SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-8180
TECO ENERGY, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-2052286
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
702 North Franklin Street, Tampa, Florida 33602
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813) 228-4111
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
Number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date (July 31, 1999):
Common Stock, $1 Par Value 132,080,557
FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
In the opinion of management, the unaudited condensed
consolidated financial statements include all adjustments
necessary to present fairly the results for the three- and
six-month periods ended June 30, 1999 and 1998. Reference
should be made to the explanatory notes affecting the income
and balance sheet accounts contained in TECO Energy, Inc.'s
Annual Report on Form 10-K for the year ended Dec. 31, 1998
and to the notes on pages 7 through 12 of this report.
2
FORM 10-Q
CONSOLIDATED BALANCE SHEETS
unaudited
(in millions)
June 30, Dec. 31,
1999 1998
Assets
Current assets
Cash and cash equivalents $ 19.4 $ 16.9
Receivables, less allowance
for uncollectibles 233.0 229.6
Inventories, at average cost
Fuel 109.6 93.2
Materials and supplies 66.6 64.1
Prepayments 17.4 15.1
446.0 418.9
Property, plant and equipment,
at original cost
Utility plant in service
Electric 4,029.4 3,991.3
Gas 555.9 518.5
Construction work in progress 125.9 101.1
Other property 1,020.1 989.6
5,731.3 5,600.5
Accumulated depreciation (2,370.7) (2,292.9)
3,360.6 3,307.6
Other assets
Other investments 109.0 72.0
Investment in unconsolidated affiliates 160.1 141.2
Deferred income taxes 103.3 99.1
Deferred charges and other assets 149.0 140.5
521.4 452.8
$4,328.0 $4,179.3
Liabilities and Capital
Current liabilities
Long-term debt due within one year $ 35.2 $ 36.0
Notes payable 449.1 319.0
Accounts payable 153.2 208.1
Customer deposits 79.2 78.3
Interest accrued 19.5 14.2
Taxes accrued 68.7 5.1
804.9 660.7
Deferred income taxes 490.4 499.9
Investment tax credits 44.2 46.7
Regulatory liability-tax related 33.3 34.0
Other deferred credits 149.3 150.6
Long-term debt, less amount due
within one year 1,275.3 1,279.6
Common equity
Common equity - 400 million shares
authorized, $1 par value - issued and
outstanding 132,082,039 in 1999 and
131,955,939 in 1998 1,590.1 1,569.2
Unearned compensation (59.5) (61.4)
$4,328.0 $4,179.3
The accompanying notes are an integral part of the consolidated financial
statements.
3
FORM 10-Q
CONSOLIDATED STATEMENTS OF INCOME
unaudited
(in millions)
For the three months ended June 30, 1999 1998
Revenues $491.7 $490.6
Expenses
Operation 266.0 253.7
Maintenance 32.8 31.9
Depreciation 55.7 57.4
Taxes, other than income 37.5 37.2
392.0 380.2
Income from operations 99.7 110.4
Other income (expense)
Other income (expense), net 1.4 (0.5)
Income before interest and income taxes 101.1 109.9
Interest expense 27.6 26.0
Income before provision for income taxes 73.5 83.9
Provision for income taxes 21.6 26.0
Net income $ 51.9 $ 57.9
Average common shares outstanding 132.0 131.7
Earnings per average common share outstanding:
Basic and diluted $ 0.39 $ .44
Dividend per common share outstanding $0.325 $ 0.31
The accompanying notes are an integral part of the consolidated financial
statements.
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FORM 10-Q
CONSOLIDATED STATEMENTS OF INCOME
unaudited
(in millions)
For the six months ended June 30, 1999 1998
Revenues $938.1 $958.4
Expenses
Operation 495.5 503.1
Maintenance 60.3 60.0
Non-recurring charges -- 25.9
Depreciation 112.4 114.3
Taxes, other than income 75.5 74.9
743.7 778.2
Income from operations 194.4 180.2
Other income (expense)
Other income (expense), net 2.1 (3.3)
Income before interest and income taxes 196.5 176.9
Interest expense 53.7 52.0
Income before provision for income taxes 142.8 124.9
Provision for income taxes 42.3 36.2
Net income from continuing operations 100.5 88.7
Gain on disposal of discontinued operations,
net of income tax expense of $.3 million
for 1999 and $12.9 million for 1998 .6 22.2
Net income $101.1 $110.9
Average common shares outstanding 132.0 131.6
Earnings per average common share outstanding:
Basic and diluted-
From continuing operations $ 0.76 $ .67
Net income $ 0.76 $ .84
Dividend per common share outstanding $0.635 $0.605
The accompanying notes are an integral part of the consolidated financial
statements.
5
FORM 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS
unaudited
(in millions)
For the six months ended June 30, 1999 1998
Cash flows from operating activities
Net income $101.1 $110.9
Adjustments to reconcile net income
to net cash:
Depreciation 112.4 114.3
Deferred income taxes (14.1) --
Investment tax credits, net (2.5) (2.5)
Amortization of unearned compensation 4.3 3.4
Gain on disposal of discontinued
operations, pretax -- (37.5)
Deferred revenue 3.9 (19.8)
Deferred recovery clause (13.8) 9.0
Non-recurring charges, pretax -- 25.9
Receivables, less allowance
for uncollectibles (8.3) (3.3)
Inventories (19.0) (11.5)
Taxes accrued 63.6 26.9
Interest accrued 5.3 2.7
Accounts payable (54.9) (14.6)
Other (0.1) 11.7
177.9 215.6
Cash flows from investing activities
Capital expenditures (166.7) (116.2)
Net proceeds from sale of assets -- 39.2
Investment in unconsolidated affiliates (18.1) (11.9)
Other non-current investments (31.9) 0.3
(216.7) (88.6)
Cash flows from financing activities
Common stock .1 1.2
Repayment of long-term debt (5.0) (7.7)
Net increase (decrease) in short-term debt 130.1 (34.9)
Dividends (83.9) (79.6)
41.3 (121.0)
Net increase in cash and cash equivalents 2.5 6.0
Cash and cash equivalents
at beginning of period 16.9 10.6
Cash and cash equivalents at end of period $ 19.4 $ 16.6
The accompanying notes are an integral part of the consolidated financial
statements.
6
FORM 10-Q
NOTES TO FINANCIAL STATEMENTS
A. Certain prior year amounts have been reclassified to conform
with the current year presentation.
B. As reported in the company's Annual Report on Form 10-K for
the year ended Dec. 31, 1998, TECO Oil & Gas, Inc., the company's
conventional oil and gas subsidiary, sold its offshore assets to
American Resources Offshore, Inc. (ARO) in March 1998 for $57.7
million, consisting of $39.2 million in cash and a subordinated
note (the "Note") in the principal amount of $18.5 million. TECO
Energy reported a net after-tax gain of $22.2 million from the
disposal of discontinued operations in the first quarter of 1998.
At Dec. 31, 1998, TECO Energy wrote off the recorded value
of all assets associated with the discontinued oil and gas
operation, including the $18.5-million note and associated
accrued interest income and the remaining on-shore assets. The
net after-tax gain reported from disposal of discontinued
operations, including this write-off for full-year 1998 was $6.1
million.
In March 1999, TECO Oil & Gas completed a transaction in
which it sold the note from ARO to a third party for $500,000 in
cash and in a separate transaction settled disputed joint billing
payments of approximately $425,000. A $.6 million after-tax gain
from these transactions was recognized in the first quarter of
1999 as a gain on disposal of discontinued operations.
In June 1999, TECO Oil & Gas exercised its warrant at a
nominal price for approximately 23 percent of American Resources
Offshore s outstanding common stock. The warrant was scheduled
to expire at the end of June 1999.
7
FORM 10-Q
There were no revenues from the discontinued oil and gas
operations for the three- and six-month periods ended June 30,
1999 and 1998.
C. T E C O Energy and its subsidiaries have made certain
c o m m itments in connection with their continuing capital
expenditure program and estimate that capital expenditures for
continuing operations during 1999, excluding those for TECO Power
Services Corporation's investments in unconsolidated affiliates,
will be as follows:
millions
Tampa Electric Company
Electric division $224
Peoples Gas System 75
TECO Transport Corporation 29
TECO Coal Corporation 18
TECO Power Services 24
Other diversified businesses 12
$382
TECO Power Services - investment
in unconsolidated affiliates $ 31
D. Revenues in the three- and six-month periods ended June 30,
1999 reflected the deferral for refund to customers of $2.5
million and $3.9 million, respectively, of revenues at Tampa
Electric under its current regulatory agreement. Revenues for
the three- and six month periods ended June 30, 1998 included
recognition of $11.1 million and $19.8 million, respectively, of
previously deferred revenues, which were partially offset by a
stipulated temporary base rate reduction totaling $5.1 million
and $9.5 million, in the same three- and six-month periods ended
in 1998. In accordance with the agreement, the temporary base
rate reduction and recognition of previously deferred revenues
ended in December 1998.
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FORM 10-Q
E. The reconciliation of TECO Energy's basic and diluted
earnings per share is shown below:
Three Months Ended June 30, 1999 1998
(millions, except per share amounts)
Numerator (Basic and Diluted)
Net income $51.9 $57.9
Denominator
Average number of shares outstanding-basic 132.0 131.7
Plus: incremental shares for assumed
conversions: Stock options at end
of period 2.3 3.2
Less: Treasury shares which could
be purchased (2.1) (2.7)
Average number of shares outstanding-diluted 132.2 132.2
Earnings per share
Basic and diluted $ .39 $ .44
Six Months Ended June 30, 1999 1998
(millions, except per share amounts)
Numerator (Basic and Diluted)
Net income from continuing operations $100.5 $ 88.7
Net income $101.1 $110.9
Denominator
Average number of shares outstanding-basic 132.0 131.6
Plus: incremental shares for assumed
conversions: Stock options at end
of period 2.3 3.3
Less: Treasury shares which could
be purchased (2.0) (2.7)
Average number of shares outstanding-diluted 132.3 132.2
Earnings per share from continuing operations
Basic and diluted $ .76 $ .67
Earnings per share
Basic and diluted $ .76 $ .84
F. As discussed in its Annual Report on Form 10-K for the year
ended Dec. 31, 1998, the company recognized, in the first quarter
of 1998, one-time charges at TECO Coal, TeCom and Tampa Electric
Company totaling $16.5 million, after tax, or $.13 per share.
9
FORM 10-Q
T h e one-time charges in 1998 reflected asset value
adjustments at TECO Coal's Gatliff mining facilities relating to
the expiration of the coal supply contract with Tampa Electric in
1999 ($8.9 million after tax), a write off of product development
costs associated with features of the InterLane residential
system developed early in the product life and no longer
incorporated in the current system's design at TeCom ($1.7
million after tax) and a $5.9-million after-tax charge at Tampa
Electric associated with ongoing actions to mitigate the effects
of a 1997 Florida Public Service Commission (FPSC) ruling.
G. The management of TECO Energy determined its reportable
segments based on each subsidiaries' contribution of revenues,
operating income and total assets. All significant intercompany
t r ansactions are eliminated in the consolidated financial
statements of TECO Energy but are included in determining
reportable segments.
Contributions by business segment (millions)
Operating Net
Three Months Ended June 30, 1999 Revenues(1) Income(1) Income(1)
Tampa Electric Company
Electric division(2)(3) $304.3 $ 68.1 $ 34.8
Peoples Gas System 56.7 8.6 3.4
361.0 76.7 38.2
TECO Transport(4) 60.8 12.0 6.8
TECO Coal(5) 59.3 5.0 3.6
TECO Power Services(6)(7) 28.9 3.6 3.5
Other diversified business(6) 23.7 4.6 4.6
533.7 101.9 56.7
Other and eliminations (42.0) (2.2) (4.8)
TECO Energy consolidated $491.7 $ 99.7 $ 51.9
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FORM 10-Q
Operating Net
Revenues(1) Income(1) Income(1)
Three Months Ended June 30, 1998
Tampa Electric Company
Electric division(2)(3)(8) $ 320.9 $ 80.2 $ 41.1
Peoples Gas System 58.0 4.7 1.8
378.9 84.9 42.9
TECO Transport(4) 55.9 9.4 4.9
TECO Coal(5)(8) 54.4 5.0 3.7
TECO Power Services(6)(7) 25.0 3.1
2.0
Other diversified business(6)(8) 27.7 9.6 7.8
541.9 112.0 61.3
Other and eliminations (51.3) (1.6) (3.4)
TECO Energy consolidated $ 490.6 $110.4 $ 57.9
Six Months Ended June 30, 1999
Tampa Electric Company
Electric division(2)(3) $ 565.2 $ 123.3 $ 62.1
Peoples Gas System 127.9 23.3 10.7
693.1 146.6 72.8
TECO Transport(4) 118.4 23.2 13.1
TECO Coal(5) 112.4 10.2 7.4
TECO Power Services(6)(7) 52.7 8.4 6.8
Other diversified business(6) 47.4 10.6 9.9
1,024.0 199.0 110.0
Other and eliminations (85.9) (4.6) (9.5)
938.1 194.4 100.5
Non-recurring charges -- -- --
TECO Energy consolidated $ 938.1 $194.4 $100.5
Six Months Ended June 30, 1998
Tampa Electric Company
Electric division(2)(3)(8) $ 594.3 $136.4 $ 67.1
Peoples Gas System 138.6 20.1 8.9
732.9 156.5 76.0
TECO Transport(4) 110.4 18.6 10.2
TECO Coal(5)(8) 111.1 9.4 6.8
TECO Power Services(6)(7) 43.9 6.6 4.2
Other diversified business(6)(8) 57.2 18.7 15.4
1,055.5 209.8 112.6
Other and eliminations (97.1) (3.7) (7.1)
958.4 206.1 105.5
Non-recurring charges -- (25.9) (16.8)
TECO Energy consolidated $ 958.4 $180.2 $ 88.7
(1) From continuing operations.
(2) The electric division deferred revenues of $2.5 million and $3.9
million, respectively, for the three- and six-months ended June 30,
1999 for refunds to customers, and recognized revenues previously
deferred of $11.1 million and $19.8 million, respectively, for the
three- and six-months ended June 30, 1998. See Note D on page 8.
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FORM 10-Q
(3) Revenues from sales to affiliates were $7.1 million and $11.3
million respectively, for the three- and six-months ended June 30,
1999, and $6.6 million and $10.8 million respectively, for the
three- and six-months ended June 30, 1998.
(4) Revenues from sales to affiliates were $21.6 million and $46.7
million, respectively, for the three- and six-months ended June 30,
1999, and $28.9 million and $57.8 million, respectively, for the
three- and six-months ended June 30, 1998.
(5) Revenues from sales to affiliates were $4.1 million and $10.5
million, respectively, for the three- and six-months ended June 30,
1999, and $7.7 million and $16.3 million, respectively, for the
three- and six-months ended June 30, 1998 .
(6) O p e rating income includes items that are reclassified for
consolidated financial statement purposes. The principal items are
the non-conventional fuels tax credit related to coalbed methane
production ($4.4 million and $8.5 million, respectively, for the
three- and six-months ended June 30, 1999, and $4.7 million and
$9.5 million, respectively, for the three- and six-months ended
June 30, 1998) and interest expense on the limited-recourse debt
related to independent power operations ($2.8 million and $5.1
million, respectively, for the three- and six-months ended June 30,
1999, and $3.4 million and $6.9 million, respectively, for the
three- and six-months ended June 30, 1998), both of which are
included in operating income for the segments. In the Consolidated
Statements of Income, the tax credit is part of the provision for
income taxes and the interest is part of interest expense.
(7) Revenues from sales to affiliates were $9.1 million and $17.2
million, respectively, for the three- and six-months ended June 30,
1999, and $7.8 million and $11.8 million, respectively, for the
three- and six-months ended June 30, 1998.
(8) 1998 operating income and net income exclude the non-recurring
charges discussed in Note F on pages 9 and 10.
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FORM 10-Q
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
This Quarterly Report on Form 10-Q contains forward-looking
statements which are subject to the inherent uncertainties in
predicting future results and conditions. Certain factors that
could cause actual results to differ materially from those
p r ojected in these forward-looking statements include the
following: general economic conditions, particularly those in
Tampa Electric's service area affecting energy sales; weather
variations affecting energy sales and operating costs; potential
c o m petitive changes in the electric and gas industries,
particularly in the area of retail competition; regulatory
a c tions affecting Tampa Electric and Peoples Gas System;
commodity price changes affecting the competitive positions of
Tampa Electric, Peoples Gas System and the Peoples Gas Company as
well as margins at TECO Coalbed Methane and TECO Coal; business
growth opportunities as they may relate to the company's ability
to achieve its previously announced long-term strategy to grow
its diversified business; international risks as they may relate
to TECO Power Services' ability to continue to operate and invest
successfully in its international projects; and changes in and
c o mpliance with environmental regulations that may impose
additional costs or curtail some activities. These factors are
d i scussed more fully under "Investment Considerations" in
registrant's Annual Report on Form 10-K for the year ended Dec.
31, 1998, and reference is made thereto.
Results of Operations
Three months ended June 30, 1999:
Net income for the quarter ended June 30, 1999 of $51.9
million, or $.39 per share, was 10 percent lower than in last
year s second quarter when net income was $57.9 million, or $.44
per share. These results reflect lower revenues at Tampa Electric
and lower gas production and prices at TECO Coalbed Methane,
partially offset by improved results at Peoples Gas System and
TECO Transport.
Consolidated operating income from continuing operations was
$99.7 million, compared with last year s second quarter operating
income of $110.4.
13
FORM 10-Q
Tampa Electric Company - Electric division
Tampa Electric reported second quarter operating income of
$68.1 million and revenues of $304.3 million compared with $80.2
million and $320.9 million, respectively, for the same period
last year. Lower retail sales in the quarter were a result of
milder-than-normal weather, which was in contrast to 1998 s
e x c eptionally hot spring when record demand levels were
experienced. In addition, as discussed in Note D on page 8,
quarterly revenue comparisons reflect recognition of $11.1
million of previously deferred revenues in 1998 (partially offset
by a temporary base rate reduction of $5.1 million) that were not
available in 1999 under the current regulatory agreement. The
current year period included $2.5 million of revenue deferral for
refund to customers. Customer growth remained strong at 2.5
percent for the quarter.
On April 8, 1999, an explosion at Tampa Electric's Gannon
Station Unit Six, a 375-megawatt generator that was off line for
scheduled spring maintenance, resulted in damage to Unit Six, the
shut down of the other five units at the Station and injuries to
45 employees and contractors, including three fatalities. The
units at Gannon Station that were affected by the accident have
returned to service.
Replacement power purchased from neighboring utilities, at a
cost estimated at $2 million, is expected to be recovered through
Tampa Electric's fuel and purchased power clause, with little
impact on customer rates. Although the financial impact to Tampa
Electric has not been fully determined, the costs resulting from
the accident are expected to be substantially covered by
insurance. The impact on current year operation and maintenance
14
FORM 10-Q
expenses is estimated to be $1-2 million.
Peoples Gas System
Peoples Gas System reported operating income of $8.6 million
and revenues of $56.7 million for the quarter compared with
operating income of $4.7 million and revenues of $58.0 million
last year. Commercial therm sales were up 2 percent, reflecting
customer growth of nearly 3.5 percent. Residential customer
growth also was strong at 2.7 percent, but residential therm
sales were down, due to milder-than-normal weather in 1999 s
second quarter. Operations and maintenance expenses were lower
in 1999 due to cost reductions from last year s restructuring.
Diversified Companies-Operating Results
TECO Transport reported operating income of $12.0 million
and revenues of $60.8 million in the second quarter, compared
with operating income of $9.4 million and revenues of $55.9
million last year. Results at TECO Transport reflected a strong
increase in grain shipments and higher northbound volumes,
partially offset by lower movements to Tampa Electric in response
to reduced electric demand. In 1998, delays and temporary tow
restrictions associated with flooding along the river system last
spring unfavorably affected earnings. Weakness in the export
coal and petroleum coke markets continued in the second quarter
of 1999 and will likely continue in the second half of the year.
The effects of the mild weather to date on coal requirements at
Tampa Electric as well as other utilities will also have an
unfavorable impact on transportation volumes during the second
half of the year.
15
FORM 10-Q
TECO Coal achieved second quarter operating income of $5.0
million, unchanged from 1998 s second quarter, with revenues of
$59.3 million compared with $54.4 million last year. Operating
income for 1998 excluded a one-time pretax charge of $13.6
million for asset valuation adjustments. Operating income in
1999 reflected higher third-party coal sales and continued
improvements in unit production costs, offset by lower revenues
from planned reductions in Tampa Electric volumes.
TECO Power Services (TPS) operating income for the quarter
was $3.6 million compared with $3.1 million last year, and
revenues were $28.9 million compared with last year s $25.0
million. Improvements for the quarter reflected higher
earnings from the company s Alborada Power Station in Guatemala;
capitalization of interest during construction on the company s
e q u i t y investment in the San Jose Power Station; and
contributions from the company s recent investments.
TECO Energy s other diversified companies recorded operating
income of $4.6 million for the second quarter on revenues of
$23.7 million. This compares with operating income of $9.6
million and revenues of $27.7 million for the same period last
year. TECO Coalbed Methane s operating income was down for the
quarter by $2.9 million, as a result of a 7 percent decline in
production and lower gas prices which reflected the impact of
mild weather. Results at Peoples Gas Company, the propane
business, were slightly down, reflecting lower propane volumes
because of warmer weather. Operating income at TeCom was lower
as a result of the amortization of capitalized development costs,
which began in late 1998.
The effective income tax rate on net income from continuing
16
FORM 10-Q
operations for the three-month period ended June 30, 1999 was
29.3 percent compared to 31.0 percent last year. This decrease
was primarily due to lower pretax income in 1999 and its effect
on recurring permanent tax difference items.
Six month s ended June 30, 1999:
Year-to-date net income from continuing operations was
$100.5 million; net income was $101.1 million including gains
from discontinued operations of $.6 million. Net income from
continuing operations for the same period last year, including
the one-time after-tax charges of $16.8 million discussed in Note
F on pages 9 and 10, was $88.7 million. Net income excluding
one-time charges and discontinued operations was $105.5 million
for the first six months of 1998. Discontinued operations are
discussed in Note B on page 7.
Net income from continuing operations for the first half of
1999 was 5 percent lower than in 1998's first half, excluding
one-time charges. These results were affected by the same factors
described for the second quarter.
Consolidated operating income from continuing operations was
$194.4 million, down 6 percent from 1998's first half operating
income, before non-recurring charges, of $206.1 million.
Tampa Electric Company - Electric division
Tampa Electric s year-to-date operating income was $123.3
million compared with $136.4 million in 1998 after a one-time
charge discussed in Note F on pages 9 and 10. Revenues were
$565.2 million compared with $594.3 million last year, which
included recognition in 1998 of previously deferred revenues of
17
FORM 10-Q
$19.8 million, partially offset by a temporary base rate
reduction of $9.5 million. The effects of the mild weather were
offset by customer growth of 2.5 percent with retail sales levels
increasing overall. Wholesale sales levels were down due to
weather and lower gas prices compared to 1998. Tampa Electric
expects to offset the impact of the unfavorable weather during
the first half of the year through continued strong customer
growth and expense control in the second half of the year.
Peoples Gas System
Year-to-date results at Peoples Gas System were 16 percent
higher with operating income of $23.3 million compared with $20.1
million last year. Mild winter weather led to lower year-to-date
revenues of $127.9 million in 1999 compared with $138.6 million
last year; customer growth was 2.9 percent. Operating expenses
were lower in 1999, the result of last year s restructuring.
Diversified Companies-Operating Results
TECO Transport s year-to-date operating income was $23.2
million and revenues were $118.4 million, compared with $18.6
million and $110.4 million in 1998. These results were affected
by the same factors described for the second quarter.
TECO Coal s year-to-date operating income was $10.2 million
on revenues of $112.4 million compared with operating income of
$9.4 million on revenues of $111.1 million in 1998. Operating
income for 1998 excluded a one-time pretax charge of $13.6
million for asset valuation adjustments. Operating income in
1999 reflected higher third-party coal sales and continued
improvements in unit production costs, offset by lower revenues
18
FORM 10-Q
from planned reductions in Tampa Electric volumes. Although six-
month 1999 results are in line with last year, the planned
reduction in Tampa Electric volumes will likely yield results for
the full year below those of 1998.
TECO Power Services year-to-date operating income was $8.4
million, up 27 percent from last year s $6.6 million, with
revenues of $52.7 million compared to $43.9 million for 1998.
Improvements reflected higher earnings from the company s
Alborada Power Station in Guatemala; capitalization of interest
during construction on the company s equity investment in the San
Jose Power Station; and contributions from the company s other
investments.
T E C O Energy s other diversified companies recorded
operating income and revenues of $10.6 million and $47.4 million,
compared with $18.7 million and $57.2 million last year. Prior
year operating income excluded a one-time pretax charge of $2.7
million at TeCom. TECO Coalbed Methane s operating income was
down for the six-month period by $4.7 million, as a result of a 7
percent decline in production and lower gas prices. Results at
Peoples Gas Company, the propane business, were down reflecting
lower propane volumes because of warmer weather. Operating
income at TeCom was lower as a result of the amortization of
capitalized development costs, which began in late 1998.
During 1998, Tampa Electric recorded $1.1 million of after-
tax charges in Other Income (Expense). These charges related to
its 1996 earnings the result of an FPSC audit of that year which
involved several adjustments. No such charges were recognized in
the 1999 period.
19
FORM 10-Q
In March 1999, the TECO Oil & Gas completed a transaction in
which it sold the note from ARO to a third party for $500,000 in
cash. In a separate transaction, ARO agreed to be responsible for
disputed joint billing payments of approximately $425,000. The
net gain recorded as discontinued operations in 1999's first
quarter related to these two transactions was $.6 million. (See
Note B on page 7.)
Liquidity, Capital Resources and Changes in Financial Condition
TPS expended $25 million in the form of a loan to Energia
Global International, Inc. (EGI) in February 1999, as described
in TECO Energy's report on Form 10-Q for the quarter ended March
31, 1999. In addition, fuel inventories were higher as a result
of lower generation at Tampa Electric.
The United States Environmental Protection Agency (EPA) has
commenced an investigation under the Clean Air Act of coal-fired
e l e c t ric power generators to determine compliance with
environmental permitting requirements associated with repairs,
m a intenance, modifications and operations changes made to
facilities that were in commercial operation prior to 1977 and
were "grandfathered" with respect to such requirements. The
EPA's focus is on whether new source performance standards should
be applied to the changes and further, whether the best available
control technology was or should have been used. Tampa Electric
is one of several electric utilities that have been visited by
E P A personnel and received a comprehensive request for
information pursuant to Section 114 of the Clean Air Act. Tampa
Electric has provided its response in compliance with the
information request. It believes that it has constructed,
20
FORM 10-Q
repaired, maintained, modified and operated its facilities in
compliance with relevant environmental permitting requirements.
T h e timing of completion and the outcome of the EPA's
investigation are uncertain.
Year 2000 Computer Systems Readiness:
Background
There is a global awareness that many computer programs use
only two digits to refer to a year and, therefore, may not
correctly recognize and process date information beyond the year
1999. This is referred to as the "Year 2000" issue.
The Year 2000 issue exists in two primary areas of TECO
Energy's operations: the critical business systems (such as the
financial reporting, procurement, payroll and customer
information and billing systems) and the control systems (such as
t h o se used in the operation of electric generation and
transmission facilities, gas and electric distribution facilities
and coal mining facilities).
TECO Energy began work on Year 2000 readiness in August
1995. The project is segmented into the following phases:
a w a reness, inventory, assessment, renovation, testing and
contingency planning. The project addresses readiness at Tampa
Electric, Peoples Gas System and the diversified companies.
Readiness
TECO Energy has completed its assessment of all hardware,
software and embedded systems and has substantially completed its
renovation, testing and contingency planning efforts. TECO
E n e r g y's critical systems (those required for reliable
21
FORM 10-Q
operations) are expected to be ready for the Year 2000, i.e.
renovated and tested to the extent necessary, during the third
quarter of 1999. Set forth below is a description of readiness
by functional area.
Critical Business Systems
Critical business systems, including mainframe hardware
which was replaced in 1998, have been renovated and tested and
are believed to be ready for the Year 2000. To assist in assuring
readiness, the renovation work and the integrated system testing
were handled by separate outside consulting firms.
Control Systems
Tampa Electric believes that its electric generation,
transmission and distribution systems, including energy
management and control and related embedded systems, are now
ready for the Year 2000. Tampa Electric retained industry
specialty firms to assist in identifying areas where renovations
were needed in the embedded systems associated with generator
unit controls and with making these renovations. A number of
t e sts have been successfully completed on these systems,
including future date scenarios. With the exception of a portion
of the TECO Coal plant control systems, which is scheduled to be
fully renovated and tested in the third quarter of 1999, critical
systems in the other parts of TECO Energy, including Peoples Gas
System, have been renovated and tested.
22
FORM 10-Q
Coordination with Others
TECO Energy has surveyed its largest suppliers and customers
with respect to their Year 2000 readiness, including all
providers of technology supplies and services. As part of its
Year 2000 project, the company is coordinating with its suppliers
and customers based on their responses to these surveys. At the
request of the U. S. Department of Energy (DOE), the North
American Electric Reliability Council (NERC) is coordinating
monthly readiness monitoring and reporting, information sharing
and contingency planning for the industry. The latest quarterly
report was published in early August of 1999. The NERC activity
addresses all aspects of the interconnected electric grid. The
aggregated results are being reported to the DOE and other
regulatory bodies in the U.S., Canada and Mexico. The Natural Gas
Council, through the American Gas Association, is coordinating
similar processes within the gas industry, reporting to the
Federal Energy Regulatory Commission (FERC). Tampa Electric and
Peoples Gas System are active participants in these industry
groups.
Costs
The total cost of Year 2000 remediation is expected to
remain under $10 million, which includes contracted resources,
purchases and internal labor. An estimated breakdown of project
costs is as follows: Tampa Electric - $6 million, Peoples Gas
System - $2.5 million, and the diversified companies - $.5
million. Approximately 40 percent of the these costs are
attributable to testing expenses, and the remainder consists
23
FORM 10-Q
primarily of renovation or replacement costs. Through June 30,
1999, approximately $8.5 million had been spent.
Risks
TECO Energy believes the most reasonably likely worst case
scenario would be the occurrence of isolated outages of limited
duration for utility customers, similar to those occurring during
the utilities' storm season. The utilities have assessed the risk
of this scenario, and believe that their contingency efforts,
primarily the ability to bypass automated controls, would
mitigate the effect of such a scenario.
Contingency Plans
TECO Energy has prepared contingency plans for critical
functions. The Tampa Electric and Peoples Gas System plans have
been filed with by the Florida Public Service Commission and are
being coordinated with local emergency planning organizations.
The plans provide for an incident management center; designated
on-site and on-call response teams for critical systems and
c u stomer communication functions; appropriate inventory of
critical materials and supplies; verification of computer-
generated utility service orders; adjusted maintenance schedules;
and alternate means of communications, both internally and with
other industry participants. TECO Energy will continue to test
less critical systems and refine contingency plans throughout the
remainder of this year.
24
FORM 10-Q
Forward-Looking Statements
The costs of TECO Energy's Year 2000 efforts and the dates
on which the company believes it will complete such efforts are
based upon management's best estimates, which were derived using
numerous assumptions regarding future events, including the
c o n t inued availability of certain resources, third-party
remediation plans and other factors. There can be no assurance
that these estimates will prove to be accurate, and actual
results could differ materially from those currently projected.
Specific factors that could cause such differences include, but
are not limited to, the availability and cost of personnel
trained in Year 2000 issues, the ability to identify, assess,
remediate and test all relevant computer codes and embedded
technology and similar uncertainties.
Accounting Standards
Accounting for Derivative Instruments and Hedging
In 1998, the Financial Accounting Standards Board (FASB)
issued Financial Accounting Standard (FAS) 133, Accounting for
Derivative Instruments and Hedging. This standard was initially
to be effective for fiscal years beginning after June 15, 1999.
In July 1999, the FASB delayed the effective date of this
pronouncement until fiscal years beginning after June 15, 2000.
TECO Energy does not use derivatives or other financial products
for speculative purposes. The company has not yet determined to
what extent the standard will impact its financial statements.
25
FORM 10-Q
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
TECO Energy is exposed to changes in interest rates
p r i m arily as a result of its borrowing activities. A
hypothetical increase in interest rates of 10 percent of TECO
Energy's weighted average interest rate on its variable rate
debt would not have a significant impact on TECO Energy's pretax
earnings over the next fiscal year.
A hypothetical 10-percent decrease in interest rates would
not have a significant impact on the estimated fair value of
TECO Energy's long-term debt at June 30, 1999.
From time to time, TECO Energy enters into futures, swaps
and option contracts to moderate its exposure to interest rate
changes. The benefits of these arrangements are at risk only in
the event of non-performance by the other party to the
agreement, which the company does not anticipate. TECO Energy
does not use derivatives or other financial products for
speculative purposes.
Commodity Price Risk
Currently, at Tampa Electric, Peoples Gas System and at
TPS, commodity price increases due to changes in market
conditions for fuel, purchased power and natural gas are
recovered through cost recovery mechanisms, with no effect on
earnings.
TECO Coalbed Methane is exposed to commodity price risk
through the sale of natural gas. A 10-percent change in the
market price of natural gas would not have a significant impact
on TECO Energy's earnings.
26
FORM 10-Q
TECO Coal is exposed to commodity price risk through coal
sales. A 10-percent change in the market price of coal would not
have a significant impact on TECO Energy's earnings.
From time to time, TECO Energy enters into futures, swaps
and options contracts to hedge the selling price for its
physical production at TECO Coalbed Methane, to limit exposure
to gas price increases at both the regulated natural gas utility
and unregulated propane business, and to limit exposure to fuel
price increases at TECO Transport. The benefits of these
financial arrangements are at risk only in the event of non-
performance by the other party to the agreement, which the
c o m pany does not anticipate. TECO Energy does not use
d e r ivatives or other financial products for speculative
purposes.
27
FORM 10-Q
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Supplemental Executive Retirement Plan for R.D. Fagan,
dated as of May 24, 1999.
10.2 Terms of R. D. Fagan s employment, dated as of
May 24, 1999.
10.3 Nonstatutory Stock Option granted to R. D. Fagan,
dated as of May 24, 1999.
10.4 Restricted Stock Agreement between TECO Energy, Inc.
and R. D. Fagan, dated as of May 24, 1999.
10.5 Form of Nonstatutory Stock Option under the TECO
Energy, Inc. 1996 Equity Incentive Plan.
10.6 Form of Performance Shares Agreement between TECO
Energy, Inc. and certain senior executives under the
TECO Energy, Inc. 1996 Equity Incentive Plan.
10.7 Voluntary Retirement Agreement and General Release
between TECO Energy, Inc. and A. D. Oak dated as of
April 23, 1999.
12 Ratio of earnings to fixed charges
27 Financial data schedule - six months ended
June 30, 1999. (EDGAR filing only)
(b) Reports on Form 8-K
The registrant filed a Current Report on Form 8-K dated
April 27, 1999 reporting under "Item 5. Other Events" the
election of Robert D. Fagan as President and Chief
Executive Officer of TECO Energy, Inc. effective June 1,
1999.
28
FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
TECO ENERGY, INC.
(Registrant)
Date: August 13, 1999 By: /s/G. L. Gillette
G. L. Gillette
Vice President - Finance and Chief
Financial Officer
(Principal Financial Officer)
28
Exhibit 12
INDEX TO EXHIBITS
Exhibit No. Description of Exhibits Page
No.
10.1 Supplemental Executive Retirement Plan for 30
R. D. Fagan, dated as of May 24, 1999.
10.2 Terms of R. D. Fagan's employment, dated as of 35
May 24, 1999
10.3 Nonstatutory Stock Option granted to R. D. 39
Fagan, dated as of May 24, 1999.
10.4 Restricted Stock Agreement between TECO Energy, 43
Inc. and R. D. Fagan, dated as of May 24, 1999.
10.5 Form of Nonstatutory Stock Option under the TECO 47
Energy, Inc. 1996 Equity Incentive Plan.
10.6 Form of Performance Shares Agreement between 51
TECO Energy, Inc. and certain senior
executives under the TECO Energy, Inc. 1996
Equity Incentive Plan.
10.7 Voluntary Retirement Agreement and General Release 56
between TECO Energy, Inc. and A. D. Oak dated
as of April 23, 1999.
12 Ratio of earnings to fixed charges 64
27 Financial data schedule - six months ended --
June 30, 1999. (EDGAR filing only)
29
TECO ENERGY GROUP
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
FOR ROBERT D. FAGAN
SECTION 1. PURPOSE AND EFFECTIVE DATE
The purpose of this plan is to provide Robert D. Fagan, Chief
Executive Officer of TECO Energy, Inc. with additional retirement
income by supplementing the retirement benefits provided under the
retirement plan. The plan is effective as of May 24, 1999.
SECTION 2. DEFINITIONS
This section contains definitions of terms used in the plan.
Where the context so requires, the singular includes the plural, and
the plural includes the singular.
2.1 Annual earnings will have the same meaning as in the
retirement plan, except that the same will be determined without
regard to (a) any dollar limitation on such annual earnings that may
be imposed under the retirement plan or (b) any reduction in taxable
income as a result of voluntary salary reduction deferrals under the
TECO Energy Group Retirement Savings Excess Benefit Plan.
2.2 Average annual earnings of Mr. Fagan as of any date of
reference means the average of his annual earnings during the 36
consecutive months of active employment preceding the date of
reference. Bonuses are included as compensation for the period in
which paid, provided that if more than three regular annual bonuses
are paid in any 36 consecutive month period, only the largest three
bonuses will be counted.
2.3 Board means the Board of Directors of TECO Energy.
2.4 Committee means the retirement plan committee as constituted
under the retirement plan.
2.5 TECO Energy means TECO Energy, Inc. and any successor to all
or a major portion of its assets or business which assumes the
obligations of TECO Energy, Inc. under this plan.
2.6 D i s ability income plan means the TECO Energy Group
Disability Income Plan, as amended from time to time.
2.7 Plan means the TECO Energy Group Supplemental Executive
Retirement Plan for Robert D. Fagan, as set forth in this plan
instrument, and as it may be amended from time to time.
2.8 Retirement means termination of Mr. Fagan s employment with
TECO Energy by Mr. Fagan or TECO Energy for any reason.
2.9 Retirement plan means the TECO Energy Group Retirement Plan,
as amended from time to time.
30
2.10 Service will have the same meaning as plan service in the
retirement plan.
2.11 Social security benefit of Mr. Fagan as of any date of
reference (the computation date ) means the primary insurance amount
to which he is or would be entitled, payable under Title II of the
Social Security Act as in effect on such date, based on the
assumptions: (a) that no changes in the benefit levels payable or the
wage base under Title II occur after the computation date; (b) that,
if the computation date falls before his 63rd birthday, his annual
earnings during the calendar year in which the computation date falls
and during any subsequent calendar year before the calendar year in
which his 63rd birthday falls is zero; (c) that payment of his primary
insurance amount begins for the month after he reaches age 63, or his
retirement date if later, without reduction or delay because of future
gainful employment or delay in applying for benefits; and (d) that his
earnings for calendar years before the calendar year in which the
computation date falls will be determined using his actual earnings
history if available, and otherwise by applying a six percent
retrospective salary scale to his rate of annual earnings in effect on
the computation date. The social security benefit of Mr. Fagan if he
retires after his 66th birthday will include any delayed retirement
credit.
2.12 Survivor income plan means the TECO Energy Group Survivor
Income Plan, as amended from time to time.
SECTION 3. RETIREMENT BENEFITS
3.1 Amount. Subject to the reductions in Section 6.1 below, Mr.
Fagan will receive a supplemental monthly retirement benefit equal to
one-twelfth of the greater of (a) (1) the sum of (A) 20 percent and
(B) four percent multiplied by his years of service (or portions
thereof), multiplied by (2) his average annual earnings, up to a
maximum benefit of 60 percent of his average earnings (60 percent is
equal to 20 percent plus four percent multiplied by a maximum of ten
years of service), and (b) $160,000. Mr. Fagan s retirement benefit
hereunder will be calculated using his years of service (or portions
thereof) and average annual earnings as of his actual date of
retirement.
3.2 Form of Payment.
(a) Normal form of retirement benefits. The normal form of
retirement benefit payable to Mr. Fagan under the plan is a life
annuity. Benefits payable in the normal form will begin on the first
day of the month coinciding with or next following the date of
Mr. Fagan s retirement.
(b) Optional lump sum benefit. In lieu of the normal form
of benefit, Mr. Fagan may elect to receive payment of his benefit in
the form of a commuted single sum payment that is the actuarial
equivalent of the normal form of benefit (including the value of the
post-retirement surviving spouse benefit under Section 4.2(c)). If
Mr. Fagan elects to receive a lump sum payment, such payment will be
made on the first day of the month coinciding with or next following
the date Mr. Fagan s employment terminates. Actuarial equivalence
31
will be based on the actuarial assumptions specified from time to time
in the retirement plan for lump sum payments. Mr. Fagan s election to
receive a lump sum payment will be effective only with respect to a
retirement occurring at least 12 months after the date Mr. Fagan
submits the election, provided that elections submitted on or before
June 30, 1999 will be immediately effective.
SECTION 4. SURVIVING SPOUSE BENEFIT
4.1 Eligibility. Mr. Fagan s surviving spouse will receive the
surviving spouse benefit if Mr. Fagan and his spouse were married to
each other for at least the 12 months preceding Mr. Fagan s death and,
in the case of Mr. Fagan s death after retirement, Mr. Fagan and his
spouse were married to each other on Mr. Fagan s date of retirement.
4.2 Amount of surviving spouse benefit. Subject to the
reductions described in Section 6.2 below, the benefit provided under
the plan to Mr. Fagan s surviving spouse will be determined as
follows:
(a) Pre-retirement before age 63. If Mr. Fagan dies during
employment with TECO Energy and before his 63rd birthday, his
surviving spouse will receive a monthly survivor income payment equal
to 50 percent of his monthly projected retirement benefit. Mr.
Fagan s monthly projected retirement benefit is the monthly benefit he
would have received if he had retired at age 63 under Section 3.1
calculated using his average annual earnings determined as of his date
of death.
(b) Pre-retirement on or after age 63. If Mr. Fagan dies
during employment with TECO Energy on or after his 63rd birthday, his
surviving spouse will receive a monthly survivor income payment equal
to 50 percent of his monthly retirement benefit earned under Section
3.1 using his years of service (or portions thereof) and his average
annual earnings as of his date of death.
(c) Post-retirement. If Mr. Fagan dies on or after the
date of his retirement, his surviving spouse will receive a monthly
survivor income payment equal to 50 percent of the monthly benefit
payment he was receiving at his death (or would have received if he
had survived until the first payment date).
4.3 Form and time of surviving spouse benefit. Surviving spouse
benefits under this Section 4 will be payable in the form of a life
annuity to the surviving spouse. Benefit payments will begin on the
first day of the month coinciding with or next following the date of
Mr. Fagan s death.
4.4 Death benefit where lump sum paid. If Mr. Fagan received a
lump sum payment of his benefit under Section 3.2(b), no surviving
spouse benefit or other death benefit will be payable under the plan
to any person.
SECTION 5. DISABILITY
5.1 If Mr. Fagan suffers a total disability (as defined in the
32
rd
disability income plan) before his 63 birthday, he will continue to
be credited with service as if he were actively employed by TECO
Energy during his period of total disability. Mr. Fagan may not
receive benefits under this plan at any time when he is receiving
disability income payments under the disability income plan. Benefits
under this plan will begin when payments cease under the disability
income plan.
5.2 Mr. Fagan s disability date is his last day of work for TECO
Energy before becoming unable to continue working because of his total
disability. A period of total disability of Mr. Fagan will begin on
his disability date and will end on the earlier of the last day of the
month in which his final disability income payment is due under the
disability income plan or on the date he retires hereunder and starts
receiving benefit payments.
5.3 If Mr. Fagan does not return to active service with TECO
Energy after suffering a total disability, his retirement benefits
under Section 3 will be calculated using his average annual earnings
as of his disability date, his total service including service
credited under Section 5.1 above, and his primary social security
benefit as of his date of disability.
5.4 If Mr. Fagan dies while disabled, his surviving spouse will,
if eligible, receive the pre-retirement surviving spouse benefit
determined under Section 4.2(a) or (b).
SECTION 6. OFFSET FOR OTHER PAYMENTS
6.1 Mr. Fagan s retirement benefit will be reduced (but not
below zero) by the following payments, with such reductions starting
when such payments are assumed to begin: (a) 100 percent of the
social security benefit of Mr. Fagan assuming such benefit begins on
the later of his 63rd birthday or the date of his actual retirement
and (b) the amount of his benefit payments under the retirement plan
and any tax-qualified or nonqualified defined benefit retirement plan
of former employers of Mr. Fagan (converted in all cases to a life
annuity if such payments are in a form other than a life annuity,
using the actuarial assumptions in the TECO Energy retirement plan),
assuming such payments begin on the later of the earliest date on
which he could begin receiving payments from such plan or the date of
his actual retirement.
6.2 The benefit of Mr. Fagan s surviving spouse will be reduced
(but not below zero) by the following payments to her: (a) payments
under the survivor income plan, and (b) payments under the retirement
plan and any tax-qualified or nonqualified defined benefit retirement
plans of former employers of Mr. Fagan.
SECTION 7. BENEFITS NOT CURRENTLY FUNDED
7.1 Nothing in this plan will be construed to create a trust or
to obligate TECO Energy or any other employer to segregate a fund,
purchase an insurance contract, or in any other way currently to fund
the future payment of any benefits hereunder, nor will anything herein
33
be construed to give Mr. Fagan or any other person rights to any
specific assets of TECO Energy or of any other employer or entity.
7.2 Notwithstanding Section 7.1, TECO Energy has established a
grantor trust of which it is treated as the owner under Section 671 of
the Internal Revenue Code to provide for the payment of benefits
hereunder.
SECTION 8. ADMINISTRATION
The plan will be administered by the committee, which will have
full power and authority to construe, interpret and administer the
plan. Decisions of the committee will be final and binding on all
persons. The committee may, in its discretion, adopt, amend and
rescind rules and regulations relating to the administration of the
plan.
SECTION 9. RIGHTS NON-ASSIGNABLE
Neither Mr. Fagan, his surviving spouse, nor any other person
will have any right to assign or otherwise to alienate the right to
receive payments under the plan, in whole or in part.
SECTION 10. OTHER BENEFIT PLANS
This plan will supersede any obligation to pay benefits to Mr.
Fagan under the excess benefit plan contained in the retirement plan
or the TECO Energy Group Supplemental Executive Retirement Plan, as
they may be amended from time to time. No benefits will be payable to
Mr. Fagan under such excess benefit plan or the TECO Energy Group
Supplemental Executive Retirement Plan.
SECTION 11. AMENDMENT
TECO Energy reserves the right at any time by action of the board
to amend the plan in any way. However, no amendment of the plan may
reduce the benefits to be paid to Mr. Fagan or his surviving spouse
below those that would have been paid if the plan had continued
without change to the date of Mr. Fagan s retirement.
Executed as of May 24, 1999
TECO ENERGY, INC.
By: /s/ G. F. Anderson
G. F. Anderson
Chairman of the Board
34
Exhibit 10.2
May 24, 1999
Mr. Robert D. Fagan
TECO Energy, Inc.
702 N. Franklin Street
Tampa, FL 33602
Dear Mr. Fagan:
This will confirm certain terms and conditions relating to your
employment by TECO Energy, Inc. (the Company ).
1. Duties. You shall serve at the pleasure of the Company s
Board of Directors and you shall perform such executive duties for the
Company and its subsidiaries as may be assigned to you by the
Company's Board of Directors. While so employed, you shall devote
your full employable time to the performance of such duties and use
your best efforts to promote the interests of the Company and its
subsidiaries. You shall, at the pleasure of the Company, serve on
such boards of directors and committees of the Company and its
s u bsidiaries and hold such offices with the Company and its
subsidiaries to which you may be duly elected or appointed.
2. Compensation Upon Other Termination. If, within three years
of the date hereof, your employment shall be terminated by the Company
other than for Cause or Disability or if it is terminated by you for
Good Reason, then you shall be entitled to the following benefits:
(a) The Company shall pay you your full base salary through
the date of termination at the rate in effect at the time notice of
termination is given, plus all other amounts to which you are entitled
under any compensation plan of the Company, at the time such payments
are due.
(b) In lieu of any further salary payments to you for
periods subsequent to the date of termination, the Company shall pay
as severance pay to you a lump sum severance payment within five days
after the date of termination equal to two times the sum of (1) the
highest annual rate of base salary in effect at any time within the 12
months preceding the date of termination and (2) the greater of (A)
your targeted annual incentive award as of the date of termination and
(B) the most recent annual incentive award paid to you by the Company
preceding the date of termination.
(c) For a 24-month period after such termination, the
Company shall arrange to provide you with life, disability, accident
and health insurance benefits substantially similar to those that you
35
Letter to Mr. Fagan
Page 2
May 24, 1999
were receiving immediately prior to termination. Benefits otherwise
receivable by you under this subsection will be reduced to the extent
comparable benefits are actually received by you from a subsequent
employer during the 24-month period following your termination, and
any such benefits actually received by you shall be reported to the
Company.
"Cause" is defined as (i) willful and continued failure to
substantially perform your obligations under this agreement (other
than by reason of physical or mental illness) after written demand
specifically identifying such failure is given to you by the Company
or (ii) willful conduct by you that is demonstrably and materially
injurious to the Company. For purposes of this definition, "willful"
conduct requires an act, or failure to act, that is not in good faith
and that is without reasonable belief that the action or omission was
in the best interest of the Company. Notwithstanding the foregoing,
you shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to you a copy of a resolution
duly adopted by the affirmative vote of not less than three quarters
(3/4) of the entire membership of the Board of Directors at a meeting
of the Board of Directors called and held for such purpose (after
reasonable notice to you and an opportunity for you, together with
your counsel, to be heard before the Board of Directors), finding that
in the the good faith opinion of the Board of Directors you were
guilty of conduct set forth above in this paragraph and specifying the
particulars thereof in detail.
Disability is defined as (i) being absent from the full-time
performance of your duties with the Company for six consecutive months
as a result of your incapacity due to physical or mental illness and
(ii) after subsequent written notice of termination is given, not
returning to the full-time performance of your duties within 30 days.
"Good Reason" is defined as (i) the assignment to you of any
duties inconsistent (except in the nature of a promotion) with the
position in the Company that you then held or a substantial adverse
a l t e r a t ion in the nature or status of your position or
responsibilities or the conditions of your employment from those then
in effect, (ii) a reduction by the Company in your annual base salary
as in effect on the date hereof or as the same may be increased from
time to time or (iii) the failure by the Company to name you as
Chairman of the Board by January 1, 2000, in each case that is not
corrected by the Company within 15 days after you give written notice
specifying the Good Reason. Such termination of employment must occur
within one year after the date of the event constituting Good Reason.
36
Letter to Mr. Fagan
Page 3
May 24, 1999
3. Non-Competition. You agree that while you are employed by
the Company and for two years thereafter, you shall not (i)(a) engage
in any business, or acquire an interest in any business as a partner,
stockholder, proprietor or otherwise (except as the beneficial owner
o f publicly-traded stock), or become affiliated as an agent,
consultant, employee, director or officer of or provide any consulting
services to any business having its principal place of business within
the State of Florida that is in competition with any business in which
the Company is engaged or (b) engage in, or provide services with
respect to, strategic planning, marketing or sales in the State of
Florida for any such business regardless of its principal place of
business; (ii) solicit, divert, do business with, or accept business
from any person who is or has been a customer of the Company if such
solicitation, diversion or business has the effect of or results in
the Company s loss of all or a portion of such customer s business or
potential business; (iii) influence or attempt to influence any
employee of the Company to terminate his/her employment with the
Company or (iv) influence or attempt to influence any agent, customer,
supplier or distributor who has a business relationship with the
Company to cease or adversely alter its business relations with the
Company. For purposes of the above paragraph, Company shall be
deemed to include all of its subsidiaries.
4. Confidential Information. You agree to receive confidential
and proprietary information of the Company and its subsidiaries
acquired or developed by you during your employment with the Company
in confidence, and except as authorized by the Company, not to
disclose or use such information to or for the benefit of others
during the period of your employment and for a period of ten years
thereafter except to the extent such disclosure may be required by law
or such information has become public knowledge without breach of this
agreement.
5. Nontransferability; Successors. No payment hereunder shall
be subject to anticipation, sale, transfer, assignment, pledge or
other charge. The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business or assets of the Company to
expressly assume and agree to perform this agreement.
6. Costs of Enforcement; Interest. The Company shall reimburse
you, within five days after demand, for all reasonable legal fees and
expenses incurred by you in enforcing your rights under this
agreement. The Company shall also pay to you interest on any amount
that the Company fails to pay in accordance with the terms of this
agreement at an annual rate equal to the prime rate as reported in The
37
Letter to Mr. Fagan
Page 4
May 24, 1999
Wall Street Journal (Southeastern Edition) plus 2% from the date such
amount became due until payment is made.
7. Governing Law. This agreement shall be governed by the laws
of the State of Florida, without giving effect to the conflicts of law
principles thereof.
Very truly yours,
TECO ENERGY, INC.
By: /s/ G. F. Anderson
G. F. Anderson
Chairman of the Board
Agreed to this 24 day of May, 1999.
/s/ Robert D. Fagan
Robert D. Fagan
38
Exhibit 10.3
TECO ENERGY, INC.
1996 EQUITY INCENTIVE PLAN
Nonstatutory Stock Option
TECO Energy, Inc. (the Company ) grants to Robert D. Fagan (the
Optionee ) a nonstatutory stock option (the Option ) dated May 24,
1999 under the Company s 1996 Equity Incentive Plan (the Plan ).
Capitalized terms not otherwise defined herein have the meanings given
to them in the Plan.
1. Grant of Stock Option. Pursuant to the Plan and subject to
the terms and conditions set forth in this Option, the Company hereby
grants to the Optionee the right and option to purchase from the
Company the following number of shares of Common Stock of the Company
at $21.4063 per share at the earlier of the dates listed below and the
date determined under Section 2.
Number of shares Price per Time Option is first
share exercisable
15,556 $21.4063 May 24, 2000
15,556 $22.4766 May 24, 2000
15,556 $23.5469 May 24, 2000
15,556 $21.4063 May 24, 2001
15,556 $22.4766 May 24, 2001
15,555 $23.5469 May 24, 2001
15,555 $21.4063 May 24, 2002
15,555 $22.4766 May 24, 2002
15,555 $23.5469 May 24, 2002
The Option may be exercised at any time and from time to time
after the first time it may be exercised in accordance with the
foregoing schedule and prior to the expiration of ten years from the
date hereof (the Expiration Date ), except as otherwise provided
herein. The Option may be exercised only with respect to whole
shares.
This Option will not be treated as an incentive stock option
under Section 422 of the Internal Revenue Code of 1986, as amended.
2. Effects of Certain Events. Notwithstanding Section 1, the
Option will become immediately exercisable in full upon the earliest
to occur of the following events:
(a) the Optionee s death;
(b) the termination of Optionee s employment with the
Company or any business entity in which the Company owns directly or
indirectly 50% or more of the total voting power or has a significant
financial interest as determined by the Committee (an Affiliate )
because of a disability that would entitle the Optionee to benefits
39
under the long-term disability benefits program of the Company for
which the Optionee is eligible, as determined by the Committee;
(c) the termination by the Company or any Affiliate of
Optionee s employment other than for Cause as determined by the
Committee. Cause means (i) willful and continued failure of the
Optionee to substantially perform his duties with the Company or such
Affiliate (other than by reason of physical or mental illness) after
written demand specifically identifying such failure is given to the
Optionee by the Company, or (ii) willful conduct by the Optionee that
is demonstrably and materially injurious to the Company. For purposes
of this subsection, willful conduct requires an act, or failure to
act, that is not in good faith and that is without reasonable belief
that the action or omission was in the best interest of the Company or
the Affiliate;
(d) the Optionee s retirement from the Company or an
Affiliate at or after attainment of the age at which benefits are
payable under the TECO Energy Group Retirement Plan or any successor
thereto without reduction for commencement of benefits before normal
retirement age, or any earlier date that the Committee determines will
constitute a normal retirement for purposes of this Agreement; or
(e) upon a Change in Control. For purposes of this Option,
a 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 6(e)
of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended (the Exchange Act ), whether or not
the Company is in fact required to comply therewith; provided, that,
without limitation, such a Change in Control shall be deemed to have
occurred if:
(1) any person (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than the Company, any
trustee or other fiduciary holding securities under an employee
benefit plan of the Company or a corporation owned directly or
indirectly by the shareholders of the Company in substantially the
same proportions as their ownership of stock of the Company, is or
becomes the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) directly or indirectly of securities of the Company
representing 30% or more of the combined voting power of the Company s
then outstanding securities;
(2) during any period of 24 consecutive months (not
including any period prior to the date of this Option), individuals
who at the beginning of such period constitute the Board of Directors
of the Company and any new director (other than a director designated
by a person who has entered into an agreement with the Company to
effect a transaction described in subsections (1), (3) or (4) of this
Section 2(e)) whose election by the Board of Directors of the Company
or nomination for election by the shareholders of the Company was
approved by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning of such
period or whose election or nomination for election was previously so
approved cease for any reason to constitute a majority thereof;
40
(3) there is consummated a merger or consolidation of
the Company or any direct or indirect subsidiary of the Company with
any other corporation, other than (i) a merger or consolidation
resulting in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity) at least 65% of the combined voting securities of
the Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation or (ii) a merger or
consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no person (as hereinabove defined)
acquires 30% or more of the combined voting power of the Company s
then outstanding securities; or
(4) the shareholders of the Company approve a plan of
complete liquidation of the Company or there is consummated the sale
or disposition by the Company of all or substantially all of the
Company s assets.
3. Exercise and Payment. To exercise this Option, the Optionee
will deliver written notice to the Secretary of the Company specifying
the date of this Option, the number of shares as to which this Option
is being exercised, the price at which the Option on those shares is
exercisable, and a date not later than 30 days after the date of
delivery of the notice when the Optionee will take up and pay for such
shares. On the date specified in such notice, the Company will issue
to the Optionee the number of shares purchased against payment
therefor in cash, including by check, or in such other form as the
Committee may approve.
4. Termination of Employment. If the Optionee s employment
with the Company or an Affiliate terminates for any reason (a
Termination of Employment ) coincident with or after the first time
this Option may be exercised, the Option will remain exercisable, with
respect to the shares with respect to which the Option was exercisable
as of the date of Termination of Employment, for the longest
applicable period provided below. This Option will terminate, and no
rights will be exercisable hereunder, after the expiration of the
applicable exercise period.
(a) The Optionee may exercise the rights available under
this Option at the time of Termination of Employment for a period of
three months thereafter, but in no event after the Expiration Date.
(b) I f Termination of Employment occurs because of
disability, the Optionee or the Optionee s guardian or legal
representative may exercise the rights available under this Option at
the time of Termination of Employment at any time on or before the
later of (i) twelve months after the Termination of Employment or
(ii) the Expiration Date. The Committee will determine whether and
when Termination of Employment because of disability has occurred for
purposes of this Section 4(b).
(c) If Termination of Employment occurs for any reason on
or after the age at which benefits are payable to the Optionee without
reduction for commencement of such benefits before normal retirement
age under the TECO Energy Group Retirement Plan (or any successor
thereto), or any earlier age that the Committee determines will
41
constitute a normal retirement for purposes of this Option, the
Optionee (or the Optionee s guardian or legal representative or, after
death, the Optionee s Designated Beneficiary under the Plan or, if
none has been designated, those entitled to do so by the Optionee s
will or the laws of descent and distribution) may exercise the rights
available under this Option at the time of Termination of Employment
at any time on or before the Expiration Date.
(d) Upon the death of the Optionee, the Optionee s
Designated Beneficiary under the Plan or, if none has been designated,
those entitled to do so by the Optionee s will or the laws of descent
and distribution, may exercise the rights available under this Option
at the time of death for a period of twelve months thereafter or, if
Termination of Employment occurs because of death, at any time on or
before the later of (i) twelve months after the date of death or
(ii) the Expiration Date.
The Committee will determine whether an authorized leave of
absence constitutes Termination of Employment for purposes of this
Option.
5. Adjustment of Terms. In the event of corporate transactions
affecting the Company s outstanding Common Stock, the Committee will
equitably adjust the number and kind of shares subject to this Option
and the respective exercise prices hereunder to the extent provided by
the Plan.
6. No Transfer. This Option will not be transferable other
than by will or the laws of descent and distribution and will be
exercisable during the Optionee s lifetime only by the Optionee or the
Optionee s guardian or legal representative.
7. Securities Laws. The purchase of any shares by the Optionee
upon exercise of this Option will be subject to the conditions that
(i) the Company may in its discretion require that a registration
statement under the Securities Act of 1933 with respect to the sale of
such shares to the Optionee will be in effect, and such shares will be
duly listed, subject to notice of issuance, on any securities exchange
on which the Common Stock may then be listed, (ii) all such other
action as the Company considers necessary to comply with any law, rule
or regulation applicable to the sale of such shares to the Optionee
will have been taken and (iii) the Optionee will have made such
representations and agreements as the Company may require to comply
with applicable law.
8. Withholding Taxes. The Optionee will pay to the Company, or
make provision satisfactory to the Committee for payment of, any taxes
required by law to be withheld in respect of the exercise of the
Option no later than the date of the event creating the tax liability.
In the Committee s discretion, such tax obligations may be paid in
whole or in part in shares of Common Stock, including shares retained
from the exercise of this Option, valued at fair market value on the
date of delivery. The Company and its Affiliates may, to the extent
permitted by law, deduct any such tax obligations from any payment of
any kind otherwise due to the Optionee.
9. The Committee. Any determination by the Committee under, or
interpretation of the terms of, this Option or the Plan will be final
42
and binding on the Optionee.
10. Limitation of Rights. The Optionee will have no rights as a
shareholder with respect to any shares subject to this Option until
such shares are issued against payment therefor. The Optionee will
have no right to continued employment by virtue of this Option.
11. Amendment. The Company may amend, modify or terminate this
Option, including substituting another Award of the same or a
different type and changing the date of realization, provided that the
Optionee s consent to such action will be required unless the action,
taking into account any related action, would not adversely affect the
Optionee.
12. Governing Law. This Option will be governed by and
interpreted in accordance with the laws of Florida.
TECO ENERGY, INC.
By: /s/ G. F. Anderson
G. F. Anderson
Chairman of the Board
43
Exhibit 10.4
TECO ENERGY, INC.
1996 EQUITY INCENTIVE PLAN
Restricted Stock Agreement
TECO Energy, Inc. (the "Company") and Robert D. Fagan (the
"Grantee") have entered into this Restricted Stock Agreement (the
"Agreement") dated May 24, 1999 under the Company's 1996 Equity
Incentive Plan (the "Plan"). Capitalized terms not otherwise defined
herein have the meanings given to them in the Plan.
1. Grant of Restricted Stock. Pursuant to the Plan and subject
to the terms and conditions set forth in this Agreement, the Company
hereby grants, issues and delivers to the Grantee 14,015 shares of its
Common Stock (the "Restricted Stock").
2. Restrictions on Stock. Until the restrictions terminate
under Section 3, unless otherwise determined by the Committee:
(a) the Restricted Stock may not be sold, assigned, pledged
or transferred by the Grantee; and
(b) all shares of Restricted Stock will be forfeited and
returned to the Company if the Grantee ceases to be an employee of the
Company or any business entity in which the Company owns directly or
indirectly 50% or more of the total voting power or has a significant
financial interest as determined by the Committee (an "Affiliate").
3. Termination of Restrictions. The restrictions on all shares
of Restricted Stock will terminate on the earliest to occur of the
following events:
(a) the Grantee's death;
(b) the termination of Grantee's employment with the
Company or any Affiliate because of a disability that would entitle
the Grantee to benefits under the long-term disability benefits
program of the Company for which the Grantee is eligible, as
determined by the Committee;
(c) the termination by the Company or any Affiliate of
Grantee's employment other than for Cause as determined by the
Committee. "Cause" means (i) willful and continued failure of the
Grantee to substantially perform his duties with the Company or such
Affiliate (other than by reason of physical or mental illness) after
written demand specifically identifying such failure is given to the
Grantee by the Company, or (ii) willful conduct by the Grantee that is
demonstrably and materially injurious to the Company. For purposes of
this subsection, "willful" conduct requires an act, or failure to act,
35
that is not in good faith and that is without reasonable belief that
the action or omission was in the best interest of the Company or the
Affiliate. Notwithstanding the foregoing, the Grantee shall not be
deemed to have been terminated for Cause unless and until there shall
have been delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters (3/4) of the entire
membership of the Board of Directors at a meeting of the Board of
Directors called and held for such purpose (after reasonable notice to
the Grantee and an opportunity for him, together with his counsel, to
be heard before the Board of Directors), finding that in the the good
faith opinion of the Board of Directors the Grantee was guilty of
conduct set forth above in this subsection and specifying the
particulars thereof in detail;
(d) the Grantee's attainment of the age at which benefits
are payable under the TECO Energy Group Retirement Plan or any
successor thereto without reduction for commencement of benefits
before normal retirement age, or any earlier date that the Committee
determines will constitute a normal retirement for purposes of this
Agreement;
(e) upon a Change in Control. For purposes of this
Agreement, a "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 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
whether or not the Company is in fact required to comply therewith;
provided, that, without limitation, such a Change in Control shall be
deemed to have occurred if:
(1) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than the Company, any
trustee or other fiduciary holding securities under an employee
benefit plan of the Company or a corporation owned, directly or
indirectly, by the shareholders of the Company in substantially the
same proportions as their ownership of stock of the Company is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the Company's
then outstanding securities;
(2) during any period of twenty-four (24) consecutive
months (not including any period prior to the date of this Agreement),
individuals who at the beginning of such period constitute the Board
of Directors of the Company and any new director (other than a
director designated by a person who has entered into an agreement with
the Company to effect a transaction described in subsections (1), (3)
or (4) of this Section 3(e)) whose election by the Board of Directors
of the Company or nomination for election by the shareholders of the
Company was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election
was previously so approved, cease for any reason to constitute a
majority thereof;
36
(3) t h e re is consummated a merger or
consolidation of the Company or any direct or indirect subsidiary of
the Company with any other corporation, other than (i) a merger or
consolidation resulting in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities
of the surviving entity) at least 65% of the combined voting
securities of the Company or such surviving entity or any parent
thereof outstanding immediately after such merger or consolidation or
(ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no
"person" (as hereinabove defined) acquires 30% or more of the combined
voting power of the Company's then outstanding securities; or
(4) the shareholders of the Company approve a plan of
complete liquidation of the Company or there is consummated the sale
or disposition by the Company of all or substantially all of the
Company's assets;
(f) January 2, 2000, if the Grantee has not become Chairman
of the Board of the Company by that date; or
(g) the fifth anniversary of the date of this Agreement.
4. Rights as Shareholder. Subject to the restrictions and
other limitations and conditions provided in this Agreement, the
Grantee as owner of the Restricted Stock will have all the rights of a
shareholder, including but not limited to the right to receive all
dividends paid on, and the right to vote, such Restricted Stock.
5. Stock Certificates. Each certificate issued for shares of
Restricted Stock will be registered in the name of the Grantee and
deposited by the Grantee, together with a stock power endorsed in
blank, with the Company and will bear a legend in substantially the
following form:
THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES
OF STOCK REPRESENTED HEREBY ARE SUBJECT TO THE TERMS,
CONDITIONS AND RESTRICTIONS (INCLUDING RESTRICTIONS ON
TRANSFER AND FORFEITURE PROVISIONS) CONTAINED IN AN
AGREEMENT BETWEEN THE REGISTERED OWNER AND TECO ENERGY,
INC. A COPY OF SUCH AGREEMENT WILL BE FURNISHED TO THE
HOLDER OF THIS CERTIFICATE UPON WRITTEN REQUEST AND
WITHOUT CHARGE.
Upon the termination of the restrictions imposed under this
Agreement as to any shares of Restricted Stock deposited with the
Company hereunder, the Company will return to the Grantee (or to such
Grantee's legal representative, beneficiary or heir) certificates,
without such legend, for such shares.
6. Notice of Election Under Section 83(b). If the Grantee
makes an election under Section 83(b) of the Internal Revenue Code of
1986, as amended, he will provide a copy thereof to the Company within
thirty days of the filing of such election with the Internal Revenue
37
Service.
7. Withholding Taxes. The Grantee will pay to the Company, or
make provision satisfactory to the Committee for payment of, any taxes
required by law to be withheld in respect of the Restricted Stock no
later than the date of the event creating the tax liability. In the
Committee's discretion, such tax obligations may be paid in whole or
in part in shares of Common Stock, including the Restricted Stock,
valued at fair market value on the date of delivery. The Company and
its Affiliates may, to the extent permitted by law, deduct any such
tax obligations from any payment of any kind otherwise due to the
Grantee.
8. The Committee. Any determination by the Committee under, or
interpretation of the terms of, this Agreement or the Plan will be
final and binding on the Grantee.
9. Limitation of Rights. The Grantee will have no right to
continued employment by virtue of this grant of Restricted Stock.
10. Amendment. The Company may amend, modify or terminate this
Agreement, including substituting another Award of the same or a
different type and changing the date of realization, provided that the
Grantee's consent to such action will be required unless the action,
taking into account any related action, would not adversely affect the
Grantee.
11. Governing Law. This Agreement will be governed by and
interpreted in accordance with the laws of Florida.
TECO ENERGY, INC.
By: /s/ G. F. Anderson
G. F. Anderson
Chairman of the Board
/s/ Robert D. Fagan
Robert D. Fagan
38
Exhibit 10.5
TECO ENERGY, INC.
1996 EQUITY INCENTIVE PLAN
Nonstatutory Stock Option
TECO Energy, Inc. (the Company ) grants to _______________ (the
Optionee ) a nonstatutory stock option (the Option ) dated
______________ under the Company s 1996 Equity Incentive Plan (the
Plan ). Capitalized terms not otherwise defined herein have the
meanings given to them in the Plan.
1. Grant of Stock Option. Pursuant to the Plan and subject to
the terms and conditions set forth in this Option, the Company hereby
grants to the Optionee the right and option to purchase from the
Company the following number of shares of Common Stock of the Company
at $______________ per share at the earlier of the dates listed below
and the date determined under Section 2.
Number of Shares Date Exercisable
[1/3 of total] [one year from date of grant]
[1/3 of total] [two years from date of grant]
[1/3 of total] [three years from date of
grant]
The Option may be exercised at any time and from time to time
after the first time it may be exercised in accordance with the
foregoing schedule and prior to the expiration of ten years from the
date hereof (the Expiration Date ), except as otherwise provided
herein. The Option may be exercised only with respect to whole
shares.
This Option will not be treated as an incentive stock option
under Section 422 of the Internal Revenue Code of 1986, as amended.
2. Effects of Certain Events. Notwithstanding Section 1, the
Option will become immediately exercisable in full upon the earliest
to occur of the following events:
(a) the Optionee s death;
(b) the termination of Optionee s employment with the
Company or any business entity in which the Company owns directly or
indirectly 50% or more of the total voting power or has a significant
financial interest as determined by the Committee (an Affiliate )
because of a disability that would entitle the Optionee to benefits
under the long-term disability benefits program of the Company for
which the Optionee is eligible, as determined by the Committee;
(c) the termination by the Company or any Affiliate of
Optionee s employment other than for Cause as determined by the
Committee. Cause means (i) willful and continued failure of the
Optionee to substantially perform his duties with the Company or such
47
Affiliate (other than by reason of physical or mental illness) after
written demand specifically identifying such failure is given to the
Optionee by the Company, or (ii) willful conduct by the Optionee that
is demonstrably and materially injurious to the Company. For purposes
of this subsection, willful conduct requires an act, or failure to
act, that is not in good faith and that is without reasonable belief
that the action or omission was in the best interest of the Company or
the Affiliate;
(d) the Optionee s retirement from the Company or an
Affiliate at or after attainment of the age at which benefits are
payable under the TECO Energy Group Retirement Plan or any successor
thereto without reduction for commencement of benefits before normal
retirement age, or any earlier date that the Committee determines will
constitute a normal retirement for purposes of this Agreement; or
(e) upon a Change in Control. For purposes of this Option,
a 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 6(e)
of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended (the Exchange Act ), whether or not
the Company is in fact required to comply therewith; provided, that,
without limitation, such a Change in Control shall be deemed to have
occurred if:
(1) any person (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than the Company, any
trustee or other fiduciary holding securities under an employee
benefit plan of the Company or a corporation owned directly or
indirectly by the shareholders of the Company in substantially the
same proportions as their ownership of stock of the Company, is or
becomes the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) directly or indirectly of securities of the Company
representing 30% or more of the combined voting power of the Company s
then outstanding securities;
(2) during any period of 24 consecutive months (not
including any period prior to the date of this Option), individuals
who at the beginning of such period constitute the Board of Directors
of the Company and any new director (other than a director designated
by a person who has entered into an agreement with the Company to
effect a transaction described in subsections (1), (3) or (4) of this
Section 2(e)) whose election by the Board of Directors of the Company
or nomination for election by the shareholders of the Company was
approved by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning of such
period or whose election or nomination for election was previously so
approved cease for any reason to constitute a majority thereof;
(3) there is consummated a merger or consolidation of
the Company or any direct or indirect subsidiary of the Company with
any other corporation, other than (i) a merger or consolidation
resulting in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity) at least 65% of the combined voting securities of
48
the Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation or (ii) a merger or
consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no person (as hereinabove defined)
acquires 30% or more of the combined voting power of the Company s
then outstanding securities; or
(4) the shareholders of the Company approve a plan of
complete liquidation of the Company or there is consummated the sale
or disposition by the Company of all or substantially all of the
Company s assets.
3. Exercise and Payment. To exercise this Option, the Optionee
will deliver written notice to the Secretary of the Company specifying
the date of this Option, the number of shares as to which this Option
is being exercised, the price at which the Option on those shares is
exercisable, and a date not later than 30 days after the date of
delivery of the notice when the Optionee will take up and pay for such
shares. On the date specified in such notice, the Company will issue
to the Optionee the number of shares purchased against payment
therefor in cash, including by check, or in such other form as the
Committee may approve.
4. Termination of Employment. If the Optionee s employment
with the Company or an Affiliate terminates for any reason (a
Termination of Employment ) coincident with or after the first time
this Option may be exercised, the Option will remain exercisable, with
respect to the shares with respect to which the Option was exercisable
as of the date of Termination of Employment, for the longest
applicable period provided below. This Option will terminate, and no
rights will be exercisable hereunder, after the expiration of the
applicable exercise period.
(a) The Optionee may exercise the rights available under
this Option at the time of Termination of Employment for a period of
three months thereafter, but in no event after the Expiration Date.
(b) I f Termination of Employment occurs because of
disability, the Optionee or the Optionee s guardian or legal
representative may exercise the rights available under this Option at
the time of Termination of Employment at any time on or before the
later of (i) twelve months after the Termination of Employment or
(ii) the Expiration Date. The Committee will determine whether and
when Termination of Employment because of disability has occurred for
purposes of this Section 4(b).
(c) If Termination of Employment occurs for any reason on
or after the age at which benefits are payable to the Optionee without
reduction for commencement of such benefits before normal retirement
age under the TECO Energy Group Retirement Plan (or any successor
thereto), or any earlier age that the Committee determines will
constitute a normal retirement for purposes of this Option, the
Optionee (or the Optionee s guardian or legal representative or, after
death, the Optionee s Designated Beneficiary under the Plan or, if
none has been designated, those entitled to do so by the Optionee s
will or the laws of descent and distribution) may exercise the rights
available under this Option at the time of Termination of Employment
at any time on or before the Expiration Date.
49
(d) Upon the death of the Optionee, the Optionee s
Designated Beneficiary under the Plan or, if none has been designated,
those entitled to do so by the Optionee s will or the laws of descent
and distribution, may exercise the rights available under this Option
at the time of death for a period of twelve months thereafter or, if
Termination of Employment occurs because of death, at any time on or
before the later of (i) twelve months after the date of death or
(ii) the Expiration Date.
The Committee will determine whether an authorized leave of
absence constitutes Termination of Employment for purposes of this
Option.
5. Adjustment of Terms. In the event of corporate transactions
affecting the Company s outstanding Common Stock, the Committee will
equitably adjust the number and kind of shares subject to this Option
and the respective exercise prices hereunder to the extent provided by
the Plan.
6. No Transfer. This Option will not be transferable other
than by will or the laws of descent and distribution and will be
exercisable during the Optionee s lifetime only by the Optionee or the
Optionee s guardian or legal representative.
7. Securities Laws. The purchase of any shares by the Optionee
upon exercise of this Option will be subject to the conditions that
(i) the Company may in its discretion require that a registration
statement under the Securities Act of 1933 with respect to the sale of
such shares to the Optionee will be in effect, and such shares will be
duly listed, subject to notice of issuance, on any securities exchange
on which the Common Stock may then be listed, (ii) all such other
action as the Company considers necessary to comply with any law, rule
or regulation applicable to the sale of such shares to the Optionee
will have been taken and (iii) the Optionee will have made such
representations and agreements as the Company may require to comply
with applicable law.
8. Withholding Taxes. The Optionee will pay to the Company, or
make provision satisfactory to the Committee for payment of, any taxes
required by law to be withheld in respect of the exercise of the
Option no later than the date of the event creating the tax liability.
In the Committee s discretion, such tax obligations may be paid in
whole or in part in shares of Common Stock, including shares retained
from the exercise of this Option, valued at fair market value on the
date of delivery. The Company and its Affiliates may, to the extent
permitted by law, deduct any such tax obligations from any payment of
any kind otherwise due to the Optionee.
9. The Committee. Any determination by the Committee under, or
interpretation of the terms of, this Option or the Plan will be final
and binding on the Optionee.
10. Limitation of Rights. The Optionee will have no rights as a
shareholder with respect to any shares subject to this Option until
such shares are issued against payment therefor. The Optionee will
have no right to continued employment by virtue of this Option.
11. Amendment. The Company may amend, modify or terminate this
Option, including substituting another Award of the same or a
50
different type and changing the date of realization, provided that the
Optionee s consent to such action will be required unless the action,
taking into account any related action, would not adversely affect the
Optionee.
12. Governing Law. This Option will be governed by and
interpreted in accordance with the laws of Florida.
TECO ENERGY, INC.
By:
D. E. Schwartz
Secretary
51
Exhibit 10.6
TECO ENERGY, INC.
1996 EQUITY INCENTIVE PLAN
Performance Shares Agreement
TECO Energy, Inc. (the Company ) and _______________ (the
Grantee ) have entered into this Performance Shares Agreement (the
Agreement ) dated April 21, 1999 under the Company s 1996 Equity
Incentive Plan (the Plan ). Capitalized terms not otherwise defined
herein have the meanings given to them in the Plan.
1. Grant of Performance Shares. Pursuant to the Plan and
subject to the terms and conditions set forth in this Agreement, the
C o m p a ny hereby grants, issues and delivers to the Grantee
_____________ shares ( Number of Restricted Performance Shares ) of
its Common Stock (the Restricted Performance Shares ) as of the date
of this Agreement and will grant, issue and deliver to the Grantee the
Performance Reward Percentage of _____________ shares ( Number of
Additional Performance Shares ) of its Common Stock (the Additional
Performance Shares ) no later than 30 days after the end of the
Performance Period.
The Performance Period is the period beginning April 1, 1999
and ending on the date determined under Section 3.
Total Shareholder Return is the amount obtained by dividing (1)
the sum of (a) the amount of dividends with respect to the Performance
Period, assuming dividend reinvestment, and (b) the difference between
the share price at the end and beginning of the Performance Period, by
(2) the share price at the beginning of the Performance Period, with
the share price in each case being determined by using the average
closing price during the 20 trading days preceding the date of
determination.
The Performance Increment is the Total Shareholder Return with
respect to the Company s Common Stock minus the Total Shareholder
Return with respect to the Dow Jones US Electrical Utilities Index-All
Regions (ELC).
The Performance Reward Percentage is the percentage shown in
column B for Restricted Performance Shares and in column C for
A d ditional Performance Shares corresponding to the Performance
Increment in column A, with interpolation of the percentages in
columns B and C in proportion to the corresponding percentage points
in column A for whole percentage Performance Increments of more than 0
but less than 30; provided that if the Performance Period ends less
than three years after it began, the respective Performance Reward
P e r c entages for Restricted Performance Shares and Additional
Performance Shares will be prorated based on the portion of three
years from the beginning of the Performance Period that has elapsed by
51
t h e end of the Performance Period, and before proration the
Performance Reward Percentage for Restricted Performance Shares will
be 100%.
A B C
Performance Performance Performance Reward
Increment Reward Percentage for
Percentage for Additional
Restricted Performance Shares
Performance
Shares
0 50% 0%
15 percentage points 100% 0%
25 percentage points 100% 50%
30 or more 100% 100%
percentage points
2. Restrictions on Restricted Performance Shares. Until the
restrictions terminate under Section 3, unless otherwise determined by
the Committee:
(a) the Restricted Performance Shares may not be sold,
assigned, pledged or transferred by the Grantee; and
(b) all Restricted Performance Shares will be forfeited and
returned to the Company if the Grantee ceases to be an employee of the
Company or any business entity in which the Company owns directly or
indirectly 50% or more of the total voting power or has a significant
financial interest as determined by the Committee (an Affiliate ).
3. End of Performance Period and Termination of Restrictions.
The Performance Period will end, the restrictions on the Performance
Reward Percentage of the Number of Restricted Performance Shares will
terminate, the remainder of the Restricted Performance Shares will be
forfeited and returned to the Company, and the Grantee will cease to
have any right to receive any Additional Performance Shares in excess
of the Performance Reward Percentage of the Number of Additional
Performance Shares, on the earliest to occur of the following events:
(a) the Grantee s death;
(b) the termination of Grantee s employment with the
Company or any Affiliate because of a disability that would entitle
the Grantee to benefits under the long-term disability benefits
program of the Company for which the Grantee is eligible, as
determined by the Committee;
(c) the termination by the Company or any Affiliate of
Grantee s employment other than for Cause as determined by the
Committee. Cause means (i) willful and continued failure of the
Grantee to substantially perform his duties with the Company or such
Affiliate (other than by reason of physical or mental illness) after
written demand specifically identifying such failure is given to the
Grantee by the Company, or (ii) willful conduct by the Grantee that is
52
demonstrably and materially injurious to the Company. For purposes of
this subsection, willful conduct requires an act, or failure to act,
that is not in good faith and that is without reasonable belief that
the action or omission was in the best interest of the Company or the
Affiliate;
(d) the Grantee s retirement from the Company or an
Affiliate at or after attainment of the age at which benefits are
payable under the TECO Energy Group Retirement Plan or any successor
thereto without reduction for commencement of benefits before normal
retirement age, or any earlier date that the Committee determines will
constitute a normal retirement for purposes of this Agreement;
(e) upon a Change in Control. For purposes of this
Agreement, a 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 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the Exchange Act ),
whether or not the Company is in fact required to comply therewith;
provided, that, without limitation, such a Change in Control shall be
deemed to have occurred if:
(1) any person (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than the Company, any
trustee or other fiduciary holding securities under an employee
benefit plan of the Company or a corporation owned, directly or
indirectly, by the shareholders of the Company in substantially
the same proportions as their ownership of stock of the Company
is or becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of
the Company representing 30% or more of the combined voting power
of the Company s then outstanding securities;
(2) during any period of twenty-four (24) consecutive
months (not including any period prior to the date of this
Agreement), individuals who at the beginning of such period
constitute the Board of Directors of the Company and any new
director (other than a director designated by a person who has
e n tered into an agreement with the Company to effect a
transaction described in subsections (1), (3) or (4) of this
Section 3(e)) whose election by the Board of Directors of the
Company or nomination for election by the shareholders of the
Company was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at
the beginning of such period or whose election or nomination for
election was previously so approved, cease for any reason to
constitute a majority thereof;
(3) there is consummated a merger or consolidation of
the Company or any direct or indirect subsidiary of the Company
w i th any other corporation, other than (i) a merger or
consolidation resulting in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
voting securities of the surviving entity) at least 65% of the
combined voting securities of the Company or such surviving
entity or any parent thereof outstanding immediately after such
53
merger or consolidation or (ii) a merger or consolidation
effected to implement a recapitalization of the Company (or
similar transaction) in which no person (as hereinabove
defined) acquires 30% or more of the combined voting power of the
Company s then outstanding securities; or
(4) the shareholders of the Company approve a plan of
complete liquidation of the Company or there is consummated the
sale or disposition by the Company of all or substantially all of
the Company s assets; or
(f) March 31, 2002.
4. Rights as Shareholder. Subject to the restrictions and
other limitations and conditions provided in this Agreement, the
Grantee as owner of the Restricted Performance Shares will have all
the rights of a shareholder, including but not limited to the right to
receive all dividends paid on, and the right to vote, the Restricted
Performance Shares.
5. Stock Certificates. Each certificate issued for shares of
Restricted Performance Shares will be registered in the name of the
Grantee and deposited by the Grantee, together with a stock power
endorsed in blank, with the Company and will bear a legend in
substantially the following form:
THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF
S T O CK REPRESENTED HEREBY ARE SUBJECT TO THE TERMS,
CONDITIONS AND RESTRICTIONS (INCLUDING RESTRICTIONS ON
T R A NSFER AND FORFEITURE PROVISIONS) CONTAINED IN AN
AGREEMENT BETWEEN THE REGISTERED OWNER AND TECO ENERGY, INC.
A COPY OF SUCH AGREEMENT WILL BE FURNISHED TO THE HOLDER OF
THIS CERTIFICATE UPON WRITTEN REQUEST AND WITHOUT CHARGE.
Upon the termination of the restrictions imposed under this
Agreement as to any shares of Restricted Performance Shares deposited
with the Company hereunder under conditions that do not result in the
forfeiture of those shares, the Company will return to the Grantee (or
t o such Grantee s legal representative, beneficiary or heir)
certificates, without such legend, for such shares.
6. Adjustment of Terms. In the event of corporate transactions
affecting the Company s outstanding Common Stock, the Committee will
equitably adjust the number and kind of Additional Performance Shares
subject to this Agreement to the extent provided by the Plan.
7. Notice of Election Under Section 83(b). If the Grantee
makes an election under Section 83(b) of the Internal Revenue Code of
1986, as amended, with respect to Restricted Performance Shares, he or
she will provide a copy thereof to the Company within 30 days of the
filing of such election with the Internal Revenue Service.
8. Withholding Taxes. The Grantee will pay to the Company, or
make provision satisfactory to the Committee for payment of, any taxes
required by law to be withheld in respect of the Restricted
Performance Shares and Additional Performance Shares no later than the
date of the event creating the tax liability. In the Committee s
discretion, such tax obligations may be paid in whole or in part in
shares of Common Stock, including the Restricted Performance Shares
54
and the Additional Performance Shares, valued at fair market value on
the date of delivery. The Company and its Affiliates may, to the
extent permitted by law, deduct any such tax obligations from any
payment of any kind otherwise due to the Grantee.
9. The Committee. Any determination by the Committee under, or
interpretation of the terms of, this Agreement or the Plan will be
final and binding on the Grantee.
10. Limitation of Rights. The Grantee will have no right to
continued employment by virtue of this Agreement.
11. Amendment. The Company may amend, modify or terminate this
Agreement, including substituting another Award of the same or a
different type and changing the date of realization, provided that the
Grantee s consent to such action will be required unless the action,
taking into account any related action, would not adversely affect the
Grantee.
12. Governing Law. This Agreement will be governed by and
interpreted in accordance with the laws of Florida.
TECO ENERGY, INC.
By: ___________________________
R. A. Dunn
Vice President-Human Resources
___________________________
55
Exhibit 10.7
TECO ENERGY, INC.
VOLUNTARY RETIREMENT AGREEMENT
AND GENERAL RELEASE
THIS AGREEMENT AND GENERAL RELEASE (the "Agreement") is dated as
of April 23, 1999, by and between A. D. Oak (the "Officer") and TECO
Energy, Inc., whose address is 702 North Franklin Street, Tampa,
Florida 33602 (the "Company").
WHEREAS, the Officer is currently employed in the position of
Executive Vice President and Chief Operating Officer; and
WHEREAS, the Officer has elected to take early retirement under
the terms of this Agreement as of May 1, 1999, and;
WHEREAS, in recognition of the Officer's service to the Company,
the Company desires to extend certain benefits and to make certain
payments to the Officer; and
WHEREAS, the parties have mutually agreed to enter into this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, it is agreed as follows:
1. RETIREMENT DATE
(a) The Officer hereby notifies the Company of his intention to
retire from the Company effective as of May 1, 1999 (the "Retirement
Date").
(b) The Officer and the Company agree to cooperate in the
development of joint internal and external announcements prior to the
Retirement Date in connection with his retirement. Upon issuance of
such announcements, the Officer agrees that he will coordinate with
the Company in responding to all inquiries from the news media.
Without limitation of the foregoing, the Company and the Officer have
agreed to address the misleading statements attributed to a Company
spokesman in the Tampa Tribune article dated April 28, 1999, by
sending the letter to the Business Editor of the Tampa Tribune dated
April 29, 1999, a copy of which has been provided to Officer.
(c) From time to time after the Retirement Date, the Company
shall direct all inquiries from a potential employer of the Officer to
the Vice President - Human Resources who will respond to such
inquiries in a positive manner, and upon request of the Officer, shall
provide a positive letter of recommendation.
56
2. COMPENSATION AND BENEFITS
(a) Within ten (10) days following the Retirement Date, the
Company shall make payments to the Officer as follows:
(i) a lump-sum payment for his accrued but unused vacation
allowance for 1999, and any accrued vacation allowance
for 2000, as specified in Administrative Policy I.3.1,
Paragraph III B;
(ii) a lump-sum payment comprised of the following:
(x) an amount equal to two and one-half (2.5) times
the sum of the Officer's base salary as of the
Retirement Date and the average of his incentive
payments for calendar years 1997 and 1998; and
(y) an amount equal to the present value of two (2)
additional years of age and service credit under the
Officer's Supplemental Executive Retirement Plan (the
"SERP").
(iii) a payment equal to the present value of the
Officer's SERP as of the Retirement Date, paid as a
lump-sum in accordance with the Officer's election.
(b) The restrictions upon all of the restricted stock granted to
the Officer under the TECO Energy, Inc. 1996 Equity Incentive Plan
shall terminate, and all of such restricted stock shall vest for the
benefit of the Officer, as of the Retirement Date, subject to the
provisions of such plan.
(c) All of the Officer's outstanding TECO Energy, Inc. stock
options shall remain exercisable by the Officer at any time on or
before the expiration date specified for each applicable stock option
grant, in accordance with the provisions of such grant.
(d) All benefits granted or amounts paid by the Company as
provided in Sections 2(a) and (b) above shall be reduced by the amount
of applicable FICA and federal withholding taxes.
(e) Immediately prior to the Retirement Date, the Officer and
his dependents, Diane Oak, Daren Oak and Alison Oak (collectively, the
"Covered Individuals") were covered under the Company's medical,
hospitalization and dental benefit plan (the "Existing Plan"). After
the Retirement Date, the Company shall provide to the Covered
Individuals the same medical, hospital and dental coverage and
benefits as the Company provides to other retired employees of the
Company (the "Plans"), as such Plans may change from time to time;
provided, however, no such Plan change shall have the effect of
rendering Daren Oak ineligible to be covered thereunder as a dependent
of the Officer. The Company's obligations under this Section 2(e)
shall continue, with respect to Alison Oak, until she no longer
qualifies as a dependent of the Officer under the Plans, and shall
continue, with respect to each of the other Covered Individuals, until
57
his or her death; provided, however, the Company's obligations
pursuant to this Section 2(e) shall expire with respect to a Covered
Individual if, after the Retirement Date, such Covered Individual
obtains comparable coverage (including coverage for preexisting
conditions, if any) under another medical, hospitalization and dental
plan. The Officer shall pay the Company either directly or as a
deduction from any monthly retirement benefits due to him, for the
coverage provided pursuant to this Section 2(e), on a monthly basis,
an amount calculated in the manner which is the same for any other
officer who had attained 27 years of service with the Company as of
the Retirement Date.
3. CONFIDENTIALITY AND OTHER CONDUCT
(a) The Officer recognizes and acknowledges that during the
course of his employment with the Company, he has developed,
participated in the development of, been exposed to, has had access
to, and has had disclosed to him information and material developed
specifically by and for the benefit of the Company (including its
parent company and other subsidiaries), sensitive and/or proprietary
information, strategic planning and financial information, business
planning, operations and marketing information, and personnel and
plant security information, and, in each case, specific Company
policies, practices and procedures related thereto and other matters,
including without limitation trade secrets, trademarks, service marks,
trademarked and copyrighted material, patents, patents pending,
financial and data processing information, data bases, interfaces,
and/or source codes, Company procedures, specifications, commercial
information or other Company or Customer records as described in
Administrative Policies I.8.7. and I.1.28, including any information
or material, belonging to others which has been provided to the
Company on a confidential basis, all of which are hereinafter referred
to as "Confidential Information."
(b) The Officer agrees to maintain, in strict confidence, the
Confidential Information and agrees not to disclose the Confidential
Information or the terms of or the amount of the consideration paid as
part of this Agreement to any third party or to use the Confidential
Information to benefit himself or any third party. The Officer shall
b e p rohibited from using, duplicating, reproducing, copying,
distributing or disclosing the Confidential Information regardless of
form or purpose, including without limitation verbal disclosure, data,
documents, electronic media or any other media form. The Officer also
agrees to continue to abide by the non-disclosure and non-use
obligations relating to Company records, information, and property
contained in the Company's Standards of Integrity.
(c) The restrictions on the Officer's disclosure of Confidential
Information set out herein do not apply to such information which (i)
is now, or which hereafter, through no act or failure to act on the
part of the Officer becomes, generally known or available to the
public; or (ii) is required to be disclosed by a court of competent
jurisdiction or by an administrative or quasi-judicial body having
jurisdiction over the subject matter after the Officer has given the
Company reasonable prior notice of such disclosure requirement.
58
(d) The Officer agrees to conduct himself in all actions or
conduct relating to the Company in a manner consistent with existing
Company policy and to refrain from engaging in any conduct or activity
that in any manner harasses or interferes with the Company, its
employees, officers and/or directors or holds the Company up to
ridicule in the community or which jeopardizes or adversely affects
the business or reputation of the Company. Likewise the Company
agrees to conduct itself in all actions or conduct relating to the
Officer in a manner consistent with the existing Company policy and to
refrain from engaging in any conduct or activity that in any manner
harasses or disparages the Officer, holds him up to ridicule in the
community, or jeopardizes or adversely affects his reputation.
(e) The Officer hereby waives all rights to employment with the
Company and agrees not to seek employment with the Company at any time
in the future.
4. COMPETITION
(a) C o venant Not to Compete. The Officer, directly or
indirectly, in any capacity, either for himself, or on behalf of any
corporation, partnership, joint venture, business trust, or other
person or entity, shall not:
For a period of two (2) years commencing on the date of this
Agreement ("Prohibited Period"), (i) (a) engage in any business, or
acquire an interest in any business as a director or officer, partner,
stockholder, proprietor or otherwise (except as the beneficial owner
of publicly-traded stock), or become affiliated as an agent or
consultant of or provide any consulting services to any business or
activity having its principal place of business within the State of
Florida that is in competition with any business or material activity
in which the Company is engaged or planning to be engaged as of the
Retirement Date, or (b) engage in, or provide services with respect
to, strategic planning, marketing and sales in the State of Florida
for any such business or material activity regardless of its principal
place of business; ("Competitor"); (ii) solicit, divert, do business
with, or accept business from any person who is or has been a customer
of the Company if such solicitation, diversion or business has the
effect of or results in the Company's loss of all or a portion of such
customer's business or potential business; (iii) represent any person
in its dealings with the Company; (iv) influence or attempt to
influence any employee of the Company to terminate his/her employment
with the Company; or (v) influence or attempt to influence any agent,
customer, supplier, or distributor who has a business relationship
with the Company to cease or adversely alter its business relations
with the Company.
(b) Consideration. In consideration for Officer's agreement to
the preceding covenant not to compete set forth in Section 4(a) above,
the Company agrees to pay the Officer FOUR HUNDRED THOUSAND AND NO/100
DOLLARS ($400,000.00) payable quarterly in the amount of FIFTY
THOUSAND AND NO/100 DOLLARS ($50,000.00). Such payments shall be due
throughout the Prohibited Period so long as the Officer adheres to the
covenant not to compete set forth in Section 4(a) hereof, breach of
59
which shall entitle the Company to cease making such payments during
the period of such breach in addition to the other remedies set forth
in Section 6 hereof. Such payments shall be made on the first day of
the month immediately following the last day of each calendar quarter.
The first payment hereunder shall be due on July 1, 1999.
The Officer's covenant not to compete pursuant to Section 4(a) is
independent of any obligation of the Company to the Officer, including
any obligation of the Company to the Officer under this Agreement
other than its obligation to make payment under Section 4(b) hereof,
and is not subject to any setoff, defense, deduction, or counterclaim
based on any claim that the Officer might have against the Company
other than a claim arising out of non-payment by the Company of the
amounts specified in Section 4(b) hereof. The Officer stipulates that
the geographic scope, duration, and the related restrictions are
reasonable limitations necessary to protect the Company's business
interests, and such restrictions do not unreasonably prevent the
O f ficer from obtaining acceptable professional or occupational
employment opportunities. The Officer acknowledges that his position
with the Company has given him access to the Confidential Information
defined herein, certain specialized knowledge and training not readily
available to him otherwise, and that he has been directly and
indirectly responsible for, participated in and contributed to the
development of and managed certain of the Company's marketing and
competitive business strategies. The Prohibited Period covering the
obligations set forth in Section 4(a) above shall be extended by any
period of time during which the Officer is in breach of such
obligation.
(c) Reformation. Each provision of the covenant set forth in
Section 4(a) shall be construed and interpreted so that it is valid
and enforceable under applicable law. However, if a court of
competent jurisdiction determines that the duration, geographical
area, or proscribed activities contained in the restrictions under
this Agreement would cause strict application of those restrictions to
be invalid or unenforceable in a particular jurisdiction, the
restrictions automatically will be reformed to shorten their duration,
d i minish their geographical area, or confine their proscribed
activities to the extent necessary (but only to such extent) to make
the restrictions valid and enforceable.
5. RELEASE OF CLAIMS AND INDEMNIFICATION
(a) For and in consideration of the payments and increased
benefits made to the Officer pursuant to Section 2 hereof, the
Officer, for himself, his heirs, executors, administrators, successors
and assigns, hereby releases and agrees to hold harmless the Company
(which, for purposes of this section includes the Company and any
agent, officer, director or employee thereof) from all claims, rights,
causes of action or liabilities of whatever nature, whether at law or
in equity, against the Company that the Officer, his heirs, executors,
administrators, successors, and assigns, may now have or hereafter
can, shall or may have for, upon, or by reason of any matter, cause or
thing, whatsoever, which has happened, developed or occurred on or
before the date of this Agreement, arising out of Officer's employment
60
with or termination of employment from the Company hereunder,
including, but not limited to, claims for wrongful termination,
discrimination, retaliation, invasion of privacy, defamation, slander,
and/or intentional infliction of emotional distress and those claims
arising under any federal, state, or local discrimination or civil
rights or labor laws and/or rules or regulations, and/or common law,
whether in contract or in tort, as they relate to the employment
relationship of the Employee/Employer (including without limitation
claims arising under the Age Discrimination in Employment Act, the
Older Workers' Benefit Protection Act (29 USC 626), Title VII of the
Civil Rights Act of 1964, or the Employee Retirement Income Security
Act, as such laws have been or may be amended from time to time);
provided, however, nothing herein shall constitute a release by the
Officer of any claim he may have arising under this Agreement, under
the SERP, or under the various restricted stock agreements and stock
option agreements to which he is a party.
(b) In consideration of the mutual covenants herein contained,
and for other good and sufficient consideration, receipt whereof is
hereby acknowledged, the Company, for itself, its subsidiaries and
affiliates, and all of their respective successors and assigns, hereby
releases and discharges the Officer from all claims, rights, causes of
action or liabilities of whatever nature, whether at law or in equity,
against the Officer that the Company, its subsidiaries and affiliates,
or any of their respective successors and assigns may now have or
hereafter can, shall or may have for, upon, or by reason of any
matter, cause or thing, whatsoever, which has happened, developed or
occurred on or before the date of this Agreement, arising out of the
Officer's employment with or termination of employment from the
Company hereunder; provided, however, nothing herein shall constitute
a release by the Company of any claim it may have against the Officer
arising under this Agreement.
(c) E a ch party hereto acknowledges and agrees that this
Agreement shall not be construed as an admission by the other party of
any improper or unlawful actions or of any wrongdoing whatsoever
against such party or any other persons, and each party expressly
denies any wrongdoing whatsoever against the other party or any other
employee.
(d) The Officer covenants with and represents to the Company
that he is the sole owner of any and all claims being waived and from
which the Company is being released by the Officer in Section 5(a)
above. The Company covenants with and represents to the Officer that
it is the sole owner of any and all claims being waived and from which
the Officer is being released by the Company in Section 5(b) above.
Each party hereby covenants with and agrees to indemnify and save and
hold harmless the other party against any and all liability, claims,
suits, damages, costs, losses and expenses whatsoever, in any manner
resulting from or arising out of the matters released above. The
Company agrees to indemnify and save and hold harmless the Officer in
accordance with the provisions of the Company's Bylaws in effect from
time to time and applicable to any other officer who is then actively
employed by the Company, to the extent permitted by law, against all
expenses and liabilities incurred in connection with any threatened,
61
pending or completed proceeding to which the Officer is or becomes a
party by reason of the fact that he was an officer or employee of the
Company. The Company's obligation to indemnify the Officer hereunder
is subject to the Officer providing the Company with prompt written
notice of any threatened or existing suit, proceeding or claim.
6. REMEDIES
(a) Remedy at Law Insufficient. The parties acknowledge that
damages at law will be an insufficient remedy if: Officer violates the
terms of Sections 3 and 4 hereof or if the Company or Officer breach
the covenants contained in Sections 1 and 5 hereof, or if the Company
inappropriately fails to make the payments pursuant to Section 2
hereof, and that each would suffer irreparable damage as a result of
such violation. Accordingly, upon a violation of any of the covenants
set out in such Sections applicable to the parties, the affected
party, either Officer or the Company without excluding or limiting any
other available remedy, shall be entitled to seek from a court of
competent jurisdiction the following remedies:
(1) Upon posting reasonable bond and filing with a court of
c o m p etent jurisdiction an appropriate pleading and affidavit
specifying each obligation breached by Officer or the Company,
appropriate injunctive relief or specific performance compelling the
defaulting party or parties to comply with that obligation, without
proof of monetary damage or an inadequate remedy at law; and
(2) Reimbursement of all reasonable costs and expenses
reasonably incurred by the non-defaulting party in enforcing those
obligations or otherwise defending or prosecuting any litigation
arising out of the defaulting party's obligations, including premiums
for bonds, fees for experts and investigators, and legal fees, costs,
and expenses incurred before a lawsuit is filed and in trial,
appellate, bankruptcy and judgment execution proceedings.
(b) Cumulative Remedies. The foregoing remedies are cumulative
and in addition to all other remedies afforded or available to the
parties by law or in equity, and the parties may exercise any such
remedy concurrently, independently or successively.
(c) Attorneys' Fees. In the event that either party is required
to institute litigation or some other alternative dispute resolution
process (other than the proceedings contemplated in Section 6(a)
above) in order to enforce the terms of this Agreement, the prevailing
party shall be entitled to recover its reasonable attorney's fees and
costs from the other party.
7. SURVIVAL
Neither completion of payments hereunder nor termination of this
Agreement shall be deemed to relieve Officer or Company of any rights
or obligations hereunder which by their very nature survive the
completion of payments by the Company, including without limitation,
Sections 1(b), 1(c), 2(b), 2(c), 2(e), 3, 4, 5 and 6 hereof. For the
purpose of this Agreement, the term "Company" shall mean TECO Energy,
62
Inc. and all of its subsidiaries and affiliates.
8. ENTIRE AGREEMENT
Except as provided below, the Officer acknowledges and agrees
that this Agreement contains the entire agreement between himself and
Company and that no statements or promises have been made by either
party concerning the subjects of this Agreement other than as
expressly contained in this document. Notwithstanding the foregoing,
the Officer's SERP and all of the restricted stock and stock option
agreements between the Officer and the Company shall expressly survive
the execution and delivery of this Agreement in accordance with their
respective terms, as modified by the provisions of Sections 2(b) and
2(c) hereof.
9. EFFECTIVE DATE
This Agreement shall be governed by the Laws of the State of
Florida and shall become effective at the close of business on the
seventh (7th) day following the date of this Agreement.
10. AUTHORITY OF COMPANY TO ENTER INTO THIS AGREEMENT
The provisions of Sections 2(b) and 2(c) and the matters covered
by this Agreement have been duly authorized by the Board of Directors
of the Company at its meeting held on April 21, 1999.
11. FURTHER ASSURANCES
Each party hereto shall cooperate with the other party and shall
take such further action and shall execute and deliver such further
documents as may be reasonably requested by any other party in order
to carry out the provisions and purposes of this Agreement.
12. STATEMENT OF UNDERSTANDING
THE OFFICER ACKNOWLEDGES THAT (A) HE HAS CAREFULLY READ THIS
AGREEMENT AND RELEASE, KNOWS AND UNDERSTANDS THE CONTENTS CONTAINED IN
IT AND HAS BEEN GIVEN THE OPPORTUNITY TO CONSIDER THIS AGREEMENT FOR
TWENTY-ONE (21) DAYS AND (B) THE COMPANY HAS ADVISED HIM TO CONSULT AN
ATTORNEY AND HE HAS BEEN GIVEN THE OPPORTUNITY TO DO SO. THE OFFICER
DOES FREELY AND VOLUNTARILY ASSENT TO ALL OF ITS TERMS AND CONDITIONS
AND SIGNS THIS AGREEMENT AS HIS OWN FREE ACT, AND UNDERSTANDS THAT HE
HAS THE RIGHT TO RESCIND THIS AGREEMENT DURING THE SEVEN-DAY PERIOD
DISCLOSED IN SECTION 9 ABOVE.
If the Officer chooses to waive the 21-day requirement, please
indicate by initialing and dating the following paragraph in the space
provided in the left margin.
THE OFFICER DOES HEREBY WAIVE THE TWENTY-ONE (21) DAY PERIOD TO
____ CONSIDER THIS AGREEMENT AS REQUIRED UNDER THE OLDER WORKERS'
Initial BENEFIT PROTECTION ACT (29 USC '626), BUT ACKNOWLEDGES THAT HE HAS
____ REVIEWED AND CONSIDERED THIS AGREEMENT, HAS CONSULTED WITH
63
HIS
Date ATTORNEY AND FREELY AND VOLUNTARILY ASSENTS TO ALL OF ITS
TERMS AND CONDITIONS AND SIGNS THIS AGREEMENT AS HIS OWN FREE ACT.
IN WITNESS WHEREOF, TECO Energy, Inc. and Alan D. Oak, have
caused this instrument to be executed in Tampa, Florida as of the date
first written above.
WITNESSES: TECO ENERGY, INC., A FLORIDA
CORPORATION
By: /s/ Girard F. Anderson
Name: Girard F. Anderson
Title: President and Chief Executive
Officer
CAUTION! READ BEFORE SIGNING
By: /s/ Alan D. Oak
Name: Alan D. Oak
Date Signed: April 30, 1999
64
Exhibit 12
TECO Energy, Inc.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the company's ratio of earnings to
fixed charges for the periods indicated.
Six Months Twelve Months
Ended Ended Year Ended December 31,
June 30, 1999 June 30, 1999 1998 1997 1996 1995 1994
3.62x 3.83x(1) 3.61x(2) 3.77x(3) 3.72x 3.48x 3.06x(4)
For the purposes of calculating these ratios, earnings consist of
income before income taxes and fixed charges. Fixed charges consist of
interest on indebtedness, amortization of debt premium, the interest
component of rentals and preferred stock dividend requirements.
(1) Includes the effect of non-recurring pretax charges totaling $7.3
million associated with a write-off at Tampa Electric. The effect
of this charge was to reduce the ratio of earnings to fixed
charges. Had this charge been excluded from the calculation, the
ratio of earnings to fixed charges would have been 3.90x for the
12-month period ended June 30, 1999.
(2) Includes the effect of non-recurring pretax charges totaling
$33.2 million associated with write-offs at TECO Coal, TeCom and
Tampa Electric, and $.6 million pretax of merger-related costs.
The effect of these charges was to reduce the ratio of earnings
to fixed charges. Had these charges been excluded from the
calculation, the ratio of earnings to fixed charges would have
been 3.92x for the year ended Dec. 31, 1998.
(3) Includes a $2.6-million pretax charge for all transactions
associated with the mergers completed in June 1997. The effect of
this charge was to reduce the ratio of earnings to fixed charges.
Had this charge been excluded from the calculation, the ratio of
earnings to fixed charges would have been 3.79x for the year
ended Dec. 31, 1997.
(4) Includes the effect of a $25-million pretax restructuring charge.
The effect of this charge was to reduce the ratio of earnings to
fixed charges. Had this non-recurring charge been excluded from
the calculation, the ratio of earnings to fixed charges would
have been 3.30x for the year ended Dec. 31, 1994.
64
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THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TECO ENERGY, INC. CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS
OF INCOME AND CONSOLIDATED STATEMENTS OF CASH FLOWS AND IS QUALIFIED
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<NAME> TECO Energy, Inc.
<MULTIPLIER> 1000000
<FISCAL-YEAR-END> DEC-31-1999
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<EARNINGS-AVAILABLE-FOR-COMM> 101
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