<PAGE>
SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [x]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Carolina Power & Light Company
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(Name of Registrant as Specified In Its Charter)
Merrill
--------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14(a)-6(I)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------
3) Per unit price of other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it is determined):
--------------------------------------------------------------------------
4) Proposed Maximum aggregate value of transaction:
--------------------------------------------------------------------------
5) Total fee paid:
--------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
CAROLINA POWER & LIGHT COMPANY
411 FAYETTEVILLE STREET
RALEIGH, NORTH CAROLINA 27601
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 7, 1997
The Annual Meeting of the Shareholders of Carolina Power & Light Company
will be held in the auditorium at the North Carolina Museum of Art, 2110 Blue
Ridge Road, Raleigh, North Carolina, on May 7, 1997, at 10 o'clock a.m. The
meeting will be held in order to:
(1) Elect three Class II directors of the Company to serve for three-year
terms;
(2) Act upon a proposal to adopt the 1997 Equity Incentive Plan; and
(3) Transact any other business properly brought before the meeting.
All shareholders of $5 Preferred Stock, Serial Preferred Stock and Common
Stock of record at the close of business on February 28, 1997, will be entitled
to vote. The stock transfer books will remain open.
By order of the Board of Directors.
WILLIAM D. JOHNSON
Vice President, Senior Counsel and
Assistant Secretary
Raleigh, North Carolina
March 31, 1997
YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD
PROMPTLY SO THAT AS MANY SHARES AS POSSIBLE WILL BE REPRESENTED.
<PAGE>
CAROLINA POWER & LIGHT COMPANY
411 FAYETTEVILLE STREET
RALEIGH, NORTH CAROLINA 27601
------------------------
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the the Board of
Directors' of Carolina Power & Light Company (Company) solicitation of proxies
to be used at the Annual Meeting of Shareholders. That meeting will be held in
the auditorium at the North Carolina Museum of Art, 2110 Blue Ridge Road,
Raleigh, North Carolina on May 7, 1997, at 10 o'clock a.m. (For directions to
the meeting location, please see the map included at the end of the Proxy
Statement.) The Proxy Statement and form of proxy were first sent to
shareholders on or about March 31, 1997.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR 1996,
INCLUDING FINANCIAL STATEMENTS AND SCHEDULES, ARE AVAILABLE UPON WRITTEN
REQUEST, WITHOUT CHARGE, TO THE PERSONS WHOSE PROXIES ARE SOLICITED. ANY EXHIBIT
TO FORM 10-K IS ALSO AVAILABLE UPON WRITTEN REQUEST AT A REASONABLE CHARGE FOR
COPYING AND MAILING. WRITTEN REQUESTS SHOULD BE MADE TO MR. MARK F. MULHERN,
VICE PRESIDENT AND TREASURER, CAROLINA POWER & LIGHT COMPANY, P. O. BOX 1551,
RALEIGH, NORTH CAROLINA 27602.
PROXIES
The accompanying proxy is solicited by the Board of Directors of the Company
and the entire cost of solicitation will be borne by the Company. The Company
expects to solicit proxies primarily by mail. Proxies may also be solicited by
telephone, telegraph or personally by officers and employees of the Company, who
will not be specially compensated for such services. Additionally, solicitation
of proxies will be made by Morrow & Co., Inc. at a cost to the Company of
approximately $5,000 plus out-of-pocket expenses.
Any shareholder who has executed a proxy and attends the meeting may elect
to vote in person rather than by proxy. A shareholder may revoke his proxy at
any time before it is exercised by filing written notice of revocation or by
filing a later valid proxy with the Secretary of the Company. All shares
represented by valid proxies received pursuant to this solicitation, and not
revoked before they are exercised, will be voted in the manner specified
therein. Proxies that do not contain specifications will be voted for the
election of Directors as set forth in this Proxy Statement, for the proposal to
adopt the 1997 Equity Incentive Plan, and, in the discretion of the named
proxies, upon any other business properly brought before the meeting.
VOTING SECURITIES
The Directors of the Company have fixed February 28, 1997, as the record
date for shareholders entitled to vote at the Annual Meeting. Only holders of
the Company's $5 Preferred Stock, Serial Preferred Stock and Common Stock of
record at the close of business on that date will be entitled to notice of and
to vote at the Annual Meeting. Holders of $5 Preferred Stock, Serial Preferred
Stock and Common Stock will vote together without regard to class, and each
share is entitled to one vote. As of February 28, 1997, there were outstanding
237,259 shares of $5 Preferred Stock, 1,200,000 shares of Serial Preferred Stock
and 151,415,722 shares of Common Stock.
1
<PAGE>
Pursuant to the provisions of the North Carolina Business Corporation Act,
Directors will be elected by a plurality of the votes cast. Withheld votes will
have no effect. Approval of the proposal relating to the 1997 Equity Incentive
Plan will require the affirmative vote of a majority of the votes cast on the
proposal provided that the total votes cast on the proposal represents over 50%
of the shares entitled to vote on the proposal. Abstentions will not have the
effect of "negative" votes with respect to the proposal. Broker shares that are
not voted with respect to approval of the Plan will not be included in
determining the number of shares cast. Approvals of other matters to be
presented at the Annual Meeting, if any, generally will require the affirmative
vote of a majority of the shares voted on such matters. Abstentions from voting
and broker non-votes will not have the effect of a "negative" vote with respect
to any such matters.
ELECTION OF DIRECTORS
Based on the report of the Nominating Committee (see page 7), the Board of
Directors nominates for election the three nominees listed below. Valid proxies
received pursuant to this solicitation will be voted in the manner specified.
Where specifications are not made, the shares represented by the accompanying
proxy will be voted for the election of the three nominees as Directors in Class
II to serve for the term expiring in 2000, and until their respective successors
have been elected and qualified:
CLASS II
(Term expiring in 2000)
EDWIN B. BORDEN, RICHARD L. DAUGHERTY, AND ROBERT L. JONES
Votes (other than votes withheld) will be cast pursuant to the accompanying
proxy for the election of the nominees listed above unless, by reason of death
or other unexpected occurrence, one or more of such nominees shall not be
available for election, in which event it is intended that such votes will be
cast for such substitute nominee or nominees as may be determined by the persons
named in such proxy. The Board of Directors has no reason to believe that any of
the nominees listed above will not be available for election as a director.
The names of the three nominees for election to the Board of Directors and
of the other Directors, along with their ages, principal occupations or
employment for the past five years, and current directorships are set forth
below.
DIRECTOR NOMINEES -- CLASS II
(Terms Expiring in 2000)
EDWIN B. BORDEN, age 63, is President of The Borden Manufacturing Company, a
textile yarn manufacturer. He has served as a Director of the Company since 1985
and also serves as a director of Jefferson-Pilot Corporation, Triangle Bancorp,
Inc., Ruddick Corporation and Winston Hotels, Inc.
RICHARD L. DAUGHERTY, age 61, is the Executive Director of NCSU Research
Corporation, a development corporation of the Centennial Campus of North
Carolina State University. He previously served as Vice President of IBM PC
Company, manufacturers and distributors of personal computers worldwide, and
also as Senior State Executive for IBM Corporation in North Carolina. Mr.
Daugherty retired from IBM in August 1994. He has served as a Director of the
Company since 1992.
ROBERT L. JONES, age 60, is President of Davidson and Jones Corporation,
general contractors/ developers and operators of real estate properties. He has
served as a Director of the Company since 1990 and also serves as a director of
Giant Cement Holding, Inc.
2
<PAGE>
DIRECTORS CONTINUING IN OFFICE -- CLASS III
(Terms Expiring in 1998)
FELTON J. CAPEL, age 70, is President of Century Associates of North
Carolina, distributors of cookware and housewares. He has served as a Director
of the Company since 1972.
WILLIAM CAVANAUGH III, age 58, is President and Chief Executive Officer of
the Company (since October 1996). He previously served as President and Chief
Operating Officer of the Company (since September 1992). Prior to September
1992, he served in various executive capacities for Entergy Corporation and its
affiliates. He has served as a Director of the Company since 1993.
CHARLES W. COKER, age 63, is Chairman and Chief Executive Officer of Sonoco
Products Company, a manufacturer of paperboard and paper and plastics packaging
products. He has served as a Director of the Company since 1975 and also serves
as a director of NationsBank Corporation, Sara Lee Corporation and Springs
Industries, Inc.
ESTELL C. LEE, age 61, is President of The Lee Company, a building supplies
company. Previously, she was Secretary of the North Carolina Department of
Economic and Community Development and President of Seacor, Inc. She has served
as a Director of the Company since 1988.
DIRECTORS CONTINUING IN OFFICE -- CLASS I
(Terms Expiring in 1999)
LESLIE M. BAKER, JR., age 54, is President and Chief Executive Officer of
Wachovia Corporation, an interstate bank holding company (since January 1994).
He previously served as President and Chief Operating Officer of Wachovia
Corporation (from February 1993 to December 1993) and as President and Chief
Executive Officer of Wachovia Bank of North Carolina, N.A., a subsidiary of
Wachovia Corporation (from January 1990 to May 1993). He also served in various
executive capacities for other subsidiaries of Wachovia Corporation. He has
served as a Director of the Company since 1995.
WILLIAM O. MCCOY, age 63, is Vice President-Finance of the University of
North Carolina (since 1994). He previously served as Vice Chairman of the Board
of BellSouth Corporation and President and Chief Executive Officer of BellSouth
Enterprises. He has served as a Director of the Company since 1996 and also
serves as a director of Fidelity Investments, The Kenan Corporation, Liberty
Corporation and Weeks Corporation.
SHERWOOD H. SMITH, JR., age 62, is Chairman of the Company's Board of
Directors (since October 1996). He previously served as Chairman and Chief
Executive Officer (since 1992) and as Chairman/President and Chief Executive
Officer. He has served as a Director of the Company since 1971 and also serves
as a director of Wachovia Corporation, Springs Industries, Inc., and Northern
Telecom Limited, and as a Trustee of The Northwestern Mutual Life Insurance
Company.
J. TYLEE WILSON, age 65, is retired Chairman and Chief Executive Officer of
RJR Nabisco, Inc. He has served as a Director of the Company since 1987 and also
serves as a director of BellSouth Corporation.
3
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth the only shareholder known to the Company to
beneficially own more than 5% of the outstanding shares of any class of the
Company's voting securities as of December 31, 1996.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
NUMBER OF
SHARES
NAME AND ADDRESS OF BENEFICIALLY PERCENTAGE
TITLE OF CLASS BENEFICIAL OWNER OWNED OF CLASS
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Serial Preferred The Colonial Group, Inc. 30,000(1) 6%
Stock, One Financial Center
$7.72 Series Boston, MA 02111
Common Stock Wachovia Bank of North Carolina, N.A. 8,791,601(2) 5.8%
Post Office Box 3099
Winston-Salem, NC 27102
- -------------------------------------------------------------------------------------------
</TABLE>
(1)The Colonial Group, Inc. has shared voting power and shared dispositive power
with respect to these shares.
(2)Consists of shares of Common Stock held in fiduciary capacity as Trustee of
the Company's Stock Purchase-Savings Plan. Wachovia Bank of North Carolina,
N.A. has sole voting power with respect to 593,445 shares, shared voting
power with respect to 8,156,231 shares, sole dispositive power with respect
to 536,818 shares and shared dispositive power with respect to 129,440
shares.
4
<PAGE>
MANAGEMENT OWNERSHIP OF COMMON STOCK
The following table describes the beneficial ownership of the Common Stock
of the Company and ownership of Common Stock units as of December 31, 1996 of
(i) all current Directors and nominees for Director, (ii) each executive officer
of the Company named in the Summary Compensation Table presented later in this
document and (iii) all Directors and executive officers as a group. A unit of
Common Stock does not represent an equity interest in the Company and possesses
no voting rights, but is equal in value at all times to a share of Common Stock.
As of December 31, 1996, none of the individuals or group in the above
categories owned one percent (1%) or more of any class of the Company's voting
securities.
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------
NUMBER OF SHARES OF COMMON
STOCK
BENEFICIALLY OWNED(1) AND
UNITS REPRESENTING
NAME SHARES OF COMMON
STOCK (2),(3),(4)
- -------------------------------------------------------------------
Leslie M. Baker, Jr. 1,000 Common Stock
1,496(2) Units
Edwin B. Borden 4,109 Common Stock
10,624(2) Units
Felton J. Capel 1,000 Common Stock
9,886(2) Units
William Cavanaugh III 12,044(5) Common Stock
25,413(3),(4) Units
Charles W. Coker 3,448(6) Common Stock
11,502(2) Units
Richard L. Daugherty 772 Common Stock
5,202(2) Units
James M. Davis, Jr. 20,056 Common Stock
6,142(3),(4) Units
Glenn E. Harder 628 Common Stock
2,655(3),(4) Units
Richard E. Jones 11,537 Common Stock
4,895(3),(4) Units
Robert L. Jones 2,000 Common Stock
8,055(2) Units
Estell C. Lee 4,484(7) Common Stock
10,544(2) Units
William O. McCoy 1,170 Common Stock
72(2) Units
William S. Orser 4,014 Common Stock
9,596(3),(4) Units
Sherwood H. Smith, Jr. 71,499(8) Common Stock
115,058(3),(4) Units
J. Tylee Wilson 5,000 Common Stock
433(2) Units
Shares of Common Stock beneficially
owned by all directors and
executive officers of the Company
as a group (18 persons) 152,116 Common Stock
</TABLE>
5
<PAGE>
(1)Unless otherwise noted, all shares of Common Stock set forth in the table
are beneficially owned, directly or indirectly, with sole voting and investment
power, by such shareholder.
(2)Consists of units representing Common Stock of the Company under the
Directors' Deferred Compensation Plan (see "Directors' Compensation" on page 8).
(3)Consists of performance units under the Long-Term Compensation Program
(see "Long-Term Incentive Plan Awards Table" on page 12 and footnote 1
thereunder for units awarded in 1996).
(4)Consists of replacement units to replace the value of Company
contributions to the Stock Purchase-Savings Plan that would have been made but
for the deferral of salary under the Deferred Compensation Plan for Key
Management Employees and contribution limitations under Section 415 of the
Internal Revenue Code of 1986, as amended (see "Summary Compensation Table" on
page 9 and footnote 4 thereunder).
(5)Includes 230 shares with shared voting and investment power owned by
members of immediate family to which beneficial ownership has not been
disclaimed.
(6)Includes 3,248 shares with shared voting and investment power owned by
members of immediate family to which beneficial ownership has not been
disclaimed.
(7)Includes 160 shares with shared voting and investment power owned by
members of immediate family to which beneficial ownership has not been
disclaimed.
(8)Does not include 900 shares owned by members of immediate family to which
beneficial ownership has been disclaimed.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Inadvertently, Mr. Charles W. Coker, a Director of the Company, did not file
on a timely basis two required reports relating to two transactions. Those
transactions involved purchases of a total of 31 shares of the Company's Common
Stock by a member of Mr. Coker's family (18 shares were purchased on August 8,
1991, at a price of $47.75 per share, and 13 shares were purchased on August 14,
1994, at a price of $26.25 per share). When the reporting omissions were brought
to Mr. Coker's attention, he reported both transactions on a timely filed Form 5
for 1996.
BOARD OF DIRECTORS
The Board of Directors is currently comprised of eleven members. The Board
of Directors met six times in 1996. Average attendance of the Directors at the
meetings of the Board and its Committees held during 1996 was 96%.
The Board of Directors appoints from its members an Executive Committee, a
Committee on Audit, Finance and Corporate Performance, a Committee on System
Operations, Forecasting and Development, a Committee on Personnel, Executive
Development and Compensation, a Committee on Customer and Public Relations, and
a Nominating Committee.
EXECUTIVE COMMITTEE
The Executive Committee is presently composed of one Officer/Director and
four Directors-- Messrs. Sherwood H. Smith, Jr., Chairman, William Cavanaugh
III, Richard L. Daugherty, Robert L. Jones and William O. McCoy. The authority
and responsibility of the Executive Committee are provided in the Company's
Charter and By-Laws. The Committee held four meetings in 1996.
6
<PAGE>
COMMITTEE ON AUDIT, FINANCE
AND CORPORATE PERFORMANCE
The Committee on Audit, Finance and Corporate Performance is presently
composed of four outside Directors--Mr. J. Tylee Wilson, Chairman, Ms. Estell C.
Lee and Messrs. Charles W. Coker and William O. McCoy. The work of this
Committee includes review of the performance of the independent auditors and the
internal audit department. The Committee reviews corporate goals established by
the Company and the Company's progress in achieving these goals. The Committee
also maintains an overall view of the long and short range financial planning of
the Company and the supporting rate action. The Committee held three meetings in
1996.
COMMITTEE ON SYSTEM OPERATIONS,
FORECASTING AND DEVELOPMENT
The Committee on System Operations, Forecasting and Development is presently
composed of five outside Directors--Messrs. Edwin B. Borden, Chairman, Leslie M.
Baker, Jr., Felton J. Capel, Richard L. Daugherty, and Robert L. Jones. The
Committee examines the Company's projections of the economic development of the
Company's service area and the estimates of sales and load growth. The Committee
considers recommendations on the locations of generating facilities and types of
fuels for these facilities. It also reviews the Company's construction budget
and generation plan. The Committee held two meetings in 1996.
COMMITTEE ON PERSONNEL, EXECUTIVE
DEVELOPMENT AND COMPENSATION
The Committee on Personnel, Executive Development and Compensation is
presently composed of five outside Directors--Messrs. Charles W. Coker,
Chairman, Edwin B. Borden, Robert L. Jones, William O. McCoy and J. Tylee
Wilson. The Committee ascertains that personnel policies and procedures are in
keeping with all governmental rules and regulations and are designed to attract
and retain competent, talented employees and develop the potential of these
employees. The Committee reviews all executive development plans, makes
executive compensation decisions and oversees plans for management succession.
The Committee held seven meetings in 1996.
COMMITTEE ON CUSTOMER AND PUBLIC RELATIONS
The Committee on Customer and Public Relations is presently composed of four
outside Directors-- Ms. Estell C. Lee, Chairman, and Messrs. Leslie M. Baker,
Jr., Felton J. Capel and Richard L. Daugherty. It is the responsibility of the
Committee to review, monitor and assess the effectiveness of the Company's
communications programs for informing its customers, the general public and the
various governmental bodies. The Committee held two meetings in 1996.
NOMINATING COMMITTEE
The Nominating Committee is presently composed of four outside
Directors--Mr. Edwin B. Borden, Chairman, Ms. Estell C. Lee and Messrs. Charles
W. Coker, and J. Tylee Wilson. The Committee proposes to the Board annually a
slate of nominees for directors to be submitted to the shareholders for election
at the Annual Meeting of Shareholders. It is also the responsibility of the
Committee to submit nominations for the filling of vacancies which occur at
other times. Shareholder suggestions as to persons suitable for
7
<PAGE>
service on the Board sent to the Chairman of the Nominating Committee at the
Company's principal office are received and considered by the Nominating
Committee. The Committee held one meeting in 1996.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS' COMPENSATION
Directors who are not employees of the Company receive an annual retainer of
$26,000, of which $8,000 is automatically deferred under the Directors' Deferred
Compensation Plan (see below), and an attendance fee of $1,000 per meeting for
regularly scheduled Board meetings. Directors who are not employees of the
Company also receive an attendance fee for committee meetings of $1,000 for
committee members and $1,200 for committee chairmen except that the attendance
fee is $500 and $600 for committee members and committee chairmen, respectively,
for a committee meeting held on the day of a regularly scheduled Board meeting
or another committee meeting. Directors who are officers do not receive an
annual retainer or attendance fees. All Directors are reimbursed for expenses
incident to their service as Directors.
In addition to the $8,000 in annual retainer that is automatically deferred,
outside Directors may elect to defer the remainder of their annual retainer and
Board attendance fees until after the termination of their service on the Board
under the Directors' Deferred Compensation Plan. Any deferred fees are deemed to
be invested in a number of Units of Common Stock of the Company, but
participating Directors receive no equity interest or voting rights in the
Common Stock. The number of Units credited to the account of a participating
Director is equal to the dollar amount of the deferred fees divided by the
average of the high and low selling prices (i.e., market value) of the Common
Stock on the day the deferred fees would otherwise be payable to the
participating Director. The number of Units in each account is adjusted from
time to time to reflect the payment of dividends on the number of shares of
Common Stock represented by the Units. Unless otherwise agreed to by the
participant and the Board, when the participant ceases to be a member of the
Board of Directors, he or she will receive cash equal to the market value of a
share of the Company's Common Stock on the date of payment multiplied by the
number of Units credited to the participant's account.
Directors are also eligible for matching contributions of up to $8,000 under
an incentive compensation program. Awards under this program are based upon the
achievement of the corporate incentive goals established each year by the Board
and used as the basis for a matching contribution of shares of Common Stock for
participating employees in the Company's Stock Purchase-Savings Plan. In the
event that five of the corporate incentive goals are met, the $8,000 portion of
the annual retainer that is automatically deferred pursuant to the Directors'
Deferred Compensation Plan will be increased by 50 percent, with an additional
10 percent increase for each corporate incentive goal met in excess of five (up
to a maximum matching contribution of 100 percent).
An unfunded plan for outside Directors who have served on the Board for a
minimum period of five years provides retirement compensation to outside
Directors in an amount established by the Board (currently $15,000 annually) for
life or for the number of years the individual has served on the Board,
whichever period expires first.
All of the Directors participate in a Directors' Educational Contribution
Plan. The plan is funded by policies of corporate-owned life insurance on the
lives of pairs of Directors, with proceeds payable to the Company at the death
of the second to die in each pair. All costs of the plan are expected to be
covered
8
<PAGE>
from the life insurance proceeds to be received by the Company. Pursuant to this
plan, the Company will make a contribution in the name of each Director to an
educational institution or approved educational foundation or fund in North
Carolina or South Carolina selected by the Director and approved by the
Executive Committee of the Board of Directors. The contribution will be made at
the later to occur of the retirement of the Director from the Board of Directors
or ten years from the date of adoption of the plan. If a Director has served as
a Director for at least five but less than ten years at the time the
contribution is to be made, the Company will contribute $250,000 in the name of
the Director. If the Director has served for ten or more years, the amount of
the contribution will be $500,000. The plan may be terminated at any time in the
discretion of the Executive Committee without recourse or obligation to the
Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------------------ ---------- ----------
OTHER RESTRICTED
ANNUAL STOCK LTIP ALL OTHER
NAME AND SALARY(1) BONUS(2) COMPENSATION(3) AWARD(S)(4) PAYOUTS(5) COMPENSATION(6)
PRINCIPAL POSITION YEAR ($) ($) ($) ($) ($) ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sherwood H. Smith, Jr., 1996 $662,000 $ 400,000 $51,817 $ 30,578(8) N/A $ 88,785(9)
Chairman (Chief Executive 1995 630,000 360,000(7) 7,989 26,849 N/A 67,782
Officer through September 30, 1994 595,000 215,000 7,428 21,363 N/A 66,303
1996)
William Cavanaugh III, 1996 $525,000 $ 315,000 $7,067 $ 22,030(11) N/A $ 50,542(12)
President and Chief Executive 1995 445,000 250,000(10) 7,142 18,421 N/A 52,914
Officer 1994 420,000 152,000 6,267 12,932 N/A 50,308
William S. Orser, 1996 $321,000 $ 125,000 $4,620 $ 10,628(13) N/A $ 38,497(14)
Executive Vice President and 1995 306,000 125,000 651 8,493 N/A 38,999
Chief Nuclear Officer 1994 291,770 80,000 517 5,004 N/A 35,050
Glenn E. Harder, 1996 $234,000 $ 90,000 $4,248 $ 6,232(15) N/A $ 24,699(16)
Executive Vice President and 1995 208,990 75,000 701 2,775 N/A 71,950
Chief Financial Officer 1994 23,589 40,000 N/A N/A N/A 20,000(17)
(employed as of October 31,
1994)
James M. Davis, Jr., 1996 $216,000 $ 70,000 $3,815 $ 4,688(18) $ 63,637 $ 26,092(19)
Senior Vice President 1995 206,000 66,000 1,004 2,695 12,170 28,142
1994 186,458 37,000 1,145 1,347 N/A 26,963
Richard E. Jones, 1996 $264,257 $ 0 $3,575 $ 5,318(20) $ 71,179 $ 24,496(21)
Senior Vice President, 1995 217,000 65,000 836 3,344 12,170 28,598
General Counsel and Secretary 1994 205,000 45,000 1,173 2,409 15,260 28,372
(Resigned April 15, 1996)
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)Consists of base salary prior to (i) employee contributions to the Stock
Purchase-Savings Plan and (ii) voluntary deferrals, if any, under the Deferred
Compensation Plan for Key Management Employees or the Executive Deferred
Compensation Plan. See "Other Benefit Opportunities" on page 17.
9
<PAGE>
(2)Except as otherwise noted, consists of amounts awarded with respect to
performance in the stated year under the Management Incentive Compensation
Program. See "Other Annual Compensation Opportunities" on page 16.
(3)Consists of gross-up payments for certain federal and state income tax
obligations.
(4)Consists of the value of performance units credited to the account of a
participant to replace the value of Company contributions to the Stock
Purchase-Savings Plan that would have been made on behalf of the participant but
for the deferral of salary under the Deferred Compensation Plan for Key
Management Employees and compensation limitations under Section 415 of the
Internal Revenue Code of 1986, as amended ("Replacement Units"). Replacement
Units do not represent an equity interest in the Company and the crediting of
such Units to a participant's account does not convey any voting rights.
However, a Replacement Unit is equal in value at all times to a share of the
Company's Common Stock. Additional Replacement Units are credited from time to
time to reflect the payment of dividends on the underlying Common Stock. For
participant's with less than five years of service with the Company, these
Replacement Units vest two years from the end of the calendar year in which they
are granted. Participants with five or more years of service with the Company
are 100% vested in all Replacement Units credited to their accounts. Payment of
the value of the Replacement Units will be made in cash and will generally be
made at such time as a participant retires or is no longer a full-time employee
of the Company. The amount of the payout will equal the market value of a share
of the Company's Common Stock on the date of payout multiplied by the number of
units credited to the account of the participant. See "Other Benefit
Opportunities" on page 17. (In prior years, this column also included
performance units awarded under the Long-Term Compensation Program. The Company
has determined that awards granted under that Program are more properly
characterized as "Long-Term Incentive Plan" awards, and the awards for 1996 are
reported in the Long-Term Incentive Plan Awards Table. The "Restricted Stock
Awards" and "All Other Compensation" columns of the Summary Compensation Table
have been adjusted to conform to this method of reporting.)
(5)Consists of the value of payouts of awards and dividends earned on those
awards granted under the Company's Long-Term Compensation Program.
(6)Amounts reported in this column have been adjusted to include dividends
earned on awards granted under the Long-Term Compensation Program. These
adjustments were necessitated by the Company's determination that awards granted
under that Program are more properly characterized as Long-Term Incentive Plan
awards rather than Restricted Stock Awards, and that dividends earned on those
awards are reportable in the "All Other Compensation" column of the Summary
Compensation Table.
(7)Mr. Smith has elected to defer receipt of fifty percent of this amount to
January 1, 1999, the second anniversary of his date of retirement.
(8)Consists of 839 Replacement Units based on the market value of a share of
Common Stock on the date such units were credited to the account of the
participant.
(9)Consists of (i) $8,232 which represents Company contributions under the
Stock Purchase-Savings Plan; (ii) $42,001 which represents the dollar value of
the premium relating to the term portion and the present value of the premium
relating to the whole life portion of the benefit to be received pursuant to the
Executive Permanent Life Insurance Program; and (iii) $38,552 which represents
dividends earned in 1996 on performance units awarded under the Long-Term
Compensation Program.
(10)Mr. Cavanaugh has elected to defer receipt of twenty-five percent of
this award until his date of retirement.
(11)Consists of (i) 605 Replacement Units based on the market value of a
share of Common Stock on the date such units were credited to the account of the
participant.
(12)Consists of (i) $7,119 which represents Company contributions under the
Stock Purchase-Savings Plan; (ii) $36,685 which represents the dollar value of
the premium relating to the term portion and the present value of the premium
relating to the whole life portion of the benefit to be received pursuant to the
Executive Permanent Life
10
<PAGE>
Insurance Program; and (iii) $6,738 which represents dividends earned in 1996 on
performance units awarded under the Long-Term Compensation Program.
(13)Consists of 292 Replacement Units based on the market value of a share
of Common Stock on the date such units were credited to the account of the
participant.
(14)Consists of (i) $8,232 which represents Company contributions under the
Stock Purchase-Savings Plan; (ii) $25,635 which represents the dollar value of
the premium relating to the term portion and the present value of the premium
relating to the whole life portion of the benefit to be received pursuant to the
Executive Permanent Life Insurance Program; and (iii) $4,630 which represents
dividends earned in 1996 on performance units awarded under the Long-Term
Compensation Program.
(15)Consists of 171 Replacement Units based on the market value of a share
of Common Stock on the date such units were credited to the account of the
participant.
(16)Consists of (i) $7,107 which represents Company contributions under the
Stock Purchase-Savings Plan; (ii) $14,413 which represents the dollar value of
the premium relating to the term portion and the present value of the premium
relating to the whole life portion of the benefit to be received pursuant to the
Executive Permanent Life Insurance Program; and (iii) $3,179 which represents
dividends earned in 1996 on performance units awarded under the Long-Term
Compensation Program.
(17)Pursuant to an employment agreement, this amount was required to be
treated as if it were a one-year deferral under the Deferred Compensation Plan
for Key Management Employees.
(18)Consists of 129 Replacement Units based on the market value of a share
of Common Stock on the date such units were credited to the account of the
participant.
(19)Consists of (i) $8,022 which represents Company contributions under the
Stock Purchase-Savings Plan; (ii) $15,575 which represents the dollar value of
the premium relating to the term portion and the present value of the premium
relating to the whole life portion of the benefit to be received pursuant to the
Executive Permanent Life Insurance Program; and (iii) $2,495 which represents
dividends earned in 1996 on performance units awarded under the Long-Term
Compensation Program.
(20)Consists of 146 Replacement Units based on the market value of a share
of Common Stock on the date such units were credited to the account of the
participant.
(21)Consists of (i) $9,169 which represents Company contributions under the
Stock Purchase-Savings Plan; and (ii) $15,327 which represents the dollar value
of the premium relating to the term portion and the present value of the premium
relating to the whole life portion of the benefit to be received pursuant to the
Executive Permanent Life Insurance Program.
11
<PAGE>
LONG-TERM INCENTIVE PLAN
AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF
NAME UNITS(1)
- ------------------------------------------------------------------------------------------------------ -----------
<S> <C>
Sherwood H. Smith, Jr.,............................................................................... 70,668
Chairman (Chief Executive Officer
through September 30, 1996)
William Cavanaugh III,................................................................................ 4,875
President and Chief Executive Officer
William S. Orser,..................................................................................... 3,350
Executive Vice President
and Chief Nuclear Officer
Glenn E. Harder,...................................................................................... 2,300
Executive Vice President
and Chief Financial Officer
James M. Davis, Jr.,.................................................................................. 1,805
Senior Vice President
</TABLE>
<TABLE>
<S> <C>
(1) Consists of the number of performance units awarded under the Long-Term Compensation
Program in 1996, based on the market value of a share of Common Stock on the date of grant.
(In past years, performance units awarded under the Long-Term Compensation Program were
reported as Restricted Stock Awards. The Company has determined that awards granted under
the Program are more properly characterized as Long-Term Incentive Plan awards.) The number
of performance units awarded are recorded in a separate account for each participant.
Performance units do not represent an equity interest in the Company and the crediting of
such units to a participant's account does not convey any voting rights. However, a
performance unit is equal in value at all times to a share of the Company's Common Stock.
Additional units are credited to a participant's account from time to time to reflect the
payment of dividends on the underlying Common Stock. Awards made under the Long-Term
Compensation Program vest on the earlier of the date of death, the fourth month of the
second year following grant or the date of normal, early or disability retirement. The
Company will distribute in cash the aggregate value of the units related to an award as
follows: one-third on the date of vesting; one-third one year following vesting; and the
remaining one-third two years after vesting. In addition, a participant may make a
one-time, irrevocable payment election to defer receipt of the payout until the fifth year
following the grant of the award, the year following retirement, or over three years
beginning in the year following retirement; provided, however, that the entire award must
be paid on the earlier of the date of death, or the date of normal, early or disability
retirement. This payment election must be made no later than the end of the year for which
an award is made. See "Long-Term Compensation Opportunities" on page 16.
</TABLE>
12
<PAGE>
PENSION PLAN TABLE
<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------
ESTIMATED ANNUAL PENSION AT NORMAL
RETIREMENT
AVERAGE (YEARS OF CREDITED SERVICE)
COMPENSATION
- ---------------------------------------------------------
10 YEARS 15 YEARS 15 1/2 OR MORE
YEARS
- ---------------------------------------------------------
$190,000 $ 76,000 $ 114,000 $117,800
255,000 102,000 153,000 158,100
320,000 128,000 192,000 198,400
385,000 154,000 231,000 238,700
450,000 180,000 270,000 279,000
515,000 206,000 309,000 319,300
555,000 222,000 333,000 344,100
595,000 238,000 357,000 368,900
635,000 254,000 381,000 393,700
675,000 270,000 405,000 418,500
715,000 286,000 429,000 443,300
760,000 304,000 456,000 471,200
795,000 318,000 477,000 492,900
</TABLE>
- --------------------------------------------------------------------------------
The above table demonstrates senior executive pension benefits payable upon
normal retirement under the Supplemental Retirement Plan and Supplemental
Executive Retirement Plan at age 65 as a function of average annual income and
years of service. Covered compensation under these plans consists only of the
amounts in the Salary and Bonus columns of the Summary Compensation Table.
Pursuant to the Supplemental Retirement Plan, a defined benefit plan, benefits
are partially offset by Social Security payments and the monthly pension benefit
payable upon retirement is based on final five years average compensation
multiplied by 1.7% for each year of service up to a maximum of 60%. Benefits
under the Supplemental Executive Retirement Plan are fully offset by Social
Security benefits and by benefits paid under the Supplemental Retirement Plan.
The monthly benefit payable upon retirement under this plan is equal to 4% of
the average of a participant's highest three years of earnings for each year of
credited service with the Company up to a maximum of 62%. Benefits listed in the
table above do not reflect the Social Security or other offset. For purposes of
benefits under these plans, Messrs. Smith, Cavanaugh, Davis, and Jones each have
more than 15 1/2 years of credited service and are thereby entitled to the
maximum percentage allowable in the benefit formula under these plans. Mr.
Harder has five years of credited service, and Mr. Orser has three years of
credited service.
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<PAGE>
EMPLOYMENT AGREEMENTS
Messrs. Cavanaugh, Orser and Harder have entered into employment agreements
with the Company. These agreements provide for base salary, bonuses, and
participation in the various executive compensation plans offered to senior
executives of the Company. Base salary increases and bonus amounts are
determined by the Board of Directors' Committee on Personnel, Executive
Development and Compensation, as described in "Report of Board Committee on
Personnel, Executive Development and Compensation" below.
None of the agreements provide a specific employment term; however, the
agreements with Messrs. Cavanaugh and Orser state that employment is at the
continued will of the parties. The agreements provide that upon termination or
constructive termination of employment by the Company for any reason other than
good cause, Messrs. Cavanaugh and Orser will be entitled to the continuation of
salary and health benefits for 24 months. Constructive termination is defined in
the agreements with Messrs. Cavanaugh and Orser as a change in the form of
ownership of the Company or a change in the Chairman and Chief Executive Officer
(or a material change in his responsibilities), and must be elected by the
individual within one year of the occurrence of such a change. In addition, if
Mr. Orser's employment is terminated after he has attained age 55 but before
attaining age 60, the Company shall pay to him a retirement severance benefit of
$153,912 per year (less benefits payable under the Supplemental Executive
Retirement Plan). Mr. Cavanaugh received 14 years of credited service in the
Supplemental Executive Retirement Plan and Mr. Harder received 3 years of
credited service in that Plan.
The agreements with Messrs. Cavanaugh and Orser provide that if employment
under the agreements is terminated by the individual for any reason other than
death or disability, he shall retain all vested benefits but shall not be
entitled to any form of salary or health benefit continuance.
TERMINATION OF EMPLOYMENT ARRANGEMENTS
Mr. Smith retired from the Company on December 31, 1996. In anticipation of
his retirement, Mr. Smith entered into a personal services contract with the
Company in 1996. Under the terms of the contract, Mr. Smith will perform, as a
non-employee, the duties of the Chairman of the Company's Board of Directors and
of the Executive Committee of said Board. Additionally, Mr. Smith will perform
certain personal services, subject to the request and general direction of the
Company's Chief Executive Officer, related to representing the Company and its
subsidiaries in various areas, including industry, governmental, public
relations, economic development, and civic matters, and assisting the Company in
furthering its business purposes. Pursuant to the agreement, the Company will
pay Mr. Smith for the services rendered as follows: $397,200 in 1997; $330,996
in 1998; and $148,950 from January 1, 1999 through September 30, 1999.
Mr. Jones resigned from his full-time employment and status as an officer of
the Company effective April 15, 1996. Pursuant to the terms of an agreement
between Mr. Jones and the Company, Mr. Jones will perform various legal,
consulting and other services for the Company from April 15, 1996 to September
30, 1997. The Company will pay Mr. Jones approximately $23,333 per month (less
applicable withholdings) for those services, and he will have the right to
participate in the employee benefits the Company offers. During the first twelve
months following September 30, 1997, the Company will retain Mr. Jones to
provide legal, consulting and other services to the Company as prescribed by the
Chief Executive Officer. As compensation for these services, the Company will
pay Mr. Jones $6,000 per month (less applicable withholdings). During the second
twelve months following September 30, 1997, the Company will pay Mr. Jones
$3,000 per month (less applicable withholdings) to provide these services to the
Company. The Company will also complete Mr. Jones' contribution to the Deferred
Compensation Plan for Key Management Employees in the total amount of $88,425.
Mr. Jones will be entitled to retirement benefits under the various Company
benefit plans in which he participated as a Senior Executive of the Company.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
During 1996 Sherwood H. Smith, Jr. was a member of the Management Resources
and Compensation Committee of Wachovia Corporation. Leslie M. Baker, Jr., a
Director of the Company, is the President and Chief Executive Officer of
Wachovia Corporation.
14
<PAGE>
REPORT OF BOARD COMMITTEE ON PERSONNEL,
EXECUTIVE DEVELOPMENT AND COMPENSATION
The Company's executive compensation program is administered by the
Committee on Personnel, Executive Development and Compensation of the Board of
Directors (the "Committee"). The five-member Committee is composed entirely of
independent outside Directors who are not eligible to participate; provided,
however, that the Committee members will be eligible to participate in the 1997
Equity Incentive Plan which is proposed for shareholder approval later in this
Proxy.
COMPENSATION PRINCIPLES
The Company uses an independent executive benefits consulting firm to assist
the Company in meeting its compensation objectives. Each year, this consulting
firm provides the Committee with an analysis comparing overall compensation paid
to the Company's executives with overall compensation paid to executives of a
comparison group of electric utility companies. This comparison group consists
of seven electric utility companies in the southeastern United States. While
this comparison group is smaller than (i) the group of companies comprising the
Standard & Poor's Uitility (Electric Power Companies) Index, which is a
published industry index shown in the performance graph on page 20, and (ii) the
group of companies utilized for performance comparisons in determining award
eligibility under the Management Incentive Compensation Program and the
Long-Term Compensation Program, the Committee believes these seven electric
utility companies are appropriate for overall compensation comparisons, because
they are similar to the Company in size, electric facilities, and geographic
location.
The Company's executive compensation program consists of four major
elements: base salary; other annual compensation opportunities; long-term
compensation opportunities; and other benefit opportunities. The Committee's
objective in administering this program is to structure, through a combination
of these elements, an overall compensation package for executives which
approximates in value the median level to third quartile of overall compensation
paid to executives of the comparison group. Overall compensation paid to the
Company's executives in 1996 met this objective.
Section 162(m) of the Internal Revenue Code imposes a limit, with certain
exceptions, on the amount a publicly held corporation may deduct for
compensation over $1 million paid or accrued with respect to the Company's Chief
Executive Officer and any of the other four most highly compensated officers.
Certain performance-based compensation is however, specifically exempt from the
deduction limit. To qualify as exempt, compensation must be made pursuant to a
plan that is (1) administered by a committee of outside directors, (2) based on
achieving objective performance goals and (3) disclosed to and approved by the
shareholders. The 1996 compensation disclosed in this proxy statement does not
exceed the limit. As to future compensation, the Company does not have a policy
that requires the Committee to qualify compensation awarded to executive
officers for deductibility under Section 162(m) of the Code. The Committee does,
however, consider the impact of Section 162(m) when determining executive
compensation and proposed the adoption of the 1997 Equity Incentive Plan in an
effort to minimize the effect of this provision. Although the Committee is not
required to qualify executive compensation paid to Company executives for
exemption from Section 162(m), it will continue to consider the effects of
Section 162(m) when making compensation decisions.
Set forth below is a description of the major elements of the Company's
executive compensation program and their relationship to corporate performance,
as well as a summary of the actions taken by the Committee with respect to the
compensation of the Chief Executive Officer.
BASE SALARY
Executives of the Company receive a base salary determined by the Committee
based upon the value of their position compared to competitively established
salary ranges, their individual performance and overall corporate performance.
The Committee does not utilize specific targets or a specific mathematical
formula in determining base salaries. During 1996, the Committee in its
discretion approved increases in the base salaries of the Chairman, the Chief
Executive Officer and the named executives, as set forth in the Summary
Compensation Table. These increases were based on each executive's level of
responsibility in the Company, the median level of compensation for executives
in the comparison group of utilities, the
15
<PAGE>
achievement of corporate goals, and individual merit performance as
qualitatively determined by the Committee.
OTHER ANNUAL COMPENSATION OPPORTUNITIES
The Company sponsors a Management Incentive Compensation Program for its
senior executives, department managers and selected key employees. In order for
awards to be made under the program, a matching contribution must be earned by
all employees under the corporate incentive feature of the Company's Stock
Purchase-Savings Plan, a tax qualified 401(k) plan. Incentive matching
contributions are earned by participating employees if at least five out of ten
annual corporate goals are met. (See the description of the Stock
Purchase-Savings Plan under "Other Benefit Opportunities" below.) In the event
an incentive matching contribution is earned, the Committee compares the
Company's return on common equity and electric revenue per kWh for the most
recent three-year period with those of a comparison group that is comprised of
the major electric utility companies in the eastern United States with nuclear
and fossil generation. This twenty-three member comparison group is larger in
number and more diverse in terms of size and geographic location than the
comparison group utilized for overall compensation purposes. The Committee
believes, however, that the additional size and diversity of this group is
appropriate for comparisons based on corporate performance. This performance
comparison group also differs from the group comprising the Standard & Poor's
Utility (Electric Power Companies) Index shown in the performance graph on page
20. Participants are eligible for an award under this program only if the
Company's performance criteria surpass the median of the performance criteria of
the comparison group. If participants at or above the Department Head level of
the Company are eligible for awards, then the Committee in its discretion
determines whether awards are to be made and, if so, in what amounts. If
participants below the Department Head level of the Company are eligible for
awards, then the Chief Executive Officer has sole and complete authority to
approve such awards. Awards consist of both a corporate component and
noncorporate component. Award opportunities, expressed as a percentage of
salary, are applicable to both components of an award. The corporate component
of an award is based upon the overall performance of the Company. The
noncorporate component of an award is based upon the level of attainment of
group, departmental and individual performance measures. Those measures are
evaluated in terms of three levels of performance--outstanding, target and
threshold--each of which is related to a particular payout percentage. If
earned, awards are either paid in cash in the succeeding year, or deferred to a
later date, as elected by each individual participant. Deferred awards are
recorded in the form of performance units. Each performance unit is generally
equivalent to a share of the Company's common stock.
The threshold requirements for award eligibility, as discussed above, were
met and exceeded in 1996. At a meeting of the Committee on March 19, 1997, based
on highly commendable performance, awards were made in the discretion of the
Committee to the named executives including the Chief Executive Officer, as set
forth in the Summary Compensation Table under the Bonus column.
LONG-TERM COMPENSATION OPPORTUNITIES
The Company also sponsors a Long-Term Compensation Program. There are two
award opportunities available under this program. The first is an award which
may be made to attract and retain key executives or to recognize and reward
sustained individual performance which has in the opinion of the Committee
contributed significantly to the success of the Company. This type of award is
granted in the discretion of the Committee considering the Company's overall
performance and best interests, and it is not subject to specific criteria,
specific targets, or a specific mathematical formula. The other award
opportunity available under the Long-Term Compensation Program is an annual
award. An annual award may be granted only if a contribution is earned by one or
more groups of employees under the corporate incentive feature of the Company's
Stock Purchase-Savings Plan. Additionally, the Company's performance, as
measured by at least two of the following criteria for the most recent
three-year period must surpass that of a comparison group consisting of the same
companies as the comparison group utilized for performance comparisons under the
Management Incentive Compensation Program as discussed above: return on common
equity; electric revenue per kWh; and total return to shareholders. This
comparison group is utilized for performance comparisons only and differs from
the comparison group utilized for overall compensation
16
<PAGE>
comparisons (which is comprised of electric utilities that are generally similar
in size, electric facilities, and geographic location to the Company), and the
group comprising the Standard & Poor's Utility (Electric Power Companies) Index
shown in the performance graph on page 20. In addition, other criteria may be
established by the Committee in its discretion that may be of relevance to the
overall success of the Company. If participants are eligible for an award, then
the Committee in its discretion determines whether awards are to be made and, if
so, in what amounts; provided, however, that no annual awards granted to any
participant in any one year may exceed in value forty percent of that
participant's salary for that year. The Committee does not utilize specific
targets in determining award levels under the Long-Term Compensation Program.
Awards made under the Long-Term Compensation Program are deferred and
recorded in the form of performance units equal in value to the Company's Common
Stock. A performance unit does not represent an equity interest in the Company
and conveys no voting rights. However, a performance unit is equal in value at
all times to a share of Common Stock and additional units are credited from time
to time to reflect the payment of dividends on the Company's Common Stock. An
award to a participant vests on the earlier of the date of death, the fourth
month of the second year following the date of grant, or the date of normal,
early or disability retirement. The Company will distribute in cash to a
participant the value of the performance units credited to the participant's
account as follows: one-third on the date the award vests; one-third one year
after the date the award vests; and the remaining one-third two years after the
date the award vests. Thus, the amount received by a participant is dependent
upon the future performance of the Company and market value of Common Stock over
a future four-year period after the award is granted. In addition, a participant
may make a one-time, irrevocable payment election to defer receipt of the payout
until the fifth year following the date of grant, the year following retirement,
or over a three-year period beginning in the year following retirement;
provided, however, that the entire award must be paid on the earlier of the date
of death, or the date of normal, early or disability retirement.
In September of 1996, the Committee granted a Long-Term Compensation Program
award to Mr. Smith for "sustained individual outstanding performance which has
contributed significantly to the growth and profitability of the Company." The
award, which is permitted under the Plan, is set forth in the Long-Term
Incentive Plan (LTIP) Awards Table. Since the conditions for annual awards under
the Long-Term Compensation Program were satisfied in 1996, participants were
eligible for annual awards for 1996. At a meeting on March 19, 1997, the
Committee, in its discretion made an award, based on highly commendable
performance, to Mr. Smith under the Long-Term Compensation Program. The
Committee does not intend to grant additional awards under the Long-Term
Compensation Program if the shareholders approve the proposed 1997 Equity
Incentive Plan. Thus, other executives named in this Proxy who were eligible to
receive awards for 1996 under the Long-Term Compensation Program were instead
granted Performance Shares under the proposed 1997 Equity Incentive Plan. Those
awards are contingent upon shareholder approval of the proposed Plan.
OTHER BENEFIT OPPORTUNITIES
The following additional benefit opportunities are also available to the
Company's senior executives:
- The Company sponsors a Deferred Compensation Plan for Key Management
Employees which allows a participant to defer until retirement up to 15% of the
participant's annual compensation for one to four years. All employees at or
above the department head level are eligible to participate in the plan. Upon
retirement, the participant receives monthly supplemental retirement payments
over a 180-month period.
- Pursuant to the Executive Deferred Compensation Plan, all or a portion of
an executive's salary may be deferred. There was no deferral of compensation in
1996 under this plan.
- To replace the value of Company contributions to the Stock
Purchase-Savings Plan that would have been made but for (i) the deferral of
salary under the Executive Deferred Compensation Plan and the Deferred
Compensation Plan for Key Management Employees and (ii) compensation limitations
under Section 415 of the Internal Revenue Code of 1986, as amended, senior
executives and other employees are credited with performance units equal in
value to shares of the Common Stock of the Company. These
17
<PAGE>
performance units do not represent an equity interest in the Company and convey
no voting rights to their owners. However, additional units are credited from
time to time to reflect the payment of dividends on the Company's Common Stock.
Unless otherwise determined by the Board, at the time a participant is no longer
a full-time employee of the Company, he or she will receive cash equal to the
market value of a share of Common Stock times the number of performance units
credited to the account of the participant. (The vesting rules that apply to the
Company's contributions to the Stock Purchase-Savings Plan apply to these plans
as well.)
- The Company has implemented an executive split dollar life insurance
program which consists of two separate plans. The first plan provides life
insurance coverage approximately equal to three times salary for senior
executives. The second plan provides additional life insurance coverage
approximately equal to five times salary for those officers of the Company who
are also members of the Board of Directors.
- The Company also provides broad-based employee benefit plans in which
senior executives participate. Under the Stock Purchase-Savings Plan, a salary
reduction plan under Section 401(k) of the Internal Revenue Code of 1986, as
amended, full-time highly compensated employees may invest up to 10% of earnings
(up to a maximum of $9,500 in 1996) on a before-tax basis in the Company's
Common Stock and other investment options. The Company makes a matching
contribution of 50% of such investment (up to 3% of earnings) which is invested
in Company Common Stock. Under an incentive feature, the Company's contribution
may be increased by up to an additional 50% if certain corporate financial,
operating, safety and customer satisfaction performance goals are met. The
Company also sponsors the Supplemental Retirement Plan, a defined benefit plan
which covers full-time employees who are at least twenty-one years old and have
been employed for at least one year. The right to receive pension benefits under
this plan is vested after five years. The monthly pension benefit payable upon
retirement is based on final five years average compensation multiplied by 1.7%
for each year of service up to a maximum of 60%, less projected age 65 Social
Security benefits multiplied by 1.43% for each year of service up to a maximum
of 50%.
- The Supplemental Executive Retirement Plan provides a retirement benefit
for eligible senior executives equal to 4% of the average of their highest three
years of base salary and annual bonus for each year of credited service with the
Company up to a maximum of 62%. Benefits under this plan are fully offset by
Social Security benefits and by benefits paid under the Company's Supplemental
Retirement Plan.
- The Company's senior executives also receive certain perquisites and other
personal benefits which in 1996 did not exceed the lesser of either $50,000 or
10% of the executive's salary and bonus. In addition, executives received
gross-up payments in 1996 for related federal and state income tax obligations,
as disclosed in the Summary Compensation Table on page 9.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Compensation in 1996 for Mr. Smith and Mr. Cavanaugh was consistent with the
compensation principles described above and reflected performance of the Company
and the individuals in 1995, as well as services in 1996. The determination of
their compensation by the Committee was qualitative in nature and based on a
variety of factors, including comparison group compensation data, attainment of
various corporate goals, total shareholder return, financial and operating
performance, individual performance and other factors. Specific mathematical
weights were not assigned to these factors. Overall compensation in 1996
approximated in value the median level of overall compensation paid to chief
executive officers in the comparison group. The Committee considered the fact
that 1996 was a superlative year for the Company in terms of earnings, operating
performance, sales and costs for customers. Specifically, the Committee
considered the Company's stock and total return, which continued to exceed the
Standard & Poor's Utility (Electric Power Companies) Index average. That Index
ranked the Company's stock third-highest in total return and highest among all
utilities in the Southeast. The Committee also considered the fact that in 1996,
all three of the Company's nuclear plants set a record for generation, while
production costs decreased nearly 8 percent from 1995. The Company's
kilowatt-hour sales grew by 2.9 percent in 1996 compared to 1995, while the cost
to customer per kilowatt-hour declined. Fuel costs, the biggest
18
<PAGE>
portion of the Company's production expense, decreased, due in part to the
Company's renegotiation of a major coal-supply contract. The Committee also took
into account the fact that each of the nuclear plants have exceeded the
long-term goals set in 1993 as part of a three-year plan. The Committee
considered the fact that the leadership provided by Mr. Smith and Mr. Cavanaugh
contributed significantly to the Company's success in achieving corporate goals,
developing and implementing strategic initiatives, achieving national leadership
in the fields of nuclear power and electric utility operations, pursuing
additional earnings opportunities in telecommunications and energy-management
services, and supporting the economic growth and quality of life in the
Company's service area. Finally, the Committee considered Mr. Cavanaugh's
achievements in assuming the role of Chief Executive Officer and Mr. Smith's
sustained outstanding performance during the course of his career with the
Company.
Committee on Personnel, Executive
Development and Compensation
Charles W. Coker, Chairman
Edwin B. Borden
Robert L. Jones
William O. McCoy
J. Tylee Wilson
19
<PAGE>
PERFORMANCE GRAPH
The following line graph compares the yearly percentage change in the
Company's cumulative total shareholder return on its Common Stock with the
cumulative total return of the Standard & Poor's 500 Stock Index and the
Standard & Poor's Utility (Electric Power Companies) Index.
[GRAPH APPEARS HERE]
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG CAROLINA POWER & LIGHT COMPANY, S&P 500 STOCK INDEX
AND S&P UTILITY (ELECTRIC POWER COMPANIES) INDEX
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Carolina S&P S&P
Power & Utility 500
Measurement period Light ------- ----
(Fiscal Year Covered) Company Index Index
- -------------------- ------- ------ -----
Measurement PT-
12/31/91 $ 100 $ 100 $ 100
FYE 12/31/92 $ 109 $ 106 $ 108
FYE 12/31/93 $ 125 $ 119 $ 118
FYE 12/31/94 $ 118 $ 102 $ 120
FYE 12/31/95 $ 162 $ 134 $ 165
FYE 12/31/96 $ 180 $ 130 $ 203
</TABLE>
* $100 Investment Beginning on December 31, 1991 in Stock or Index. Including
reinvestment of dividends.
20
<PAGE>
PROPOSAL
APPROVAL OF THE CAROLINA POWER & LIGHT COMPANY
1997 EQUITY INCENTIVE PLAN
BACKGROUND
- ----------
Below is a description of the Carolina Power & Light Company 1997 Equity
Incentive Plan (the "Plan"), adopted by the Board of Directors of the Company on
March 19, 1997. The Board unanimously recommends that the Plan be approved. In
keeping with this recommendation, the Board has directed that the Plan be
submitted to a vote of the shareholders at this Annual Meeting. If approved by
the shareholders as proposed herein, the Plan will allow the Personnel,
Executive Development and Compensation Committee (the "Committee") to make
various types of awards to Key Employees, including Directors of the Company,
its Affiliates and Subsidiaries.
The Plan, along with other elements of the Company's compensation program,
will support the stock ownership guidelines for Company officers, which were
adopted by the Board at its December 11, 1996 meeting. These guidelines are
designed to link the interests of Company executives with those of shareholders
by ensuring that executives hold an ownership stake in the Company that is
significant in comparison to their salaries, and thus have a sustained interest
in the Company's long-term performance. The guidelines require executives to own
Company "stock," including forms other than shares owned outright by an
executive, valued at between one and four times their individual base salaries,
depending upon their positions. Executives are encouraged to achieve their
target ownership levels within five years.
Under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), the Company is not entitled to a federal income tax deduction for
compensation in excess of $1 million paid in any year to a "Covered
Participant," subject to certain exceptions. Compensation that qualifies as
"performance-based" under Section 162(m) is exempt from this limitation. The
Plan sets forth a list of alternative Performance Measures, the attainment of
which may determine the degree of payout and/or vesting with respect to Awards
that are designed to qualify for the performance-based exception to Section
162(m). Under the Plan, the Committee may grant awards in a manner that
qualifies them for the exemption for performance-based compensation, or it may
grant awards that do not qualify for the exemption. The applicable conditions of
the performance-based compensation exemption include, among others, a
requirement that the shareholders of the Company approve the material terms of
the Plan.
Approximately 50 persons are currently eligible to participate in the Plan.
The number of persons eligible to participate in the Plan and the number of
grantees may vary from year to year.
The Plan is a broad umbrella plan that allows the Company to enter into
Award Agreements and/or adopt various individual Sub-Plans that will permit the
grant of several different types of Awards. Contingent upon shareholder approval
of the Plan, the Committee has approved a Performance Share Sub-Plan under which
40 Performance Share awards have been granted. The New Plan Benefits Table on
page 27 describes the awards granted under this Sub-Plan. The Performance Share
Sub-Plan is intended to replace the Company's Long-Term Compensation Program.
The dollar amount that will be received when Awards granted under the Sub-Plan
are paid out can increase or decrease depending on how the Company's total
shareholder return performance compares over a three-year period to that of
others in a peer group of companies. Thus, the Performance Share Sub-Plan
ensures that participants' compensation is tightly linked to measurable
performance.
21
<PAGE>
The Plan is reproduced in its entirety in Appendix A to this Proxy
Statement, and all capitalized terms used but not defined either above or in the
following description are used as defined in the Plan. The following description
is qualified in all respects by reference to the full Plan document.
PLAN DESCRIPTION
PURPOSE
The purposes of the Plan are to promote the interests of the Company and its
shareholders by (i) attracting and retaining executive officers and other key
employees who are essential to the Company's success; (ii) motivating executive
officers and other key employees using performance-related and stock-based
incentives that are linked to long-range performance goals and the interests of
Company shareholders; and (iii) enabling such employees to share in the
long-term growth and success of the Company.
ELIGIBILITY
The Committee shall have sole and complete discretion to determine Key
Employees, including officers and Directors, who shall be eligible to
participate in the Plan, subject to the following limitations: (i) no member of
the Committee or Director shall be eligible to participate in the Plan except
with approval of the full Board; (ii) no person owning, directly or indirectly,
more than 5% of the total combined voting power of all classes of stock of the
Company shall be eligible to participate in the Plan; and (iii) only regular,
full-time employees shall be eligible to participate in the Plan, except that
Directors may be granted Non-Qualified Stock Options or Restricted Stock awards.
EFFECTIVE DATE AND DURATION
Subject to the approval of the Company's shareholders, the Plan shall be
effective as of January 1, 1997. The Plan shall expire on January 1, 2007;
provided, however, that all awards made prior to, and outstanding on that date,
shall remain valid in accordance with their terms and conditions.
ADMINISTRATION
The Plan shall be administered and interpreted by the Committee, which is
intended to be comprised of "non-employee directors" as defined in Rule 16b-3 of
the Securities Exchange Act of 1934, as amended (the "Act") and to satisfy the
"outside director" provisions of Section 162(m) of the Code. The Committee shall
have sole and complete discretion to adopt, alter, suspend and repeal any such
administrative rules, regulations, guidelines and practices governing operation
of the Plan as it shall from time to time deem advisable. In addition to any
other powers and, subject to the provisions of the Plan, the Committee shall
also have the following specific powers: (i) to determine the terms and
conditions upon which the Awards may be made and exercised; (ii) to determine
all terms and provisions of each Agreement and/or Sub-Plan, which need not be
identical for types of awards nor for the same type of award to different
Participants; (iii) to construe and interpret the Agreements, Sub-Plans and the
Plan; (iv) to establish, amend, or waive rules or regulations for the Plan's
administration; (v) to accelerate the exercisability of any Award, the length of
a Performance Period or the termination of any Period of Restriction; and (vi)
to make all other determinations and take all other actions necessary or
advisable for the administration of the Plan.
22
<PAGE>
SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
Subject to adjustment as provided in the Plan, the maximum aggregate number
of shares that may be issued over the years pursuant to Awards made under the
Plan shall not exceed 5,000,000 Shares of Common Stock, which may be in any
combination of Options, Restricted Stock, Performance Shares, or any other right
or option. Shares of Common Stock may be available from the authorized but
unissued Shares of Common Stock, or any Shares of Common Stock acquired by the
Company, including Shares of Common Stock purchased in the open market. Except
as provided below, the issuance of Shares in connection with the exercise of, or
as other payment for, Awards under the Plan shall reduce the number of Shares
available for future Awards under the Plan.
If (i) any Option or other Award granted under the Plan terminates, expires,
or lapses for any reason other than exercise of the Award, or (ii) Shares issued
pursuant to the Awards are canceled or forfeited for any reason, such Shares
subject to such Award shall thereafter again be available for grant of an Award
under the Plan.
In the event a Participant pays for any Option or other Award granted under
the Plan through the delivery of previously acquired shares of Common Stock, the
number of shares of Common Stock available for Awards under the Plan shall be
increased by the number of shares surrendered by the Participant, subject to
Rule 16b-3 under the Exchange Act as interpreted by the Securities and Exchange
Commission or its staff.
The maximum Award that may be earned in the form of Restricted Stock,
Performance Units, Performance Shares, or Other Stock-Based Awards to any
Covered Participant under the Plan for any Performance Period is $1,500,000. The
maximum number or Shares of Stock subject to Options, Stock Appreciation Rights
and/or Restricted Stock granted to any Covered Participant for any Performance
Period shall be 250,000 shares.
The issuance of Stock or Shares under the Plan requires the registration of
such Stock or Shares with the Securities and Exchange Commission, and the
approval of the North Carolina Utilities Commission and the South Carolina
Public Service Commission.
TYPES OF AWARDS
The Plan is a broad umbrella Plan that allows the Company to enter into
Award Agreements and adopt various individual Sub-Plans that will permit the
grant of the following types of Awards: Nonqualified Stock Options, Incentive
Stock Options, Stock Appreciation Rights, Restricted Stock, Performance Units,
Performance Shares and Other Stock Unit Awards or stock-based forms of Awards.
The Plan sets forth certain minimum requirements for each type of Award.
Detailed provisions regarding Awards will be set out either in Award Agreements
or in the Sub-Plans adopted under the Plan. The adoption of any such Sub-Plans
shall not be subject to shareholder approval.
STOCK OPTIONS
The Committee may grant Stock Options, including Nonqualified Stock Options
(NQSOs) and Incentive Stock Options (ISOs) to Key Employees and Directors;
provided, however, that Directors may only receive NQSOs. (Option grants to
Directors must be approved by the full Board.) The terms and conditions
applicable to each Option grant shall be detailed in an Award Agreement. Stock
Option grants will entitle the Participant to purchase Stock at prices
determined by the Committee at the time of grant.
23
<PAGE>
The "Option Price" must not be less than 100% of the Fair Market Value of the
Company's Common Stock on the Grant Date. Options granted under the Plan shall
be exercisable at such times as the Committee determines; provided, however that
no Option may be exercisable more than ten years from the Grant Date. The Option
exercise price shall be payable to the Company in full by any one or a
combination of the following: in cash or its equivalent, or by the delivery of
Shares of Stock (not subject to any security interest or pledge) valued at Fair
Market Value at the time of exercise. At the request of the Participant, the
Company may, but shall not be required to cooperate in a Cashless Exercise of
the Option.
STOCK APPRECIATION RIGHTS
The Committee may grant freestanding Stock Appreciation Rights, Stock
Appreciation Rights in tandem with an Option, or Stock Appreciation Rights in
addition to an Option. The exercise price of each Stock Appreciation Right shall
be determined by the Committee at the time of grant but shall in no event be
less than 100% of the Fair Market Value of the Common Stock on the Grant Date.
The Participant is entitled to receive an amount equal to the excess of the Fair
Market Value of a Share over the grant price thereof on the date of exercise of
the Stock Appreciation Right. Upon exercise of the Stock Appreciation Right, the
Participant shall be entitled to receive payment from the Company in an amount
determined by multiplying (a) the difference between the Fair Market Value of a
Share on the date of exercise of the Stock Appreciation Right over the grant
price specified in the Award Agreement by (b) the number of Shares with respect
to which the Stock Appreciation Right is exercised.
RESTRICTED STOCK
The Committee may grant shares of Restricted Stock to Participants in such
amounts and for such duration and/or consideration as it shall determine. Each
Restricted Stock grant shall be evidenced by an Award Agreement specifying the
Period of Restriction, the conditions which must be satisfied prior to removal
of the restriction, the number of shares of Restricted Stock granted, and such
other provisions as the Committee shall determine. The types of restrictions the
Committee may specify in an Award Agreement include but are not limited to
restrictions on acceleration or achievement of terms or vesting based on any
business or financial goals of the Company, such as the Performance Measures
described in the Plan. Participants receiving Restricted Stock Awards generally
are not required to pay for them (except applicable tax withholding) other than
by the rendering of services to the Company.
Restricted Stock covered by an Award made under the Plan shall become freely
transferable by the Participant after the last day of the Period of Restriction
and/or upon the satisfaction of other conditions as determined by the Committee.
The minimum Period of Restriction shall be at least one year for
performance-based grants of Restricted Stock. The Period of Restriction for
non-performance-based grants of Restricted Stock shall be a minimum of three
years. During that three year period the removal of restrictions on up to
one-third of the shares may be permitted at the end of each year following the
Grant Date. Restrictions on grants of Restricted Stock shall not be removed
during the first year following the Grant Date except in the event of a Change
in Control. Except as described above, the Committee shall not have the
authority to reduce or remove restrictions or the Period of Restriction.
During the Period of Restriction, Participants in whose name Restricted
Stock is granted under the Plan may exercise full voting rights with respect to
those shares, and shall be entitled to receive all dividends and other
distributions paid with respect to those Shares. If any such dividends or
distributions are paid in Shares, the Shares shall be subject to the same
restrictions on transferability as the Restricted Stock with respect to which
they were distributed.
24
<PAGE>
PERFORMANCE-BASED AWARDS
The Committee may issue Performance Awards in the form of either Performance
Units or Performance Shares, subject to the Performance Measures and Performance
Period it determines. The extent to which Performance Measures are met will
determine the value of each Performance Unit or the number of Performance Shares
earned by the Participant. The terms and conditions of each Performance Award
will be set forth in an Awards Agreement and/or a Sub-Plan. Payment of the
amount due upon settlement of a Performance Award shall be made in cash and/or
Stock, paid in lump sum or installments as prescribed by the Committee.
OTHER STOCK-BASED AWARDS
The Committee may issue to Participants, either alone or in addition to
other Awards made under the Plan, Stock Unit Awards which may be in the form of
Common Stock or other securities. The value of each such Award shall be based,
in whole or in part, on the value of the underlying Common Stock or other
securities. The Committee, in its sole and complete discretion, may determine
that an Award may provide to the Participant (i) dividends or dividend
equivalents (payable on a current or deferred basis) and (ii) cash payments in
lieu of or in addition to an Award. Subject to the provisions of the Plan, the
Committee in its sole and complete discretion, shall determine the terms,
restrictions, conditions, vesting requirements, and payment rules of the Award
which shall be specified in an Award Agreement.
AMENDMENT OF PLAN
The Committee or Board may amend, suspend or terminate the Plan, in whole or
in part, at any time; provided, however, that any amendment shall be made with
shareholder approval where such approval is necessary to comply with applicable
tax or regulatory requirements.
CHANGE IN CONTROL OR DIVESTITURE
In the event of a Change in Control or a Divestiture, the Committee may
accelerate the payment or vesting of any Award and release any restrictions on
any Award.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief description of the federal income tax consequences
to Participants and the Company relating to Options and other Awards that may be
granted under the 1997 Equity Incentive Plan.
NON-QUALIFIED STOCK OPTION
There will be no federal income tax consequences to either the optionee or
the Company upon the grant of an NQSO. Upon exercise of an NQSO, the optionee
generally will have taxable ordinary income equal to the difference between the
current fair market value of the shares and the option price, and the Company
will be entitled to a federal income tax deduction of that amount. The tax basis
of the shares will equal the exercise price plus the amount of income recognized
on exercise, and the holding period commences on the date the option is
exercised. Subsequent disposition of the share will result in either short-term
or long-term capital gain or loss to the optionee and will have no impact on the
Company.
25
<PAGE>
INCENTIVE STOCK OPTION
There will be no federal income tax consequences to either the optionee or
the Company upon the grant or exercise of an ISO. However, unless the holding
period requirements discussed below are violated, the optionee will be deemed to
have a tax preference item (equal to the difference between the current market
value of the shares on the date of exercise and the option price) that may
result in alternative minimum tax liability. If an optionee exercises an ISO and
does not dispose of the shares within two years from the date of grant or within
one year from the date of exercise, any gain realized upon disposition will be
taxable as long-term capital gain, and the Company will not be entitled to any
deduction. If an optionee violates the holding period requirements, the optionee
will realize ordinary income in the year of disposition, and the Company will be
entitled to a corresponding deduction in an amount equal to the excess of (1)
the lesser of (a) the amount realized on the sale or exchange, or (b) the fair
market value of the shares on the date of exercise, over (2) the option price.
Any remaining gain or loss will be treated as a capital gain or loss and the
Company is not entitled to a deduction for said amount.
An ISO which is exercised more than three months after the optionee
terminates employment with the Company will be treated as an NQSO for federal
income tax purposes.
OTHER AWARDS
The federal income tax consequences of other Awards authorized under the
Plan are generally in accordance with the following: Stock Appreciation Rights
are taxed and deductible by the Company in substantially the same manner as
NQSO's; Restricted Stock subject to a substantial risk of forfeiture results in
income recognition equal to the excess of the Fair Market Value of the Shares
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 the grant);
cash dividends on Restricted Stock; Restricted Units, Performance Units,
Performance Shares, Other Stock Unit Awards or stock-based forms of Awards and
dividend equivalents generally are subject to tax at the time of payment. In
each of the foregoing cases, the Company will generally have a corresponding
deduction at the time the Participant recognizes income.
PERFORMANCE SHARE SUB-PLAN
- --------------------------
The Performance Share Sub-Plan was established pursuant to the 1997 Equity
Incentive Plan on March 19, 1997. The Committee approved the awards described in
the table below, contingent upon shareholder approval of the 1997 Equity
Incentive Plan.
26
<PAGE>
NEW PLAN BENEFITS
PERFORMANCE SHARE SUB-PLAN OF THE 1997 EQUITY INCENTIVE PLAN
<TABLE>
<CAPTION>
DOLLAR NUMBER OF
NAME AND POSITION VALUE UNITS(1)
- --------------------------------------------------------------------------------- ----------- -----------------
<S> <C> <C>
William Cavanaugh III,........................................................... $ 450,000 12,245
President and Chief Executive Officer
William S. Orser,................................................................ 176,500 4,803
Executive Vice President and Chief Nuclear Officer
Glenn E. Harder,................................................................. 125,000 3,401
Executive Vice President and Chief Financial Officer
James M. Davis, Jr.,............................................................. 112,500 3,061
Senior Vice President
Executive Group.................................................................. 986,000 26,829
Non-Executive Director Group..................................................... 0 None
Non-Executive Officer Employee Group............................................. 984,312 26,784
</TABLE>
- ------------------------
(1) The dollar value of each Performance Share is $36.75, which was the closing
price of a share of the Company's Common Stock on March 18, 1997, as published
in the WALL STREET JOURNAL.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 1997 EQUITY
INCENTIVE PLAN. ---
27
<PAGE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Deloitte & Touche LLP has been selected by the Board of
Directors to serve as independent public accountants for the Company for the
current year, having served in that capacity since 1930. A representative of
Deloitte & Touche LLP will be present at the Annual Meeting of Shareholders,
will have the opportunity to make a statement and will be available to respond
to appropriate questions.
FINANCIAL STATEMENTS
The Company's 1996 Annual Report, which includes financial statements for
the fiscal years ended December 31, 1996 and 1995 together with related notes,
audited statements of income and changes in financial position for the three
most recent years and the report of Deloitte & Touche LLP, independent public
accountants, was mailed to shareholders of record as of the close of business on
February 28, 1997.
DATE FOR RECEIPT OF SHAREHOLDER PROPOSALS
The deadline by which shareholder proposals must be submitted for
consideration at the 1998 Annual Meeting of Shareholders is December 1, 1997.
OTHER BUSINESS
The Board of Directors does not intend to bring any business before the
meeting other than that stated in this Proxy Statement. The Board knows of no
other matter to come before the meeting. If other matters are properly brought
before the meeting, it is the intention of the Board of Directors that the
persons named in the enclosed Proxy will vote on such matters pursuant to the
Proxy in accordance with their best judgment.
28
<PAGE>
APPENDIX A
CAROLINA POWER & LIGHT COMPANY
1997 EQUITY INCENTIVE PLAN
SECTION 1. PURPOSE
Carolina Power & Light Company (hereinafter referred to as the "Company"), a
North Carolina corporation, hereby establishes the 1997 Equity Incentive Plan
(the "Plan") to promote the interests of the Company and its shareholders
through the (i) attraction and retention of executive officers and other key
employees essential to the success of the Company; (ii) motivation of executive
officers and other key employees using performance-related and stock-based
incentives linked to longer-range performance goals and the interests of Company
shareholders; and (iii) enabling of such employees to share in the long-term
growth and success of the Company. The Plan permits the grant of Nonqualified
Stock Options, Incentive Stock Options (intended to qualify under Section 422 of
the Internal Revenue Code of 1986, as amended), Stock Appreciation Rights,
Restricted Stock, Performance Shares, Performance Units, and any other Stock
Unit Awards or stock-based forms of awards as the Committee may determine under
its sole and complete discretion at the time of grant, subject to the provisions
of this Plan document and applicable law.
SECTION 2. EFFECTIVE DATE AND DURATION
The Plan was approved by the Committee and the Board of Directors on March
19, 1997. Subject to shareholder approval, the Plan shall be effective on
January 1, 1997; however, any Award granted under this Plan shall be granted
subject to shareholder approval, and no Stock, rights or Options may be sold,
awarded or granted under the Plan until the Company has filed a Registration
Statement under the Securities Act covering the shares of Stock to be issued
under the Plan. The Plan shall expire on January 1, 2007; however, all Awards
made prior to, and outstanding on such date, shall remain valid in accordance
with their terms and conditions.
SECTION 3. DEFINITIONS
Except as otherwise defined in the Plan, the following terms shall have the
meanings set forth below:
3.1 "Affiliate" shall have the meaning ascribed to such term in Rule 12b-2
under the Exchange Act.
3.2 "Award" means individually or collectively, a grant under this Plan of
Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation
Rights, Restricted Stock, Performance Units, Performance Shares, or other
Stock Unit Awards.
3.3 "Award Date" or "Grant Date" means the date on which an Award is made by
the Committee under this Plan.
3.4 "Award Agreement" or "Agreement" means a written agreement implementing
the grant of each Award signed by an authorized officer of the Company and
by the Participant.
3.5 "Beneficial Owner" shall have the meaning ascribed to such term in Rule
13d-3 under the Exchange Act.
3.6 "Board" or "Board of Directors" means the Board of Directors of the
Company.
3.7 "Cashless Exercise" means the exercise of an Option by the Participant
through the use of a brokerage firm to make payment to the Company of the
exercise price either from the proceeds of a loan to the Participant from
the brokerage firm or from the proceeds of the sale of Stock issued
pursuant to the exercise of the Option, and upon receipt of such payment,
the Company delivers the
<PAGE>
exercised Shares to the brokerage firm. The date of exercise of a Cashless
Exercise shall be the date the broker executes the sale of exercised
Shares, or if no sale is made, the date the broker receives the exercise
loan notice from the Participant to pay the Company for the exercised
Shares.
3.8 "Change in Control" means a change in control of the Company of a nature
that would be required to be reported in response to Item 1(a) of the
Current Report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Exchange Act; provided, that without limitation,
such a Change in Control shall be deemed to have occurred at such time as a
"person" (as used in Section 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 25% or more of the combined voting power of the
Company's outstanding securities ordinarily having the right to vote in
elections of directors; or (b) individuals who constitute the Board of
Directors of the Company on the date hereof (the "Incumbent Board") cease
for any reason to constitute at least a majority thereof, provided that any
person becoming a Director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was approved by a
vote of at least three quarters of the Directors comprising the Incumbent
Board shall be, for purposes of this subsection (b), considered as though
such person were a member of the Incumbent Board. Notwithstanding the
foregoing definition, no Change in Control shall be deemed to have occurred
unless and until the Participant has actual knowledge from one of the
following sources: a report filed with the Securities and Exchange
Commission, a public statement issued by the Company, or a periodical of
general circulation, including but not limited to The New York Times or The
Wall Street Journal.
3.9 "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
3.10 "Committee" means the Personnel, Executive Development and Compensation
Committee of the Board which will administer the Plan pursuant to Section 4
herein.
3.11 "Common Stock" or "Stock" means the Common Stock of the Company, or such
other security or right or instrument into which such Common Stock may be
changed or converted in the future.
3.12 "Company" means Carolina Power & Light Company, including all Affiliates
and Subsidiaries, or any successor thereto.
3.13 "Covered Participant" means a Participant who is a "covered employee" as
defined in Section 162(m)(3) of the Code, and the regulations promulgated
thereunder.
3.14 "Department" means the Human Resources Department of the Company.
3.15 "Designated Beneficiary" means the beneficiary designated by the
Participant, pursuant to procedures established by the Department, to
receive amounts due to the Participant in the event of the Participant's
death. If the Participant does not make an effective designation, then the
Designated Beneficiary will be deemed to be the Participant's estate.
3.16 "Director" shall mean a non-employee member of the Board of Directors.
3.17 "Disability" means (i) the mental or physical disability, either
occupational or non-occupational in origin, of the Participant defined as
"total disability" in the Long-term Disability Plan of the Company
currently in effect and as amended from time to time; or (ii) a
determination by the Committee of "Total Disability" based on medical
evidence that precludes the Participant from engaging in any occupation or
employment for wage or profit for at least twelve months and appears to be
permanent.
3.18 "Divestiture" means the sale of, or closing by, the Company of the
business operations in which the Participant is employed.
<PAGE>
3.19 "Early Retirement" means retirement of a Participant from employment with
the Company after age 55, but prior to age 65 under the provisions of the
Company's Supplemental Retirement Plan. In the event of a change in the
Supplemental Retirement Plan such that there is no longer a definition of
"Early Retirement", for purposes of this plan "Early Retirement" shall
continue to mean retirement before age 65 after reaching the 55th birthday
together with completion of 15 years of Vesting Service, or after
completion of 35 Vesting Years with no age limitation. "Vesting Service"
shall continue to mean each year of employment with the Company in which a
Participant works 1,000 hours.
3.20 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
3.21 "Executive Officer" means those individuals designated as "officers" for
purposes of Section 16 of the Securities Exchange Act of 1934 by the Board
pursuant to resolution adopted at a meeting of the Board held on March 20,
1991.
3.22 "Fair Market Value" means, on any given date, the closing price of Stock
as reported on the New York Stock Exchange composite tape on such day or,
if no Shares were traded on the New York Stock Exchange on such day, then
on the next preceding day that Stock was traded on such exchange, all as
reported by such source as the Committee may select.
3.23 "Full-time Employee" means an employee designated by the Company's
Department as being a "regular, full-time employee" who is eligible for all
plans and programs of the Company set forth for such employees. This
designation excludes all part-time, temporary, leased or contract employees
and consultants to the Company.
3.24 "Incentive Stock Option" or "ISO" means an option to purchase Stock,
granted under Section 7 herein, which is designated as an incentive stock
option and is intended to meet the requirements of Section 422A of the
Code.
3.25 "Key Employee" means an officer or other employee of the Company, who, in
the opinion of the Committee, can contribute significantly to the growth
and profitability of, or perform services of major importance to, the
Company.
3.26 "Nonqualified Stock Option" or "NQSO" means an Option to purchase Stock,
granted under Section 7 herein, which is not intended to be an Incentive
Stock Option.
3.27 "Normal Retirement" means the retirement of any Participant under the
Company's Supplemental Retirement Plan at age 65. In the event of a change
in the Supplemental Retirement Plan such that there is no longer a
definition of "Normal Retirement", for purposes of this plan "Normal
Retirement" shall continue to mean retirement upon attaining the age of 65
years.
3.28 "Option" means an Incentive Stock Option or a Nonqualified Stock Option.
3.29 "Other Stock Unit Award" means awards of Stock or other awards that are
valued in whole or in part by reference to, or are otherwise based on,
Shares or other securities of the Company.
3.30 "Participant" means a Key Employee or Director who has been granted an
Award under the Plan.
3.31 "Performance Based Exception" means the performance-based exception from
the tax deductibility limitations of Code Section 162(m).
3.32 "Performance Measures" mean, unless and until the Committee proposes for
shareholder approval and the Company's shareholders approve a change in the
general performance measures set forth in this article, the attainment of
which may determine the degree of payout and/or vesting with respect
<PAGE>
to Awards which are designed to qualify for the Performance-Based
Exception, measure(s) chosen from among the following alternatives:
(a) Total shareholder return (absolute or peer-group comparative)
(b) Stock price increase (absolute or peer-group comparative)
(c) Dividend payout as a percentage of net income (absolute or
peer-group comparative)
(d) Return on equity (absolute or peer-group comparative)
(e) Return on capital employed (absolute or peer-group comparative)
(f) Cash flow, including operating cash flow, free cash flow, discounted
cash flow return on investment, and cash flow in excess of cost of
capital
(g) Economic value added (income in excess of capital costs)
(h) Cost per kWh (absolute or peer-group comparative)
(i) Revenue per kWh (absolute or peer-group comparative)
(j) Market share
(k) Customer satisfaction as measured by survey instruments (absolute or
peer-group comparative). The Committee shall have the discretion to
adjust the determinations of the degree of attainment of the
pre-established performance objectives; provided, however, that
Awards which are designed to qualify for the Performance-Based
Exception may not be adjusted upward (the Committee shall retain the
discretion to adjust such Awards downward), except to the extent
permitted under Code Section 162(m) to reflect accounting changes or
other events.
3.33 "Performance Award" means a performance-based Award, which may be in the
form of either Performance Shares or Performance Units.
3.34 "Performance Period" means the time period designated by the Committee
during which performance goals must be met.
3.35 "Performance Share" means an Award, designated as a Performance Share,
granted to a Participant pursuant to Section 10 herein, the value of which
is determined, in whole or in part, by the value of Stock in a manner
deemed appropriate by the Committee and described in the Agreement or Sub-
Plan.
3.36 "Performance Unit" means an Award, designated as a Performance Unit,
granted to a Participant pursuant to Section 10 herein, the value of which
is determined, in whole or in part, by the attainment of pre-established
goals relating to Company financial or operating performance as deemed
appropriate by the Committee and described in the Agreement or Sub-Plan.
3.37 "Period of Restriction" means the period during which the transfer of
Shares of Restricted Stock is restricted, pursuant to Section 9 of the
Plan.
3.38 "Person" shall have the meaning ascribed to such term in Section 3 (a) (9)
of the Exchange Act and used in Sections 13 (d) and 14 (d) thereof,
including a "group" as defined in Section 13 (d).
3.39 "Plan" means the Carolina Power & Light Company 1997 Equity Incentive Plan
as herein described and as hereafter from time to time amended.
<PAGE>
3.40 "Restricted Stock" means an Award of Stock granted to a Participant
pursuant to Section 9 of the Plan.
3.41 "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the Exchange Act as
adopted in Exchange Act Release No. 34-37260 (May 31, 1996, effective
August 15, 1996), or any successor rule as amended from time to time.
3.42 "Section 162(m)" means Section 162(m) of the Code, or any successor
section under the Code, as amended from time to time and as interpreted by
final or proposed regulations promulgated thereunder from time to time.
3.43 "Securities Act" means the Securities Act of 1933 and the rules and
regulations promulgated thereunder, or any successor law, as amended from
time to time.
3.44 "Stock" or "Shares" means the Common Stock of the Company.
3.45 "Stock Appreciation Right" means the right to receive an amount equal to
the excess of the Fair Market Value of a share of Stock (as determined on
the date of exercise) over the Exercise Price of a related Option or the
Fair Market Value of the Stock on the date of grant of the Stock
Appreciation Right.
3.46 "Stock Unit Award" means an Award of Common Stock or units granted under
Section 11 of the Plan.
3.47 "Sub-Plan" means a written document that permits the grant of Awards
consistent with the provisions of this Plan.
3.48 "Subsidiary" means a corporation in which the Company owns, either
directly or through one or more of its Subsidiaries, at least 50% of the
total combined voting power of all classes of stock.
SECTION 4. ADMINISTRATION
4.1 THE COMMITTEE. The Plan shall be administered and interpreted by the
Committee which shall have full authority and all powers necessary or desirable
for such administration. The express grant in this Plan of any specific power to
the Committee shall not be construed as limiting any power or authority of the
Committee. In its sole and complete discretion the Committee may adopt, alter,
suspend and repeal any such administrative rules, regulations, guidelines, and
practices governing the operation of the Plan as it shall from time to time deem
advisable. In addition to any other powers and, subject to the provisions of the
Plan, the Committee shall have the following specific powers: (i) to determine
the terms and conditions upon which the Awards may be made and exercised; (ii)
to determine all terms and provisions of each Agreement and/or Sub-Plan, which
need not be identical for types of Awards nor for the same type of Award to
different Participants; (iii) to construe and interpret the Agreements,
Sub-Plans and the Plan; (iv) to establish, amend, or waive rules or regulations
for the Plan's administration; (v) to accelerate the exercisability of any
Award, the length of a Performance Period or the termination of any Period of
Restriction; and (vi) to make all other determinations and take all other
actions necessary or advisable for the administration of the Plan. The Committee
may take action by a meeting in person, by unanimous written consent, or by
meeting with the assistance of communications equipment which allows all
Committee members participating in the meeting to communicate in either oral or
written form. The Committee may seek the assistance or advice of any persons it
deems necessary to the proper administration of the Plan.
<PAGE>
4.2 SELECTION OF PARTICIPANTS. The Committee shall have sole and complete
discretion in determining those Key Employees and Directors who shall
participate in the Plan. The Committee may request recommendations for
individual Awards from the Chief Executive Officer of the Company and may
delegate to the Chief Executive Officer of the Company the authority to make
Awards to Participants who are not Executive Officers of the Company, subject to
a fixed maximum Award amount for such a group and a maximum Award amount for any
one Participant, as determined by the Committee. Awards made to the Executive
Officers shall be determined by the Committee.
4.3 AWARD AGREEMENTS AND SUB-PLANS. Each Award granted under the Plan
shall be granted either under the terms of an Award Agreement and/or a Sub-Plan.
Award Agreements and Sub-Plans shall specify the terms, conditions and any rules
applicable to the Award, including but not limited to the effect of
transferability, a Change in Control, or death, Disability, Divestiture, Early
Retirement, Normal Retirement or other termination of employment of the
Participant of the Award. If the Award is granted under the terms of an Award
Agreement, the Award Agreement shall be signed by an authorized representative
of the Company and the Participant, and a copy of the signed Award Agreement
shall be provided to the Participant. If the Award is granted under the terms
and conditions of a Sub-Plan, the Sub-Plan shall be approved by the Committee as
an Exhibit to the Plan, and a copy of the Sub-Plan or a summary description
thereof shall be provided to each Participant.
4.4 COMMITTEE DECISIONS. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan shall be final, conclusive, and
binding upon all persons, including the Company, its stockholders, employees,
Participants, and Designated Beneficiaries, except when the terms of any sale or
award of shares of Stock or any grant of rights or Options under the Plan are
required by law or by the Articles of Incorporation or Bylaws of the Company to
be approved by the Company's Board of Directors or shareholders prior to any
such sale, award or grant.
4.5 RULE 16B-3 AND SECTION 162(M) REQUIREMENTS. Notwithstanding any other
provision of the Plan, the Committee may impose such conditions on any Award,
and the Board may amend the Plan in any such respects, as may be required to
satisfy the requirements of Rule 16b-3 or Section 162(m).
4.6 INDEMNIFICATION OF COMMITTEE. In addition to such other rights of
indemnification as they may have as Directors or as members of the Committee,
the members of the Committee shall be indemnified by the Company against
reasonable expenses incurred from their administration of the Plan. Such
reasonable expenses include, but are not limited to, attorneys' fees, actually
and reasonably incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any Award granted or made hereunder, and against all
amounts reasonably paid by them in settlement thereof or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, if such
members acted in good faith and in a manner which they believed to be in, and
not opposed to, the best interests of the Company.
SECTION 5. ELIGIBILITY
The Committee in its sole and complete discretion shall determine the Key
Employees, including officers and Directors, who shall be eligible for
participation under the Plan, subject to the following limitations: (i) no
member of the Committee or Director shall be eligible to participate under the
Plan except with full Board approval; (ii) no person owning, directly or
indirectly, more than 5% of the total combined voting power of all classes of
Stock shall be eligible to participate under the Plan, and (iii) only Full-time
Employees shall be eligible to participate under the Plan, except that Directors
may be granted Nonqualified Stock Options or Restricted Stock awards.
<PAGE>
SECTION 6. SHARES SUBJECT TO THE PLAN
6.1 NUMBER OF SHARES. Subject to adjustment as provided in Section 6.4
herein, the maximum aggregate number of Shares that may be issued pursuant to
Awards made under the Plan shall not exceed 5,000,000 Shares of Common Stock,
which may be in any combination of Options, Restricted Stock, or any other
rights or Option. Shares of Common Stock may be available from the authorized
but unissued Shares of Common Stock, or any Shares of Common Stock acquired by
the Company, including Shares of Common Stock purchased in the open market.
Except as provided in Section 6.2 and 6.3 herein, the issuance of Shares in
connection with the exercise of, or as other payment for, Awards under the Plan
shall reduce the number of Shares available for future Awards under the Plan.
6.2 LAPSED AWARDS OF FORFEITED SHARES. In the event that (i) any Option or
other Award granted under the Plan terminates, expires, or lapses for any reason
other than exercise of the Award, or (ii) if Shares issued pursuant to the
Awards are canceled or forfeited for any reason, such Shares subject to such
Award shall thereafter again be available for grant of an Award under the Plan
6.3 DELIVERY OF SHARES AS PAYMENT. In the event a Participant pays for any
Option or other Award granted under the Plan through the delivery of previously
acquired shares of Common Stock, the number of shares of Common Stock available
for Awards under the Plan shall be increased by the number of Shares surrendered
by the Participant, subject to Rule 16b-3 as interpreted by the Securities and
Exchange Commission or its staff.
6.4 CAPITAL ADJUSTMENTS. The number and class of Shares subject to each
outstanding Award, the Option Price and the aggregate number, type and class of
Shares for which Awards thereafter may be made shall be subject to adjustment,
if any, as the Committee deems appropriate, based on the occurrence of a number
of specified and non-specified events. Such specified events include but are not
limited to the following:
(a) If the outstanding Shares of the Company are increased, decreased or
exchanged through merger, consolidation, sale of all or substantially all of
the property of the Company, reorganization, recapitalization,
reclassification, stock dividend, stock split or other distribution in
respect to such Shares, for a different number or type of Shares, or if
additional Shares or new or different Shares are distributed with respect to
such Share, an appropriate and proportionate adjustment shall be made in:
(i) the maximum number of shares of Stock available for the Plan as provided
in Section 6.1 herein, (ii) the type of Shares or others securities
available for the Plan, (iii) the number of shares of Stock subject to any
then outstanding Awards under the Plan, and (iv) the price (including
exercise price) for each share of Stock (or other kind of shares or
securities) subject to then outstanding awards, but without change in the
aggregate purchase as to which such Options remain exercisable or Restricted
Stock releasable.
(b) If other events not specified above in this Section 6.4, such as any
extraordinary cash dividend, split-up, spin-off, combination, exchange of
shares, warrants or rights offering to purchase Common Stock, or other
similar corporate event affect the Common Stock such that an adjustment is
necessary to maintain the benefits or potential benefits intended to be
provided under this Plan, then the Committee in its discretion may make
adjustments to any or all of (i) the number and type of Shares which
thereafter may be optioned and sold or awarded or made subject to Stock
Appreciation Rights under the Plan, (ii) the grant, exercise or conversion
price of any Award made under the Plan thereafter, and (iii) the number and
price (including Exercise Price) of each share of Stock (or other kind of
shares or securities) subject to then outstanding Awards, but without change
in the aggregate purchase price as to which such Options remain exercisable
or Restricted Stock releasable. Any
<PAGE>
adjustment as provided above shall be subject to any applicable restrictions
set forth in Section 13 or in Section 162(m).
(c) Any adjustment made by the Committee pursuant to the provisions of this
Section 6.4, subject to approval by the Board of Directors, shall be final,
binding and conclusive. A notice of such adjustment, including
identification or the event causing such an adjustment, the calculation
method of such adjustment, and the change in price and the number of shares
of Stock, or securities, cash or property purchasable subject to each Award
shall be sent to each Participant. No fractional interests shall be issued
under the Plan based on such adjustments, and shall be forfeited.
SECTION 7. STOCK OPTIONS
7.1 GRANT OF STOCK OPTIONS. Subject to the terms and provisions of the
Plan and applicable law, the Committee, at any time and from time to time, may
grant Options to Key Employees and Directors as it shall determine, provided
however, that Directors may only receive NQSO's. The Committee shall have sole
and complete discretion in determining the type of Option granted, the Option
Price (as hereinafter defined), the duration of the Option, the number of Shares
to which an Option pertains, any conditions imposed upon the exercisability of
the Options, the conditions under which the Option may be terminated and any
such other provisions as may be warranted to comply with the law or rules of any
securities trading system or stock exchange. Notwithstanding the preceding,
grants to Directors must be approved by the full Board. Each Option grant shall
have such specified terms and conditions detailed in an Award Agreement. The
Agreement shall specify whether the Option is intended to be an Incentive Stock
Option within the meaning of Section 422A of the Code, or a Nonqualified Stock
Option.
7.2 OPTION PRICE. The exercise price per share of Stock covered by an
Option ("Option Price") shall be determined at the time of grant and by the
Committee, subject to the limitation that the Option Price shall not be less
than 100% of Fair Market Value of the Common Stock on the Grant Date.
7.3 EXERCISABILITY. Options granted under the Plan shall be exercisable at
such times and be subject to such restrictions and conditions as the Committee
shall determine, which will be specified in the Award Agreement and need not be
the same for each Participant. However, no Option may be exercisable after the
expiration of ten years from the Grant Date.
7.4 METHOD OF EXERCISE. Options shall be exercised by the delivery of a
written notice from the Participant to the Company in the form prescribed by the
Committee setting forth the number of Shares with respect to which the Option is
to be exercised, accompanied by full payment for the Shares. The Option Price
shall be payable to the Company in full in cash, or its equivalent, or by
delivery of Shares of Stock (not subject to any security interest or pledge)
valued at Fair Market Value at the time of exercise or by a combination of the
foregoing. In addition, at the request of the Participant, and subject to
applicable laws and regulations, the Company may (but shall not be required to)
cooperate in a Cashless Exercise of the Option. As soon as practicable, after
receipt of written notice and payment, the Company shall deliver to the
Participant, Stock certificates in an appropriate amount based upon the number
of Shares with respect to which the option is exercised, issued in the
Participant's name.
7.5 NOTICE. Each Participant shall give prompt notice to the Company of
any disposition of Shares acquired upon exercise of an Incentive Stock Option if
such disposition occurs within either two (2) years after the date of grant or
one (1) year after the date of transfer of such Shares to the Participant upon
the exercise of such Incentive Stock Option.
7.6 MAXIMUM AWARD. Each Participant's Award shall be limited to the
maximum Award set out in Section 12 of this Plan.
<PAGE>
SECTION 8. STOCK APPRECIATION RIGHTS
8.1 GRANT OF STOCK APPRECIATION RIGHTS. Subject to the terms and
provisions of the Plan and applicable law, the Committee at any time and from
time to time, may grant freestanding Stock Appreciation Rights, Stock
Appreciation Rights in tandem with an Option, or Stock Appreciation Rights in
addition to an Option. Stock Appreciation Rights granted in tandem with an
Option or in addition to an Option may be granted at the time of the Option or
at a later time.
8.2 PRICE. The exercise price of each Stock Appreciation Right shall be
determined at the time of grant by the Committee, subject to the limitation that
the grant price shall not be less than 100% of Fair Market Value of the Common
Stock on the Grant Date.
8.3 EXERCISE. The Participant is entitled to receive an amount equal to
the excess of the Fair Market Value of a Share over the grant price thereof on
the date of exercise of the Stock Appreciation Right.
8.4 PAYMENT. Upon exercise of the Stock Appreciation Right, the
Participant shall be entitled to receive payment from the Company in an amount
determined by multiplying (a) the difference between the Fair Market Value of a
Share on the date of Exercise of the Stock Appreciation Right over the grant
price specified in the Award Agreement by (b) the number of Shares with respect
to which the Stock Appreciation Right is exercised.
8.5 MAXIMUM AWARD. Each Participant's Award shall be limited to the
maximum Award set out in Section 12 of this Plan.
SECTION 9. RESTRICTED STOCK
9.1 GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of the
Plan and applicable law, the Committee, at any time and from time to time, may
grant shares of Restricted Stock under the Plan to such Participants, and in
such amounts and for such duration and/or consideration as it shall determine.
Participants receiving Restricted Stock Awards are not required to pay the
Company therefor (except for applicable tax withholding) other than the
rendering of services and/or until other considerations are satisfied as
determined by the Committee at its sole discretion.
9.2 RESTRICTED STOCK AGREEMENT. Each Restricted Stock grant shall be
evidenced by an Agreement that shall specify the Period of Restriction; the
conditions which must be satisfied prior to removal of the restriction; the
number of Shares of Restricted Stock granted; and such other provisions as the
Committee shall determine. The Committee may specify, but is not limited to, the
following types of restrictions in the Award Agreement: (i) restrictions on
acceleration or achievement of terms or vesting based on any business or
financial goals of the Company, including, but not limited to the Performance
Measures set out in Section 3.33, and (ii) any other further restrictions that
may be advisable under the law, including requirements set forth by the
Securities Act, any securities trading system or stock exchange upon which such
Shares under the Plan are listed.
9.3 REMOVAL OF RESTRICTIONS. Except as otherwise noted in this Section 9,
Restricted Stock covered by each Award made under the Plan shall be provided and
become freely transferable by the Participant after the last day of the Period
of Restriction and/or upon the satisfaction of other conditions as determined by
the Committee. Except as specifically provided in this Section 9, the Committee
shall have no authority to reduce or remove the restrictions or to reduce or
remove the Period of Restriction without the express consent of the stockholders
of the Company. If the grant of Restricted Stock is performance based, the total
Restricted Period for any or all shares or units of Restricted Stock so granted
shall be no less than one (1) year. Any other shares of Restricted Stock issued
pursuant to this Section 9 shall provide that the minimum Period of Restrictions
shall be three (3) years, which Period of Restriction may permit
<PAGE>
the removal of restrictions on no more than one-third ( 1/3) of the shares of
Restricted Stock at the end of the first year following the Grant Date, and the
removal of the restrictions on an additional one-third ( 1/3) of the Shares at
the end of each subsequent year. In no event shall any restrictions be removed
from shares of Restricted Stock during the first year following the Grant Date,
except in the event of a Change in Control.
9.4 VOTING RIGHTS. During the Period of Restriction, Participants in whose
name Restricted Stock is granted under the Plan may exercise full voting rights
with respect to those Shares.
9.5 DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of Restriction,
Participants in whose name Restricted Stock is granted under the Plan shall be
entitled to receive all dividends and other distributions paid with respect to
those Shares. If any such dividends or distributions are paid in Shares, the
Shares shall be subject to the same restrictions on transferability as the
Restricted Stock with respect to which they were distributed.
9.6 MAXIMUM AWARD. Each Participant's Award shall be limited to the
maximum Award set out in Section 12 of this Plan.
SECTION 10. PERFORMANCE BASED AWARDS
10.1 GRANT OF PERFORMANCE AWARDS. Subject to the terms and provisions of
the Plan and applicable law, the Committee, at any time and from time to time,
may issue Performance Awards in the form of either Performance Units or
Performance Shares to Participants subject to the Performance Measures and
Performance Period as it shall determine. The Committee shall have complete
discretion in determining the number and value of Performance Units or
Performance Shares granted to each Participant. Participants receiving
Performance Awards are not required to pay the Company therefor (except for
applicable tax withholding) other than the rendering of services.
10.2 VALUE OF PERFORMANCE AWARDS. The Committee shall determine the number
and value of Performance Units or Performance Shares granted to each Participant
as a Performance Award. The Committee shall set Performance Measures in its
discretion for each Participant who is granted a Performance Award. The extent
to which such Performance Measures are met will determine the value of the
Performance Unit to the Participant or the number of Performance Shares earned
by the Participant. Such Performance Measures may be particular to a
Participant, may relate to the performance of the Subsidiary or Affiliate which
employs him or her, may be based on the division which employs him or her, may
be based on the performance of the Company generally, or a combination of the
foregoing. The terms and conditions of each Performance Award will be set forth
in an Agreement and/or a Sub-Plan.
10.3 SETTLEMENT OF PERFORMANCE AWARDS. After a Performance Period has
ended, the holder of a Performance Share shall be entitled to receive the value
thereof based on the degree to which the Performance Measures established by the
Committee and set forth in the Agreement and/or Sub-Plan have been satisfied.
10.4 FORM OF PAYMENT. Payment of the amount to which a Participant shall
be entitled upon the settlement of a Performance Award shall be made in cash,
Stock, or a combination thereof as determined by the Committee. Payment may be
made in a lump sum or installments as prescribed by the Committee.
10.5 MAXIMUM AWARD. Each Participant's Award shall be limited to the
maximum Award set out in Section 12 of this Plan.
<PAGE>
SECTION 11. OTHER STOCK BASED AWARDS
11.1 GRANT OF OTHER STOCK BASED AWARDS. Subject to the terms and
provisions of the Plan and applicable law, the Committee, at any time and from
time to time, may issue to Participants, either alone or in addition to other
Awards made under the Plan, Stock Unit Awards which may be in the form of Common
Stock or other securities. The value of each such Award shall be based, in whole
or in part, on the value of the underlying Common Stock or other securities. The
Committee, in its sole and complete discretion, may determine that an Award,
either in the form of a Stock Unit Award under this Section 11 or as an Award
granted pursuant to Sections 7 through 10, may provide to the Participant (i)
dividends or dividend equivalents (payable on a current or deferred basis) and
(ii) cash payments in lieu of or in addition to an Award. Subject to the
provisions of the Plan, the Committee in its sole and complete discretion, shall
determine the terms, restrictions, conditions, vesting requirements, and payment
rules (all of which are sometimes hereinafter collectively referred to as
"rules") of the Award. The Award Agreement and/or Sub-Plan shall specify the
rules of each Award as determined by the Committee. However, each Stock Unit
Award need not be subject to identical rules.
11.2 RULES. The Committee, in its sole and complete discretion, may grant
a Stock Unit Award subject to the following rules:
(a) Common Stock or other securities issued pursuant to Other Stock
Awards may not be sold, transferred, pledged, assigned or otherwise
alienated or hypothecated by a Participant until the expiration of
at least six months from the Award Date, except that such limitation
shall not apply in the case of death or disability of the
Participant. All rights with respect to such other Stock Unit Awards
granted to a Participant under the Plan shall be exercisable during
his or her lifetime only by such Participant or his or her guardian
or legal representative.
(b) Stock Unit Awards may require the payment of cash consideration by
the Participant in receipt of the Award or provide that the Award,
and any Common Stock or other securities issued in conjunction with
the Award be delivered without the payment of cash consideration.
(c) The Committee, in its sole and complete discretion, may establish
certain Performance Measures that may relate in whole or in part to
receipt of the Stock Unit Awards.
(d) Stock Unit Awards may be subject to a deferred payment schedule
and/or vesting over a specified employment period.
(e) The Committee, in its sole and complete discretion, as a result of
certain circumstances, may waive or otherwise remove, in whole or in
part, any restriction or condition imposed on a Stock Unit Award at
the time of grant.
SECTION 12. SPECIAL PROVISIONS APPLICABLE TO COVERED PARTICIPANTS
Unless the Committee in its sole discretion determines that any Award made
to a Covered Employee is not intended to qualify for the exemption for
performance-based compensation under Section 162(m), Awards subject to
Performance Measures paid to Covered Participants under this Plan shall be
governed by the conditions of this Section 12 in addition to the requirements of
Sections 9, 10 and 11 above. Should conditions set forth under this Section 12
(when applicable) conflict with the requirements of Sections 9, 10, and 11, the
conditions of this Section 12 shall prevail.
(a) Performance Measures for Covered Participants shall be established
by the Committee in writing prior to the beginning of the
Performance Period, or by such other later date during the
Performance Period as may be permitted under Section 162(m).
Performance Measures
<PAGE>
for Covered Participants may include alternative and multiple
Performance Measures and may be based on one or more business
criteria.
(b) All Performance Measures must be objective and must satisfy third
party "objectivity" standards under Section 162(m).
(c) The Performance Measures shall not allow for any discretion by the
Committee as to an increase in any Award, but discretion to lower an
Award is permissible.
(d) The Award and payment of any Award under this Plan to a Covered
Participant with respect to the relevant Performance Period shall be
contingent upon the attainment of the Performance Measures that are
applicable to such Covered Participant. The Committee shall certify
in writing prior to payment of any such Award that such applicable
Performance Measures relating to the Award are satisfied. Approved
minutes of the Committee may be used for this purpose.
(e) The maximum Award that may be paid to any Covered Participant under
the Plan pursuant to Sections 9, 10, and 11 for any Performance
Period is $1,500,000. The maximum number of shares of Stock subject
to Options, Stock Appreciation Rights and/or Restricted Stock
granted to any Covered Participant for any Performance Period shall
be 250,000 Shares.
(f) All Awards to Covered Participants under this Plan shall be further
subject to such other conditions, restrictions, and requirements as
the Committee may determine to be necessary to carry out the purpose
of this Section 12.
SECTION 13. GENERAL PROVISIONS
13.1 WITHHOLDING. The Company shall have the right to deduct or withhold,
or require a Participant to remit to the Company, any taxes required by law to
be withheld with respect to the Awards made under this Plan. In the event an
Award is paid in the form of Common Stock, the Committee may require the
Participant to remit to the Company the amount of any taxes required to be
withheld from such payment in Common Stock, or, in lieu thereof the Company may
withhold (or the Participant may be provided the opportunity to elect to tender)
the number of shares of Common Stock equal in Fair Market Value to the amount
required to be withheld.
13.2 NO RIGHT TO EMPLOYMENT. No granting of an Award shall be construed as
a right to employment with the Company.
13.3 RIGHTS AS SHAREHOLDER. Subject to the Award provisions, no
Participant or Designated Beneficiary shall be deemed a shareholder of the
Company nor have any rights as such with respect to any shares of Common Stock
to be provided under the Plan until he or she has become the holder of such
Shares. Notwithstanding the aforementioned with respect to Stock granted under a
Restricted Stock Agreement under this Plan, the Participant or Designated
Beneficiary of such Award shall be deemed the owner of such Shares. As such,
unless contrary to the provisions herein or in any such related Award Agreement,
such stockholders shall be entitled to full voting, dividend and distribution
rights as provided any other Company stockholder.
13.4 CONSTRUCTION OF THE PLAN. The Plan, and its rules, rights,
Agreements, Sub-Plans and regulations, shall be governed, construed, interpreted
and administered in accordance with applicable Federal laws, or to the extent
that Federal laws do not apply, the laws of the State of North Carolina. In the
event any provision of the Plan shall be held invalid, illegal or unenforceable,
in whole or in part, for any reason, such determination shall not affect the
validity, legality or enforceability of any remaining provision, or portion of
provision, of the Plan overall, which shall remain in full force and effect.
<PAGE>
13.5 AMENDMENT OF PLAN. The Committee or Board of Directors may amend,
suspend, or terminate the Plan or any portion thereof at any time, provided such
amendment is made with shareholder approval if such approval is necessary to
comply with any tax or regulatory requirement, including for these purposes any
approval requirement for the performance-based compensation exception under
Section 162(m). The Committee in its discretion may amend the Plan so as to
conform with local rules and regulations subject to any provisions to the
contrary specified herein.
13.6 AMENDMENT OF AWARD. At any time and in its sole and complete
discretion, the Committee may amend any Award for the following reasons: (i)
additions and/or changes are made to the Code, any federal or state securities
law, or other law or regulations subsequent to the date of grant, and have an
impact on the Award; or (ii) for any other reason not described in clause (i)
provided the Participant gives his or her consent to such amendment.
13.7 EXEMPTION FROM COMPUTATION OF COMPENSATION FOR OTHER PURPOSES. By
accepting an Award under this Plan, each Participant agrees that such Award
shall be considered special incentive compensation and will be exempt from
inclusion as "wages" or "salary" for purposes of calculating benefits under
pension, profit sharing, disability, severance, life insurance, and other
employee benefit plans of the Company, except as otherwise provided in those
benefit plans.
13.8 LEGEND. In its sole and complete discretion, the Committee may elect
to legend certificates representing shares of Stock sold or awarded under the
Plan, to make appropriate references to the restrictions imposed on such Shares.
13.9 EXECUTIVE OFFICERS AND COVERED PARTICIPANTS. All Award Agreements
and/or Sub-Plans for Participants subject to Section 16(b) shall be deemed to
include any such additional terms, conditions, limitations and provisions as
Rule 16b-3 requires, unless the Committee in its discretion determines that any
such Award should not be governed by Rule 16b-3. All performance-based Awards
shall be deemed to include any such additional terms, conditions, limitations
and provisions as are necessary to comply with the performance-based
compensation exemption of Section 162(m), unless the Committee, in its sole
discretion, determines that an Award to a Covered Participant is not intended to
qualify as exempt performance-based compensation
13.10 CHANGE IN CONTROL. In the event of a Change in Control, the
Committee may, in its sole and complete discretion, accelerate the payment or
vesting of any Award and release any restrictions on any Awards.
13.11 DIVESTITURE. In the event of a Divestiture, the Committee may, in
its sole and complete discretion, accelerate the payment or vesting of any Award
and release any restrictions on any Awards.
13.12 UNFUNDED OBLIGATION. Nothing in this Plan shall be interpreted or
construed to require the Company in any manner to fund any obligation to the
Participants or any Designated Beneficiary. Nothing contained in this Plan nor
any action taken hereunder shall create, or be construed to create a trust of
any kind, or a fiduciary relationship between the Company and/or the Committee,
and the Participants and/or any Designated Beneficiary. To the extent that any
Participant or Designated beneficiary acquires a right to receive payments under
this Plan, such rights shall be no greater than the rights of any unsecured
general creditor of the Company.
13.13 PLAN EXPENSES. All reasonable expenses of the Plan shall be paid by
the Company.
<PAGE>
[MAP]
MAP SHOWING THE LOCATION OF THE COMPANY'S
1997 ANNUAL SHAREHOLDERS' MEETING TO BE HELD
AT THE NORTH CAROLINA MUSEUM OF ART IN
RALEIGH, NORTH CAROLINA APPEARS HERE
<PAGE>
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
------------------------------
CAROLINA POWER & LIGHT COMPANY
------------------------------
Mark box at right if an address change has been noted on the / /
reverse side of this card.
Please be sure to sign and date this Proxy. Date ______________________
Shareholder sign here ____________________ Co-owner sign here _______________
DIRECTORS RECOMMEND VOTE FOR
With- For All
1. Election of Directors as set forth in the Proxy For hold Except
Statement. / / / / / /
NOMINEES:
E. BORDEN, R. DAUGHERTY, R. JONES
Note: If you do not wish your shares voted "For" a particular nominee,
mark the "For All Except" box and strike a line through the nominee's
name. Your shares will be voted for the remaining nominee(s).
For Against Abstain
2. Approval of the 1997 Equity Incentive Plan. / / / / / /
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or at any adjournment
thereof.
Common Shares
$5.00 Preferred Shares
Serial Preferred $4.20 Shares
Serial Preferred $5.44 Shares
Serial Preferred $7.72 Shares
Serial Preferred $7.95 Shares
TOTAL RECORD DATE SHARES
<PAGE>
CAROLINA POWER & LIGHT COMPANY
411 FAYETTEVILLE STREET, RALEIGH, NORTH CAROLINA 27601
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
PROXY. The undersigned hereby appoints Sherwood H. Smith, Jr. and William
Cavanaugh III, and each of them, as Proxies, with full power of substitution,
to vote the shares of stock of Carolina Power & Light Company registered in the
name of the undersigned, or which the undersigned has the power to vote, at the
Annual Meeting of Shareholders of the Company to be held Wednesday, May 7, 1997,
at 10:00 a.m., and at any adjournment thereof, for the election of directors,
upon the proposal set forth on the reverse side hereof, and upon other matters
properly coming before the meeting. The undersigned acknowledges receipt of
the notice of said Annual Meeting and the proxy statement.
THIS PROXY WILL BE VOTED AS DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER(S).
UNLESS OTHERWISE SPECIFIED, IT WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND
FOR THE BOARD OF DIRECTORS' PROPOSAL TO APPROVE THE 1997 EQUITY INCENTIVE PLAN,
ALL AS SET FORTH IN THE PROXY STATEMENT. THE NOMINEES FOR DIRECTOR ARE:
E. BORDEN, R. DAUGHERTY, R. JONES. IF ANY DIRECTOR BECOMES UNAVAILABLE, THE
PROXIES WILL VOTE FOR A SUBSTITUTE DESIGNATED BY THE BOARD.
PLEASE VOTE, DATE, SIGN ON REVERSE AND RETURN
PROMPTLY USING THE ENCLOSED ENVELOPE.
NOTE: Please sign exactly as name(s) appear(s) hereon. When signing as attorney,
executor, administrator, trustee or guardian, or as custodian for a minor,
please give full title as such. If a corporation, please have signed in full
corporate name by any authorized officer, giving full title. If a partnership,
sign in full partnership name by an authorized person, giving full title.
HAS YOUR ADDRESS CHANGED? COMPLETE BELOW.
NEW ADDRESS:
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
