P. O. Box 33042, St. Petersburg, Florida 33733
[LOGO]
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
FLORIDA
PROGRESS
CORPORATION
March 11, 1999
To the Common Shareholders:
The Annual Meeting of Shareholders of Florida Progress Corporation
(the "Company") will be held at the Mahaffey Theater at the Bayfront Center
Arena, 400 First Street South, St. Petersburg, Florida, on Friday, April 16,
1999, at 9:00 a.m., to elect four directors: three directors to serve for a
three-year term; and one director to serve for the remaining two years of a
three-year term; and to transact such other business as may properly come before
the meeting, or any adjournment thereof.
The Board of Directors has fixed the close of business on February 5,
1999, as the record date for the determination of the shareholders entitled to
notice of, and to vote at, the meeting and any adjournment thereof. A complete
list of the shareholders entitled to vote at the meeting will be open to
examination by the shareholders, during regular business hours, for a period of
ten days prior to the meeting at the principal executive offices of the Company,
One Progress Plaza, St. Petersburg, Florida 33701.
By order of the Board of Directors,
Kathleen M. Haley
Corporate Secretary
You are urged, whether you own one or many shares, to mark, date,
sign and promptly mail the enclosed Proxy in the enclosed envelope, which
requires no postage.
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS............................1
Election of Directors ........................................................1
Information as to Nominees ...................................................3
NOMINEES .....................................................................3
CONTINUING DIRECTORS .........................................................4
Security Ownership of Certain Beneficial Owners ..............................6
Security Ownership of Management .............................................6
Certain Relationships and Related Transactions ...............................7
Compliance with Section 16(a) of the Exchange Act ............................7
Governance of the Board of Directors .........................................7
Meetings of the Board of Directors and Standing Committees...................11
Compensation of Directors....................................................12
EXECUTIVE COMPENSATION ......................................................13
Pension Plan Table ..........................................................15
Employment Contracts, Termination of Employment
and Change-in-Control Arrangements ...............................16
Report of the Compensation Committee of the Board of Directors ..............17
Company Performance .........................................................20
Relationship with Independent Accountants ..................................20
2000 Shareholder Proposals ..................................................21
General......................................................................21
<PAGE>
Florida Progress Corporation, P. O. Box 33042, St. Petersburg, Florida 33733,
March 11, 1999
PROXY STATEMENT FOR ANNUAL MEETING
OF SHAREHOLDERS/APRIL 16, 1999
This statement is furnished in connection with the solicitation by
the Board of Directors of Florida Progress Corporation (the "Company") of
proxies to be voted at the Annual Meeting of Shareholders to be held at the
Mahaffey Theater at the Bayfront Center Arena, 400 First Street South, St.
Petersburg, Florida, on Friday, April 16, 1999, at 9:00 a.m., or at any
adjournment thereof. Any proxy given pursuant to this solicitation may be
revoked by the person giving it at any time prior to the voting thereof by
giving written notice of revocation to the Secretary of the Company at the
Company's principal executive offices at any time before the proxy is voted, by
executing and delivering a later-dated proxy or by attending the Annual Meeting
and voting his or her shares in person. No such notice of revocation or
later-dated proxy, however, will be effective unless and until received by the
Company prior to or at the Annual Meeting.
Shares of Common Stock, without par value (the "Common Stock"), are
the only outstanding voting securities of the Company.
Only shareholders whose names appeared of record on the books of the
Company at the close of business on February 5, 1999, are entitled to receive
notice of and to vote at the Annual Meeting and any adjournment thereof. As of
that date, there were 97,390,973 shares of Common Stock outstanding. Each share
is entitled to one vote for each director to be elected and one vote for each
other matter to be considered. The attendance, in person or by proxy, of the
holders of a majority of the issued and outstanding shares of Common Stock
entitled to vote at the Annual Meeting is necessary to constitute a quorum to
transact business. The Florida Business Corporation Act (the "FBCA") provides
that directors are elected by a plurality of the votes cast and all other
matters are approved if the votes cast in favor of the action exceed the votes
cast against the action (unless the matter is one for which the FBCA, or other
applicable laws, or the Company's articles of incorporation require a greater
vote). Therefore, under the FBCA, abstentions and broker non- votes have no
legal effect, unless a specific percentage of those shareholders entitled to
vote is required by the FBCA, or other applicable laws, or the Company's
articles of incorporation to approve a matter.
The cost of preparing and mailing proxy material and soliciting
proxies will be borne by the Company. Solicitation of proxies from some
shareholders will be made by telephone or in person by regular employees of the
Company, who will receive no additional compensation therefor. In addition,
arrangements will be made with brokerage firms and other custodians, nominees
and fiduciaries to forward solicitation material for the Annual Meeting to
beneficial owners, and the Company will reimburse such firms for their expense
in so doing.
This proxy statement and accompanying notice and form of proxy are
first being sent to the shareholders of the Company on or about March 11, 1999.
Election of Directors
The Board of Directors of the Company currently consists of nine
members, divided into three classes. The terms of the three classes expire in
1999 (Class III directors), 2000 (Class I directors) and 2001 (Class II
directors). Directors are generally elected for three-year terms. Effective with
the retirement of Jack B. Critchfield from the Board of Directors on July 1,
1998, the number of directors was reduced from eleven to ten and the number of
Class III directors was reduced from four to three. Following the death of Frank
C. Logan on December 27, 1998, the number of directors was reduced from ten to
nine; Richard Korpan was appointed to fill the vacancy in
1
<PAGE>
Class II; and the number of Class I directors was reduced from four to three.
Three Class III directors with terms expiring in 2002 are to be
elected at the Annual Meeting and one Class II director with a term expiring in
2001 is to be elected at the Annual Meeting. The Board of Directors has
nominated four persons, all of whom are currently directors, to stand for
election at the Annual Meeting. The directors shall be elected by a plurality of
the votes cast, so that the three persons nominated for election as Class III
directors receiving the three highest totals of votes cast in favor of his or
her election will be elected as Class III directors and the one person nominated
for election as Class II director receiving the highest total of votes cast in
favor of his or her election will be elected as a Class II director. Each share
of Common Stock entitles its holder to cast one vote in respect of each director
to be elected. Votes may not be cumulated.
It is the intention of the persons named in the accompanying proxy,
unless otherwise directed, to vote all proxies FOR the election of the four
nominees of the Board of Directors as directors of the Company. Directors
elected at the Annual Meeting, after being duly qualified, will serve until
their successors are elected and qualified.
The Board of Directors has been informed that all nominees are
willing to serve as directors, but if any of them should decline or be unable to
serve as a director, the persons named in the accompanying proxy will vote for
the election of another person or persons as they, in their discretion, may
choose. The Board of Directors has no reason to believe that any nominee will be
unable or unwilling to serve.
2
<PAGE>
Information as to Nominees
The names and ages of the nominees for election as directors, their
principal occupations and employment during the past five years, including a
brief biography, and the first year elected as a director, are as follows:
NOMINEES FOR TERMS EXPIRING IN 2002
(CLASS III DIRECTORS)
PHOTO CLARENCE V.
MCKEE, ESQ., age 56, Chairman and Chief Executive Officer of
McKee Communications, Inc., Tampa, Florida, a firm involved in
the acquisition and management of television and radio stations.
He served as Counsel to Pepper & Corazinni, a Washington, D.C.
communications law firm, from 1980 until 1987 when he became a co-owner of WTVT
Holdings, Inc., where he held the position of Chairman and Chief Executive
Officer until 1992. He is a director of Florida Power Corporation, the Company's
principal subsidiary ("Florida Power"), American Heritage Life Insurance
Company, and Checkers Drive-In Restaurants, Inc. Committees: Compensation;
Audit, Chairman; Nominating and Board Governance. Director since 1989.
RICHARD A. NUNIS, age 66, Former Chairman of Walt Disney PHOTO
Attractions, Orlando, Florida, from which he retired in
December 1998. He has held various positions with the
Disney organization since 1955, including Vice
President,Operations in 1968, Executive Vice President of DISNEYLAND and Walt
Disney World in 1972, President of Walt Disney Attractions in 1980, and Chairman
in 1991. He is a director of Florida Power and SunTrust Bank, Central Florida
N.A. and Director Emeritus of The Walt Disney Company. Committees: Executive;
Finance and Budget; Compensation, Chairman. Director since 1989.
PHOTO JEAN GILES
WITTNER, age 64, President of Wittner & Co. and Wittner &
Associates, Inc., St. Petersburg, Florida, firms involved in real
estate management and insurance brokerage and consulting,
positions she has held for more than five years. She previously served as
President and Chief Executive Officer of a savings association until it was sold
in 1986. She serves on the boards of Florida Power, and Raymond James Bank,
F.S.B. Committees: Executive; Compensation; Compliance. Director since 1982.
3
<PAGE>
NOMINEE FOR TERM EXPIRING IN 2001
(CLASS II DIRECTOR)
PHOTO RICHARD KORPAN, age 57, Chairman of the Board, President and
Chief Executive Officer of the Company. He was appointed Chairman
of the Board, effective July 1, 1998. He has held the position of
President since 1991, and became Chief Executive Officer of the
Company in June 1997. Since April 1996, he has also served as Chairman of the
Board of Florida Power, and until June 1, 1997, as Chief Executive Officer of
Florida Power. He joined the Company in 1989 as Executive Vice President and
Chief Financial Officer. He is a director of SunTrust Bank of Tampa Bay and a
Member of the Business Roundtable. Committee: Executive, Chairman. Director
since 1989.
Information as to Continuing Directors
The names and ages of directors who continue in terms expiring in
2000 and 2001, their principal occupations and employment during the past five
years, including a brief biography, and the first year elected as a director,
are as follows:
CONTINUING DIRECTORS WHOSE TERMS EXPIRE IN 2000
(CLASS I DIRECTORS)
MICHAEL P. GRANEY, age 55, Partner, Simpson Thacher & PHOTO
Bartlett, Columbus, Ohio. He has practiced law with this
New York based law firm since 1980 and is now resident
partner in its Ohio office. His specialties are utilities,
antitrust and litigation. He is a member of the American, District of Columbia,
Ohio and Columbus Bar Associations and the Federal Energy Bar Association. He is
a director of Florida Power. Committees: Executive; Audit; Nominating and Board
Governance, Chairman. Director since 1991.
PHOTO JOAN D. RUFFIER, age 59, Chairman of Human Services Technologies,
Inc., a computer software products company which develops,
markets and sells software used to link client information in
not-for-profit businesses. She also serves as Chairman of the
University of Florida Foundation and Chair of the Finance Committee of Shands
Healthcare, Inc. She was a General Partner of Sunshine Cafes, Ltd., Orlando,
Florida, a food and beverage concession business at major Florida airports, for
more than five years previously. She practiced public accounting with the firm
of Colley, Trumbower & Howell from 1982-1986. She is a director of Florida Power
and also serves on the boards of directors of Cyprus Equity Fund and INVEST,
INC. Committees: Audit; Compliance; Finance and Budget, Chairman. Director since
1990.
4
<PAGE>
PHOTO ROBERT T. STUART, JR., age 66, rancher and investor, Dallas,
Texas, for more than five years. He held numerous executive
positions with Mid-Continent Life Insurance Company
("Mid-Continent") since 1949, including Vice President,
President, Chairman of the Board and Chief Executive Officer until 1986 when
Mid-Continent was acquired by the Company. He is a director of Florida Power.
Committee: Audit. Director since 1986
CONTINUING DIRECTORS WHOSE TERMS EXPIRE IN 2001
(CLASS II DIRECTORS)
W. D. ("BILL") FREDERICK, JR., age 64, Citrus grower and PHOTO
investor, Orlando, Florida. From 1980 to 1992, Mr. Frederick
served as Mayor of the City of Orlando. He practiced law
as a public defender for the Ninth Judicial Circuit of Florida
and in 1966 founded the Orlando law firm of Frederick, Wooten & Honeywell P.A.
He returned to the practice of law in 1992 as a partner in the Orlando office of
the firm of Holland & Knight from which he retired in 1995. He is a member of
the Board of Directors of Florida Power, Blue Cross/Blue Shield of Florida, and
SunTrust Bank, Central Florida, N.A. Committees: Compensation; Nominating and
Board Governance; Compliance, Chairman. Director since 1995
PHOTO VINCENT J. NAIMOLI, age 61, Chairman, President and Chief
Executive Officer of Anchor Industries International, Inc., an
operating and holding company, Tampa, Florida, a position he has
held for more than five years. He is also Managing General
Partner and Chief Executive Officer of the Tampa Bay Devil Rays, Ltd. Major
League Baseball Club, St. Petersburg, Florida. He is a director of Florida
Power, and in conjunction with the business activities of Anchor Industries, Mr.
Naimoli serves as a director of Russell Stanley Corp. and Players International,
Inc. Committees: Executive; Finance and Budget; Nominating and Board Governance.
Director since 1992
5
<PAGE>
Security Ownership of Certain Beneficial Owners
The following table sets forth information concerning shares of
Common Stock that are held by persons known to the Company to be the beneficial
owners of more than 5% of said stock as of December 31, 1998.
<TABLE>
<CAPTION>
Number of Shares Percent
Name and Address Beneficially Owned of Class
<S> <C> <C>
Franklin Resources, Inc.
777 Mariners Island Blvd.
San Mateo, CA 94404 5,673,800(1) 5.8%
Capital Research and
Management Company
333 South Hope Street
Los Angeles, CA 90071 9,295,800(2) 9.6%
(1) Franklin Advisers, Inc. has sole voting and dispositive power as to
5,672,300 shares. Franklin Management, Inc. has sole dispositive
power as to 1,500 shares.
(2) Sole dispositive power.
</TABLE>
Security Ownership of Management
As of December 31, 1998, the directors and nominees and all other named
executive officers individually, and the directors, nominees, named executive
officers and executive officers of the Company as a group, beneficially owned
Common Stock as follows:
<TABLE>
<CAPTION>
Number of Shares Percent of
Name Beneficially Owned(1) Class (2)
<S> <C> <C>
W. D. ("Bill") Frederick, Jr. 3,409(3)
Michael P. Graney 4,335
Richard Korpan 26,057
Clarence V. McKee 2,537
Vincent J. Naimoli 11,148(4)
Richard A. Nunis 25,577
Joan D. Ruffier 5,462
Robert T. Stuart, Jr. 1,505,462(5) 1.55%
Jean Giles Wittner 11,036
Richard D. Keller 17,538
Joseph H. Richardson 14,075(6)
Jeffrey R. Heinicka 7,325(7)
Kenneth E. Armstrong 7,430
Jack B. Critchfield 56,114
Stanley I. Garnett, II 837
All 16 directors, nominees,
named executive officers and
executive officers as a group,
including those named above 1,698,408 1.74%
</TABLE>
(1) Unless otherwise noted, the directors, nominees and named executive
officers, and the directors, nominees and executive officers as a
group, have sole voting and investment power with respect to the shares
listed. An indication of shared voting or investment power for
purposes of this proxy statement does not constitute an admission of
ownership for any other purpose.
(2) Unless otherwise noted, each director, nominee and named executive
officer, and all directors, nominees and executive officers as a group,
own less than one percent of the outstanding shares of the Company's
Common Stock.
(3) Voting and investment power with respect to 1,500 shares is shared.
(4) Voting and investment power with respect to 1,600 shares is shared.
(5) Voting and investment power with respect to 150,473 shares is shared.
(6) Voting power with respect to 4,318 shares is shared.
(7) Voting and investment power with respect to 140 shares is shared.
6
<PAGE>
Certain Relationships and Related
Transactions
The Company has invested $5 million for a limited partnership interest in the
Tampa Bay Devil Rays, Ltd. ("Devil Rays"), a Florida limited partnership that
acquired in 1995 a Major League Baseball franchise for the Tampa Bay area. A
corporation controlled by Vincent J. Naimoli, a director of the Company, is the
managing general partner and a limited partner in the Devil Rays. The Company
has entered into a Private Suite License Agreement ("License") with the Devil
Rays for the use of a private suite in Tropicana Field, the site in St.
Petersburg, Florida, where the Devil Rays team plays its scheduled home baseball
games. The License which commenced in March 1998 was extended to a ten-year
term. The $125,000 annual License fee is subject to annual increases equal to
the percentage increase in the Consumer Price Index or 2 1/2%, whichever is
less. The terms and conditions of the License are substantially similar to those
entered into with other licensees.
Florida Power has entered into a Sponsorship Agreement (the
"Agreement") with the Devil Rays. Durring the term of the Agreement, Florida
Power will pay to the Devil Rays a sponsorship fee of $100,000 per year for the
maintenance of the Sunsation Walkway, a 900-foot ceramic tiled walkway that cuts
through the parking lot at Tropicana Field. From 1998 through 2000 inclusive,
Florida Power also pays a sponsorship fee for one in-stadium sign in the amount
of $350,000, and beginning in the year 2001 and for the duration of the term of
the Agreement; the fee will be increased by 3 1/2% over the fee paid in the
immediately preceding year. In addition, Florida Power has entered into
agreements with the Devil Rays for the naming rights and promotional and
advertising programs at the baseball stadium in St. Petersburg where the Devil
Rays team plays its spring training games. This baseball stadium complex has
been renamed "Florida Power Park, Home of Al Lang Field." Approximately
one-third of a $150,000 annual fee for the naming rights is shared by the Devil
Rays with the City of St. Petersburg. A $150,000 annual fee for promotion and
advertising is paid to the Devil Rays by Florida Power for community and
employee relations programs. The terms of the agreements expire in 2007.
Mr. Michael P. Graney is a partner in the law firm of Simpson Thacher &
Bartlett. That firm provided legal services to Electric Fuels Corporation
("Electric Fuels") and its subsidiary, Progress Rail Services Corporation, in
1998, and has been providing similar legal services in 1999.
Compliance with Section 16(a) of
the Exchange Act.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the New York Stock Exchange. Officers, directors and greater than
ten-percent shareholders are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file.
Based upon a review of the copies of such forms furnished to the
Company during 1998 and written representations concerning the number of
transactions that were not reported on a timely basis, the Company believes that
all of the required persons filed their applicable Section 16(a) reports on a
timely basis during 1998 with the following exceptions: (1) a Form 4 report of
the sale of 1,100 shares of common stock was filed seven days late by Clarence
V. McKee; and (2) a Form 4 report of the sale of 135 shares of common stock was
filed one month late by Robert T. Stuart, Jr.
Governance of the Board of
Directors
During 1998 the responsibilities of the Nominating Committee were
expanded to include Board Governance. Now known as the Nominating and Board
Governance Committee, the Committee recommended, and on February 18, 1999, the
Board adopted the following Statement on Corporate Governance which describes
the policies and practices under which the Board will operate:
7
<PAGE>
FLORIDA PROGRESS CORPORATION
STATEMENT ON CORPORATE
GOVERNANCE
The corporate governance standards established by the Board provide a
structure within which directors and management can effectively pursue the
Company's growth objectives through its commitments to shareholders, customers,
employees and the communities in which we live. The Company's business is
managed under the direction of the Board of Directors, but the Board delegates
the conduct of business to the Company's Chief Executive Officer, the Chief
Executive Officer's Operating Committee and the senior management team. The
principal functions of the Board are to:
o Select and evaluate the Chief Executive Officer;
o Ensure legal and ethical conduct of the Company's business;
o Review and approve the Company's strategic direction and annual
operating plan, and monitor the Company's performance against the plan;
o Review senior management compensation and succession planning;
o Advise and counsel management; and
o Review the structure and operation of the Board.
I. Select and Evaluate the Chief Executive Officer:
Annually, the non-employee directors are asked to evaluate the
performance of the Chief Executive Officer. The results of this evaluation are
then communicated to the Chief Executive Officer by the Chairman of the
Compensation Committee.
II. Ensure Legal and Ethical Conduct of the Company's Business:
The Board, through the Compliance Committee, insures that the Company
has established the procedures necessary to prevent and detect criminal conduct
by its employees and other agents. The Board has adopted a Code of Conduct for
the Company and its subsidiaries to emphasize its commitment to the highest
standards of business conduct.
III. Review and Approve the Company's Strategic Direction and Annual
Operating Plan, and monitor the Company's performance against the Plan:
The Board stays abreast of political, regulatory and economic trends and
developments that may impact the Company's strategic direction. Each year, the
Board participates in a strategic planning seminar at which major long-term
strategies are discussed. Annually, the Board reviews and approves a five-year
forecast and a yearly profit plan for the Company and its subsidiaries. On an
ongoing basis during the year, the Board monitors the Company's performance
against its annual operating plan.
IV. Review Management Compensation and Succession Planning:
The Board reviews and approves the Chief Executive Officer's evaluation
of the top management team. On an annual basis, the following occur:
The Chief Executive Officer reviews succession planning and management
development with the Board, and provides an assessment of persons considered
potential successors.
The Board, through the Compensation Committee, evaluates the
compensation plans for senior management and other employees to ensure they are
appropriate, competitive and properly reflect the Company's objectives and
performance.
The Chief Executive Officer meets with the Compensation Committee to
establish the Chief Executive Officer's goals and objectives for the ensuing
year, against which the Chief Executive Officer's performance is measured.
V. Advise and Counsel Management:
Providing advice and counsel to management occurs both in formal Board and
Committee meetings and through informal, individual Board member's contacts with
the Chief Executive Officer and other members of
8
<PAGE>
management. The Board is composed of individuals whose knowledge, background,
experience and judgment are useful to the Company. The information needed for
the Board's decision-making generally will be found within the Company, and
Board members have full access to management. On occasion, the Board may seek
legal or other expert advice from a source independent of management, and
generally this is done with the knowledge and concurrence of the Chief Executive
Officer.
VI. Review Structure and Operations of the Board:
The Board, through the Nominating and Board Governance Committee,
annually reviews the Board's structure and operations. The following are the
Board's current structure, policies and practices:
A.COMPOSITION, SELECTION, EVALUATION AND ORIENTATION:
1. Composition. The Company's Amended Articles of Incorporation
provide that the number of directors shall be at least three as
determined by the Bylaws and shall be divided into three classes of
approximately equal size. The Bylaws as amended by the Board of
Directors to date, provide that the Board of Directors shall consist
of nine members, divided into three classes serving staggered
three-year terms.
The Board has determined that the majority of its members should be
outside directors. The term "outside" director is any director who is
free of any relationship that, in the opinion of the Board, would
interfere with the designated director's exercise of independent
judgment. The Board believes that there is no current relationship
between any outside director and the Company that would be construed in
any way to compromise any Board member being designated independent.
2. Selection and Evaluation. Among other qualifications, candidates
nominated for election or re-election to the Board of Directors should
possess the highest standards of personal and professional ethics,
integrity and values along with expertise that is useful to the Company
and complementary to the background and experience of other Board
members. Directors must display a willingness to devote the required
amount of time to carrying out the duties and responsibilities of Board
membership and to represent the best interests of all stockholders. The
Nominating and Board Governance Committee is responsible for assessing
the appropriate mix of skills and characteristics required of Board
members in the context of the needs of the Board at a given point in
time. Diversity of the Board as a whole is a valued objective and may
be taken into account in considering individual candidates.
The Nominating and Board Governance Committee will evaluate the
qualifications of each Director candidate against the foregoing
criteria in connection with its recommendation to the Board concerning
his or her initial nomination for election and prior to his or her
nomination for re-election to a new three-year term. A Director who no
longer meets the qualifications during his or her term is expected to
offer a resignation to the Nominating and Board Governance Committee.
3. Orientation. New directors participate in an orientation program
personalized to benefit their needs which includes the distribution of
materials regarding the Company's business and operations, visits to
facilities and meetings with key personnel.
B. LEADERSHIP OF THE BOARD:
The Board believes that, under normal circumstances, the Chief
Executive Officer of the Company should also serve as the Chairman of
the Board. The Chairman of the Board and Chief Executive Officer is
responsible to the Board for the overall management and functioning of
the Company. In the event of a crisis, the Board members may convene a
meeting through the Corporate Secretary to establish the appropriate
leadership for the circumstance.
C. COMPENSATION OF THE BOARD: Compensation of Board members should be
reviewed annually, should be competitive and include some form of
equity. The
9
<PAGE>
Company's Stock Plan for Non-Employee Directors provides that 75%
of a director's retainer be paid in the form of Company common stock.
D. RESIGNATION AND RETIREMENT:
1. Change in Qualifications or Position. It is expected that Board
members will offer their resignation if they no longer meet the
qualifications set forth in Section A.2. above, or upon a change of
position, including retirement from the position which they held when
they were last nominated. It is not the intention that such Board
members should necessarily leave the Board; however, there should be an
opportunity for the Board, through the Nominating and Board Governance
Committee, to review the implications of the directors' new
circumstances and the appropriateness of his or her continuing service.
2. Standard Retirement Age. Non-employee directors will retire from the
Board effective on the date of the Annual Meeting of Shareholders in
the year during which the Board member turns 70 years of age.
3. Retirement of Former Company Chief Executive Officer. It has been
customary that a former Chief Executive Officer of the Company should
not continue to serve on the Board following retirement from employment
with the Company. In most circumstances it is expected that this custom
will continue.
E. BOARD MEETINGS: The Company's Board usually meets six times per year
in regularly scheduled meetings, supplemented by special meetings, or
conference calls, if necessary. The Board believes that a carefully
planned agenda is important for effective Board meetings. The agenda is
generally developed by the Chairman and Chief Executive Officer and is
flexible enough to accommodate unexpected developments. Each agenda
should normally include time for an Executive Session with the Chief
Executive Officer. Any director may request that an item be included on
the agenda. Generally, Board members receive information one week
to ten days in advance of the Board meetings so they will have an
opportunity to prepare for discussion of the items at the meeting.
F. CONFLICTS OF INTEREST: A Board member's business or personal
relationships may occasionally give rise to material personal interest
on a particular issue that conflicts, or appears to conflict, with the
interests of the Company. The Board should take appropriate steps in
accordance with the Company's Bylaws to identify such potential
conflicts to ensure that all directors voting on an issue are
disinterested with respect to that issue. In appropriate cases, a
director with a conflict will be excused from discussions on that
issue.
G. COMMITTEE STRUCTURE: The full Board considers all major decisions of
the Company. However, the Board has established the following standing
committees, so that certain important areas can be addressed in more
depth than may be possible in a full Board meeting. Each Committee is
chaired by an outside director except for the Executive Committee.
Committee Chairs are rotated every two to three years and memberships
are rotated less frequently. The issues addressed by each of the six
current standing committees are the following:
o The Audit Committee examines accounting processes and
reporting systems, assesses the adequacy of internal controls,
monitors the Company's financial disclosures, and evaluates the
performance and recommends the appointment of independent
auditors.
o The Nominating and Board Governance Committee reviews
the role, composition, qualifications and structure of the Board
and its committees. It reviews and evaluates Board members in
determining the annual directors' slate and identifies new
director nominees. The Committee accepts nominees submitted by
shareholders in accordance with the requirements of the Company's
Bylaws. This Committee, along with the Board, is responsible for
reviewing and updating the Com-
10
<PAGE>
pany's Statement on Corporate Governance.
o The Compensation Committee reviews matters related to
directors' and executive officers' compensation, as well as
the general employees' compensation and benefit policies and
practices of the Company. This Committee also approves goals for
annual and long-term incentive plans, evaluates performance
against these goals, administers the Company's stock-based
long-term incentive plan and issues the Compensation Committee
Report on executive compensation to shareholders.
o The Compliance Committee ensures that the Company has
established the procedures necessary to prevent and detect
criminal conduct by its employees and other agents. It is
responsible for oversight of the high standards of ethical
conduct of the Company's businesses implemented through the
Com
o The Finance and Budget Committee approves the annual
profit plans, capital budgets and capital allocations of the
Company. The Committee also makes recommendations to the Board
regarding dividend policy and reviews financings, acquisitions or
divestitures by the Company or its subsidiaries involving at
least $20 million of total capital.
o The Executive Committee exercises the authority of the
Board during the intervals between meetings of the Board.
H. BOARD ACCESS TO MANAGEMENT: Directors have complete access to the
Company's management. Members of the Chief Executive Officer's
Operating Committee, the General Counsel and the Corporate Secretary
regularly attend meetings of the Board and its Committees. Other
appropriate officers and managers are invited to attend Board and
Committee meetings, or portions thereof, for the purpose of making
presentations or participating in discussions. Generally, presentations
of matters to be considered by the Board or Committee are made by the
officer or manager responsible for that area of the Company's business.
I. BOARD INTERACTION WITH INVESTORS, OTHER STAKEHOLDERS AND THE
MEDIA: The Board believes that it is management's responsibility to
speak for the Company. Individual directors may, from time to time,
meet or otherwise communicate with outside constituencies that are
involved with the Company. In those instances, however, it is expected
that directors will do so only with the knowledge of management and,
absent unusual circumstances, only at the request of management.
Meetings of the Board of Directors and Standing Committees
The Company's Board of Directors has six standing committees, the
functions of which are briefly described in the Statement on Corporate
Governance on pages 8- 11. Members of all committees are identified in the
sections titled "Information as to Nominees" and "Information as to Continuing
Directors." During 1998, all directors attended at least 75% of the total
number of Board and pertinent committee meetings. During 1998, the Board of
Directors held six meetings; the Audit Committee held three meetings; the
Compensation Committee held three meetings; and the Nominating and Board
Governance Committee held one meeting.
The Nominating and Board Governance Committee will consider
recommendations for nominees for election to the Board of Directors submitted by
shareholders. In addition to other requirements, for a nomination to be made by
a shareholder, the Company's bylaws provide that such shareholder must have
given timely notice thereof in proper written form to the Secretary of the
Corporation. To be timely, a shareholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Company (a) in the case of an annual meeting, not less than 90 days nor more
than 120 days prior to the date of the annual meeting; provided, however, that
in the event that less than 100 days'
11
<PAGE>
notice or prior public disclosure of the date of the annual meeting is given or
made to shareholders, notice by the shareholder in order to be timely must be so
received not later than the close of business on the 10th day following the day
on which such notice of the date of the annual meeting was mailed or such public
disclosure of the date of the annual meeting was made, whichever occurs first;
and (b) in the case of a special meeting of shareholders called for the purpose
of electing directors, not later than the close of business on the 10th day
following the day on which the notice of the date of the special meeting was
mailed or public disclosure of the date of the special meeting was made,
whichever occurs first.
Compensation of Directors
Under the terms of the Stock Plan for Non-Employee Directors of Florida
Progress Corporation and Subsidiaries (the "Director Plan"), 75% of each
non-employee director's $30,000 retainer fee for 1998 was paid quarterly in
arrears in Common Stock. In addition, non-employee directors were paid $1,500
for attendance at each meeting of the Company's Board of Directors, and a per
meeting fee of $1,000 for attendance at each subsidiary board or board committee
meeting. A $750 meeting fee was also paid to each Committee Chairman for each
meeting chaired. Directors have also been paid a $500 attendance fee for
participation in strategic update conferences and are reimbursed for expenses
incurred for Company business purposes, or may use Company transportation or
facilities, if available. The cash portion of directors' compensation is allowed
to be deferred.
The Compensation Committee meets each year to review all elements of
director compensation. In December 1998, the Compensation Committee reviewed the
total value of all forms of director compensation and determined that in
addition to retainer and meeting fees, many companies offer a separate
equity-based component in their directors' compensation programs. To further
align the interest of the Board of Directors to those of the shareholders the
Board of Directors has approved a Phantom Stock Plan for the Benefit of
Non-Employee Directors of the Company. The Plan generally provides for the
awarding of phantom stock, or the right to receive in cash the value of a share
of stock in the future, subject to certain conditions. Under the Plan, on
December 17, 1998, an initial award, effective January 1, 1999, of 2,000 shares
of phantom stock with a six year vesting schedule was made to each non-employee
director. One sixth of the shares is vested for each year of service by the
non-employee director. It is expected that new directors will be granted an
award of approximate size with a similar vesting schedule. At the Annual
Shareholders' Meeting to be held April 16, 1999, non-employee directors elected
to a three-year term will receive an award of 600 shares of phantom stock to
vest over a period of three years; non-employee directors continuing in office
for a two-year term will receive an award of 400 shares of phantom stock to vest
over a period of two years; and non-employee directors continuing in office for
a one-year term will receive an award of 200 shares of phantom stock to vest
over a period of one year. Thereafter, each non-employee director elected to a
three-year term will receive an award of 600 shares of phantom stock to vest
over a period of three years. Directors elected to a lesser term would be given
a prorated award. Dividend equivalents will be added to the phantom stock
accounts upon the declaration of each quarterly dividend. The balance of each
account will be paid in a lump sum cash payment or series of annual cash
installments valued on the date of termination of service of the director.
12
<PAGE>
Executive Compensation
The following table contains information with respect to compensation
awarded, earned or paid during the years 1996-1998 to (i) the Chief Executive
Officer ("CEO") of the Company; (ii) the four most highly compensated executive
officers other than the CEO of the Company who were serving as executive
officers at the end of the last completed fiscal year; and (iii) two individuals
for whom disclosures would have been provided pursuant to this item but for the
fact that each individual was not serving as an executive officer of the Company
at the end of the last completed fiscal year (the individuals referred to in
(i), (ii) and (iii) are referred to collectively as the "Named Executive
Officers") whose total remuneration paid in 1998 exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Payouts
---------------------------------------------------------- --------------
Other Annual LTIP All Other Com-
Name and Principal Position Year Salary Bonus Compensation(1) Payouts(2) pensation(3)
-------------------------- ------ --------- --------- ---------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
RICHARD KORPAN 1998 $650,766 $594,000 $ 16,891 $792,754 $28,650
Chairman, President and 1997 592,304 41,500 11,850 324,028 26,490
Chief Executive Officer 1996 535,610 333,500 1,489 339,107 18,900
JOSEPH H. RICHARDSON 1998 421,158 382,500 2,625 437,994 18,900
Group Vice President and 1997 384,619 -0- 1,685 162,091 13,890
President and Chief Executive 1996 288,884 214,000 -0 - 128,858 16,585(4)
Officer, Florida Power
Corporation
RICHARD D. KELLER 1998 391,926 250,000 4,978 363,399 17,681
Group Vice President and 1997 366,733 173,500 413 205,910 16,227
President and Chief 1996 320,640 -0- -0- 139,347 12,646
Executive Officer,
Electric Fuels Corporation
JEFFREY R. HEINICKA 1998 278,530 190,000 1,772 208,288 12,318
Senior Vice President and 1997 264,992 15,500 -0- 110,393 12,315
Chief Financial Officer 1996 258,456 169,000 -0- 113,139 8,595
KENNETH E. ARMSTRONG 1998 231,933 127,500 -0- 170,849 9,882
Vice President and 1997 215,009 10,000 -0- 88,944 9,963
General Counsel 1996 212,785 144,500 -0- 101,748 8,010
JACK B. CRITCHFIELD (5) 1998 446,571 308,000 3,270 875,947 17,681
Former Chairman of the Board 1997 685,006 47,500 2,997 527,363 33,465
1996 672,581 498,000 445 505,252 25,060
STANLEY I. GARNETT, II (6) 1998 567,695 130,000 11,339 -0- 10,463
Former Executive VicePresident 1997 408,616 21,500 65 51,891 5,063
1996 N/A N/A N/A N/A N/A
</TABLE>
(1) Amounts represent the reimbursement of taxes on certain
perquisites and other personal benefits.
(2) Information for fiscal year 1998, represents the dollar value
as of February 17, 1999, the date of award, of shares of Common
Stock earned under the 1996- 1998 performance cycle of the Company's
Long-Term Incentive Plan ("LTIP"), none of which are restricted. The
total number of shares earned, including dividend equivalent shares,
is as follows: Richard Korpan 19,544 shares; Joseph H. Richardson
10,798 shares; Richard D. Keller 8,959 shares; Jeffrey R. Heinicka
5,135 shares; Kenneth E. Armstrong 4,212 shares; Jack B. Critchfield
21,595 shares; and Stanley I. Garnett, II -0- shares.
13
<PAGE>
See the discussion of the method of calculating payouts contained
in the Long- Term Incentive Compensation portion of the
Compensation Committee Report of the Board of Directors on pages
18-19.
(3) Company contributions to its Savings Plan and Executive Optional
Deferred Compensation Plan on behalf of the Named Executive
Officers.
(4) Represents $8,835 in Company Contributions to the Savings Plan of
Florida Progress and the Executive Optional Deferred Compensation
Plan and $7,750 of director fees for services as a director of
Echelon International Corporation, a former subsidiary of Florida
Progress.
(5) Jack B. Critchfield retired from the Company July 1, 1998.
(6) Stanley I. Garnett, II retired from the Company September 1,
1998. Salary information for 1997 includes $182,075 paid to Mr.
Garnett through a consulting firm that was retained by the
Company prior to his employment by the Company. No information is
provided for 1996 because he was not an executive officer of the
Company during that year.
The following table contains information with respect to
performance shares granted in 1998 to the Named Executive Officers of the
Company under the LTIP:
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLAN(1)
AWARDS IN 1998
Number of Performance
Performance Period Estimated Payout at End of Period (3)
Name Shares (2) Covered Threshold Target Maximum
------ ------------ ----------- --------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Richard Korpan 17,171 1998-2000 4,293 shares 17,171 shares 34,342 shares
Joseph H. Richardson 8,293 1998-2000 2,073 shares 8,293 shares 16,586 shares
Richard D. Keller 7,707 1998-2000 0 shares 7,707 shares 21,194 shares
Jeffrey R. Heinicka 2,924 1998-2000 731 shares 2,924 shares 5,848 shares
Kenneth E. Armstrong 2,446 1998-2000 621 shares 2,446 shares 4,892 shares
Jack B. Critchfield 17,821 1998-2000 4,455 shares 17,821 shares 35,642 shares
Stanley I. Garnett, II 6,341 1998-2000 1,585 shares 6,341 shares 12,682 shares
</TABLE>
(1) The LTIP is a Common Stock and cash-based incentive plan to reward
participants for long-term performance of the Company. It was approved
by the shareholders in 1990. See the Long-Term Incentive Compensation
portion of the Report of the Compensation Committee of the Board of
Directors on pages 18-19 for additional information.
(2) The number of performance shares granted is based on a percentage of
base salary in effect at the time of each award and is subject to
automatic increase or decrease on a prorated basis in accordance with
changes to a participant's base salary or LTIP percentages throughout
the performance cycle. In the event of a change in control of the
Company, 150% of all performance shares granted to the Named Executive
Officers under the LTIP and then outstanding would automatically be
considered earned and would be paid in shares of unrestricted Common
Stock together with shares of unrestricted Common Stock payable for
dividend equivalents accrued through the date of the change in control.
(3) Payouts for the 1998-2000 performance cycle are based on a comparison
of the Company's three-year average annual total shareholder return
("TSR") against an industry peer group.
14
<PAGE>
Pension Plan Table
The table below illustrates the estimated annual benefits (computed as a
straight life annuity beginning at retirement at age 65) payable under the
Company's Retirement Plan for Exempt and Nonexempt Employees ("Retirement
Plan"), Nondiscrimination Plan and Supplemental Executive Retirement Plan
("SERP") for specified final average compensation and years of service levels.
<TABLE>
<CAPTION>
Estimated Aggregate Annual Retirement Benefits Payable Under
the Retirement Plan for Exempt and Nonexempt Employees,
Nondiscrimination Plan and
Supplemental Executive Retirement Plan
Average Annual
Compensation Service Years
- -------------- --------------------------------------------------------------------------------------------------
5 10 15 20 25 30 35 or more
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 200,000 $ 37,500 $ 75,000 $ 112,500 $120,000 $120,000 $120,000 $126,000
300,000 56,250 112,500 168,750 180,000 180,000 180,000 189,000
400,000 75,000 150,000 225,000 240,000 240,000 240,000 252,000
500,000 93,750 187,500 281,250 300,000 300,000 300,000 315,000
600,000 112,500 225,000 337,500 360,000 360,000 360,000 378,000
700,000 131,250 262,500 393,750 420,000 420,000 420,000 441,000
800,000 150,000 300,000 450,000 480,000 480,000 480,000 504,000
900,000 168,750 337,500 506,250 540,000 540,000 540,000 567,000
1,000,000 187,500 375,000 562,500 600,000 600,000 600,000 630,000
1,100,000 206,250 412,500 618,750 660,000 660,000 660,000 693,000
1,200,000 225,000 450,000 675,000 720,000 720,000 720,000 756,000
1,300,000 243,750 487,500 731,250 780,000 780,000 780,000 819,000
1,400,000 262,500 525,000 787,500 840,000 840,000 840,000 882,000
1,500,000 281,250 562,500 843,750 900,000 900,000 900,000 945,000
1,600,000 300,000 600,000 900,000 960,000 960,000 960,000 1,008,000
</TABLE>
The Named Executive Officers are entitled to benefits under the SERP.
These benefits are offset by the benefits payable under the Retirement Plan and
the Nondiscrimination Plan, as well as 50% of the executive's primary Social
Security benefit. The estimated annual SERP benefit for the Named Executive
Officers (prior to any offsets) may be determined using the Pension Plan Table
set forth above. For these purposes, the current compensation for each executive
that would be used in calculating benefits under the SERP is substantially the
same as the three year average of the salary and bonus reported in the summary
compensation table, and the number of years of deemed credited service that
would be used in calculating benefits under the SERP for each such executive is
as follows: Mr. Korpan, 35 years of service; Mr. Richardson, 23 years of
service; Mr. Keller, 20 years of service; Mr. Heinicka, 21 years of service; Mr.
Armstrong, 15 years of service; Dr. Critchfield, 35 years of service; and Mr.
Garnett, 6 years of service. Under the formula used for calculating benefits
under the SERP, the maximum benefit payable to each Named Executive Officer
would be reached at 16 years of deemed credited service unless the Named
Executive Officer would have 35 years of deemed credited service.
Accrued benefits may also be paid under each of the Retirement Plan,
Nondiscrimination Plan and SERP if a participant terminates employment
before age 65 and meets the requirements for early retirement, disability,
death or other termination-of-employment benefits after becoming vested
under the rules of the particular plan.
Under the Retirement Plan and the Nondiscrimination Plan, the
compensation taken into account in calculating benefits is salary only. The
years of credited service that would be used in calculating benefits under the
formula applicable to the Retirement Plan and the Nondiscrimination Plan (1.8%
of final average earnings for each year of service) for the Named Executive
Officers in the summary compensation table are as follows: Mr. Korpan, 10 years
of service; Mr. Richardson, 23 years of service; Mr. Keller, 20 years of
service; Mr. Heinicka, 21 years of service; Mr. Armstrong, 12 years of
service;
15
<PAGE>
Dr. Critchfield, 15 years of service; and Mr. Garnett 1 year of
service. The benefits under the Retirement Plan and the Nondiscrimination Plan
are subject to offset by an amount equal to 1 1/7% of a participant's primary
Social Security benefit for each year of service (with a maximum offset of 40%).
In the event of a change in control, each Named Executive Officer
currently employed by the Company would receive credit under the SERP for five
additional years of service, but in no event would such additional years of
credited service cause the maximum benefit to be increased. If a participant's
employment were terminated following a change in control, the benefit payable
from the SERP would be as follows: (1) an annuity at age 55 through 59, subject
to early payment reductions in the amount of 3% for each year prior to age 60,
or at age 60 without reduction; (2) the amount of any federal excise taxes (and
income taxes on any reimbursement under this provision) imposed on the executive
under Section 4999 of the Internal Revenue Code; and (3) a 50% surviving spouse
benefit payable upon death.
Employment Contracts, Termination of Employment and Change-in-Control
Arrangements
In 1998, the Company amended its 1995 employment agreement with Mr.
Korpan. The term of the agreement is from March 1, 1998 through February 28,
2002. On each March 1, beginning with March 1, 2000, the agreement will
automatically be extended for one additional year, unless either party gives 90
days' written notice to the contrary. The agreement provides for an annual base
salary of not less than $660,000 with award opportunities as a participant in
the Management Incentive Compensation Plan ("MICP") and LTIP of not less than
the level authorized for any other executive officer of the Company. The
agreement establishes minimum annual retirement benefits that increase with Mr.
Korpan's tenure. The agreement also provides for the payment of comparable
retirement benefits to his surviving spouse as well as payment to his estate of
the base salary and MICP target bonus for the year in which death occurs.
Severance pay established in the agreement is three times the sum of his annual
base pay and MICP target bonus. Severance pay is due upon termination by the
Company without cause or upon termination by the employee for good reason. The
agreement contains restrictive covenants that apply for a period of two years
after termination of employment. The Company will pay Mr. Korpan's attorneys'
fees in the event of an action to enforce the agreement after a change in
control. He will be entitled to an additional payment in the event that any
payment or benefit under the agreement would subject him to the excise tax
imposed under Section 4999 of the Internal Revenue Code. To the extent that
benefits are payable under both Mr. Korpan's employment agreement and the
agreement referred to in the next paragraph, they are payable to the maximum
extent under either, but not both, of those agreements.
Change-in-control benefits were previously included in the SERP which
was originally adopted August 1, 1989, and which has been amended from time to
time. In 1998, the Company entered into individual agreements with each of the
Named Executive Officers, except Jack B. Critchfield, dealing with a change in
control as defined in each agreement. These agreements implemented changes to
the change-in-control benefits previously included in the SERP and reduced the
cost to the Company in the event a change in control occurs. In the event of a
change in control, each Named Executive Officer would receive credit under the
SERP for five additional years of service. Each agreement establishes the
conditions of employment during an employment period which commences on the date
of any change in control and lasts until the earliest to occur of: (1) the date
which is 36 months from the date of any such change in control; or (2) the date
of termination of employment of the Named Executive Officer. In the event of
termination of employment following a change in control, each agreement provides
for the following: (1) a severance payment equal to two and a half or three
times the Named Executive Officer's base salary and annual bonus; (2) payout in
cash at maximum of performance shares granted under the LTIP after a change in
control and, in one instance, payout of the difference between actual and
maximum of performance share awards paid out as a result of the occurrence of
a change in control;
16
<PAGE>
(3) welfare benefits for the Named Executive Officer for a maximum of
thirty months after termination with lifetime access to medical insurance with
the executive paying the full cost thereafter; (4) the payment of the premium
for group executive excess liability insurance for 15 years; (5) tax assistance
up to $15,000; (6) the payment of reasonable attorneys' fees and expenses
related to disputes involving the agreement; and (7) reimbursement of relocation
expenses not covered by another employer and not in excess of $10,000 incurred
within 30 months of termination.
Jack B. Critchfield retired July 1, 1998. Dr. Critchfield receives an
annual retirement benefit pursuant to the "normal retirement" provisions of the
SERP of $644,009 under the 75% Joint and Survivor payment option. After his
death, his spouse will receive an annual survivor benefit of $489,104.
Approximately 74% of those benefits are payable pursuant to the SERP, with the
balance payable under the Retirement and Nondiscrimination Plans. The Company
will also pay 79% of his Company medical insurance premiums and 59% of his
spouse's.
Stanley I. Garnett, II retired September 1, 1998. Mr. Garnett receives
an annual retirement benefit under the "early retirement" provisions of the SERP
of $79,943 from the SERP under the 100% Joint and Survivor payment option. After
his death, his spouse will receive an annual retirement benefit of $79,943 from
the SERP. In addition, Mr. Garnett will receive $15,882 annually from the
Company for life. The Company will pay 100% of his and his spouse's medical
premium until August 31, 1999. Beginning September 1, 1999, Mr. Garnett and his
spouse will have the option to continue medical coverage by paying the entire
premium amount.
Report of the Compensation Committee of the Board of Directors
Executive Compensation Design
The Company's executive compensation system is intended to attract,
retain and motivate high quality executives with individually tailored market-
and performance-based compensation packages that reward protection of Company
assets and enhancement of shareholder value. The Compensation Committee of the
Board of Directors of Florida Progress Corporation (the "Committee"), comprised
solely of non-employee directors, approves total compensation opportunities and
awards for executive officers of the Company and Florida Power. The target
compensation for each executive officer is established annually by the Committee
and is made up of three principal components: base salary; annual incentive cash
compensation; and long-term incentive compensation payable in cash or Common
Stock. A significant portion of each executive officer's total target
compensation is variable, at risk and dependent upon the Company's annual
and long-term performance.
In determining target compensation, the Committee reviews market values
compiled by human resource professionals from several independent surveys based
upon an equal blend of compensation levels of both electric power and general
industry median rates, where possible. This philosophy is intended to reflect
the changing nature of the electric utility industry and to recognize the fact
that pay practices in the future must be adequate to attract talented employees
from other industries. In 1998, the Committee received an updated competitive
compensation analysis for total direct compensation prepared by Towers and
Perrin, a benefits consulting firm, for each executive officer.
The Committee believes its "pay-for-performance" program, which
compensates an executive officer at his or her target level of compensation only
if specific goals are achieved, is a fair way to structure an executive
compensation program. The program rewards executives for meeting performance
targets, thus producing benefits for the entire Company and its shareholders.
A discussion of the three compensation components and the actions taken
by the Committee with respect to compensation reported for 1998 for the Named
Executive Officers
follows:
Base Salary
The base salary component is based, in most instances, on an equal
weighting of market data from both utility and general industry sources. An
executive officer's base salary will
17
<PAGE>
vary within this competitive framework based on experience,
responsibilities, leadership and performance. As a result, updated market data
indicated that increases were appropriate in 1998 for the Named Executive
Officers as is reflected in the Summary Compensation Table. For the Company's
CEO, the Committee took into consideration the planned transition of the
Company's CEO to Chairman of the Board and established his 1998 base salary in
accordance with a market value range which included those increased
responsibilities. Annual Incentive Cash Compensation
The Company's MICP provides annual incentive cash compensation
opportunities to officers and key employees of the Company and Florida Power
(including the Named Executive Officers) by creating performance award
opportunities associated with the achievement of corporate and business unit
goals. For 1998, the goals associated with the threshold, target and maximum
payout levels of the MICP were established by the Committee to include corporate
staff performance measures as well as strategic business unit ("SBU")
performance measures. The performance measures for Florida Power were broken
down into four levels (50%, 100%, 150% and 200% of target) with weightings for
both company financial and SBU performance based on the executive's level of
influence in the organization. SBU goals were designed to reward shareholder
value added with corresponding incentive payouts. The CEO of Florida Power's
incentive opportunity is based on the overall financial performance of Florida
Power. The weighting for corporate staff vice presidents' incentive
opportunities are based 70% on the overall financial performance of Florida
Power and 30% on the SBU goals. The CEO of Electric Fuels' incentive opportunity
continues to be based on the net income and return on invested capital targets
of Electric Fuels with a maximum payout level of 150% of target. The Company
CEO's incentive opportunity is based on a weighting of total Company results
with Florida Power at 80%, Electric Fuels at 15% and corporate and other at 5%
with a maximum payout level of 190% of target.
The 1998 annual incentive compensation opportunities at target payout
level for the Named Executive Officers ranged from 40% to 60% of base salary.
None of the target opportunities were increased from 1997, including the target
opportunity established for the Company's CEO of 60%.
The amounts contained in the bonus column of the Summary Compensation
Table for the Named Executive Officers (other than the Company's CEO) for 1998
are the result of the Committee's determination that 1998 results were above the
target goal established for Florida Power and slightly below the target goal
established for Electric Fuels. Florida Power's results were capped at 150% of
target since the results in excess thereof were attributable to the impact of
weather upon corporate performance. The amount contained in the bonus column of
the Summary Compensation Table for the Company's CEO and Dr. Critchfield for
1998 is based on achievement at 150% of the target goal, the same as the Florida
Power goal as capped. The amounts contained in the bonus column for all the
Named Executive Officers were the result of the application of a mathematical
formula that converts the goal levels achieved into dollar amounts and
adjustments made by the Company's CEO, plus or minus up to 10%, with respect to
three of the Named Executive Officers in accordance with his authority under the
plan.
Long-Term Incentive Compensation
To facilitate executive stock ownership and align the interest of key
executives with that of the Company's other shareholders in the long-term
performance of the Company, the Committee awarded in 1998 the Named Executive
Officers the opportunity to earn Common Stock or cash through the grant of
performance shares under the Company's LTIP, as indicated in the table appearing
on page 14. To date, under the LTIP, the Committee has granted performance
shares for nine consecutive three-year performance cycles beginning with the
1991-1993 performance cycle.
To the extent earned, performance shares are converted into shares of
unrestricted Common Stock; however, if certain stock ownership guidelines
have been met, a participant may elect to convert such performance shares into
either unrestricted Common Stock or cash.
18
<PAGE>
The financial goals for the 1996-1998 performance cycle of the LTIP
were established by the Committee to be the same as the annual ROE goals used
for the MICP for 1996 and the Company's TSR against an industry peer group for
1997 and 1998. The goal for the CEO of Electric Fuels also included a two-year
earnings growth and return on invested capital (ROIC) goal for 1997 and 1998.
The payouts listed in the Long- Term Compensation column of the Summary
Compensation Table for the Named Executive Officers on page 13 for the 1996-1998
performance cycle are the result of the Committee's determination of maximum
achievement of Florida Power's 1996 ROE goal, slightly below target achievement
of Electric Fuels's 1996 ROE goal, above target achievement of Electric Fuels's
1997 and 1998 earnings growth and ROIC goals and above target achievement of the
1997 and 1998 TSR goal. The payout to Florida Power's CEO was based on Florida
Power's ROE results for 1996 and TSR results for 1997 and 1998. The payout to
Electric Fuels's CEO was based on Electric Fuels's ROE results for 1996 and a
weighting of Electric Fuels's earnings growth and ROIC results 75% and TSR
results 25% for 1997 and 1998. The LTIP payouts to all other Named Executive
Officers, including the Company's CEO were based on (1) the weighted average of
the 1996 ROE results for Florida Power (85%) and Electric Fuels (15%) and (2)
the results for the 1997 and 1998 TSR. A mathematical formula was used to
convert the goal level achieved into the number of performance shares earned;
then, dividend equivalents on shares earned for the period of the performance
cycle were added. All payouts to currently employed Named Executive Officers
were made in shares of Common Stock.
During 1998, the Committee approved the number of performance shares
granted to each Named Executive Officer (other than the Company's CEO) for the
1998-2000 performance cycle that had a value on the date of grant equal to 40%
or 75% of 1998 base salary, depending on the total compensation opportunity
established by the Committee for each executive. Increases were made to the
target percentages for several of the Named Executive Officers from the
percentages used in the previous performance cycle due to increased market
values. The grants are subject to automatic increase or decrease on a prorated
basis in accordance with changes to a participant's base salary or LTIP
percentage during the performance cycle. For the Company's CEO and Dr.
Critchfield, the number of performance shares granted for the 1998-2000
performance cycle had a value on the date of grant equal to 100% of his 1998
base salary which was increased from the previous year based upon a review of
updated market data and the planned transition of the Company's CEO to Chairman.
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code would deny the Company a
deduction for compensation paid to each Named Executive Officer in a taxable
year to the extent it exceeds $1 million per officer, unless the compensation
qualifies as "performance-based compensation." In 1997, the Committee rescinded
an amendment to the Company's MICP that provided for the mandatory deferral of
annual cash incentive compensation which would not qualify for a Company tax
deduction due to Section 162(m) of the Internal Revenue Code until such time as
it becomes deductible. The MICP deferral was no longer effective in preserving
the full deduction and the Committee has determined that the amount of the
foregone deduction for 1998 was not material.
Respectfully submitted,
Richard A. Nunis, Chairman since 8/98
W. D. ("Bill") Frederick, Jr.
Clarence V. McKee
Jean Giles Wittner, Chairman until 8/98
19
<PAGE>
Company Performance
The following graph compares the Company's performance, as measured by
the change in price of its Common Stock plus reinvested dividends, with the
Standard & Poor's ("S & P") 500 stock index and the S & P Electric Companies
stock index for the five years ended December 31, 1998:
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG FLORIDA PROGRESS CORPORATION, THE S & P 500 INDEX
AND THE S & P ELECTRIC COMPANIES INDEX
[GRAPH]
1993 1994 1995 1996 1997 1998
Florida Progress 100 96 120 120 156 187
S & P 500 100 101 139 171 229 294
S & P Electrics 100 87 114 114 144 166
* $100 invested on 12/31/93 in stock or index, including reinvestment of
dividends. Fiscal year ending December 31.
Relationship with Independent Accountants
The firm of KPMG LLP, which has been the Company's independent
certified public accountants since February 2, 1990, was recommended by the
Audit Committee and approved by the Board of Directors as the Company's auditor
for the year ended December 31, 1998. Representatives of KPMG LLP are expected
to be present at the Annual Meeting, will have the opportunity to make a
statement if they desire
20
<PAGE>
to do so and are expected to be available to respond to appropriate questions.
On February 3, 1999, the Company again selected KPMG LLP as its
independent auditors for the current year.
2000 Shareholder Proposals
Proposals of shareholders intended to be included in the proxy
statement and presented at the 2000 Annual Meeting must be received on or before
November 12, 1999. Shareholder proposals submitted outside the foregoing process
must satisfy the advance notice provisions of the Company's Bylaws, which
require timely notice by shareholders in proper form for other business to be
conducted at an annual meeting. To be timely, in addition to other requirements,
a shareholder's notice must be delivered to or mailed and received at the
principal executive offices of the Company not less than 90 days nor more than
120 days prior to the date of the annual meeting; provided, however, that in the
event that less than 100 days' notice or prior public disclosure of the date of
the annual meeting is given or made to shareholders, notice by the shareholder
in order to be timely must be so received not later than the close of business
on the 10th day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure of the date of the annual meeting
was made, whichever occurs first. Proposals should be sent to the Secretary of
the Company, Florida Progress Corporation, P.O. Box 33042, St. Petersburg,
Florida 33733.
General
In the event that any other matters properly come before the Annual
Meeting, the persons named in the form of proxy intend to vote all proxies in
accordance with their judgment on such matters.
Enclosed is the Annual Report of the Company for the year ended
December 31, 1998. It is not to be regarded as proxy soliciting material.
By order of the Board of Directors,
Kathleen M. Haley
Corporate Secretary
<PAGE>
[LOGO]
FLORIDA
PROGRESS
CORPORATION
I M P 0 R T A N T
YOUR PROXY CARD IS BELOW
Your proxy card is attached below. Please follow these steps:
1. Please clearly mark your voting selections on the reverse side.
2. Please sign and date your card on the reverse side.
3. Please detach and return to us in the enclosed postage-paid envelope.
4. Please help us avoid the expense of follow-up mailings by completing
and returning your proxy card promptly.
(DETACH HERE)
PROXY
FLORIDA PROGRESS CORPORATION - Annual Meeting, April 17, 1998
Proxy solicited on behalf of the Board of Directors
The undersigned hereby appoints Richard Korpan and Kathleen M. Haley and
each of them, with power of substitution, proxies to represent, and to vote all
shares of Common Stock of Florida Progress Corporation, which the undersigned is
entitled to vote, at the Annual Meeting of Shareholders to be held in St.
Petersburg, Florida on April 16, 1999, at 9 a.m. EDT, and at any and all
adjournments thereof, and hereby revokes any prior proxies given with respect to
such stock, and the undersigned authorizes the voting of such stock as follows
on the reverse side.
SEE REVERSE CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE SEE REVERSE
SIDE SIDE
LOGO] FLORIDA
PROGRESS
CORPORATION
P.O. BOX 9398
BOSTON, MA 02205-9398
I M P 0 R T A N T
YOUR PROXY CARD IS BELOW
Your proxy card is attached below. Please follow these steps:
1. Please clearly mark your voting selections.
2. Please sign and date your card.
3. Please detach and return to us in the enclosed postage-paid
envelope.
4. Please help us avoid the expense of follow-up mailings by
completing and returning your proxy card promptly.
(DETACH HERE)
|X|Please mark
votes as in
this example.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no contrary specification is made,
this proxy will be voted "FOR" the nominees listed in the Election of Directors.
Election of Directors
Class II Nominee: Richard Korpan
Class III Nominees: Clarence V. McKee, Esq.,
Richard A. Nunis, Jean Giles Wittner
FOR WITHHELD
|_| |_|
|_| ________________________________
For all nominees except those written on the line above.
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournment thereof.
MARK HERE IF YOU PLAN TO ATTEND THE MEETING |_|
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT |_|
(Please mark, date, sign, detach and mail in the enclosed envelope.)
When signing as attorney, executor, administrator, trustee or guardian,
please give title. For joint account, each joint owner should sign. If the
signer is a corporation, please sign full corporation name by duly authorized
officer. If a partnership, please sign in partnership name by authorized person.
Signature:_______________ Date:______ Signature:_____________ Date: __________
