Duke Energy 1998 Long-Term Incentive Plan.
5. A shareholder proposal relating to act upon acontributions to political movements
and entities, if properly presented at the annual meeting.
6. A shareholder proposal; and
(5)proposal relating to transact suchinvestments in alternative energy
sources, if properly presented at the annual meeting.
7. Any other business that properly comes before the annual meeting.
Shareholders of record as may comeof March 1, 2001 can vote at the annual meeting. This
proxy statement, proxy card and voting instructions, along with our 2000 annual
report to shareholders, are being distributed on or about March 19, 2001.
Your vote is very important. If voting by mail, please sign, date and return the
enclosed proxy card in the enclosed prepaid envelope and allow sufficient time
for the postal service to deliver your proxy before the meeting. The Board of Directors has fixedIf voting by
telephone or on the close of businessInternet, please follow the instructions on February 22,
1999 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.card.
By Orderorder of the Board of Directors
RICHARDRichard W. BLACKBURN
EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARYBlackburn
Executive Vice President,
General Counsel and Secretary
DUKE ENERGY CORPORATION
PROXY STATEMENT
This proxy statement, withTable of Contents
Commonly Asked Questions and Answers About the accompanying proxy card, is first being
mailedAnnual Meeting 2
Proposals to holdersbe Voted Upon 5
Proposal 1: Election of Directors 5
Proposal 2: Ratification of Deloitte & Touche LLP as 5
Duke Energy's Independent Auditors for 2001
Proposal 3: Amendment to the Articles of Incorporation to Increase 5
the Amount of Authorized Common Stock
on or about MarchProposal 4: Amendment to the Duke Energy 1998 Long-Term 6
Incentive Plan
Proposal 5: Shareholder Proposal Relating to Contributions to 11
Political Movements and Entities
Proposal 6: Shareholder Proposal Relating to Investments in Alternative 12
1999 and is furnished
in connection with the solicitationEnergy Sources
The Board of proxies byDirectors 15
Beneficial Ownership 19
Information on the Board of Directors 21
Report of the CorporationAudit Committee 23
Report of the Compensation Committee 24
Performance Graph 29
Compensation 30
Summary Compensation Table 30
Long-Term Incentive Plan - Awards in 2000 32
Option Grants in 2000 32
Option Exercises and Year-End Values 33
Employment Contracts and Termination of Employment and 33
Change-in-Control Arrangements
Retirement Plan Information 35
Other Information 37
Appendix A - Charter of the Audit Committee of the Board of Directors A-1
Commonly Asked
Questions and Answers
About the Annual Meeting
Q: What am I voting on?
A: o Election of three directors: the nominees are Ann Maynard Gray, Dennis
R. Hendrix and Harold S. Hook;
o Ratification of Deloitte & Touche LLP as Duke Energy's independent
auditors for 2001;
o Amendment to be used at the annual meeting of shareholders to be held on
April 15, 1999.
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 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 proposal to
amend the Articles of Incorporation to increase the amount of authorized
Common Stock (Proposal 2); FORStock;
o Amendment to the ratification of the appointment of auditors
(Proposal 3); AGAINST theDuke Energy 1998 Long-Term Incentive Plan;
o A shareholder proposal (Proposal 4);relating to contributions to political movements
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 or special delivery letter or by other means.
RECORD DATE; QUORUM; VOTING RIGHTS
The Board of Directors has fixed February 22, 1999, as the record date
(the "Record Date") for determination of holders of Common Stock entitled to
notice of and to voteentities, if properly presented at the annual meeting; and
o A shareholder proposal relating to investments in alternative energy
sources, if properly presented at the annual meeting.
Accordingly, only holdersQ: Who can vote?
A: Common shareholders of recordDuke Energy as of
Common Stock at the close of business on the
Record Daterecord date, March 1, 2001 can vote at the annual meeting, either in person
or by proxy. Each share of Duke Energy Common Stock has one vote.
Q: How do I vote?
A: Sign and date each proxy card that you receive and return it in the prepaid
envelope or vote by telephone or on the Internet. If we receive your signed
proxy card (or properly transmitted telephone or Internet proxy) before the
annual meeting, we will vote your shares as you direct. You can specify
when submitting your proxy whether your shares should be voted for all,
some or none of the nominees for director. You can also specify whether you
approve, disapprove or abstain from voting on the other five proposals.
If you use the proxy card and simply sign, date and return it without
making any selections, your proxy will be entitledvoted in accordance with the
recommendations of the Board of Directors:
o in favor of the election of the nominees for directors named in
Proposal 1;
o in favor of Proposals 2, 3 and 4; and
o against Proposals 5 and 6.
Q: May I change my vote?
A: You may change your vote by:
o casting another vote either in person at the meeting or by one of the
other methods discussed above; or
o notifying the Corporate Secretary, in care of the Investor Relations
Department, at Post Office Box 1005, Charlotte, NC 28201-1005.
Q: Can I vote my shares by telephone or on the Internet?
2
A: If you hold your shares in your own name, you may vote by telephone or on
the Internet, by following the instructions included on your proxy card.
Your deadline for voting by telephone or on the Internet is 11:59 p.m.,
April 24, 2001.
If your shares are held in "street name," you will need to noticecontact your
broker or other nominee holder to find out whether you will be able to vote
by telephone or on the Internet.
Q: Will my shares be voted if I do not provide my proxy?
A: No, if you hold your shares directly in your own name, they will not be
voted if you do not provide a proxy unless you vote in person at the
meeting. Brokerage firms generally have the authority to vote customers'
unvoted shares on certain "routine" matters. If your shares are held in the
name of a brokerage firm, the brokerage firm can vote your shares for the
election of directors and for Proposals 2 and 4 (but not the other
proposals) if you do not timely provide your proxy because these matters
are considered "routine" under the applicable rules.
Q: As a Duke Energy employee, how do I vote shares held in my account in the
Duke Energy Retirement Savings Plan?
A: If you are a participant in the Duke Energy Retirement Savings Plan, you
have the right to direct the Plan trustee in the voting of those shares of
Duke Energy Common Stock that are held by the Plan and allocated to your
Plan account on any issues presented at the annual meeting. Plan
participant proxies will be treated confidentially.
If you elect not to vote by proxy, shares allocated to your Plan account
will be voted by the Plan trustee in the same proportion as those shares
held by the Plan for which the Plan trustee has received direction from
Plan participants.
Q: What constitutes a quorum?
A: As of the record date, March 1, 2001, ______________ shares of Duke
Energy Common Stock were issued and outstanding and entitled to vote at the
meeting. The number of outstanding shares of
Common Stock entitled to vote at the meeting is 363,464,761. In order to establish a quorum forconduct the annual meeting, a majority of the votesshares
entitled to be castvote must be either present in person or represented by valid proxy. This is referred to
as a "quorum." If you submit a properly executed proxy card or vote by
telephone or on the Internet, you will be considered part of the quorum.
Abstentions and broker non-votes"non-votes" will be counted as present and entitled
to vote for purposes of determining whether a quorum
exists atquorum. A broker "non-vote" occurs
when a nominee holding shares for a beneficial owner does not vote on a
particular proposal because the meeting.
Each share of Common Stock entitlednominee does not have discretionary voting
power with respect to that item and has not received instructions from the
beneficial owner.
Q: What vote at the meeting entitles its
holderis needed for these proposals to one vote.be adopted?
A: Directors will beare elected by a plurality of the votes cast by the holders of Common Stock entitled to vote at the meeting.
"Plurality" means that the individuals who receivenominees receiving 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 aA majority of the votes cast by holders of Common Stock
entitled to vote at the meeting is
required to approve Proposals 2,the other proposals. For the election of directors,
3
abstentions and 4.
Any sharesbroker "non-votes" will not voted, whether by abstention orbe counted. For the other
proposals, abstentions and broker non-vote,"non-votes" will not be counted as votes
castcast.
Q: Who conducts the proxy solicitation and how much will it cost?
A: Duke Energy is asking for purposesyour proxy for the annual meeting and will pay
all the costs of determining whether Proposals 2, 3 and 4asking for shareholder proxies. We have received sufficient votes for approval, nor will any abstentions or broker
non-votes be counted inhired Georgeson
Shareholder Communications, Inc. to help us send out 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 duplicate reports, the
Corporation will discontinue the mailing of those reports if you mark the
appropriate box on each proxy card for which you do not wish to receive an
Annual Report. Mailing of dividends, dividend reinvestment and stock purchase
statements, proxy materials
and special notices will not be affectedask for proxies. Georgeson's fee for these services is $17,500, plus
out-of-pocket expenses. We can ask for proxies through the mail or
personally by 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, brokertelephone, telegram, fax or other nomineemeans. We can use
directors, officers and regular employees of Duke Energy to ask for
proxies. These people do not receive more than one Annual Report, contactadditional compensation for these
services. We will reimburse brokerage houses and other custodians, nominees
and fiduciaries for their reasonable out-of-pocket expenses for forwarding
solicitation material to the holderbeneficial owners of recordDuke Energy Common Stock.
Q: How does a shareholder nominate someone to eliminate
duplicate mailings.
ADVANCE NOTICE PROCEDURES
Underbe a director of Duke Energy
or bring business before the Corporation's By-Laws, nominationsannual meeting?
A: Nominations for director may be made only by the Board of Directors or by a
shareholder entitled to vote who has deliveredgiven the proper notice, toas provided in the Corporation not less thanBy-Laws,
between 90 nor more thanand 120 days prior to the first anniversary of the precedingprevious
year's annual meeting. For the 2002 annual meeting, of shareholders in the year 2000, the Corporationwe must receive this
notice on or after December 17, 1999,27, 2001, and on or before January 16, 2000.
The Corporation's By-Laws also provide that no26, 2002.
Other 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
pursuantthrough the SEC's shareholder proposal procedures. If you intend to use the
SEC procedures under Rule 14a-8 ofand wish to have your proposal included in next year's proxy
statement, you must deliver the Securities and Exchange Commission ("SEC").proposal in writing to our Corporate
Secretary by November 19, 2001.
A copy of the full text of the By-Law advance notice provisions discussed
above may be obtained by writing to the SecretaryOffice of the Corporation,Corporate Secretary,
Post Office Box 1244,1006, Charlotte, North Carolina 28201-1244.
ELECTION OF DIRECTORS
(PROPOSAL 1)28201-1006.
Q: How does the recent stock split affect the information in this proxy
statement?
A: Except for the number of authorized shares set forth in Proposal 3 or as
otherwise noted, all references to numbers of shares, stock option data and
market prices of Duke Energy Common Stock in this proxy statement have been
restated to reflect the stock split.
4
Proposals to be Voted Upon
PROPOSAL 1:
Election of Directors
The Corporation'sBoard of Directors recommends a vote FOR each nominee.
The Board of Directors of Duke Energy consists of 12 members, divided into three
classes. The three-year terms of the classes are staggered so that the term of
one class expires at each annual meeting. The terms of the three Class I
directors will expire at the 2001 annual meeting.
The Board of Directors has nominated the following Class I directors for
re-election: Ann Maynard Gray, Dennis R. Hendrix and Harold S. Hook.
If any director is unable to stand for re-election, the Board of Directors may
reduce the number of directors, or designate a substitute. In that case, shares
represented by proxies may be voted for a substitute director. We do not expect
that any nominee will be unavailable or unable to serve.
PROPOSAL 2:
Ratification of Deloitte & Touche LLP as Duke Energy's Independent Auditors for
2001
The Board of Directors recommends a vote FOR this proposal.
The Board of Directors, upon recommendation of the Audit Committee, has
reappointed, subject to shareholder ratification, the firm of Deloitte & Touche
LLP, certified public accountants, as independent auditors to examine Duke
Energy's accounts for the year 2001. If the shareholders do not ratify this
appointment, the Board of Directors will consider other certified public
accountants upon recommendation of the Audit Committee.
A representative of Deloitte & Touche LLP will, as in prior years, attend the
annual meeting and will have the opportunity to make a statement and be
available to respond to appropriate questions.
PROPOSAL 3:
Increase in Authorized Common Stock
The Board of Directors recommends a vote FOR this proposal.
Duke Energy completed a two-for-one split of its Common Stock in January 2001.
After giving effect to the stock split, Duke Energy had outstanding on March 1,
2001 approximately __________ shares of Common Stock out of 1,000,000,000 shares
authorized for issuance. In addition, Duke Energy will have approximately
____________ shares reserved for issuance under various stock-based plans,
assuming shareholder approval at the annual meeting of the
5
proposed increase in shares reserved for issuance under the Duke Energy 1998
Long-Term Incentive Plan. In view of this, the Board of Directors has approved
an amendment to the Articles of Incorporation to increase the number of shares
of authorized Common Stock from 1,000,000,000 to 2,000,000,000 shares. The Board
recommends that the shareholders approve the proposed amendment.
Reasons for the Amendment
The Board believes it advisable to increase the authorized number of shares of
Common Stock because there may be insufficient shares available for issuance
from time to time for purposes which the Board determines to be in Duke Energy's
interest. These purposes would include financing growth, effecting stock splits
or stock dividends, providing shares for employee benefit and dividend
reinvestment plans, possible acquisitions and other general corporate purposes
related to the development and expansion of the corporate enterprise. The Board
believes it will be advantageous to be able to act promptly with respect to
investment or acquisition opportunities without the expense and delay involved
in convening special shareholder meetings to authorize additional shares which
may be issued in connection with such opportunities. Duke Energy is not
currently planning any material acquisition, although such transactions are
considered from time to time.
The additional shares of Common Stock, if authorized, would have the same rights
and privileges as the shares of Common Stock presently outstanding. The Articles
of Incorporation provide that holders of shares of Common Stock do not have
preemptive rights.
While the Board believes it advisable to increase the number of authorized
shares of Common Stock for the reasons set forth above, the Board realizes that
the increase in the number of authorized shares could be used for anti-takeover
purposes as Duke Energy could issue additional shares to make more difficult or
discourage an attempt to acquire control of Duke Energy. Duke Energy is not
aware of any effort to accumulate its securities or obtain control by means of a
tender offer, proxy contest or otherwise.
Unless required by law or by the applicable rules of the New York Stock
Exchange, no further authorization for the issuance of Common Stock by the
shareholders would be necessary, but any such issuance would be subject to the
approval of the North Carolina Utilities Commission and The Public Service
Commission of South Carolina.
PROPOSAL 4:
Amendment of the Duke Energy 1998 Long-Term Incentive Plan
The Board of Directors recommends a vote FOR this proposal.
The Duke Energy 1998 Long-Term Incentive Plan was approved by Duke Energy's
shareholders at the 1998 annual meeting. The purpose of the Plan is to
strengthen Duke Energy's ability to attract, motivate and retain employees and
outside directors and to provide an additional incentive for employees and
outside directors to promote Duke Energy's financial success and growth.
6
The Amendment
- -------------
The Amendment seeks to increase the number of shares reserved for issuance under
the Plan by an additional 30,000,000 shares and to increase the maximum number
of shares of Common Stock that may be issued under the Plan under restricted
stock awards, performance awards and phantom stock awards from 3,000,000 to
6,000,000. The additional shares reserved for issuance are needed to facilitate
the continued use of the Plan because the original authorization in 1998 of
30,000,000 shares is expected to be largely exhausted in the near term.
The Board of Directors approved the Amendment on December 20, 2000, subject to
shareholder approval.
The full text of the amended Plan has been filed electronically with the SEC
with this proxy statement. You are encouraged to read the full text of the Plan
if you need more information.
Other Principal Features of the Plan
- ------------------------------------
Administration of the Plan. The Compensation Committee of the Board of Directors
is to be divided into three classes, as nearly equal in size as
possible. Each yearadministers the directorsPlan. The Compensation Committee determines who receives awards,
what types of one classawards are elected to servegranted, when awards are granted, and the terms of
three years.
Four persons have been nominatedawards, except that awards to outside directors and the Chairman, President and
Chief Executive Officer must be made by the Board of Directors for election asDirectors.
Eligibility to Receive Awards. Substantially all employees of Duke Energy and
its subsidiaries and all of Duke Energy's outside directors are eligible to Class IIbe
granted awards under the Plan. The number of actual grantees may vary from year
to year.
Stock Option Awards. Awards of nonqualified stock options and incentive stock
options may be granted under the Plan. Nonqualified stock options may be granted
to employees and outside directors; incentive stock options may be granted only
to employees. The maximum number of shares of Common Stock that may be granted
under stock options to any one participant during any calendar year is 2,000,000
shares. The value of Common Stock (determined at the meeting,time of grant) that may be
subject to serve three-year termsincentive stock options that become exercisable by any one employee
in any one year is limited to $100,000.
The maximum term of a stock option granted under the Plan is ten years. The
exercise price per share of an option is established by the Compensation
Committee and until their
successors are duly electedmay not be less than the fair market value of a share of Common
Stock on the grant date. The Compensation Committee determines the extent to
which an option becomes and/or remains exercisable if the employment or service
of a participant terminates due to retirement, death, disability or certain
other circumstances, subject to limitations for incentive stock options.
Stock Appreciation Rights. The Compensation Committee may grant stock
appreciation rights under the Plan. A stock appreciation right entitles the
holder to receive the difference between the base price specified in the award
and qualified.the fair market value of a share of Common Stock on the date of exercise,
with respect to each share of Common Stock to which the stock appreciation right
relates. The Class II nominees are G. Alex
Bernhardt, Sr., William A. Coley, Max Lennon and Leo E. Linbeck, Jr. Allmaximum number of shares of Common Stock subject to stock
appreciation rights granted to any one participant during any calendar year is
2,000,000 shares.
7
A stock appreciation right may be granted either in tandem with an option or on
a stand-alone basis. A stock appreciation right granted in tandem with an option
has a base price per share equal to the per share exercise price of the Class II nominees are currently Class II directors.
Votes (other than votes withheld)option
and generally has the same vesting and termination schedule as the option.
Exercise of the stock appreciation right as to a number of shares results in the
cancellation of the same number of shares under the option. A stock appreciation
right granted on a stand-alone basis 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 will not be
available for election. In that event, it is intended that such votes will be
cast for such substitute nominee or nomineesexercisable as may be determined by the
personsCompensation Committee, but in no event after ten years from the date of grant.
The base price of a stand-alone stock appreciation right may not be less than
100% of the fair market value of a share of Common Stock on the date of grant.
Stock appreciation rights are payable in cash, in shares of Common Stock, or
both, as determined by the Compensation Committee.
Performance Awards. Performance awards are units denominated 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 Compensation Committee at the beginning of the
performance period. The performance period may not exceed ten years from the
date of grant. At the end of the performance period, the Compensation Committee
determines the payment to be made based on the extent to which the performance
goals have been achieved. Performance awards are payable in cash, in shares of
Common Stock, or both, as determined by the Compensation Committee.
The Compensation Committee may grant performance awards that are intended to
qualify for exemption under section 162(m) of the Internal Revenue Code, as well
as performance awards that are not intended to so qualify. The performance
criteria for a section 162(m) qualified performance award may relate to Duke
Energy, a subsidiary or a business unit, and may be absolute or measured
relative to a peer group. Only the following criteria may be used for a section
162(m) qualified award: total shareholder return, stock price increase, return
on equity, return on capital, earnings per share, earnings before interest and
taxes, 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 cost
per kWh. No more than $2.5 million may be payable in any one calendar year to
any one participant under a section 162(m) qualified performance unit award. No
more than 400,000 share units may be subject to a section 162(m) qualified
performance share award granted to any one participant in any calendar year.
Restricted Stock Awards. The Compensation Committee may grant restricted stock
awards under the Plan. Restricted stock awards contain restrictions with respect
to transferability and ownership of the shares of Common Stock granted and are
subject to forfeiture under certain conditions. The restrictions lapse in
accordance with the vesting requirements set forth in the award. Vesting
requirements may be based on the participant's continued employment for a
specified time period or on the attainment of specified business goals or
performance criteria. The Compensation Committee may require the payment of a
specified purchase price in connection with a restricted stock award.
No more than 400,000 shares of restricted stock intended to qualify under
section 162(m) may be granted to any one participant during any calendar year.
An award of restricted stock that is intended to qualify for exemption under
section 162(m) will have its vesting requirements limited to the performance
criteria described under "Performance Awards" above.
8
Phantom Stock Awards. The Compensation Committee may grant awards of phantom
stock under the Plan. A phantom stock award gives the participant the right to
receive the fair market value of a share of Common Stock on the vesting date
(subject to any applicable maximum value) for each unit of phantom stock
awarded. Vesting periods may be no more than ten years from the date of grant.
Phantom stock units may be subject to restrictions and conditions set by the
Compensation Committee. Payments of phantom stock awards may be in cash, in
shares of Common Stock, or both, as determined by the Compensation Committee.
Dividend Equivalents Awards. The Compensation Committee may grant dividend
equivalent awards under the Plan. A dividend equivalent award gives the
participant the right to receive cash payments that are equivalent to dividends
on the shares of Common Stock to which the award relates. Dividend equivalent
awards may be granted in tandem with other awards or on a stand-alone basis.
Dividend equivalent awards granted in tandem with other awards expire at the
time the underlying award is exercised, becomes otherwise payable, or expires.
Dividend equivalent awards may be payable in cash or in shares of Common Stock,
as determined by the Compensation Committee.
Term of the Plan. The Plan will terminate on April 16, 2008, except that the
Plan may be terminated earlier by the Board of Directors.
Other Information. The Board of Directors may amend the Plan at any time, except
that shareholder approval is required for amendments that change who is eligible
to participate in the Plan, increase the number of shares of Common Stock
reserved for issuance under the Plan or for certain kinds of awards, allow
grants of options at an exercise price below fair market value, or allow the
repricing of options.
The Compensation Committee may provide for the effect of a "change in control"
(as defined in the Plan) on awards granted under the Plan. Such provisions may
include accelerating or extending time periods for exercising, vesting or
realizing gain from any awards, waiving or modifying performance or other
conditions relating to payment or other rights under awards, or cash settlement
of awards.
Federal Income Tax Consequences. The following is a general description of the
federal income tax consequences to participants and Duke Energy relating to
awards that may be granted under the Plan. The description does not purport to
cover all tax consequences relating to awards.
The grant of a stock option will not result in taxable income at the time of
grant for the grantee or Duke Energy. The grantee will have no taxable income
upon exercising an incentive stock option (except that the alternative minimum
tax may apply), and Duke Energy will receive no deduction when an incentive
stock option is exercised. Upon exercising a nonqualified stock option, the
grantee will recognize ordinary income in the amount by which the fair market
value exceeds the option price; Duke Energy will be entitled to a deduction for
the same amount. The treatment to a grantee of a disposition of shares acquired
through the exercise of an option depends on how long the shares are held and on
whether the shares were acquired by exercising an incentive stock option or a
nonqualified stock option. Generally, there will be no tax consequence to Duke
Energy when shares acquired under an option are disposed of except that Duke
Energy may be entitled to a deduction if shares acquired upon exercise of an
incentive
9
stock option are disposed of before the applicable incentive stock option
holding periods have been satisfied.
The current federal income tax consequences of other awards authorized under the
Plan are generally in accordance with the following: stock appreciation rights
are subject to taxation in substantially the same manner as nonqualified stock
options; restricted stock subject to a substantial risk of forfeiture results in
income recognition to the excess of the fair market value of the shares 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); performance awards, phantom stock awards and dividend equivalent awards
are generally subject to tax at the time of payment. In each of the foregoing
cases, Duke Energy will generally have a corresponding deduction at the same
time the participant recognizes income.
Compensation of the executive officers listed in the Summary Compensation Table
in "Compensation" below is subject to the tax deduction limits of section 162(m)
of the Internal Revenue Code. Stock options and stock appreciate rights that
qualify as "performance-based compensation" are exempt from section 162(m), thus
allowing Duke Energy the full tax deduction otherwise permitted for such
compensation. The Plan enables the Compensation Committee to grant stock options
and stock appreciation rights that will be exempt from the deduction limits of
section 162(m) of the Internal Revenue Code.
The closing price of Duke Energy Common Stock on the New York Stock Exchange on
March , 2001 was $ per share.
10
1998 Long-Term Incentive Plan Benefits. The Compensation Committee has granted
stock option awards as part of 2001 compensation under the Plan as described in
the table entitled "Option Grants in 2000" in this proxy statement. The exercise
price of such option was $42.8125. Award recipients were allowed to elect to
receive a portion of the value of 2001 long-term incentive compensation in the
form of phantom stock, as further described in footnote 2 of the Summary
Compensation Table under "Compensation" below. The fair market value of one
phantom stock unit on the date of grant was $42.8125. In addition, members of
the groups named below have received option awards and phantom stock awards for
2001 as follows:
Number of
Number of Shares Phantom Stock
Identity of Group Underlying Options Units
----------------- ------------------ -------------
All executive officers
as a group (11) 1,130,400 34,320
All non-executive directors
as a group (10) 40,000 --
All employees (including
non-executive officers) as a group (1,670) 4,829,408 137,000
In addition to the above, one executive officer received a restricted stock
award of 20,000 shares as part of his initial compensation package. No other
determinations have been made with respect to future awards under the Plan.
SHAREHOLDER PROPOSALS
The following two proposals have been submitted by shareholders for inclusion in
such proxy.this proxy statement. Upon oral or written request, we will promptly furnish the
names and addresses of the shareholders submitting the proposals, as well as the
number of shares they held at the time the proposals were submitted.
PROPOSAL 5:
Contributions to Political Movements and Entities
The Board of Directors recommends a vote AGAINST this proposal.
Whereas the money for donations to political movements and political entities
comes from the profits of the company's operations, and belongs to the
shareholders; and since these contributions are nothing more than an overt
effort to control elections, shareholders should not be made to support
political movements or political entities with whom they do not agree.
The Board of Directors is requested to adopt a policy that no contribution to
any political movement or entity shall be made by Duke Energy; nor shall
solicitations for contributions to any political movement or entity be made on
company property, nor to any company employee; nor shall company facilities or
equipment be used for this purpose.
11
Opposing Statement of the Board of Directors
The Board of Directors has no reasonconsidered this proposal and believes that its
adoption is unnecessary and would not be in the best interests of Duke Energy or
its shareholders.
Duke Energy is subject to, believe
that anyand complies with, extensive federal and state
regulations relating to political contributions. Adoption of the nominees listedproposal,
however, would prohibit it from continuing its customary support of various
political action committees and permitted state and local campaigns. Many of
Duke Energy's business activities are heavily regulated at the federal, state
and local levels, which affects its ability to own and maintain energy
facilities, and offer energy and energy-related products and services. Duke
Energy believes that its interaction with legislators and regulators influences
the products and services that it is able to offer and deliver, and believes in
the importance of participating in the political process on behalf of its
shareholders, customers, employees and other stakeholders. The proposal,
however, would limit Duke Energy's effectiveness and place it at a competitive
disadvantage by prohibiting its participation in various activities routinely
engaged in by energy companies and others.
In addition to placing Duke Energy at a competitive disadvantage, the proposal
does not define "political movement or entity" or provide any guidance as to how
it would determine whether or not a "movement or entity" is "political."
Consequently, the extremely broad language of the proposal could prohibit a
multitude of activities that shareholders would not commonly view as political
in nature.
The Board of Directors therefore recommends a vote AGAINST this shareholder
proposal.
PROPOSAL 6:
Investments in Alternative Energy Sources
The Board of Directors recommends a vote AGAINST this shareholder proposal.
Invest in Clean Energy (ICE) Proposal
Be it resolved that Duke Energy shall invest sufficient resources to build new
electrical generation from solar and wind power sources to replace approximately
one percent (1%) of system capacity yearly for the next twenty years with the
goal of having the company producing twenty percent (20%) of generation capacity
from clean renewable sources in 20 years.
Supporting Statement
Utility deregulation demands the company present a good public image, and the
public is demanding progress towards clean energy.
Efforts must be made to slow down changes in global climate so that we can
continue to survive on planet earth.
12
The proposal allows flexibility in schedule for the Board of Directors to
implement this proposal. The 20% figure is just a reasonable and conservative
goal to aim for.
A one percent yearly addition to generation capacity allows for small pilot
plants to be built and tried as the program advances.
The company should look to building facilities that are made to last a long
time.
Solar power towers, wind farms, solar photovoltaic arrays and parabolic solar
troughs already exist in other places in this range of power production, proving
that Duke could realistically build such facilities in the Carolinas and
elsewhere.
Opposing Statement of the Board of Directors
Duke Energy considers the development of clean, renewable energy sources to be a
matter of importance. It also supports research in the development and
commercial deployment of such technologies and closely monitors technological
developments in this sector. Duke Energy has developed several different
commercial projects utilizing these kinds of technologies through its Duke
Engineering & Services and DukeSolutions business units and participates in
commercial developments that are consistent with its business strategy and
capital investment requirements. As with other generation technologies deployed
by Duke Energy, renewable energy generation technologies must be economically
attractive in addition to their having technological feasibility.
The proponent would have shareholders require Duke Energy to pursue certain
renewable energy sources without reference to any economic, scientific or
technical data on which to evaluate such actions. If adopted, the proposal would
require Duke Energy to replace its electric generating system capacity with
solar and wind power sources by approximately 1% per year, regardless of whether
1% replacements are practical and regardless of cost, and to commit to that
timetable for the next 20 years.
The proposal generally requires Duke Energy to replace portions of its electric
generation system in artificial, predetermined percentage amounts according to
an artificial, predetermined timetable. Changes in the composition of electric
generation systems, however, do not occur in successive increments of
approximately 1% and are not implemented on the basis of the sort of timetable
that the proposal specifies. Moreover, the proposal could require Duke Energy to
dismantle system capacity that might be highly productive in order to replace it
with solar and wind power technologies, replacements that would involve very
substantial costs with respect to construction and maintenance. Based on data
provided by the World Energy Assessment conducted by the United Nations
Development Programme, the technologies included in the proposal presently are 3
times to 40 times as expensive as current conventional generation technologies.
The timing and advisability of entering into any new business, such as
renewables, including research and marketing decisions relating to it, require
the judgment of experienced management. Duke Energy has experience in renewable
energy. It has participated in past research and development and commercial
ventures involving renewable energy, including biomass and solar energy. In
2000, DukeSolutions, a Duke Energy business, announced new capital investment in
biomass fueled renewable energy projects. Duke Energy will continue to
13
pursue similar opportunities when its business strategy and capital investment
requirements are satisfied. However, the long-term time commitment and scale of
investment required by the proposal would not, in the Board's opinion, be availablein
the best interest of shareholders or customers.
The Board of Directors opposes this proposal because it requires Duke Energy to
adopt a highly restrictive and costly plan with respect to Duke Energy's future
electric operations. Duke Energy remains committed through research, technology
and innovation to meet consumers' demands for new products and services. The
Board of Directors believes, however, that the requirement in the proposal that
Duke Energy should actively pursue a business activity, such as renewable energy
sources, irrespective of consumers' demands, technical data and economic
factors, is unwarranted and not in the best interests of shareholders.
The Board of Directors therefore recommends a vote AGAINST this shareholder
proposal.
14
The Board of Directors
Nominees for election as a
director.
NOMINEES FOR ELECTION AS
CLASS II DIRECTORS
(TERM EXPIRING IN 2002)
[GRAPHIC]at the annual meeting are marked with an asterisk (*).
(Photo) G. ALEX BERNHARDT, SR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER,
BERNHARDT FURNITURE COMPANY, FURNITURE MANUFACTURERAlex Bernhardt, Sr.
Director since 1991
Chairman and CEO, Bernhardt Furniture Company, furniture
manufacturer
Age 57
Mr. Bernhardt 55, 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 OfficerCEO
in 1996. Mr. Bernhardt is a director of First Union
Corporation. He is a Class II director with a term expiring in
2002.
(Photo) Robert J. Brown
Director since 1994
Chairman and CEO, B&C Associates, Inc., marketing research and
public relations firm
Age 66
Mr. Brown founded B&C Associates, Inc., High Point, North
Carolina, in 1960, served as its President from 1960 until
1968 and has been its Chairman and CEO since 1973. He is a
director of Robert Talbott, Inc. and First Union Corporation. He serves as a trustee of Davidson CollegeCorporation, Sonoco Products Company
and a member of the North Carolina Governor's Business Council.AutoNation, Inc. He is a Class III director emeritus and pastwith a term
expiring in 2003.
(Photo) William A. Coley
Director since 1990
Group President, Duke Power, electric operations of the American
Furniture Manufacturers Association.
2
[GRAPHIC]
WILLIAM A. COLEY, GROUP PRESIDENT, DUKE POWER, ELECTRIC
OPERATIONS OF DUKE ENERGY CORPORATIONDuke
Energy
Age 57
Mr. Coley 55, joined the CorporationDuke Energy in 1966 and was elected
a director in 1990.1966. 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,of Duke Energy's 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 PadCT Communications, Inc. and Paper CompanySouthTrust Corporation. Mr. Coley
is a Class II director with a term expiring in 2002.
(Photo) William T. Esrey
Director since 1985
Chairman and the North
Carolina BoardCEO, Sprint Corporation, a diversified
telecommunications holding company
Age 61
Mr. Esrey has served as Chairman of SouthTrust Bank.Sprint Corporation since
1990 and as its CEO since 1985. He also serves on the
Boardswas President 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 andSprint
Corporation from 1985 to 1996. Mr. Esrey is on the Institutional
Advisory Board and the Engineering Advisory Board of the
Georgia Institute of Technology.
[GRAPHIC]
MAX LENNON, PRESIDENT, MARS HILL COLLEGE, MARS HILL, NORTH
CAROLINA
Dr. Lennon, 58, was elected a director in 1988.of
Sprint Corporation, General Mills, Inc.,
15
and Exxon Mobil Corporation and had been a director of
PanEnergy Corp since 1985. He is a Class III director with a
term expiring in 2003.
(Photo) Ann Maynard Gray *
Director since 1994
Former Vice President, ABC, Inc. and Former President,
Diversified Publishing Group of ABC, Inc., television, radio
and publishing
Age 55
Ms. Gray was President, Diversified Publishing Group of ABC,
Inc. from 1991 until 1997, and was a Corporate Vice President
of ABC, Inc. and its predecessors from 1979 to 1998. She had
been a director of PanEnergy Corp since 1994. Ms. Gray is a
director of Elan Corporation, plc. as of February 1, 2001.
(Photo) Dennis R. Hendrix *
Director since 1990
Retired Chairman of the Audit CommitteeBoard, PanEnergy Corp
Age 61
Mr. Hendrix was Chairman of the Board of PanEnergy Corp from
1990 to 1997; CEO from 1990 to 1995; and alsoPresident from 1990
to 1993. He served as a director of Texas Eastern Transmission
Corporation from 1990 to 1997 and as President and CEO from
1990 to 1994. Mr. Hendrix is a director of Allied Waste
Industries, Inc., International Power, PLC and Newfield
Exploration Company.
(Photo) Harold S. Hook *
Director since 1978
Consultant; Retired Chairman and CEO, American General
Corporation, diversified financial services
Age 69
Mr. Hook retired from American General Corporation in 1997
after more than 18 years as Chairman and CEO. He serves onas a
director of Sprint Corporation and had been a director of
PanEnergy Corp since 1978.
(Photo) George Dean Johnson, Jr.
Director since 1986
CEO, Extended Stay America, development, ownership and
management of extended-stay lodging facilities
Age 58
Mr. Johnson served as President of the Corporate Governance Committee.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 CEO since 1995. Mr. Johnson is a director of
Extended Stay America, Boca Resorts,
16
Inc., and AutoNation, Inc. He is a Class III director with a
term expiring in 2003.
(Photo) Max Lennon
Director since 1988
President, Mars Hill College, Mars Hill, NC
Age 60
Dr. Lennon 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. HeDr. Lennon is a director of Delta
Woodside Industries, Inc.
[GRAPHIC]
LEO E. LINBECK, JR., CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, LINBECK CORPORATION, HOLDING COMPANY OF FOUR
CONSTRUCTION-RELATED FIRMS
Mr. Linbeck, 64, was appointed a director in June 1997 upon
the merger of the CorporationDelta Apparel, Inc. and PanEnergy. He had been a
director of PanEnergy since 1986.Duck Head
Apparel, Inc. He is a Class II director with a term expiring
in 2002.
(Photo) Leo E. Linbeck, Jr.
Director since 1986
Chairman, President and CEO, Linbeck Corporation, holding
company of the
Compensation Committee and serves on the Audit Committee. Hefour construction-related firms
Age 66
Mr. Linbeck assumed his present position with Linbeck Corporation in 1990 after serving
as Chairman, President and Chief
Executive OfficerCEO of Linbeck Construction
Corporation from 1975 to 1990. He servesserved as a director of
Daniel Industries,
Inc. and as a director and trustee of 33 investment
companies managed by John Hancock Advisers, Inc.
DIRECTORS CONTINUING IN OFFICE
[GRAPHIC]
ROBERT J. BROWN, CHAIRMAN AND PRESIDENT, B&C ASSOCIATES,
INC., MARKETING RESEARCH AND PUBLIC RELATIONS FIRMPanEnergy Corp from 1986. Mr. Brown, 64, 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. HeLinbeck is a Class IIIII director
with a term expiring in 2000.
3
[GRAPHIC]
WILLIAM T. ESREY, CHAIRMAN AND CHIEF EXECUTIVE OFFICER,
SPRINT CORPORATION, A DIVERSIFIED TELECOMMUNICATIONS HOLDING
COMPANY
Mr. Esrey, 59, was appointed a director in June 1997 upon
the merger of the Corporation and PanEnergy. He had been a
director of PanEnergy2002.
(Photo) James G. Martin, Ph.D.
Director since 1985. He serves on the
Compensation and Corporate Governance 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, General Mills, Inc., Everen Capital
Corporation, Exxon Corporation and Earthlink Network, Inc.
He is a Class III director with a term expiring in 2000.
[GRAPHIC]
ANN MAYNARD GRAY, FORMER VICE PRESIDENT, ABC, INC. AND FORMER
PRESIDENT, DIVERSIFIED PUBLISHING GROUP OF ABC, INC.,
TELEVISION, RADIO AND PUBLISHING
Ms. Gray, 53, was appointed 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 was a Corporate1994
Vice President, of ABC,
Inc. and its predecessors from 1979 to 1998. She is a
director of Cyprus Amax Minerals Company. She is a Class I
director with a term expiring in 2001.
[GRAPHIC]
DENNIS R. HENDRIX, RETIRED CHAIRMAN OF THE BOARD, PANENERGY
CORP
Mr. Hendrix, 59, 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 and Corporate Governance Committees. He
was Chairman of the Board of PanEnergy from 1990 to 1997;
Chief Executive Officer of PanEnergy from 1990 to 1995; and
President of PanEnergy from 1990 to 1993. He served as a
director 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 Allied Waste Industries, Inc., National Power,
PLC, Newfield Exploration Company and Pool Energy Services
Co. He is a Class I director with a term expiring in 2001.
[GRAPHIC]
HAROLD S. HOOK, CONSULTANT, RETIRED CHAIRMAN AND CHIEF
EXECUTIVE OFFICER OF AMERICAN GENERAL 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 director of Chase Manhattan Corporation, The Chase
Manhattan Bank, Cooper Industries, Inc. and Sprint
Corporation. He is a Class I director with a term expiring
in 2001.
4
[GRAPHIC]
GEORGE DEAN JOHNSON, JR., PRESIDENT AND CHIEF EXECUTIVE
OFFICER, EXTENDED STAY AMERICA, DEVELOPMENT, OWNERSHIP AND
MANAGEMENT OF EXTENDED-STAY LODGING FACILITIES
Mr. Johnson, 56, 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. and is 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.
[GRAPHIC]
JAMES G. MARTIN, PH.D., VICE PRESIDENT, RESEARCH, CAROLINAS
HEALTHCARE SYSTEM
Mr. Martin, 63, was elected a director in 1994. He is
Chairman of the Corporate Governance 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. HeAge 65
Dr. Martin was named to his present position in 1995. He
served as Governor of the State of North Carolina from 1985 to
1993 and was a member of the United States House of
Representatives, representing the Ninth District of North
Carolina, from 1973 to 1984. Mr.Dr. Martin is currently a director of J. A. Jones, Inc.,
Palomar Medical Technologies, Inc., Entropy, Inc., Reprogenesis,aaiPharma, Inc. and Family
Dollar Stores, Inc. He is Chairman of the
Global TransPark Foundation, Inc. and a Trustee of Davidson
College, where he was on the Chemistry Department faculty
from 1960 to 1972. He is a Class III direc
tordirector with a term
expiring in 2000.
[GRAPHIC]
RICHARD2003.
(Photo) Richard B. PRIORY, CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, DUKE ENERGY CORPORATIONPriory
Director since 1990
Chairman of the Board, President and CEO, Duke Energy
Corporation
Age 54
Mr. Priory 52, became Chairman of the Board and Chief
Executive OfficerCEO in June 1997 upon
the merger of the
CorporationDuke Energy and PanEnergy Corp, and became
President in November
1998. He was elected a director in 1990. He joined the
Corporation in 1976had served 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 Corporate Governance Committees.Duke
17
Energy from 1994 until 1997. He is a director of Dana
Corporation and J. A. Jones Applied
Research Corp. HeUS Airways Group, Inc. and 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. HeMr. Priory is a Class III
director with a term expiring in 2000.
[GRAPHIC]
RUSSELL M. ROBINSON, II, ATTORNEY, ROBINSON BRADSHAW &
HINSON, P.A.
Mr. Robinson, 67,2003.
18
Beneficial Ownership
This table indicates how much Duke Energy Common Stock was elected a directorbeneficially owned by
the current directors, the executive officers listed under "Summary Compensation
Table" in 1995"Compensation" below ("Named Executive Officers") and serves
on the Auditby all current
directors 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 servesexecutive officers as a membergroup as of February 27, 2001.
o The shares listed as "Beneficially Owned" include shares held as of February
27, 2001 in our employee benefit plans and in trust for the American Law Institute and a Fellow of the American Bar
Foundation. He is a member of the Board of Visitorscurrent
directors under their compensation plan.
o The shares listed as "May Be Acquired" are shares of Duke University Law School,Energy Common
Stock that can be acquired upon the exercise of stock options.
o Beneficial ownership of shares by current directors and executive officers
as a trustee of The Duke Endowment and
Chairman of The Foundation of the University of North
Carolina at Charlotte, Inc. He is a Class I director with a
term expiring in 2001.
5
SECURITY OWNERSHIP OF NOMINEES, DIRECTORS AND EXECUTIVE OFFICERS
The table below sets forth thegroup represents beneficial ownership of less than 1% of the
outstanding shares of Duke Energy Common Stock.
Shares of Common Stock
----------------------
Total
Beneficially Beneficially May Be
Name or Identity of Group Owned Owned(2) Acquired
- --------------------------------------------- ------------------- ----------------- -------------
G.A. Bernhardt, Sr. 18,479 21,079 11,600
R.J. Brown 8,729 11,329 11,600
W.A. Coley(1) 42,826 242,076 577,000
W.T. Esrey 48,017 50,617 11,600
F.J. Fowler 104,544 468,316 745,522
A.M. Gray 30,631 33,231 11,600
D.R. Hendrix 419,422 422,022 11,600
H.S. Hook 49,743 52,343 11,600
G.D. Johnson, Jr. 23,756 26,356 11,600
M. Lennon 18,483 21,083 11,600
L.E. Linbeck, Jr. 42,304 44,904 11,600
J.G. Martin 10,362 11,262 9,900
R.J. Osborne(1) 17,435 88,435 348,000
H.J. Padewer(1) 16,789 16,789 568,950
R.B. Priory(1) 27,539 654,339 1,726,800
Directors and executive officers as a
group (21) 972,476 2,709,815 5,468,489
(1) Also own Common Stock equivalents under the Duke Energy Executive Savings
Plan as of February 27, 2001 in the following amounts: R.B. Priory, 58,196;
H.J. Padewer, 1,626; W.A. Coley, 107,249; R.J. Osborne, 4,747.
(2) Includes shares that may be acquired within 60 days after February 27,
2001.
19
This table shows how many units of limited-partnership interests in TEPPCO
Partners, L.P. were beneficially owned on February 27, 2001 by each director, each nominee for director, each executive officer whose name
appears in the Summary Compensation Table below ("directors of Duke
Energy, Named Executive Officer")Officers, and by directors and executive officers of
the CorporationDuke Energy as a group, as of
December 31, 1998. 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, 1998, 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 OF INDIVIDUAL OR IDENTITY OF GROUP OWNED (1) ACQUIRE (2) BENEFICIALLY OWNED
- -------------------------------------------------- --------------------- ----------- -------------------
Paul M. Anderson(3) ............................. 215,133 106,800 321,933
G. Alex Bernhardt, Sr.(4) ....................... 5,968 5,968
Richard W. Blackburn(3) ......................... 4,035 4,035
Robert J. Brown(4) .............................. 2,732 2,732
William A. Coley ................................ 19,750 19,750
William T. Esrey(4) ............................. 6,151 13,574 19,725
Fred J. Fowler(3) ............................... 34,402 54,304 88,706
Ann Maynard Gray(4) ............................. 3,603 8,354 11,957
Dennis R. Hendrix(4) ............................ 237,605 237,605
Harold S. Hook(4) ............................... 11,693 5,220 16,913
George Dean Johnson, Jr.(4,6) ................... 8,805 8,805
Max Lennon (4) .................................. 6,123 6,123
Leo E. Linbeck, Jr.(4) .......................... 5,942 13,574 19,516
James G. Martin(4) .............................. 3,115 3,115
Richard J. Osborne(3) ........................... 7,586 7,586
Richard B. Priory(3) ............................ 12,138 12,138
Russell M. Robinson, II(4,7) .................... 8,909,725 8,909,725
Directors and executive officers as a group
(19 persons)(3,4,5,6,7) ........................ 9,498,812 204,046 9,702,858
- ---------
(1) Individuals may disclaim beneficial ownership of certain shares, as
indicated in a footnote. 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 shown as beneficially owned by
such person.
(2) Represents shares which the individual has a right to acquire within 60 days
after December 31, 1998 through exercise of stock options.
(3) Includes full shares allocated to the participant's accounts under employee
benefit plans as of December 31, 1998.
(4) Includes full shares held in trust under the arrangement for directors
described under the caption "Compensation of Directors."
(5) Includes 1,411 shares owned by Mr. Coley's wife. Beneficial ownership of
such shares is disclaimed.
(6) Includes 2,609 shares held in a limited partnership controlled by Mr.
Johnson.
(7) Includes 7,604,721 shares owned by The Duke Endowment and 1,302,132 shares
owned by the Doris Duke Trust. Mr. Robinson, who is a trustee of each of
such entities, with shared voting and investment power, expressly disclaims
beneficial ownership of the shares owned by such trusts.
No person listed in the table beneficially owned more than 1% of the
Common Stock outstanding on December 31, 1998, with the exception of Russell M.
Robinson, II, who beneficially owned 8,909,725 shares of such stock on that
date largely because of the attribution to him of 7,604,721 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 ingroup. TEPPCO Partners, L.P., is a publicly traded master
limited partnership, of whichand Texas Eastern Products Pipeline Company, an indirect
wholly owned subsidiary of the Corporation,Duke Energy, is theits general partner, which were
beneficially owned on December 31, 1998 by a director or nominee for director
of the Corporation, a Named Executive Officer, and by the directors and
executive officers of the Corporation
6
as a group. None of such persons had the right to acquire units within 60 days
after December 31, 1998.partner. As of December 31, 1998,February 27, 2001, the
number of units beneficially owned by directors and executive officers of the CorporationDuke
Energy as a group did not exceedwas less than 1% of the then outstanding units.
NAME OF INDIVIDUAL OR UNITS BENEFICIALLY
IDENTITY OF GROUP OWNED
- ----------------------------------------------- -------------------
Paul M. Anderson 4,000
Dennis R. Hendrix 29,000
Harold S. Hook 4,000
Richard J. Osborne 1,000
Directors and executive officers as a group 38,900
EXECUTIVE COMPENSATION
SetNone of these
persons had the right to acquire units within 60 days after February 27, 2001.
Number of Units
Name or Identity of Group Beneficially Owned
- -------------------------- ------------------
F.J. Fowler 3,100
D.R. Hendrix 22,400
H.S. Hook 4,000
R.J. Osborne 1,000
Directors and executive officers as a group 31,400
20
Information on the Board of Directors
Board Meetings and Attendance
The Board of Directors had seven meetings during 2000. During 2000, no director
attended less than 75% of the total of the board meetings and the meetings of
the committees upon which he or she served.
Board Committees
The Board of Directors has the five standing committees described
below:
o The Audit Committee recommends to the Board of Directors the
engagement of Duke Energy's independent auditors, provides
independent oversight with respect to financial reporting and
internal controls, the internal audit function and the independent
auditors, and makes recommendations on audit matters to the Board
of Directors.
o The Compensation Committee sets the salaries and other compensation
of all executive officers of Duke Energy except the Chairman of the
Board. This Committee makes recommendations to the Board of
Directors regarding the salary and other compensation of the
Chairman of the Board for consideration and action by the Board of
Directors, without the presence or participation of the Chairman of
the Board. The Committee also makes recommendations to the Board of
Directors on compensation for outside directors.
o The Corporate Governance Committee considers matters related to
corporate governance and formulates and periodically revises
principles for board governance, recommends to the Board of
Directors the size and composition of the Board of Directors within
the limits set forth below is information regarding compensationin the Articles of Incorporation and By-Laws
and recommends potential successors to the Chief Executive Officer.
This Committee considers nominees for the Board of Directors
recommended by shareholders.
o The Corporate Performance Review Committee monitors and makes
recommendations for improving Duke Energy's overall performance. It
also determines whether current policies provide sufficient support
for Duke Energy's emphasis on continuous improvement.
o The Finance Committee reviews Duke Energy's financial and fiscal
affairs and makes recommendations to the Board of Directors
regarding dividend, financing and fiscal policies.
21
Board Committee Membership Roster
Corporate
Corporate Performance
Name Audit Compensation Governance Review Finance
============================= ====== ============ ========== ====== =======
G.A. Bernhardt, Sr. X X
- ----------------------------- ------ ------------ ---------- ------ -------
R.J. Brown X X
- ----------------------------- ------ ------------ ---------- ------ -------
W.T. Esrey X X
- ----------------------------- ------ ------------ ---------- ------ -------
A.M. Gray X X
- ----------------------------- ------ ------------ ---------- ------ -------
D.R. Hendrix X X
- ----------------------------- ------ ------------ ---------- ------ -------
H.S. Hook X X
- ----------------------------- ------ ------------ ---------- ------ -------
G.D. Johnson, Jr. X X*
- ----------------------------- ------ ------------ ---------- ------ -------
M. Lennon X* X
- ----------------------------- ------ ------------ ---------- ------ -------
L.E. Linbeck, Jr. X X*
- ----------------------------- ------ ------------ ---------- ------ -------
J.G. Martin X X*
- ----------------------------- ------ ------------ ---------- ------ -------
R.B. Priory X X
- ----------------------------- ------ ------------ ---------- ------ -------
Number of 8 6 5 6 6
meetings in 2000
- ----------------------------- ------ ------------ ---------- ------ -------
* Chair
Resignation Policy
We have a policy stating that members of the Board of Directors are to submit
their resignations when they change employment or have another significant
change in their professional roles and responsibilities. The normal retirement
of those individuals who were members of the Board of Directors when the policy
was adopted in 1998 is not considered a change for this purpose. The Corporate
Governance Committee will determine whether any such resignation will be
accepted. Any resignation that is accepted will likely be effective as of the
end of the term of the director tendering the resignation.
Certain Relationships
We have had business relationships and engaged in certain transactions with
affiliated parties. It is our policy to engage in transactions with related
parties only on terms that are no less favorable to us than could be obtained in
transactions with unrelated parties.
Compensation of Directors
We pay outside directors an annual retainer of $40,000. We also pay an outside
director serving as Chairman of the Audit, Compensation, Corporate Governance,
Corporate Performance Review or Finance Committee an additional $4,000 per year.
Outside directors also receive a fee of $1,000 for attendance at each meeting of
the Board of Directors, each committee meeting and other functions requiring
their presence, together with expenses of attendance.
A director may elect to receive 50% of his or her retainer and attendance fees
in the form of Duke
22
Energy Common Stock or may defer that portion by having it held in trust for the
director's benefit and invested in Duke Energy Common Stock at market price. The
director may elect to receive the remaining 50% of such compensation in cash or
may elect to defer, until termination of his or her service on the Board of
Directors, that portion by having it held in trust as shares of Duke Energy
Common Stock or in an investment account that is credited with a market rate of
interest. Effective January 1, 2001, a director may elect to invest such
deferrals among several additional investment choices.
In January and July of each year, each outside director is credited with 100
shares of Duke Energy Common Stock to be held in trust. Dividends paid on this
stock are reinvested in Duke Energy Common Stock. An outside director will
receive, generally upon termination of service from the Board of Directors, the
shares held in trust for his or her account on the basis of the distribution
schedule that he or she has chosen.
Outside directors receive annual non-qualified stock option grants under the
Duke Energy 1998 Long-Term Incentive Plan. Each outside director is granted an
option for 2,000 shares at the same time executive officers receive annual
long-term incentive awards. The grant for 2001 was made on December 20, 2000,
consistent with the grant date for 2001 awards to executive officers.
After ten years on the Board of Directors, eligible directors participate in the
Directors' Charitable Giving Program. Under this program, Duke Energy will make,
upon the director's death, donations of up to $1,000,000 to charitable
organizations selected by the director. A director may request that Duke Energy
make donations under this program during the director's lifetime, in which case
the maximum donation will be reduced on a net present value basis. We maintain
life insurance policies upon eligible directors to fund donations under the
program. Eligible directors include only those who were members of the Board of
Directors on February 18, 1998, and certain former directors who previously
qualified for this benefit.
Outside directors are subject to stock ownership guidelines which establish a
target level of ownership of Duke Energy Common Stock (or Common Stock
equivalents) of 2,000 shares. Each outside director is expected to attain this
ownership level within five years from January 1, 1997, the implementation date
of the guidelines, or from the beginning of his or her service on the Board of
Directors, if after that date.
Report of the Audit Committee
The Audit Committee of the Board of Directors is composed entirely of
nonemployee directors, all of whom are independent. The Board of Directors has
adopted a charter for the Audit Committee, which is included as Appendix A to
this Proxy Statement. The Audit Committee's responsibilities are described under
the caption Board Committees in this proxy statement. The Audit Committee held
eight meetings during 2000.
The financial statements of Duke Energy are prepared by management, which is
responsible for their objectivity and integrity. With respect to the financial
statements for the calendar year ended December 31, 2000, the Audit Committee
reviewed and discussed the audited financial statements and the quality of
financial reporting with management and the independent auditors. It also
discussed with the independent auditors the matters required to be discussed by
Statement
23
on Auditing Standards No. 61 (Communication with Audit Committees) and received
and discussed with the independent auditors the matters in the written
disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees).
Based upon the reviews and discussions referred to above, the Audit Committee
recommended to the Board of Directors, and the Board of Directors authorized,
the inclusion of the audited financial statements in Duke Energy's Annual Report
on Form 10-K for the year ended December 31, 2000, for filing with the
Securities and Exchange Commission. The Audit Committee also recommended to the
Board, subject to shareholder ratification, the selection of Duke Energy's
independent auditors.
This report has been provided by the Audit Committee.
A. Max Lennon, Chairman
Ann M. Gray
Harold S. Hook
Leo E. Linbeck, Jr.
Report of the Compensation Committee
The Committee's Responsibilities
The Compensation Committee of the Board of Directors is composed entirely of
nonemployee directors. The Compensation Committee is responsible for setting and
administering policies which govern Duke Energy's executive compensation
programs. The purpose of this report is to summarize the compensation philosophy
and policies that the Compensation Committee applied in making executive
compensation decisions in 2000.
Compensation Philosophy
The Compensation Committee has approved compensation programs intended to:
o Attract and retain talented executive officers and key employees by
providing total compensation competitive with that of other executives
employed by companies of similar size, complexity and lines of
business;
o Motivate executives and key employees to achieve strong financial and
operational performance;
o Emphasize performance-based compensation, which balances rewards for
short-term and long-term results;
o Reward individual performance;
24
o Link the interests of executives with shareholders by providing a
significant portion of total pay in the form of stock-based incentives
and requiring target levels of stock ownership; and
o Encourage long-term commitment to Duke Energy.
Stock Ownership Guidelines
To underscore the importance of linking executive and shareholder interests, the
Board of Directors has adopted stock ownership guidelines for executive officers
and other members of senior management. The target level of ownership of Duke
Energy Common Stock (or Common Stock equivalents) is established as a fixed
number of shares. The target level for the Chairman of the Board, President and
Chief Executive Officer is 50,000 shares. The target level for the remaining
members of the Policy Committee, including Messrs. Padewer, Coley, Fowler and
Osborne, is 14,000 shares. The Policy Committee consists of eight senior
executive officers, and is responsible for strategic planning and setting policy
and management principles for the entire Duke Energy enterprise. Each employee
subject to the guidelines is expected to achieve the ownership target by January
1, 2002, or within five years from the date on which the employee became subject
to the guidelines, whichever is later. Common Stock beneficially held for an
executive's Duke Energy Retirement Savings Plan account, Common Stock
equivalents earned through non-qualified deferred compensation programs and any
other beneficially owned Common Stock are included in determining compliance
with the guidelines. Shares that executives have the right to acquire through
the exercise of stock options are not included in the calculation of stock
ownership for guideline purposes.
Compensation Methodology
Each year the Compensation Committee reviews data from market surveys, proxy
statements and independent consultants to assess Duke Energy's competitive
position with respect to the following three components of executive
compensation:
o base salary;
o annual incentives; and
o long-term incentives.
The Compensation Committee also considers individual performance, level of
responsibility, and skills and experience in making compensation decisions for
each executive.
Components of Compensation
o Base Salary: Base salaries for executives are determined based upon job
responsibilities, level of experience, individual performance,
comparisons to the salaries of executives in similar positions obtained
from market surveys, and competitive data obtained from consultants and
staff research. The goal for the base pay component is to compensate
executives at a level which approximates the median salaries of
individuals in comparable positions and markets. The Compensation
Committee approves all salary increases for executive officers. Base
pay increases were approved, effective January 1, 2000, for Messrs.
Padewer, Coley, Fowler and Osborne. Mr. Priory's base salary
25
increase was approved effective March 1, 2000.
o Annual Incentives: Annual cash incentives are provided to executives to
promote the achievement of performance objectives of Duke Energy and
the executive's particular business unit. In 2000, the Compensation
Committee administered two annual incentive plans that permitted the
granting of annual cash incentives to executive officers. Policy
Committee members, including the Named Executive Officers set forth in
the Summary Compensation Table under "Compensation" below, earned
incentive compensation under the Duke Energy Policy Committee
Short-Term Incentive Plan, while executive officers not on the Policy
Committee earned incentive compensation under the Duke Energy
Short-Term Incentive Plan. Target incentive opportunities for
executives under both Plans are established as a percentage of base
salary, using survey data for individuals in comparable positions and
markets. Incentive amounts are intended to provide competitive
incentive amounts for individuals in comparable positions and markets
when target performance is achieved. Incentive amounts may equal up to
200% of target when outstanding financial results are achieved.
Awards under Duke Energy's Policy Committee Short-Term Incentive Plan
were calculated based upon Duke Energy's earnings per share (EPS)
results. The Compensation Committee established minimum, target and
maximum performance levels prior to the beginning of 2000, and
participants could receive up to 200% of their short-term incentive
targets. EPS performance for 2000 resulted in payments of 200% of bonus
targets to the Policy Committee members, including the Named Executive
Officers.
Awards under the Duke Energy Short-Term Incentive Plan, in which
executive officers other than members of the Policy Committee
participate, were determined on the basis of a combination of: (1) EPS
measures, (2) earnings before interest and income taxes (EBIT) measures
and, in some instances, other measures unique to individual business
groups, (3) return on capital employed (ROCE) measures, and (4)
individual objectives. EPS measures, the combination of EBIT (and
individual business group measures, if applicable) and ROCE measures,
and individual objectives determined, on average, 65%, 23% and 12%,
respectively, of each executive officer's bonus.
o Long-Term Incentive Compensation: The Compensation Committee has
structured long-term incentive compensation to provide for an
appropriate balance between rewarding performance and encouraging
employee retention, and to provide a degree of flexibility to
executives in selecting the form in which long-term incentives are
received. Following review of competitive practice presented by an
independent compensation consultant, the Compensation Committee
approved the election by executives to receive up to 20% of the
annualized value of their long-term incentive compensation in the form
of phantom stock, with the remainder being provided in the form of
stock options. The purpose of stock options and phantom stock is to
align compensation directly with increases in shareholder value. The
number of options granted is determined by reviewing survey data to
determine the annualized value of long-term incentive compensation made
to other executives and management employees in comparable positions
and markets (target value) and then dividing the portion of target
value elected to be received by the executive in the form of stock
options by an expected present value
26
of the option, as determined by using the Black-Scholes option pricing
model. The number of phantom stock units granted is determined by
dividing the portion of target value elected to be received by the
executive in the form of phantom stock units by the fair market value
of a share of Duke Energy Common Stock on the date of grant. In
determining the number of options and phantom stock units to be
awarded, the Compensation Committee, or, in some cases, its designee,
also considers the grant recipient's qualitative and quantitative
performance, the size of stock option and other stock-based awards in
the past, and expectations of the grant recipient's future performance.
In late 2000, as a component of 2001 compensation, the Compensation
Committee approved awards of non-qualified stock options (as described
under "Option Grants in 2000" below) and phantom stock (as described in
the Summary Compensation Table under "Compensation" below) to members
of the Policy Committee with the exception of Mr. Priory. Messrs.
Padewer, Coley, Fowler and Osborne each elected to receive 20% of the
annualized value of their 2001 long-term incentive compensation in the
form of phantom stock. In late 2000, as a component of 2001
compensation, the Compensation Committee also approved the award of
non-qualified stock options and phantom stock to executive officers who
were not members of the Policy Committee. All of the stock option and
phantom stock awards were granted under the Duke Energy 1998 Long-Term
Incentive Plan.
In providing long-term incentive compensation, Duke Energy also seeks
to ensure the retention of key executives. Towards this objective, the
Compensation Committee approved in January 2000 the award of
performance shares (as described under "Long-Term Incentive Plan -
Awards in 2000" below) to Mr. Padewer under the Duke Energy 1998
Long-Term Incentive Plan. This award has an accelerated vesting feature
which allows one third of the performance shares to vest upon
achievement of each of three predetermined target increases in total
shareholder return. To encourage Mr. Padewer to remain employed with
Duke Energy, the award cannot vest prior to January 2003 by reason of
such accelerated vesting. If vesting does not occur earlier, the award
will vest in January 2007. Performance shares will be forfeited upon
termination of Mr. Padewer's employment to the extent not then vested.
Compliance with Section 162(m) of the Internal Revenue Code
Under Section 162(m) of the Internal Revenue Code, Duke Energy may not deduct
annual compensation in excess of $1 million paid to certain employees, generally
its Chief Executive Officer and its four other most highly compensated executive
officers, unless that compensation qualifies as performance-based compensation.
While the Compensation Committee intends to structure performance-related awards
in a way that will preserve the maximum deductibility of compensation awards,
the Compensation Committee may from time to time approve awards which would vest
upon the passage of time or other compensation which would not result in
qualification of those awards as performance-based compensation. It is not
anticipated that compensation realized by any executive officer under Duke
Energy plans and programs now in effect will result in a material loss of tax
deductions.
27
Please refer to the discussion in Proposal 4 for information on the
deductibility of certain compensation payable under the Duke Energy 1998
Long-Term Incentive Plan.
Compensation of the Corporation who were servingChief Executive Officer
The Compensation Committee reviews annually the compensation of the Chief
Executive Officer and recommends any adjustments to the Board of Directors for
approval. In 2000, the Compensation Committee retained the consulting firm of
Frederick W. Cook and Co. to conduct a review of the compensation of the Chief
Executive Officer. The Chief Executive Officer participates in the same programs
and receives compensation based upon the same criteria as Duke Energy's other
executive officers atofficers. However, the endChief Executive Officer's compensation reflects
the greater policy- and decision-making authority that the Chief Executive
Officer holds and the higher level of 1998,responsibility he has with respect to the
strategic direction of Duke Energy and oneits financial and operating results. The
components of Mr. Priory's 2000 compensation were:
o Base Salary: After considering Duke Energy's overall performance and
competitive practices, the Compensation Committee recommended, and the
Board of Directors approved, a 5.6% increase in Mr. Priory's base
salary, to $950,000, effective March 1, 2000. In October 2000, the
Compensation Committee recommended, and the Board of Directors
approved, an additional individual (Paul M. Anderson) for whom disclosure would have
been required as one of those executive officers butadjustment to Mr. Priory's base salary,
increasing it to $962,500, retroactive to March 1, 2000. This
additional base salary increase compensated Mr. Priory for the
factdiscontinuation of certain tax gross-ups on executive pension and
savings benefits.
o Annual Incentives: Annual incentive compensation for Mr. Priory is
based solely upon EPS results. Based on 2000 EPS performance, Mr.
Priory received a payment of $1,908,328, representing 200% of his
target incentive opportunity.
o Long-Term Incentives: In February 2000, Mr. Priory received a stock
option award for 400,000 shares of Duke Energy Common Stock with an
exercise price at fair market value on the date of grant. The stock
option has a ten-year term and will vest 25% on each of the first four
anniversaries of the grant date.
The Compensation Committee conducts its annual review of Chief Executive Officer
performance and compensation in February of each year, to assure thorough
consideration of year-end results. Actions taken by the Board of Directors in
February 2001 with respect to Mr. Priory's 2001 compensation will be reflected
in the proxy statement for the 2002 annual meeting, which will include, among
other things, an award to Mr. Priory of non-qualified stock options with respect
to 400,000 shares and a phantom stock award for 24,240 phantom stock units.
It is the Compensation Committee's intention that, he was
not servingwhen taken together, the
components of Mr. Priory's pay, including base salary, annual incentives,
short-term incentive opportunity and long-term incentives, will result in
compensation which approximates the 50th percentile of the market when incentive
plan performance expectations are met and in compensation as an executive officer athigh as the end75th
percentile of 1998, for services tothe market when incentive plan performance expectations are
exceeded.
28
This report has been provided by the Compensation Committee.
Leo E. Linbeck, Jr., Chairman
William T. Esrey
George Dean Johnson, Jr.
Max Lennon
James G. Martin
Performance Graph
[Line Graph appears here with the following plot points.]
Comparison of Five-Year Cumulative Total Return Among the Corporation,
forS&P 500 Index, S&P Utilities Index, and DJ Utilities
Assumes $100 Invested on Dec. 31, 1995 in
Duke Common Stock, S&P 500 Index, S&P
Utilities Index, and DJ Utilities. Assumes
reinvestment of dividends.
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
Duke: $100 $102 $127 $152 $124 $216
S&P 500: $100 $123 $163 $210 $253 $230
S&P Utilities: $100 $103 $127 $146 $133 $211
DJ Utilities: $100 $109 $133 $157 $148 $223
29
Summary Compensation Table
Annual Compensation
------------------------------------
Other Annual
Name and Principal Position Year Salary ($) Bonus ($) Compensation ($)
- --------------------------- ---- ---------- --------- ----------------
R.B. Priory 2000 954,164 1,908,328 300,384
Chairman of the years ended December 31,Board, President 1999 895,420 997,140 109,708
and Chief Executive Officer 1998 1997810,000 891,000 34,011
H.J. Padewer(1) 2000 500,004 750,006 91,111
Group President 1999 400,008 311,814 7,921
Energy Services
W.A. Coley 2000 450,000 585,000 39,315
Group President 1999 392,616 262,330 16,353
Duke Power 1998 380,676 159,884 16,941
F.J. Fowler 2000 450,000 585,000 70,940
Group President 1999 385,830 257,796 32,495
Energy Transmission 1998 360,000 237,600 2,131
R.J. Osborne 2000 399,996 520,195 66,867
Executive Vice President 1999 366,250 244,714 19,827
and 1996.
SUMMARY COMPENSATION TABLEChief Risk Officer 1998 324,000 213,840 9,987
ANNUAL COMPENSATION
------------------------------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARYLong-Term Compensation
---------------------------------------------------
Awards Payouts
---------------------- ------------------
Restricted Securities
Stock Underlying LTIP All Other
Name and Principal Position Year Award(s) ($) BONUS(2) Options/SARS (#) Payouts ($) COMPENSATION($Compensation ($)(4)
- ----------------------------------- ------ --------------------------------------- ---- ------------- ---------------- ----------- -----------------------------------
R. B.R.B. Priory 1998 810,000 891,000 34,0112000 400,000 156,596
Chairman of the Board, President 1997 671,933 297,339 59,6521999 148,501
and Chief Executive Officer 1996 476,509 107,215 14,144
P. M. Anderson1998 1,000,000 1,034,203
H.J. Padewer (1) 1998 612,500 551,280 19,932
President and 1997 373,864 225,000 5,257
Chief Operating Officer
W. A. Coley 1998 380,676 159,884 16,9412000 450,388 173,600 51,331
Group President 1997 387,392 190,407 14,3021999 375,938(3) 693,800 94,112
Energy Services
W.A. Coley 2000 258,588 100,000 66,332
Group President 1999 157,000 58,430
Duke Power 1996 378,947 300,723 43,734
F. J.1998 400,000 221,245
F.J. Fowler (2) 1998 360,000 237,600 2,1312000 270,575 104,000 44,814
Group President 1997 190,227 185,0401999 157,000 89,941
Energy Transmission R. W. Blackburn (3) 1998 360,000 237,600 2,123400,000 47,056
R.J. Osborne 2000 270,575 104,000 45,363
Executive Vice President 1997 53,077
General Counsel and Secretary
R. J. Osborne 1998 324,000 213,840 9,987
Executive Vice President 1997 299,322 72,085 36,2841999 124,000 42,751
and Chief FinancialRisk Officer 1996 253,200 47,931 3,448
LONG TERM COMPENSATION
-----------------------------------------------
AWARDS PAYOUTS
---------------------------------- ------------
RESTRICTED SECURITIES
STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL POSITION AWARD(S) ($) (4) OPTIONS/SARS(#) PAYOUTS($) COMPENSATION($) (5)
- ----------------------------------- ------------------ ----------------- ------------ ------------------
R. B. Priory 500,000 1,034,203
Chairman1998 200,000 168,907
(1) Mr. Padewer joined Duke Energy on January 1, 1999.
(2) Messrs. Padewer, Coley, Fowler and Osborne elected to receive a portion of
the Board, President 397,013 99,165
and Chief Executive Officer 124,362 31,254
P. M. Anderson (1) 400,000 1,254,052
President and 698,475
Chief Operating Officer
W. A. Coley 200,000 221,245
Group President 281,959 95,180
Duke Power 124,362 53,594
F. J. Fowler (2) 200,000 47,056
Group President 27,665
Energy Transmission
R. W. Blackburn (3) 165,750 150,000 73,166
Executive Vice President,
General Counsel and Secretary
R. J. Osborne 100,000 168,907
Executive Vice President 171,774 32,516
and Chief Financial Officer 61,272 15,932value of the long-term incentive
- ---------
(1) Mr. Anderson resigned30
component of their 2001 compensation in the form of phantom stock. The awards
were granted under the Duke Energy 1998 Long-Term Incentive Plan on December 20,
2000. Phantom stock is represented by units denominated in shares of Duke Energy
Common Stock. Each phantom stock unit represents the right to receive, upon
vesting, one share of Duke Energy Common Stock. One quarter of each award vests
on each of the first four anniversaries of the grant date provided the recipient
continues to be employed by Duke Energy or his or her employment terminates on
account of retirement. The awards fully vest in the event of the recipient's
death or disability or a change in control of Duke Energy as President and Chief Operating Officerspecified in the
Plan. If the recipient's employment terminates other than on November
15, 1998. Compensation amounts shown for Mr. Anderson for 1997 relateaccount of
retirement, death or disability, any unvested shares remaining on the
termination date are forfeited. The phantom stock awards also grant an equal
number of dividend equivalents, which represent the right to receive cash
payments equivalent to the period from June 18, 1997cash dividends paid on the number of shares of Duke
Energy Common Stock represented by the phantom stock units awarded, until the
related phantom stock units vest or are forfeited. R.B. Priory's phantom stock
award with respect to 2001 compensation was awarded on February 27, 2001, and,
accordingly, will be reported in the proxy statement for the 2001 annual
meeting.
The aggregate number of phantom stock units held by Messrs. Padewer, Coley,
Fowler and Osborne at December 31, 1997.
(2) Compensation amounts shown for Mr. Fowler for 1997 relate to the period from
June 18, 1997 to2000 and their values on that date are as
follows:
Number of Value At
Phantom Stock Units December 31, 1997.2000
------------------- -----------------
H.J. Padewer 10,520 $448,415
W.A. Coley 6,040 257,455
F.J. Fowler 6,320 269,390
R.J. Osborne 6,320 269,390
(3) Mr. Blackburn joined the Corporation on November 10, 1997. Compensation
amounts shown forPadewer received an award of restricted stock upon his employment with
Duke Energy. Mr. Blackburn for 1997 relate to the period from November
10, 1997 to December 31, 1997.
(4) Mr. Blackburn'sPadewer's aggregate restricted stock holdings at December 31,
1998,2000, were 3,00011,250 shares, with a value on that date of $192,188.$479,531. Dividends are
paid on such shares. One-thirdOne quarter of the restricted stock award to Mr. Blackburn
(1,000Padewer
(3,750 shares) vested on January 4, 1999. The remainder vests in two
additional installmentseach of 1,000 shares each on January 3, 2000 and January 2, 2001. No other Named Executive Officer held restricted stockThe
remainder is to vest in two additional installments of 3,750 shares each on
December
31, 1998.
(5)January 2, 2002 and January 2, 2003.
(4) All Other Compensation Columncolumn includes the following for 1998:2000:
a. Matching contributions under the Duke Energy Retirement Savings
Plan as follows: R. B.R.B. Priory, $8,333; W. A.$10,200; H.J. Padewer, $10,200;W.A.
Coley, $7,990; R. J.$10,200; F.J. Fowler, $10,200; R.J. Osborne, $7,200; R. W.
Blackburn, $2,138.
7
$9,933.
b. MatchingMake-whole matching contribution credits under a make-whole arrangement under the Duke Energy
Corporation Executive Savings Plan designed to maintain the
overall integrity of employee benefit plans as follows: R. B.R.B. Priory, $77,457; W. A.$106,878; H.J.
Padewer, $38,509; W.A. Coley, $27,789; R. J.$32,540; F.J. Fowler, $32,268; R.J.
Osborne, $15,970; R. W. Blackburn,
$9,108.$28,761.
c. Matching contributions under the Employees' Savings Plan of PanEnergy
Corp and Participating Affiliates as follows: P. M. Anderson, $10,560;
F. J. Fowler, $10,560.
d. Matching contribution credits under a make-whole arrangement under the
PanEnergy Corp Key Executive Deferred Compensation Plan designed to
maintain the overall integrity of employee benefit plans as follows: P.
M. Anderson, $95,936; F. J. Fowler, $25,413.
e. Above-market interest earned on account balances in the Duke
Energy Corporation Executive Savings Plan, Supplemental Account as follows:
R.
B.R.B. Priory, $8,132; W. A.$9,310; H.J. Padewer, $0; W.A. Coley, $10,805; R. J.$12,370; F.J.
Fowler, $0; R.J. Osborne, $3,656; R. W.
Blackburn, $ 0.
f. Above-market interest earned on account balances in the PanEnergy Corp
Key Executive Deferred Compensation Plan as follows: P. M. Anderson,
$8,558; F. J. Fowler, $16.
g.$4,814.
d. Economic value of life insurance coverage provided under life
insurance plans as follows: R. B.R.B. Priory, $16,323; P. M. Anderson, $3,276; W. A.$17,881; H.J. Padewer,
$2,622; W.A. Coley, $6,408; F.
J.$4,736; F.J. Fowler, $8,006; R. J.$2,346; R.J. Osborne,
$2,081; R. W. Blackburn, $ 0.
h.$1,855.
e. The cost to the CorporationDuke Energy of supplemental life insurance coverage
under the Duke Energy Supplemental Insurance Plan as follows:
R. B.R.B. Priory, $10,851;
W. A.$11,524; H.J. Padewer, $0; W.A. Coley, $3,997; R. J.$5,876; F.J.
Fowler, $0; R.J. Osborne, $0; R. W. Blackburn, $ 0.
i.$0.
f. The economic benefit of split-dollar life insurance coverage
pursuant to the Duke Energy Estate Conservation Plan as follows:
R. B.R.B. Priory, $289; W. A.$803; H.J. Padewer, $0; W.A. Coley, $347; R. J.$610; F.J.
Fowler, $0; R.J. Osborne, $0; R. W. Blackburn, $ 0.
j. Pursuant$0.
31
Long-Term Incentive Plan - Awards in 2000
Number of Shares, Performance or Other Period
Name Units or Other Rights (#) * Until Maturation or Payout
- ---- ---------------------------- ---------------------------
H.J. Padewer 80,000 January 2003 - January 2007
* The award described above is a performance award granted under the Duke Energy
1998 Long-Term Incentive Plan and is represented by units denominated in shares
of Duke Energy Common Stock (performance shares). Each performance share
represents the right to receive, upon vesting, one share of Duke Energy Common
Stock. The award fully vests on the seventh anniversary of the date of the
award. The award also vests in the event of the death or disability of Mr.
Padewer or a change in control of Duke Energy as specified in the Plan. The
award has an accelerated vesting feature allowing one third to vest upon
achievement of an increase in total shareholder return averaging 50% or more for
twenty consecutive business days; one third to vest upon achievement of an
increase in total shareholder return averaging 90% or more for twenty
consecutive business days; and one third to vest upon achievement of an increase
in total shareholder return averaging 130% or more for twenty consecutive
business days, all calculated from a base amount specified in the award and
assuming dividends are reinvested. If any of such targets are achieved before
the third anniversary of the date of the award, the relevant part of the award
will vest on the third anniversary. Vesting under the award is generally subject
to the continued employment agreementof the grantee with P. M. Anderson describedDuke Energy to the time of
vesting. The performance share award also grants an equal number of dividend
equivalents, which represent the right to receive cash payments equivalent to
the cash dividends paid on the number of shares of Duke Energy Common Stock
represented by the performance shares awarded, until the related performance
shares vest or are forfeited.
Performance awards made in "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements" below, $83,3341999 to the other Named Executive Officers were
reported in deferred compensation
is accrued monthly for a two-year period beginningthe proxy statement distributed in June 1997. In
1998, $1,000,008 was deferred under such agreement.
k. Cash payments to certain key employees whose incentives were not
adjusted to market-competitive levels between June 18, 1997 and December
31, 1997 to reflect significant changesconjunction with Duke Energy's
2000 annual meeting.
Option Grants in responsibilities as follows:
R. B. Priory, $910,000; W. A. Coley, $162,000; R. J. Osborne, $140,000.
See "Compensation Committee Report on Executive Compensation -- Other
Compensation."
1998 OPTION GRANTS
The following2000
This table sets forthshows options granted to the Named Executive Officers during 1998,2000,
along with the present value of suchthe options on the date they were granted,
calculated as described in the footnote 2 to the table. OPTION/SAR GRANTS IN LAST FISCAL YEARGrants shown in the table
with an expiration date of December 20, 2010, were awarded on December 20, 2000,
and relate to compensation for 2001. The grant to R. B. Priory having an
expiration date of February 23, 2010, was awarded on February 23, 2000 as a
component of 2000 compensation. R.B. Priory's option grant with respect to 2001
compensation was awarded on February 27, 2001, and, accordingly, will be
reported in the proxy statement for the 2002 annual meeting.
GRANT DATE
INDIVIDUAL GRANTS VALUE
- --------------------------------------------------------------------------------- ------------
NUMBER
OF SHARESOption/SAR Grants in Last Fiscal Year
Grant Date
Individual Grants Value
----------------------------------------------------- ----------
Number
of Shares % OF TOTAL EXERCISE
UNDERLYING OPTIONS/of Total Exercise
Underlying Options/SARS OR BASE GRANT DATE
OPTIONS/or Base Grant Date
Options/SARS GRANTED TO PRICE EXPIRATION PRESENT
NAME GRANTED (1) Granted to Price Expiration Present
Name Granted(1)(#) EMPLOYEESEmployees ($/SH) DATE VALUE (2) Sh) Date Value(2)($)
- ------------------------ --------------- ------------------ ------------ ------------ ----------------------- ------ ---------- ----------
Richard B.
R.B. Priory 500,000 14.1 58.9375 04/16/2008 4,495,000
Paul M. Anderson 400,000 11.3 58.9375 04/16/2008 3,596,000
William A.5.8% 25.3125 02/23/2010 2,093,000
H.J. Padewer 173,600 2.5% 42.8125 12/20/2010 1,802,300
W.A. Coley 200,000 5.6 58.9375 04/16/2008 1,798,000
Fred J.100,000 1.5% 42.8125 12/20/2010 1,038,200
F.J. Fowler 200,000 5.6 58.9375 04/16/2008 1,798,000
Richard W. Blackburn 150,000 4.2 58.9375 04/16/2008 1,348,500
Richard J.104,000 1.5% 42.8125 12/20/2010 1,079,700
R.J. Osborne 100,000 2.8 58.9375 04/16/2008 899,000104,000 1.5% 42.8125 12/20/2010 1,079,700
- ---------
(1) The CorporationDuke Energy has not granted any SARs to the Named Executive Officers or any
other persons.
(2) Based on the Black-Scholes option valuation model. The following table lists
key input variables used in valuing the
options were: risk-free interest rate, 5.8%; dividend
yield, 4.23%; stock price volatility, .151;32
options:
400,000 Share Option
Input Variable Grant to R. B. Priory All Other Option Grants
-------------- --------------------- -----------------------
Risk-free Interest Rate 6.37% 5.45%
Dividend Yield 3.95% 3.70%
Stock Price Volatility 18.91% 25.88%
Option Term 10 years 10 years
With respect to Mr. Priory's 400,000 share option term, ten years. Thegrant, the volatility variable
reflected weekly historical stock price trading data with respect to Duke Energy
Common Stock from June 18, 1997 (the effective date of the merger between the Corporation andwith PanEnergy
Corp) through April 16, 1998 (theDecember 31, 1999. With respect to all other option grant date).grants listed
in the table, the volatility variable reflected historical monthly stock price
trading data from November 30, 1997 through November 30, 2000. An adjustment was
made with respect to each valuation for risk of forfeiture during the vesting
period. The actual value, if any, that a grantee may realize will depend on the
excess of the stock price
8
over the exercise price on the date the option is
exercised, so that there is no assurance the value realized will be at or near
the value estimated bybased upon the Black-Scholes model.
EXERCISES OF STOCK OPTIONS IN 1998 AND YEAR-END OPTION VALUES
The followingOption Exercises and Year-End Values
This table shows aggregate exercises of options during 19982000 by the Named
Executive Officers, and the aggregate year-end value of the unexercised options
held by them. The value assigned to each unexercised "in-the-money" stock option
is based on the positive spread between the exercise price of suchthe stock option
and the split-adjusted fair market value ("FMV") of theDuke Energy Common Stock on December
31, 1998,2000, which was $64.25.$42.86. The FMVfair market value is the average of the high and
low prices of a share of Duke Energy Common Stock on that date as reported on
the New York Stock Exchange Composite Transactions Tape. The ultimate value of a
stock option will be dependentdepend on the market value of the underlying shares on a
future date.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
Number of Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Options/SARS AT OPTIONS/at Options/SARS AT
FY-ENDat
FY-End * (#) FY-ENDFY-End ($)
----------------- ---------------------
SHARES
ACQUIRED ON EXERCISABLE/ EXERCISABLE/
NAME EXERCISE------------ -------
Shares
Acquired on Exercisable/ Exercisable/
Name Exercise (#) VALUE REALIZEDValue Realized ($) UNEXERCISABLE UNEXERCISABLE
- ------------------------ -------------- -------------------- ----------------- ---------------------Unexercisable Unexercisable
---- ------------ ------------------ ------------- -------------
Richard B.
R.B. Priory 73,200 1,021,906 326,800 / 1,000,000 4,376,261 / 15,053,750
H.J. Padewer -- -- 0/500,000 0/2,656,250
Paul M. Anderson 253,394 8,594,366 106,800/0 4,682,486/0
William A.173,450 / 693,950 2,193,717 / 6,589,397
W.A. Coley -- -- 0/200,000 0/1,062,500
Fred J.80,000 1,068,650 119,250 / 457,750 1,777,211 / 5,336,384
F.J. Fowler 5,495 209,144 50,823/206,963 2,063,239/1,202,358
Richard W. Blackburn -- -- 0/150,000 0/796,875
Richard J.11,466 228,539 296,208 / 461,750 5,682,637 / 5,336,574
R.J. Osborne -- -- 0/100,000 0/531,250
---------
* The Corporation80,000 1,042,500 31,000 / 317,000 557,535 / 3,284,495
* Duke Energy has not granted any SARs to the Named Executive Officers or any
other persons.
Future exercisability
Employment Contracts and Termination of currently unexercisable stock options dependsEmployment and Change-in-Control
Arrangements
Duke Energy entered into a change-in-control agreement with Mr. Padewer, which
became effective on January 1, 2000. The agreement replaced Mr. Padewer's
employment agreement with certain exceptions. Duke Energy had entered into
severance agreements and change in control agreements with Messrs. Coley, Fowler
and Osborne, which became effective on August 18, 1999, and with Mr. Priory,
which became effective on August 19, 1999, in each case
33
upon expiration of the grantee remaining employedexecutive's employment agreement. The severance
agreements and change-in-control agreements remain in effect for a two-year
period from the effective time specified above (in each case, the "Effective
Time") or for such longer period as may be mutually agreed upon by the Corporation throughout the vesting periodparties
(the "Employment Period"). The principal terms and conditions of the options, subjectseverance
agreements and change-in-control agreements are described below.
The severance agreements for Messrs. Priory, Coley, Fowler and Osborne provide
for severance payments and benefits to provisions applicable at retirement,the executive in the event of termination
of employment other than upon death or total
disability. As of December 31, 1998, the Named Executive Officers'
unexercisable options vest and become exercisable on the following schedule,
although all unvested options will fully vest and become exercisable upon a
change-in-controldisability or for "cause" (as defined in
the applicable option agreement)severance agreements) by Duke Energy as follows: (1) a lump-sum payment
equal to two times the sum of the Corporation.
UNEXERCISABLE OPTIONS HELD BY:
VESTING DATE R. B. PRIORY W. A. COLEY F. J. FOWLER R. W. BLACKBURN R. J. OSBORNE
- -------------------- -------------- ------------- -------------- ----------------- --------------
January 22, 1999 0 0 3,481 0 0
April 16, 1999 100,000 40,000 40,000 30,000 20,000
January 22, 2000 0 0 3,482 0 0
April 16, 2000 100,000 40,000 40,000 30,000 20,000
April 16, 2001 100,000 40,000 40,000 30,000 20,000
April 16, 2002 100,000 40,000 40,000 30,000 20,000
April 16, 2003 100,000 40,000 40,000 30,000 20,000
RETIREMENT PLAN INFORMATIONexecutive's then-current base salary and
target bonus, plus a pro rata amount of the executive's target bonus for the
year in which the termination occurs; (2) a lump sum payment equal to the
present value of the amount Duke Energy would have contributed or credited to
the executive's pension and savings accounts during the two years following the
termination date; (3) continued medical, dental and basic life insurance
coverage for a two-year period following the termination date or retiree medical
benefits, if the executive would have become eligible for such benefits within
two years following the termination date, from the date of eligibility; and (4)
continued vesting of long-term incentive awards, including stock options or
restricted stock but excluding performance share awards, held but not vested or
exercisable on the termination date, in accordance with their terms for two
years following the termination date, with any options or similar rights
thereafter remaining exercisable for 90 days, if their term has not expired. If
Messrs. Priory, Coley, Fowler and Osborne receive a payment under their
severance agreements, no payment will be made under the performance share award.
The severance agreements contain restrictive covenants which prohibit Messrs.
Priory, Coley, Fowler and Osborne from competing with Duke Energy or soliciting
Duke Energy's employees or customers for one year following termination, and
from disclosing certain confidential information.
The change-in-control agreements for Messrs. Priory, Padewer, Coley, Fowler and
Osborne provide for payments and benefits to the executive in the event of
termination of employment for "good reason" by the executive or other than for
"cause" by Duke Energy within a two-year period following a "change-in-control"
(each such term as defined in the change-in-control agreements) as follows: (1)
a lump-sum payment equal to the sum of the executive's then-current base salary
and target bonus, for each year of the three-year period after termination,
including a pro rata amount for any partial years in such period, plus a pro
rata amount of the executive's target bonus for the year in which the
termination occurs; (2) a lump sum payment equal to the present value of the
amount Duke Energy would have contributed or credited to the executive's pension
and savings accounts during the three years following the termination date; (3)
continued medical, dental and basic life insurance coverage for a three-year
period following the termination, or retiree medical benefits, if the executive
would have become eligible for such benefits within two years following the
termination date, from the date of eligibility; and (4) continued vesting of
long-term incentive awards, including stock options or restricted stock but
excluding performance share awards, held but not vested or exercisable on the
termination date, in accordance with their terms for three years following the
termination date, with any options or similar rights thereafter remaining
exercisable for 90 days, if their term has not expired. If the executive becomes
eligible for normal retirement at age sixty-five within the three-year period
following termination, the three-year period mentioned above will be reduced to
the period from the termination date to the eligible executive's normal
retirement date. In the event that any of the payments or benefits provided for
in the change-in-control agreement would constitute a
34
"parachute payment" (as defined in section 280G(b)(2) of the Internal Revenue
Code), the executive is entitled to receive an additional payment such that,
after the payment of all income and excise taxes, he will be in the same
after-tax position as if no excise tax under section 4999 of the Internal
Revenue Code had been imposed.
A provision continuing from Mr. Padewer's prior employment agreement provides
that Duke Energy will contribute $315,000 to Mr. Padewer's opening balance in
the Duke Energy Executive Cash Balance Plan, with vesting to occur on the third
anniversary of his employment or upon his disability, death, or termination of
employment for reasons other than for cause, if any of such events occur before
the third anniversary of his employment. An additional continuing provision
provides that Mr. Padewer will be credited for twelve years of service for the
purpose of determining vacation benefits.
Retirement Plan Information
Executive officers and other eligible employees of the CorporationDuke Energy participate in
either of twothe Duke Energy Retirement Cash Balance Plan, a noncontributory, qualified,
defined benefit retirement plans: the
Retirement Cash Balance Plan and the Retirement Income Plan. The Retirement
Income Plan ceased admitting new participants after December 31, 1998.plan. In addition, selected managers are eligible to
participate in the Duke Energy Executive Cash Balance Plan, which is a
noncontributory, nonqualified, defined benefit retirement plan. A portion of the
benefits earned in the Executive Cash Balance Plan is attributable to
compensation in excess of the Internal Revenue Service annual compensation limit
($160,000170,000 for 1998)2000) and deferred compensation, as well as reductions caused by
maximum benefit limitations that apply to qualified plans from the benefits that
would otherwise be provided under the Retirement Cash Balance Plan. The
Retirement Benefit Equalization Plan andis designed to restore benefit reductions
caused by the maximum benefit limitations that apply to qualified plans from
benefits that would otherwise be provided under the Retirement IncomeCash Balance Plan
for eligible employees of Duke Energy who do not participate in the Executive
Cash Balance Plan. Benefits under the Retirement Cash Balance Plan, the
Retirement
9
IncomeExecutive Cash Balance Plan and the Executive Cash BalanceRetirement Benefit Equalization Plan are
based on eligible pay, generally consisting of base pay, short-term incentives
and lump-sum merit increases. The Retirement Cash Balance Plan and the
Retirement IncomeBenefit Equalization Plan exclude deferred compensation, other than
deferrals pursuant to Sections 401(k) and 125 of the Internal Revenue Code.
Under a newthe benefit accrual formula that applies in determiningused to determine benefits under the
Retirement Cash Balance Plan, on and after January 1, 1997, and under
the Retirement Income Plan on and after January 1, 1999, an eligible employee's plan account receives a pay
credit at the end of each month in which the employee remains eligible and
receives eligible pay for services. The monthly pay credit is equal to a
percentage of the employee's monthly eligible pay. TheFor most eligible employees,
the percentage depends on age and completed years of service at the beginning of
the year, as shown below:
MONTHLY PAY CREDIT
AGE AND SERVICE PERCENTAGE
- ---------------------- -------------------
Monthly Pay Credit
Age and Service Percentage
34 or less ......... 4%
35 to 49 ........... 5%
50 to 64 ........... 6%
65 or more ......... 7%
35
In addition, the employee receives a monthly allocation ofan additional 4% for any portion of eligible
pay above the Social Security taxable wage base ($72,60076,200 for 1999)2000). However, for
certain othereligible employees, of the Corporation, thetotal percentage is a flat 3% of eligible pay.
Employee accounts also receive monthly interest credits on their balances. The
rate of the interest credit is adjusted quarterly and equals the yield on
30-year U.S. Treasury Bonds during the third week of the last month of the
previous quarter, subject to a minimum rate of 4% per year and a maximum rate of
9% per year.
Prior to application of the new benefit accrual formula, benefits for
eligible employees, including benefits under the Retirement Income Plan for
1998, were determined under other formulas. To transition from a prior formula
to the new formula, an eligible employee's accrued benefit earned under the
prior formula is preserved as a minimum, and the employee's account under the
new benefit accrual formula receives an opening balance derived from a variety
of factors. In addition, during 1998, Messrs. Priory, Coley, Osborne and
Blackburn were awarded one-time supplemental credits to their Executive Cash
Balance Plan accounts of $337,100; $102,800; $137,062; and $89,075,
respectively.
Assuming that the Named Executive Officers continue in their present positions
at their present salaries until retirement at age 65, their estimated annual
pensions in a single life annuity form under the applicable planplans attributable
to such salaries would be: Richard B.R.B. Priory, $666,438; William A.$770,069; H.J. Padewer, $189,462; W.A.
Coley, $255,114; Fred J.$386,044; F.J. Fowler, $294,231; Richard W. Blackburn, $37,231; and
Richard J.$279,754; R.J. Osborne, $196,147. Such$314,507. These estimates
are calculated assuming interest credits at aan annual rate of 7% per annum4% and using a
future Social Security taxable wage base equal to $72,600.$76,200.
36
Other Information
Discretionary Voting Authority
As described under "Employment Contracts and
Termination of Employment and Change-in-Control Arrangements," Mr. Anderson's
employment agreement provided that, upon a termination prior to early
retirement age of (55), he would receive retirement benefits as if he had
reached such age. As a result, Mr. Anderson received a lump sum distribution of
$3,434,743, exceeding by $244,356 the retirement benefit otherwise payable to
him.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors is currently
comprised of 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 1998 or at any other time an officer or
employee of the Corporation.
No executive officer of the Corporation 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 Committee.
---------------
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE
CORPORATION'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 IN WHOLE OR IN
PART, THE FOLLOWING COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION AND
THE PERFORMANCE GRAPH IMMEDIATELY FOLLOWING SUCH REPORT SHALL NOT BE
INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
10
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors, which is composed
exclusively of nonemployee directors, is responsible for the Corporation's
executive compensation programs. The following is the report of the
Compensation Committee on compensation policies regarding executive officers
and the basis of compensation actions it has taken.
The objective of the Corporation'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 an 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 median 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 has adopted stock ownership guidelines for
executive officers and other members of senior management. The target level of
ownership of Common Stock (or Common Stock equivalents) for the Chairman of the
Board, President and Chief Executive Officer under such guidelines is three
times annual salary. The target level for other officers who are members of the
Corporation's Policy Committee, including Messrs. Coley, Fowler, Blackburn 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
Retirement Savings Plan account, Common Stock equivalents earned through
non-qualified deferred compensation programs and any Common Stock beneficially
owned outside such programs are included in determining compliance with the
guidelines.
COMPLIANCE WITH SECTION 162(M) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code imposes a limitation on the
Corporation's ability to deduct from income tax annual compensation in excess
of $1 million paid to certain 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,
in 1998 the Board of Directors recommended and shareholders approved the Duke
Energy Corporation 1998 Long-Term Incentive Plan and the Duke Energy
Corporation Policy Committee Short-Term Incentive Plan to allow future grants
of stock options (under the 1998 Long-Term Incentive Plan) 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.
BASE SALARIES
The Compensation Committee believes that a significant percentage of each
individual's compensation should be at risk as incentive compensation.
Therefore, the Compensation Committee tends to be conservative in establishing
salary opportunities and typically sets them at a level which approximates the
competitive median as determined by survey data. Individual executive officer's
salaries are reviewed annually and increases are determined by the Compensation
Committee based upon job responsibilities, level of experience, individual
performance and data obtained from surveys, consultants and staff research. No
salary increase was approved by the Compensation Committee for any Named
Executive Officer in 1998.
SHORT-TERM INCENTIVE COMPENSATION
In 1998, the Compensation Committee administered two annual incentive
plans that permitted the granting of cash awards. Policy Committee members,
including Messrs. Priory, Anderson (before his resignation), Coley, Fowler,
Blackburn and Osborne, earned incentive compensation under the Policy Committee
Short-Term Incentive Plan, while other executive officers earned incentive
compensation under the Duke Energy Short-Term Incentive Plan. Individual
incentive targets under both Plans are intended to pay amounts equal to the
competitive median when target performance is achieved and to reward
outstanding results by paying bonuses of up to 150% of target when outstanding
results are achieved.
11
Awards under the Policy Committee Short-Term Incentive Plan were
calculated pursuant to a formula based upon the Corporation's earnings per
share (EPS). Minimum, target and maximum performance levels were established,
and participants could receive up to 150% of their short-term incentive
targets. According to the range of EPS threshold amounts established by the
Compensation Committee at the beginning of 1998, EPS resulted in payments of
110% of bonus targets to each Policy Committee member, including the Named
Executive Officers, prior to changes in such amounts as determined by the
Compensation Committee because of individual performance.
Awards under the Duke Energy Short-Term Incentive Plan, in which executive
officers other than members of the Policy Committee participated, were
determined on the basis of a combination of 1) EPS measures, 2) earnings before
interest and income taxes (EBIT) measures and, in some instances, other
measures unique to individual business groups, and 3) individual objectives.
Each of these three components determined one-third of each executive officer's
bonus.
LONG-TERM INCENTIVE COMPENSATION
In 1998, the Compensation Committee approved the award of non-qualified
stock options (as described earlier in the proxy statement) to members of the
Policy Committee under the Duke Energy Corporation 1998 Long-Term Incentive
Plan. Also in 1998, the Compensation Committee approved the award of
non-qualified stock options to executive officers who were not members of the
Policy Committee under the Duke Power Company Stock Incentive Plan approved in
1996. The number of stock options granted was determined through a process
which: first, utilizes survey data to determine the annualized value of
long-term incentive compensation made to other executives and management
employees in comparable positions in companies with which the Corporation
competes for executive talent (target value), second, uses a variant of the
Black-Scholes stock option pricing model to calculate a ratio which, when
multiplied by the exercise price of the option, produces an expected present
value of the option, and third, calculates the number of options required to
make a competitive long-term grant by dividing target value by the expected
present value of a single option. The result of this process, expressed as a
number of options, may be adjusted by the Compensation Committee, or, in some
cases, its designee, depending upon the grant recipient's qualitative and
quantitative performance, the size of stock option awards in the past, and
expectations of the grant recipient's future performance.
OTHER COMPENSATION
In 1998 the Compensation Committee approved one-time payments to certain
employees whose long-term and short-term compensation was not adjusted at the
time of the merger of the Corporation with PanEnergy Corp, when, with regard to
those employees, there was a significant change in responsibilities as a result
of the merger, clear evidence of a compensation shortfall based on survey data
and a significant contribution by the employees to the success of the merger.
Messrs. Priory, Coley and Osborne qualified for and were awarded such one-time
payments in the amounts of $910,000, $162,000 and $140,000, respectively.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Prior to the merger of the Corporation and PanEnergy Corp, the
Compensation Committee commissioned its compensation consultant to prepare an
independent report regarding the level of compensation of the Chief Executive
Officer of the Corporation, considering in particular the size of the
Corporation, its complexity and the markets in which the Corporation competes
for executive talent. Based upon the Compensation Committee's analysis of the
consultant's report, the Compensation Committee at its June 1997 meeting
adjusted Mr. Priory's annual base salary to $810,000 and adjusted his annual
short-term incentive target to 100% of base salary beginning on January 1,
1998. Also based upon its analysis of the consultant's report, the Compensation
Committee granted Mr. Priory an award of non-qualified stock options to
purchase 500,000 shares of Common Stock under the Duke Energy Corporation 1998
Long-Term Incentive Plan. The Compensation Committee believes that this award
has put in place a mechanism which will result in meaningful rewards to Mr.
Priory for substantial improvements in shareholder value. The Compensation
Committee will consider additional stock option awards as it deems appropriate
from time to time.
It is the Compensation Committee's intention that, when taken together,
the components of Mr. Priory's pay, including salary, short-term incentive
opportunity and annualized long-term incentive award value, will result in
compensation which approximates the 50th percentile of the market when
incentive plan performance expectations are met and for compensation as high as
the 75th percentile of the market when results exceed expectations.
This report has been provided by the Compensation Committee.
LEO E. LINBECK, JR., Chairman
WILLIAM T. ESREY
GEORGE DEAN JOHNSON, JR.
JAMES G. MARTIN
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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 THE CORPORATION, S&P 500 INDEX,
S&P UTILITIES INDEX AND DOW JONES UTILITIES AVERAGE
(Performance Chart appears here -- see table below for plot points)
Assumes $100 invested on Dec. 31, 1993
in Duke Common Stock, S&P 500 Index,
S&P Utilities Index, and DJ Utilities.
Assumes reinvestment of dividends.
1993 1994 1995 1996 1997 1998
----------------------------------------------------
Duke 100 95 122 125 155 186
S&P 500 Index 100 101 139 170 227 291
S&P Utilities 100 92 129 133 165 188
DJ Utilities 100 85 111 121 147 174
The above performance graph features two widely published industry
indices, the S&P Utilities Index and the Dow Jones Utilities Average, in
satisfaction of the requirement for a comparative industry index. The
Corporation believes that the use of both of these indices provides the best
opportunity for comparison of the Corporation's total cumulative return with
those of significant peer companies in the electric and gas industries.
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, Fowler, Osborne and Anderson, 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"), when the Corporation and the employees mutually
agreed to short-term and long-term incentive opportunities. The principal terms
and conditions of the Employment Agreements are described below.
The Employment Agreements for Messrs. Priory, Coley, Fowler and 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, Fowler and Osborne were paid $476,509, $378,947,
$260,000 and $253,200, respectively, as base salary in 1996). Those Employment
Agreements also provide for an annual bonus opportunity of 100% for Mr. Priory
and 60% for each of Messrs. Coley, Fowler 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 such executive is entitled to
participate in all long-term incentive plans, savings, retirement and welfare
benefit plans on the same basis as other peer executives of the Corporation.
The Employment Agreements also provided that Messrs. Priory, Coley, Fowler and
Osborne were to receive non-qualified stock options to purchase 500,000,
200,000, 200,000 and 100,000 shares of Common Stock, respectively. Such options
were issued under the Duke Energy Corporation 1998 Long-Term Incentive Plan. 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), Messrs. Priory, Coley and Osborne will be entitled to
receive a lump-sum severance payment
13
equal to the product of three times the executive's annual base salary and
target bonus and Mr. Fowler will be entitled to receive a lump-sum severance
payment equal to two times 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, Messrs. Priory, Coley and Osborne will
be entitled to continued coverage under the medical, life insurance and other
welfare benefit plans of the Corporation; Mr. Fowler's coverage would be
extended for two years and he would receive supplemental pension benefits
calculated as if he had an additional two years of service. 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,
Osborne and Fowler 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 provided that Mr. Anderson
would 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. The Anderson Employment Agreement further
provided that during the Employment Period Mr. Anderson would 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 became
subject to North Carolina taxes such that the amount of Mr. Anderson's
after-tax compensation would be no less than the amount he would have received
absent the imposition of North Carolina taxes. In addition, Mr. Anderson was to
be awarded 400,000 nonqualified stock options, which were issued in 1998. Such
options were issued under the Duke Energy Corporation 1998 Long-Term Incentive
Plan. Pursuant to the Anderson Employment Agreement, the Corporation also
provided Mr. Anderson with deferred compensation payable upon 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. The
Anderson Employment Agreement also provided that if Mr. Anderson's employment
terminated 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 would 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
would reduce such payments if and to the extent it would maximize Mr.
Anderson's after-tax compensation. Upon Mr. Anderson's resignation, effective
November 15, 1998, he received the payments described above and in the Summary
Compensation Table.
The Corporation entered into an employment agreement with Mr. Blackburn,
effective November 10, 1997, in connection with his employment as Executive
Vice President and General Counsel of the Corporation and a member of the
Policy Committee. The term of the employment agreement extended through
December 31, 1998. The agreement established an initial annual base salary of
$360,000 and an annual incentive target opportunity of 60% of base salary under
the Duke Energy Corporation Policy Committee Short-Term Incentive Plan. The
Agreement also provided for an award of 150,000 stock options which were
granted in 1998 at the same time and under the same terms as grants of stock
options to other Policy Committee members. The agreement further provided for
the award of 9,000 shares of restricted stock in three equal grants of 3,000
shares in January 1998, January 1999 and January 2000. With respect to each
such grant, 1,000 shares were to vest on each of the three successive
anniversary dates of the original award of the grant. It was also agreed that
Mr. Blackburn would be eligible to participate in the executive benefits plans
that are available to other members of the Policy Committee. The Blackburn
employment agreement further contained a non-competition clause and
confidentiality provision.
COMPENSATION OF DIRECTORS
The fixed annual retainer for nonemployee directors of the Corporation is
$40,000. Additional annual compensation for serving as the Chairman of the
Audit, Compensation, Corporate Governance, Corporate Performance Review or
Finance Committees is $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 Corporation requiring their
presence, together with expenses of attendance.
14
A nonemployee director may elect to receive 50% of his or her retainer and
attendance fees in 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 at
market price. The director may elect to receive the remaining 50% of such
compensation in cash or may elect to defer, until termination of 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. In general, shares of Common Stock held in trust,
and income thereon, will not 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 account 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, certain
directors become 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 director. 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 Board of
Directors on February 18, 1998, and certain former directors who previously
qualified for benefits.
Nonemployee directors are subject to the Corporation's stock ownership
guidelines which require nonemployee directors to build and maintain holdings
of Common Stock (or Common Stock equivalents) equal in market value to three
times the annual retainer ($120,000). Nonemployee directors must attain this
ownership level within five years from January 1, 1997, 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 had eight meetings during 1998. No director
attended fewer than 75% of the aggregate of the meetings of the Board of
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.
Among its standing committees the Corporation has a Management Committee,
an Audit Committee, a Compensation Committee, a Corporate Governance Committee,
a Corporate Performance Review Committee, and a Finance Committee.
The Management Committee consists of Richard B. Priory 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, 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 Corporation, determines the scope of the auditing of the books and
accounts of the Corporation, reviews reports submitted by the auditors,
examines procedures employed in connection with the Corporation's internal
audit program and makes recommendations to the Board of Directors as may be
appropriate. The Committee held seven meetings during 1998.
The Compensation Committee consists of William T. Esrey, George Dean
Johnson, Jr., Leo E. Linbeck, Jr. and James G. Martin. This Committee sets the
salaries and other compensation of all executive officers of the Corporation
except the Chairman of the Board. This Committee makes recommendations to the
Board of Directors regarding the salary and other compensation of the Chairman
of the Board for consideration and action by the Board of Directors, without
the presence or participation of the Chairman of the Board. The Committee also
makes recommendations to the Board of Directors regarding the compensation of
nonemployee directors. The Committee held seven meetings during 1998.
The Corporate Governance Committee considers matters related to corporate
governance and formulates and periodically revises principles for board
governance, recommends to the Board of Directors the size and composition of
the Board of Directors within the limits set forth in the Corporation's
Articles of Incorporation and By-Laws and recommends persons to be considered
as successors to the Chief Executive Officer. The Committee will consider
nominees for the Board of Directors recommended by shareholders. The Committee,
consisting of William T. Esrey, Dennis R. Hendrix, Max Lennon, James G. Martin
and Richard B. Priory, met three times in 1998.
15
The Corporate Performance Review Committee consists of G. Alex Bernhardt,
Sr., Robert J. Brown, Ann Maynard Gray, Dennis R. Hendrix, Harold S. Hook and
Russell M. Robinson, II. This Committee monitors and makes recommendations for
improving the overall performance of the Corporation, and, at the policy level,
determines the adequacy of and support for the Corporation's emphasis on
continuous improvement. The Committee met six times during 1998.
The Finance Committee consists of G. Alex Bernhardt, Sr., Harold S. Hook,
George Dean Johnson, Jr., and Richard B. Priory. This Committee reviews the
financial and fiscal affairs of the Corporation and makes recommendations to
the Board of Directors regarding the Corporation's dividend, financing and
fiscal policies. The Committee met six times during 1998.
In February 1998, the Corporation adopted a policy stating that members of
the Board 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 members of the Board of Directors on the date the
policy was adopted. The Corporate Governance Committee 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 1998, the Corporation 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 matters. Fees for legal
services paid by the Corporation to the law firm in 1998 represented less than
5% of such firm's gross revenues for the year.
AMENDMENT TO ARTICLES OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK
(PROPOSAL 2)
The Board of Directors recommends that the shareholders approve the
adoption of a proposed amendment to the Articles of Incorporation to increase
the amount of authorized Common Stock of the Corporation from 500,000,000 to
1,000,000,000 shares. As of December 31, 1998, 362,965,360 shares of Common
Stock were issued and 137,034,640 were unissued, including approximately
25,000,000 shares reserved for issuance under the Corporation's stock plans.
The additional shares of Common Stock, if authorized, would have the same
rights and privileges as the shares of Common Stock presently outstanding and
could in the future be issued for any proper corporate purpose. The
Corporation's Articles of Incorporation provide that the shares of Common Stock
of the Corporation do not have preemptive rights.
In 1997, in connection with the merger of the Corporation and PanEnergy
Corp, the Corporation's shareholders approved an increase in the authorized
Common Stock from 300,000,000 shares to 500,000,000 shares, primarily to enable
the Corporation to issue the additional shares necessary to consummate the
merger. The Board of Directors believes that the proposed increase in the
number of authorized shares of Common Stock will be advantageous to the
Corporation and its shareholders because it will provide the Corporation with
added flexibility in effecting financings, stock splits or stock dividends,
stock plans and other transactions and arrangements involving the use of stock.
The Board of Directors has the authority to issue additional shares of Common
Stock without shareholder approval except as may be required by law or
regulatory agencies or by the applicable rules of the New York Stock Exchange.
Although the Corporation is always alert to opportunities, it has no present
intention to issue any of the newly authorized shares of Common Stock.
Furthermore, the Board of Directors is not proposing the increase in authorized
shares of Common Stock with the intention of discouraging tender offers or
takeover attempts. However, in the event of an unsolicited tender offer or
takeover proposal, the increased number of shares could give the Board of
Directors greater flexibility to act in the best interests of the Corporation
and its shareholders.
Unless required by law or by the applicable rules of the New York Stock
Exchange, no further authorization for the issuance of Common Stock by the
shareholders would be necessary, but any such issuance would be subject to the
approval of the North Carolina Utilities Commission and The Public Service
Commission of South Carolina.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
16
RATIFICATION OF APPOINTMENT OF AUDITORS
(PROPOSAL 3)
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 Corporation for the year 1999. 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 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.
SHAREHOLDER PROPOSAL
(PROPOSAL 4)
THE CORPORATION HAS BEEN ADVISED THAT ROBERT B. MILLS (OWNER OF RECORD OF
30 SHARES OF COMMON STOCK), 1443 GORSUCH AVENUE, BALTIMORE, MARYLAND 21218, AND
EDWARD LEWIS KING (OWNER OF RECORD OF 186 SHARES OF COMMON STOCK), 846
CANTERBURY ROAD NE, ATLANTA, GEORGIA 30324, INTEND TO PRESENT A PROPOSAL AT THE
ANNUAL MEETING.
THE SHAREHOLDER PROPOSAL AND SUPPORTING STATEMENT AND THE OPPOSING
STATEMENT OF THE BOARD OF DIRECTORS ARE SET FORTH BELOW.
A Shareholder Proposal to the Duke Power Company for consideration at its 1999
Annual Meeting
REFUSE PLUTONIUM FUEL FOR COMMERCIAL REACTORS
Whereas: The Department of Energy (DOE) plans to dispose of surplus weapons
plutonium by immobilization in ceramics and possibly as plutonium/uranium (MOX)
fuel for commercial reactors (to prevent diversion to bomb making and
environmental dispersal);
Whereas: Duke Power has expressed interest in using MOX fuel;
Whereas: I believe the public opposes using weapons plutonium fuel because I
believe it would: (1) be too dangerous because it would be more hazardous to
control during fissioning in reactors, increasing operating risks and component
aging; (2) still be weapons-usable, so would require heavy security in transit
and at reactors (greater proliferation potential than immobilization); (3) be
more costly to fabricate the fuel and to operate the reactors; (4) violate the
barrier between nuclear power and nuclear weapons; (5) generate nearly as much
new plutonium during fissioning as it initially contained, resulting in little
net loss of plutonium; (6) generate great quantities of radioactive waste,
exacerbating the already critical, unresolved problems of radioactive waste
storage; (7) increase the likelihood of locking the U.S. into a deadly
plutonium economy;
Whereas: The DOE has a poor track record over the last 23 years managing large
projects;
Whereas: The potential financial rewards are too small to justify the large
risks to some of the Company's most valuable assets;
Whereas: Cost-cutting to meet the new competition shakes public confidence that
Duke Energy could maintain adequate safety and security if the more risky
plutonium fuel were used;
THEREFORE BE IT RESOLVED that the shareholders request the Board of Directors
to establish a firm policy to refuse to use plutonium (MOX) fuel.
Shareholders Supporting Statement:
Weapons plutonium cannot be fissioned directly, but must undergo complicated
and dangerous processing, creating additional radioactive waste. No conversion
facilities exist in the U.S. It could be many years before MOX could be
produced, extending plutonium accessibility for diversion or theft. During
these delays, economic or technical conditions may close candidate reactors.
Regulatory uncertainties between the DOE and the Nuclear Regulatory Commission
(NRC) could complicate the process, introducing further adverse economic
conditions for the utility.
European experience using MOX is only from reprocessed commercial reactor
wastes, not the experimental weapons plutonium. European support for MOX is
declining. European reprocessing corporations are a driving force of the MOX
promotion, and falsely claim that the U.S. must use MOX to win Russia's
cooperation with surplus plutonium disposition.
17
Rather, the U.S. should lead in developing the most effective way to immobilize
weapons plutonium directly, and assist all others in this choice.
The safety of hundreds of future generations depends upon the careful isolation
of plutonium from the biosphere. Use of weapons plutonium in commercial
reactors would create a dangerous precedent. For economic, safety,
environmental, and nonproliferation reasons, I urge your supporting vote for
this proposal.
OPPOSING STATEMENT OF THE BOARD OF DIRECTORS
In MOX fuel, a small amount of plutonium oxide (approximately 5%) is blended
with uranium oxide (approximately 95%). The resulting fuel is very similar to
the uranium fuel that is currently used in power reactors such as those in the
Corporation's McGuire and Catawba plants. There are decades of successful
experience with MOX fuel, and it is widely used in Europe today. In France
alone, 17 pressurized water reactors, very similar to those in the McGuire and
Catawba plants, are currently using MOX fuel.
Using MOX fuel in U.S. reactors is a key part of the international
nonproliferation initiative to dispose of surplus weapons plutonium in the
United States and Russia. Currently, surplus plutonium in both countries is
simply being stored, raising the risk (especially in Russia) that the plutonium
could be stolen, diverted, or re-used in weapons. The MOX fuel project involves
converting plutonium from nuclear weapons into MOX fuel and using that fuel in
commercial reactors. Irradiation of MOX fuel in a reactor destroys much of the
original plutonium and degrades the remainder so that it is no longer
attractive for weapons use. The program to dispose of surplus weapons material
was recommended by the National Academy of Sciences and has the strong support
of the U.S. government and other industrialized nations.
In the proposed program, surplus plutonium will be converted to plutonium
oxide, blended with uranium oxide, and fabricated into MOX fuel on a U.S.
government site (most likely the Savannah River Site in South Carolina). The
completed and sealed MOX fuel assemblies, virtually indistinguishable from
uranium fuel assemblies, will be shipped to the McGuire and Catawba plants for
irradiation. Many years of European experience, government-sponsored studies,
and evaluations by the Corporation indicate that MOX fuel can be used safely.
However, before receiving and irradiating MOX fuel at the McGuire and Catawba
plants, the Corporation must first apply for and receive amendments to their
respective facility operating licenses from the Nuclear Regulatory Commission
(NRC). In order to receive these necessary regulatory approvals, the
Corporation will have to demonstrate to the NRC that MOX fuel poses no
significant hazard to the health and safety of the public.
The Corporation will pay substantially less for the MOX fuel than for the
equivalent quantity of uranium fuel. Therefore, the Corporation will realize
direct economic benefits through lower nuclear fuel prices.
THE MOX FUEL PROGRAM OFFERS THE CORPORATION AN OPPORTUNITY TO BENEFIT ITS
SHAREHOLDERS AT THE SAME TIME AS IT MAKES A MEANINGFUL CONTRIBUTION TO
NONPROLIFERATION AND INTERNATIONAL SECURITY. IN THE WORDS OF THE LATE WILLIAM
S. LEE III, WHO WAS CHAIRMAN OF THE BOARD AND PRESIDENT OF THE CORPORATION FOR
MANY YEARS:
It's clearly in the interest of world peace to make a substantial
investment in the safe dismantling and disposal of nuclear weapons. The
opportunity to earn a return on that investment by reclaiming materials for
peaceful uses seems too sensible to ignore. We should move now to convert
our nuclear weapons to power plant fuel and assist others to do the same.
Twentieth century swords can literally become the plowshares that work to
fuel a growing, more prosperous global economy in the 21st century.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
18
OTHER MATTERS
On the date this proxy statement went to press, managementwe did not know ofanticipate that
any other matters to be brought beforematter besides the meeting other than those described
in this proxy statement. If any matters come before the meeting that are not
specificallyproposals set forth on the proxy card andout in this proxy statement it iswould be raised
at the intention of the persons named in the proxy card to vote thereon in accordance
with their best judgment.
PROPOSALS FOR 2000 ANNUAL MEETING
Shareholders who intend to present proposalsannual meeting. If any other matters are properly presented at the annual
meeting, in 2000
pursuantthe persons named as proxies will have discretion to the procedures under Rule 14a-8 of the SEC, and who wishvote on those
matters according to have
such proposals included in the Corporation's proxy statement for that meeting,
must be certain that such proposals are received by the Secretary of the
Corporation by November 12, 1999. Such proposals must meet the requirements set
forth in the rules and regulations of the SEC in order to be eligible for
inclusion in the proxy statement for the 2000 annual meeting.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the Corporation's knowledge, basedtheir best judgment.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely on information furnished to itus and contained in the reports filed pursuant to Rule 16a-3 ofwith
the Exchange Act,SEC, as well as any written representations that no other reports were
required, we believe that during 2000 all applicable Section 16(a) filing requirements wereSEC filings of our directors and
executive officers complied with during the requirements of Section 16 of the
Securities Exchange Act, except that F. J. Fowler did not timely report an
exercise of options in February 2000 and a sale of Duke Energy Common Stock in
August 2000, and H. S. Hook did not timely report an exercise of options in May
2000. The failure to timely report such option exercises was due to
administrative oversight on the part of Duke Energy.
Fees Paid to Independent Auditors
The aggregate fees billed by Deloitte & Touche LLP, the member firms of Deloitte
Touche Tohmatsu, and their respective affiliates (collectively, "Deloitte") for
professional services rendered for the audit of Duke Energy's annual financial
statements for the fiscal year ended December 31, 1998.
ANNUAL REPORT ON FORM 10-K2000 and for the review of the
financial statements included in its Quarterly Reports on Form 10-Q for that
fiscal year were $3,373,051.
There were no fees billed by Deloitte for professional services rendered for
information technology services relating to financial information systems design
and implementation for the fiscal year ended December 31, 2000.
The aggregate fees billed by Deloitte for services rendered to Duke Energy,
other than the audit and review services referred to above, for the fiscal year
ended December 31, 2000 were $11,796,608. The Audit Committee considers the
provision of non-audit services by Deloitte to be compatible with maintaining
the principal accountant's independence.
Online Access to Annual Reports and Proxy Statements
Save Duke Energy future postage and printing expense by consenting to view
future annual reports and proxy statements online on the Internet.
Most shareholders can elect to view future proxy statements and annual reports
over the Internet instead of receiving paper copies in the mail. Those
shareholders will be given the opportunity to consent to future Internet
delivery when they vote their proxy. For some shareholders, this option is only
available if you vote on the Internet.
37
If you are not given an opportunity to consent to Internet delivery when you
vote your proxy, contact the bank, broker or other holder of record through
which you hold your shares and inquire about the availability of such an option
for you.
If you consent, your account will be so noted and, when Duke Energy's annual
report for 2001 and proxy statement for the 2002 annual meeting become
available, you will be notified on how to access them on the Internet.
Shareholders of record may indicate their consent on this year's proxy card, and
will receive a paper proxy card for next year's annual meeting in the mail.
If you elect to receive your Duke Energy materials via the Internet, you can
still request paper copies by contacting Investor Relations at (800) 488-3853 or
by e-mail at InvestDUK@duke-energy.com.
38
Appendix A
COPYCHARTER OF THE
CORPORATION'S ANNUAL REPORT ON FORM 10-K FORAUDIT COMMITTEE
OF THE
YEAR ENDED
DECEMBER 31, 1998, WHICH IS REQUIRED TO BE FILED WITH THE SEC, WILL BE MADE
AVAILABLE TO HOLDERSBOARD OF COMMON STOCK TO WHOM THIS PROXY STATEMENT IS MAILED,
WITHOUT CHARGE, UPON WRITTEN REQUEST TO THE INVESTOR RELATIONS DEPARTMENT,DIRECTORS
OF
DUKE ENERGY CORPORATION
P.O. BOX 1005, CHARLOTTE, NORTH CAROLINA 28201-1005.
Whether(February 27, 2001)
Organization
The Board shall annually elect from its members who are not officers or
not you plan to attendemployees of the meeting, please mark, sign, dateCorporation the Committee consisting of three or more persons,
one of whom shall be designated as chair. The Board shall ensure that Committee
members meet at all times the independence and promptly returnexperience requirements of the
enclosed proxy inNew York Stock Exchange (NYSE).
Meetings
The Committee will meet at least four times annually at the enclosed envelope. No postage is
required for mailing in the United States.
By Orderdiscretion
of the Board of Directors RICHARD W. BLACKBURN
EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
Charlotte, North Carolina
March 12, 1999
19or at the call of the chair or any two members
thereof. The Committee shall have the opportunity to meet privately (without
members of management present) and separately with the Vice President of Audit
Services, the external auditor and General Counsel when requested. The chair
shall designate a person who need not be a member thereof to act as secretary
and minutes of its proceedings shall be kept in minute books provided for that
purpose. The agenda of each meeting will be prepared by the secretary and,
whenever reasonably practicable, circulated to each member prior to each
meeting.
Specific Responsibilities
A. Financial Reporting and Internal Controls
1) Review the Corporation's annual audited financial statements
prior to filing or distribution. The review shall include:
discussion of the audited financial statements with
management, including changes in accounting policies and
significant judgements that may affect the financial results,
and discussion with the external auditors required by relevant
auditing standards.
[DUKE LOGO]The Committee shall report to the Board and to the
shareholders whether, based on such review and discussions, it
recommends to the Board that the most recent year's audited
financial statements be included in the Corporation's annual
report on Form 10-K to be filed with the Securities and
Exchange Commission (SEC).
2) Monitor the Corporation's news releases regarding material
interim financial results by reviewing them with management
and the external auditors prior to the filing of the Form 10-Q
with the SEC. Discuss any significant changes to the
Corporation's accounting policies and significant judgements
that may affect the financial results and any items required
to be communicated by the external auditors in accordance with
relevant auditing standards. The chair of the Committee may
represent the entire Committee for purposes of this review and
rely upon management for determining materiality.
3) As necessary, but at least annually, review the effects of
changes in accounting standards that may materially affect the
Corporation's financial reporting practices.
4) In consultation with management, the external auditors and the
internal auditors consider the integrity of the Corporation's
financial reporting practices and the adequacy and
effectiveness of internal controls. Discuss significant
financial risk exposures and the steps management has taken to
monitor, control and report such exposures. Review significant
findings identified by the external auditors and the internal
auditing department together with management's responsiveness
to such recommendations.
B. External Auditors
1) The external auditors are ultimately accountable to the
Committee and the Board, which have the ultimate authority to
select, evaluate and, where appropriate, replace the external
auditors. The Committee shall review the independence and
performance of the auditors and annually recommend to the
Duke EnergyBoard the appointment of the external auditors or approve any
discharge of auditors when circumstances warrant.
2) The Committee is responsible for ensuring the independence of
the external auditors. On an annual basis, the Committee shall
receive and evaluate a formal report from the external
auditors, which discloses all significant relationships with
the Corporation that the auditors believe may impact their
independence and objectivity. Discussions should be held with
the external auditors and management on the scope of any such
disclosed relationships and their impact or potential impact
on the external auditors' independence and objectivity.
3) Review the external auditors' audit plan and areas of audit
focus. Review the fees and other significant compensation to
be paid to the external auditors.
C. Internal Audit
1) Review the audit plan and significant changes in planned
activities; review significant findings resulting from audits
and management's responsiveness to the findings.
2) Review Audit Services' assessment of the effectiveness of, or
weaknesses in, internal control systems.
3) Evaluate the performance and independence of Audit Services
based on the review of information referred to above and
discussions with the Vice President of Audit Services.
D. Other Audit Committee Responsibilities
1) On at least an annual basis, review with the Corporation's
General Counsel any legal matters that can reasonably be
expected to have a material impact on the organization's
financial position and results of operations, the
Corporation's compliance program and Code of Business Ethics
compliance and any material inquiries or reports received from
regulators or governmental agencies.
2) Annually, and at any other time when the composition of the
Committee changes, ensure that management submits the "Written
Affirmation Form" addressing the Committee composition and
charter to the NYSE.
3) Review and reassess the adequacy of this Charter at least
annually. Submit the Charter to the Board for approval and
adoption and have the document published at least every three
years in accordance with SEC regulations.
4) Review and approve the Audit Committee Report that must be
included in the proxy statement.
5) Periodically report to the Board of Directors on significant
developments with respect to the foregoing activities.
Procedural Matters
A majority of the members, but not less than two, will constitute a
quorum. A majority of the members present at any meeting at which a quorum is
present may act on behalf of the Committee. The Committee may meet by telephone
or videoconference and may take action by unanimous written consent.
DUKE ENERGY CORPORATION
Annual Meeting of Shareholders
April 15, 199926, 2001 at 10:00 a.m.
Energy Center-O.J.Center - O.J. Miller Auditorium
526 South Church Street
Charlotte, NC
[Map of Charlotte Location Appeared Here]
- --------------------------------------------------------------------------------
DUKE ENERGY CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints R.B. Priory, R.J. OsborneR.P. Brace and R.W. Blackburn, and
each of them, proxies, with the powers the undersigned would possess if
personally present, and with full power of substitution, to vote all shares of
Common Stock of Duke Energy Corporation of the undersigned at the annual meeting
of shareholders to be held in the Energy Center, 526 South Church Street,
Charlotte, North Carolina, on April 15, 1999,26, 2001, 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.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 G. Alex Bernhardt, Sr., William A. Coley, Max LennonAnn Maynard Gray, Dennis R. Hendrix and Leo E.
Linbeck, Jr.
PleaseHarold S. Hook.
If you are voting by mail, please sign on the reverse and return promptly in the
enclosed return envelope.
[DUKE ENERGY LOGO
APPEARS HERE]
To Participants invote by telephone or Internet, see instructions to
the Duke Energy
Retirement Savings Plan:
As a participant inright.
VOTE BY TELEPHONE OR INTERNET
quick - easy - immediate
Your telephone or Internet vote authorizes the Duke Energy Retirement Savings Plan, you have the rightnamed proxies to direct the Plan trustee in the voting of thosevote your shares of Duke Energy Common
Stock that are held by the Plan and allocated to your Plan account, on any
issues presented at Duke Energy's 1999 annual shareholder meeting, to be held
April 15 in Charlotte, N.C.
I encourage you to read the enclosed Proxy Statement and to complete the
attached proxy to direct the voting of the shares allocated to your Plan
account. Your Plan participant proxy will be treated confidentially. If you
elect not to return a completed proxy, shares allocated to your Plan account
will be voted by the Plan trustee
in the same proportionmanner as those shares held byif you marked, signed and returned your proxy card.
VOTE BY PHONE:
You will be asked to enter a control number located in the Plan for whichbox in the Plan trustee has received direction from Plan
participants. Even though you may have returned a proxy for shares owned outide
the Plan, you are encouraged to exercise your rights by completing and returning
the enclosed proxy.
Sincerely,
R.B. Priory
Chairmanlower
right of this form.
Option A: To vote as the Board Presidentof Directors recommends for all nominees and
Chief Executive Officeron all proposals: Press 1
Option B: If you choose to vote on each item separately, press 0. You will
hear these instructions:
Directors: To vote FOR ALL nominees, press 1;
To WITHHOLD FOR ALL nominees, press 9;
To WITHHOLD FOR AN INDIVIDUAL nominee, Press 0
and listen to
the instructions.
Proposals: To vote FOR, press 1;
To vote AGAINST, press 9;
To ABSTAIN, press 0.
The instructions are the same for all proposals to be voted.
When asked, you must confirm your vote by pressing 1.
VOTE BY INTERNET:
The Website address is www.proxyvoting.com/dukeenergy. You will be asked to
enter the control number located in the box in the lower right of this
form. Then follow the instructions on the screen.
TO VOTE BY PHONE
Call - Toll Free - On a Touch-Tone Telephone
1-888-457-2966 Anytime
There is NO CHARGE to you for this call.
[Control Number - For Telephone/Internet Voting]
If you vote by phone or Internet, DO NOT mail the proxy card. Thank you for
voting.
[Duke Energy Logo]
Duke Energy will conduct its annual shareholders meeting on April 26, 2001 at
10:00 a.m. in the O.J. Miller Auditorium, located in the Energy Center at 526
South Church Street in Charlotte, North Carolina.
See reverse for telephone and internet voting instructions.
The Board of Directors recommendrecommends a vote "FOR" Items 1,each of the nominees listed
below, "FOR" Proposals 2, and 3 and a vote4 and "AGAINST" Item 4Proposals 5 and 6.
Directors
Recommend
DIRECTORS
1. Election of four directors who will constitute Class II of
the Board of Directors.
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 exceptions in the space provided.I Directors: 01- Ann Maynard Gray For ALL
02- Dennis R. Hendrix
03- Harold S. Hook
Directors
Recommend
PROPOSALS
2. Proposal to increase the authorized Common Stock of
the Corporation from 500,000,000 shares to
1,000,000,000 shares.
3. Ratification of appointment of auditors. For
3. Increase in authorized common stock. For
4. Approval of amendment to 1998 Long-Term Incentive Plan. For
5. Shareholder proposal BEFORE MAILING, PLEASE DETACH THIS PORTION.
================================================================================
[DUKE ENERGY LOGO
APPEARS HERE]relating to contributions to political
movements and entities. Against
6. Shareholder proposal relating to investments in alternative
energy sources. Against
[Duke Energy Logo]
Investor Relations Department
526 South Church Street
PO Box 1005 Charlotte, NC 28201-1005
(704) 382-3853 Charlotte
(800) 488-3853 Toll-Free Account
(704) 382-3814 Fax
As of
March 1,2001
- --------------------------------------------------------------------------
1. Withhold * Except for- Mark this box if, in the following
For All For* Authority ------------------ ----------------
[ ] [ ] [ ] ------------------ ----------------
------------------ ----------------future, you would prefer to view the annual report
and proxy statement via the Duke Energy Website (www.duke-energy.com). You will
still receive this voting form by U.S. Mail if you mark the box.
- ---------------------------------------------------------------------------
------------------------
2.
For Against Abstain
[ ] [ ] [ ]
------------------------
JOHN A SHAREHOLDER ------------------------ ------------------------
422 S. CHURCH STREET 3. 4.
PB01H For Against Abstain For Against Abstain
CHARLOTTE, NC 28242-0001 [ ] [ ] [ ] [ ] [ ] [ ]
------------------------ ------------------------- If you are voting by mail, sign here as name(s) appear(s) above.
Date________________,2001
If you are voting by mail, please sign and date this proxy and return it
promptly whether or not you plan to attend the meeting, please mark: [ ]
If you do not wish to receive an Annual Report for this account, please mark:[ ]
ALLOCATION OF SHARES HELD BY RSP AS OF FEBRUARY 22, 1999
Shares
300.0352
Sign here as
------------------------------------
name(s) appears above Date ,1999
------------------------------------ -----------------
PLEASE SIGN THIS PROXY AND RETURN IT PROMPTLY WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING.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 LOGO
APPEARS HERE]
DEAR SHAREHOLDER:
I hope you will join me and your fellow shareholders at Duke Energy's annual
meeting, which begins at 10:00 a.m., Thursday, April 15, 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 four directors, a proposal
to increase the authorized Common Stock, the ratification of appointment of
auditors and a shareholder proposal.
I hope to see you personally on April 15 in Charlotte.
Sincerely,
R.B. Priory
Chairman of the Board, President and
Chief Executive Officer
Directors recommend a vote "FOR" Items 1, 2 and 3 and a vote "AGAINST" Item 4
1. Election of four directors who will constitute Class II of
the Board of Directors.
To vote, your shares for all director nominees, or to withhold voting for
all nominees, mark an "X" In
the appropriate box.
If you do not wish your shares
voted for a particular director nominee, mark1. For ALL Nominees
Withold Authority
For ALL EXCEPT the "For*" box and enter
the name(s)following:
(Write number(s) of the exceptions in the space provided.
2. Proposal to increase the authorized Common Stock of
the Corporation from 500,000,000 shares to
1,000,000,000 shares.
3. Ratification of appointment of auditors.
4. Shareholder proposal
BEFORE MAILING, PLEASE DETACH THIS PORTION.
================================================================================
[DUKE ENERGY LOGO
APPEARS HERE]
- --------------------------------------------------------------------------
1. Withhold * Except for the followingnominee(s) below)
For All For* Authority ------------------ ----------------
[ ] [ ] [ ] ------------------ ----------------
------------------ ----------------
- ---------------------------------------------------------------------------
------------------------Against Abstain
|_| |_| |_|
2.
For Against Abstain
[ ] [ ] [ ]
------------------------
JOHN A SHAREHOLDER ------------------------ ------------------------
422 S. CHURCH STREET|_| |_| |_|
3. 4.
PB01H
For Against Abstain
|_| |_| |_|
4.
For Against Abstain
CHARLOTTE, NC 28242-0001 [ ] [ ] [ ] [ ] [ ] [ ]
------------------------ ------------------------
If you plan to attend the meeting, please mark: [ ]
If you do not wish to receive an Annual Report for this account, please mark:[ ]
ALLOCATION OF SHARES HELD BY RSP AS OF FEBRUARY 22, 1999
Shares Account Number
300.0352 000052335
Sign here as
------------------------------------
name(s) appears above Date ,1999
------------------------------------ -----------------
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.|_| |_| |_|
5.
For Against Abstain
|_| |_| |_|
6.