UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Exact name of each Registrant as specified in I.R.S. Employer
Commission its charter, state of incorporation, address Identification
File No. of principal executive offices, telephone Number
- -------------- ---------------------------------------------- ---------------
1-8349 FLORIDA PROGRESS CORPORATION 59-2147112
A Florida Corporation
One Progress Plaza
St. Petersburg, Florida 33701
Telephone (813) 824-6400
1-3274 FLORIDA POWER CORPORATION 59-0247770
A Florida Corporation
3201 34th Street South
St. Petersburg, Florida 33711
Telephone (813) 866-5151
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
-------------------------------------- ----------------------
Florida Progress Corporation:
Common Stock without par value and New York Stock Exchange
Preferred Stock Purchase Rights Pacific Stock Exchange
Florida Power Corporation: None
Securities registered pursuant to Section 12(g) of the Act:
Florida Progress Corporation: None
Florida Power Corporation: Cumulative Preferred Stock,
par value $100 per share
Indicate by check mark whether the registrants (1) have 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
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. YES X . NO .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of each registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
<PAGE> 2
The aggregate market value of the voting stock held by non-affiliates of Florida
Progress Corporation as of December 31, 1997 was $3,743,134,026 (determined by
subtracting the number of shares held by directors and executive officers of
Florida Progress Corporation from the total number of shares outstanding, then
multiplying the difference times the closing sale price from the New York Stock
Exchange Composite Transactions).
The aggregate market value of the voting stock held by non-affiliates of Florida
Power Corporation as of February 28, 1998 was $-0-. As of February 28, 1998,
there were issued and outstanding 100 shares of Florida Power Corporation's
common stock, without par value, all of which were held, beneficially and of
record, by Florida Progress Corporation.
The number of shares of Florida Progress Corporation common stock without par
value outstanding as of December 31, 1997 was 97,062,954.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for Florida Progress Corporation
dated March 12, 1998, relating to the 1998 Annual Meeting of Shareholders, are
incorporated by reference in Part III hereof.
----------------------------
This combined Form 10-K represents separate filings by Florida Progress
Corporation and Florida Power Corporation. Florida Power Corporation makes no
representations as to the information relating to Florida Progress Corporation's
diversified operations.
[THIS SPACE INTENTIONALLY BLANK]
<PAGE> 3
TABLE OF CONTENTS
-Page-
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PART I.
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . 15
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . 19
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . . . . 26
PART II.
Item 5. Market for the Registrants' Common Equity
and Related Stockholder Matters . . . . . . . . . . . 27
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . 28
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 29
Item 7a. Quantitative and Qualitative Disclosures About
Market Risks. . . . . . . . . . . . . . . . . . . . . 41
Item 8. Financial Statements and Supplementary Data . . . . . . 42
Combined Report of Independent Certified Public
Accountants . . . . . . . . . . . . . . . . . . . . 42
Consolidated Financial Statements of Florida Progress 43
Financial Statements of Florida Power . . . . . . . . 48
Combined Notes to the Financial Statements. . . . . . 53
Quarterly Financial Data (unaudited). . . . . . . . . 73
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . 73
PART III.
Item 10. Directors and Executive Officers of the Registrants . . 74
Item 11. Executive Compensation. . . . . . . . . . . . . . . . . 76
Item 12. Security Ownership of Certain Beneficial Owners and
Management. . . . . . . . . . . . . . . . . . . . . . 80
Item 13. Certain Relationships and Related Transactions. . . . . 81
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K. . . . . . . . . . . . . . . . . . . . . . 81
Signatures - Florida Progress Corporation . . . . . . . . . . . . 87
Signatures - Florida Power Corporation. . . . . . . . . . . . . . 89
Financial Statement Schedules . . . . . . . . . . . . . . . . . . 91
<PAGE> 4
GLOSSARY
When used herein, the following terms will have the meanings indicated:
TERM MEANING
1935 Act. . . . . . . . . . . . .Public Utility Holding Company Act of 1935
APB . . . . . . . . . . . . . . .Accounting Principles Board
AST . . . . . . . . . . . . . . .Advanced Separation Technologies, Incorporated
Btu . . . . . . . . . . . . . . .British thermal units
CAAA. . . . . . . . . . . . . . .Clean Air Act Amendments of 1990
Calgon. . . . . . . . . . . . . .Calgon Carbon Corporation
CERCLA or Superfund . . . . . . .Comprehensive Environmental Response
Compensation and Liability Act
Commissioner. . . . . . . . . . .Insurance Commissioner of the State of Oklahoma
CR3 . . . . . . . . . . . . . . .Florida Power's nuclear generating plant,
Crystal River Unit No. 3
Dade. . . . . . . . . . . . . . .Metropolitan Dade County
DOE . . . . . . . . . . . . . . .United States Department of Energy
Echelon . . . . . . . . . . . . .Echelon International Corporation
Electric Fuels. . . . . . . . . .Electric Fuels Corporation
EMF . . . . . . . . . . . . . . .electromagnetic fields, or electric and
magnetic fields
EPA . . . . . . . . . . . . . . .United States Environmental Protection Agency
EPA of 1992 . . . . . . . . . . .Energy Policy Act of 1992
EPS . . . . . . . . . . . . . . .Earnings per share
FASB. . . . . . . . . . . . . . .Financial Accounting Standards Board
FDEP. . . . . . . . . . . . . . .Florida Department of Environmental Protection
FERC. . . . . . . . . . . . . . .Federal Energy Regulatory Commission
Financial Statements. . . . . . .Florida Progress' Consolidated Financial
Statements and Florida Power's Financial
Statements, for the year ended December 31,
1997 contained under Item 8 herein
Florida Power . . . . . . . . . .Florida Power Corporation
Florida Progress. . . . . . . . .Florida Progress Corporation
FPSC. . . . . . . . . . . . . . .Florida Public Service Commission
FRCC. . . . . . . . . . . . . . .Florida Reliability Coordinating Council
Georgia Power . . . . . . . . . .Georgia Power Company
KV. . . . . . . . . . . . . . . .kilovolts
KVA . . . . . . . . . . . . . . .kilovolt amperes
KWH . . . . . . . . . . . . . . .kilowatt hours
Lake. . . . . . . . . . . . . . .NCP Lake Power, Inc.
LTIP. . . . . . . . . . . . . . .Florida Progress Long-Term Incentive Plan
MD&A. . . . . . . . . . . . . . .Management's Discussion and Analysis of
Financial Condition and Results of Operations
MEMCO . . . . . . . . . . . . . .MEMCO Barge Line, Inc.
MICP. . . . . . . . . . . . . . .Management Incentive Compensation Plan
Mid-Continent . . . . . . . . . .Mid-Continent Life Insurance Company
Montenay. . . . . . . . . . . . .Montenay Power Corporation
MW. . . . . . . . . . . . . . . .megawatts
NEIL. . . . . . . . . . . . . . .Nuclear Electric Insurance Limited
NERC. . . . . . . . . . . . . . .North American Electric Reliability Council
NRC . . . . . . . . . . . . . . .United States Nuclear Regulatory Commission
NWPA. . . . . . . . . . . . . . .Nuclear Waste Policy Act
OCL . . . . . . . . . . . . . . .Orlando Cogen Limited, Ltd.
PAA . . . . . . . . . . . . . . .Proposed Agency Action
PCBs. . . . . . . . . . . . . . .polychlorinated biphenyls
Progress Capital. . . . . . . . .Progress Capital Holdings, Inc.
Progress Credit . . . . . . . . .Progress Credit Corporation
Progress Packaging. . . . . . . .Progress Packaging Corporation
Progress Rail . . . . . . . . . .Progress Rail Services Corporation
Proxy Statement . . . . . . . . .The definitive proxy statement dated March 12,
1998, relating to Florida Progress' 1998
Annual Meeting of Shareholders
PRP . . . . . . . . . . . . . . .potentially responsible party, as defined in
CERCLA
<PAGE> 5
PURPA . . . . . . . . . . . . . .Public Utility Regulatory Policies Act of 1978
QFs . . . . . . . . . . . . . . .qualifying facilities
RI/FS . . . . . . . . . . . . . .Remedial Investigation and Feasibility Study
Sanford site. . . . . . . . . . .gasification plant site, Sanford, Florida
SBUs. . . . . . . . . . . . . . .Strategic Business Units
SEC . . . . . . . . . . . . . . .United States Securities and Exchange
Commission
Seminole. . . . . . . . . . . . .Seminole Electric Cooperative, Inc.
SERP. . . . . . . . . . . . . . .Florida Progress Corporation Supplemental
Executive Retirement Plan
SOP . . . . . . . . . . . . . . .Statement of Position issued by American
Institute of Certified Public Accountants
SNF . . . . . . . . . . . . . . .spent nuclear fuel
the nuclear plant . . . . . . . .Florida Power's nuclear generating plant,
Crystal River Unit No. 3
the utility . . . . . . . . . . .Florida Power Corporation
<PAGE> 6
PART I
ITEM 1. BUSINESS
FLORIDA PROGRESS
Florida Progress Corporation ("Florida Progress," which term includes
consolidated subsidiaries unless otherwise indicated), is a diversified electric
utility holding company. Florida Progress' revenues for the year ended December
31, 1997 were $3.3 billion and assets at year end were $5.8 billion. Its
principal executive offices are located at One Progress Plaza, St. Petersburg,
Florida 33701, telephone number (813) 824-6400. The Florida Progress home page
on the Internet's World Wide Web is located at http://www.fpc.com. Florida
Progress was incorporated in Florida on January 21, 1982.
Florida Progress defines its principal business segments as utility and
diversified operations. Florida Power Corporation ("Florida Power" or "the
utility"), Florida Progress' largest subsidiary, is the utility segment and
encompasses all regulated public utility operations. See Item 1 "Business
Utility Operations - Florida Power". Progress Capital Holdings, Inc. ("Progress
Capital") is the downstream holding company for Florida Progress' diversified
subsidiaries which consolidates the financing of non-utility operations. The
diversified operations segment includes Electric Fuels Corporation ("Electric
Fuels"), an energy and transportation company. For information concerning the
operating profit and assets attributable to the business segments, see Note 8 to
Florida Progress' consolidated financial statements and Florida Power's
financial statements for the year ended December 31, 1997 contained herein under
Item 8 (the "Financial Statements").
In December 1996, Florida Progress spun off Echelon International Corporation
("Echelon"). Echelon, successor to Progress Credit Corporation ("Progress
Credit"), was the Florida Progress subsidiary with lending, leasing and real
estate operations. The spin-off was accomplished through a tax-free stock
dividend to Florida Progress' shareholders, thus completing a strategy begun in
1991 to exit those businesses.
Florida Progress is a public utility holding company under the Public Utility
Holding Company Act of 1935 ("1935 Act"). Florida Progress is exempt from
registration with the United States Securities and Exchange Commission ("SEC")
under the 1935 Act and attendant regulation because its utility operations are
primarily intrastate.
UTILITY OPERATIONS - FLORIDA POWER
Florida Power was incorporated in Florida in 1899, and is an operating public
utility engaged in the generation, purchase, transmission, distribution and sale
of electricity. Florida Power has a system generating capacity of 7,717
megawatts ("MW"). In 1997, the utility accounted for 74% of Florida Progress'
consolidated revenues and 85% of its assets. Florida Power contributed $134.4
million to Florida Progress' earnings after the reduction for nuclear outage
costs.
Florida Power provided electric service during 1997 to an average of 1.3 million
customers in west central Florida from its headquarters in St. Petersburg. The
service area covers approximately 20,000 square miles and includes the densely
populated areas around Orlando, as well as the cities of St. Petersburg and
Clearwater. Of Florida Power's 1997 electric revenues billed, approximately 55%
were derived from residential sales, 24% from commercial sales, 9% from
industrial sales, 6% from other retail sales and 6% from wholesale sales.
Important industries in the territory include phosphate and rock mining and
processing, electronics design and manufacturing, and citrus and other food
processing. Other important commercial activities are tourism, health care,
construction and agriculture.
<PAGE> 7
COMPETITION
Florida Power continued to prepare for increased competition in the electric
utility industry. In 1996, the utility began the transition to a strategic
business unit organization, and in 1997 continued to redefine Florida Power
along functional lines. By dividing the organization into three Strategic
Business Units ("SBUs"), the electric generation, transmission and distribution,
and marketing operations are given the opportunity to more closely focus their
attention on the needs of their respective future customers while still meeting
today's needs. In 1997, the evolution to the SBU structure was complemented by
the start of a corporate-wide management effort called Reinvention. Reinvention
focuses on redefining work procedures and improving processes to be more cost
effective, while pursuing new opportunities to increase profits.
For additional information with respect to Florida Power and competition, see
Item 7 "Management's Discussion and Analysis of Financial Condition and Results
of Operations ("MD&A") - Operating Results - Florida Power Corporation "Utility
Competition - Industry Restructuring".
FUEL AND PURCHASED POWER
GENERAL: Florida Power's consumption of various types of fuel depends on several
factors, the most important of which are the demand for electricity by Florida
Power's customers, the availability of various generating units, the
availability and cost of fuel, and the requirements of federal and state
regulatory agencies. Florida Power's energy mix for the last three years is
presented in the following table:
ENERGY MIX PERCENTAGES*
Fuel Type 1997 1996 1995
--------- ---- ---- ----
Coal 45% 43% 39%
Oil 18% 16% 12%
Nuclear 0% 6% 19%
Gas 6% 3% 4%
Purchased Power 31% 32% 26%
* See "NUCLEAR" below for information regarding an extended outage at Florida
Power's nuclear generating plant beginning in September 1996 and continuing
until February 1998.
Florida Power is permitted to pass the cost of recoverable fuel and purchased
power to its customers through fuel adjustment clauses. In June 1997, Florida
Power reached an agreement with the Florida Public Service Commission ("FPSC")
regarding costs related to the extended nuclear outage. (See Notes 1 and 9 to
the Financial Statements).
The future prices for and availability of various fuels discussed in this report
cannot be predicted with complete certainty. However, Florida Power believes
that its fuel supply contracts, as described below, will be adequate to meet its
fuel supply needs.
<PAGE> 8
Florida Power's average fuel costs per million British thermal units ("Btu") for
each year of the five-year period ended December 31, 1997 were as follows:
AVERAGE FUEL COST
(per million Btu)
1997 1996 1995 1994 1993
Coal $1.91 $1.91 $1.93 $1.96 $1.96
Oil 2.75 2.80 2.70 2.39 2.49
Nuclear -- .50 .49 .55 .54
Gas 2.87 2.78 1.98 2.46 4.27
Weighted Average 2.24 2.04 1.69 1.75 1.79
OIL AND GAS: Oil is purchased under contracts and in the spot market from
several suppliers. The cost of Florida Power's oil is determined by world market
conditions. Management believes that Florida Power has access to an adequate
supply of oil for the reasonably foreseeable future. Florida Power's natural gas
supply is purchased under firm contracts and in the spot market from numerous
suppliers and is delivered under firm, released firm and interruptible
transportation contracts. Florida Power believes that existing contracts for oil
are sufficient to cover its requirements when natural gas transmission that is
purchased on an interruptible basis is not available.
NUCLEAR: Florida Power has one nuclear generating plant, Crystal River Unit No.
3 ("CR3" or "the nuclear plant"). After completing a record performance in 1995
by achieving a capacity factor of 100%, CR3 was shut down for much of 1996 and
all of 1997. Beginning in February 1996, the plant underwent a scheduled
refueling outage that lasted until May 1996, when the plant returned to service.
In September 1996, an oil pressure problem in the main turbine forced the plant
to shut down until repairs could be made. After the repairs were completed in
October, the plant remained down while certain backup safety system design
issues were addressed. CR3 returned on-line in February 1998. For more
information regarding the outage, see Item 7 "MD&A - Operating Results - Florida
Power Corporation Extended Nuclear Outage Costs" and Note 9 to the Financial
Statements.
Nuclear fuel is processed through four distinct stages. Stage I and Stage II
involve the mining and milling of the natural uranium ore to produce a
concentrate and the conversion of this uranium concentrate into uranium
hexafluoride. Stage III and Stage IV entail the enrichment of the uranium
hexafluoride, and the fabrication of the enriched uranium hexafluoride into
usable fuel assemblies. Florida Power has contracts in place which provide for a
supply of enriched uranium and fuel fabrication through 2004.
It will be necessary for Florida Power to enter into future fuel contracts to
cover the differences between the total unit lifetime requirements of CR3 and
the requirements covered by existing contracts. Although no assurances can be
given as to the future availability or costs of such contracts, Florida Power
expects that future contract commitments will be obtained at the appropriate
time.
Spent nuclear fuel ("SNF") is stored at CR3 pending disposal under a contract
with the United States Department of Energy ("DOE"). (See Note 4 to the
Financial Statements.) At the present time, Florida Power has facilities on site
for the temporary storage of SNF generated through the year 2010.
COAL: Florida Power anticipates a requirement of approximately 5,800,000 tons of
coal in 1998. Current environmental regulations limit sulfur content, at 12,000
Btu per pound, to 1.2% for Crystal River Unit Nos. 1 and 2, and 0.7% for Unit
Nos. 4 and 5. Most of the coal is expected to be supplied from the Appalachian
coal fields of the United States. Approximately two-thirds of the coal is
expected to be delivered by rail and the remainder by barge. The coal is
supplied by Electric Fuels pursuant to contracts between Florida Power and
Electric Fuels.
<PAGE> 9
For 1998, Electric Fuels has long-term contracts with various sources for
approximately 60% of the coal requirements of Florida Power's coal units. These
long-term contracts have price adjustment provisions. Electric Fuels expects to
acquire the remainder in the spot market and under short-term contracts.
Electric Fuels does not anticipate any problem obtaining the remaining Florida
Power requirements with short-term contracts and in the spot market. (See Note
11 to the Financial Statements.)
PURCHASED POWER: Florida Power, along with other Florida utilities, buys and
sells economy power through the Florida energy brokering system. In addition,
Florida Power has long-term contracts for the purchase of approximately 465 MW
of purchased power with other utilities, including a contract with The Southern
Company for approximately 400 MW. Also, Florida Power has entered into purchased
power contracts with certain qualifying facilities ("QFs") for 946 MW of
capacity, of which 831 MW have been completed and are currently operating. The
capacity currently available from QFs represents about 9% of Florida Power's
total system capacity. The purchased power component was reduced in 1997
primarily through the purchase of the Tiger Bay Cogeneration Facility. See Item
2 "Properties - Utility Operations", Item 7 "MD&A - Fuel and Purchased Power"
and Note 11 to the Financial Statements.
REGULATORY MATTERS AND FRANCHISES
Florida Power is subject to the jurisdiction of the FPSC with respect to retail
rates, customer service, planning, construction of facilities, accounting,
issuance of securities and other matters. In addition, Florida Power is subject
to regulation by the Federal Energy Regulatory Commission ("FERC") with respect
to transmission and sales of wholesale power, accounting and certain other
matters. The underlying concept of utility ratemaking is to set rates at a level
that allows the utility to collect revenues equal to its cost of providing
service plus a reasonable rate of return on its equity. Increased competition,
as a result of industry restructuring, may affect the ratemaking process. See
Item 7 "MD&A - Florida Power - Utility Competition - Industry Restructuring".
The FPSC oversees the retail sales of the state's investor-owned utilities. The
FPSC authorizes retail "base rates" that are designed to provide a utility with
the opportunity to earn a specific rate of return on its "rate base", or average
investment in utility plant. These rates are intended to cover all reasonable
and prudent expenses of utility operations and to provide investors with a fair
rate of return. The FPSC generally allows utilities to recover fuel, purchased
power and conservation costs through an adjustment charge on monthly electric
bills. Beginning in 1995, the FPSC ordered Florida Power to conduct a three-year
test of revenue decoupling for its residential customers. This test ended
December 31, 1997. (See Notes 1 and 9 to the Financial Statements.)
Florida Power is interconnected with 22 municipal and 9 rural electric
cooperative systems. Major wholesale power sales customers include Seminole
Electric Cooperative, Florida Municipal Power Agency and Reedy Creek Utilities
District. During 1997, about 6% of Florida Power's electric revenues were from
wholesale customers whose rates are subject to the jurisdiction of the FERC.
For further information with respect to rates, see Note 9 to the Financial
Statements.
Florida Power's CR3 nuclear plant is subject to regulation by the United States
Nuclear Regulatory Commission ("NRC"). The NRC's jurisdiction encompasses broad
supervisory and regulatory powers over the construction and operation of nuclear
reactors, including matters of health and safety, antitrust considerations and
environmental impact. Florida Power has a 90.4% ownership interest in CR3. (See
Note 4 to the Financial Statements.)
By virtue of state and municipal legislation, Florida Power holds franchises
with varying expiration dates to provide electric service in nearly all
municipalities in which it distributes electric energy. Approximately 99% of
revenues from customers in incorporated areas are covered by franchises. The
<PAGE> 10
general effect of these franchises is to grant Florida Power the right to enter
upon and use streets, alleys and other public places for erecting and
maintaining poles, wires and other apparatus for the sale and distribution of
electric energy. All but one of the existing franchises cover a 30-year period
from the date granted, the maximum allowed by Florida law. The one exception is
a franchise that covers a 10-year period from the date granted. There are 112
franchises, of which 5 expire before December 31, 2000, 26 expire before
December 31, 2001, 33 expire between January 1, 2002 and December 31, 2012, and
48 expire between January 1, 2013 and December 31, 2027.
ENVIRONMENTAL MATTERS
Florida Power is subject to federal, state and local regulations dealing with
air and water quality and other environmental matters.
AIR: All of Florida Power's air emission sources meet the air quality standards
currently set by the Florida Department of Environmental Protection ("FDEP")
and/or the United States Environmental Protection Agency ("EPA").
The Clean Air Act Amendments of 1990 ("CAAA"), under Title IV, Acid Rain
Control, set a permanent cap on emissions of sulfur dioxide and nitrogen oxides
beginning in the year 2000. The cap is to be implemented in two phases. Phase I
limitations became effective in 1995 and Phase II cap will be effective in 2000.
Florida Power has not been and does not expect to be materially affected by
either Phase I or Phase II. In addition, nitrogen oxide emissions from coal
units are being limited by the CAAA. Continuous emission monitors were installed
on most of Florida Power's units by the end of 1994 as required under Title IV
of the CAAA at a total cost of $11 million. To meet Phase II limitations,
Florida Power expects to spend about $10 million by 2000 to implement a strategy
based primarily on burning cleaner fuels and installing burners that reduce
nitrogen oxide emissions on some coal units.
Under Title III of the CAAA, the EPA is studying the emission of hazardous air
pollutants and, where appropriate, promulgating emission limitations for
specific source categories. Depending on the results of these studies and the
EPA's determination of the need for additional limitations, Florida Power could
be required to incur additional capital expenditures and operating expenses.
Under Title V of the CAAA, Florida Power is required to pay annual operating
fees based on the previous year's emissions. In 1998, these fees are expected to
total approximately $800,000 and may increase to approximately $1 million by
2000.
Florida Power's construction program includes approximately $7 million of
planned environmental expenditures for air quality projects for the two-year
period ending December 31, 1999.
WATER: To help meet the future electricity needs of its customers, Florida Power
is building a new power plant complex in Polk County, Florida. Florida Power
plans to have the complex's first plant on line during the fourth quarter of
1998. This plant will use combined cycle technology and be capable of producing
up to 470 MW of power. (See Item 2, "Properties - Utility Operations Planned
Generation".) Approximately $27.6 million was spent through December 31, 1997 on
environmental projects related to site development, mainly for water resource
related facilities. Florida Power expects that approximately $600,000 of
additional costs will be expended on environmental projects related to site
development. In addition, Florida Power's construction program includes
approximately $4 million of additional environmental expenditures for water
resource projects at other Florida Power facilities for the two-year period
ending December 31, 1999.
WASTE MATERIALS: Florida Power is nearing completion of its program to reduce
electrical equipment utilizing polychlorinated biphenyls ("PCB"). All regulatory
compliance dates have been met. All PCB transformers (i.e. those having greater
than 500 ppm PCB) have been removed from Florida Power's electric generating
plants, except for one small plant. Removal of PCB transformers from this final
<PAGE> 11
plant will be delayed until Florida Power decides whether and for how long the
plant will remain in operation.
STORAGE TANK PROGRAM: The regulation of underground and above-ground storage
tanks has expanded to affect virtually every Florida Power storage tank with a
capacity of 100 gallons or greater, including vehicular fuel tanks, bulk fuel
storage tanks, mineral acid tanks, hazardous material tanks and compression
vessels. The FDEP's storage tank regulations require the replacement or
upgrading of tanks that are not protected from corrosion, and the installation
of release detection and containment capabilities for spills and leaks. These
requirements must be met by 1999. Florida Power expects the annual operating
expense and construction expenditures through 1999 related to compliance with
these regulations to be $1 million and $3 million, respectively.
Under a FDEP program, revenues from taxes on imported oil either have been or
are expected to be used to reimburse Florida Power for the majority of past
storage tank contamination cleanup expenditures. In March 1995, the Governor of
Florida ordered a moratorium on this FDEP program. However, Florida Power
expects to receive reimbursement for cleanup activities completed prior to the
moratorium. The FDEP has implemented a new reimbursement program that should
reimburse Florida Power for the majority of storage tank contamination clean- up
expenditures incurred after the moratorium. The expenditures needed to clean up
the remaining storage tank contamination are not expected to be material.
With expansion of regulation and the resulting increased monitoring of tank
systems and oil filled electrical equipment, further expenditures for
contamination cleanup and retrofitting and upgrading equipment are likely, but
these expenditures are not expected to be material to Florida Power.
ELECTROMAGNETIC FIELDS: The potential adverse effect of electromagnetic fields,
or electric and magnetic fields ("EMF"), upon human health continues to be an
important issue in the siting, construction and operation of electric
transmission and distribution systems. EMF from a variety of sources, including
transmission and distribution lines, has been the subject of many studies and
much public discussion in recent years. Currently, the National EMF Research and
Public Information Dissemination Program is in its fifth and final year of an in
depth research program. This program was co-funded by federal and private
utilities, including Florida Power. The findings, to be presented to the U.S.
Congress in 1998, are expected to have a major impact on the EMF issue.
Because of its exclusive jurisdiction to regulate EMF associated with electric
transmission and distribution lines and substation facilities in Florida, the
FDEP has adopted rules that establish certain EMF limits for new transmission
lines and substations. The rules also require an annual review of the state of
the scientific research into the potential adverse effects of EMF upon human
health. The staff of the FDEP provided its progress report to the Environmental
Regulation Commission in February 1997. Based on its review of the scientific
research, the staff recommended that no revision of the current EMF standards be
made at that time. The Environmental Regulation Commission adopted the staff's
recommendation and made no revision to EMF standards. Florida Power believes
that compliance with these EMF rules, which at present essentially maintain the
status quo with respect to regulated EMF exposure levels, will not have a
material adverse effect on the cost of constructing or maintaining new
transmission lines or substations. However, there always is a potential for
lawsuits brought by plaintiffs alleging damages caused by EMF.
Florida Power's management monitors and reports to Florida Power's Board of
Directors at least annually on developments in research concerning the potential
health effects of EMF, EMF mitigation technologies and procedures, and
significant actions by principal federal and Florida agencies related to EMF.
OTHER ENVIRONMENTAL MATTERS: Florida Power has received notices from the EPA
that it is or could be a potentially responsible party ("PRP") under the
Comprehensive Environmental Response Compensation and Liability Act ("CERCLA" or
"Superfund") and the Superfund Amendment and Reauthorization Act and may be
liable, together with others, for the costs of cleaning up several contaminated
sites identified by the FDEP. In addition to these designated sites, there are
<PAGE> 12
other sites where Florida Progress affiliates may be responsible for additional
environmental cleanup. For further information concerning certain environmental
matters relating to Florida Power, see paragraphs 8 and 11 under Item 3 "Legal
Proceedings" and "Contaminated Site Cleanup" in Note 11 to the Financial
Statements.
EMPLOYEES
As of December 31, 1997, Florida Power had 4,799 full-time employees. The
International Brotherhood of Electrical Workers represents approximately 2,058
of these full-time employees. The current union contract was ratified in May
1997 and expires in December 1999.
DIVERSIFIED OPERATIONS
Florida Progress' diversified operations are owned directly or indirectly
through Progress Capital, a Florida corporation and wholly owned subsidiary of
Florida Progress. Progress Capital holds the capital stock of, and provides
funding for, Florida Progress' non-utility subsidiaries. It's primary subsidiary
is Electric Fuels Corporation. Formed in 1976, Electric Fuels is an energy and
transportation company with operations organized into three business units.
Electric Fuels' energy and related services business unit supplies coal to
Florida Power's Crystal River Energy Complex and other utility and industrial
customers. Electric Fuels' inland marine transportation business unit, MEMCO
Barge Line, Inc. ("MEMCO"), transports coal and dry-bulk cargoes primarily along
the Mississippi and Ohio rivers. The rail services business unit, led by
Progress Rail Services Corporation ("Progress Rail"), is one of the largest
integrated processors and suppliers of railroad materials in the country. With
operations in 16 states, Progress Rail offers a full range of railcar parts,
rail and other track material, railcar repair facilities, railcar scrapping and
metal recycling as well as railcar sales and leasing.
As of December 31, 1997, Progress Capital and its subsidiaries had 3,162
full-time employees. (For additional information with respect to Progress
Capital and its subsidiaries, see Item 7 "MD&A - Operating Results - Diversified
Operations" and paragraph 10 of Item 3 "Legal Proceedings.")
COMPETITION
Florida Progress' non-utility subsidiaries compete in their respective
marketplaces in terms of price, service reliability, location and other factors.
Electric Fuels competes in several distinct markets: its coal operations compete
in the eastern United States utility and industrial coal markets; its marine
transportation and barge operations compete in the coal, grain and bulk products
transportation markets on the Ohio and lower Mississippi rivers; its marine
equipment repair business competes in the inland river and gulf coast repair
markets; and its rail operations compete in the railcar repair, parts and
associated services markets in the eastern United States and, to a limited
extent, in the midwest and west. Factors contributing to Electric Fuels' success
in these markets include a competitive cost structure, strategic locations and,
in the case of its marine transportation operations, a modern fleet. There are,
however, numerous competitors in each of these markets, although no one
competitor is dominant in any industry. The business of Electric Fuels and its
subsidiaries, taken as a whole, is not subject to significant seasonal
fluctuation.
For further information with respect to Florida Progress' non-utility
subsidiaries and competition, see Item 7 "MD&A - Operating Results - Diversified
Operations".
ENVIRONMENTAL MATTERS
Electric Fuels is subject to federal, state and local regulations which govern
air and water quality, waste disposal and other environmental matters. The coal
mining business is affected primarily by the Clean Water Act, the Clean Air Act
and the Surface Mining Control and Reclamation Act of 1977. The transportation
and the railcar and marine repair businesses are primarily affected by the
<PAGE> 13
Resource Conservation and Recovery Act, the Emergency Planning and Community
Right-To-Know Act and the Clean Water Act.
The Environmental Services Department of Electric Fuels reviews existing and
emerging environmental regulations, disseminates applicable environmental
information throughout the organization and conducts site specific environmental
compliance audits. Transactional environmental assessments are performed on new
acquisitions to determine the potential environmental liabilities associated
with the facilities being considered. Compliance with environmental laws and
regulations has not had a material effect on Electric Fuels' capital
expenditures, earnings or competitive position, and Electric Fuels does not
anticipate making any material capital expenditures for environmental facilities
through the end of 1999.
For further information concerning certain environmental matters relating to
Florida Progress' diversified operations, see paragraph 12 under Item 3 "Legal
Proceedings" and Note 11 "Commitments and Contingencies", Notes to the Financial
Statements.
<PAGE> 14
EXECUTIVE OFFICERS
Roy A. Anderson, Senior Vice President, Energy Supply, and
Chief Nuclear Officer of Florida Power, Age 49.
Mr. Anderson became Senior Vice President, Nuclear Operations, effective January
20, 1997, was named Chief Nuclear Officer, effective April 1, 1997, and now
serves as the Senior Vice President of Energy Supply. Prior to joining Florida
Power, Mr. Anderson was employed by Carolina Power and Light, where he held
numerous executive officer positions since 1993 in the areas of nuclear
operations, fossil generation, and distribution and customer service. From 1987
to 1993, he was employed by Boston Edison Company where he served as Plant
Manager, Vice President and ultimately as Senior Vice President, Nuclear
Operations.
Kenneth E. Armstrong, Vice President and General Counsel of Florida Progress
and Florida Power, Age 50.
Mr. Armstrong has served as General Counsel of Florida Progress since July 1990
and as Vice President since April 1992. In April 1995, he became Vice President
and General Counsel of Florida Power. In addition to these positions, Mr.
Armstrong served as Assistant Secretary of Florida Progress from April 1992 to
April 1993 and as Secretary from April 1993 to April 1996. He also served as
Assistant Secretary of Florida Power from 1987 until April 1993 and as Secretary
from April 1993 until April 1996.
Janice B. Case, Senior Vice President, Energy SolutionsSM of Florida Power,
Age 45.
Mrs. Case was named Senior Vice President, Energy SolutionsSM effective June 1,
1997, after serving as Vice President since 1996. From October 1990 until July
1996, she served as Vice President, Suncoast Florida Region of Florida Power.
Jack B. Critchfield, Chairman of the Board of Florida Progress, Age 64.
Since June 1, 1997, Dr. Critchfield's principal occupation has been as shown
above. Since 1983, he has held numerous executive positions with Florida
Progress and its subsidiaries including President, Chief Executive Officer,
Chief Operating Officer, Group Vice President, President of Electric Fuels and
Vice President of the Eastern and Ridge Divisions of Florida Power. He has been
a director of Florida Power since 1988 and served as a director from 1975
through 1978 and as Chairman of its Board from 1990 until April 1996. He is a
director of Florida Progress.
Michael B. Foley, Jr., Senior Vice President, Energy Delivery of Florida Power,
Age 54.
Since July 1996, Mr. Foley's principal occupation has been as shown above.
Mr. Foley served as Vice President in that position since February 1995. From
October 1988 until February 1995, Mr. Foley served as Director of System
Planning of Florida Power.
Stanley I. Garnett, II, Executive Vice President of Florida Progress, Age 54
Mr. Garnett was appointed Executive Vice President of Florida Progress,
effective June 1, 1997. From 1996 and until he joined Florida Progress, Mr.
Garnett was employed as Senior Advisor by Putnam, Hayes & Bartlett, Inc., an
economic and management consulting firm. From 1981 to 1995, he was employed by
Allegheny Power System, Inc., where he served as Vice President, Legal and
Regulatory and Chief Legal Officer and ultimately as Senior Vice President and
Chief Financial Officer. He is a director of Baycorp Holdings, Ltd.
<PAGE> 15
Jeffrey R. Heinicka, Senior Vice President and Chief Financial Officer of
Florida Progress and Florida Power, Age 43.
From December 1990 until appointment to his current positions in 1994, Mr.
Heinicka served as Vice President and Treasurer of Florida Progress. Mr.
Heinicka also served as Vice President and Treasurer of Florida Power from April
1993 to March 1994, a position he held concurrently with his Vice President and
Treasurer position at Florida Progress.
Richard D. Keller, Group Vice President, Energy and Transportation of Florida
Progress, and President and Chief Executive Officer, Electric Fuels, Age 44.
Since May 1990, Mr. Keller's principal occupation has been as shown above.
He has served as President and Chief Executive Officer of Electric Fuels since
February 1988.
Richard Korpan, President and Chief Executive Officer of Florida Progress, and
Chairman of the Board of Florida Power, Age 56.
Since June 1, 1997, Mr. Korpan's principal occupation has been as shown above.
He has held the position of President since 1991, and became Chief Executive
Officer of Florida Progress 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 Florida Progress in 1989 as
Executive Vice President and Chief Financial Officer. He is a director of
SunTrust Bank of Tampa Bay.
Joseph H. Richardson, Group Vice President, Utility Group of Florida Progress
and President and Chief Executive Officer of Florida Power, Age 48.
Since 1996, Mr. Richardson's principal occupation has been as Group Vice
President, Utility Group of Florida Progress and President and Chief Operating
Officer of Florida Power. Effective June 1, 1997, he was appointed Chief
Executive Officer, in addition to President, of Florida Power. From April 1995
to April 1996, he served as Senior Vice President, Energy Distribution of
Florida Power. From October 1993 to April 1995, he served as Senior Vice
President, Legal and Administrative Services, and General Counsel of Florida
Power. From August 1991 through April 1995, Mr. Richardson also held the
position of Senior Vice President of Florida Progress. He was President and
Chief Executive Officer of Talquin Corporation, a former subsidiary of Florida
Progress from May 1990 until September 1993. He is a director of Echelon.
There are no family relationships between any director or any executive officer
of Florida Progress or Florida Power. The executive officers serve at the
pleasure of their respective Boards of Directors. Each executive officer is
appointed annually.
ITEM 2. PROPERTIES
Florida Progress believes that its physical properties and those of its
subsidiaries are adequate to carry on its and their businesses as currently
conducted. Florida Progress and its subsidiaries maintain property insurance
against loss or damage by fire or other perils to the extent that such property
is usually insured. (See Note 11 to the Financial Statements.) Substantially all
of Florida Power's utility plant is pledged as collateral for Florida Power's
First Mortgage Bonds. Certain river barges and tug/barge units owned or operated
by Electric Fuels are subject to liens in favor of certain lenders.
UTILITY OPERATIONS
GENERATION: As of December 31, 1997, the total net winter generating capacity of
Florida Power's generating facilities, including CR3, was 7,717 MW. This
capacity was generated by 13 steam units with a capacity of 4,661 MW and 45
combustion turbine units with a capacity of 3,056 MW. Florida Power's ability to
use its generating units may be adversely impacted by various governmental
regulations affecting nuclear operations and other aspects of Florida Power's
business. (See "Regulatory Matters and Franchises" and "Environmental Matters"
<PAGE> 16
under Item 1 "Business Utility Operations - Florida Power.") Operation of these
generating units may also be substantially curtailed by unanticipated equipment
failures or interruption of fuel supplies. Florida Power expects to have
sufficient system capacity, access to purchased power and demand-side management
capabilities to meet anticipated future demand.
Florida Power's existing generating plants (all located in Florida) and their
capacities at December 31, 1997 are as follows:
Winter Net
Maximum
Combustion Dependable
Primary Location Steam Turbine Capacity
Plants Fuel (County) MW MW MW
- ---------------- ------- ------------- ------- ------- ----------
Crystal River: Citrus
Unit #1 Coal 373 - 373
Unit #2 Coal 469 - 469
Unit #3 Uranium 755* - 755
Unit #4 Coal 717 - 717
Unit #5 Coal 717 - 717
----- -----
3,031 3,031
Anclote: Pasco
Unit #1 Oil 517 - 517
Unit #2 Oil 517 - 517
Bartow Oil Pinellas 449 217 666
Turner Oil Volusia - 200 200
Intercession City** Oil Osceola - 912 912
DeBary Oil Volusia - 786 786
Higgins Oil Pinellas - 148 148
Bayboro Oil Pinellas - 232 232
Avon Park Oil Highlands - 64 64
Rio Pinar Oil Orange - 18 18
Suwannee River Oil Suwannee 147 201 348
Tiger Bay Gas Polk - 236 236
University of Fla. Gas Alachua - 42 42
----- ----- -----
4,661 3,056 7,717
===== ===== =====
* Represents 90.4% of total plant capacity. The remaining 9.6% of capacity
is owned by other parties. The CR3 nuclear plant was shut down in
September 1996 for repairs and to address certain backup safety system design
concerns. CR3 was restarted in February 1998.
** Florida Power and Georgia Power Company ("Georgia Power") are co-owners of a
168-MW advanced combustion turbine located at Florida Power's Intercession
City site. Georgia Power has the exclusive right to the output of this unit
during the months of June through September. Florida Power has that right for
the remainder of the year.
PLANNED GENERATION AND ENERGY SALES: Florida Power has agreed to sell 605 MW of
year round capacity to Seminole Electric Cooperative, Inc. ("Seminole") from
1999 through 2001. While 150 MW of this transaction represents a continuation of
existing business, 455 MW represents new sales to Seminole. In addition, Florida
Power has agreed to sell from 150 to 300 MW to Seminole from 2000-2002. This
contract was awarded to Florida Power as a result of a competitive bidding
process initiated by Seminole.
In 1992, the FPSC granted Florida Power a certificate of need to build 470 MW of
new generation using combined cycle technology. In September 1994, Florida Power
purchased approximately 8,100 acres of mined-out phosphate land for the new
power plant site. The site is located in Polk County, Florida, approximately 50
miles east of Tampa, and has been designated the Hines Energy Complex. Site
development activities were completed in 1996. Commencement of construction of
the initial unit began in January 1997. The first power block is a 470-MW
<PAGE> 17
combined cycle unit that is expected to come on line during the fourth quarter
of 1998. Florida Power plans to use natural gas to fuel the first phase of the
Hines Energy Complex. (See Item 7 "MD&A - Liquidity and Capital Resources -
Florida Power Corporation".)
Florida Power has obtained capacity on the Florida Gas Transmission Company's
system for the transportation of natural gas to the Hines Energy Complex in Polk
County. Florida Power began using the capacity in January 1998. This
transportation will serve a portion of the plant's requirements. Florida Power
also has contracted for natural gas supply and its transportation for the
remaining portion of the plant's requirements.
Some of the capacity at the Hines Energy Complex will be used to meet the
requirements of a wholesale contract signed in 1995, in which Florida Power
agreed to sell an additional 455 MWs to Seminole Electric Cooperative, beginning
in 1999.
In connection with the construction of new power plants in Florida, the FPSC
requires each investor-owned electric utility to engage in a competitive bidding
process for the construction of new generation, unless the utility demonstrates
on a case-by-case basis that such a process is not in the best interests of the
utility's ratepayers.
NUCLEAR PLANT AND NUCLEAR INSURANCE: Information regarding nuclear plant and
nuclear insurance is contained in Note 4 "Nuclear Operations" and Note 11
"Commitments and Contingencies," Notes to the Financial Statements.
TRANSMISSION AND DISTRIBUTION: As of December 31, 1997, Florida Power
distributed electricity through 362 substations with an installed transformer
capacity of 42,392,415 kilovolt amperes ("KVA"). Of this capacity, 28,690,260
KVA is located in transmission substations and 13,702,155 KVA in distribution
substations. Florida Power has the second largest transmission network in
Florida. Florida Power has 4,622 circuit miles of transmission lines, of which
2,620 circuit miles are operated at 500, 230, or 115 kilovolts ("KV") and the
balance at 69 KV. Florida Power has 24,311 circuit miles of distribution lines
which operate at various voltages ranging from 2.4 to 25 KV.
Florida Power along with 21 other in-state electric utilities and 14
non-utilities comprise the Florida Reliability Coordinating Council ("FRCC"),
which was approved by the North American Electric Reliability Council ("NERC")
as the tenth region of NERC. The FRCC is responsible for ensuring the
reliability of the bulk power electric system in peninsular Florida.
Florida Power and five other FRCC transmission providers have established
Florida Open Access Sametime Information System. This is a single internet
location where transmission customers may obtain transmission information and
submit requests for service or resell service rights.
<PAGE> 18
DIVERSIFIED OPERATIONS
Electric Fuels owns and/or operates approximately 5,000 railcars, 50
locomotives, 900 river barges and 30 river towboats that are used for the
transportation and shipping of coal, steel and other bulk products. Through
joint ventures, Electric Fuels has five oceangoing tug/barge units. An Electric
Fuels subsidiary, through another joint venture, owns one third of a large bulk
products terminal located on the Mississippi River south of New Orleans, which
handles coal and other products. Electric Fuels provides drydocking and repair
services to towboats, offshore supply vessels and barges through operations it
owns near New Orleans, Louisiana.
Electric Fuels controls, either directly or through subsidiaries, coal reserves
located in eastern Kentucky and southwestern Virginia. Electric Fuels owns, in
fee, properties that contain estimated proven and probable coal reserves of
approximately 185 million tons and controls, through mineral leases, additional
estimated proven and probable coal reserves of approximately 30 million tons.
The reserves controlled by Electric Fuels include substantial quantities of high
quality, low sulfur coal that is appropriate for use at Florida Power's existing
generating units. Electric Fuels' total production of coal during 1997 was
approximately 3.2 million tons.
In connection with its coal operations, Electric Fuels subsidiaries, own and
operate an underground mining complex in southeastern Kentucky and southwestern
Virginia. Other Electric Fuels subsidiaries own and operate surface and
underground mines, coal processing and loadout facilities and a river terminal
facility in eastern Kentucky, a railcar-to-barge loading facility in West
Virginia, and three bulk commodity terminals: one on the Ohio River in
Cincinnati, Ohio, and two on the Kanawha River near Charleston, West Virginia.
Electric Fuels and its subsidiaries employ both company and contract miners in
their mining activities.
An Electric Fuels subsidiary owns railroad car repair and parts reconditioning
and rail and trackworks facilities in 16 states and Mexico, including a railcar
hydraulic cushioning unit manufacturing and reconditioning facility in Fort
Worth, Texas. Electric Fuels subsidiaries are also involved in scrap metal
recycling and railcar leasing.
Another subsidiary of Electric Fuels owns and operates a manufacturing facility
at the Florida Power Energy Complex in Crystal River, Florida. The manufacturing
process utilizes the fly ash generated by the burning of coal as the major raw
material in the production of lightweight aggregate used in construction
building blocks. Electric Fuels also operates an environmental testing
laboratory in Tampa, Florida.
<PAGE> 19
ITEM 3. LEGAL PROCEEDINGS
Purchased Power Contracts with Qualifying Facilities ("QFs")
Florida Power has interpreted the pricing provision in these contracts to allow
it to pay an as-available energy price rather than a higher firm energy price
when the avoided unit upon which the contract is based would not have been
operated. Several QFs filed suit against Florida Power over the level of
payments made by Florida Power under the contracts. All but the three discussed
below have been settled. Four QFs are involved in matters pending before the
FPSC. Additional details regarding the legal proceedings with these four QFs are
covered in paragraphs 1, 2, 3 and 4 below:
1. In re: Conservation Cost Recovery Clause, Florida Public Service
Commission, Docket No. 960002-EG
In re: Petition for Approval of Early Termination Amendment to
Negotiated Qualifying Facility Contract with Orlando Cogen Limited,
Florida Public Service Commission, Docket No. 961184-EQ.
In October 1996, Florida Power filed a petition with the FPSC seeking approval
of an early termination amendment with Orlando Cogen Limited, L.P. ("OCL") which
would reduce the term of the contract with OCL from 30 years to 20 years,
expiring in the year 2013. In return for terminating the last ten years of the
contract, the amendment provides for the payment to OCL of $49,405,000 over a
five-year period, which the petition asks to recover from retail customers
through Florida Power's capacity cost recovery clause. In February 1998, the
FPSC denied Florida Power's petition to approve the early termination amendment.
2. Metropolitan Dade County and Montenay Power Corp. v. Florida Power
Corporation, Circuit Court of the Eleventh Circuit for Dade County,
Florida, Case No. 96-09598-CA-30
Metropolitan Dade County and Montenay Power Corp. v. Florida Power
Corporation, U.S. District Court, Southern District, Miami Division,
Case No. 96-0594-C.V.-LENNARD
On February 13, 1996, Metropolitan Dade County ("Dade") and Montenay Power Corp.
("Montenay") filed a complaint in the above-referenced state court seeking a
declaratory judgment that their interpretation of the energy pricing provision
in the contract is correct, and damages in excess of $1.3 million for breach of
that contract. On May 14, 1996, Dade and Montenay filed suit against Florida
Power in the above-referenced federal district court based on essentially the
same facts as presented in the state court case, but alleging violations of
federal antitrust laws and demanding unspecified treble damages. In March 1997,
the plaintiffs amended the federal court case to include Florida Progress and
Electric Fuels. A jury trial date has been set for October 1998 in the federal
case and in the meantime, the case has been referred to mediation.
On February 23, 1998, Florida Power filed a petition with the FPSC for a
Declaratory Statement that the previous FPSC approved negotiated contract
between the parties limits energy payments thereunder to the avoided costs based
upon an analysis of a hypothetical unit having the characteristics specified in
the contract.
3. NCP Lake Power, Inc. v. Florida Power Corporation, Florida Circuit
Court, Fifth Judicial Circuit for Lake County, Case No. 94-2354-CA-01
In re: Petition for Expedited Approval of Settlement Agreement With
Lake Cogen Ltd., Public Service Commission, Docket No. 961477-EQ
On October 21, 1994, NCP Lake Power, Inc. ("Lake"), a general partner of Lake
Cogen, Ltd., filed suit in the above-referenced circuit court against Florida
Power asserting breach of contract and requesting a declaratory judgment. On
January 23, 1996, the court entered a partial summary judgment for Lake ordering
Florida Power to pay the firm energy cost rate when the avoided unit would have
<PAGE> 20
been operating, and the as available energy cost rate during those times when
the avoided unit would not have been operating.
In October 1996, Lake filed suit against Florida Power seeking unspecified
damages for breach of contract with respect to Florida Power's interpretation of
the pricing provision in the contract. In December 1996, Florida Power and Lake
resolved their dispute by executing a final settlement agreement, subject to
approval by the FPSC and lenders to Lake. In November 1997, the FPSC denied
approval of the settlement agreement. Lake filed a petition protesting the
FPSC's decision, and Florida Power filed a motion to dismiss Lake's petition as
moot. In March 1998, the FPSC voted to dismiss the petition for expedited
approval of the settlement agreement because the agreement upon which the
petition was based has expired. The case has been set for trial in November
1998.
4. In re: Standard Offer Contract for the Purchase of Firm Capacity and
Energy From a Qualifying Facility Between Panda-Kathleen L.P. and
Florida Power Corporation, Florida Public Service Commission, Docket
No. 950110-EI
Florida Power Corporation v. Panda-Kathleen Corp., United States
District Court for the Middle District of Florida, Tampa Division,
Case No. 95-2145-CIV-T-25-B.
On January 23, 1995, Florida Power petitioned the FPSC for a declaratory
statement that Florida Power's standard offer contract is not available to Panda
if it constructs a 115 MW facility. Florida Power's petition further sought a
declaration that the contact term is 20 years rather than 30 years. Panda
intervened in the proceeding and filed its own declaratory statement petition on
the issues raised by Florida Power and raised additional issues regarding
postponement of significant milestone dates in the contract pending the FPSC's
resolution of the issues in the proceeding.
On May 20, 1996, after a hearing, the FPSC issued an order ruling against Panda
on two of the three material issues in the case. First, the FPSC held that
Panda's proposed 115 MW facility does not comply with the 75 MW limitation
contained in the FPSC's standard offer rules. The FPSC found that the 75 MW
limitation applies to the output of the plant, not to the contract's committed
capacity. Second, the FPSC held that under its rules, Florida Power is required
to make capacity payments for 20 years rather than for 30 years as argued by
Panda. Third, the FPSC ruled against Florida Power by extending for 19 months
the "milestone" dates contained in the standard offer contract, including the
construction commencement date and the commercial in-service date.
On September 18, 1997, the Florida Supreme Court ruled that the FPSC had
jurisdiction over this matter and further affirmed the FPSC's May 20, 1996
order. On February 11, 1998, Panda filed a petition for a writ of certiorari
with the U.S. Supreme Court to review the Florida Supreme Court decision, and
Florida Power has filed its response.
On January 6, 1998, Panda filed a motion with the FPSC to again extend the
"milestone" dates. Florida Power has opposed Panda's motion to extend the
milestone dates. On February 25, 1998, Florida Power sent Panda a Notice of
Default for its failure to adhere to the previously revised milestone dates,
conditioned upon the FPSC's denial of Panda's motion.
5. Wanda L. Adams, et al. v. Florida Power Corporation and Florida
Progress Corporation, U.S. District Court, Middle District of Florida,
Ocala Division, Case No. 95-123-C.V.-OC-10.
On October 13, 1995, Florida Power and Florida Progress were served with a
multi-party lawsuit involving 17 former Florida Power employees. The plaintiffs
generally alleged discrimination in violation of the Age Discrimination and
Employment Act and wrongful interference with pension rights in violation of the
Employee Retirement Income Security Act as a result of their involuntary
terminations during Florida Power's reduction in force. While no dollar amount
is specified, each Plaintiff seeks back pay, reinstatement or front pay through
their projected dates of normal retirement, costs and attorney's fees.
<PAGE> 21
The plaintiffs subsequently filed several motions attempting to add more
plaintiffs, including one present employee who contends he was demoted because
of his age.
On November 10, 1995, Florida Power filed its answer, a motion to dismiss
Florida Progress, and a counterclaim against five of the plaintiffs who signed
releases, promising, among other things, not to sue Florida Power with respect
to matters involving their employment or termination. The counterclaim seeks
enforcement of the agreement, dismissal of plaintiffs' complaints, and an award
of attorneys fees and costs of litigation.
On October 29, 1996, a joint stipulation to provisionally certify the case as a
class action pursuant to the Age Discrimination in Employment Act was approved.
A notice was sent to all former employees involuntarily discharged during the
reduction in force, who were 40 years of age or older at the time of their
discharge, informing them of their right to opt into this action if they
believed they were discriminated against on the basis of age. Florida Power
reserved the right to file a motion to decertify the class at the end of the
opt-in period.
On May 28, 1997, the final day for individuals to "opt into" this action, 61
additional former employees elected to do so, for a total of 117 plaintiffs. On
August 28, 1997, the parties filed an amended case management report which
included a proposed schedule. To date, no scheduling order has been entered.
6. Florida Power Corporation v. United States, U.S. Court of Federal
Claims, Civil Action No. 96-702C.
On November 1, 1996, Florida Power filed suit against the U.S. Government
alleging breach of contract and illegal taking of property without just
compensation. The suit arises out of several contracts under which the
government provided uranium enrichment services at fixed prices. After Florida
Power paid for all services provided under the contracts, the government,
through federal legislation enacted in 1992, imposed a retroactive price
increase in order to fund the decontamination and decommissioning of the
government's gaseous diffusion uranium enrichment facilities. The government is
collecting this increase through an annual "special assessment" levied upon all
utilities that had enrichment services contracts with the government. Collection
of the special assessments began in 1992 and is scheduled to continue for a
fifteen-year period.
To date, Florida Power has paid more than $9.5 million in special assessments,
and if continued throughout the anticipated fifteen-year life, the special
assessments would increase the cost of Florida Power's contracts by more than
$23 million.
Florida Power seeks an order declaring that all such special assessments are
unlawful, and an injunction prohibiting the government from collecting future
special assessments, and damages of approximately $9.5 million, plus interest.
On December 23, 1996, the case was stayed pending the U.S. Supreme Court's
potential review of a similar case. (Yankee Atomic Electric Co. v. U.S.).
There, a petition for a writ of certiorari has been filed by Yankee Atomic
Electric Co.
7. Gulf Power et al. v. United States of America and the Federal
Communications Commission, U.S. District Court, Northern District of
Florida, Pensacola Division, Case No. 3:96-CV-381-LAC
On July 30, 1996, Florida Power together with Gulf Power Company, Alabama Power
Company, Georgia Power, Mississippi Power Company, Ohio Edison Company and Duke
Power Company filed suit challenging the constitutionality of the pole
attachment amendments to the Telecommunications Act of 1996. The suit seeks a
declaration that the pole attachments are unconstitutional because they impose a
mandatory obligation on utilities to provide access to poles they own or control
to cable television and telecommunications service providers without providing
just compensation for this use. The claim is based on the Fifth Amendment to the
United States Constitution which provides that private property shall not be
<PAGE> 22
taken for public use without just compensation. The suit also seeks a permanent
injunction against the Federal Communications Commission preventing it from
enforcing the mandatory access provision.
In February 1997, the Association for Local Telecommunications Services and
American Communication Services intervened as party defendants in this case. On
February 21, 1997, Florida Power filed a Motion for Summary Judgment. On March
20, 1997, the defendants filed their Motion for Summary Judgment. Oral arguments
on the motions were on February 18, 1998.
On March 6, 1998, the Court granted the U.S.'s Motion for Summary Judgment. The
judge opined that while mandatory access to utility poles constitutes a
"taking", it was not an unconstitutional taking and just compensation would have
to be determined.
8. Sanford Gasification Plant Site, Sanford, Florida
The Sanford Gasification Site is a former manufactured gas site located in the
city of Sanford, Florida. It began operation in the 1880's and continued through
the early 1950's. Originally owned by Southern Utilities Company, the plant was
purchased in 1924 by the City of Sanford, then sold again in 1928 to Sanford Gas
Company. Sanford Gas Company, which merged into Florida Power Corporation in
1944, operated the plant until 1946 when it was sold to South Atlantic Gas
Company (later Atlanta Gas Company). The plant was conveyed three more times,
being purchased by the current owner, Florida Public Utilities, in 1965. The
FDEP began investigating the site in 1990. Florida Public Utilities initiated an
action styled Florida Public Utilities Company v. Florida Power Corporation,
Florida Power and Light Company, Atlanta Gas Company and City of Sanford,
Florida, United States District Court of the Middle District of Florida, Orlando
Division, Civil Action No. 92-115-C.V.-ORL-19, seeking contribution for cleanup
from former owners or operators of the site, including Florida Power. That
action was dismissed without prejudice on February 17, 1995.
On June 27, 1996, the EPA completed an Expanded Site Investigation/Remedial
Investigation at the site. On July 11, 1997, the EPA sent a general and special
notice letter which advised Florida Power and other PRPs of their potential
liability for cleanup. The investigation concluded that such release or
threatened release includes the site itself and down gradient contamination in
sediment through an unnamed tributary for storm water drainage flowing through
Cloud Branch Creek into Lake Monroe.
On October 20, 1997, the PRPs filed a good faith offer to conduct a Remedial
Investigation and Feasibility Study ("RI/FS"), which, if accepted by the EPA
would allow the PRPs to perform and finance cleanup activities at the site under
the guidance of the EPA. The PRPs have reached a tentative agreement on an
allocation of costs to fund the RI/FS and subsequent remedial work up to $1.5
million. Additional contributions for subsequent cleanup costs will be
negotiated among the PRPs as the scope of clean-up efforts become more defined.
(See Note 11 "Commitments and Contingencies," Notes to the Financial
Statements).
9. Northern States Power Company et al. v. United States Department of
Energy, U.S. Court of Appeals for the D.C. Circuit, Case No. 97-1065.
On January 31, 1997, in response to the DOE's announcement that it would be
unable to meet its statutory obligation to commence disposing of spent nuclear
fuel by January 31, 1998, Florida Power joined approximately 35 other utilities
with nuclear power plants in this lawsuit against DOE under the Nuclear Waste
Policy Act ("NWPA"). The NWPA and contracts between the utilities and DOE
require utilities to make payments into the Nuclear Waste Fund based on each
kilowatt hour of electricity generated and sold from nuclear plants. In
exchange, the NWPA and those contracts require DOE to begin disposing of
<PAGE> 23
utilities' spent nuclear fuel by January 31, 1998. In their lawsuit, the
utilities requested the U.S. Court of Appeals for the D.C. Circuit to (1) order
DOE to begin accepting spent fuel not later than January 31, 1998, (2) declare
that the utilities are relieved of their obligation to make payments into the
Nuclear Waste Fund unless and until DOE commences disposing of their spent fuel,
and (3) prohibit DOE from taking any adverse action against utilities suspending
payments.
In its November 14, 1997 ruling, the D.C. Circuit affirmed its previous decision
in Indiana Michigan Power Co. v. DOE, 88 F.3d 1272 (D.C. Cir. 1996), and held
that DOE has an unconditional obligation to begin disposing of spent fuel by
January 31, 1998. The court also prohibited DOE from using the "unavoidable
delays" clause in its contracts with the utilities as a means of avoiding its
unconditional obligation to begin accepting utility spent fuel by January 31,
1998. Although the court refused to require DOE to begin accepting utility spent
fuel based on its view that utilities had a potentially available remedy under
their contracts with DOE, the D.C. Circuit nonetheless retained jurisdiction in
the event DOE failed to comply with the court's mandate.
On December 29, 1997, DOE requested rehearing of the D.C. Circuit's decision
asserting that the D.C. Circuit lacked jurisdiction to hear the case. On that
same day, Yankee Atomic Electric Company filed a separate rehearing petition of
the Northern States decision requesting a move fuel order from the court. Unlike
most other utility petitioners in the Northern States case, Yankee Atomic has
largely completed decommissioning its nuclear plant and has fully paid its
Nuclear Waste Fund fees.
Based on statements made by DOE in its rehearing petition, approximately 40
states and state utility commissions and more than 40 utilities, including
Florida Power, filed motions to enforce the mandate issued by the D.C. Circuit
in Northern States. The state and utility petitions, filed on January 30, 1998
and February 19, 1998 respectively, request the D.C. Circuit for relief similar
to that sought in the Northern States litigation.
Failure of DOE to accept spent nuclear fuel will not immediately affect Florida
Power, which has sufficient on-site spent nuclear fuel storage capacity through
the year 2010.
10. State of Oklahoma, ex rel. John P. Crawford, Insurance Commissioner
v. Mid-Continent Life Insurance Company, District Court of Oklahoma
County, State of Oklahoma, Case No. CJ-97-2518-62
State of Oklahoma, ex rel, John P. Crawford, Insurance Commissioner as
Receiver for Mid-Continent Life Insurance Company v. Florida Progress
Corporation, a Florida corporation, Jack Barron Critchfield, George
Ruppel, Thomas Steven Krzesinski, Richard Korpan, Richard Donald Keller,
James Lacy Harlan, Gerald William McRae, Thomas Richard Dlouhy, Andrew
Joseph Beal and Robert Terry Stuart, Jr.
On April 14, 1997, the Insurance Commissioner of the state of Oklahoma
("Commissioner") received approval from the Oklahoma County District Court to
temporarily seize control of the operations of Mid-Continent Life Insurance
Company ("Mid-Continent"). On May 23, 1997, the District Court of Oklahoma
County granted the application of the Commissioner to place Mid-Continent into
receivership and ordered the Commissioner to develop a plan of rehabilitation
for Mid-Continent. The Commissioner alleged that Mid-Continent's reserves were
understated by more than $125 million, thus causing Mid-Continent to be
statutorily impaired, and further alleged that Mid-Continent had violated
Oklahoma law relating to deceptive trade practices in connection with the sale
of its "Extra Life" insurance policies. Mid-Continent is appealing the decision
to the Supreme Court of Oklahoma. Mid-Continent believes it is not statutorily
impaired because the court ruled that it could raise premiums on the insurance
policies at issue.
In connection with this matter, the Commissioner of Insurance of the State of
Texas entered a cease and desist order on July 10, 1997, prohibiting
Mid-Continent from writing any new policies in the state of Texas. The Texas
<PAGE> 24
Commissioner cited the lack of permanent management at, and plan of
rehabilitation for, Mid-Continent and the alleged reserve deficiency as reasons
for the action.
On December 22, 1997, the Commissioner filed with the court a petition for
damages against the defendants alleging alter ego, negligence, breach of
fiduciary duty, misappropriation of funds, unjust enrichment, ultra vires,
violation of Oklahoma statutory insurance law, violation of Oklahoma statutory
corporate law, and seeking equitable relief.
On February 13, 1998, the Commissioner filed with the court a "Report Regarding
Rehabilitation Plan". This report did not put forward a serious rehabilitation
plan, but rather stated that the Commissioner has filed a petition seeking
recovery of damages from the defendants, the proceeds of which would be used to
offset the alleged reserve deficiencies.
On February 26, 1998, the defendants filed motions to dismiss the petition and
Mid-Continent filed a response to the report regarding the Commissioner's
rehabilitation plan and requested approval of its proposed plan of
rehabilitation. Mid-Continent's proposed rehabilitation plan presents a
multi-faceted approach to rehabilitation, including raising premiums. A hearing
before the court has been set on March 17, 1998, for the proposed rehabilitation
plans. A hearing before the court has been set on the motions to dismiss on
April 17, 1998.
Florida Progress intends to vigorously defend itself and other defendants
against these charges and support Mid-Continent in its efforts to gain the
court's approval of its rehabilitation plan. (See Item 7 MD&A, "Mid-Continent
Life Insurance Company").
11. Peak Oil Company, Missouri Electric Works, 62nd Street, AKO Bayside, and
Bluff Electric.
Florida Power has been notified by the EPA that it is or could be a PRP with
respect to each of the above Superfund sites. Based upon the information
presently available, Florida Power has no reason to believe that its total
liability for the cleanup of these sites will be material or that it will be
required to pay a significantly disproportionate share of those costs. However,
these matters are being reported because liability for cleanup of certain sites
is technically joint and several, and because the extent to which Florida Power
may ultimately have to participate in those cleanup costs is not presently
determinable.
12. Zellwood Groundwater Superfund Site
In 1992, Florida Progress was notified by the EPA that Progress Packaging
Corporation ("Progress Packaging") is or could be a PRP in reference to the
Zellwood Groundwater site. Florida Progress sold the assets of Progress
Packaging in 1988. The EPA issued Special Notice Letters to potentially
responsible parties in 1996. Florida Progress has been advised orally by the EPA
that if no letter was received, then Progress Packaging will not be held liable
for any damages related to this matter. Progress Packaging did not receive a
letter. On November 7, 1996, Florida Progress requested written confirmation
from the EPA that Progress Packaging was not mailed a Special Notice Letter. No
confirmation has been received to date. Based upon the above stated information
and the fact that the last written communication received from the EPA was in
1994, the file on this matter has been closed. This report concludes this matter
for reporting purposes.
13. In re: Petition of IMC-Agrico Company for a Declaratory Statement
Confirming Non-Jurisdictional Nature of Planned Self-Generation,
Florida Public Service Commission, Docket No. 971313-EI.
In re: Petition of Duke Mulberry Energy, L.P., and IMC-Agrico Company
for a Declaratory Statement Concerning Eligibility to Obtain
Determination of Need Pursuant to Section 403.519, Florida Statutes,
Florida Public Service Commission, Docket No. 971337-EI.
<PAGE> 25
In re: Petition of Duke Energy New Smyrna Beach Power Company, LLP for
a Declaratory Statement Concerning Eligibility to Obtain Determination
of Need Pursuant to Section 403.519, Florida Statutes, Florida Public
Service Commission Docket No. 971446-EI.
IMC-Agrico Company, a retail customer of Florida Power and Duke Energy Power
Services, announced their intention to construct, own and operate a natural
gas-fired combined cycle power plant in Florida, with a capacity of between 240
and 750 megawatts. A portion of the plant's capacity would be used in
IMC-Agrico's operations and the remainder sold on a "merchant plant" basis to
wholesale customers by an affiliate of Duke Energy.
IMC-Agrico filed a petition with the FPSC in 1997, seeking a declaratory
statement that its proposed ownership and operation of an interest in the plant
will constitute self generation and not render it a public utility subject to
regulation by the FPSC. On November 14, 1997, Florida Power filed a Petition for
Leave to Intervene in this proceeding. Florida Power's petition asserts that IMC
has provided insufficient information to enable the FPSC to determine whether
its proposal constitutes a non-jurisdictional retail sale. On December 16, 1997,
the FPSC decided to set this matter for a hearing pursuant to the Administrative
Procedures Act, at the conclusion of which, a decision would be rendered on the
jurisdictional question. On February 3, 1998, IMC-Agrico filed notice of
withdrawal of its petition.
In Docket No. 971337-EI, IMC-Agrico and Duke Mulberry Energy, L.P. petitioned
the FPSC for a declaratory statement that the joint venture to construct and own
a generation plant gave them standing as an "Applicant" under the Power Plant
Siting Act to seek a Determination of Need from the FPSC for the proposed plant.
On November 17, 1976, Florida Power filed a Petition for Leave to Intervene,
asserting that the declaration being sought raised broad and serious policy
questions that are inappropriate for consideration in a declaratory statement
proceeding. On December 16, 1997, the FPSC agreed with the Florida Power
position and denied the IMC-Agrico/Duke petition. The FPSC directed its staff to
review the matter and submit recommendations on the appropriate proceeding to be
utilized in reviewing similar merchant plant requests.
In Docket No. 971446-EI, Duke Energy New Smyrna Beach Power Company, LLP
petitioned the FPSC for a declaratory statement that its proposed plant near New
Smyrna Beach gave it standing as an "Applicant" under the Power Plant Siting
Act. On December 16, 1997, the FPSC denied the petition on the same grounds as
reported regarding FPSC Docket No. 971337-EI, above.
This concludes the IMC-Agrico, Duke Mulberry Energy, L.P. and Duke Energy
New Smyrna Beach Power Company, LLP petitions for reporting purposes.
14. Florida Power Corporation and Seminole Electric Cooperative v. Ronald
J. Schultz, Circuit Court for Citrus County
On December 15, 1997, Florida Power and Seminole filed suit against the Citrus
County Property Appraiser and Citrus County Tax Collector contesting 1997 ad
valorem tax assessments on pollution control equipment at the Crystal River
site. Florida Power is seeking, among other things, a $5 million refund of all
taxes paid in excess of those lawfully due.
Under Florida Statutes, pollution control facilities are subject to assessment
for ad valorem taxation at an amount which does not exceed the market value of
such facilities as salvage. Florida Power contends that the 1997 assessment has
the effect of assigning a taxable value to Florida Power's pollution control
equipment of approximately $286 million. On February 19, 1998, Property
Appraiser Schultz filed a motion for summary judgment.
15. Calgon Carbon Corporation v. Potomac Capital Investment Corporation,
Potomac Electric Power Company, Progress Capital Holdings, Inc., and
Florida Progress Corporation, United States District Court for the
Western District of Pennsylvania, Civil Action No. 98-0072.
<PAGE> 26
Calgon Carbon Corporation ("Calgon") filed a complaint on January 12, 1998,
asserting securities fraud, breach of contract and other claims in connection
with the sale to it by two of the defendants in December 1996 of their interests
in Advanced Separation Technologies, Incorporated ("AST"), a corporation engaged
in the business of designing and assembling proprietary separation equipment.
Prior to closing, Progress Capital, a wholly owned subsidiary of Florida
Progress, owned 80 percent of the outstanding stock of AST and Potomac Capital
Investment Corporation (an entity unaffiliated with PCH or Florida Progress)
owned 20 percent. Calgon paid PCH an aggregate of approximately $57.5 million in
respect of PCH's share of AST's stock. Calgon claims that AST's assets and
revenues were overstated and liabilities and expenses were understated for 1996.
Calgon also alleges undisclosed facts relating to accounting methodology, poor
products, manufacturing and quality control problems and undisclosed warranty
claims. Calgon seeks damages, punitive damages and the right to rescind the
purchase. Florida Progress and PCH intend to vigorously defend this case.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
<PAGE> 27
PART II
ITEM 5. MARKET FOR THE REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
FLORIDA PROGRESS
Florida Progress' common stock is listed on the New York Stock Exchange and the
Pacific Stock Exchange. The high and low price per share of Florida Progress'
common stock for each quarterly period and the dividends per common share paid
on shares of Florida Progress' common stock during the last two fiscal years
appear in Item 8 on the "Quarterly Financial Data" table for Florida Progress at
the end of the Notes to the Financial Statements, and is incorporated herein by
reference.
In February 1998, Florida Progress' Board announced an increase of 4 cents per
share in the common stock quarterly dividend, which on an annual basis would
increase the dividend from $2.10 to $2.14 per share. This represents an annual
dividend growth rate of 1.9%. In 1997, Florida Progress' dividend payout ratio
from continuing operations before non-recurring items was 80.18% of earnings.
Information concerning the Florida Progress dividend payout ratio and dividend
policy is set forth in Item 7 "MD&A - Liquidity and Capital Resources".
Florida Progress' Restated Articles of Incorporation do not limit the dividends
that may be paid on its common stock. However, the primary source for payment of
Florida Progress' dividends consists of dividends paid to it by Florida Power.
Florida Power's Amended Articles of Incorporation and its Indenture dated as of
January 1, 1944, under which it issues first mortgage bonds, contain provisions
restricting dividends in certain circumstances. At December 31, 1997, Florida
Power's ability to pay dividends was not limited by these restrictions.
Florida Progress and Progress Capital have entered into a Second Amended and
Restated Guaranty and Support Agreement dated as of August 7, 1996, pursuant to
which Florida Progress has unconditionally guaranteed the payment of Progress
Capital's debt (as defined in the agreement).
Florida Progress did not sell any equity securities during 1997 that were not
registered under the Securities Act.
The approximate number of equity security holders of Florida Progress is as
follows:
Number of Registered Holders*
Title of Class as of December 31, 1997
- ------------------------------- ----------------------------
Common Stock without par value 48,550
* The computation of registered holders includes record holders as well as
individual positions in the Progress Plus Stock Plan.
<PAGE> 28
FLORIDA POWER
All of Florida Power's common stock is owned by Florida Progress, and as a
result there is no established public trading market for the stock. For the past
three years, Florida Power has paid quarterly dividends to Florida Progress
totaling the amounts shown in the Statements of Shareholder's Equity in the
Financial Statements.
Florida Power's amended articles of incorporation, and its Indenture dated as of
January 1, 1944, as supplemented, under which it issues first mortgage bonds,
contain provisions restricting dividends in certain circumstances. At December
31, 1997, Florida Power's ability to pay dividends was not limited by these
restrictions.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Annual Growth Rates
(in percent)
1992-1997 1997 1996 1995 1994 1993 1992
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FLORIDA PROGRESS CORPORATION
Summary of operations (in millions)
Utility revenues 6.7 $2,448.4 $2,393.6 $2,271.7 $2,080.5 $1,957.6 $1,774.1
Diversified revenues (continuing) 25.3 867.2 764.3 736.1 644.8 430.3 281.1
Income from continuing operations (21.6) 54.3 250.7 238.9 212.0 196.0 183.8
Income (loss) from discontinued
operations and change in accounting - - (26.3) - - 0.6 (8.1)
Net income (20.9) 54.3 224.4 238.9 212.0 196.6 175.7
------------------------------------------------------------------------------------------------------------------
Balance sheet data (in millions):
Total assets 3.0 $5,760.0 $5,348.4 $5,550.4 $5,453.1 $5,338.0 $4,978.8
Capitalization:
Short-term capital 5.3 $ 230.0 $ 39.0 $173.7 $ 99.9 $195.2 $177.6
Long-term debt 7.6 2,377.8 1,776.9 1,662.3 1,835.2 1,840.5 1,651.3
Preferred stock (31.1) 33.5 33.5 138.5 143.5 148.5 216.0
Common stock equity .4 1,776.0 1,924.2 2,078.1 1,984.4 1,820.5 1,737.6
-------------------------------------------------------------------------------------------------------------------
Total capitalization 3.2 $4,417.3 $3,773.6 $4,052.6 $4,063.0 $4,004.7 $3,782.5
-------------------------------------------------------------------------------------------------------------------
Common stock data:
Average shares outstanding (in millions) 2.6 97.1 96.8 95.7 93.0 88.3 85.4
Earnings per share:
Utility (7.1) $1.38 $2.40 $2.27 $2.05 $2.06 $1.99
Diversified (continuing) (.82) .19 .23 .23 .16 .16
Discontinued operations and change
in accounting - - (.27) - - .01 (.09)
Consolidated (22.9) .56 2.32 2.50 2.28 2.23 2.06
Dividends per common share 2.0 2.10 2.06 2.02 1.99 1.95 1.905
Dividend payout 375.3% 88.9% 81.0% 87.7% 87.6% 93.0%
Dividend yield 5.4% 6.4% 5.7% 6.7% 5.9% 5.9%
Book value per share of common stock (1.6) $18.30 $19.84 $21.55 $20.85 $20.40 $19.85
Return on common equity 2.9% 10.9% 11.8% 11.1% 11.1% 10.6%
--------------------------------------------------------------------------------------------------------------------
Common stock price per share:
High 39 1/4 36 3/8 35 3/4 33 5/8 36 3/8 33 1/4
Low 27 3/4 31 5/8 29 3/8 24 3/4 31 1/4 27 7/8
Close 3.8 39 1/4 32 1/4 35 3/8 30 33 5/8 32 5/8
Price earnings ratio (year-end) 70.1 13.9 14.2 13.2 15.1 15.8
- ---------------------------------------------------------------------------------------------------------------------
Other year-end data:
Number of employees 1.8 7,990 7,291 7,174 7,394 7,825 7,301
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
[CONTINUED ON NEXT PAGE]
<PAGE> 29
<TABLE>
<CAPTION>
Annual Growth Rates
(in percent)
1992-1997 1997 1996 1995 1994 1993 1992
------------------------------------------------------------------------------------------------------------------
FLORIDA POWER CORPORATION
Electric sales (million of KWH)
<S> <C> <C> <C> <C> <C> <C> <C>
Residential 3.3 15,079.8 15,481.4 14,938.0 13,863.4 13,372.6 12,825.8
Commercial 4.2 9,257.3 8,848.0 8,612.1 8,252.1 7,884.8 7,544.1
Industrial 5.2 4,187.8 4,223.7 3,864.4 3,579.6 3,380.8 3,254.5
Total retail sales 4.0 30,850.3 30,784.8 29,499.5 27,675.2 26,528.3 25,414.0
Total electric sales 4.0 33,289.9 33,492.5 32,402.6 30,014.6 28,647.8 27,375.5
- ---------------------------------------------------------------------------------------------------------------------
Residential service (average annual):
KWH sales per customer 1.2 12,993 13,560 13,282 12,597 12,420 12,214
Revenue per customer 4.8 $1,115 $1,138 $1,114 $1,038 $983 $884
Revenue per KWH 3.5 $0.0858 $0.0839 $0.0839 $0.0824 $0.0792 $0.0724
- ---------------------------------------------------------------------------------------------------------------------
Financial Data:
Operating revenues 6.7 $ 2448.4 $2,393.6 $2,271.7 $2,080.5 $1,957.6 $1,774.1
Net income after dividends
on preferred stock (4.6) $ 134.4 $ 232.6 $217.3 $190.7 $181.5 $170.2
Total assets 4.2 $4,900.8 $4,264.0 $4,284.9 $4,284.5 $4,259.5 $3,980.6
Long-term debt and preferred stock
subject to mandatory redemption 5.8 $1,745.4 $1,296.4 $1,304.1 $1,393.8 $1,433.6 $1,318.3
Total capitalization including
short-term debt (in millions) 4.2 $3,727.7 $3,180.8 $3,202.2 $3,265.4 $3,240.4 $3,029.2
Capitalization ratios:
Short-term capital 2.2 4.9% 0.8% 1.0% 2.8% 5.3% 4.4%
Long-term debt 2.8 46.8% 40.8% 39.9% 41.7% 43.1% 40.8%
Preferred stock (33.8) .9% 1.0% 4.3% 4.4% 4.6% 7.1%
Common stock equity (.1) 47.4% 57.4% 54.8% 51.1% 47.0% 47.7%
Ratio of earnings to fixed charges
(SEC method) (6.5) 2.75 4.80 4.41 3.90 3.83 3.84
Embedded cost of long-term debt (1.4) 7.0% 7.2% 7.2% 7.1% 6.8% 7.5%
Embedded cost of preferred stock (8.8) 4.6% 4.6% 6.8% 6.8% 6.8% 7.3%
- ---------------------------------------------------------------------------------------------------------------------
Operating Data:
Net system capacity (MW) 2.0 7,717 7,341 7,347 7,295 7,563 6,998
Net system peak load (MW) 2.9 8,066 8,807 7,722 6,955 6,729 6,982
Capital expenditures (in millions) (3.9) $387.2 $217.3 $283.4 $319.5 $426.4 $472.9
Net cash flow to capital expenditures 7.9 76% 175% 125% 103% 63% 52%
Fuel cost per million BTU 3.8 $2.24 $2.04 $1.69 $1.75 $1.79 $1.86
Average number of customers 2.1 1,314,508 1,292,075 1,271,784 1,243,891 1,214,653 1,182,170
Number of full-time employees (3.7) 4,799 4,629 4,658 4,972 5,807 5,806
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OPERATING RESULTS
Florida Progress' 1997 consolidated earnings from continuing operations were
$54.3 million. This compares to $250.7 million in 1996 and $238.9 million in
1995. Florida Progress' 1997 operating results were negatively impacted by the
extended outage of Florida Power's Crystal River nuclear plant and the provision
for loss on its investment in Mid-Continent Life Insurance Company. These two
events reduced Florida Progress' 1997 earnings by $200 million or $2.06 per
share.
Excluding these one-time charges, Florida Progress' 1997 consolidated earnings
from continuing operations were $254.3 million. This compares with $252.4
million in 1996 and $238.9 million in 1995. Florida Power earned $240.9 million
in 1997 before nuclear outage costs, compared with $232.6 million in 1996 and
$217.3 million in 1995. Earnings from recurring diversified operations were
$13.4 million in 1997, compared with $19.8 million in 1996 and $21.6 million in
1995.
<PAGE> 30
<TABLE>
<CAPTION>
EARNINGS PER SHARE
1997 1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Florida Power Corporation $2.48 $2.40 $2.27
- ---------------------------------------------------------------------------
Electric Fuels Corporation .33 .28 .25
Mid-Continent Life Ins. Co. - .02 .07
Other (.19) (.09) (.09)
- ---------------------------------------------------------------------------
Diversified .14 .21 .23
Continuing operations before
nonrecurring items 2.62 2.61 2.50
Nuclear outage costs (1.10) - -
Loss related to
Mid-Continent Life Ins. Co. (.96) - -
Provision for loss on
coal properties - (.26) -
Gain on sale of business - .24 -
- ---------------------------------------------------------------------------
Total continuing operations .56 2.59 2.50
Discontinued operations - (.27) -
- ---------------------------------------------------------------------------
Consolidated $ .56 $2.32 $2.50
- ---------------------------------------------------------------------------
</TABLE>
Excluding nuclear outage costs, Florida Power's 1997 earnings per share were up
3.3 percent over 1996, primarily due to strong customer growth. During 1997,
Florida Power added more than 22,000 customers. Customer growth among
residential and commercial customers averaged about 2 percent in 1997 and 1996.
Florida Power's Crystal River nuclear plant was out of service during 1997 to
address design issues related to the plant's safety systems. As a result of the
outage, Florida Power's earnings were reduced by $1.10 per share. This resulted
from $100 million in additional nuclear operating and maintenance expenses and
$73 million of disallowed replacement power costs. (See Item 7, "MD&A - Nuclear
Outage Costs".)
In April 1997, Mid-Continent Life Insurance Company was placed in receivership
over allegations that its policy reserves were inadequate. While Mid-Continent
has appealed an Oklahoma district court judge's ruling to keep Mid-Continent in
receivership, Florida Progress has recorded a provision for the loss on its
investment in Mid-Continent as well as an accrual for legal fees for pending
litigation. This resulted in a $.96 after-tax charge to 1997 earnings. (See Item
7, "MD&A - Mid-Continent Life Insurance Company".)
In 1996, Florida Progress divested Echelon International Corporation, formerly
Progress Credit Corporation, through a tax-free stock dividend. This resulted in
a $26.3-million charge to earnings for the write-down of certain assets of
Echelon and other costs. Also in 1996, Florida Progress sold its 80-percent
interest in Advanced Separation Technologies, Inc. for $56 million and realized
an after-tax gain of $23.5 million, or $.24 per share.
Lastly, Electric Fuels recorded a $25.2-million after-tax charge to 1996
earnings to establish a provision for loss on its unprofitable coal properties,
now available for sale. The provision was necessary because management did not
consider the unfavorable market conditions for low-sulfur coal to be temporary.
While significant, the one-time charges incurred in 1997 and 1996 should not
affect the future earnings prospects of Florida Progress. Florida Power's
growing customer base and good cost control combined with the expanding
operations of Electric Fuels are the fundamental drivers of earnings growth for
Florida Progress. The growth of these core businesses is forecasted to provide
earnings per share growth of four to five percent annually for Florida Progress
over the next five years.
The financial return on Florida Power's common equity was 13 percent in 1997
before considering nonrecurring items, compared with 12.9 percent in 1996 and
12.7 percent in 1995. Florida Power's above average customer growth and
continued control over operating and maintenance costs should enable Florida
Power to maintain its return on equity and continue its earnings growth while
pursuing strategic initiatives designed to prepare the utility for a more
competitive environment. Return on equity from the energy and transportation
<PAGE> 31
subsidiary was 17.3 percent in 1997, 14 percent in 1996 before its provision for
loss on coal properties and 13.8 percent in 1995.
FLORIDA POWER CORPORATION
Utility Competition - Industry Restructuring
The electric utility industry is undergoing changes designed to increase
competition in an industry that, since inception, has been considered a natural
monopoly. Starting with the Public Utilities Regulatory Policies Act of 1978
("PURPA") and the Energy Policy Act of 1992 ("EPA of 1992"), competition in the
wholesale electric generation market has greatly increased, especially from
non-utility generators of electricity.
In 1996, the FERC issued new rules on transmission service to facilitate
competition in wholesale generation on a nationwide basis. The rules give
greater flexibility and more choices to wholesale power customers.
The effect of these changes on the wholesale generation market has been
significant. In the last five years, power supplied by non-utility generators
has increased over 100 percent. From 1990 through 1995, non-utility generation
capacity grew at a rate of 47 percent, compared to utility generation capacity
which grew at a rate of two percent.
Electricity in Florida is supplied largely through existing generation capacity
located in the state. Florida's peninsular shape and limited transmission access
into the state set Florida apart from other regions of the country.
The amount of electricity that presently can be imported into Florida from
adjoining states is limited to about ten percent of the total daily demand for
electricity in Florida. Most of the demand for electricity is in the southern
portion of the state, which increases the amount of transmission line losses
when importing electricity from a generating source outside the state.
These two unique characteristics of Florida make it difficult to compete in the
Florida wholesale generation market without access to generation resources
within the state.
The regulatory changes described above relate to the wholesale market for
electricity which is regulated by federal law. The sale of electricity to
residential, commercial and industrial customers is governed by the states. To
date, several states have adopted legislation that would give retail customers
the right to choose their electricity provider (retail choice) and many other
states are considering the issue.
California, Pennsylvania and some states in the New England region, where
legislation to allow retail choice has passed, have rates that are well above
the national average. In states where electricity rates are more competitive,
such as Florida, there has been less incentive to push forward legislative
proposals concerning retail choice.
In addition to restructuring activity in various states, there have been several
industry restructuring bills introduced in Congress. A key issue concerning the
passage of any industry restructuring legislation by federal lawmakers is
whether the federal government has the authority to mandate legislation by the
states. Several of the federal bills being considered require states to
implement retail choice between 2000 and 2003.
The changes taking place in the industry today have caused many companies to
develop new corporate strategies. Some of these corporate strategies include
alliances, mergers with or acquisitions of other electric or gas utilities or
other types of service providers including home security and telecommunications
companies.
During the last five years there have been 30 mergers or acquisitions of
investor-owned utilities announced, of which 11 have been completed and the
others are either pending regulatory approval or have been withdrawn.
<PAGE> 32
While it may be several years before retail choice exists in Florida, Florida
Progress believes that retail choice will eventually exist in every state.
Florida Progress has developed a corporate strategy to compete in a more
competitive marketplace. Florida Progress is focused on establishing a national
retail energy services business to efficiently develop new products and services
for its customers.
To be successful in this market, a retail services company will likely need a
sizeable number of customers in order to realize the economies of scale
necessary to keep the cost of such products and services competitive. Florida
Progress has set a goal of achieving a customer base of at least 10 million and
will pursue this goal through joint ventures, alliances, mergers, acquisitions
or some combination thereof. In September 1997, Florida Progress entered into a
joint venture with two other utilities, Cinergy Corp. and New Century Energies.
The joint venture, named Cadence, is a marketing alliance aimed at providing
national chain account customers with a variety of energy management services
and products.
An important and frequently contentious issue surrounding industry restructuring
is the recovery of "stranded costs." Stranded costs include the generation
assets of utilities whose value in a competitive marketplace would be less than
their current book value as well as above-market purchased power commitments to
QFs. States that have passed legislation for industry restructuring have
provided for utilities to recover some portion of their stranded costs.
Assessing the amount of stranded costs for a utility requires various
assumptions about future market conditions including the future price of
electricity. For Florida Power, the single largest stranded cost issue lies with
its commitments to QFs.
Florida Power is continuing to seek ways to mitigate the impact of escalating
payments from contracts it was obligated to sign under provisions of the federal
Public Utilities Regulatory Policies Act of 1978. (See Item 3, "Legal
Proceedings", Paragraphs 1-4.)
In 1997 Florida Power reduced its purchased power commitments by over 20 percent
through the buy-out of the Tiger Bay purchased power contracts.
Utility Revenues and Sales
Florida Power's operating revenues were $2.4 billion in 1997 and 1996, compared
to $2.3 billion in 1995.
The utility's retail kilowatt-hour sales were essentially level in 1997 when
compared to 1996. The lack of sales growth was due primarily to milder weather
in 1997 than 1996. Kilowatt-hour sales in 1996 were up 2.9 percent when compared
to 1995.
Normally, Florida Power's revenues are heavily influenced by weather, especially
among residential customers. However in 1995, Florida Power, as ordered by the
Florida Public Service Commission, began a three-year test of residential
revenue decoupling. This ratemaking concept is designed to eliminate the direct
link between kilowatt-hour sales and revenues. Under revenue decoupling,
abnormal weather does not impact earnings from residential sales, which
represents the single-largest customer group for Florida Power. A change in
customer usage due to extreme heating or cooling conditions would not have a
material effect on Florida Power's earnings, whereas customer growth and higher
usage due to nonweather-related factors can affect earnings.
Over the three-year period, the earnings impact of residential revenue
decoupling was not material. As of December 31, 1997, the cumulative adjustment
to revenues was a reduction of less than $.5 million. Florida Power does not
intend to seek approval to use residential revenue decoupling beyond 1997. The
termination of residential revenue decoupling will likely result in Florida
Power's earnings being subject to greater fluctuation due to changes in weather.
(See Note 1 "Summary of Significant Accounting Policies", Notes to the Financial
Statements.)
<PAGE> 33
Fuel and Purchased Power
Fuel and purchased power costs are recovered primarily through an adjustment
recovery clause established by state and federal regulators. Fluctuations in
these costs have little impact year to year on net income, but could become
increasingly important in a more competitive environment.
Factors influencing fuel and purchased power costs include demand for
electricity, the availability of generating plants and the price of electricity
purchased from QFs and other utilities.
Total fuel and purchased power expenses for 1997, including amounts incurred as
a result of the nuclear outage, were up $80.7 million over 1996 due largely to
the extended outage of Florida Power's Crystal River nuclear plant. The outage
forced Florida Power to replace nuclear generation with other, higher-cost
replacement power. (See "Extended Nuclear Outage Costs" contained herein.)
In 1996, fuel and purchased power expenses increased $73.5 million compared to
1995. This was due to increased purchased power costs and higher system
requirements.
The nuclear plant is not scheduled to be taken out of service until 1999, which
will be for refueling. Having the nuclear plant in service for most of 1998
should help lower Florida Power's fuel and purchased power costs for 1998 when
compared to 1997. (See Item 7, "MD&A - Extended Nuclear Outage Costs".)
As mentioned above, a key factor influencing Florida Power's purchased power
costs are the prices paid to QFs for electricity. Currently, Florida Power
receives 831 megawatts of total capacity from QFs. This amount is down 220
megawatts from 1996 due to the buy-out of the Tiger Bay purchased power
contracts. (See Item 7, "MD&A - Impact of Tiger Bay Buy-Out".)
In addition to the Tiger Bay buy-out, the FPSC approved Florida Power's buy-out
of the last four years and seven months of a cogeneration contract between
Florida Power and Pasco Cogen Ltd.
In 1997, Florida Power spent $233.6 million for purchased power under all
cogeneration contracts. This represented approximately 23% of system fuel and
purchased power expenses for the year.
Costs associated with those contracts raised Florida Power's system average cost
for generation in 1997 and 1996, and this trend is expected to continue based on
the contracts currently in place and the escalating payment schedules associated
with each contract.
Florida Power will continue its effort to mitigate the impact of escalating
payments from its purchased power contracts. Under the provisions of PURPA,
Florida Power was obligated to sign contracts with those QFs.
Florida Power's present strategy is to pursue opportunities to buy-down or
buy-out those contracts whose prices are projected to be above future market
prices.
While this strategy requires paying higher amounts in the short-term, the
long-term benefit to customers can be significant. Long-term savings to
customers resulting from the buy-out of the Tiger Bay purchased power contracts
are estimated to be more than $2 billion over the next 30 years.
Other Utility Expenses
Utility operation and maintenance expenses increased by $8.9 million in 1997
exclusive of nuclear outage costs. The increase was due primarily to costs
associated with planned fossil plant outages and expenditures designed to
improve reliability and customer service.
<PAGE> 34
In 1996, operation and maintenance expenses increased by $19.7 million when
compared with the previous year, primarily due to additional costs associated
with the outage of the nuclear plant as well as expenses related to improving
service and reliability.
Cost control is a primary focus of each strategic business unit at Florida Power
as each looks for ways to efficiently meet its customers' needs. This has
resulted in Florida Power's recurring operation and maintenance costs growing at
an annual rate below inflation since 1994.
It is one of management's goals to continue to limit increases in operation and
maintenance costs to less than the national inflation rate.
Recoverable energy conservation program costs increased by $4.4 million in 1997
over 1996. In 1996 these costs decreased by $21.4 million from the previous year
due to a reduction in the credits paid to customers who participated in Florida
Power's load management program.
The change had no significant impact on earnings because Florida Power recovers
substantially all of these costs through a clause in electric rates similar to
the fuel adjustment clause. Florida Power does not expect the level of energy
conservation costs to vary materially in the future from the 1997 expenditure
level since little growth is forecast for this program.
In 1997, Florida Power wrote-off approximately $20 million of contract
termination costs related to the Tiger Bay buy-out. In 1996, Florida Power
amortized approximately $31 million related to two oil-fired power plants and a
canceled transmission line.
Extended Nuclear Outage Costs
In September 1996, Florida Power's Crystal River nuclear plant was taken out of
service to fix an oil pressure problem in the main turbine. When the repairs
were completed in October 1996, Florida Power decided to keep the plant shut
down to address certain backup safety system design issues.
The NRC had been critical of the plant's overall performance in 1996 and in
January 1997 placed the nuclear plant on its "Watch List" as a plant whose
operations would be monitored closely until Florida Power demonstrates a period
of improved performance. In March 1997, the NRC outlined necessary actions
Florida Power must complete before returning the nuclear plant to service.
In late January 1998, Florida Power notified the NRC that it had completed all
of the requirements and was subsequently granted permission to restart the
plant. Florida Power's Crystal River nuclear plant returned to service in
February 1998.
Florida Power's operating results for 1997 were significantly impacted by the
costs associated with the extended outage. These costs included $100 million in
additional operation and maintenance expenses and approximately $173 million in
replacement power costs. Capital expenditures related to the outage were $42
million in 1997.
In June 1997, the FPSC approved a settlement agreement between Florida Power and
several parties who objected to Florida Power recovering replacement power costs
resulting from the extended outage.
The settlement allows Florida Power to recover, through rates charged to
customers, approximately $38 million of $174 million of replacement power costs
incurred from September 1996 through December 1997. Florida Power can begin
recovering the $38 million once the plant has been operating at 100-percent
power for 14 consecutive days. Of the remaining $136 million, $63 million was
recorded as a regulatory asset and is being amortized over four years. The
remaining $73 million was expensed in 1997 and, along with the $100 million of
additional operation and maintenance costs, is classified as "Extended Nuclear
Outage Costs" on the consolidated statements of income. The amortization of the
<PAGE> 35
$63-million regulatory asset is being recovered by the suspension of an annual
accrual for fossil plant dismantlement costs for a period of up to four years.
Actual replacement power costs incurred in 1998 prior to the nuclear plant's
return to service will be expensed as incurred.
The settlement agreement also provided that, for purposes of monitoring Florida
Power's earnings, the FPSC would exclude the nuclear outage costs when assessing
Florida Power's regulatory return on equity. Florida Power is currently allowed
to earn between 11 and 13 percent on its common equity. By excluding these
outage costs, Florida Power's future earnings capacity will not be penalized for
the one-time charge for outage costs.
Impact of Tiger Bay Buy-Out
In July 1997, Florida Power bought-out the purchased power contracts related to
Tiger Bay, a 220-megawatt cogeneration facility. In addition to buying-out the
purchased power contracts, Florida Power acquired the 220-megawatt facility.
Costs associated with the termination of the purchased power contracts and the
acquisition of the facility totaled $445 million. Tiger Bay was Florida Power's
largest cogeneration supplier, representing more than 20-percent of Florida
Power's total capacity received from QFs. The purchase was funded primarily
through the issuance of medium-term notes with maturities ranging from two to 10
years at interest rates between six and seven percent.
The FPSC-approved purchase allowed Florida Power to record a regulatory asset of
approximately $350 million for contract termination costs and add $75 million to
its electric plant.
Florida Power continues to collect from customers an amount equal to what it
would have been allowed to recover for capacity and energy payments made in
accordance with the original Tiger Bay purchased power contract. Based on the
contract's capacity payment schedule, Florida Power should recover enough
revenues by the year 2008 to fully amortize the regulatory asset and related
interest charges.
The Tiger Bay expenses including operation and maintenance, depreciation,
interest and property taxes are expected to be absorbed through Florida Power's
growing base revenues. These additional expenses are expected to be about $20
million annually. The utility's base revenues increase largely from the addition
of new retail customers, particularly residential customers.
DIVERSIFIED OPERATIONS
In 1997, Florida Progress established a provision for loss on its $87 million
investment in Mid-Continent Life Insurance Company and accrued for litigation
costs. (See Item 7, "MD&A - Mid-Continent Life Insurance Company".) In 1996,
Florida Progress made two restructuring decisions that had a significant impact
on earnings from diversified operations. The spin-off of Echelon resulted in a
$26.3-million after-tax charge to earnings while the sale of Advanced Separation
Technologies contributed an after-tax gain of $23.5 million. Another item that
affected 1996 diversified earnings was the provision for loss on unprofitable
coal properties owned by Electric Fuels. This resulted in an after-tax charge of
$25.2 million.
The actions taken to restructure its diversified operations reflect management's
commitment to establishing a diversified group of businesses more closely
aligned to its core utility operations.
Electric Fuels Corporation
Electric Fuels, Florida Progress' energy and transportation subsidiary, has
three principal business units: energy and related services, inland marine
transportation, and rail services. Florida Progress continues to build on
Electric Fuels' existing operations through internal expansion and by pursuing
new market opportunities, primarily with its inland marine transportation and
rail services units.
<PAGE> 36
Over the last five years Electric Fuels has grown significantly:
<TABLE>
<CAPTION>
Five-Year
1993 1994 1995 1996 1997 Growth Rate
(In millions)
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 581 $ 784 $ 844 $ 881 $1,037 17.4%
Earnings $14.9 $22.6 $24.0 $27.1* $ 32.1 21.6%
Assets $ 397 $ 489 $ 574 $ 620 $ 799 19.4%
</TABLE>
*Before provision for loss on coal properties
Most of the growth of Electric Fuels has come from acquisitions in its rail
services business unit and expansion of the inland marine barge fleet.
During 1997 and 1996, Progress Rail expanded its operations through acquisitions
of railcar wheel shops, rail welding, and rail anchor manufacturing operations,
railcar leasing and metal recycling operations. Over this period Progress Rail's
acquisitions totaled nearly $71 million.
Today, Progress Rail is one of the largest integrated suppliers of rail services
in the United States, with locations in 16 states. Revenues from rail services
in 1997 were $476.3 million, an increase of $122.6 million or 35 percent over
1996. The increase reflects the expansion of these operations as well as an
increase in demand for rail services as railroads continue outsourcing certain
service and repair needs.
Expansion of MEMCO, Electric Fuels' inland marine transportation unit, has been
achieved primarily through the purchase of river barges. MEMCO's fleet of
barges, which hauls coal, agricultural products and other dry bulk products
along the Ohio and lower Mississippi rivers, totaled approximately 900 at the
end of 1997. During 1997 and 1996 MEMCO added approximately 300 new
high-capacity river barges to its fleet and plans to purchase 200 additional
barges and two new towboats in 1998.
Further expansion of the barge fleet depends largely on the future demand for
barge capacity and MEMCO's ability to secure long-term contracts for hauling.
MEMCO's objective is to maintain at least 70 percent of its barge capacity under
long-term contracts. The remaining capacity is used to take advantage of new
market opportunities as they arise.
Electric Fuels' energy and related services business unit includes coal
operations, river terminal services and off-shore marine transportation. Annual
sales of coal average about 12 million tons of which five to six million tons
are sold to Florida Power. In 1997, increased tonnage of coal transported by
Electric Fuels' energy and related business unit resulted in improved earnings
compared to 1996. In December 1996, Electric Fuels established a provision for
loss on certain coal properties after it determined that depressed market
conditions for low-sulfur coal were not temporary. The impact of the write-down
was a one-time after-tax charge to earnings of $25.2 million.
Electric Fuels' business plan for its coal operations includes supplying Florida
Power with high-quality, competitively-priced coal and increasing output from
company-operated mines which can be directed to more profitable niche markets.
Earnings from Electric Fuels in 1997 were $32.1 million, up $5 million over 1996
earnings before the provision for loss on unprofitable coal properties. Although
Electric Fuels' earnings continued to grow at a double-digit rate, 1997 earnings
were lower than Electric Fuels' target for the year because of March floods
along the Ohio and Mississippi rivers that temporarily disrupted barge traffic
and terminal services.
Partially offsetting the impact of the floods were increased earnings from rail
services and the energy and related services business units. Acquisitions and
higher production at a trackworks facility contributed to the improved results
at Progress Rail. Increased coal deliveries to Florida Power's Crystal River
coal units resulted in higher volumes of coal transported by the energy and
related services division.
<PAGE> 37
The higher volume was due largely to increased coal requirements of Florida
Power's coal-fired plants. The lack of availability of its nuclear plant in 1997
forced Florida Power to increase the generation of its coal plants.
Mid-Continent Life Insurance Company
When Mid-Continent was acquired in 1986, it sold a popular, low-priced
death-benefit insurance policy. In 1996, Mid-Continent replaced this policy with
a new product after it was determined that premiums on the old policy would have
to be raised.
Mid-Continent was hoping to rebuild market share and achieve increased
profitability with the new product, but sales did not meet management's
expectations. In December 1996, Mid-Continent reduced its work force in an
effort to compete on a more focused and cost-efficient basis and was developing
a plan to raise premiums on its prior low-priced death benefit policy.
The business plan would increase premiums and lower dividends so that a
projected reserve shortfall in 2020 could be avoided. Mid-Continent discussed
the outline of its plan with the Insurance Commissions of both Texas and
Oklahoma, states where the majority of Mid-Continent's policyholders reside.
On April 14, 1997, the Oklahoma Commissioner obtained approval from the Oklahoma
County District Court to temporarily seize control of the operations of
Mid-Continent. The Commissioner claimed that Mid-Continent's policy reserves
were currently understated and that Mid-Continent could not raise premiums to
address this issue.
During hearings on this matter, the Commissioner's actuary conceded that if
Mid-Continent could raise premiums, it was not insolvent. Although the judge
agreed with Mid-Continent that it had the right to raise premiums, in May he
ordered Mid-Continent to remain in receivership. Both sides appealed the
decision to the Oklahoma Supreme Court.
In December 1997, the Commissioner filed a lawsuit against Florida Progress and
certain directors and officers making a number of allegations and seeking access
to Florida Progress' assets to satisfy policy holder and creditor claims.
On February 13, 1998, the Commissioner filed with the court a "report Regarding
Rehabilitation Plan". This report did not put forward a serious rehabilitation
plan, but rather stated that the Commissioner has filed a petition seeking
recovery of damages from Florida Progress and certain directors and officers,
the proceeds of which would be used to offset the alleged reserve deficiencies.
On February 26, 1998, the defendants filed motions to dismiss the petition and
Mid-Continent filed a response to the report regarding the Commissioner's
rehabilitation plan and requested approval of its proposed plan of
rehabilitation. Mid-Continent's proposed rehabilitation plan presents a
multi-faceted approach to rehabilitation, including raising premiums. A hearing
before the court has been set on March 17, 1998, for the proposed rehabilitation
plans. A hearing before the court has been set on the motions to dismiss on
April 17, 1998.
Florida Progress intends to vigorously defend itself and other defendants
against these charges and support Mid-Continent in its efforts to gain the
court's approval of its rehabilitation plan.
The actions taken by the Commissioner significantly impacted Mid-Continent's
business plan for addressing its projected reserve deficiency, leading Florida
Progress to conclude that the full amount of its $86.9 million investment in
Mid-Continent at December 31, 1997 was impaired. As a result, Florida Progress
recorded a provision for loss on its investment in December 1997 and accrued for
estimated legal costs, resulting in a $.96 per share reduction to 1997 earnings.
<PAGE> 38
Other
Florida Progress does not anticipate incurring significant costs related to
modifications of Florida Progress' information systems to prepare for the year
2000. In addition, Florida Progress expects to complete the modifications on
time.
Florida Progress has adopted several new accounting standards during the last
three years. (See Note 1 "Summary of Significant Accounting Policies", Notes to
the Financial Statements.)
Florida Power and a former company subsidiary have been notified by the U.S.
Environmental Protection Agency that each is or may be a potentially responsible
party for the cleanup costs of several contaminated sites. (See Note 11
"Commitments and Contingencies", Notes to the Financial Statements.)
Florida Progress has off-balance sheet risk related to debt of unconsolidated
partnerships. (See Note 11 "Contingencies", Notes to the Financial Statements.)
Florida Power entered into a single forward treasury lock agreement in 1997 to
effectively fix the treasury rate component of an anticipated issuance of
medium-term notes. (See Note 2 "Financial Instruments", Notes to the Financial
Statements.)
Florida Progress is involved in other litigation as described in Note 11,
"Commitments and Contingencies", Notes to the Financial Statements.
Even though the inflation rate has been relatively low during the last three
years, inflation continues to affect Florida Progress by reducing the purchasing
power of the dollar and increasing the cost of replacing assets used in the
business. This has a negative effect on Florida Power because regulators
generally do not consider this economic loss when setting utility rates.
However, such losses are partly offset by the economic gains that result from
the repayment of long-term debt with inflated dollars.
LIQUIDITY AND CAPITAL RESOURCES
Cash from operations has been the primary source of capital for Florida
Progress. Other sources of capital over the last three years include proceeds
from the sales of properties and businesses, debt financing, issuance of common
stock and the orderly withdrawal from Florida Progress' lending and leasing and
real estate portfolio.
Florida Progress has issued new equity in recent years primarily to fund Florida
Power's construction program. Florida Power is forecasting lower construction
expenditures in the years ahead. The utility does not expect construction to
require any significant increase in equity or debt over the next five years.
Because of the reduced equity requirements, the dividend reinvestment plan began
purchasing shares in the open market instead of issuing new shares beginning in
July 1996.
For the first half of 1996 and for all of 1995 approximately $57 million of new
equity was issued through Florida Progress' dividend reinvestment plan.
Florida Progress contributed $12.5 million in 1996 and $50 million in 1995 to
Florida Power from the proceeds of the dividend reinvestment plan. These funds
were used to further strengthen Florida Power's financial position.
Florida Progress' capital structure as of December 31, 1997, was 40.2 percent
common equity, 59 percent debt and .8 percent preferred stock of Florida Power.
On December 31, 1996, Florida Progress' capital structure was 51 percent common
equity, 48.1 percent debt and .9 percent preferred stock. The increase in debt
in 1997 over 1996 is due primarily to the buy-out of the Tiger Bay purchased
power contracts. Florida Progress' current goal is to maintain capital
structures for its utility and diversified operations at levels that will enable
its subsidiaries to preserve their current credit ratings.
<PAGE> 39
CREDIT RATINGS
Standard Duff &
& Poor's Moody's Phelps
Florida Power Corporation
First mortgage bonds AA- Aa3 AA-
Medium-term notes A+ A1 A+
Commercial paper A-1+ P-1 D-1+
Progress Capital Holdings, Inc.
Medium-term notes A A2
Commercial paper A-1 P-1
Florida Power Corporation
Florida Power's construction expenditures in 1997 totaled about $387 million.
This was primarily for distribution lines related to the utility's growing
customer base and the construction of a new 470-megawatt power plant scheduled
to begin commercial operation in the fall of 1998. Florida Power's five-year
construction program totals $1.2 billion for the 1998-2002 forecast period. It
includes planned expenditures of $294 million, $263 million, $210 million, $268
million and $204 million for 1998 through 2002. Florida Power expects these
construction expenditures will be financed primarily with internally generated
funds.
In July 1997, Florida Power issued $450 million of medium-term notes primarily
to finance the buy-out of purchased power contracts associated with the
220-megawatt Tiger Bay cogeneration facility. (See Item 7, "MD&A - Impact of
Tiger Bay Buy-Out".)
In February 1998, Florida Power announced that it would redeem in March 1998 all
of its outstanding $150 million principal amount of First Mortgage Bonds, 8 5/8%
series due November 2021, at a redemption price of 105.17% of the principal
amount thereof, together with accrued interest. Substantially all of the
redemption will be funded using the proceeds from the issuance of $150 million
of medium-term notes in February 1998. The notes bear an interest rate of 6
3/4%, and will mature in February 2028.
Amendments to the Clean Air Act in 1990 require electric utilities to reduce
sulfur dioxide emissions. Florida Power is meeting these requirements with
minimal capital expenditures. (See Item 1, "Business - Environmental Matters".)
In 1997, Florida Power's net cash flow to capital expenditures was 76 percent.
In addition to funding its construction commitments with cash from operations,
Florida Power receives equity from Florida Progress and accesses the capital
markets through the issuance of commercial paper, medium-term notes and first
mortgage bonds.
Florida Power has a medium-term note program, providing for the issuance of
either fixed or floating interest rate notes, with maturities that may range
from nine months to 30 years. Florida Power has available for issuance $250
million of medium-term notes, after the issuance of the $150 million of
medium-term notes in February 1998.
Florida Power's interim financing needs are funded primarily through its
commercial paper program. Florida Power has a $300 million, 364-day revolving
bank credit facility and a $200 million five-year facility, which are used to
back up commercial paper. (See Note 6 "Debt", Notes to the Financial
Statements.)
In 1997, debt levels increased at Florida Power largely due to the costs
associated with the extended nuclear outage and the buy-out of the Tiger Bay
purchased power contracts. Florida Power used additional cash generated by
operations to redeem $105 million of preferred stock in 1996 and reduced total
debt levels by about $145 million in 1995.
<PAGE> 40
Florida Power's embedded cost of long-term debt was 7.0% as of December 31, 1997
and 7.2% as of December 31, 1996.
Diversified Operations
Progress Capital Holdings, Inc., the downstream holding company of Florida
Progress, consolidates the collective financial strength of Florida Progress'
diversified operations and, with the benefit of a guaranty and support agreement
with Florida Progress, helps to lower the cost of capital of the diversified
businesses. Progress Capital funds diversified operations primarily through the
issuance of commercial paper and medium-term notes.
Progress Capital has a medium-term note program for the issuance of either fixed
or floating interest rate notes, with maturities that may range from nine months
to 30 years. In 1997 and 1996, Progress Capital issued $35 million and $178
million of medium-term notes, respectively, with maturities ranging from five to
10 years, leaving $87 million of medium-term notes available for issuance. The
proceeds were primarily used to repay maturing medium-term notes and for other
corporate purposes.
Progress Capital has two revolving bank credit facilities: a 364-day,
$100-million facility and a five-year, $300-million facility. These facilities
are in place to provide back up for Progress Capital's $400 million commercial
paper program. (See Note 6 "Debt", Notes to the Financial Statements.) Progress
Capital also has an uncommitted $75 million discretionary line of credit that
expires on December 31, 1998, which is used for general corporate purposes.
In 1997, total diversified capital expenditures were about $120 million,
primarily for operations at Electric Fuels. During 1997, approximately $50
million was for the purchase of barges and towboats and $23.3 million for
acquisitions by Progress Rail. In 1996, Progress Capital received net proceeds
of $53 million from the sale of Advanced Separation Technologies and expended
$54 million related to acquisitions made by Electric Fuels or its affiliates.
In 1998, diversified capital expenditures are expected to be $125 million and
are designated for operations of Electric Fuels. The inland marine
transportation unit plans to add approximately 200 new barges and two new
towboats in 1998 as it continues to take advantage of market opportunities to
expand its business.
Electric Fuels' rail services unit is expected to continue to grow by expanding
geographically into the Midwest and western markets. These expenditures are
expected to be funded through cash generated internally and from outside
financing sources.
Dividend Policy
Florida Progress evaluates its dividend policy on an annual basis to ensure that
the dividend payout and dividend rate are appropriate given the business plan,
projected earnings growth and outlook for the electric utility industry. Florida
Progress' five-year business plan forecasts sustained earnings growth of 4 to 5
percent annually, a key factor in determining dividend policy.
FORWARD-LOOKING STATEMENTS
In this report, Florida Progress has projected sustained earnings per share
growth of 4 to 5 percent annually over the next five years, indicated that
confidence in earnings growth remains a key factor in determining dividend
policy, and established a goal to develop a national retail energy business that
provides access to at least 10 million customers. Florida Progress has indicated
that it believes that retail choice eventually will exist in every state, and
that Florida Power's above average customer growth and continued control over
operating and maintenance costs should enable it to maintain its return on
equity and continue its earnings growth while pursuing strategic initiatives
designed to prepare the utility for a more competitive environment. Florida
Progress also has projected expansion of Electric Fuels, and indicated that it
<PAGE> 41
will vigorously defend itself against a lawsuit related to Mid-Continent, which
Florida Progress believes is without merit.
Risk Factors
These statements, and any other statements contained in this report that are not
historical facts, are forward-looking statements that are based on a series of
projections and estimates regarding the economy, the electric utility industry
and Florida Progress' other businesses in general, and on key factors which
impact Florida Progress directly. The projections and estimates relate to the
pricing of services, the actions of regulatory bodies, the success of new
products and services, and the effects of competition.
Key factors that have a direct bearing on Florida Progress' ability to attain
these projections include continued annual growth in customers, successful cost
containment efforts and the efficient operation of Florida Power's existing and
future generating units. Also, in developing its forward-looking statements,
Florida Progress has made certain assumptions relating to productivity
improvements and the favorable outcome of various commercial, legal and
regulatory proceedings, and the lack of disruption to its markets.
If Florida Progress' projections and estimates regarding the economy, the
electric utility industry and key factors differ materially from what actually
occurs, or if various proceedings have unfavorable outcomes, Florida Progress'
actual results could vary significantly from the performance projected.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
Florida Progress is exposed to changes in interest rates primarily as a result
of its borrowing activities.
A hypothetical 59 basis point increase in interest rates (10% of Florida
Progress' weighted average interest rate) affecting its variable rate debt
($714.8 million at December 31, 1997) would have an immaterial effect on Florida
Progress' pre-tax earnings over the next fiscal year. A hypothetical 10%
decrease in interest rates would also have an immaterial effect on the estimated
fair value of Florida Progress' long-term debt at December 31, 1997.
Florida Power entered into a single forward treasury lock agreement in 1997 to
effectively fix the treasury rate component for an anticipated issuance of
medium-term notes. The treasury lock agreement was terminated in conjunction
with the issuance of the Florida Power 6 3/4% medium-term notes, at an
immaterial loss to Florida Power, which will be deferred and recognized as an
adjustment to interest expense over the life of the new notes. (See Note 2
"Financial Instruments," Notes to the Financial Statements.)
Commodity Price Risk
Florida Progress is exposed to commodity price risk due to changes in market
conditions for fuel and purchased power at Florida Power and coal sales at EFC.
Under current regulatory treatment, Florida Power recovers changes in these fuel
and purchased power prices through its fuel adjustment clause, with no effect on
earnings. A 10% change in the market price of coal at EFC would have an
immaterial effect on the earnings of Florida Progress.
<PAGE> 42
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
AUDITORS' REPORT
To the Shareholders of Florida Progress Corporation
and Florida Power Corporation:
We have audited the accompanying consolidated balance sheets of Florida Progress
Corporation and subsidiaries, and of Florida Power Corporation, as of December
31, 1997 and 1996, and the related consolidated statements of income, cash
flows, and shareholders' equity for each of the years in the three-year period
ended December 31, 1997. In connection with our audits of the financial
statements, we also have audited the financial statement schedules listed in
Item 14 therein. These financial statements and financial statement schedules
are the responsibility of the respective managements of Florida Progress
Corporation and Florida Power Corporation. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Florida Progress Corporation
and subsidiaries, and Florida Power Corporation, as of December 31, 1997 and
1996, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1997, in conformity with
generally accepted accounting principles. Also in our opinion, the related
financial statement schedules when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
/s/KPMG Peat Marwick LLP
- ---------------------------
KPMG Peat Marwick LLP
St. Petersburg, Florida
January 26, 1998
<PAGE> 43
FLORIDA PROGRESS
Consolidated Financial Statements
<TABLE>
<CAPTION>
FLORIDA PROGRESS CORPORATION
Consolidated Statements of Income
For the years ended December 31, 1997, 1996 and 1995
(In millions, except per share amounts)
1997 1996 1995
--------- --------- ---------
REVENUES:
<S> <C> <C> <C>
Electric utility $2,448.4 $2,393.6 $2,271.7
Diversified 867.2 764.3 736.1
--------- --------- ---------
3,315.6 3,157.9 3,007.8
--------- --------- ---------
EXPENSES:
Electric utility:
Fuel 458.1 409.7 431.3
Purchased power 490.6 531.6 436.5
Energy conservation cost 67.0 62.6 84.0
Operation and maintenance 422.3 413.4 393.7
Extended nuclear outage -
O&M and replacement power costs 173.3 - -
Depreciation 325.9 324.2 293.7
Taxes other than income taxes 193.6 183.6 176.2
---------- --------- ---------
2,130.8 1,925.1 1,815.4
---------- --------- ---------
Diversified:
Cost of sales 753.9 642.9 624.6
Provision for loss on coal properties - 40.9 -
Loss related to life insurance subsidiary 97.6 - -
Other 60.7 66.6 58.9
---------- --------- ---------
912.2 750.4 683.5
---------- --------- ---------
INCOME FROM OPERATIONS 272.6 482.4 508.9
---------- --------- ---------
INTEREST EXPENSE AND OTHER:
Interest expense 158.7 135.9 139.4
Allowance for funds used during
construction (9.7) (7.5) (7.3)
Preferred dividend requirements
of Florida Power 1.5 5.8 9.7
(Gain) on sale of business - (44.2) -
Other expense (income), net 1.4 (4.2) (9.9)
---------- --------- ---------
151.9 85.8 131.9
---------- --------- ---------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 120.7 396.6 377.0
Income taxes 66.4 145.9 138.1
---------- --------- ---------
INCOME FROM CONTINUING OPERATIONS 54.3 250.7 238.9
DISCONTINUED OPERATIONS, NET OF INCOME TAXES - (26.3) -
---------- --------- ---------
NET INCOME $ 54.3 $ 224.4 $ 238.9
========== ========= =========
AVERAGE SHARES OF COMMON STOCK OUTSTANDING 97.1 96.8 95.7
========== ========= =========
EARNINGS PER AVERAGE COMMON SHARE:
Continuing operations $ .56 $ 2.59 $ 2.50
Discontinued operations - (.27) -
---------- --------- ---------
$ .56 $ 2.32 $ 2.50
========== ========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 44
<TABLE>
<CAPTION>
FLORIDA PROGRESS CORPORATION
Consolidated Balance Sheets
December 31, 1997 and 1996
(Dollars in millions)
1997 1996
--------- ---------
ASSETS
PROPERTY, PLANT AND EQUIPMENT:
Electric utility plant in service and
<S> <C> <C>
held for future use $6,166.8 $5,965.6
Less: Accumulated depreciation 2,511.0 2,335.8
Accumulated decommissioning
for nuclear plant 223.7 193.3
Accumulated dismantlement for fossil plants 128.5 119.6
--------- ---------
3,303.6 3,316.9
Construction work in progress 279.4 140.3
Nuclear fuel, net of amortization of $356.7
in 1997 and 1996 66.5 59.9
--------- ---------
Net electric utility plant 3,649.5 3,517.1
Other property, net of depreciation of $219.3
in 1997 and $173.8 in 1996 437.7 309.3
--------- ---------
4,087.2 3,826.4
--------- ---------
CURRENT ASSETS:
Cash and equivalents 3.1 5.2
Accounts receivable, net 373.7 265.0
Inventories, primarily at average cost:
Fuel 77.6 67.1
Utility materials and supplies 91.9 95.4
Diversified materials 126.8 125.5
Underrecovery of fuel costs 34.5 82.6
Income taxes receivable 16.8 -
Other 50.9 48.2
--------- ---------
775.3 689.0
--------- ---------
OTHER ASSETS:
Investments:
Loans receivable, net 24.0 68.1
Marketable securities - 217.9
Nuclear plant decommissioning fund 266.7 207.8
Joint ventures and partnerships 54.6 41.9
Deferred insurance policy acquisition costs - 120.9
Deferred purchased power contract termination costs 348.2 -
Other 204.0 176.4
---------- ---------
897.5 833.0
---------- ---------
$5,760.0 $5,348.4
========== =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 45
<TABLE>
<CAPTION>
FLORIDA PROGRESS CORPORATION
Consolidated Balance Sheets
December 31, 1997 and 1996
(Dollars in millions)
1997 1996
-------- --------
CAPITAL AND LIABILITIES
COMMON STOCK EQUITY:
Common stock without par value, 250,000,000
shares authorized, 97,062,954 shares
<S> <C> <C>
outstanding in 1997 and 97,007,182 in 1996 $1,209.0 $1,208.3
Retained earnings 567.0 716.5
Unrealized loss on securities available
for sale - (.6)
--------- --------
1,776.0 1,924.2
CUMULATIVE PREFERRED STOCK OF FLORIDA POWER:
Without sinking funds 33.5 33.5
LONG-TERM DEBT 2,377.8 1,776.9
--------- --------
TOTAL CAPITAL 4,187.3 3,734.6
--------- --------
CURRENT LIABILITIES:
Accounts payable 253.2 193.2
Customers' deposits 97.1 81.8
Taxes payable 12.0 41.2
Accrued interest 56.8 48.3
Other 74.8 78.5
--------- --------
493.9 443.0
Notes payable 214.8 4.1
Current portion of long-term debt 15.2 34.9
--------- --------
723.9 482.0
--------- --------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes 471.2 475.4
Unamortized investment tax credits 85.7 93.5
Insurance policy benefit reserves - 325.3
Other postretirement benefit costs 107.4 100.0
Other 184.5 137.6
--------- --------
848.8 1,131.8
--------- --------
COMMITMENTS AND CONTINGENCIES (Note 11)
--------- --------
$5,760.0 $5,348.4
========= ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 46
<TABLE>
<CAPTION>
FLORIDA PROGRESS CORPORATION
Consolidated Statements of Cash Flows
For the years ended December 31, 1997, 1996 and 1995
(In millions)
1997 1996 1995
------- ------ ------
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Income from continuing operations $ 54.3 $250.7 $238.9
Adjustments for noncash items:
Depreciation and amortization 364.2 366.7 352.7
Extended nuclear outage - replacement power cost 73.3 - -
Provision for loss on investment in life insurance subsidiary 86.9 - -
Gain on sale of business - (44.2) -
Provision for loss on coal properties - 40.9 -
Deferred income taxes and investment tax credits, net (30.7) (56.6) (38.0)
Increase in accrued post-employment benefit costs 8.6 15.5 16.8
Net change in deferred insurance policy acquisition costs (1.7) (14.5) (14.5)
Net change in insurance policy benefit reserves 52.7 60.3 42.5
Changes in working capital, net of effects from acquisition or sale of
businesses:
Accounts receivable (108.3) 35.4 (35.2)
Inventories 2.2 (10.9) (29.1)
Overrecovery (underrecovery) of fuel cost (33.1) (82.3) 1.5
Accounts payable 58.3 21.6 16.4
Taxes payable (47.1) 21.0 (7.6)
Other 1.2 (13.5) 29.0
Other operating activities (38.2) (19.2) 7.3
-------- ------ ------
Cash provided by continuing operations 442.6 570.9 580.7
-------- ------ ------
Cash used by discontinued operations - (8.9) (17.6)
-------- ------ ------
442.6 562.0 563.1
-------- ------ ------
INVESTING ACTIVITIES:
Property additions (including allowance for borrowed funds used
during construction) (513.6) (264.0) (331.4)
Purchase of loans and securities, net (11.0) (70.4) (28.9)
Acquisition of businesses (32.7) (53.8) (9.2)
Cogeneration facility acquisition and contract termination costs (445.0) - -
Proceeds from sales of properties and businesses 24.3 61.1 13.1
Investing activities of discontinued operations - 56.5 69.8
Other investing activities (52.7) (37.0) (15.0)
-------- ------ ------
(1,030.7) (307.6) (301.6)
-------- ------ ------
FINANCING ACTIVITIES:
Issuance of long-term debt 482.8 178.0 -
Repayment of long-term debt (34.9) (190.4) (45.8)
Increase (decrease) in commercial paper with long-term support 130.6 (15.3) 1.0
Redemption of preferred stock - (106.4) (5.0)
Sale of common stock - 18.5 38.4
Equity contributions to discontinued operations - (23.7) -
Dividends paid on common stock (203.8) (199.5) (193.4)
Increase (decrease) in short-term debt 210.8 4.1 (55.3)
Financing activities of discontinued operations - 85.2 (9.7)
Other financing activities .5 (4.0) (1.2)
-------- ------ ------
586.0 (253.5) (271.0)
-------- ------ ------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (2.1) .9 (9.5)
Beginning cash and equivalents 5.2 4.3 13.8
-------- ------ ------
ENDING CASH AND EQUIVALENTS $ 3.1 $ 5.2 $ 4.3
======== ====== ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 142.7 $128.7 $135.5
Income taxes (net of refunds) $ 141.7 $189.3 $214.7
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 47
<TABLE>
<CAPTION>
FLORIDA PROGRESS CORPORATION
Consolidated Statements of Shareholders' Equity
For the years ended December 31, 1997, 1996 and 1995
(Dollars in millions, except per share amounts)
Cumulative
Unrealized Preferred Stock
Gain of Florida Power
(Loss) on ----------------
Securities Without With
Common Retained Available Sinking Sinking
Stock Earnings for Sale Funds Funds
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $1,148.1 $842.9 $ (6.6) $113.5 $30.0
Net income 238.9
Common stock issued - 1,245,267 shares 39.5
Cash dividends on common stock ($2.02 per share) (193.4)
Unrealized gain on marketable securities 8.7
Preferred stock redeemed - 50,000 shares (5.0)
- ------------------------------------------------------------------------------------------------------------------
Balance December 31, 1995 1,187.6 888.4 2.1 113.5 25.0
Net income 224.4
Common stock issued - 586,555 shares 20.7
Echelon International stock dividend (194.5)
Cash dividends on common stock ($2.06 per share) (199.5)
Unrealized loss on marketable securities (2.7)
Preferred stock redeemed - 1,050,000 shares (2.3) (80.0) (25.0)
- ------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 1,208.3 716.5 (.6) 33.5 -
Net income 54.3
Common stock issued - 55,772 shares .7
Cash dividends on common stock ($2.10 per share) (203.8)
Reversal of unrealized loss on marketable securities
due to deconsolidation .6
- ------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 $1,209.0 $567.0 $ - $ 33.5 $ -
- ------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 48
FLORIDA POWER
Financial Statements
<TABLE>
<CAPTION>
FLORIDA POWER CORPORATION
Statements of Income
For the years ended December 31, 1997, 1996 and 1995
(In millions)
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
OPERATING REVENUES: $2,448.4 $2,393.6 $2,271.7
-------- -------- --------
OPERATING EXPENSES:
Operation:
Fuel used in generation 458.1 409.7 431.3
Purchased power 490.6 531.6 436.5
Energy Conservation Cost Recovery 67.0 62.6 84.0
Operations and maintenance 422.3 413.4 393.7
Extended nuclear outage - O&M and
replacement fuel costs 173.3 - -
Depreciation 325.9 324.2 293.7
Taxes other than income taxes 193.6 183.6 176.2
Income taxes 69.9 135.8 129.5
-------- -------- --------
2,200.7 2,060.9 1,944.9
-------- -------- --------
OPERATING INCOME 247.7 332.7 326.8
-------- -------- --------
OTHER INCOME AND DEDUCTIONS:
Allowance for equity funds used
during construction 5.4 4.6 3.8
Miscellaneous other expense, net (4.2) (3.4) (2.6)
-------- -------- --------
1.2 1.2 1.2
-------- -------- --------
INTEREST CHARGES
Interest on long-term debt 102.4 86.6 93.5
Other interest expense 14.9 11.8 11.0
-------- -------- --------
117.3 98.4 104.5
Allowance for borrowed funds used
during construction (4.3) (2.9) (3.5)
-------- -------- --------
113.0 95.5 101.0
-------- -------- --------
NET INCOME 135.9 238.4 227.0
DIVIDENDS ON PREFERRED STOCK 1.5 5.8 9.7
-------- -------- --------
NET INCOME AFTER DIVIDENDS
ON PREFERRED STOCK $134.4 $232.6 $217.3
======== ======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 49
<TABLE>
<CAPTION>
FLORIDA POWER CORPORATION
Balance Sheets
For the years ended December 31, 1997, and 1996
(Dollars in millions)
1997 1996
----------- ----------
ASSETS
PROPERTY, PLANT AND EQUIPMENT:
<S> <C> <C>
Electric utility plant in service and held $6,166.8 $5,965.6
for future use
Less - Accumulated depreciation 2,511.0 2,335.8
Accumulated decommissioning for nuclear plant 223.7 193.3
Accumulated dismantlement for fossil plants 128.5 119.6
----------- ----------
3,303.6 3,316.9
Construction work in progress 279.4 140.3
Nuclear fuel, net of amortization of $356.7
in 1997 and $356.7 in 1996 66.5 59.9
----------- ----------
3,649.5 3,517.1
Other property, net 33.2 13.3
----------- ----------
3,682.7 3,530.4
----------- ----------
CURRENT ASSETS:
Accounts receivable, less reserve of $3.2
in 1997 and $4.1 in 1996 243.9 174.7
Inventories at average cost:
Fuel 44.0 47.2
Materials and supplies 91.9 95.4
Underrecovery of fuel cost 34.5 82.6
Income tax receivable 13.5 -
Deferred income taxes 5.8 35.6
Other 32.2 6.2
----------- ----------
465.8 441.7
----------- ----------
OTHER ASSETS:
Nuclear plant decommissioning fund 266.7 207.8
Unamortized debt expense, being amortized
over term of debt 25.0 25.0
Deferred purchased power contract
termination costs 348.2 -
Other 112.4 59.1
----------- ----------
752.3 291.9
----------- ----------
$4,900.8 $4,264.0
=========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 50
<TABLE>
<CAPTION>
FLORIDA POWER CORPORATION
Balance Sheets
For the years ended December 31, 1997, and 1996
(Dollars in millions)
1997 1996
----------- -----------
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
<S> <C> <C>
Common stock $1,004.4 $1,004.4
Retained earnings 763.1 821.1
---------- ----------
1,767.5 1,825.5
CUMULATIVE PREFERRED STOCK:
Without sinking funds 33.5 33.5
LONG-TERM DEBT 1,745.4 1,296.4
---------- ----------
TOTAL CAPITAL 3,546.4 3,155.4
---------- ----------
CURRENT LIABILITIES:
Accounts payable 161.9 115.5
Accounts payable to associated companies 26.5 21.2
Customers' deposits 97.1 81.7
Income taxes payable - 10.4
Accrued other taxes 7.9 10.0
Accrued interest 45.7 34.8
Other 59.2 47.3
---------- ----------
398.3 320.9
Notes payable 179.8 4.1
Current portion of long-term debt 1.5 21.3
---------- ----------
579.6 346.3
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes 451.3 472.3
Unamortized investment tax credits 85.1 92.8
Other postretirement benefit costs 104.7 96.5
Other 133.7 100.7
---------- ----------
774.8 762.3
---------- ----------
$4,900.8 $4,264.0
========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 51
<TABLE>
<CAPTION>
FLORIDA POWER CORPORATION
Statements of Cash Flows
For the years ended December 31, 1997, 1996 and 1995
(In millions)
1997 1996 1995
---------- ---------- ---------
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income after dividends on preferred stock $134.4 $232.6 $217.3
Adjustments for noncash items:
Depreciation and amortization 333.8 341.1 329.7
Extended nuclear outage - replacement power costs 73.3 - -
Deferred income taxes and investment tax credits, net (15.2) (32.8) (29.3)
Increase in accrued other postretirement benefit costs 8.3 14.9 16.1
Allowance for equity funds used during construction (5.4) (4.6) (3.8)
Changes in working capital:
Accounts receivable (69.2) 16.2 (33.4)
Inventories 6.7 (.5) 14.2
Overrecovery (underrecovery) of fuel cost (33.1) (82.3) 1.5
Accounts payable 46.4 25.7 4.8
Accounts payable to associated companies 5.3 (3.5) 3.4
Taxes payable (26.0) (.8) 2.8
Other 12.3 (12.1) 39.5
Other operating activities (38.8) 3.8 8.6
--------- --------- --------
432.8 497.7 571.4
--------- --------- --------
INVESTING ACTIVITIES:
Construction expenditures (387.2) (217.3) (283.4)
Allowance for borrowed funds used during construction (4.3) (2.9) (3.5)
Additions to nonutility property (3.5) (2.7) (2.3)
Acquisition cogeneration facility and
payment of contract termination costs (445.0) - -
Proceeds from sale of properties 19.7 5.5 10.8
Other investing activities (22.2) (27.6) (11.0)
--------- --------- --------
(842.5) (245.0) (289.4)
--------- --------- --------
FINANCING ACTIVITIES:
Issuance of long-term debt 447.7 - -
Repayment of long-term debt (21.3) (47.3) (35.4)
Increase (decrease) in commercial paper with
long term support - 54.8 (54.8)
Redemption of preferred stock - (106.3) (5.0)
Dividends paid on common stock (192.4) (171.3) (180.7)
Equity contributions from parent - 12.5 50.0
Increase (decrease) in short-term debt 175.7 4.1 (55.3)
--------- --------- --------
409.7 (253.5) (281.2)
--------- --------- --------
NET INCREASE IN CASH AND EQUIVALENTS - (.8) .8
Beginning cash and equivalents - .8 -
--------- --------- --------
ENDING CASH AND EQUIVALENTS $ - $ - $0.8
========= ========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $98.9 $90.7 $97.9
Income taxes (net of refunds) $108.4 $166.9 $157.1
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 52
<TABLE>
<CAPTION>
FLORIDA POWER CORPORATION
Statements of Shareholder's Equity
For the years ended December 31, 1997, 1996 and 1995
(Dollars in millions, except share amounts)
Cumulative
Preferred Stock
--------------------
Without With
Common Retained Sinking Sinking
Stock Earnings Funds Funds
-------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Balance, December 31, 1994 $942.9 $724.5 $113.5 $30.0
Net income after dividends on
preferred stock 217.3
Capital contribution by parent company 50.0
Cash dividends on common stock (180.7)
Preferred stock redeemed -
50,000 shares (5.0)
-------- ---------- --------- ---------
Balance, December 31, 1995 992.9 761.1 113.5 25.0
Net income after dividends on
preferred stock 232.6
Capital contribution by parent company 12.5
Cash dividends on common stock (171.3)
Preferred stock redemption costs (1.3)
Premium on preferred stock redemption (1.0)
Preferred stock redeemed -
1,050,000 shares (80.0) (25.0)
--------- --------- ---------- --------
Balance, December 31, 1996 1,004.4 821.1 33.5 -
Net income after dividends on
preferred stock 134.4
Cash dividends on common stock (192.4)
--------- --------- ---------- --------
Balance, December 31, 1997 $1,004.4 $763.1 $33.5 $ -
========= ========= ========= ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 53
FLORIDA PROGRESS CORPORATION AND FLORIDA POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL -- Florida Progress is an exempt holding company under the Public
Utility Holding Company Act of 1935. Its largest subsidiary, representing 85% of
total assets, is Florida Power Corporation, a public utility engaged in the
generation, purchase, transmission, distribution and sale of electric energy
primarily within Florida.
The consolidated financial statements include the financial results of Florida
Progress and its majority-owned operations. All significant intercompany
balances and transactions have been eliminated. Investments in 20%- to 50%-owned
joint ventures are accounted for using the equity method.
Effective December 31, 1997, Florida Progress deconsolidated the financial
statements of Mid-Continent. Florida Progress' investment in Mid-Continent will
prospectively be accounted for under the cost method. The deconsolidation has
not been reflected in the financial statements of prior periods.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions.
This could affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period. These
estimates involve judgments with respect to various items including various
future economic factors which are difficult to predict and are beyond the
control of Florida Progress. Therefore actual results could differ from these
estimates.
REGULATION -- Florida Power is regulated by the Florida Public Service
Commission (FPSC) and the Federal Energy Regulatory Commission (FERC). The
utility follows the accounting practices set forth in Financial Accounting
Standard (FAS) No. 71, "Accounting for the Effects of Certain Types of
Regulation." This standard allows utilities to capitalize or defer certain costs
or revenues based on regulatory approval and management's ongoing assessment
that it is probable these items will be recovered through the ratemaking
process.
Florida Power has total regulatory assets (liabilities) at December 31, 1997 and
1996 as detailed below:
<TABLE>
<CAPTION>
1997 1996
(In millions)
-----------------
Deferred purchased power
<S> <C> <C>
contract termination costs $348.2 $ -
Replacement fuel (extended nuclear outage) 55.0 -
Underrecovery of fuel costs 34.5 82.6
Revenue decoupling 21.8 (3.6)
Unamortized loss on reacquired debt 16.8 18.4
Other regulatory assets, net 25.2 24.6
------------------
Net regulatory assets $501.5 $122.0
==================
</TABLE>
The utility expects to fully recover these assets and refund the liabilities
through customer rates under current regulatory practice.
If Florida Power no longer applied FAS No. 71 due to competition, regulatory
changes or other reasons, the utility would make certain adjustments. These
adjustments could include the write-off of all or a portion of its regulatory
assets and liabilities, the evaluation of utility plant, contracts and
commitments and the recognition, if necessary, of any losses to reflect market
conditions.
UTILITY PLANT -- Utility plant is stated at the original cost of construction,
which includes payroll and related costs such as taxes, pensions and other
fringe benefits, general and administrative costs, and an allowance for funds
<PAGE>54
used during construction. Substantially all of the utility plant is pledged as
collateral for Florida Power's first mortgage bonds.
The allowance for funds used during construction represents the estimated cost
of equity and debt for utility plant under construction. Florida Power is
permitted to earn a return on these costs and recover them in the rates charged
for utility services while the plant is in service. The average rate used in
computing the allowance for funds was 7.8%.
UTILITY REVENUES, FUEL AND PURCHASED POWER EXPENSES -- Revenues include amounts
resulting from fuel, purchased power and energy conservation adjustment clauses,
which are designed to permit full recovery of these costs. The adjustment
factors are based on projected costs for a 6 or 12-month period. The cumulative
difference between actual and billed costs is included on the balance sheet as a
current regulatory asset or liability. Any difference is billed or refunded to
customers during the subsequent period.
In December 1997, Florida Power ended the three-year test period for residential
revenue decoupling which was ordered by the FPSC and began in January 1995.
Decoupling eliminates the direct link between kilowatt-hour sales and revenues.
A nonfuel revenue target is determined by multiplying a revenue per customer
amount by the total number of residential customers. Differences between target
revenues and actual revenues are included as a regulatory asset or liability on
the balance sheet. The regulatory asset at December 31, 1997 will be collected
from customers beginning April 1998 through the energy conservation cost
recovery clause as directed by the FPSC decoupling order.
Florida Power accrues the nonfuel portion of base revenues for services rendered
but unbilled.
The cost of nuclear fuel is amortized to expense based on the quantity of heat
produced for the generation of electric energy in relation to the quantity of
heat expected to be produced over the life of the nuclear fuel core.
INCOME TAXES -- Deferred income taxes are provided on all significant temporary
differences between the financial and tax basis of assets and liabilities using
presently enacted tax rates in accordance with FAS No. 109, "Accounting for
Income Taxes."
Deferred investment tax credits, subject to regulatory accounting practices, are
amortized to income over the lives of the related properties.
DEPRECIATION AND MAINTENANCE -- Florida Power provides for depreciation of the
cost of properties over their estimated useful lives primarily on a
straight-line basis. Florida Power's annual provision for depreciation,
including a provision for nuclear plant decommissioning costs and fossil plant
dismantlement costs, expressed as a percentage of the average balances of
depreciable utility plant, was 4.8% for 1997, 4.9% for 1996 and 5% for 1995.
The Financial Accounting Standards Board ("FASB") is in the process of modifying
its project addressing the accounting for obligations related to the
decommissioning of nuclear power plants.
The fossil plant dismantlement accrual has been suspended for a period of four
years, beginning July 1, 1997. (See Note 9 contained herein.)
Florida Power charges maintenance expense with the cost of repairs and minor
renewals of property. The plant accounts are charged with the cost of renewals
and replacements of property units. Accumulated depreciation is charged with the
cost, less the net salvage, of property units retired.
Florida Power accrues a reserve for maintenance and refueling expenses
anticipated to be incurred during scheduled nuclear plant outages.
INSURANCE PREMIUMS, POLICY ACQUISITION COSTS AND BENEFIT RESERVES -- Accounting
policies governing the recognition of income and expense for the life insurance
subsidiary were in effect until December 31, 1997.
Due to the deconsolidation of the financial results of Mid-Continent in the
Florida Progress' consolidated financial statements, accounting policies
<PAGE> 55
relating to the balance sheet were in effect only for amounts presented in the
1996 Florida Progress Consolidated Balance Sheet.
Life insurance premiums are recognized as revenues over the premium-paying
periods of the policies.
Florida Progress defers recoverable costs in its insurance operations that
directly relate to the production of new business. These costs are amortized
over the expected premium-paying period. Benefit reserves are established out of
each premium payment to provide for the present value of future insurance policy
benefits. Florida Progress reviews the adequacy and recoverability of the
deferred acquisition costs and the benefit reserves based on a gross premium
reserve analysis of the in-force business.
Significant assumptions used in this analysis include estimates of future
premium increases, mortality rates, withdrawal rates, expense rates, and
investment yield. The assumptions are based on Florida Progress' actual
experience adjusted for the effect of future actions affecting the in-force
business. Although these assumptions are Florida Progress' best estimate of the
future experience, actual results may vary in either direction and could
significantly impact income in the period of change.
ACCOUNTING FOR CERTAIN INVESTMENTS -- Florida Progress considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents. Florida Progress' investments in debt and equity securities
are classified and accounted for as follows:
Type of Security Accounting Treatment
Debt securities held to maturity Amortized cost
- ------------------------------------------------------------------------------
Trading securities Fair market value with unrealized gains
and losses included in earnings
- ------------------------------------------------------------------------------
Securities available for sale Fair market value with
unrealized gains and losses, net of taxes,
reported separately in shareholders' equity
- ------------------------------------------------------------------------------
See Note 2 for securities held to maturity or available for sale. Florida
Progress had no investments in assets classified as trading securities at
December 31, 1996 and only held securities classified as available for sale at
December 31, 1997. A decline in the market value of any security
available-for-sale or held-to-maturity that falls below cost results in a
reduction in carrying amount to fair value if the decline is not considered
temporary. The impairment is charged to earnings and a new cost basis for the
security is established. Premiums and discounts are amortized or accreted over
the life of the related held-to-maturity security as an adjustment to yield
using the effective interest method. Dividend and interest income are recognized
when earned.
ACCOUNTING FOR LONG-LIVED ASSETS -- Long-lived assets and certain identifiable
intangibles subject to the provisions of FAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. FAS No. 121 also
amends FAS No. 71, "Accounting for the Effects of Certain Types of Regulation,"
to require that regulatory assets, which include certain deferred charges, be
charged to earnings if such assets are no longer considered probable of
recovery. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to undiscounted future net cash
flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceed the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
costs to sell.
<PAGE> 56
STOCK-BASED COMPENSATION -- Under its Long-Term Incentive Plan ("LTIP"), Florida
Progress grants selected executives performance shares, which upon achievement
of performance criteria for a three-year performance cycle can result in the
award of shares of common stock of Florida Progress or cash if certain stock
ownership requirements are met. Florida Progress accounts for its LTIP in
accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees," as allowed under FAS No.
123, "Accounting for Stock-Based Compensation."
ENVIRONMENTAL -- Florida Progress adopted the American Institute of Certified
Public Accountants Statement of Position ("SOP") 96-1, "Environmental
Remediation Liabilities" on January 1, 1997. The SOP requires, among other
things, environmental remediation liabilities to be accrued when the criteria of
FAS No. 5, "Accounting for Contingencies," have been met. The SOP also provides
guidance with respect to the measurement of remediation liabilities.
Environmental expenditures are expensed or capitalized depending on their future
economic benefit. Expenditures that relate to an existing condition caused by
past operations and that have no future economic benefits are expensed.
Liabilities for expenditures of a noncapital nature are recorded when
environmental assessment and/or remediation is probable, and the costs can be
reasonably estimated. Such accounting is consistent with Florida Progress'
current method of accounting for environmental remediation costs and, therefore,
adoption of this new statement did not have a material impact on Florida
Progress' financial position, results of operations or liquidity.
NEW ACCOUNTING STANDARDS -- In June 1996, the FASB issued FAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities." FAS No. 125 provides accounting and reporting standards
effective for transfers and servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996 and is to be applied
prospectively. There was no material effect on net income as a result of
adopting this standard.
In February 1997, the FASB issued FAS No. 128, "Earnings per Share," ("EPS"). It
replaces the standards for computing EPS under APB Opinion No. 15, "Earnings per
Share," and makes the computations comparable to international EPS standards.
Florida Progress adopted this statement for financial statements issued for the
period ended December 31, 1997. Adoption of this statement did not have an
impact on earnings per share, therefore no restatement was necessary for prior
periods.
Also in February 1997, the FASB issued FAS No. 129, "Disclosure of Information
about Capital Structure," which designates certain disclosure requirements for
public and nonpublic entities. Florida Progress adopted this statement for
financial statements issued for the period ended December 31, 1997. As Florida
Progress already disclosed the information required by FAS No. 129, adoption of
this statement did not have any effect on the financial disclosures of Florida
Progress.
In June 1997, the FASB issued FAS No. 130, "Reporting Comprehensive Income"
which establishes standards for reporting comprehensive income. The standard
defines comprehensive income as all changes in equity of an enterprise during a
period except those resulting from shareholder transactions. All components of
comprehensive income are required to be reported in a financial statement that
is displayed with equal prominence as existing financial statements. Florida
Progress will be required to adopt this statement January 1, 1998. As the
standard addresses reporting and presentation issues only, there will be no
impact on earnings from the adoption of this standard.
Also in June 1997, the FASB issued FAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" which establishes standards for
additional disclosure about operating segments for interim and annual financial
statements. The standard requires financial and descriptive information be
disclosed for segments meeting certain materiality criteria whose operating
results are reviewed for decisions on resource allocation and for which discrete
financial information is available. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
Florida Progress will be required to adopt this statement for financial
statements for the fiscal year ending December 31, 1998 and for interim periods
<PAGE> 57
thereafter. As the standard addresses reporting and disclosure issues only,
there will be no impact on earnings from the adoption of this standard.
In January 1998, the FASB issued FAS No. 132, "Employers' Disclosures about
Pensions and Other Post-retirement Benefits" which revises current note
disclosure requirements for employers' pensions and other retiree benefits.
Florida Progress will be required to adopt this statement for financial
statements for the year ending December 31, 1998. The standard addresses
reporting and disclosure issues only, and there will be no impact on earnings
from the adoption of this standard.
NOTE 2 FINANCIAL INSTRUMENTS
Estimated fair value amounts have been determined by Florida Progress using
available market information and discounted cash-flow analysis. Judgment is
required in interpreting market data to develop the estimates of fair value.
Accordingly, the estimates may be different than the amounts that Florida
Progress could realize in a current market exchange.
Florida Progress' exposure to market risk for changes in interest rates relates
primarily to Florida Progress' marketable securities and long-term debt
obligations.
At December 31, 1997, Florida Power held a single forward treasury lock
agreement to effectively fix the treasury rate component of an anticipated
issuance of $150 million of medium-term notes in February 1998. The financial
impact of this contract, which will result in either a cash payment or receipt,
will be deferred and recognized as an adjustment to interest expense over the
life of the new notes. Florida Progress had no derivative financial instruments
outstanding at December 31, 1996.
At December 31, 1997 and 1996, Florida Progress had the following financial
instruments with estimated fair values and carrying amounts:
<TABLE>
<CAPTION>
1997 1996
Carrying Fair Carrying Fair
(In millions) Amount Value Amount Value
ASSETS:
Loans receivable:
<S> <C> <C> <C> <C>
Echelon International $ - $ - $ 32.9 $ 32.9
Life insurance business:
Loans secured by real estate - - 4.1 4.4
Policy loans - - 11.0 10.1
--------- -------- ------- -------
$ - $ - $ 48.0 $ 47.4
========= ======== ======= =======
Marketable securities:
Available for sale:
Life insurance business $ - $ - $ 144.6 $ 144.6
Nuclear decommissioning fund 266.7 266.7 207.8 207.8
Held to maturity - - 73.3 76.8
CAPITAL AND LIABILITIES:
Long-term debt:
Florida Power Corporation $1,746.9 $1,801.1 $1,317.7 $1,335.3
Progress Capital Holdings 646.1 656.5 494.1 497.1
</TABLE>
The December 31, 1997 balances reflect the deconsolidation of Mid-Continent
Life's financial statements from Florida Progress' consolidated financial
statements. (See Note 11 contained herein).
<PAGE> 58
NOTE 3 INCOME TAXES
FLORIDA PROGRESS
(In millions) 1997 1996 1995
- ----------------------------------------------------------------------------
Components of income tax expense:
Payable currently:
Federal $86.6 $179.7 $157.3
State 10.5 23.0 18.8
- ----------------------------------------------------------------------------
97.1 202.7 176.1
- ----------------------------------------------------------------------------
Deferred, net:
Federal (22.4) (41.9) (27.5)
State (.5) (6.9) (2.0)
- ----------------------------------------------------------------------------
(22.9) (48.8) (29.5)
- ----------------------------------------------------------------------------
Amortization of investment
tax credits, net (7.8) (8.0) (8.5)
- ----------------------------------------------------------------------------
$66.4 $145.9 $138.1
============================================================================
FLORIDA POWER
(In millions) 1997 1996 1995
- ----------------------------------------------------------------------------
Components of income tax expense:
Payable currently:
Federal $73.5 $143.6 $136.8
State 11.6 24.9 22.1
- ----------------------------------------------------------------------------
85.1 168.5 158.9
- ----------------------------------------------------------------------------
Deferred, net:
Federal (7.6) (20.9) (18.9)
State .2 (4.0) (1.9)
- ----------------------------------------------------------------------------
(7.4) (24.9) (20.8)
- ----------------------------------------------------------------------------
Amortization of investment
tax credits, net (7.8) (7.9) (8.5)
- ----------------------------------------------------------------------------
Total income tax expense 69.9 135.7 129.6
Less: Amounts charged or (credited)
to non-operating income -- (.1) .1
- ----------------------------------------------------------------------------
Amounts charged to operating income $69.9 $135.8 $129.5
============================================================================
<PAGE> 59
The primary differences between the statutory rates and the effective income tax
rates are detailed below:
FLORIDA PROGRESS
1997 1996 1995
- ----------------------------------------------------------------------------
Federal statutory income tax rate 35.0% 35.0% 35.0%
State income tax, net of federal
income tax benefits 5.4 2.6 2.8
Amortization of investment tax credits (6.4) (2.0) (2.2)
Provision for loss on investment in
life insurance subsidiary 24.9 - -
Other (4.5) .6 .1
- ----------------------------------------------------------------------------
Effective income tax rates 54.4% 36.2% 35.7%
============================================================================
FLORIDA POWER
1997 1996 1995
- ----------------------------------------------------------------------------
Federal statutory income tax rate 35.0% 35.0% 35.0%
State income tax, net of federal
income tax benefits 3.7 3.6 3.7
Amortization of investment tax credits (3.8) (2.2) (2.4)
Other (.9) - -
- ----------------------------------------------------------------------------
Effective income tax rates 34.0% 36.4% 36.3%
============================================================================
The following summarizes the components of deferred tax liabilities and assets
at December 31, 1997 and 1996:
FLORIDA PROGRESS
(In millions) 1997 1996
- ---------------------------------------------------------------------------
Deferred tax liabilities:
Difference in tax basis of property,
plant and equipment $539.0 $544.1
Deferred acquisition costs - 35.9
Investment in partnerships 19.7 20.1
Deferred book expenses 34.1 12.7
Other 29.7 22.9
- ---------------------------------------------------------------------------
Total deferred tax liabilities $622.5 $635.7
===========================================================================
Deferred tax assets:
Loss reserves not currently deductible $ 17.0 $ 69.5
Accrued book expenses 110.8 90.6
Unbilled revenues 17.6 17.6
Other 11.7 18.2
- ---------------------------------------------------------------------------
Total deferred tax assets $157.1 $195.9
===========================================================================
At December 31, 1997 and 1996, Florida Progress had net noncurrent deferred tax
liabilities of $471.2 million and $475.4 million and net current deferred tax
assets of $5.8 million and $35.6 million, respectively. Florida Progress expects
the results of future operations will generate sufficient taxable income to
allow for the utilization of deferred tax assets.
<PAGE> 60
FLORIDA POWER
(In millions) 1997 1996
- --------------------------------------------------------------------------
Deferred tax liabilities:
Difference in tax basis of property,
plant and equipment $506.3 $516.0
Deferred book expenses 34.1 12.7
Under recovery of fuel 2.8 2.8
Carrying value of securities over cost 15.0 7.7
Other 1.5 -
-------------------------------------------------------------------------
Total deferred tax liabilities $559.7 $539.2
==========================================================================
Deferred tax assets:
Accrued book expenses $ 95.0 $ 76.5
Unbilled revenues 17.6 17.6
Regulatory liability for deferred income taxes 1.6 4.4
Other - 4.0
- --------------------------------------------------------------------------
Total deferred tax assets $114.2 $102.5
==========================================================================
At December 31, 1997 and 1996, Florida Power had net noncurrent deferred tax
liabilities of $451.3 million and $472.3 million and net current deferred tax
assets of $5.8 million and $35.6 million, respectively. Florida Power expects
the results of future operations will generate sufficient taxable income to
allow the utilization of deferred tax assets.
NOTE 4 NUCLEAR OPERATIONS
Florida Power's Crystal River nuclear plant began an extended outage in
September 1996, which caused Florida Power to incur $100 million in additional
operation and maintenance expenses in 1997. The plant was placed on the NRC's
"Watch List" in January 1997, as a plant whose operations will be closely
monitored until Florida Power demonstrates a period of improved performance. In
January 1998, the NRC granted Florida Power permission to restart the plant.
(See Note 9 contained herein.)
JOINTLY OWNED PLANT - The following information relates to Florida Power's 90.4%
proportionate share of the nuclear plant at December 31, 1997 and 1996:
(In millions) 1997 1996
- ------------------------------------------------------------
Utility plant in service $673.8 $643.6
Construction work in progress 49.3 14.8
Unamortized nuclear fuel 66.5 59.9
Accumulated depreciation 341.0 309.5
Accumulated decommissioning 223.7 193.3
============================================================
Net capital additions/(retirements) for Florida Power were $64.7 million in 1997
and $(16.5) million in 1996. Depreciation expense, exclusive of nuclear
decommissioning, was $29 million in 1997 and $28.3 million in 1996. Each
co-owner provides for its own financing. Florida Power's share of the asset
balances and operating costs is included in the appropriate consolidated
financial statements. Amounts exclude any allocation of costs related to common
facilities.
DECOMMISSIONING COSTS -- Florida Power's nuclear plant depreciation expenses
include a provision for future decommissioning costs, which are recoverable
through rates charged to customers. Florida Power is placing amounts collected
in an externally managed trust fund. The recovery from customers, plus income
earned on the trust fund, is intended to be sufficient to cover Florida Power's
share of the future dismantlement, removal and land restoration costs. Florida
Power has a license to operate the nuclear unit through December 3, 2016, and
contemplates decommissioning beginning at that time.
<PAGE> 61
In November 1995, the FPSC approved a new site-specific study that estimated
total future decommissioning costs at approximately $2 billion, which
corresponds to $453.8 million in 1997 dollars. Florida Power's share of the
retail portion of annual decommissioning expense is $20.5 million. Florida
Power's annual expense for the wholesale portion is $1.2 million.
FUEL DISPOSAL COSTS -- Florida Power has entered into a contract with the U.S.
Department of Energy (DOE) for the transportation and disposal of spent nuclear
fuel. Disposal costs for nuclear fuel consumed are being collected from
customers through the fuel adjustment clause at a rate of $.001 per net nuclear
kilowatt-hour sold and are paid to the DOE quarterly. Florida Power currently is
storing spent nuclear fuel on-site and has sufficient storage capacity in place
for fuel consumed through the year 2010.
NOTE 5 PREFERRED AND PREFERENCE STOCK AND SHAREHOLDER RIGHTS
The authorized capital stock of Florida Progress includes 10 million shares of
preferred stock, without par value, including 2 million shares designated as
Series A Junior Participating Preferred Stock. No shares of Florida Progress'
preferred stock are issued and outstanding. However, under the Florida Progress
Shareholder Rights Agreement, each share of common stock has associated with it
approximately two-thirds of one right to purchase one one-hundredth of a share
of Series A Junior Participating Preferred Stock, subject to adjustment, which
is exercisable in the event of certain attempted business combinations. If
exercised, the rights would cause substantial dilution of ownership, thus
adversely affecting any attempt to acquire Florida Progress on terms not
approved by Florida Progress' Board of Directors. The rights have no voting or
dividend rights and expire in December 2001, unless redeemed earlier by Florida
Progress.
The authorized capital stock of Florida Power includes three classes of
preferred stock: 4 million shares of Cumulative Preferred Stock, $100 par value;
5 million shares of Cumulative Preferred Stock, without par value; and 1 million
shares of Preference Stock, $100 par value. No shares of Florida Power's
Cumulative Preferred Stock, without par value, or Preference Stock are issued
and outstanding. A total of 334,967 shares, of the 335,000 authorized, of
Cumulative Preferred Stock, $100 par value, were issued and outstanding at
December 31, 1997 and 1996.
Florida Power redeemed 1,050,000 shares of its Cumulative Preferred Stock in
1996 and 50,000 shares in 1995.
Cumulative Preferred Stock for Florida Power is detailed below:
Current Outstanding at
Dividend Redemption Shares December 31,
Rate Price Outstanding 1997 & 1996
(In millions)
- ------------------------------------------------------------------
4.00% $104.25 39,980 $ 4.0
4.40% $102.00 75,000 7.5
4.58% $101.00 99,990 10.0
4.60% $103.25 39,997 4.0
4.75% $102.00 80,000 8.0
- ------------------------------------------------------------------
334,967 $33.5
==================================================================
All Cumulative Preferred Stock series are without sinking funds and are not
subject to mandatory redemption.
<PAGE> 62
NOTE 6 DEBT
Florida Progress' long-term debt at December 31, 1997 and 1996, is scheduled to
mature as follows:
<TABLE>
<CAPTION>
Interest Rate 1997 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Florida Power Corporation
(In millions)
First mortgage bonds:
Maturing in 1999 6.50% $ 75.0 $ 75.0
Maturing 2002 and 2003 6.50%(a) 280.0 280.0
Maturing 2008 6.88% 80.0 80.0
Maturing 2021 through 2023 7.98%(a) 400.0 400.0
Pollution control revenue bonds:
Maturing 2014 through 2027 6.59%(a) 240.9 240.9
Notes maturing
1997-1998 6.67% 1.5 22.8
1999-2008 6.60%(a) 474.5 24.5
Commercial paper, supported by revolver maturing November 30, 2002 5.85%(a) 200.0 200.0
Discount, net of premium, being amortized over term of bonds (5.0) (5.5)
- -----------------------------------------------------------------------------------------------------------------
1,746.9 1,317.7
Progress Capital Holdings:
Notes maturing:
1997-1998 9.90% 10.0 20.0
1999-2008 6.90%(a) 329.0 294.0
Commercial paper, supported by revolver maturing November 30, 2002 5.92%(a) 300.0 169.4
Other debt, maturing through 2006 6.78%(a) 7.1 10.7
- -----------------------------------------------------------------------------------------------------------------
2,393.0 1,811.8
Less: Current portion of long-term debt 15.2 34.9
- -----------------------------------------------------------------------------------------------------------------
$2,377.8 $1,776.9
=================================================================================================================
(a) Weighted average interest rate at December 31, 1997.
</TABLE>
Florida Progress' consolidated subsidiaries have lines of credit totaling $900
million, which are used to support commercial paper. The lines of credit were
not drawn on as of December 31, 1997. Interest rate options under the line of
credit arrangements vary from subprime or money market rates to the prime rate.
Banks providing lines of credit are compensated through fees. Commitment fees on
lines of credit vary between .06 and .10 of 1%.
The lines of credit consist of four revolving bank credit facilities, two each
for Florida Power and Progress Capital Holdings, Inc. The Florida Power
facilities consist of $300 million with a 364-day term and $200 million with a
five-year term. The Progress Capital facilities consist of $100 million with a
364-day term and $300 million with a five-year term. In 1997, both 364-day
facilities were extended to November 1998. In addition, both five-year
facilities were extended to November 2002. Based on the duration of the
underlying backup credit facilities, $500 million of outstanding commercial
paper at December 31, 1997, and $369.4 million of outstanding commercial paper
at December 31, 1996, are classified as long-term debt. Additionally, as of
December 31, 1997 Florida Power and Progress Capital Holdings had $179.8 million
and $35.0 million, respectively of outstanding commercial paper classified as
short-term debt.
Florida Power has a public medium-term note program providing for the issuance
of either fixed or floating interest rate notes. These notes have maturities
ranging from nine months to 30 years. A balance of $400 million is available for
issuance.
Florida Power has registered $370 million of first mortgage bonds which are
unissued and available for issuance.
Progress Capital has a private medium-term note program providing for the
issuance of either fixed or floating interest rate notes, with maturities
ranging from nine months to 30 years. A balance of $87 million is available for
issuance under this program.
The combined aggregate maturities of long-term debt for 1998 through 2002 are
$15.2 million, $143.6 million, $77.6 million, $183.0 million and $632.2 million,
respectively. In addition, about 12% of Florida Power's outstanding first
mortgage bonds have an annual 1% sinking fund requirement. These requirements,
<PAGE> 63
which total $1 million annually for 1998 through 2002, are expected to be
satisfied with property additions.
Florida Progress has unconditionally guaranteed the payment of Progress
Capital's debt as defined in an amended and restated support agreement.
NOTE 7 RETIREMENT BENEFIT PLANS
Pension Benefits -- Florida Progress and certain of its subsidiaries have a
noncontributory defined benefit pension plan covering most employees. The
benefits are based on length of service, compensation and Social Security
benefits. The participating companies make annual contributions to the plan
based on an actuarial determination and consideration of tax regulations and
funding requirements under federal law. Based on actuarial calculations and the
funded status of the pension plan, Florida Progress was not required to
contribute to the plan for 1997, 1996 or 1995.
Shown below are the components of the net pension expense calculations for those
years:
<TABLE>
<CAPTION>
(In millions) 1997 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 15.3 $ 16.2 $ 13.4
Interest cost 33.4 31.3 30.1
Actual earnings on plan assets (131.6) (88.0) (124.4)
Net amortization and deferral 64.0 29.5 77.7
- ------------------------------------------------------------------------------
Net pension benefit recognized $ (18.9) $(11.0) $ (3.2)
==============================================================================
</TABLE>
Florida Power's share of the plan's pension benefits for 1997, 1996 and 1995 was
$(18.4) million, $(10.3) million and $(3.0) million, respectively.
The following weighted average actuarial assumptions at January 1 were used in
the calculation of pension expense:
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.50% 7.25% 8.25%
Expected long-term rate of return 9.00% 9.00% 9.00%
Rate of compensation increase 4.50% 4.50% 5.00%
==============================================================================
</TABLE>
{THIS SPACE INTENTIONALLY LEFT BLANK}
<PAGE> 64
The following summarizes the funded status of the pension plan at December 31,
1997 and 1996:
<TABLE>
<CAPTION>
(In millions) 1997 1996
- ---------------------------------------------------------------------
Accumulated benefit obligation:
<S> <C> <C>
Vested $359.3 $326.1
Nonvested 40.8 31.5
- ---------------------------------------------------------------------
400.1 357.6
Effect of projected compensation increases 100.1 94.4
- ---------------------------------------------------------------------
Projected benefit obligation 500.2 452.0
Plan assets at market value, primarily listed
stocks and bonds 769.0 655.0
- ---------------------------------------------------------------------
Plan assets in excess of projected
benefit obligation $268.8 $203.0
=====================================================================
Consisting of the following components:
Unrecognized transition asset $ 25.5 $ 30.4
Unrecognized prior service cost (14.7) (6.3)
Unrecognized net actuarial gains 236.7 176.4
Prepaid pension costs 21.3 2.5
- ----------------------------------------------------------------------
$268.8 $203.0
======================================================================
</TABLE>
Due to changes in interest rates, Florida Progress used a discount rate of 7.25%
to calculate the pension plan's 1997 year-end funded status. The change in the
discount rate from 7.5% at December 31, 1996, to 7.25% at December 31, 1997,
increased the projected benefit obligation by $17.4 million and is expected to
increase the annual pension costs by $1.8 million, beginning in 1998.
In 1997 the Board of Directors approved a restructuring of the Plan effective
January 1, 1998. The existing plan will be split into two separate plans, one
covering eligible bargaining unit employees and the other covering all other
eligible employees. Plan assets will be allocated to each plan in accordance
with applicable law. The restructuring is expected to have a minimal effect on
funded status and periodic pension costs.
OTHER POST-RETIREMENT BENEFITS -- Florida Progress and some of its subsidiaries
provide certain health care and life insurance benefits for retired employees.
Employees become eligible for these benefits when they reach retirement age
while working for Florida Progress.
The net post-retirement benefit costs for 1997, 1996 and 1995 are detailed
below:
<TABLE>
<CAPTION>
(In millions) 1997 1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 3.2 $ 5.3 $ 5.1
Interest cost 10.4 12.4 13.5
Amortization of unrecognized
transition obligation 3.4 6.1 6.1
Actual earnings on plan assets (.4) (.3) (.3)
- ---------------------------------------------------------------------------
$16.6 $23.5 $24.4
===========================================================================
</TABLE>
<PAGE> 65
The following summarizes the plan's status, reconciled with amounts recognized
in Florida Progress' balance sheet at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
(In millions) 1997 1996
- ----------------------------------------------------------------------------
Accumulated post-retirement benefit obligation:
<S> <C> <C>
Retirees $ 92.7 $100.4
Fully eligible active plan participants 1.2 3.1
Other active plan participants 59.3 81.2
Plan assets at fair value,
primarily municipal securities (6.4) (4.7)
- ----------------------------------------------------------------------------
146.8 180.0
Unrecognized transition obligation (55.0) (97.2)
Unrecognized net gains 15.6 17.2
- ----------------------------------------------------------------------------
Accrued post-retirement benefit cost $107.4 $100.0
============================================================================
</TABLE>
Florida Power's share of the plan's net post-retirement benefit cost for 1997,
1996 and 1995 was $16.2 million, $22.7 million and $23.5 million, respectively.
The following weighted average actuarial assumptions were used in the
calculation of the year-end status of other post-retirement benefits:
1997 1996
- ------------------------------------------------------------------
Discount rate 7.25% 7.50%
Rate of compensation increase 4.50% 4.50%
Health care cost trend rates:
Pre-Medicare 9.00%-5.00% 9.50%-5.25%
Post-Medicare 7.25%-4.75% 7.50%-5.00%
==================================================================
The transition obligation is being accrued through 2012. A one-percentage point
increase in the assumed health care cost trend rate for each future year would
have increased the 1997 current service and interest cost by approximately $.8
million and the accumulated post-retirement benefit obligation as of December
31, 1997, by about $9.6 million. The change in the discount rate from 7.5% at
December 31, 1996, to 7.25% at December 31, 1997, increased the projected
benefit obligation by $4.4 million and is expected to increase annual
post-retirement benefit costs by $.3 million, beginning in 1998.
Due to different retail and wholesale regulatory rate requirements, Florida
Power began making quarterly contributions in 1995 to an irrevocable external
trust fund for wholesale ratemaking, while continuing to accrue postretirement
benefit costs to an unfunded reserve for retail ratemaking. Florida Power
contributed approximately $1.3 million in both 1997 and 1996, to the trust fund.
NOTE 8 BUSINESS SEGMENTS
Florida Progress' principal business segments are utility and diversified
operations. The utility is engaged in the generation, purchase, transmission,
distribution and sale of electric energy. Electric Fuels Corporation's (Electric
Fuels) operations include energy and related services, inland marine
transportation and rail services. Other diversified operations include ownership
of a life insurance subsidiary.
<PAGE> 66
Florida Progress' business segment information for 1997, 1996 and 1995 is
summarized below. No single customer accounted for 10% or more of unaffiliated
revenues.
<TABLE>
<CAPTION>
(In millions) 1997 1996 1995
Revenues:
<S> <C> <C> <C>
Utility $2,448.4 $2,393.6 $2,271.7
Diversified:
Electric Fuels, combined:
Coal sales to electric utility 285.1 272.1 236.8
Sales to external customers 751.4 609.0 607.0
Other 115.8 155.3 129.1
- --------------------------------------------------------------------------------
3,600.7 3,430.0 3,244.6
Eliminations (285.1) (272.1) (236.8)
- --------------------------------------------------------------------------------
Revenues from external customers $3,315.6 $3,157.9 $3,007.8
================================================================================
Income from operations:
Utility $ 317.6 $ 468.5 $ 456.3
Diversified:
Electric Fuels recurring, combined 71.5 61.4 52.1
Electric Fuels loss provision - (40.9) -
Loss related to life insurance subsidiary (97.6) - -
Other diversified (18.9) (6.6) .5
- --------------------------------------------------------------------------------
272.6 482.4 508.9
Interest and other expense 151.9 85.8 131.9
- --------------------------------------------------------------------------------
Income from continuing operations
before income taxes $ 120.7 $ 396.6 $ 377.0
================================================================================
Identifiable assets:
Utility $ 4,887.0 $4,263.7 $ 4,284.7
Diversified:
Electric Fuels, combined 799.1 619.8 573.6
Other diversified 73.9 464.9 692.1
- --------------------------------------------------------------------------------
$ 5,760.0 $5,348.4 $ 5,550.4
================================================================================
Depreciation and amortization:
Utility $ 333.8 $ 341.1 $ 329.7
Diversified:
Electric Fuels, combined 27.4 23.5 21.2
Other diversified 3.0 2.1 1.8
- --------------------------------------------------------------------------------
$ 364.2 $ 366.7 $ 352.7
================================================================================
Capital additions:
Utility $ 395.0 $ 222.9 $ 289.2
Diversified:
Electric Fuels, combined 117.5 40.6 40.5
Other diversified 1.1 .5 1.7
- --------------------------------------------------------------------------------
$ 513.6 $ 264.0 $ 331.4
================================================================================
</TABLE>
In December 1997, Florida Progress recorded a provision for loss on its
investment in Mid-Continent Life and accrued for related legal costs, totaling
$97.6 million. (See Note 11 contained herein.)
In December 1996, Electric Fuels revised its assessment that low-sulfur coal
market prices were depressed temporarily. Electric Fuels decided to close and
dispose of its unprofitable coal operations and recorded a provision for loss of
$40.9 million, as shown above.
<PAGE> 67
NOTE 9 RATES
Florida Power's retail rates are set by the FPSC. Florida Power's last general
rate case was approved in 1992 and allowed a 12% regulatory return on equity
with an allowed range between 11% and 13%.
EXTENDED NUCLEAR OUTAGE -- In June 1997, a settlement agreement between Florida
Power and all parties who intervened in Florida Power's request to collect
replacement fuel and purchased power costs resulting from the extended outage of
its nuclear plant was approved by the FPSC. The plant has been off-line since
September 1996 to address certain design issues related to its safety systems.
Florida Power incurred $174 million in total system replacement power costs
through the end of 1997. In accordance with the settlement agreement, Florida
Power recorded a charge of approximately $73 million for retail replacement
power costs incurred that will not be recovered through its fuel adjustment
clause. Of the remaining $101 million, Florida Power will recover approximately
$38 million through its fuel adjustment clause. The remaining $63 million of
replacement power costs was recorded as a regulatory asset and is being
amortized for a period of up to four years. The amortization of the regulatory
asset is being recovered by the suspension of fossil plant dismantlement
accruals during the amortization period. Actual replacement power costs incurred
prior to the nuclear unit's return to service in excess of the $174 million,
will be expensed as incurred.
The parties to the settlement agreement have agreed not to seek or support any
increase or reduction in Florida Power's base rates or the authorized range of
its return on equity during the four-year amortization period. The settlement
agreement also provided that for purposes of monitoring Florida Power's future
earnings, the FPSC will exclude the nuclear outage costs when assessing Florida
Power's regulatory return on equity. The agreement resolves all present and
future disputed issues between the parties regarding the extended outage of the
nuclear plant.
TIGER BAY BUY-OUT -- In 1997, Florida Power bought out the Tiger Bay purchased
power contracts for $370 million and acquired the cogeneration facility for $75
million, for a total of $445 million. Of the $370 million of contract
termination costs, $350 million was recorded as a regulatory asset and the
remaining $20 million was written off. Florida Power recorded $75 million as
electric plant.
The regulatory asset is being recovered pursuant to a stipulation agreement
between Florida Power and several intervening parties which was approved by the
FPSC in June 1997. The amortization of the regulatory asset is calculated using
revenues collected under the fuel adjustment clause as if the purchase power
agreements related to the facility were still in effect, less the actual fuel
costs and the related debt interest expense. This will continue until the
regulatory asset is fully amortized. Florida Power has the option to accelerate
the amortization.
NOTE 10 DISCONTINUED OPERATIONS
On November 21, 1996, The Florida Progress Board of Directors declared a
spin-off distribution to common shareholders of record on December 5, 1996, of
the common shares of Echelon, which comprised Florida Progress' lending, leasing
and real estate operations. Common shares were distributed on the basis of one
share of Echelon common stock for every 15 shares of Florida Progress common
stock.
In connection with the spin-off in 1996, Florida Progress has presented Echelon
as a discontinued operation in the accompanying Consolidated Statements of
Income. As of the date of the spin-off, the net assets of Echelon were $194.5
million. This amount has been charged against Florida Progress' retained
earnings in the accompanying December 31, 1996 Consolidated Balance Sheet to
reflect the distribution of Echelon common shares on December 18, 1996.
<PAGE> 68
A summary of net assets distributed is as follows:
(In millions)
- ------------------------------------------------------------------
Cash and equivalents $ 53.8
Assets held for sale 26.8
Leases and loans receivable, net 272.0
Property and equipment, net 126.0
Other assets 39.9
- ------------------------------------------------------------------
Total assets 518.5
Total liabilities (324.0)
- ------------------------------------------------------------------
Net assets distributed $ 194.5
==================================================================
Summarized income statement information relating to Echelon's results of
operations (as reported in discontinued operations) is as follows:
<TABLE>
<CAPTION>
Year ended December 31,
(In millions) 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
Sales and revenues $63.2 $50.0
- ------------------------------------------------------------------------------
Loss from operations (net of income tax) - -
Provision for loss on disposition of assets
(net of income tax benefits of $11.3) (18.0) -
Spin-off transaction costs (net
of income tax benefits of $1.8) (8.3) -
- ------------------------------------------------------------------------------
Total discontinued operations $(26.3) $ -
==============================================================================
</TABLE>
Fiscal year 1996 includes results of operations through December 18, 1996.
Results of operations include allocated interest expense of $8.7 million and
$11.7 million for 1996 and 1995 respectively.
NOTE 11 COMMITMENTS AND CONTINGENCIES
FUEL, COAL AND PURCHASED POWER COMMITMENTS -- Florida Power has entered into
various long-term contracts to provide the fossil and nuclear fuel requirements
of its generating plants and to reserve pipeline capacity for natural gas. In
most cases, such contracts contain provisions for price escalation, minimum
purchase levels and other financial commitments. Estimated annual payments,
based on current market prices, for Florida Power's firm commitments for fuel
purchases and transportation costs, excluding delivered coal and purchased
power, are $40 million, $46 million, $47 million, $47 million and $48 million
for 1998 through 2002, respectively, and $464 million in total thereafter.
Additional commitments will be required in the future to supply Florida Power's
fuel needs.
Electric Fuels has entered into several contracts with outside parties for the
purchase of coal. Electric Fuels also has entered into several operating leases,
and rental or royalty agreements, relating to transportation equipment and coal
procurement and processing. The annual obligations under these contracts and
leases, including transportation costs, are $163.1 million, $82.0 million, $50.2
million, $45.7 million and $32.2 million for 1998 through 2002, respectively,
and $64.1 million in total thereafter. The total cost incurred for these
commitments was $219.6 million in 1997, $221.4 million in 1996 and $235.2
million in 1995.
Florida Power has long-term contracts for about 460 megawatts of purchased power
with other utilities, including a contract with The Southern Company for
approximately 400 megawatts of purchased power annually through 2010. This
represents 4.5% of Florida Power's total current installed system capacity.
Florida Power has an option to lower these Southern purchases to approximately
200 megawatts annually with a three-year notice. The purchased power from
Southern is supplied by generating units with a capacity of approximately 3,500
megawatts and is guaranteed by Southern'S entire system, totaling more than
30,000 megawatts.
<PAGE> 69
As of December 31, 1997, Florida Power had entered into purchased power
contracts with certain QFs for 946 megawatts of capacity with expiration dates
ranging from 2002 to 2025. The purchased power contracts provide for capacity
and energy payments. Energy payments are based on the actual power taken under
these contracts. Capacity payments are subject to the QFs meeting certain
contract performance obligations. In most cases, these contracts account for
100% of the generating capacity of each of the facilities. Of the 946 megawatts
under contract, approximately 830 megawatts currently are available to Florida
Power. All commitments have been approved by the FPSC. Florida Power does not
plan to increase the level of purchased power currently under contract.
The FPSC allows the capacity payments to be recovered through a capacity cost
recovery clause, which is similar to, and works in conjunction with, energy
payments recovered through the fuel adjustment clause.
Through the buy-out of the Tiger Bay purchased power contracts for $370 million,
Florida Power reduced its long-term purchased power commitments by 20 percent.
Florida Power recorded $350 million of the contract termination costs as a
regulatory asset and wrote off $20 million of the contract termination costs in
1997. (See Note 9 contained herein.)
Florida Power incurred purchased power capacity costs totaling $292.3 million in
1997, $284 million in 1996 and $260.1 million in 1995. The following table shows
minimum expected future capacity payments for purchased power commitments.
Because the purchased power commitments have relatively long durations, the
total present value of these payments using a 10% discount rate also is
presented. These amounts assume that all units are brought into service as
contracted and meet contract performance requirements:
<TABLE>
<CAPTION>
Purchased Power Capacity Payments
(In millions) Utilities Cogenerators Total
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ 59 $ 206 $ 265
1999 60 215 275
2000 60 223 283
2001 33 230 263
2002 32 236 268
2003-2025 248 5,802 6,050
- ----------------------------------------------------------------------------
Total $492 $6,912 $ 7,404
============================================================================
Total net present value $ 2,573
============================================================================
</TABLE>
The purchased power contracts with QFs employ separate pricing methodologies for
capacity payments and energy payments. Florida Power has interpreted the pricing
provision in these contracts to allow it to pay an as-available energy price
rather than a higher firm energy price when the avoided unit upon which the
applicable contract is based would not have been operated.
Four QFs filed suit against Florida Power over the contract payment terms.
Florida Power entered into settlement agreements with three of the four QFs. Two
of those agreements have been approved by the FPSC and the litigation has been
dismissed. In September 1997, the FPSC reversed its original decision and voted
to deny Florida Power's request to approve the third settlement agreement. As a
result of the FPSC denial, the settlement expired by its own terms in October
1997. In December 1997, the state court action with the third cogenerator was
set for trial in late 1998. Florida Power's dispute with the fourth cogenerator
has been set for trial in federal court for late 1998, but no trial date has
been set for a parallel contract dispute in state court. Management does not
expect that the results of these legal actions will have a material impact on
Florida Power's financial position, operations or liquidity.
MID-CONTINENT LIFE INSURANCE COMPANY (MID-CONTINENT) -- A series of events in
1997 have significantly jeopardized Mid-Continent's ability to implement a plan
to eliminate a projected reserve deficiency resulting in the impairment of
Florida Progress' investment in Mid-Continent, its wholly owned life insurance
subsidiary.
<PAGE> 70
On April 14, 1997, the Commissioner received legal approval to temporarily seize
control of the operations of Mid-Continent, and in May 1997, the Oklahoma County
District Court granted the Insurance Commissioner's application to place
Mid-Continent into receivership. The Insurance Commissioner had alleged that
Mid-Continent's reserves were understated by more than $125 million, thus
causing Mid-Continent to be statutorily impaired. The Insurance Commissioner
further alleged that Mid-Continent had violated Oklahoma law relating to
deceptive trade practices in connection with the sale of its "Extra Life"
insurance policies and was not entitled to raise premiums, a key element to
Mid-Continent's plan to address the projected reserve deficiency. While
sustaining the receivership, the court also ruled that premiums could be raised.
Both sides have appealed the decision to the Oklahoma Supreme Court. In December
1997, the Insurance Commissioner filed a lawsuit against Florida Progress and
certain directors and officers making a number of allegations and seeking access
to Florida Progress' assets to satisfy policyholder and creditor claims. Florida
Progress believes that the Commissioner's lawsuit is without merit and intends
to vigorously defend itself and the other defendants against these charges. The
ultimate outcome of the matter cannot presently be determined. Accordingly,
Florida Progress has made no provision for any loss.
Another element of Mid-Continent's plan to eliminate the projected reserve
deficiency was to offer a new life insurance product. However, as a result of
the Commissioner's actions, which resulted in Mid-Continent being placed in
receivership, agents were reluctant to sell the new policy. This also prompted
insurance commissioners in several states to enter cease and desist orders
prohibiting Mid-Continent from writing new policies.
As a result of the Oklahoma Commissioner's efforts to block Mid-Continent from
raising insurance premiums, his failure to offer any formal plan to eliminate
the projected reserve deficiency, the legal proceedings, and the cease and
desist orders, Florida Progress now believes the full amount of its $86.9
million investment in Mid-Continent at December 31, 1997 is impaired. Therefore,
Florida Progress recorded a provision for loss on investment of $86.9 million in
1997. In addition, tax benefits of approximately $11 million related to the
excess of the tax basis over the book value in the investment in Mid-Continent
as of December 31, 1997, were not recorded because of uncertainties associated
with the timing of a tax deduction. Florida Progress also recorded an accrual at
December 31, 1997 for legal fees associated with defending its position in
current Mid-Continent legal proceedings.
Mid-Continent's financial statements have been deconsolidated effective December
31, 1997. The investment will prospectively be accounted for under the cost
method.
ADVANCED SEPARATION TECHNOLOGIES - Florida Progress sold its 80% interest in
Advanced Separation Technologies to Calgon in December 1996 for $56 million in
cash. Calgon filed a lawsuit in January 1998 alleging misstatement of AST's 1996
revenues, assets and liabilities, seeking damages and granting Calgon the right
to rescind the sale. The lawsuit also accuses Florida Progress of failing to
disclose flaws in AST's manufacturing process and a lack of quality control. No
projection of an outcome or estimate of a potential liability, if any, can be
determined at the date of issuance of these financial statements. Florida
Progress intends to vigorously defend itself against this lawsuit.
CONSTRUCTION PROGRAM - Substantial commitments have been made in connection with
Florida Progress' construction program. In 1998, Florida Power has projected
construction expenditures of $294 million, primarily for electric plant and
nuclear fuel. Electric Fuels has projected capital additions of $125 million in
1998, primarily for barges and towboats.
OFF-BALANCE SHEET RISK -- Several of Florida Progress' subsidiaries are general
partners in unconsolidated partnerships and joint ventures. Florida Progress or
subsidiaries have agreed to support certain loan agreements of the partnerships
and joint ventures. These credit risks are not material to the financial
statements and Florida Progress considers these credit risks to be minimal,
based upon the asset values supporting the partnership liabilities.
INSURANCE -- Florida Progress and its subsidiaries utilize various risk
management techniques to protect assets from risk of loss, including the
purchase of insurance. Risk avoidance, risk transfer and self-insurance
<PAGE> 71
techniques are utilized depending on Florida Progress' ability to assume risk,
the relative cost and availability of methods for transferring risk to third
parties, and the requirements of applicable regulatory bodies.
Florida Power self-insures its transmission and distribution lines against loss
due to storm damage and other natural disasters. Pursuant to a regulatory order,
Florida Power is accruing $6 million annually to a storm damage reserve and may
defer any losses in excess of the reserve.
Under the provisions of the Price Anderson Act, which limits liability for
accidents at nuclear power plants, Florida Power, as an owner of a nuclear
plant, can be assessed for a portion of any third-party liability claims arising
from an accident at any commercial nuclear power plant in the United States. If
total third-party claims relating to a single nuclear incident exceed $200
million (the amount of currently available commercial liability insurance),
Florida Power could be assessed up to $79.3 million per incident, with a maximum
assessment of $10 million per year.
Florida Power is a member of the Nuclear Electric Insurance, Ltd. ("NEIL"), an
industry mutual insurer, which provides business interruption and extra expense
coverage in the event of a major accidental outage at a covered nuclear power
plant. Florida Power is subject to a retroactive premium assessment by NEIL
under this policy in the event loss experience exceeds NEIL's available surplus.
Florida Power's present maximum share of any such retroactive assessment is $2.7
million per policy year.
Florida Power also maintains nuclear property damage insurance and
decontamination and decommissioning liability insurance totaling $2.1 billion.
The first layer of $500 million is purchased in the commercial insurance market
with the remaining excess coverage purchased from NEIL. Florida Power is
self-insured for any losses that are in excess of this coverage. Under the terms
of the NEIL policy, Florida Power could be assessed up to a maximum of $9.5
million in any policy year if losses in excess of NEIL's available surplus are
incurred.
Florida Power has never been assessed under these nuclear indemnities or
insurance policies.
CONTAMINATED SITE CLEANUP -- Florida Progress is subject to regulation with
respect to the environmental impact of its operations. Florida Progress'
disposal of hazardous waste through third-party vendors can result in costs to
clean up facilities found to be contaminated. Federal and state statutes
authorize governmental agencies to compel responsible parties to pay for cleanup
of these hazardous waste sites.
Florida Power and former subsidiaries of Florida Progress, whose properties were
sold in prior years, have been identified by the EPA as PRPs at certain sites,
including a coal gasification plant site in Sanford, Florida ("Sanford site")
that Florida Power previously owned and operated. There are five parties,
including Florida Power, that have been identified as PRPs at the Sanford site.
Liability for the cleanup costs of these sites is joint and several.
Negotiations are underway with the EPA to define the extent of contamination
that may be attributable to Florida Power's previous operation at the site. The
discussions and resolution of liability for cleanup costs could cause Florida
Power to increase its estimate of its liability for cleanup costs. Although
estimates of any additional costs are not currently available, the outcome is
not expected to have a material effect on Florida Progress' financial position,
results of operations or liquidity.
In addition to these designated sites, there are other sites where affiliates
may be responsible for additional environmental cleanup.
Florida Progress believes that its subsidiaries will not be required to pay a
disproportionate share of the costs for cleanup of any of these sites. Florida
Progress' best estimates indicate that its proportionate share of liability for
cleaning up all sites ranges from $2.5 million to $7.5 million. It has reserved
$4.7 million against these potential costs.
<PAGE> 72
AGE DISCRIMINATION SUIT -- Florida Power and Florida Progress have been served
with an age discrimination lawsuit involving 116 former Florida Power employees
and one current employee. While no dollar amount was requested in the lawsuit,
each plaintiff seeks back pay, reinstatement or front pay through their
projected dates of normal retirement, costs and attorneys' fees. In October
1996, the court approved an agreement between parties to provisionally certify
this case as a class action suit under the Age Discrimination in Employment Act.
Estimates of the potential liability associated with this lawsuit, if any,
remain pending until the final decision on whether to certify the case as a
class action suit has been made. A decision regarding the class action status is
expected in 1998.
<PAGE> 73
QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
FLORIDA PROGRESS CORPORATION
(Unaudited)
Three Months Ended
(In millions, except per share amounts) March 31 June 30 September 30 December 31
- ------------------------------------------------------------------------------------------------------------------
1997
OPERATING RESULTS
<S> <C> <C> <C> <C>
Revenues $747.5 $797.3 $922.5 $848.3
Income (loss) from operations 95.0 (34.6) 199.0 13.2
Net income (loss) 42.0 (38.2) 102.0 (51.5)
DATA PER SHARE
Earnings (loss) per common share 0.43 (0.39) 1.05 (0.53)
Dividends per common share .525 .525 .525 .525
Common stock price per share:
High 32 7/8 31 5/8 33 5/16 39 1/4
Low 29 3/4 27 3/4 31 1/4 31 5/8
- ------------------------------------------------------------------------------------------------------------------
1996
OPERATING RESULTS
Revenues $730.4 $773.6 $879.0 $774.9
Income from operations 107.2 125.0 189.3 60.9
Net income from continuing operations 48.3 58.7 98.1 45.6
Loss from discontinued operations - (25.0) - (1.3)
Net income 48.3 33.7 98.1 44.3
DATA PER SHARE
Earnings:
Continuing operations .50 .61 1.01 .47
Discontinued operations - (.26) - (.01)
Consolidated .50 .35 1.01 .46
Dividends per common share .515 .515 .515 .515
Common stock price per share:
High 36 3/8 34 3/4 35 1/8 34 1/2
Low 33 32 1/2 33 1/2 31 5/8
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FLORIDA POWER CORPORATION
(Unaudited)
- -------------------------------------------------------------------------------------------------------------
Three Months Ended
(In millions) March 31 June 30 September 30 December 31
- -------------------------------------------------------------------------------------------------------------
1997
<S> <C> <C> <C> <C>
Operating revenues $553.8 $597.2 $706.9 $590.5
Net income (loss) $41.6 $(43.2) $96.7 $40.8
Earnings (loss) on common stock $41.2 $(43.6) $96.4 $40.4
1996
Operating revenues $547.3 $588.7 $694.7 $562.9
Net income $45.2 $56.0 $93.9 $43.3
Earnings on common stock $42.9 $53.9 $93.1 $42.7
</TABLE>
The business of Florida Power is seasonal in nature and comparisons of earnings
for the quarters do not give a true indication of overall trends and changes in
Florida Power's operations. Effective December 31, 1997, Florida Progress
deconsolidated the financial statements of Mid-Continent Life Insurance Company
and established a provision for loss for the full amount of its investment. The
deconsolidation has not been reflected in the consolidated financial statements
of prior periods. In 1996, the divestiture of Echelon International Corporation
is reflected in the loss from discontinued operations.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
<PAGE> 74
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
FLORIDA PROGRESS
Information concerning the Directors of Florida Progress is included under the
headings "Information as to Nominees" and "Information as to Continuing
Directors" in Florida Progress' Proxy Statement and is incorporated herein by
reference. Information concerning the executive officers of Florida Progress is
set forth in Part I, Item 1 hereof under the heading "Executive Officers". With
respect to compliance by Florida Progress' directors and officers, and persons
who own more than 10% of Florida Progress' common stock, with the reporting
requirements of Section 16(a) of the Securities Act of 1934, there were no
reporting delinquencies.
FLORIDA POWER
DIRECTORS
Jack B. Critchfield, Age 64, Director 1975-1978 and since 1988.
Member - Executive Committee
Information concerning Dr. Critchfield is set forth in Part I, Item 1 hereof
under the heading "Executive Officers".
W. D. ("Bill") Frederick, Jr., Age 63, Director since 1997.
Member - Compliance Committee
Mr. Frederick's principal occupation for the past five years has been as an
investor and citrus grower in Orlando, Florida. He served as Mayor of the City
of Orlando from 1980 to 1992. In 1966 he founded the Orlando law firm of
Frederick, Wooten & Honeywell P.A., and subsequently became a partner in the
Orlando law office of Holland & Knight, from which he retired in 1995. He is a
member of the Board of Directors of Florida Progress, Blue Cross/Blue Shield of
Florida, and SunTrust Bank, Central Florida, N.A.
Michael P. Graney, Esquire, Age 54, Director since 1997.
Member - Executive Committee, Compliance Committee
Mr. Graney has practiced law with the New York based law firm of Simpson Thacher
& Bartlett since 1980 and is now resident partner in its Ohio office. His
specialties are utilities, anti-trust 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 Progress.
Richard Korpan, Age 56, Director since 1989.
Chairman - Executive Committee
Information concerning Mr. Korpan is set forth in Part I, Item 1 hereof under
the heading "Executive Officers".
Frank C. Logan, Age 62, Director since 1994.
Chairman - Compliance Committee
Mr. Logan, age 62, has been an attorney with the law firm of Harper, Kynes,
Geller, Watson & Buford, P.A., Clearwater, Florida since 1996. Previously, he
was with the Clearwater law firm of Harris, Barrett, Mann & Dew and the Tampa
firm of MacFarlane, Ausley, Ferguson & McMullen. He has practiced law since
1962, specializing in estate planning, probate, corporate and business law. He
is also a director of Florida Progress.
Clarence V. McKee, Esquire, Age 55, Director since 1988.
Mr. McKee's principal occupation is 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
<PAGE> 75
Chairman and Chief Executive Officer until 1992. He is a director of Florida
Progress, American Heritage Life Insurance Company, and Checkers Drive-In
Restaurants, Inc.
Vincent J. Naimoli, Age 60, Director since 1997.
Mr. Naimoli's principal occupation for more than five years has been as
Chairman, President and Chief Executive Officer of Anchor Industries
International, Inc., Tampa, Florida, an operating and holding company. He is
also Managing General Partner and Chief Executive Officer of the Tampa Bay Devil
Rays, Ltd. Major League Baseball Club, St. Petersburg, Florida. Mr. Naimoli is
a director of Florida Progress, and in conjunction with the business activities
of Anchor Industries, serves as a director of Russell Stanley Corp., Simplicity
Pattern Company, and Players International, Inc.
Richard A. Nunis, Age 65, Director since 1997.
Member - Executive Committee
Mr. Nunis' principal occupation for more than five years has been Chairman of
Walt Disney Attractions, Orlando, Florida. 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 his current position since
1991. He is a director of Florida Progress, The Walt Disney Company, and
SunTrust Bank, Central Florida N.A.
Joseph H. Richardson, Age 48, Director since 1996.
Member - Executive Committee
Information concerning Mr. Richardson is set forth in Part I, Item 1 hereof
under the heading "Executive Officers".
Joan D. Ruffier, Age 58, Director since 1991.
Member - Compliance Committee
Ms. Ruffier's principal occupation for more than five years has been as general
partner of Sunshine Cafes, Ltd., Orlando, Florida, a food and beverage
concession business at major Florida airports. Previously, she practiced public
accounting with the firm of Colley, Trumbower & Howell. She also serves on the
boards of directors of Florida Progress, Cyprus Equity Fund and INVEST, Inc.
Robert T. Stuart, Jr., Age 65, Director since 1997
Mr. Stuart's principal occupation for more than five years has been as a rancher
and investor. Since 1949, he has held numerous executive positions with
Mid-Continent, including Vice President, President, Chairman of the Board and
Chief Executive Officer until 1986 when Mid-Continent was acquired by Florida
Progress. He is a director of Florida Progress.
Jean Giles Wittner, Age 63, Director since 1977.
Member - Compliance Committee
Mrs. Wittner's principal occupation is President of Wittner & Co., Wittner
Securities, Inc., and Wittner & Associates, Inc., St. Petersburg, Florida, firms
involved in real estate management, 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 Progress, Raymond James Bank,
F.S.B., and Checkers Drive-In Restaurants, Inc.
Each director holds office until the next Annual Meeting of Shareholders and
until the election and qualification of a successor.
<PAGE> 76
EXECUTIVE OFFICERS
Information concerning the executive officers of Florida Power is set forth in
Part I, Item 1 hereof under the heading "Executive Officers" and is incorporated
herein by reference.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely on a review of the copies of Section 16(a) forms furnished to
Florida Power during 1997, or written representations that no forms were
required, Florida Power believes that all persons who at any time during 1997
were officers, directors or greater than 10% beneficial owners of Florida
Power's preferred stock, filed their applicable Section 16(a) reports on a
timely basis during 1997 and prior fiscal years, except that Florida Power's
directors, W. D. Frederick, Jr., Michael P. Graney, Vincent J. Naimoli, Richard
A. Nunis, Charles B. Reed and Robert T. Stuart, Jr., failed to timely file
a Form 3 within 10 days of becoming directors on May 15, 1997. Each of their
forms was filed November 26, 1997.
ITEM 11. EXECUTIVE COMPENSATION
FLORIDA PROGRESS
The information under the headings "Compensation of Directors", "Executive
Compensation", "Pension Plan Table" and "Employment Contracts, Termination of
Employment and Change in Control Arrangements" in Florida Progress' Proxy
Statement is incorporated herein by reference.
FLORIDA POWER
COMPENSATION OF DIRECTORS
Effective May 15, 1997, compensation for all directors of Florida Power
(excluding employees of Florida Progress or subsidiaries) was $1,000 for
attendance at each meeting of the Florida Power Board of Directors or a
committee of the Board of Directors. A $750 fee is paid to each committee
chairman for each meeting chaired.
<PAGE> 77
EXECUTIVE COMPENSATION
The following table contains information with respect to compensation awarded,
earned or paid during the years 1995-1997, to (i) the former Chief Executive
Officer ("former CEO") of Florida Power; (ii) the current Chief Executive
Officer ("CEO") and (iii) the other four most highly compensated executive
officers of Florida Power (the individuals referred to in (i), (ii) and (iii)
are referred to collectively as the "Named Executive Officers") in 1997, whose
total remuneration paid in 1997 exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation(1) Compensation
----------------------------------------- -------------
Other
Name and Principal Annual LTIP All Other
Position Year Salary Bonus Compensation Payouts(2) Compensation(3)
- -------------------------- ----- ------ ----- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
RICHARD KORPAN 1997 $592,304 $ 41,500 $324,028(4) $26,490
Chairman and Former 1996 535,610 333,500 339,107 18,900
Chief Executive Officer 1995 440,003 257,000 284,109 19,800
JOSEPH H. RICHARDSON 1997 $384,619 $ -0- $162,091(4) $ 13,890
President and Chief 1996 288,884 214,000 128,858 16,585(5)
Executive Officer 1995 215,009 113,000 110,473 8,835
JEFFREY R. HEINICKA 1997 $264,992 $ 15,500 $110,393(4) $ 12,315
Senior Vice President and 1996 258,456 169,000 113,139 8,595
Chief Financial Officer 1995 211,200 100,000 N/A 8,325
ROY A. ANDERSON(6) 1997 $226,157 $ -0- $343,035(7) $ 32,518(4) $ 5,643
Senior Vice President and 1996 N/A N/A N/A N/A
Chief Nuclear Officer 1995 N/A N/A N/A N/A
KENNETH E. ARMSTRONG 1997 $215,009 $ 10,000 $ 88,944(4) $ 9,963
Vice President and 1996 212,785 144,500 101,748 8,010
General Counsel 1995 197,995 77,000 N/A 8,910
JOHN A. HANCOCK 1997 $220,002 $ -0- $ 93,826(4) $ 10,200
Former Senior Vice 1996 217,385 115,000 130,787 8,400
President, Energy Supply 1995 199,992 105,000 109,974 8,550
(1) Unless otherwise noted, all other annual compensation paid to
the Named Executive Officers during 1997 other than salary and
annual incentive compensation, does not exceed the minimum
amounts required to be reported pursuant to SEC rules.
(2) The number of shares of restricted Common Stock held by Named
Executive Officers as of December 31, 1997 as a result of awards
earned under the 1993-1995 and 1994-1996 performance cycles and
the value of such shares as of that date, is as follows: Richard
Korpan 8,010 shares, $314,393; Joseph H. Richardson 3,062 shares,
$120,184; Jeffrey R. Heinicka 1,938 shares, $76,067; Roy A.
Anderson -0-; Kenneth E. Armstrong 1,743 shares, $68,413; and
John A. Hancock 3,091 shares, $121,322. The restrictions
were removed from all shares effective January 1, 1998.
(3) Represents contributions to the Savings Plan of Florida Progress
and/or the Executive Optional Deferred Compensation Plan on behalf
of the Named Executive Officers.
(4) Represents the dollar value as of February 18, 1998, the date
of award, of shares of Common Stock of Florida Progress earned
under the 1995-1997 performance cycle ("Cycle V") of the LTIP,
none of which are restricted. The total number of shares earned
are as follows: Richard Korpan 8,430 shares; Joseph H.
Richardson 4,217 shares; Jeffrey R. Heinicka 2,872 shares;
Roy A. Anderson 846 shares, Kenneth E. Armstrong 2,314 shares;
and John A. Hancock 2,441 shares.
The payouts listed in the Long-Term Compensation column of the
Summary Compensation table for the Named Executive Officers for the
1995-1997 performance cycle are the result of (i) the Florida
Progress Compensation Committee's determination that Cycle V
results did meet the threshold goals for Florida Power after
adjusting for strategic expenditures or expenses incurred in
connection with the buyout of the Tiger Bay purchase power
contract, the nuclear replacement fuel costs, and nuclear operating
and maintenance outage costs that exceeded the Nuclear Regulatory
<PAGE> 78
Commission mandated work for 1997; (ii) the Committee's
determination that the Cycle V results did meet the threshold goals
for certain non-utility subsidiaries, after adjusting for the
exclusion of a provision for loss on coal properties in determining
Electric Fuels' return-on-equity for 1996; (iii) the application of
a mathematical formula converting the goal level achieved into the
number of performance shares earned and (iv) adding dividend
equivalents on shares earned for the period of the performance
cycle. All payouts to the Named Executive Officers were made in
shares of Common Stock except that Mr. Hancock's award was paid in
cash.
(5) Represents $8,835 in Company Contributions to the Savings Plan of
Florida Progress and/or the Executive Optional Deferred
Compensation Plan and $7,750 of director fees for services as a
director of Echelon, a former subsidiary of Florida Progress.
(6) No compensation information is provided for 1995 and 1996 because
Mr. Anderson was not an executive officer or employee of Florida
Power during those years.
(7) Includes $282,686 paid to Mr. Anderson under the terms of his
employment agreement to place Mr. Anderson in substantially the
same economic position as he would have been had he remained
with his previous employer. Also includes reimbursement for
Mr. Anderson's moving expenses and tax reimbursement payments
for moving expenses and imputed flight income.
</TABLE>
The following table contains information with respect to Performance Shares
granted in 1997 to each of the Named Executive Officers of Florida Power for the
1997-1999 performance cycle of the LTIP:
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLAN(1)
AWARDS IN 1997
Number of Performance Estimated Payout in Shares at End of Period(3)
Performance Period ---------------------------------------------
Name Shares(2) Covered Threshold Target Maximum
- ---------------------- ---------- --------- --------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Richard Korpan 9,639 1997-1999 2,410 9,639 19,278
Joseph H. Richardson 6,426 1997-1999 1,607 6,426 12,852
Jeffrey R. Heinicka 3,406 1997-1999 852 3,406 6,812
Roy A. Anderson 3,149 1997-1999 787 3,149 6,298
Kenneth E. Armstrong 2,763 1997-1999 691 2,763 5,526
John A. Hancock 2,827 1997-1999 707 2,827 5,654
(1) The LTIP is a Common Stock and cash-based incentive plan to reward
participants for long-term performance of Florida Progress. It was approved
by the Florida Progress shareholders in 1990.
(2) The number of performance shares granted are 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 Florida Progress, 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 1997-1999 performance cycle are based on achievement of
total shareholder return goals established by the Florida Progress
Corporation Compensation Committee.
</TABLE>
<PAGE> 79
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
Florida Progress Corporation Retirement Plan, Nondiscrimination Plan and
Supplemental Executive Retirement Plan ("SERP") for specified final average
compensation and years of service levels.
<TABLE>
<CAPTION>
Estimated Annual Retirement Benefits Payable Under the Retirement Plan,
Nondiscrimination Plan and the Supplemental Executive Retirement Plan
---------------------------------------------------------------------
Average Annual
Compensation Service Years
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5 10 15 20 25 30 35 or more
$ 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
</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, 22 years of
service; Mr. Heinicka, 20 years of service; Mr. Anderson 1 year of service; and
Mr. Armstrong, 13 years of service. A description of Mr. Hancock's benefits
under the SERP are described below. Under the formula used for calculating
benefits under the SERP, the maximum benefit payable to each Named Executive
Officer is reached at 16 years of deemed credited service unless the Named
Executive Officer achieves 35 years of 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, 9 years of service; Mr.
Richardson, 22 years of service; Mr. Heinicka, 20 years of service; Mr.
Anderson, 1 year of service; Mr. Armstrong, 11 years of service; and Mr.
Hancock, 31 years 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 of Florida Progress, each Named Executive
Officer except Mr. Hancock will receive credit under the SERP for five
additional years of service. If a participant's employment is terminated
following a change in control, the benefit payable from the SERP is as follows:
(1) an annuity beginning at age 55 through 59, subject to early payment
reductions in the amount of 3% for each year prior to age 60, or age 60 without
reduction; (2) the amount of any federal excise taxes (and income taxes on any
<PAGE> 80
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.
Mr. Hancock relinquished his officer status as of December 31, 1997 and will
retire on September 30, 1998, pursuant to the "early retirement" provisions of
the SERP. Upon his retirement, Mr. Hancock will receive until age 62, an annual
retirement benefit of $180,543. After age 62, the annual benefit will be reduced
by $6,150, one-half the amount of his annual Social Security benefit. After his
death, his spouse will receive an annual survivor benefit of $90,272.
Approximately 49% of the benefits are payable pursuant to the SERP, with the
balance payable under the Retirement and Nondiscrimination Plans. Mr. Hancock
will also be paid 67.8% of his medical insurance premiums and 90.4% of his
spouse's.
In March 1997, Florida Power entered into an Employment Agreement with Roy A.
Anderson which provides for his employment from January 20, 1997 through April
30, 2003. His annual base salary will be $245,000, or such greater sum as shall
be mutually agreed, with initial award opportunities as a participant in the
Management Incentive Compensation Plan ("MICP") and LTIP of 40% of base salary
for each plan. He is entitled to participate in the SERP, and shall be credited
beginning in 2003 with up to 22 years of additional service constituting "Deemed
Credited Service" thereunder depending on the number of years of actual service.
The agreement also provides for certain payments designed to place Mr. Anderson
in substantially the same economic position as that which he would have enjoyed
had he remained with his former employer. The agreement provided for payments in
1997 for a total of $282,686 and for two payments, payable if employment
terminates other than as a result of termination for good cause. The first is a
$105,960 15-year annuity. The second is a 5-year annuity ranging from $143,000
to $231,000, depending on length of service after age 60. Both payments are to
be offset by payments made by his former employer pursuant to comparable
arrangements. The agreement contains a confidentiality agreement and covenant
not to compete.
In the event of a change in control of Florida Progress, all of the Named
Executive Officers except Mr. Hancock are entitled to benefits under individual
agreements described in Florida Progress' Proxy Statement under the heading
"Employment Contracts, Termination of Employment and Change in Control
Arrangements."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
FLORIDA PROGRESS
The information included under the headings "Security Ownership of Certain
Beneficial Owners" and "Security Ownership of Management" in Florida Progress'
Proxy Statement is incorporated herein by reference.
FLORIDA POWER
All of Florida Power's common stock is held beneficially and of record by
Florida Progress. None of Florida Power's directors or executive officers owns
any shares of Florida Power's common or preferred stock. Information concerning
shares of Florida Progress common stock that are held by persons known to
Florida Progress to be the beneficial owners of more than 5% of Florida
Progress' common stock is set forth in the table under the heading "Security
Ownership of Certain Beneficial Owners" in the Florida Progress Proxy Statement
and is incorporated herein by reference.
<PAGE> 81
The table below sets forth as of December 31, 1997, the number of shares of
common stock of Florida Progress owned by Florida Power's directors and Named
Executive Officers individually and the directors and all executive officers of
Florida Power as a group.
Florida Power Number of Shares Percent of
Officer or Director Name Beneficially Owned (1) Class (2)
- ------------------------ ---------------------- ----------
Jack B. Critchfield 51,394
W. D. ("Bill") Frederick 2,885
Michael P. Graney 3,616
Richard Korpan 24,326
Frank C. Logan 2,383
Clarence V. McKee 3,113
Vincent J. Naimoli 9,206
Richard A. Nunis 22,672
Charles B. Reed 3,768
Joseph H. Richardson 12,643
Joan D. Ruffier 4,688
Robert T. Stuart, Jr. 1,506,073 1.55%
Jean Giles Wittner 10,317
Roy A. Anderson 2,173
Kenneth E. Armstrong 5,697
John A. Hancock 18,454
Jeffrey R. Heinicka 5,692
All 19 directors, Named
Executive Officers and executive
officers as a group, including
those named above 1,694,850 1.75%
(1) As used in this table, "beneficial ownership" means the direct or indirect,
sole or shared power to vote, or to direct the voting of, a security and/or
investment power with respect to a security.
(2) Unless otherwise noted, less than 1% per individual.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
FLORIDA PROGRESS
The information included under the heading "Certain Relationships and Related
Transactions" in Florida Progress' Proxy Statement is incorporated herein by
reference.
FLORIDA POWER
With respect to Florida Power, there are no relationships or related
transactions required to be reported under this item.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
FOR FLORIDA PROGRESS AND FLORIDA POWER
(a) 1. Financial Statements, notes to Financial Statements and report
thereon of KPMG Peat Marwick LLP are found in Item 8 "Financial
Statements and Supplementary Data" herein.
2. The following Financial Statement Schedules and reports are
included herein:
Florida Progress
II-Valuation and Qualifying Accounts
for the years ended December 31,
1997, 1996 and 1995
<PAGE> 82
Florida Power
II-Valuation and Qualifying Accounts
for the years ended December 31,
1997, 1996 and 1995
All other schedules are not submitted because they are not
applicable or not required or because the required information is
included in the financial statements or notes thereto.
3. Exhibits filed herewith:
Florida Florida
Number Exhibit Progress Power
------ ------- -------- -------
3.(a) Bylaws of Florida Progress, as amended to X
date.
10.(a) Management Incentive Compensation Plan X X
of Florida Progress Corporation, as amended
to date.*
10.(b) Agreement between Florida Progress and X
Kenneth E. Armstrong dated as of January
30, 1998 regarding change in control.*
10.(c) Agreement between Florida Progress and X
Stanley I. Garnett, II dated as of January
30, 1998 regarding change in control.*
10.(d) Agreement between Florida Progress and X
Jeffrey R. Heinicka dated as of January
30, 1998 regarding change in control.*
10.(e) Agreement between Florida Progress and X
Richard D. Keller dated as of January
30, 1998 regarding change in control.*
10.(f) Agreement between Florida Progress and X
Richard Korpan dated as of January 30,
1998 regarding change in control.*
10.(g) Agreement between Florida Progress and X
Joseph H. Richardson dated as of January
30, 1998 regarding change in control.*
10.(h) Employment Agreement between Florida X
Progress and Richard Korpan dated as
of March 1, 1998.*
12 Statement of Computation of Ratios. X
21 Subsidiaries of Florida Progress. X
23.(a) Consent of Independent Certified Public X
Accountants to the incorporation by reference
of their report on the financial statements
into the following registration statements of
Florida Progress: Form S-3 (No. 33-51573)
(relating to the registration of 4.5 million
shares of common stock and filed with the SEC
on December 17, 1993); Form S-8 (No. 333-19037)
(relating to the Savings Plan for Employees
of Florida Progress and filed with the SEC on
December 31, 1996); Form S-3 (No. 333-07853)
(relating to the Progress Plus Plan and filed
with the SEC on July 10, 1996); Form S-8
<PAGE> 83
(No. 33-47623) (relating to Florida Progress'
Long-Term Incentive Plan and filed with the
SEC on May 1, 1992); Form S-3 (No. 2-93111)
(relating to the acquisition of Better Business
Forms and filed with the SEC on September 5,
1984.
23.(b) Consent of Independent Certified Public X
Accountants to the incorporation by reference
of their report on the financial statements
into Florida Power's registration statements
on Form S-3 (Nos. 33-62210 and 33-55273)
(relating to Florida Power's first mortgage
bond shelf) and Form S-3 (No. 333-29897)
(relating to Florida Power's medium-term
note shelf).
27.(a) Florida Progress Financial Data Schedule X
27.(b) Florida Power Financial Data Schedule X
4. Exhibits incorporated herein by reference:
Florida Florida
Number Exhibit Progress Power
------ -------- --------- -------
3.(b) Bylaws of Florida Power, as amended to date. X
(Filed as Exhibit 3.(b) to the Florida Power
Form 10-K for the year ended December 31,
1995, as filed with the SEC on March 20,
1996.)
3.(c) Restated Articles of Incorporation, as X
amended, of Florida Progress. (Filed
as Exhibit 3(a) to Florida Progress'
Form 10-K for the year ended December 31,
1991, as filed with the SEC on March 30,
1992.)
3.(d) Amended Articles of Incorporation, as X X
amended, of Florida Power. (Filed as
Exhibit 3(a) to the Florida Power Form
10-K for the year ended December 31, 1991,
as filed with the SEC (File No. 1-3274)
on March 30, 1992.)
4.(a) Amendment to Shareholder Rights Agreement X
dated February 20, 1997, between Florida
Progress and The First National Bank of
Boston. (Filed as Exhibit 4(a) to the
Florida Progress Form 10-K for the year
ended December 31, 1996, as filed with
the SEC on March 27, 1997.)
4.(b) Form of Certificate representing shares of X
Florida Progress Common Stock. (Filed as
Exhibit 4(b) to the Florida Progress Form
10-K for the year ended December 31, 1996,
as filed with the SEC on March 27, 1997.)
4.(c) Rights Agreement, dated as of November 21, X
1991, between Florida Progress and
Manufacturers Hanover Trust Company,
including as Exhibit A the form of Rights
Certificate. (Filed as Exhibit 4(a) to
Florida Progress' Form 8-K dated November
21, 1991, as filed with the SEC on November
27, 1991.)
4.(d) Indenture, dated as of January 1, 1944 (the X X
<PAGE> 84
"Indenture"), between Florida Power and
Guaranty Trust Company of New York and The
Florida National Bank of Jacksonville, as
Trustees. (Filed as Exhibit B-18 to Florida
Power's Registration Statement on Form A-2
(No. 2-5293) filed with the SEC on January
24, 1944.)
4.(e) Seventh Supplemental Indenture, dated as of X X
July 1, 1956, between Florida Power and
Guaranty Trust Company of New York and The
Florida National Bank of Jacksonville, as
Trustees, with reference to the modification
and amendment of the Indenture. (Filed as
Exhibit 4(b) to Florida Power's Registration
Statement on Form S-3 (No. 33-16788) filed
with the SEC on September 27, 1991.)
4.(f) Eighth Supplemental Indenture, dated as of X X
July 1, 1958, between Florida Power and
Guaranty Trust Company of New York and The
Florida National Bank of Jacksonville, as
Trustees, with reference to the modification
and amendment of the Indenture. (Filed as
Exhibit 4(c) to Florida Power's Registration
Statement on Form S-3 (No. 33-16788) filed
with the SEC on September 27, 1991.)
4.(g) Sixteenth Supplemental Indenture, dated as of X X
February 1, 1970, between Florida Power and
Morgan Guaranty Trust Company of New York and
The Florida National Bank of Jacksonville, as
Trustees, with reference to the modification
and amendment of the Indenture. (Filed as
Exhibit 4(d) to Florida Power's Registration
Statement on Form S-3 (No. 33-16788) filed
with the SEC on September 27, 1991.)
4.(h) Twenty-Ninth Supplemental Indenture, dated as X X
of September 1, 1982, between Florida Power
and Morgan Guaranty Trust Company of New York
and Florida National Bank, as Trustees, with
reference to the modification and amendment
of the Indenture. (Filed as Exhibit 4(c) to
Florida Power's Registration Statement on
Form S-3 (No. 2-79832) filed with the SEC on
September 17, 1982.)
4.(i) Thirty-Eighth Supplemental Indenture dated as X X
of July 25, 1994, between Florida Power and
First Chicago Trust Company of New York, as
successor Trustee, Morgan Guaranty Trust
Company of New York, as resigning Trustee,
and First Union National Bank of Florida, as
resigning Co-Trustee, with reference to
confirmation of First Chicago Trust Company
of New York as successor Trustee under the
Indenture. (Filed as exhibit 4.(f) to Florida
Power's Registration Statement on Form S-3
(No. 33-55273) as filed with the SEC on August
29, 1994.)
10.(i) Executive Optional Deferred Compensation X X
Plan*. (Filed as exhibit 10.(c) to the
Florida Progress Form 10-K for the year
ended December 31, 1996 as filed with the
SEC on March 27, 1997.)
10.(j) Florida Progress Supplemental Executive X X
Retirement Plan*. (Filed as exhibit
10.(b) to the Florida Progress Form 10-K
<PAGE> 85
for the year ended December 31, 1996 as
filed with the SEC on March 27, 1997.)
10.(k) Second Amended and Restated Guaranty and X
Support Agreement dated as of August 7,
1996. (Filed as Exhibit 4 to Florida
Progress' Form 10-Q for the quarter
ended June 30, 1996).
10.(l) Florida Progress Corporation Long-Term X X
Incentive Plan, approved by Florida
Progress' Shareholders on April 19,
1990. (Filed as Exhibit 10(d) to
Florida Progress' Form 10-Q for the
quarter ended March 31, 1990, as filed
with the SEC on May 14, 1990). *
10.(m) Stock Plan for Non-Employee Directors of X X
Florida Progress Corporation and Subsidiaries.
(Filed as Exhibit 4.(k) to the Florida Progress
Registration Statement on Form S-8 (No. 333-
02619) as filed with the SEC on April 18, 1996.)*
X = Exhibit is filed for that respective company.
* = Exhibit constitutes an executive compensation plan or arrangement.
In reliance upon Item 601(b)(4)(iii) of Regulation S-K, certain instruments
defining the rights of holders of long-term debt of Florida Progress and its
consolidated subsidiaries are not being filed herewith, because the total amount
authorized thereunder does not exceed 10% of the total assets of Florida
Progress and its subsidiaries on a consolidated basis. Florida Progress hereby
agrees to furnish a copy of any such instruments to the SEC upon request.
(b) Reports on Form 8-K:
During the fourth quarter of the year ended December 31, 1997,
Florida Progress and Florida Power filed the following reports on
Form 8-K:
Form 8-K dated October 16, 1997, reporting under Item 5
"Other Events" a press release and related Investor
Information Report reporting Florida Progress' and Florida
Power's third quarter 1997 earnings.
Form 8-K dated December 15, 1997, reporting under Item 5
"Other Events" a Investor News report regarding Florida
Power's Crystal River nuclear plant.
Form 8-K dated December 23, 1997, reporting under Item 5
"Other Events" an Investor News report concerning a lawsuit
filed by the receiver of MCL against Florida Progress as
well as certain former and current Directors and Officers of
Florida Progress and MCL.
In addition, Florida Progress and Florida Power filed the
following reports on Form 8-K subsequent to the fourth quarter of
1997:
Form 8-K dated January 12, 1998, reporting under Item 5
"Other Events" an Investor News report to provide an update
regarding Florida Power's Crystal River 3 and a lawsuit
filed by Calgon Corporation.
Form 8-K dated January 26, 1998, reporting under Item 5
"Other Events" a press release and related Investor News
report which stated Florida Progress' and Florida Power's
1997 year-end earnings.
Form 8-K dated January 30, 1998, reporting under Item 5
"Other Events" an Investor News report to provide an update
<PAGE> 86
regarding Florida Power's Crystal River Nuclear Plant.
Form 8-K dated February 9, 1998, reporting under Item 5
"Other Events" an Investor News report to provide an update
regarding Florida Power's Crystal River Nuclear Plant.
Form 8-K dated February 12, 1998, reporting under Item 5
"Other Events" an Investor News report to provide an update
regarding Florida Power's Crystal River Nuclear Plant.
Form 8-K dated February 19, 1998, reporting under Item 5
"Other Events" an Investor News report to report an increase
in its annual dividend.
<PAGE> 87
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
FLORIDA PROGRESS CORPORATION
March 19, 1998 By: /s/ Richard Korpan
---------------------------
Richard Korpan,
President and
Chief Executive Officer
KNOWN BY ALL MEN BY THESE PRESENTS that each of the undersigned officers
and directors of Florida Progress Corporation, a Florida corporation, for
himself or herself and not for one another, does hereby constitute and appoint
KENNETH E. ARMSTRONG, PAMELA A. SAARI and DOUGLAS E. WENTZ, and each of them, a
true and lawful attorney in his or her name, place and stead, in any and all
capacities, to sign his or her name to any and all amendments to this report,
and to cause the same to be filed with the Securities and Exchange Commission,
granting unto said attorneys and each of them full power and authority to do and
perform any act and thing necessary and proper to be done in the premises, as
fully to all intents and purposes as the undersigned could do if personally
present, and each of the undersigned for himself or herself hereby ratifies and
confirms all that said attorneys or any one of them shall lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title Date
---------- ----- -----
/s/ Richard Korpan President, Chief March 19, 1998
- ---------------------------- Executive Officer
Richard Korpan and Director
Principal Executive Officer
/s/ Jeffrey R. Heinicka Senior Vice President and March 19, 1998
- ---------------------------- Chief Financial Officer
Jeffrey R. Heinicka
Principal Financial Officer
/s/ John Scardino, Jr. Vice President and March 19, 1998
- ---------------------------- Controller
John Scardino, Jr.
Principal Accounting Officer
/s/ Jack B. Critchfield Chairman of the Board March 19, 1998
- ---------------------------- and Director
Jack B. Critchfield
Principal Executive Officer
/s/ W. D. Frederick, Jr. Director March 19, 1998
- ----------------------------
W. D. Frederick, Jr.
(Continued)
<PAGE> 88
Signature Title Date
----------- ----- -----
/s/ Michael P. Graney Director March 19, 1998
- ----------------------------
Michael P. Graney
/s/ Frank C. Logan Director March 19, 1998
- ----------------------------
Frank C. Logan
/s/ Clarence V. McKee Director March 19, 1998
- --------------------------
Clarence V. McKee
/s/ Vincent J. Naimoli Director March 19, 1998
- --------------------------
Vincent J. Naimoli
/s/ Richard A. Nunis Director March 19, 1998
- --------------------------
Richard A. Nunis
/s/ Charles B. Reed Director March 19, 1998
- --------------------------
Charles B. Reed
/s/ Joan D. Ruffier Director March 19, 1998
- --------------------------
Joan D. Ruffier
/s/ Robert T. Stuart, Jr. Director March 19, 1998
- --------------------------
Robert T. Stuart, Jr.
/s/ Jean Giles Wittner Director March 19, 1998
- --------------------------
Jean Giles Wittner
<PAGE> 89
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
FLORIDA POWER CORPORATION
March 19, 1998 By: /s/ Joseph H. Richardson
--------------------------------
Joseph H. Richardson, President
and Chief Executive Officer
KNOWN BY ALL MEN BY THESE PRESENTS that each of the undersigned officers
and directors of Florida Power Corporation, a Florida corporation, for himself
or herself and not for one another, does hereby constitute and appoint KENNETH
E. ARMSTRONG, PAMELA A. SAARI and DOUGLAS E. WENTZ, and each of them, a true and
lawful attorney in his or her name, place and stead, in any and all capacities,
to sign his or her name to any and all amendments to this report, and to cause
the same to be filed with the Securities and Exchange Commission, granting unto
said attorneys and each of them full power and authority to do and perform any
act and thing necessary and proper to be done in the premises, as fully to all
intents and purposes as the undersigned could do if personally present, and each
of the undersigned for himself or herself hereby ratifies and confirms all that
said attorneys or any one of them shall lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Joseph H. Richardson President, Chief March 19, 1998
- -------------------------- Executive Officer
Joseph H. Richardson and Director
/s/ Jeffrey R. Heinicka Senior Vice President March 19, 1998
- -------------------------- and
Jeffrey R. Heinicka Chief Financial Officer
Principal Financial Officer
/s/ John Scardino, Jr. Vice President March 19, 1998
- -------------------------- and Controller
John Scardino, Jr.
Principal Accounting Officer
/s/ Richard Korpan Chairman of the Board, March 19, 1998
- -------------------------- and Director
Richard Korpan
/s/ Jack B. Critchfield Director March 19, 1998
- --------------------------
Jack B. Critchfield
/s/ W. D. Frederick, Jr. Director March 19, 1998
- --------------------------
W. D. Frederick, Jr.
(Continued)
<PAGE> 90
Signature Title Date
----------- ----- -----
/s/ Michael P. Graney Director March 19, 1998
- --------------------------
Michael P. Graney
/s/ Frank C. Logan Director March 19, 1998
- --------------------------
Frank C. Logan
/s/ Clarence V. McKee Director March 19, 1998
- --------------------------
Clarence V. McKee
/s/ Vincent J. Naimoli Director March 19, 1998
- --------------------------
Vincent J. Naimoli
/s/ Richard A. Nunis Director March 19, 1998
- --------------------------
Richard A. Nunis
/s/ Charles B. Reed Director March 19, 1998
- --------------------------
Charles B. Reed
/s/ Joan D. Ruffier Director March 19, 1998
- --------------------------
Joan D. Ruffier
/s/ Robert T. Stuart, Jr. Director March 19, 1998
- --------------------------
Robert T. Stuart, Jr.
/s/ Jean Giles Wittner Director March 19, 1998
- --------------------------
Jean Giles Wittner
<PAGE> 91
<TABLE>
<CAPTION>
Schedule II
FLORIDA PROGRESS CORPORATION
Valuation and Qualifying Accounts
For the Years Ended December 31, 1997, 1996, and 1995
(In millions)
Balance at Additions Balance at
Beginning Charged to Other End of
Description of Period Expense Deductions Add (Ded) Period
- --------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1997
<S> <C> <C> <C> <C> <C>
Nuclear Refueling Outage Reserve $8.7 $14.0 $0.5 $ - $22.2
======= ======= ======= ======= =======
Insurance policy benefit reserves $325.3 $52.7 $ - $(378.0) (A) $0.0
======= ======= ======= ======= =======
Provision for loss on coal properties $40.9 $ - $ - $(28.1) $12.8
======= ======= ======= ======= =======
FOR THE YEAR ENDED DECEMBER 31, 1996
Nuclear Refueling Outage Reserve $14.7 $17.4 $23.4 $ - $8.7
======= ======= ======= ======= =======
Insurance policy benefit reserves $265.0 $60.3 $ - $ - $325.3
======= ======= ======= ======= =======
Provision for loss on coal properties $0.0 $40.9 $ - $ - $40.9
======= ======= ======= ======= =======
FOR THE YEAR ENDED DECEMBER 31, 1995
Nuclear Refueling Outage Reserve $6.4 $12.7 $4.4 $ - $14.7
======= ======= ======= ======= =======
Insurance policy benefit reserves $222.5 $42.5 $ - $ - $265.0
======= ======= ======= ======= =======
(A) Effective December 31, 1997, Florida Progress deconsolidated the financial
statements of Mid-Continent Life in its consolidated financial statements.
Florida Progress' investment from Mid-Continent will prospectively be accounted
for under the cost method.
</TABLE>
<PAGE> 92
<TABLE>
<CAPTION>
Schedule II
FLORIDA POWER CORPORATION
Valuation and Qualifying Accounts
For the Years Ended December 31, 1997, 1996, and 1995
(In millions)
Balance at Additions Balance at
Beginning Charged to Deductions End of
Description of Period Expense (See Note) Period
- ----------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1997
<S> <C> <C> <C> <C>
1996 Nuclear Refueling Outage Reserve (#10) $0.5 $0.0 $0.5 $0.0
1998 Nuclear Refueling Outage Reserve (#11) $8.2 $14.0 $0.0 $22.2
------- ------- ------- -------
$8.7 $14.0 $0.5 $22.2
======= ======= ======= =======
FOR THE YEAR ENDED DECEMBER 31, 1996
1996 Nuclear Refueling Outage Reserve (#10) $14.7 $9.2 $23.4 $0.5
1998 Nuclear Refueling Outage Revenue (#11) $0.0 $8.2 $0.0 $8.2
------- ------- ------- -------
$14.7 $17.4 $23.4 $8.7
======= ======= ======= =======
FOR THE YEAR ENDED DECEMBER 31, 1995
1993 Nuclear Refueling Outage Reserve (#10) $6.4 12.7 $4.4 $14.7
------- ------- ------- -------
$6.4 $12.7 $4.4 $14.7
======= ======= ======= =======
Note: Deductions are payments of actual expenditures related to the outage.
</TABLE>
EXHIBIT 3.(a)
Adopted January 21, 1982
Amended August 16, 1984
Amended November 19, 1987
Amended January 21, 1988
Amended November 17, 1988
Amended April 19, 1990
Amended August 16, 1990
Amended February 7, 1991, effective April 18, 1991
Amended and Restated April 18, 1991
Amended February 6, 1992
Amended November 19, 1992
Amended February 8, 1996, effective April 1, 1996
Amended May 15, 1997
Amended February 19, 1998
FLORIDA PROGRESS CORPORATION
BYLAWS
<PAGE> 1
BYLAWS
FLORIDA PROGRESS CORPORATION
ARTICLE I
Offices
Section 1. The registered office and headquarters of the Corporation
are in the City of St. Petersburg, County of Pinellas, State of Florida.
Section 2. The Corporation may also have an office at such other places
as the business of the Corporation may require.
ARTICLE II
Seal
The Corporate seal shall be circular in form and have inscribed thereon
the following:
Florida Progress Corporation
Corporate Seal
Florida
1982
ARTICLE III
Meetings of Shareholders
Section 1. Annual Meeting. There shall be an annual meeting of
shareholders in the month of April of each year on such date and at such time
and place as shall be designated by the Board of Directors for the election of
Directors and for the transaction of such other business as may properly be
brought before the meeting.
Section 2. Special Meetings. Special meetings of the shareholders of
the Corporation, or of the holders of any class or series of stock, required or
authorized by law, shall be held for the purpose or purposes stated in the call
of said meeting, on the call of the Chairman of the Board, or the President, or
the Board of Directors, or when the holders of not less than ten percent (10%)
of all the votes entitled to be cast on any issue proposed to be considered at
the proposed special meeting sign, date, and deliver to the Corporation's
Secretary one or more written demands for the meeting describing the purpose or
purposes for which it is to be held.
Section 3. Place; Record Date. Meetings of shareholders may be held
within or without the State of Florida. The Board of Directors shall fix a
record date in order to determine the shareholders entitled to notice of a
shareholders' meeting, to demand a special meeting, to vote or to take any other
action.
Section 4. Notice. Written notice stating the date, time and place of
each meeting and, in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than ten (10) nor more
than sixty (60) days before the meeting, either personally or by first class
mail, by or at the direction of the President, the Secretary or the officer or
persons calling the meeting, to each shareholder of record entitled to vote at
such meeting. If the notice is mailed at least thirty (30) days before the date
of the meeting, it may be done by a class of United States mail other than first
class. If mailed, such notice shall be deemed to be delivered when deposited in
the United States mail addressed to the shareholder as the address appears on
the stock transfer books of the Corporation, with postage thereon prepaid.
Section 5. Notice of Adjourned Meetings. When a meeting is adjourned to
another date, time or place, it shall not be necessary to give any notice of the
adjourned meeting if the date, time or place to which the meeting is adjourned
is announced at the meeting before the adjournment is taken, and at the
adjourned meeting any business may be transacted that might have been transacted
on the original date of the meeting. If, however, after the adjournment, the
Board of Directors fixes a new record date for the adjourned meeting, a notice
of the adjourned meeting shall be given as provided in Section 4 to each
shareholder of record as of the new record date who is entitled to notice of
such meeting.
Section 6. Quorum and Voting. A majority of the shares entitled to
vote, represented in person or by proxy, shall constitute a quorum at a meeting
of shareholders. When a specified item of business is required to be voted on by
a class or series of stock, the holders of a majority of the shares of such
class or series shall constitute a quorum for the transaction of such item of
business by that class or series.
If a quorum exists, action on a matter, other than the
election of Directors, is approved if the votes cast by the holders of the
shares represented at the meeting and entitled to vote on the subject matter
favoring the action exceed the votes cast opposing the action, unless a greater
number of affirmative votes or voting by classes is required by law or the
Articles of Incorporation. The Directors shall be elected by a plurality of the
votes cast by the shares entitled to vote in the election at a meeting at which
a quorum is present.
If a quorum does not exist, the holders of a majority of
the shares represented in person or by proxy and who would be entitled to vote
if a quorum had been present shall have the power to adjourn the meeting from
time to time, until the requisite amount of stock shall be represented. At such
adjourned meeting at which the requisite amount of stock shall be represented
any business may be transacted which might have been transacted at the original
meeting if a quorum had been present.
Section 7. Manner of Voting. A shareholder, other person entitled to
vote on behalf of a shareholder pursuant to law, or attorney-in-fact may vote
the shareholder's shares either in person or by proxy executed in writing by the
shareholder or his duly authorized attorney-in-fact in accordance with law.
Section 8. Action by Shareholders Without a Meeting. Any action
required by law, these Bylaws or the Articles of Incorporation of the
Corporation to be taken at any annual or special meeting of shareholders of the
Corporation, or any action which may be taken at any annual or special meeting
of such shareholders, may be taken without a meeting, without prior notice and
without a vote, if one or more written consents, setting forth the action so
taken, shall be dated and signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted, and shall be delivered to the Corporation within sixty (60)
days of the date of the earliest dated consent. If any class of shares is
entitled to vote thereon as a class, such written consent shall be required of
the holders of a majority of the shares of each class of shares entitled to vote
as a class thereon and of the total shares entitled to vote thereon.
Any written consent may be revoked prior to the date that
the Corporation receives the required number of consents to authorize the
proposed action. No revocation is effective unless in writing and until
received by the Corporation.
Within ten (10) days after obtaining such authorization by
written consent, notice shall be given to those shareholders who have not
consented in writing or who are not entitled to vote on the action. The notice
shall fairly summarize the material features of the authorized action and, if
the action be a merger, consolidation, sale or exchange of assets or other
action for which dissenters' rights are provided by law, the notice shall
contain a clear statement of the right of shareholders dissenting therefrom to
be paid the fair value of their shares upon compliance with further provisions
of law regarding the rights of dissenting shareholders.
A written consent shall have the same effect as a vote cast
at a meeting and may be described as such in any document.
Whenever any action is taken by written consent, the
written consents of the shareholders consenting to such action or the written
reports of inspectors appointed to tabulate such consents shall be filed with
the minutes of proceedings of shareholders.
Section 9. Advance Notice Provisions for Election of Directors. Only
persons who are nominated in accordance with the following procedures shall be
eligible for election as directors of the Corporation. Nominations of persons
for election to the Board of Directors may be made at any annual meeting of
shareholders, or at any special meeting of shareholders called for the purpose
of electing directors, (a) by or at the direction of the Board of Directors (or
any duly authorized committee thereof) or (b) by any shareholder of the
Corporation (i) who is a shareholder of record on the date of the giving of the
notice provided for in this Section 9 and on the record date for the
determination of shareholders entitled to vote at such meeting and (ii) who
complies with the notice procedures set forth in this Section 9.
In addition to any other applicable requirements, for a
nomination to be made by a shareholder 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
Corporation (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' 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.
To be in proper written form, a shareholder's notice to the
Secretary must set forth (a) as to each person whom the shareholder proposes to
nominate for election as a director (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or employment of
the person, (iii) the number of shares of common stock of the Corporation which
are owned beneficially or of record by the person and (iv) any other information
relating to the person that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with solicitations
of proxies for election of directors pursuant to Section 14 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations promulgated thereunder; and (b) as to the shareholder giving the
notice (i) the name and record address of such shareholder, (ii) the number of
shares of common stock of the Corporation which are owned beneficially or of
record by such shareholder, (iii) a description of all arrangements or
understandings between such shareholder and each proposed nominee and any other
person or persons (including their names) pursuant to which the nomination(s)
are to be made by such shareholder, (iv) a representation that such shareholder
intends to appear in person or by proxy at the meeting to nominate the persons
named in its notice and (v) any other information relating to such shareholder
that would be required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder. Such notice must be accompanied by a
written consent of each proposed nominee to be named as a nominee and to serve
as a director if elected.
No person shall be eligible for election as a director of
the Corporation unless nominated in accordance with the procedures set forth in
this Section 9. If the Chairman of the meeting determines that a nomination was
not made in accordance with the foregoing procedures, the Chairman shall declare
to the meeting that the nomination was defective and such defective nomination
shall be disregarded.
Section 10. Advance Notice Provisions for Business to be Transacted at
Annual Meeting. No business may be transacted at an annual meeting of
shareholders, other than business that is either (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors (or any duly authorized committee thereof), (b) otherwise properly
brought before the annual meeting by or at the direction of the Board of
Directors (or any duly authorized committee thereof) or (c) otherwise properly
brought before the annual meeting by any shareholder of the Corporation (i) who
is a shareholder of record on the date of the giving of the notice provided for
in this Section 10 and on the record date for the determination of shareholders
entitled to vote at such annual meeting and (ii) who complies with the notice
procedures set forth in this Section 10.
In addition to any other applicable requirements, for
business to be properly brought before an annual meeting by a shareholder, 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
Corporation 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.
To be in proper written form, a shareholder's notice to the
Secretary must set forth as to each matter such shareholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and record address of such shareholder,
(iii) the number of shares of common stock of the Corporation which are owned
beneficially or of record by such shareholder, (iv) a description of all
arrangements or understandings between such shareholder and any other person or
persons (including their names) in connection with the proposal of such business
by such shareholder and any material interest of such shareholder in such
business and (v) a representation that such shareholder intends to appear in
person or by proxy at the annual meeting to bring such business before the
meeting.
No business shall be conducted at the annual meeting of
shareholders except business brought before the annual meeting in accordance
with the procedures set forth in this Section 10, provided, however, that, once
business has been properly brought before the annual meeting in accordance with
such procedures, nothing in this Section 10 shall be deemed to preclude
discussion by any shareholder of any such business. If the Chairman of an
annual meeting determines that business was not properly brought before the
annual meeting in accordance with the foregoing procedures, the Chairman shall
declare to the meeting that the business was not properly brought before the
meeting and such business shall not be transacted.
ARTICLE IV
Directors
Section 1. Number and Term of Office. The Board of Directors of the
Corporation shall consist of twelve (12) members, divided into three (3) classes
serving staggered three-year terms in accordance with the Articles of
Incorporation. The three classes shall be designated Class I, Class II and Class
III and each Class shall consist of four directors.
{Effective with the 1998 Annual Meeting of Shareholders, Section 1 has been
amended to read as follows:}
Section 1. Number and Term of Office. The Board of
Directors of the Corporation shall consist of eleven (11) members,
divided into three (3) classes serving staggered three-year terms in
accordance with the Articles of Incorporation. The three classes shall
be designated Class I, Class II and Class III. Class I and Class III
shall consist of four directors each, and Class II shall consist of
three directors.
Section 2. Function. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the Corporation shall be
managed under the direction of, the Board of Directors.
Section 3. Qualification. Directors need not be residents of this
state or shareholders of the Corporation.
Section 4. Authority to Fix Compensation. The Board of Directors
shall have authority to fix the compensation of the Directors of the
Corporation.
Section 5. Duties of Directors. A Director shall discharge his duties
as a Director, including his duties as a member of any committee of the Board
upon which he may serve, in good faith, in a manner he reasonably believes to be
in the best interests of the Corporation, and with such care as an ordinarily
prudent person in a like position would use under similar circumstances.
In discharging his duties, a Director shall be entitled to
rely on information, opinions, reports or statements, including financial
statements and other financial data, in each case prepared or presented by:
(a) one or more officers or employees of the Corporation
whom the Director reasonably believes to be reliable and competent in the
matters presented;
(b) legal counsel, public accountants or other persons as
to matters which the Director reasonably believes to be within the persons'
professional or expert competence; or
(c) a committee of the Board of Directors upon which he
does not serve, duly designated in accordance with a provision of the Articles
of Incorporation or the Bylaws, as to matters within its designated authority,
which committee the Director reasonably believes to merit confidence.
In discharging his duties, a Director may consider such
factors as the Director deems relevant, including the long-term prospects and
interests of the Corporation and its shareholders, and the social, economic,
legal, or other effects of any action on the employees, suppliers, customers of
the Corporation or its subsidiaries, the communities and society in which the
Corporation or its subsidiaries operate, and the economy of the state and the
nation.
A Director shall not be considered to be acting in good
faith if he has knowledge concerning the matter in question which would cause
such reliance described above to be unwarranted.
A Director is not liable for any action taken as a
Director, or any failure to take any action, if he performed the duties of his
office in compliance with this Section 5.
Section 6. Removal of Directors. At a meeting of shareholders called
expressly for that purpose, any Director may be removed, only for cause, if the
number of votes cast to remove him exceeds the number of votes cast not to
remove him. If a Director is elected by a voting group or class of shares under
the Articles of Incorporation, only the shareholders of that voting group or
class may participate in the vote to remove him.
Section 7. Vacancies. Until the next election of Directors upon the
expiration of their terms, any vacancy occurring in the Board of Directors,
including any vacancy created by reason of an increase in the number of
Directors, may be filled only by the affirmative vote of a majority of the
remaining Directors, though less than a quorum of the Board of Directors. A
Director elected to fill a vacancy shall hold office only until the next
election of Directors by the shareholders and until his successor shall have
been elected and shall qualify.
ARTICLE V
Chairman of the Board
The Corporation may have a Chairman of the Board who shall be a
Director and who shall preside at all meetings of the shareholders and of the
Board of Directors. He shall advise and counsel with the President. In addition
to the responsibility for maintaining effective external relationships on behalf
of the Corporation with industry groups, governmental agencies, scientific,
educational and other similar groups, he shall exercise such other
responsibilities and duties as shall be assigned to him by the Board of
Directors. The Board of Directors shall have the power at any time to leave the
office of Chairman of the Board vacant and, in such eventuality, the President
shall assume and exercise all of the powers and responsibilities of this office.
ARTICLE VI
Meetings of the Board
Section 1. Time, Place, and Call of Meetings. Meetings of the Board
of Directors may be held within or without the State of
<PAGE>
Florida at the time fixed by these Bylaws or upon call of the Chairman of the
Board or the President or the Secretary or any two Directors.
Section 2. Annual Meeting. The annual meeting of the Board of
Directors shall be held promptly following the annual meeting of shareholders.
Section 3. Notice of Meetings. Written notice of the date, time and
place of special meetings of the Board of Directors shall be given to each
Director by either personal delivery, mail, telegram or cablegram at least two
(2) days before the meeting.
Notice need not be given of regular meetings held each
quarter on dates promulgated before the end of the preceding year. Notice of a
meeting of the Board of Directors need not be given to any Director who signs a
waiver of notice, either before or after the meeting. Attendance of a Director
at a meeting shall constitute a waiver of notice of such meeting and waiver of
any and all objection to the place of the meeting, the time of the meeting, or
the manner in which it has been called or convened, except when a Director
states, at the beginning of the meeting or promptly upon arrival at the meeting,
any objection to the transaction of business because the meeting is not lawfully
called or convened.
Neither the business to be transacted at, nor the purpose
of, any meeting of the Board of Directors need be specified in the notice or
waiver of notice of such meeting.
A majority of the Directors present, whether or not a
quorum exists, may adjourn any meeting of the Board of Directors to another time
and place. Notice of any such adjourned meeting shall be given to the Directors
who were not present at the time of the adjournment and, unless the time and
place of the adjourned meeting are announced at the time of the adjournment, to
the other Directors.
Members of the Board of Directors or any committee of the
Board of Directors may participate in a meeting by means of a conference
telephone or similar communications equipment by means of which all Directors
participating in the meeting may simultaneously hear each other during the
meeting. Participation by such means shall constitute presence in person at a
meeting. The vote on any matter before the Board or any committee of the Board,
when members are present by means of a conference telephone or similar
communication equipment, shall be by roll call.
Section 4. Action Without a Meeting. Any action required to be taken at
a meeting of the Board of Directors or a committee thereof may be taken without
a meeting if one or more written consents, setting forth the action so to be
taken, signed by all of the Directors, or all of the members of the committee,
as the case may be, is filed in the minutes of the proceeding. Action taken
under this section is effective when the last Director signs the consent, unless
the consent specifies a different effective date. A consent under this section
has the effect of a meeting vote and may be described as such in any document.
Section 5. Quorum and Voting. A majority of the number of Directors
fixed by these Bylaws shall constitute a quorum for the transaction of business.
The act of the majority of the Directors present at a meeting at which a quorum
is present when a vote is taken shall be the act of the Board of Directors.
Section 6. Presumption of Assent. A Director of the Corporation who is
present at a meeting of the Board of Directors or a committee thereof when
corporate action is taken shall be deemed to have assented to the action taken
unless he objects at the beginning of the meeting (or promptly upon his arrival)
to holding it or transacting specified business at the meeting, or he votes
against or abstains from the action taken.
Section 7. Director Conflicts of Interest. No contract or other
transaction between the Corporation and one or more of its Directors or any
other corporation, firm, association or entity in which one or more of the
Directors are directors or officers or are financially interested shall be
either void or voidable because of such relationship or interest or because such
Director or Directors are present at the meeting of the Board of Directors or a
committee thereof which authorizes, approves or ratifies such contract or
transaction or because his or their votes are counted for such purpose, if:
(a) The fact of such relationship or interest is disclosed
or known to the Board of Directors or committee which authorizes, approves or
ratifies the contract or transaction by a vote or consent sufficient for the
purpose without counting the votes or consents of such interested Directors; or
(b) The fact of such relationship or interest is disclosed
or known to the shareholders entitled to vote and they authorize, approve or
ratify such contract or transaction by vote or written consent; or
(c) The contract or transaction is fair and reasonable as
to the Corporation at the time it is authorized by the Board, a committee, or
the shareholders.
Common or interested Directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or a
committee thereof which authorizes, approves or ratifies such contract or
transaction.
Shares owned by or voted under the control of a Director
who has a relationship or interest in the subject transaction may not be counted
in the shareholders' vote to determine whether to authorize, approve, or ratify
a conflict of interest transaction under subparagraph (b) above.
ARTICLE VII
Committees
Section 1. Committees. The Board of Directors, by resolution adopted by
a majority of the full Board, may designate from among its members an Executive
Committee, Audit Committee, Finance and Budget Committee, Compensation
Committee, Nominating Committee and one or more other committees and may
designate one or more Directors as alternate members of any such committee who
may act in the place and stead of any absent member or members at any meeting of
such committee.
The members of committees, who shall be at least two in
number, shall act only as a committee and the individual members shall have no
power as such. Unless the Board of Directors elects a committee chairman, each
committee shall elect its own chairman and secretary, and have full power and
authority to make rules for the conduct of its business. The Board shall have
the power at any time to change the membership of committees, fill vacancies,
and to abolish committees.
Neither the designation of any such committee, the
delegation thereto of authority, nor action by such committee pursuant to such
authority shall alone constitute compliance by any member of the Board of
Directors not a member of the committee in question with his responsibility to
act in good faith, in a manner he reasonably believes to be in the best
interests of the Corporation, and with such care as an ordinarily prudent person
in a like position would use under similar circumstances.
Section 2. Executive Committee. The Executive Committee shall have and
may exercise all of the powers of the Board of Directors during the intervals
between the meetings of the Board in the management of the business and affairs
of the Corporation. A majority of the Executive Committee shall constitute a
quorum for the transaction of business, and the act of a majority of those
present at a meeting, at which a quorum is present, shall be the act of the
Executive Committee. The Executive Committee shall keep a record of its acts and
proceedings and make a report thereof from time to time to the Board of
Directors.
The Executive Committee shall not have the authority to:
(a) approve or recommend to shareholders actions or
proposals required by the Florida Business Corporation Act to be approved by
shareholders;
(b) fill vacancies on the Board of Directors or any
committee thereof;
(c) adopt, amend or repeal the Bylaws;
(d) authorize or approve the reacquisition of shares
unless pursuant to a general formula or method specified by the Board of
Directors; or
(e) authorize or approve the issuance or sale or contract
for the sale of shares, or determine the designation and relative rights,
preferences, and limitations of a voting group except that the Board of
Directors may authorize a committee (or a senior executive officer of the
Corporation) to do so within limits specifically prescribed by the Board of
Directors.
Section 3. Audit Committee: The Audit Committee shall be composed of at
least three outside Directors. The Committee will nominate the public accounting
firm to conduct the annual audit of the Corporation and submit the nomination to
the Board of Directors for approval. The Audit Committee shall keep a record of
its acts and proceedings and make a report thereof from time to time to the
Board of Directors.
ARTICLE VIII
Officers
Section 1. Executive Officers. The officers of the Corporation may
consist of a Chairman of the Board of Directors, and shall consist of a
President, a Secretary, a Treasurer, and such other officers as may be
determined and appointed by the Board of Directors. Officers shall be appointed
by the Board of Directors at least annually, at the first meeting of Directors
immediately following the annual meeting of shareholders of the Corporation, and
shall serve until their successors are appointed and shall qualify. Any two or
more offices may be held by the same person.
Section 2. Duties. The officers of the Corporation shall have the
following duties:
(a) President. The President shall have general and active
management of the business of the Corporation and shall see that all orders and
resolutions of the Board of Directors are carried into effect, subject, however,
to the right of the Board to delegate to others, so far as it lawfully may, any
specific powers; and shall, in the absence of the Chairman of the Board, preside
at all meetings of the shareholders and of the Board of Directors. The President
may appoint such agents as he may deem necessary, who shall hold office during
his pleasure, and who shall have such authority and shall perform such duties as
from time to time he may prescribe.
(b) Secretary. The Secretary shall have custody of, and
maintain, all of the corporate records except the financial records, shall
record the minutes of all meetings of the shareholders and of the Board of
Directors, send all notices of meetings, authenticate records of the Corporation
and perform such other duties as may be prescribed by the Board of Directors or
the President.
(c) Treasurer. The Treasurer shall have custody of all
corporate funds and shall perform such other duties as may be prescribed by the
Board of Directors or the President.
Section 3. Removal of Officers. Any officer or agent appointed by the
Board of Directors may be removed by the Board with or without cause, whenever
in its judgment the best interests of the Corporation will be served thereby.
Any vacancy, however occurring, in any office may be
filled by the Board of Directors.
An officer's removal does not affect the officer's
contract rights, if any, with the Corporation. An officer's resignation does
not affect the Corporation's contract rights, if any, with the officer. The
appointment of an officer does not of itself create contract rights.
ARTICLE IX
Capital Stock
Section 1. Certificates of Stock. The Board of Directors shall
provide for the issue and transfer of the capital stock of the Corporation and
prescribe the form of the certificates for such stock.
Section 2. Form. Certificates representing shares in the Corporation
shall be signed (either manually or in facsimile) by the President or Vice
President and the Treasurer or an Assistant Treasurer and may be sealed with the
seal of the Corporation or a facsimile thereof. In case any officer who signed
such certificate, or whose facsimile signature has been placed upon such
certificate, shall have ceased to be such officer before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer at the date of its issuance.
If and to the extent the Corporation is authorized to issue
different classes of shares or different series within a class, each certificate
representing shares shall state or fairly summarize upon the front or back of
the certificate, or shall state conspicuously on its front or back that the
Corporation will furnish to any shareholder upon request and without charge a
full statement of:
(a) The designations, preferences, limitations, and
relative rights applicable to each class.
(b) The variations in the relative rights, preferences and
limitations determined for each series, and the authority of the Board of
Directors to determine the variations for future series.
Every certificate representing shares which are restricted
as to the sale, disposition or other transfer of such shares shall state that
such shares are restricted as to transfer and shall set forth or fairly
summarize upon the certificate such restrictions, or shall state that the
Corporation will furnish to any shareholder upon request and without
charge a full statement of such restrictions.
Each certificate representing shares shall state upon the
face thereof: the name of the Corporation; that the Corporation is organized
under the laws of the State of Florida; the name of the person or persons to
whom issued; the number and class of shares; and the designation of the series,
if any, which such certificate represents.
Section 3. Transfer of Stock. The stock of the Corporation shall be
transferable or assignable on the books of the Corporation by the holders in
person or by attorney on the surrender of the certificates therefor.
ARTICLE X
Fiscal Year
The fiscal year of the Corporation shall be the calendar year.
ARTICLE XI
Indemnification of Directors, Officers and Employees
The Corporation shall indemnify any Director, officer, or employee or
any former Director, officer, or employee to the full extent permitted by law.
ARTICLE XII
Dividends
The Board of Directors of the Corporation may, from time to time,
declare, and the Corporation may pay, dividends on its shares in cash, property
or its own shares, except as prohibited by law, or when contrary to any
restrictions contained in corporate indentures, bonds, or other financing
agreements.
ARTICLE XIII
<PAGE>
Amendment
Except as provided in Article VIII of the Articles of Incorporation,
these Bylaws may be altered, amended or repealed and new Bylaws may be adopted
by an affirmative vote of at least two-thirds of the number of Directors
constituting the Board of Directors or by an affirmative vote of the holders of
at least two-thirds of the outstanding Voting Stock (as defined in Article VIII
of the Articles of Incorporation) of the Corporation.
ARTICLE XIV
Gender
All references herein to the masculine pronoun shall be deemed to
include the feminine pronoun.
PROG.FLA
As amended 2-19-98
EXHIBIT 10.(a)
FLORIDA PROGRESS CORPORATION
MANAGEMENT INCENTIVE COMPENSATION PLAN
Amended and Restated
February 20, 1997
<PAGE>
FLORIDA PROGRESS CORPORATION
MANAGEMENT INCENTIVE COMPENSATION PLAN
Article 1. General Provisions
1.1 Purpose The purpose of the Management Incentive Compensation Plan is to
benefit the shareholders and customers of the Company by offering
annual award opportunities to management for their achievement of
financial and value added individual goals.
1.2 Term of the Plan The Plan, as amended and restated, shall be effective
as of January 1, 1997 (the "Effective Date"). The Plan shall remain in
effect until such time as the Company's Board of Directors elects to
terminate the Plan.
Article 2. Definitions
The following definitions shall be established within the Plan text, and unless
the Plan text indicates otherwise, shall have the meanings set forth below:
2.1 "Base Salary Rate" shall mean the Participant's annual base salary in
effect as of December 31 of each Plan Year.
2.2 "Board" shall mean the Board of Directors of Florida Progress
Corporation.
2.3 "Chief Executive Officer" shall mean the Chief Executive Officer
Florida Progress Corporation.
2.4 "Company" shall mean the Florida Progress Corporation and its
subsidiaries.
2.5 "Compensation Committee" or "Committee" shall mean the Compensation
Committee of the Board.
2.6 "Disability" shall have the meaning ascribed to such term in the
Participant's Company sponsored tax-qualified retirement plan, or if no
such plan exists, the following definition will apply.
Shall mean any physical or mental disability arising out of natural or
accidental causes, or both, which originate subsequent to the date of
this Plan which prevents the Participant from engaging in and
performing all of the duties assigned to him and such Disability shall
have been in existence for a period of at least six months.
2.7 "Effective Date" means the date the Plan becomes effective, as set
forth in Section 1.2 herein.
2.8 "Employee" shall mean a person who is a full-time, active employee of
Florida Progress Corporation or a Subsidiary.
2.9 "Financial Goal(s)" shall mean the annual financial goal(s) established
for the Company or Subsidiary.
2.10 "Individual Goals" shall mean the established annual performance goals
and objectives for each Participant which will be used to determine the
Participant's Performance Award pursuant to the Plan.
2.11 "Participant" shall mean an Employee who is actively participating in
the Plan during any Plan Year.
2.12 "Performance Award" shall mean the amount of the cash award payable to
a Participant based on achievement of certain preestablished
performance goals during the applicable Plan Year.
2.13 "Plan" shall mean the Management Incentive Compensation Plan for the
Company as described and set forth herein.
2.14 "Plan Year" shall mean a calendar year beginning on January 1 and
ending on December 31.
2.15 "Pool" shall mean the total Performance Awards which are created and
funded based on the achievement of Financial Goal(s) with respect to
either the Company or a particular Subsidiary.
2.16 "Prorated Award" shall mean the amount of a Performance Award paid to a
Participant for participating in the Plan less than the full Plan Year
or change of Target Incentive, as provided in Article 9 hereof.
2.17 "Retirement" shall have the meaning ascribed to such term in the
Participant's Company sponsored tax-qualified retirement plan, or if no
such plan exists, under that company's retirement policy.
2.18 "Subsidiary" shall mean any operating company or other corporate entity
which is affiliated with the Company and designated by the Board to be
included in the Plan.
2.19 "Supervisor" shall mean the immediate supervisor of Participant to whom
the latter reports on a day-to-day basis for operational and
administrative direction.
2.20 "Target Incentive" shall mean the percentage of Base Salary Rate at
risk by a Participant for 100% or full achievement of the applicable
Financial Goal(s).
<PAGE>
Article 3. Administration
3.1 Compensation Committee. The Compensation Committee shall have the final
authority with respect to all matters pursuant to the Plan. Based upon
recommendations submitted by the Chief Executive Officer, and subject
to the terms of the Plan, the Compensation Committee shall have the
authority to:
(a) Review, and either accept, reject, or modify any or all of the
annual Financial Goals;
(b) Review, and either approve, reject, or modify the recommended
Performance Awards designated for the Chief Executive Officer
and Participants who are one, two and three levels removed
from the Chief Executive Officer;
(c) Subject to Article 14 hereof, revise, amend, or otherwise
change in any manner, the terms, provisions, or other features
of the Plan as the Compensation Committee sees fit from time
to time;
(d) Review, and either approve, reject or modify the total amount
of each Pool, and achievement of Financial Goals.
3.2 Chief Executive Officer. As permitted by applicable law, and subject to
the terms of the Plan, the Chief Executive Officer or designee of his
choice, is vested with authority to manage the day-to-day activities of
the Plan. The Chief Executive Officer shall make recommendations to the
Compensation Committee as to the establishment of Financial and
Individual Goals for the Plan Year, and other administrative matters
which may evolve pursuant to the Plan from time to time. Specific
authorities of the Chief Executive Officer shall be to:
(a) Determine the eligible Employees who are designated
Participants;
(b) Prepare, review and recommend to the Compensation Committee
the Performance Awards for Participants who are one, two and
three management levels removed from him;
(c) Review and recommend to the Compensation Committee the total
expenditures for all Performance Awards according to each
Subsidiary, and achievement of Financial Goals; and
(d) Designate, at his discretion, an executive to administer the
Plan within the Company or any of its Subsidiaries.
<PAGE>
Article 4. Eligibility and Participation
4.1 Eligibility. Eligibility for participation in the Plan will be limited
to those Employees who as members of management have responsibility for
decision-making and actions which significantly influence the Company's
annual performance. The nomination of Participants will be left to the
discretion of the President of each Subsidiary with the approval of the
Chief Executive Officer.
4.2 No Right of Employment. Nothing in the Plan shall imply any right of an
Employee to continue in the employ of the Company, or shall interfere
with the right of the Company to terminate such Employee's employment
at any time.
Article 5. Performance Measurement Period
The Plan measures and rewards performance achieved by the Company over the
course of the Plan Year.
Article 6. Performance Criteria
6.1 Financial Goals. The Plan's performance criteria for funding
Performance Awards shall be established each Plan Year consistent with
the Company's annual Financial Goal(s) and objectives.
6.2 Weighting of Financial Goals. Each Financial Goal established with
respect to Florida Progress Corporation and each Subsidiary shall be
weighted to reflect its relative importance in determining the size of
the Pool. The weighting of the Financial Goals by organizational entity
shall be as set forth below:
Organizational Entity Weighting of Financial Goals
Florida Progress Corporation 85% Florida Power
15% EFC (Corporate)
Subsidiary Companies 100% Subsidiary Company
Article 7. Determination of Individual Performance Awards
7.1 Size of Individual Performance Awards. The size of individual
Performance Awards shall be based upon the achievement of financial
goals the assessment of the Participant's achievement of Individual
Goals during the Plan Year. All Performance Awards are distributed from
available funds in the applicable Pool(s).
7.2 Target Award Opportunities. Each Participant will be assigned a Target
Incentive as determined by management to be commensurate with the
responsibility and impact of their position on the Strategic, Annual
Profit Plan, and Operations Goals of the Company.
The range of Participant Target Incentives, as determined by the
Committee, shall be from 10% up to 60% of the Participant's Base Salary
Rate.
7.3 Performance Award Pool. A Pool shall be established separately with
respect to the Company and each Subsidiary, and funds are not
transferrable between Pools. The amount of each Pool shall be
determined based on the level of achievement of the applicable
Financial Goal. As set forth below, at 100% achievement, the amount of
the Pool shall equal the TOTAL of the Participant Target Incentives; at
the Threshold achievement level, the amount of the Pool shall be 50% of
the TOTAL; and at the Maximum achievement level, the amount of the Pool
shall be equal to 150% of the TOTAL. Results between achievement levels
shall produce interpolated funding levels.
Financial Goal Achievement
--------------------- ------------------ ------------------
Threshold Target Maximum
--------------------- ------------------ ------------------
% of Target
Incentive 50% 100% 150%
7.4 Development of Individual Goals. During the first quarter of each Plan
Year, all Participants will develop Individual Goals which set forth
annual goals and objectives of the Participant. The Individual Goals
are to be developed as the result of discussions between the
Participant and Supervisor. These Individual Goals may be either
quantitative or qualitative and should be consistent with the Company
or Subsidiary, Strategic, Annual Profit Plan or Operations Goals for
the Plan Year.
7.5 Measurement Against the Individual Performance Plan. Following the last
quarter of the Plan Year, management will assess the performance and
recommend a Performance Award based upon the achievement of each
Participant.
7.6 Funds Not Allocated As Performance Awards. Any funds which are not
allocated to Participants shall be returned to the Company's operating
profits for the applicable Plan Year.
Article 8. Timing and Payment of Awards
8.1 Timing of Award Payments. Subject to deferrals made pursuant to
Articles 10 and 11 hereof, Participants in the Plan will receive their
Performance Awards, if any, as soon as practical after the completion
of the Plan Year.
<PAGE>
8.2 Awards Payable in Cash. All Performance Awards payable under the Plan
shall be paid in cash. All Performance Awards shall be subject to the
Company's obligation to withhold the required amount of any Social
Security, federal, state, or local taxes attributed to any amounts
payable pursuant to the Plan.
Article 9. Limited Participation and Change in Target Incentive during Plan
Year
9.1 Partial Plan Year Eligibility. Subject to Section 9.2 hereof, a
Participant must be an Employee of the Company or a Subsidiary as of
the last day of the Plan Year in order to be eligible to receive any
Performance Award pursuant to the Plan. In the event that an Employee
is a Participant in the Plan for less than a full Plan Year, the
following provisions shall apply:
(a) An Employee who becomes eligible for participation in the Plan
due to initial employment, transfer, or promotion during the
Plan Year will be eligible to receive a Prorated Award based
upon the Participant's Target Incentive at the time of
induction. In no event, however, will Prorated Awards be made
for any employment period of time less than three months
participation during the Plan Year by the Participant.
(b) The size of the Prorated Award payable pursuant to Section
9.1(a) hereof shall be determined by multiplying the
Performance Award which would have been earned by the
Participant for a full Plan Year's participation by the
fraction that reflects the number of months of active service
during the Plan Year, as follows:
Prorated = Annual x Number of Months of Active
Award Performance Service During Plan Year
Award 12
9.2 Termination of Employment Due to Retirement, Disability or Death. A
Plan Participant who is not an Employee on the last day of the Plan
Year as a direct result of Retirement, Disability, or death (in which
case the rights would pass to the Participant's beneficiary), will be
eligible to receive a Prorated Award. The Prorated Award will be
determined by multiplying the Performance Award which would have been
earned by the Participant for a full year's participation by the
fraction that reflects the number of months of active service during
the Plan Year, as set forth below:
Prorated = Annual x Number of Months of Active
Award Performance Service During Plan Year
Award 12
<PAGE>
9.3 Proration of Target Incentives. In the event a Participant's Target
Incentive changes during the Plan Year, the Performance Award shall be
determined as follows:
12/31 x Former x # of + 12/31 x New Target x # of
Base Target Months Base Incentive Months
Salary Incentive 12 Salary 12
Rate Rate
Article 10. Deferral Opportunity
10.1 Eligibility. The Chief Executive Officer may permit any eligible
Participant to defer all or a portion of his or her Performance Award
which may become payable under the terms of the Plan for any Plan Year.
It is the intent of the Company to extend eligibility to defer receipt
of Performance Awards only to those individuals who are deemed to
comprise a select group of management or highly compensated employees
such that the Plan will qualify for treatment as a "top hat" plan under
the Employee Retirement Income Security Act of 1974, as amended from
time to time or any successor act thereto.
In the event a Participant no longer meets the eligibility requirements
for making deferrals of a Performance Award under the Plan, as
determined by the Chief Executive Officer, such Participant shall
become ineligible to make further deferrals, retaining all the rights
described in Articles 10 and 11 hereof, except the right to make any
further deferrals, until such time that the Participant again becomes
eligible to make deferrals.
10.2 Participation. The Chief Executive Officer shall determine the
Participants who are eligible to make deferrals for any Plan Year
pursuant to this Article 10 based on the criteria set forth in this
Section 10.1. Participants who are deemed eligible to defer a
Performance Award for any Plan Year shall be so notified in writing.
10.3 Mandatory Deferral of Awards. The Company shall defer paying any
Performance Award, including a Performance Award previously deferred by
a Participant, to the extent it would otherwise be disallowable as a
deduction under Section 162(m) of the Internal Revenue Code, as may be
amended from time to time, until such time as the payment will be
allowed as a deduction. Such deferral shall be subject to all of the
terms and provisions set forth in Articles 10 and 11 hereof, except to
the extent that any such terms or provisions are inconsistent with this
Section 10.3, as determined by the Chief Executive Officer. In
determining the extent that such payment would be disallowable, all
other remuneration to a Participant shall first be taken into account
for purposes of the limit imposed by Section 162(m).
10.4 No Right to Defer. No Participant shall have the right to be selected
to defer a Performance Award under this Article 10 nor, having been so
selected for any given Plan Year, to be selected for any other Plan
Year.
10.5 Amount Which May Be Deferred. An eligible Participant may elect to
defer up to one hundred percent (100%) of his or her Performance Award
payable for any Plan Year. An election to defer a Performance Award for
any Plan Year shall be expressed by each Participant in increments of
ten percent (10%) of the Performance Award which may become payable
under the Plan.
10.6 Deferral Election. Eligible Participants shall make their elections to
defer the Performance Awards which may become payable under the Plan
for a given Plan Year prior to the beginning of that Plan Year, or such
earlier date as may be specified by the Chief Executive Officer. All
deferral elections shall be irrevocable, and shall be made on a
"Performance Award Deferral Election Form," as described herein.
Eligible Participants shall make the following irrevocable elections on
each "Performance Award Deferral Election Form":
(a) The percentage amount of the Performance Award to be deferred
for the Plan Year;
(b) The length of the deferral period, pursuant to the terms of
Section 10.7 herein; and
(c) The form of payment to be made to the Participant upon
Retirement, pursuant to the terms of Section 10.8 herein.
10.7 Length of Deferral. The deferral period elected by each Participant for
any Plan Year shall be either (a) until the Participant's Retirement;
or (b) for a period at least equal to one (1) year following the end of
the Plan Year in which the Performance Award is earned and no greater
than ten (10) years following such date; provided, however, that each
Participant may have only one (1) deferral period under this Section
10.7(b) outstanding at any one time. Notwithstanding the foregoing, no
deferral period selected pursuant to Section 10.7(b) may extend beyond
a Participant's Retirement.
Notwithstanding the deferral periods elected by a Participant, payment
of deferred amounts and accumulated interest thereon shall be made to
the Participant in a single lump sum in the event the Participant's
employment with the Company terminates for any reason other than
Retirement at a time prior to full payment of deferred amounts and
interest thereon. Such payment following employment termination shall
be made in cash as soon as practicable following the termination of the
Participant's employment.
10.8 Payment of Deferred Amounts. Amounts, together with interest earned
thereon, which are deferred to a date which occurs prior to a
Participant's Retirement shall be paid, in cash, in one lump sum as
soon as practicable following such date. With respect to amounts
deferred until Retirement, Participants shall be entitled to elect to
receive payment of such deferred amounts, together with earnings
thereon, in cash, commencing upon the effective date of their
Retirement, in a single lump-sum or in installments.
(a) Lump-Sum Payment. Such payment shall be made in cash as soon as
practicable following the Participant's Retirement.
(b) Installment Payments. Participants may elect payment of deferred
amounts in installments, with a minimum of two (2) installments
and a maximum of ten (10) installments. The initial payment shall
be made, in cash, as soon as practicable following the effective
date of the Participant's Retirement. The remaining installment
payments shall be made, in cash, during the first quarter of each
Plan Year thereafter, until the Participant's entire deferred
compensation account has been paid.
The amount of each installment payment shall be equal to the
balance remaining in the Participant's deferred compensation
account immediately prior to each such payment, multiplied by a
fraction, the numerator of which is one (1), and the denominator
of which is the number of installment payments.
10.9 Financial Hardship. The Committee shall have the authority to alter the
timing or manner of payment of deferred amounts in the event that the
Participant establishes, to the satisfaction of the Committee, "severe
financial hardship." In such event, the Committee may, in its sole
discretion:
(a) Authorize the cessation of deferrals by such Participant under
the Plan; or
(b) Provide that all, or a portion, of the amount previously deferred
by the Participant shall immediately be paid in a lump-sum cash
payment; or
(c) Provide that all, or a portion, of the installments payable over
a period of time shall immediately be paid in a lump-sum cash
payment; or
(d) Provide for such other installment payment schedule as deemed
appropriate by the Committee under the circumstances.
For purposes of this Section 10.9, "severe financial hardship" shall
mean any financial hardship resulting from extraordinary and
unforeseeable circumstances arising as a result of one or more recent
events beyond the control of the Participant. In any event, payment may
not be made to the extent such emergency is or may be relieved: (i)
through reimbursement or compensation by insurance or otherwise; (ii)
by liquidation of the Participant's assets, to the extent the
liquidation of such assets would not itself cause severe financial
hardship; and (iii) by cessation of deferrals under the Plan.
Withdrawals of amounts because of a severe financial hardship may only
be permitted to the extent reasonably necessary to satisfy the
hardship. Examples of what are not considered to be severe financial
hardships include the need to send a Participant's child to college or
the desire to purchase a home. The Participant's account will be
credited with interest in accordance with the Plan up to the date of
distribution.
The severity of the financial hardship shall be judged by the
Committee. The Committee's decision with respect to the severity of
financial hardship and the manner in which, if at all, the
Participant's future deferral opportunities shall be ceased, and/or the
manner in which, if at all the payment of deferred amounts to the
Participant shall be altered or modified, shall be final, conclusive,
and not subject to appeal.
Article 11. Participant's Accounts
11.1 Participants' Accounts. The Company shall establish and maintain an
individual bookkeeping account for deferrals made by each Participant
under Article 10 herein. Each account shall be credited as of the date
the amount deferred otherwise would have become due and payable to the
Participant.
11.2 Interest on Deferred Amounts. Amounts deferred under Article 10 shall
accrue interest as established by the Corporation based on the
investment return of the Stable Value Fund of the Savings Plan for
Employees of Florida Progress Corporation. Each Participant's deferred
compensation account shall be credited on the last day of each calendar
quarter, with interest computed on the beginning quarterly balance in
the account. Interest on deferred amounts shall be paid out to
Participants at the same time and in the same manner as the underlying
deferred amounts.
11.3 Charges Against Accounts. There shall be charged against each
Participant's deferred compensation account any payments made to the
Participant or to his or her beneficiary.
Article 12. Designation of Beneficiary.
Each Participant shall designate a beneficiary or beneficiaries who, upon the
Participant's death, will receive the amounts that otherwise would have been
paid to the Participant under the Plan. All designations shall be signed by the
Participant, and shall be in such form as prescribed by the Committee. Each
designation shall be effective as of the date delivered to the Vice
President-Human Resources of Florida Power Corporation by the Participant.
Participants may change their designations of beneficiary on such form as
prescribed by the Vice President - Human Resources of Florida Power Corporation.
The payment of amounts deferred under the Plan shall be in accordance with the
last unrevoked written designation of beneficiary that has been signed by the
Participant and delivered by the Participant to the Vice President - Human
Resources of Florida Power Corporation prior to the Participant's death.
In the event that all the beneficiaries named by a Participant pursuant to this
Article 12 predecease the Participant, the amounts that would have been paid to
the Participant or the Participant's beneficiaries shall be paid to the
Participant's estate. In the event a Participant does not designate a
beneficiary, or for any reason such designation is ineffective, in whole or in
part, the amounts that otherwise would have been paid to the Participant or the
Participant's beneficiaries under the Plan shall be paid to the Participant's
estate.
Article 13. Forfeiture
13.1 Forfeiture of Participation. Participants in the Plan are expected to
provide vision and leadership in the strategic management of the
Company, exhibit the corporate philosophies and maintain trusteeship of
corporate culture. Significant activity which, by its nature, impedes
the achievement of Company goals or damages the reputation of the
Company, shall result in the immediate forfeiture of participation, as
determined by the Committee in its sole discretion.
13.2 Forfeiture of Payment. As a condition of receiving benefits under this
Plan, a Participant shall not, directly or indirectly, after the
termination of his or her employment with the Company:
(a) use or disclose any financial or business information of the
Company obtained by the Participant during the course of his or
her employment, other than information that has been previously
made available to the public through normal, authorized business
channels, in a manner that would be prejudicial to the interests
of the Company. Notwithstanding the preceding requirements of
this subsection (a), a Participant may disclose information if
required by legal process or if the disclosure is protected by
the Florida Whistle-blower's Act of 1986, or any similar
applicable federal or state statute; or
(b) render any services of an advisory nature or become employed by
or participate or engage in any business in competition with the
Company, without the prior written consent of his or her
employer. A Participant shall be considered as engaging in a
business if he or she is a shareholder or other owner, or
partner, director, officer, or employee of, or consultant to,
the business; provided, that a Participant shall not be
prohibited from owning securities of a competitor if (1) the
securities owned constitute less than 2% of the competitor's
total outstanding securities of the same class and (2) the
Participant does not have the power to control, direct or
substantially influence the competitor's management or policies.
Article 14. Amendment and Termination
The Committee, in its sole discretion, without notice, at any time and from time
to time, may modify or amend, in whole or in part, any or all of the provisions
of the Plan, or suspend or terminate the Plan entirely; provided, however, that
no such modification, amendment, suspension or termination may, without the
consent of a Participant (or beneficiary, as applicable), materially and
adversely affect the right of a Participant (or beneficiary, as applicable) to a
payment or distribution hereunder with respect to an outstanding Performance
Award or previously deferred amounts.
Article 15. Miscellaneous
15.1 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining parts of the Plan and the Plan shall be
construed and enforced as if the illegal or invalid provision had not
been included.
15.2 Costs of the Plan. All costs of administering the Plan shall be borne
by the Company out of the Company's general assets. Although not
prohibited from doing so, the Company is not required, in any way, to
segregate assets in any manner or to specifically fund any benefits
provided under this Plan.
15.3 Contractual Obligation. The Plan shall create a contractual obligation
on the part of the Company to make payments from the Participants
accounts when due. Payment of account balances shall be made out of the
general funds of the Company.
15.4 Unsecured Interest. No Participant or party claiming an interest in
deferred amounts under a Participant shall have any interest whatsoever
in any specific asset of the Company. To the extent that any party
acquires a right to receive payments under the Plan, such right shall
be equivalent to that of an unsecured general creditor of the Company.
The Company may establish one or more trusts, with such trustee as the
Committee may approve, for the purpose of providing for the payment of
deferred amounts. Such trust or trusts may be irrevocable, but the
assets thereof shall be subject to the claims of the Company's general
creditors. To the extent any deferred amounts or contributions under
the Plan are actually paid from any such trust, the Company shall have
no further obligation with respect thereto, but to the extent not so
paid, such deferred amounts shall remain the obligation of, and shall
be paid by, the Company.
15.5 Nontransferability: In no event shall the Company or any Employer make
any payment under this plan to any assignee or creditor of a
Participant or of a beneficiary. Prior to the time of a payment
hereunder, a participant or a beneficiary shall have no right by way of
anticipation or otherwise to assign (including without limitation in
connection with a divorce) or otherwise dispose of any interest under
this Plan nor shall rights be assigned or transferred by operation of
law.
Article 16. Choice of Law
The validity, interpretation, and administration of the Plan and the rights of
any and all persons having or claiming to have an interest therein, shall be
determined exclusively in accordance with the laws of the State of Florida.
micpdoc.96
EXHIBIT 10.(b)
AGREEMENT
THIS AGREEMENT, dated as of January 30, 1998 (this
"Agreement"), is made by and between Florida Progress Corporation, having its
principal offices at One Progress Plaza, St. Petersburg, Florida 33701 (the
"Corporation"), and Kenneth E. Armstrong, residing at 518 Tallahassee Drive,
N.E., St. Petersburg, Florida 33702 (the "Executive").
WHEREAS, the Corporation considers it essential to the best
interests of its shareholders to foster the continued employment of key
executive and management personnel; and
WHEREAS, the Board of Directors of the Corporation (the
"Board") recognizes that the possibility of a Change in Control (as defined in
Section 1.3 below) of the Corporation exists from time to time and that such
possibility, and the uncertainty, instability and questions that it may raise
for and among key executive and management personnel, may result in the
premature departure or significant distraction of such individuals to the
material detriment of the Corporation and its shareholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce, focus and encourage the continued attention and
dedication of key executive and management personnel of the Corporation and its
subsidiaries, such as the Executive, to their assigned duties without
distraction in the face of potentially disturbing or unsettling circumstances
arising from the possibility of a Change in Control of the Corporation;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Corporation and the Executive hereby agree as
follows:
1. Definitions. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
1.1 "Annual Base Salary" shall mean the Executive's rate of
regular base annual compensation (prior to any reduction under (i) a salary
reduction agreement pursuant to section 401(k) or section 125 of the Internal
Revenue Code of 1986, as amended from time to time (the "Code") or (ii) any plan
or arrangement deferring any base salary or bonus payments), and shall not
include (without limitation) allowances, fees, retainers, reimbursements,
bonuses, incentive awards, prizes or similar payments.
1.2 "Cause" shall mean:
(i) the Executive engaging in fraud, misappropriation
or willful misconduct that is demonstrably and materially injurious to
the property or business of the Corporation and/or its subsidiaries,
monetarily or otherwise; or
(ii) the Executive's conviction of, or plea of no
contest to, a felony.
For purposes of clause (i) of this definition, no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or omitted to be done,
by the Executive in bad faith and without reasonable belief that the Executive's
act, or failure to act, was in the best interest of the Corporation or its
subsidiaries. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board or upon the instructions of the Board (or
a committee thereof), the Corporation's chief executive officer or other duly
authorized senior officer of the Corporation (as appropriate) or based upon the
advice of counsel for the Corporation shall be conclusively presumed to be done,
or omitted to be done, by the Executive in good faith and in the best interests
of the Corporation or its subsidiaries. The cessation of employment of the
Executive shall not be deemed to be for Cause unless and until there shall have
been delivered to the Executive 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 at a meeting of the Board called and held for such purpose (after
reasonable notice of any such meeting is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board) finding that, in the good faith opinion of the Board, (a) the Executive
has acted in a manner described in clause (i) above, and specifying the
particulars thereof in detail, or (b) one of the events set forth in (ii) has
occurred.
1.3 "Change in Control" shall mean and be deemed to have
occurred if:
(i) any Person is or becomes, after the date of this
Agreement, the Beneficial Owner (as that term is defined in Rule 13d-3
under the Securities Exchange Act of 1934 (the "Exchange Act")),
directly or indirectly, of securities of the Corporation (not including
in the securities beneficially owned by such Person any securities
acquired directly from the Corporation) representing twenty-five
percent (25%) or more of the combined voting power of the Corporation's
then outstanding securities; or
(ii) during any period of twenty-four (24)
consecutive months (not including any period prior to January 1, 1998),
individuals who at the beginning of such period constitute the Board
and any new director (other than a director designated by a Person who
has entered into an agreement with the Corporation to effect a
transaction described in clause (i), (iii) or (iv) of this definition
or any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents) whose election by the Board or nomination for election by the
Corporation's stockholders 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 of the Board; or
(iii) the shareholders of the Corporation approve a
reorganization, merger or consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially all
of the individuals and entities who were Beneficial Owners, immediately
prior to such reorganization, merger or consolidation, of the combined
voting power of the Corporation's then outstanding securities
beneficially own, directly or indirectly, immediately after such
reorganization, merger or consolidation, more than seventy-five percent
(75%) of the combined voting power of the securities of the corporation
resulting from such reorganization, merger or consolidation in
substantially the same proportions as their respective ownership,
immediately prior to such reorganization, merger or consolidation, of
the combined voting power of the Corporation's securities; or
(iv) the shareholders of the Corporation approve (a)
the sale or disposition by the Corporation (other than to a subsidiary
of the Corporation) of all or substantially all of the assets of the
Corporation (or any such sale or disposition is effected through
condemnation proceedings), or (b) a complete liquidation or dissolution
of the Corporation.
Notwithstanding the foregoing, a Change in Control shall not include any event,
circumstance or transaction which results from the action (excluding the
Executive's employment activities with the Corporation, Florida Power
Corporation or any of their respective subsidiaries) of any Person or group of
Persons which includes, is directly affiliated with or is wholly or partly
controlled by one or more executive officers of the Corporation or its
subsidiaries and in which the Executive actively participates.
1.4 "Corporation" shall include Florida Progress Corporation
and any successor to its business and/or assets which assumes (either expressly,
by operation of law or otherwise) and/or agrees to perform this Agreement by
operation of law or otherwise (except in determining, under Section 1.3 hereof,
whether or not any Change in Control of the Corporation has occurred in
connection with such succession).
1.5 "Disability" shall mean and be deemed the reason for the
termination by the Corporation of the Executive's employment, if, as a result of
the Executive's incapacity due to physical and/or mental illness, (i) the
Executive shall have been absent from the full-time performance of the
Executive's duties with the Corporation or any affiliate of the Corporation for
a period of six (6) consecutive months, (ii) the Corporation and/or such
affiliate gives the Executive a Notice of Termination for Disability, and (iii)
within thirty (30) days after such Notice of Termination is given, the Executive
does not return to the full-time performance of the Executive's duties.
1.6 "Employment Period" shall mean the period commencing on
the date of any Change in Control until the earliest to occur of (i) the date
which is thirty-six (36) months from the date of any such Change in Control,
(ii) the date of termination by the Executive of the Executive's employment for
Good Reason, or (iii) the termination by the Corporation of the Executive's
employment for any reason.
1.7 "Good Reason" shall mean the occurrence (without the
Executive's express written consent) of any one of the following acts, or
failures to act, unless, in the case of any act or failure to act described in
clauses (i), (iv), (v) or (vi) below, such act or failure to act is corrected by
the Corporation prior to the Date of Termination specified in the Notice of
Termination given by the Executive in respect thereof not later than six (6)
months after the occurrence of the event that serves as the basis for the Notice
of Termination:
(i) the assignment to the Executive of any duties or
responsibilities inconsistent with those described in Section 3.2 below
or with the Executive's position(s) or status (including, without
limitation, offices, titles, and reporting relationships) as an
executive officer of the Corporation and/or its primary subsidiaries or
a substantial adverse alteration in the nature of the Executive's
authorities, duties, responsibilities, position(s) or status from those
described in Section 3.2 below or otherwise;
(ii) a reduction in the Executive's Annual Base
Salary or annual bonus opportunity as in effect on the date of this
Agreement or as the same may be increased at any time thereafter and
from time to time;
(iii) the relocation of the Corporation's principal
executive offices to a location more than thirty (30) miles from its
location on the date of this Agreement (or, if different, more than
thirty (30) miles from where such offices are located immediately prior
to any Potential Change in Control) or the Corporation's requiring the
Executive to be based anywhere other than the Corporation's principal
Florida executive offices, except for required travel on the
Corporation's business to an extent substantially consistent with the
Executive's business travel obligations as of the date of this
Agreement;
(iv) the failure by the Corporation or a subsidiary
to continue in effect any pension benefit or deferred compensation plan
in which the Executive participates immediately prior to any Potential
Change in Control which is material to the Executive's total
compensation, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan or arrangement) has been made with
respect to such plan, or the failure by the Corporation or a subsidiary
to continue the Executive's participation therein (or in such
substitute or alternative plan or arrangement) on a basis not
materially less favorable, both in terms of the amount of benefits
provided and the level of the Executive's participation relative to
other participants, as existed at the time of the Potential Change in
Control;
(v) the failure by the Corporation or a subsidiary to
continue to provide the Executive with health and welfare benefits
substantially similar to those enjoyed by the Executive under any
retirement, life insurance, medical, health and accident, or disability
or similar plan of the Corporation or a subsidiary in which the
Executive was participating at the time of any Potential Change in
Control, the taking of any action by the Corporation or a subsidiary
which would directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of the Potential Change in
Control, or the failure by the Corporation or a subsidiary to provide
the Executive with the greater number of paid vacation days to which
the Executive is entitled pursuant to the terms of the Executive's
employment agreement or in accordance with the Corporation's or a
subsidiary's normal vacation policy, in either case, as in effect at
the time of the Potential Change in Control;
(vi) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 7.1;
(vii) the failure of the Corporation to obtain a
written agreement reasonably satisfactory to the Executive from any
successor to the Corporation (as described in Section 9.1) to perform
this Agreement; and/or
(viii) any termination of employment by the Executive
which occurs during the one-month period commencing on the first
anniversary of the consummation of the transaction that produced the
Change in Control.
1.8 "Person" shall have the meaning ascribed thereto in
Section 3(a)(9) of the Exchange Act, as modified, applied and used in Sections
13(d) and 14(d) thereof; provided, however, that a Person shall not include (i)
the Corporation or any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Corporation or any of
its subsidiaries (in its capacity as such), (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the
Corporation in substantially the same character and proportions as their
ownership of stock of the Corporation.
1.9 "Potential Change in Control" shall mean and be deemed to
have occurred if:
(i) the Corporation enters into an agreement, the
consummation of which would result in the occurrence of a Change in
Control;
(ii) the Corporation or any Person publicly announces
an intention to take actions which, if consummated, would constitute a
Change in Control; and/or
(iii) any Person becomes the Beneficial Owner,
directly or indirectly, of securities of the Corporation representing
fifteen (15) percent or more of the combined voting power of the
Corporation's then outstanding securities, or any Person increases such
Person's beneficial ownership of such securities by ten (10) percentage
points or more over the percentage so owned by such Person on December
31, 1997.
1.10 "Retirement" shall mean and be deemed the reason for the
termination by the Executive of the Executive's employment if such employment is
terminated upon or after normal retirement age pursuant to the pension plan of
the Corporation or any subsidiary of the Corporation in which the Executive
participates, not including any early retirement or so-called "window period"
retirements, generally applicable to its officers, as in effect immediately
prior to any Potential Change in Control.
2. Term of this Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 2001; provided,
however, that the term of this Agreement shall automatically be extended each
January 1 after the date hereof for an additional period of one (1) year unless,
not later than 6 months prior to such January 1, the Corporation gives written
notice to the Executive that it does not wish to continue such automatic
extension; and provided, further, however, that if a Change in Control shall
have occurred during the term of this Agreement, this Agreement shall continue
in effect for a period of not less than thirty-six (36) months beyond the month
in which such Change in Control occurred or, if later, eighteen (18) months
after the consummation within such thirty-six (36) month period of the
transaction that produced the Change in Control (the "Term"). Notwithstanding
the foregoing provisions of this Section 2, the Term shall terminate upon
attainment of normal retirement age as defined in the pension plan of the
Corporation.
3. Corporation's Covenants.
3.1 Severance Payments. In order to induce the Executive to
remain in the employ of the Corporation and/or one or more of its subsidiaries
and in consideration of the Executive's covenants set forth in Section 4 below,
the Corporation agrees, under the terms and conditions described herein and in
addition to the amounts payable to the Executive under Section 5 below, to pay
the Executive the "Severance Payments" described in Section 6.1 below and the
other payments and benefits described herein in the event the Executive's
employment is terminated during the Employment Period or under the other
circumstances set forth in Section 6.1 below.
3.2 Position and Duties. During the Employment Period, (i) the
Executive's position (including status, offices, titles and reporting
relationships), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of those held,
exercised and assigned at any time during the one hundred eighty (180) day
period immediately preceding any related Potential Change in Control, and (ii)
the Executive's services shall be performed at the location where the Executive
was employed immediately preceding any such Potential Change in Control, or any
office or location less than thirty (30) miles from such location.
3.3 Base Salary. During the Employment Period, the Executive
shall receive Annual Base Salary at least equal to twenty-six (26) times the
highest bi-weekly base salary paid or payable, including (without limitation)
any base salary which has been earned but deferred, to the Executive by the
Corporation and its affiliated companies in respect of the twelve (12) month
period immediately preceding the month in which any related Potential Change in
Control occurs. The Executive's Annual Base Salary shall be reviewed annually
for potential increase. In addition, Annual Base Salary shall not be reduced
after the occurrence of a Potential Change in Control. As used in this
Agreement, the term "affiliated companies" shall include any company controlled
by, controlling or under common control with the Corporation.
3.4 Incentive Plans.
a. MICP. The Executive shall be awarded for each
fiscal year ending within the Employment Period an annual bonus (the "Annual
Bonus") in cash at least equal to the target annual bonus incentive award
received by the Executive under the Corporation's Management Incentive
Compensation Plan, or any other annual incentive bonus plan maintained by
the Corporation from time to time (the "MICP") for the fiscal year in which the
Change in Control occurs. Each Annual Bonus shall be paid no later than the end
of the third month of the fiscal year next following the fiscal year for which
the Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus in accordance with rules established by the
Corporation for that purpose.
b. LTIP. The Executive shall be awarded for each
award period that begins within the Employment Period a grant of performance
shares at least equal to the annual long-term incentive award received by the
Executive (not taking into account any pro-ration) under the Corporation's
Long-Term Incentive Plan or any other long-term incentive bonus plan
maintained by the Corporation from time to time (the "LTIP") for the fiscal year
in which the Change in Control occurs, and such shares shall be subject to
performance goals consistent with those established by the Corporation for the
fiscal years prior to the fiscal year in which the Change in Control occurs.
3.5 Savings and Retirement Plans. During the Employment
Period, the Executive (in addition to the Incentive Plans) shall be entitled to
participate in all other incentive, savings and retirement plans, practices,
policies and programs applicable generally to other peer executives of the
Corporation and its subsidiaries, but in no event shall such plans, practices,
policies and programs provide the Executive with incentive opportunities
(measured with respect to both regular and special incentive opportunities, to
the extent, if any, that such distinction is applicable), savings opportunities
and retirement benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Corporation and its
affiliated companies for the Executive under such plans, practices, policies and
programs as in effect at any time during the one hundred eighty (180) day period
immediately preceding any related Potential Change in Control or, if more
favorable to the Executive, those provided generally at any time thereafter to
other peer executives of the Corporation and its affiliated companies.
3.6 Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be entitled
to participate in and shall receive all benefits under all of the health and
welfare benefit plans, practices, policies and programs provided by the
Corporation and its affiliated companies (including, without limitation,
medical, prescription, dental, disability, employee life, group life, accidental
death and travel accident insurance plans and programs) to the extent (and at
the same cost, excluding increases in the employee contribution amounts which
are consistent with and equivalent to the historical rates of increase imposed
by the Corporation in respect thereof) applicable generally to other peer
executives of the Corporation and its subsidiaries, but in no event shall such
plans, practices, policies and programs provide the Executive with benefits that
are less favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for the Executive at any time during
the one hundred eighty (180) day period immediately preceding any related
Potential Change in Control or, if more favorable to the Executive, those
provided generally at any time thereafter to other peer executives of the
Corporation and its affiliated companies.
3.7 Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable business
expenses incurred by the Executive in accordance with the most favorable
policies, practices and procedures of the Corporation and its affiliated
companies in effect for the Executive at any time during the one hundred eighty
(180) day period immediately preceding any related Potential Change in Control
or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Corporation and its
affiliated companies.
3.8 Office Support; Perquisites. During the Employment Period,
the Executive shall be entitled to secretarial support and other facilities,
perquisites and programs to enable the Executive to be able to discharge the
Executive's responsibilities hereunder in accordance with the most favorable
plans, practices, programs and policies of the Corporation and its affiliated
companies in effect for the Executive at any time during the one hundred eighty
(180) day period immediately preceding any related Potential Change in Control
or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Corporation and its
affiliated companies.
3.9 Vacation. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Corporation and its affiliated
companies, or pursuant to the terms and provisions of any employment agreement,
as in effect for the Executive at any time during the one hundred eighty (180)
day period immediately preceding any related Potential Change in Control or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Corporation and its affiliated
companies.
4. The Executive's Covenants.
4.1 Employment. The Executive agrees that, subject to the
terms and conditions of this Agreement, in the event of a Change in Control
during the Term the Executive will remain in the employ of the Corporation
during any related Employment Period.
4.2 Time and Attention. During the Employment Period, and
excluding any periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of the Corporation and to use
the Executive's reasonable best efforts to perform faithfully and efficiently
the responsibilities and duties assigned to the Executive hereunder. During the
Employment Period it shall not be a violation of this Agreement for the
Executive to (i) serve on corporate, civic or charitable boards or committees,
(ii) deliver lectures and fulfill speaking engagements and (iii) manage personal
investments, so long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the
Corporation and its subsidiaries in accordance with this Agreement. It is
expressly understood and agreed that to the extent that any such activities have
been conducted by the Executive prior to any Potential Change in Control, the
reinstatement or continued conduct of such activities (or the reinstatement or
conduct of activities similar in nature and scope thereto) subsequent to any
related Potential Change in Control shall not thereafter be deemed to interfere
with the performance of the Executive's responsibilities to the Corporation and
its subsidiaries.
4.3. Non-interference; Confidential Information;
Non-Competition
(a) No Interference. For so long as the Executive is employed
by the Corporation, and for a period of one (1) year after termination of the
Executive's employment for any reason after a Change in Control, the Executive
shall not, whether for his own account or for the account of any other
individual, partnership, firm, corporation or other business organization (other
than the Corporation or one of its affiliates), directly or indirectly,
intentionally solicit, endeavor to entice away from the Corporation (or any of
its affiliates), or otherwise interfere with the relationship of the Corporation
(or any of its affiliates) with, any person who is employed by or otherwise
engaged to perform services for the Corporation (or any of its affiliates)
including, but not limited to, any independent representatives or organizations,
or any person or entity that is a customer of the Corporation (or any of its
affiliates); provided, however, that if a customer of the Corporation (or any of
its affiliates) also engages in business in areas outside of Florida that are
not served by the business of the Corporation (and/or any of its affiliates)
with which the Executive is involved, the Board of Directors may determine, in
an appropriate situation, that the solicitation of such customer in such areas
does not violate the restrictions of this Section 4.3(a). The Executive
understands and agrees that the rights and obligations set forth in this Section
4.3(a) could extend beyond the Term.
(b) Confidential Information. The Executive covenants and
agrees with the Corporation that he will not at any time, during or after
employment with the Corporation, except in performance of the Executive's
obligations to the Corporation or with the prior express written consent of the
Board of Directors, directly or indirectly, intentionally or unintentionally,
disclose any Confidential Information that he may learn or has learned by reason
of his employment or association with the Corporation or any of its affiliates,
or any predecessors to its business, or use any such information for his own
personal benefit or gain. The term "Confidential Information" includes, without
limitation, information not previously disclosed to the public or to the trade
by the Corporation's management with respect to the products, facilities and
methods, trade secrets and other intellectual property, systems, procedures,
manuals, confidential reports, fee or rate information, customer lists,
financial information (including without limitation the revenues, costs or
profits associated with any of the Corporation's (or any of its affiliates')
activities or products), business plans, prospects, opportunities or other
information of the Corporation or any of its affiliates. Confidential
Information shall not include information which (i) is or becomes generally
available to the public other than as a result of disclosure by the Executive in
violation of this Section 4.3(b) or (ii) the Executive is required to disclose
under any applicable laws, regulations or directives of any government agency,
tribunal or authority having jurisdiction in the matter or under subpoena or
other process of law. The Executive understands and agrees that the rights and
obligations set forth in this Section 4.3 (b) shall extend beyond the Term.
(c) Exclusive Property. The Executive confirms that all
Confidential Information is and shall remain the exclusive property of the
Corporation or any of its affiliates. All business records, papers and documents
kept or made by the Executive relating to the business of the Corporation (or
any of its affiliates) or any Confidential Information shall be and remain the
property of the Corporation and/or any such affiliates. Upon termination of
employment or upon the request of the Corporation at any time, the Executive
shall promptly deliver to the Corporation, and shall not without the prior
express written consent of the Corporation retain, any and all copies of (i) any
written materials not previously made available to the public, or (ii) records
and documents made by the Executive or coming into his possession concerning any
Confidential Information or the business or affairs of the Corporation or any
predecessors to its business, or any of its affiliates. The Executive
understands and agrees that the rights and obligations set forth in this Section
4.3(c) shall extend beyond the Term.
(d) Covenant Not to Compete. During the Employment Period and
for one (1) year after termination of the Executive's employment for any reason
after a Change in Control, the Executive shall not compete, directly or
indirectly, with the Corporation or its affiliates within fifty (50) miles of
any geographic area in which the Corporation or its affiliates has material
business interests with which the Executive is involved at the time of the
termination of the Executive's employment. If it is judicially determined that
this provision, or any portion thereof, is unenforceable under applicable law(s)
(statute, common law or otherwise), then it is hereby agreed by the Executive
and the Corporation that the unenforceable portion shall be redrafted to the
extent necessary to render it enforceable, while leaving the remaining portions
intact. By agreeing to this contractual modification prospectively at this time,
the parties intend to make this provision enforceable under the law(s) of all
applicable states so that the entire agreement not to compete and/or this
Agreement as prospectively modified shall remain in full force and effect and
shall not be rendered void or illegal. Such modifications shall not affect the
payments made to the Executive under this Agreement. The Executive acknowledges
that his skills are such that he can be gainfully employed in noncompetitive
employment and that the agreement not to compete will in no way prevent him from
earning a living. The Executive understands and agrees that the rights and
obligations set forth in this Section 4.3(d) shall extend beyond the Term.
(e) Injunctive Relief. Without intending to limit the remedies
available to the Corporation, the Executive acknowledges that a breach of any of
the covenants contained in this Section 4.3 may result in material irreparable
injury to the Corporation or its affiliates for which there is no adequate
remedy at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of such a breach or threat thereof, the
Corporation shall be entitled to obtain a temporary restraining order and/or a
preliminary or permanent injunction restraining the Executive from engaging in
activities prohibited by this Section 4.3 or such other relief as may be
required to specifically enforce any of the covenants in this Section 4.3.
5. Compensation Other Than Severance Payments.
5.1 Disability. Following a Potential Change in Control and
during the Term, during any period that the Executive fails to perform the
Executive's full-time duties with the Corporation as a result of incapacity due
to physical or mental illness, the Executive's full salary shall be paid to the
Executive at a rate no less than the rate in effect at the commencement of any
such disability period, together with all compensation and benefits payable to
the Executive under the terms of any compensation or benefit plan, program or
arrangement maintained by the Corporation or its subsidiaries during such
disability period, until the Executive's employment is terminated by the
Corporation for Disability.
5.2 Base Salary. If the Executive's employment shall be
terminated for any reason following a Potential Change in Control and during the
Term, the Executive's full salary shall be paid to the Executive through the
Date of Termination (as defined below in Section 7.2) at the rate in effect at
the time the Notice of Termination is given, together with all compensation and
benefits payable to or with respect to the Executive through the Date of
Termination under the terms of any compensation or benefit plan, program or
arrangement maintained by the Corporation or its subsidiaries during such
period.
5.3 Benefits. If the Executive's employment shall be
terminated for any reason following a Potential Change in Control and during the
Term, the Executive's normal post-termination compensation and benefits shall be
paid to the Executive as such payments become due. Such post-termination
compensation and benefits shall be determined under, and paid in accordance
with, the retirement, health insurance, life insurance and other compensation
(including without limitation any bonus and/or incentive compensation) or
benefit plans, programs and arrangements maintained by the Corporation or its
subsidiaries or affiliates.
6. Severance Payments.
6.1 Severance. The Corporation shall pay the Executive the
payments and benefits described in Section 6.1(a), (b) and (c) (the "Severance
Payments") upon the termination of the Executive's employment following a Change
in Control and during the Term, in addition to the payments and benefits
described in Section 5 hereof, unless such termination is (i) by the Corporation
for Cause, (ii) by reason of Retirement, (iii) by the Executive without Good
Reason, (iv) due to death, or (v) due to Disability. In addition, the
Executive's employment shall be deemed to have been terminated following a
Change in Control by the Corporation without Cause or by the Executive with Good
Reason (a) if the Executive reasonably demonstrates that the Executive's
employment was terminated prior to a Change in Control without Cause (1) at the
request of a Person who has entered into an agreement with the Corporation the
consummation of which will constitute a Change in Control (or who has taken
other steps reasonably calculated to effect a Change in Control) or (2)
otherwise in connection with, as a result of or in anticipation of a Change in
Control, or (b) if the Executive terminates his employment for Good Reason prior
to a Change in Control and the Executive reasonably demonstrates that the
circumstance(s) or event(s) which constitute such Good Reason occurred (1) at
the request of such Person or (2) otherwise in connection with, as a result of
or in anticipation of a Change in Control. The Executive's right to terminate
the Executive's employment for Good Reason shall not be affected by the
Executive's incapacity due to physical or mental illness. The Executive's
continued employment shall not constitute consent to, or a waiver of rights with
respect to, any act or failure to act constituting Good Reason hereunder. In the
event of Disability or death of the Executive after the Date of Termination in
respect of any termination without Cause or any termination for Good Reason,
payments and benefits shall be made to the Executive, or the Executive's
beneficiaries or legal representative, as the case may be.
(a) Lump Sum Payment. A lump sum payment equal to two
and one-half (2.50) times the highest "total 12-month compensation" of
the Executive (whether or not deferred) for any 12-month period during
the five (5) completed calendar years prior to the Date of Termination,
where "total 12-month compensation" means the sum of the Executive's
Annual Base Salary during such 12-month period and the full amount of
the Executive's MICP award (target or actual, whichever is greater)
that was payable during such 12-month period (or annualized 12-month
period if the Executive has not completed 12 months of employment).
(b) Welfare Plan Continuation. For a thirty (30)
month period after the Date of Termination, or if sooner, until the
Executive reaches the age of sixty-five (65) years, the Corporation
shall provide the Executive (at no cost to the Executive) with life,
disability, accident and health insurance benefits substantially
similar to those that the Executive is receiving immediately prior to
any related Potential Change in Control or the receipt of the Notice of
Termination (without giving effect to any reduction in such benefits
subsequent to a Change in Control which reduction constitutes Good
Reason), whichever is greater; provided, however, that the final 18
months of the continued coverage period hereunder shall be deemed to
constitute the full amount of the Executive's entitlement to COBRA
benefits as a result of the Executive's termination of employment. Upon
the termination of the Executive's continued benefits provided under
the prior sentence, the Executive shall be eligible to continue such
benefits (at the Executive's cost) to the same extent that such
benefits are provided by the Corporation thereafter (the "Continued
Access Period") to comparable executives and, after the Executive
attains age 65, to retired executives. Benefits otherwise receivable by
the Executive pursuant to the first sentence of this Section 6.1(b)
shall be reduced to the extent comparable benefits are actually
received by or made available to the Executive without cost during such
period following the Executive's termination of employment (and any
such benefits actually received by the Executive shall be reported to
the Corporation by the Executive). Continued coverage during the
Continued Access Period shall terminate if comparable benefits are made
available to the Executive under any other policy or program (and the
availability of any such benefits shall be reported to the Corporation
by the Executive).
(c) LTIP. Performance shares granted to the Executive
under the LTIP for performance cycles commencing after a Change in
Control has occurred and remaining uncompleted will be deemed earned as
of the Date of Termination to the extent of one hundred fifty percent
(150%) of target under each award agreement, and the value of each such
award will be paid out to the Executive in a lump-sum cash payment.
Performance shares granted to the Executive under the LTIP for
performance cycles which commenced after a Change in Control occurred
and were completed before the Date of Termination will be paid out to
the extent earned, and the value of such award will be paid out to the
Executive in a lump-sum cash payment.
(d) SERP; Other Deferred Compensation. The Executive
shall receive credit under the Corporation's Supplemental Executive
Retirement Plan ("SERP") for five (5) additional years of service and
shall immediately become 100% vested in the Executive's accrued benefit
and/or account balance to date under the SERP and any non-qualified
deferred compensation plan, and any amendment, modification or
termination of any such plan occurring during the Term of this
Agreement after any Change in Control shall not be effective against
the Executive to decrease or change any of the Executive's rights
thereunder.
(e) Relocation and Other Assistance. Should the
Executive be required to move his or her primary residence in order to
pursue other business opportunities within thirty (30) months of the
Date of Termination, the Company will reimburse the Executive for any
expenses (not in excess of $10,000) incurred in that relocation that
are not reimbursed by another employer, including, without limitation,
assistance in selling the Executive's home and all other assistance and
benefits that were customarily provided by the Corporation to
transferred executives prior to the Change in Control. In addition, if
the Executive retains legal counsel with respect to the taxation of
payments to be made to the Executive under this Agreement, the
Corporation shall reimburse the Executive for such reasonable legal
fees and disbursements (but not in excess of $15,000).
6.2 Special Reimbursement. (a) Notwithstanding any other
provisions of this Agreement, in the event that any payment or benefit received
or to be received by the Executive in connection with a Change in Control or the
termination of the Executive's employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Corporation or
any of its subsidiaries, any Person whose actions result in a Change in Control
or any Person affiliated with the Corporation or such Person) (all such payments
and benefits, including the Severance Payments, being hereinafter called "Total
Payments") would subject the Executive to the excise tax imposed under Section
4999 of the Code or any successor section thereto (the "Excise Tax"), the
Corporation shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Executive, after deduction of
any Excise Tax on the Total Payments and any federal, state and local income tax
and Excise Tax upon the payment provided for by this Section 6.2(a), shall be
equal to the Total Payments.
(b) For purposes of determining whether any of the
Total Payments will be subject to the Excise Tax and the amount of such Excise
Tax, (i) the Total Payments shall be treated as "parachute payments"
within the meaning of section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of section 280G(b)(1) of the Code shall
be treated as subject to the Excise Tax, unless in the opinion of tax counsel
selected by the Corporation's general counsel and reasonably acceptable to the
Executive such Total Payments (in whole or in part) do not constitute parachute
payments, including by reason of Section 280G(b)(4)(A) of the Code, or such
excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered, within the meaning of section
280G(b)(4)(B) of the Code, in excess of the Base Amount allocable to such
reasonable compensation, or are otherwise not subject to the Excise Tax, and
(ii) the value of any non-cash benefits or any deferred payment or benefit shall
be determined by the Corporation's independent auditors in accordance with the
principles of sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, the Executive shall be deemed
to pay federal income taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to be made and
applicable state and local income taxes at the highest marginal rate of
taxation, net of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes.
(c) In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at the time
of termination of the Executive's employment, the Executive shall repay to the
Corporation, at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment attributable to such
reduction plus interest on the amount of such repayment at the rate provided in
section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any payment
the existence or amount of which cannot be determined at the time of the
Gross-Up Payment), the Corporation shall make an additional Gross-Up Payment
in respect of such excess (plus any interest, penalties or additions payable by
the Executive with respect to such excess) at the time that the amount of such
excess is finally determined. The Executive and the Corporation shall each
reasonably cooperate with the other in connection with any administrative or
judicial proceedings concerning the existence or amount of any such subsequent
liability for Excise Tax with respect to the Total Payments.
6.3 Date of Payment. The payments provided for in Section 6.2
hereof shall be made not later than the fifteenth (15th) day following the Date
of Termination; provided, however, that if the amounts of such payments cannot
be finally determined on or before such day, the Corporation shall pay to the
Executive on such day an estimate, as determined in good faith by the
Corporation, of the minimum amount of such payments to which the Executive is
likely to be entitled to and shall pay the remainder of such payments (together
with interest at the rate provided in section 1274(b)(2)(B) of the Code) as soon
as the amount thereof can be determined but in no event later than the sixtieth
(60th) day after the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Corporation to the Executive, payable
on the tenth (10th) business day after demand by the Corporation (together with
interest at the rate provided in section 7872(f)(2)(A) of the Code). At the time
that payments are made under this Section 6.3, the Corporation shall provide the
Executive with a detailed written statement setting forth the manner in which
such payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Corporation has received
from outside counsel, auditors or consultants (and any such opinions or advice
which are in writing shall be attached to the statement).
6.4 Legal Costs. The Corporation shall reimburse the Executive
for reasonable legal fees and expenses incurred in good faith by the Executive
as a result of any dispute with any party (including, but not limited to, the
Corporation or any subsidiary of the Corporation) regarding the payment or
receipt of any benefit provided for in this Agreement (including, but not
limited, all such fees and expenses incurred in disputing any termination or in
seeking in good faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code) plus in each case
interest on any delayed payment at the applicable Federal rate provided for in
section 7872(f)(2)(A) of the Code. Such payments shall be made within five (5)
business days after delivery of the Executive's written requests for payment
accompanied by such evidence of fees and expenses incurred as the Corporation
reasonably may require.
7. Termination Procedures and Compensation During Dispute.
7.1 Notice of Termination. After a Change in Control and
during the Term, any purported termination of the Executive's employment (other
than by reason of death) shall be communicated by written Notice of Termination
from one party hereto to the other party hereto in accordance with Section 10
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated. Further, a Notice of Termination for Cause is
required to include 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 at a
meeting of the Board which was called and held for the purpose of considering
such termination (which meeting may be a regular meeting of the Board where
prior notice of consideration of such termination is given to members of the
Board) finding that, in the good faith opinion of the Board, (i) the Executive
engaged in conduct set forth in clause (i) or (ii) of the definition of Cause
herein, and specifying the particulars thereof in detail, or (ii) one of the
events set forth in clause (ii) of such definition has occurred. For purposes of
this Agreement, any purported termination not effected in accordance with this
Section 7.1 shall not be considered effective.
7.2 Date of Termination. "Date of Termination", with respect
to any purported termination of the Executive's employment after a Potential
Change in Control and during the Term, shall mean (i) if the Executive's
employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
full-time performance of the Executive's duties during such thirty (30) day
period), and (ii) if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination (which, in the case of a
termination by the Corporation, shall not be less than thirty (30) days (except
in the case of a termination for Cause) and, in the case of a termination by the
Executive, shall not be less than fifteen (15) days nor more than sixty (60)
days, respectively, after the date such Notice of Termination is given).
7.3 Dispute Concerning Termination. If within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved either by mutual written agreement of the
parties or by a final judgement, order, or decree of an arbitrator or a court of
competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected);
provided, however, that the Date of Termination shall not be extended by a
notice of dispute if the basis for such notice, as determined in good faith by
the party receiving such notice is not given in good faith or the party giving
such notice does not pursue the resolution of such dispute with reasonable
diligence. Subject to the rights granted by Section 4.3, any controversy or
claim arising out of, or relating to, any provision of this Agreement shall be
settled by binding arbitration in accordance with the laws of The State of
Florida by three arbitrators, one of whom shall be appointed by the Corporation,
one by the Executive, and the third by the first two arbitrators. If the first
two arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association.
Such arbitration shall be conducted in Florida in accordance with the rules of
the American Arbitration Association, except with respect to the selection of
arbitrators which shall be as provided in this Section. Judgment on the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
7.4 Compensation During Dispute. If a purported termination
occurs following a Change in Control and during the Term, and such termination
is disputed in accordance with Section 7.3 above (and pursuant thereto the Date
of Termination is extended), the Corporation shall continue to pay the Executive
the full Annual Base Salary in effect at the time of any related Potential
Change in Control or when the notice giving rise to the dispute was given
(whichever is greater). Amounts paid under this Section 7.4 are in addition to
all other amounts due under this Agreement (other than those due under Section
5.2 hereof) and shall not be offset against or reduce any other amounts due
under this Agreement or any other plan, agreement or arrangement.
8. No Mitigation. The Corporation agrees that, if the Executive's
employment is terminated during the Term, the Executive is not required to seek
other employment or to attempt in any way to reduce any amounts payable to the
Executive by the Corporation pursuant to Section 6 or Section 7.4. Further, the
amount of any payment or benefit provided for in Section 6 (other than pursuant
to Section 6.1.(b)) or Section 7.4 shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, or offset against any amount claimed to be owed by the
Executive to the Corporation or any of its subsidiaries, or otherwise.
9. Successors; Binding Agreement.
9.1 Successors. In addition to any obligations imposed by law
upon any successor to the Corporation, the Corporation will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Corporation to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Corporation would be required to perform
it if no such succession had taken place. Failure of the Corporation to obtain
such assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle the Executive to
compensation from the Corporation in the same amount and on the same terms as
the Executive would be entitled to hereunder if the Executive were to terminate
employment with the Corporation for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination.
9.2 Binding Agreement. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would still
be payable to the Executive hereunder (other than amounts which, by their terms,
terminate upon the death of the Executive) if the Executive had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the beneficiary (or
beneficiaries) designated by the Executive from time to time in accordance with
the procedures for notice set out in Section 10; provided, however, that if
there shall be no effective designation of beneficiary by the Executive, such
amounts shall be paid to the executors, personal representatives or
administrators of the Executive's estate.
10. Notices; Other Communications. For the purpose of this Agreement,
notices and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or mailed by
United States certified mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth below, or to such other address
as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
actual receipt:
To the Corporation: Florida Progress Corporation
P.O. Box 33042
St. Petersburg, Florida 33733
With a copy to: Mr. William G. Kelley
Vice President, Human Resources
Florida Progress Corporation
3201 34th Street South
St. Petersburg, Florida 33711
To the Executive: Mr. Kenneth E. Armstrong
518 Tallahassee Drive, N. E.
St. Petersburg, Florida 33702
11. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Florida without regard to the principles of conflict
of laws thereof. All references to sections of the Exchange Act or the Code (or
the rules and/or regulations under either) shall be deemed also to refer to and
include any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding required under
federal, state or local law and any additional withholding to which the
Executive has agreed. The rights and obligations of the Corporation and the
Executive under this Agreement shall survive the expiration of the Term and the
Employment Period.
12. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, all of which shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. No Limitation. Nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any plan, program, policy or
practice provided by the Corporation or any of its affiliated companies and for
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement with the Corporation or any of its affiliated companies. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan, policy, practice or program of or any contract or agreement with
the Corporation or any of its affiliated companies at or subsequent to the Date
of Termination shall be payable in accordance with such plan, policy, practice
or program or contract or agreement as in effect from time to time except as
explicitly modified by this Agreement.
15. Other Agreements. This Agreement contains the entire agreement
between the parties concerning the subject matter hereof and supersedes all
prior agreements understandings, discussions, negotiations and undertakings,
whether written or oral, between the parties with respect thereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
FLORIDA PROGRESS CORPORATION
By: /s/ Richard Korpan
-----------------------------
RICHARD KORPAN
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
/s/ Kenneth E. Armstrong
-----------------------------
Executive
EXHIBIT 10.(c)
AGREEMENT
THIS AGREEMENT, dated as of January 30, 1998 (this
"Agreement"), is made by and between Florida Progress Corporation, having its
principal offices at One Progress Plaza, St. Petersburg, Florida 33701 (the
"Corporation"), and Stanley I. Garnett, residing at 401 First Avenue South,
Tierra Verde, Florida 33715 (the "Executive").
WHEREAS, the Corporation considers it essential to the best
interests of its shareholders to foster the continued employment of key
executive and management personnel; and
WHEREAS, the Board of Directors of the Corporation (the
"Board") recognizes that the possibility of a Change in Control (as defined in
Section 1.3 below) of the Corporation exists from time to time and that such
possibility, and the uncertainty, instability and questions that it may raise
for and among key executive and management personnel, may result in the
premature departure or significant distraction of such individuals to the
material detriment of the Corporation and its shareholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce, focus and encourage the continued attention and
dedication of key executive and management personnel of the Corporation and its
subsidiaries, such as the Executive, to their assigned duties without
distraction in the face of potentially disturbing or unsettling circumstances
arising from the possibility of a Change in Control of the Corporation;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Corporation and the Executive hereby agree as
follows:
1. Definitions. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
1.1 "Annual Base Salary" shall mean the Executive's rate of
regular base annual compensation (prior to any reduction under (i) a salary
reduction agreement pursuant to section 401(k) or section 125 of the Internal
Revenue Code of 1986, as amended from time to time (the "Code") or (ii) any plan
or arrangement deferring any base salary or bonus payments), and shall not
include (without limitation) allowances, fees, retainers, reimbursements,
bonuses, incentive awards, prizes or similar payments.
1.2 "Cause" shall mean:
(i) the Executive engaging in fraud, misappropriation
or willful misconduct that is demonstrably and materially injurious to
the property or business of the Corporation and/or its subsidiaries,
monetarily or otherwise; or
(ii) the Executive's conviction of, or plea of no
contest to, a felony.
For purposes of clause (i) of this definition, no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or omitted to be done,
by the Executive in bad faith and without reasonable belief that the Executive's
act, or failure to act, was in the best interest of the Corporation or its
subsidiaries. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board or upon the instructions of the Board (or
a committee thereof), the Corporation's chief executive officer or other duly
authorized senior officer of the Corporation (as appropriate) or based upon the
advice of counsel for the Corporation shall be conclusively presumed to be done,
or omitted to be done, by the Executive in good faith and in the best interests
of the Corporation or its subsidiaries. The cessation of employment of the
Executive shall not be deemed to be for Cause unless and until there shall have
been delivered to the Executive 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 at a meeting of the Board called and held for such purpose (after
reasonable notice of any such meeting is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board) finding that, in the good faith opinion of the Board, (a) the Executive
has acted in a manner described in clause (i) above, and specifying the
particulars thereof in detail, or (b) one of the events set forth in (ii) has
occurred.
1.3 "Change in Control" shall mean and be deemed to have
occurred if:
(i) any Person is or becomes, after the date of this
Agreement, the Beneficial Owner (as that term is defined in Rule 13d-3
under the Securities Exchange Act of 1934 (the "Exchange Act")),
directly or indirectly, of securities of the Corporation (not including
in the securities beneficially owned by such Person any securities
acquired directly from the Corporation) representing twenty-five
percent (25%) or more of the combined voting power of the Corporation's
then outstanding securities; or
(ii) during any period of twenty-four (24)
consecutive months (not including any period prior to January 1, 1998),
individuals who at the beginning of such period constitute the Board
and any new director (other than a director designated by a Person who
has entered into an agreement with the Corporation to effect a
transaction described in clause (i), (iii) or (iv) of this definition
or any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents) whose election by the Board or nomination for election by the
Corporation's stockholders 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 of the Board; or
(iii) the shareholders of the Corporation approve a
reorganization, merger or consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially all
of the individuals and entities who were Beneficial Owners, immediately
prior to such reorganization, merger or consolidation, of the combined
voting power of the Corporation's then outstanding securities
beneficially own, directly or indirectly, immediately after such
reorganization, merger or consolidation, more than seventy-five percent
(75%) of the combined voting power of the securities of the corporation
resulting from such reorganization, merger or consolidation in
substantially the same proportions as their respective ownership,
immediately prior to such reorganization, merger or consolidation, of
the combined voting power of the Corporation's securities; or
(iv) the shareholders of the Corporation approve (a)
the sale or disposition by the Corporation (other than to a subsidiary
of the Corporation) of all or substantially all of the assets of the
Corporation (or any such sale or disposition is effected through
condemnation proceedings), or (b) a complete liquidation or dissolution
of the Corporation.
Notwithstanding the foregoing, a Change in Control shall not include any event,
circumstance or transaction which results from the action (excluding the
Executive's employment activities with the Corporation, Florida Power
Corporation or any of their respective subsidiaries) of any Person or group of
Persons which includes, is directly affiliated with or is wholly or partly
controlled by one or more executive officers of the Corporation or its
subsidiaries and in which the Executive actively participates.
1.4 "Corporation" shall include Florida Progress Corporation
and any successor to its business and/or assets which assumes (either expressly,
by operation of law or otherwise) and/or agrees to perform this Agreement by
operation of law or otherwise (except in determining, under Section 1.3 hereof,
whether or not any Change in Control of the Corporation has occurred in
connection with such succession).
1.5 "Disability" shall mean and be deemed the reason for the
termination by the Corporation of the Executive's employment, if, as a result of
the Executive's incapacity due to physical and/or mental illness, (i) the
Executive shall have been absent from the full-time performance of the
Executive's duties with the Corporation or any affiliate of the Corporation for
a period of six (6) consecutive months, (ii) the Corporation and/or such
affiliate gives the Executive a Notice of Termination for Disability, and (iii)
within thirty (30) days after such Notice of Termination is given, the Executive
does not return to the full-time performance of the Executive's duties.
1.6 "Employment Period" shall mean the period commencing on
the date of any Change in Control until the earliest to occur of (i) the date
which is thirty-six (36) months from the date of any such Change in Control,
(ii) the date of termination by the Executive of the Executive's employment for
Good Reason, or (iii) the termination by the Corporation of the Executive's
employment for any reason.
1.7 "Good Reason" shall mean the occurrence (without the
Executive's express written consent) of any one of the following acts, or
failures to act, unless, in the case of any act or failure to act described in
clauses (i), (iv), (v) or (vi) below, such act or failure to act is corrected by
the Corporation prior to the Date of Termination specified in the Notice of
Termination given by the Executive in respect thereof not later than six (6)
months after the occurrence of the event that serves as the basis for the Notice
ofTermination:
(i) the assignment to the Executive of any duties or
responsibilities inconsistent with those described in Section 3.2 below
or with the Executive's position(s) or status (including, without
limitation, offices, titles, and reporting relationships) as an
executive officer of the Corporation and/or its primary subsidiaries or
a substantial adverse alteration in the nature of the Executive's
authorities, duties, responsibilities, position(s) or status from those
described in Section 3.2 below or otherwise;
(ii) a reduction in the Executive's Annual Base
Salary or annual bonus opportunity as in effect on the date of this
Agreement or as the same may be increased at any time thereafter and
from time to time;
(iii) the relocation of the Corporation's principal
executive offices to a location more than thirty (30) miles from its
location on the date of this Agreement (or, if different, more than
thirty (30) miles from where such offices are located immediately prior
to any Potential Change in Control) or the Corporation's requiring the
Executive to be based anywhere other than the Corporation's principal
Florida executive offices, except for required travel on the
Corporation's business to an extent substantially consistent with the
Executive's business travel obligations as of the date of this
Agreement;
(iv) the failure by the Corporation or a subsidiary
to continue in effect any pension benefit or deferred compensation plan
in which the Executive participates immediately prior to any Potential
Change in Control which is material to the Executive's total
compensation, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan or arrangement) has been made with
respect to such plan, or the failure by the Corporation or a subsidiary
to continue the Executive's participation therein (or in such
substitute or alternative plan or arrangement) on a basis not
materially less favorable, both in terms of the amount of benefits
provided and the level of the Executive's participation relative to
other participants, as existed at the time of the Potential Change in
Control;
(v) the failure by the Corporation or a subsidiary to
continue to provide the Executive with health and welfare benefits
substantially similar to those enjoyed by the Executive under any
retirement, life insurance, medical, health and accident, or disability
or similar plan of the Corporation or a subsidiary in which the
Executive was participating at the time of any Potential Change in
Control, the taking of any action by the Corporation or a subsidiary
which would directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of the Potential Change in
Control, or the failure by the Corporation or a subsidiary to provide
the Executive with the greater number of paid vacation days to which
the Executive is entitled pursuant to the terms of the Executive's
employment agreement or in accordance with the Corporation's or a
subsidiary's normal vacation policy, in either case, as in effect at
the time of the Potential Change in Control;
(vi) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 7.1;
(vii) the failure of the Corporation to obtain a
written agreement reasonably satisfactory to the Executive from any
successor to the Corporation (as described in Section 9.1) to perform
this Agreement; and/or
(viii) any termination of employment by the Executive
which occurs during the one-month period commencing on the first
anniversary of the consummation of the transaction that produced the
Change in Control.
1.8 "Person" shall have the meaning ascribed thereto in
Section 3(a)(9) of the Exchange Act, as modified, applied and used in Sections
13(d) and 14(d) thereof; provided, however, that a Person shall not include (i)
the Corporation or any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Corporation or any of
its subsidiaries (in its capacity as such), (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the
Corporation in substantially the same character and proportions as their
ownership of stock of the Corporation.
1.9 "Potential Change in Control" shall mean and be deemed to
have occurred if:
(i) the Corporation enters into an agreement, the
consummation of which would result in the occurrence of a Change in
Control;
(ii) the Corporation or any Person publicly announces
an intention to take actions which, if consummated, would constitute a
Change in Control; and/or
(iii) any Person becomes the Beneficial Owner,
directly or indirectly, of securities of the Corporation representing
fifteen (15) percent or more of the combined voting power of the
Corporation's then outstanding securities, or any Person increases such
Person's beneficial ownership of such securities by ten (10) percentage
points or more over the percentage so owned by such Person on December
31, 1997.
1.10 "Retirement" shall mean and be deemed the reason for the
termination by the Executive of the Executive's employment if such employment is
terminated upon or after normal retirement age pursuant to the pension plan of
the Corporation or any subsidiary of the Corporation in which the Executive
participates, not including any early retirement or so-called "window period"
retirements, generally applicable to its officers, as in effect immediately
prior to any Potential Change in Control.
2. Term of this Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 2001; provided,
however, that the term of this Agreement shall automatically be extended each
January 1 after the date hereof for an additional period of one (1) year unless,
not later than 6 months prior to such January 1, the Corporation gives written
notice to the Executive that it does not wish to continue such automatic
extension; and provided, further, however, that if a Change in Control shall
have occurred during the term of this Agreement, this Agreement shall continue
in effect for a period of not less than thirty-six (36) months beyond the month
in which such Change in Control occurred or, if later, eighteen (18) months
after the consummation within such thirty-six (36) month period of the
transaction that produced the Change in Control (the "Term"). Notwithstanding
the foregoing provisions of this Section 2, the Term shall terminate upon
attainment of normal retirement age as defined in the pension plan of the
Corporation.
3. Corporation's Covenants.
3.1 Severance Payments. In order to induce the Executive to
remain in the employ of the Corporation and/or one or more of its subsidiaries
and in consideration of the Executive's covenants set forth in Section 4 below,
the Corporation agrees, under the terms and conditions described herein and in
addition to the amounts payable to the Executive under Section 5 below, to pay
the Executive the "Severance Payments" described in Section 6.1 below and the
other payments and benefits described herein in the event the Executive's
employment is terminated during the Employment Period or under the other
circumstances set forth in Section 6.1 below.
3.2 Position and Duties. During the Employment Period, (i) the
Executive's position (including status, offices, titles and reporting
relationships), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of those held,
exercised and assigned at any time during the one hundred eighty (180) day
period immediately preceding any related Potential Change in Control, and (ii)
the Executive's services shall be performed at the location where the Executive
was employed immediately preceding any such Potential Change in Control, or any
office or location less than thirty (30) miles from such location.
3.3 Base Salary. During the Employment Period, the Executive
shall receive Annual Base Salary at least equal to twenty-six (26) times the
highest bi-weekly base salary paid or payable, including (without limitation)
any base salary which has been earned but deferred, to the Executive by the
Corporation and its affiliated companies in respect of the twelve (12) month
period immediately preceding the month in which any related Potential Change in
Control occurs. The Executive's Annual Base Salary shall be reviewed annually
for potential increase. In addition, Annual Base Salary shall not be reduced
after the occurrence of a Potential Change in Control. As used in this
Agreement, the term "affiliated companies" shall include any company controlled
by, controlling or under common control with the Corporation.
3.4 Incentive Plans.
a. MICP. The Executive shall be awarded for each
fiscal year ending within the Employment Period an annual bonus (the "Annual
Bonus") in cash at least equal to the target annual bonus incentive award
received by the Executive under the Corporation's Management Incentive
Compensation Plan, or any other annual incentive bonus plan maintained by
the Corporation from time to time (the "MICP") for the fiscal year in which the
Change in Control occurs. Each Annual Bonus shall be paid no later than the end
of the third month of the fiscal year next following the fiscal year for which
the Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus in accordance with rules established by the
Corporation for that purpose.
b. LTIP. The Executive shall be awarded for each
award period that begins within the Employment Period a grant of performance
shares at least equal to the annual long-term incentive award received by the
Executive (not taking into account any pro-ration) under the Corporation's
Long-Term Incentive Plan or any other long-term incentive bonus plan
maintained by the Corporation from time to time (the "LTIP") for the fiscal
year in which the Change in Control occurs, and such shares shall be subject to
performance goals consistent with those established by the Corporation for the
fiscal years prior to the fiscal year in which the Change in Control occurs.
3.5 Savings and Retirement Plans. During the Employment
Period, the Executive (in addition to the Incentive Plans) shall be entitled to
participate in all other incentive, savings and retirement plans, practices,
policies and programs applicable generally to other peer executives of the
Corporation and its subsidiaries, but in no event shall such plans, practices,
policies and programs provide the Executive with incentive opportunities
(measured with respect to both regular and special incentive opportunities, to
the extent, if any, that such distinction is applicable), savings opportunities
and retirement benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Corporation and its
affiliated companies for the Executive under such plans, practices, policies and
programs as in effect at any time during the one hundred eighty (180) day period
immediately preceding any related Potential Change in Control or, if more
favorable to the Executive, those provided generally at any time thereafter to
other peer executives of the Corporation and its affiliated companies.
3.6 Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be entitled
to participate in and shall receive all benefits under all of the health and
welfare benefit plans, practices, policies and programs provided by the
Corporation and its affiliated companies (including, without limitation,
medical, prescription, dental, disability, employee life, group life, accidental
death and travel accident insurance plans and programs) to the extent (and at
the same cost, excluding increases in the employee contribution amounts which
are consistent with and equivalent to the historical rates of increase imposed
by the Corporation in respect thereof) applicable generally to other peer
executives of the Corporation and its subsidiaries, but in no event shall such
plans, practices, policies and programs provide the Executive with benefits that
are less favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for the Executive at any time during
the one hundred eighty (180) day period immediately preceding any related
Potential Change in Control or, if more favorable to the Executive, those
provided generally at any time thereafter to other peer executives of the
Corporation and its affiliated companies.
3.7 Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable business
expenses incurred by the Executive in accordance with the most favorable
policies, practices and procedures of the Corporation and its affiliated
companies in effect for the Executive at any time during the one hundred eighty
(180) day period immediately preceding any related Potential Change in Control
or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Corporation and its
affiliated companies.
3.8 Office Support; Perquisites. During the Employment Period,
the Executive shall be entitled to secretarial support and other facilities,
perquisites and programs to enable the Executive to be able to discharge the
Executive's responsibilities hereunder in accordance with the most favorable
plans, practices, programs and policies of the Corporation and its affiliated
companies in effect for the Executive at any time during the one hundred eighty
(180) day period immediately preceding any related Potential Change in Control
or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Corporation and its
affiliated companies.
3.9 Vacation. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Corporation and its affiliated
companies, or pursuant to the terms and provisions of any employment agreement,
as in effect for the Executive at any time during the one hundred eighty (180)
day period immediately preceding any related Potential Change in Control or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Corporation and its affiliated
companies.
4. The Executive's Covenants.
4.1 Employment. The Executive agrees that, subject to the
terms and conditions of this Agreement, in the event of a Change in Control
during the Term the Executive will remain in the employ of the Corporation
during any related Employment Period.
4.2 Time and Attention. During the Employment Period, and
excluding any periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of the Corporation and to use
the Executive's reasonable best efforts to perform faithfully and efficiently
the responsibilities and duties assigned to the Executive hereunder. During the
Employment Period it shall not be a violation of this Agreement for the
Executive to (i) serve on corporate, civic or charitable boards or committees,
(ii) deliver lectures and fulfill speaking engagements and (iii) manage personal
investments, so long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the
Corporation and its subsidiaries in accordance with this Agreement. It is
expressly understood and agreed that to the extent that any such activities have
been conducted by the Executive prior to any Potential Change in Control, the
reinstatement or continued conduct of such activities (or the reinstatement or
conduct of activities similar in nature and scope thereto) subsequent to any
related Potential Change in Control shall not thereafter be deemed to interfere
with the performance of the Executive's responsibilities to the Corporation and
its subsidiaries.
4.3. Non-interference; Confidential Information;
Non-Competition
(a) No Interference. For so long as the Executive is employed
by the Corporation, and for a period of one (1) year after termination of the
Executive's employment for any reason after a Change in Control, the Executive
shall not, whether for his own account or for the account of any other
individual, partnership, firm, corporation or other business organization (other
than the Corporation or one of its affiliates), directly or indirectly,
intentionally solicit, endeavor to entice away from the Corporation (or any of
its affiliates), or otherwise interfere with the relationship of the Corporation
(or any of its affiliates) with, any person who is employed by or otherwise
engaged to perform services for the Corporation (or any of its affiliates)
including, but not limited to, any independent representatives or organizations,
or any person or entity that is a customer of the Corporation (or any of its
affiliates). The Executive understands and agrees that the rights and
obligations set forth in this Section 4.3(a) could extend beyond the Term.
(b) Confidential Information. The Executive covenants and
agrees with the Corporation that he will not at any time, during or after
employment with the Corporation, except in performance of the Executive's
obligations to the Corporation or with the prior express written consent of the
Board of Directors, directly or indirectly, intentionally or unintentionally,
disclose any Confidential Information that he may learn or has learned by reason
of his employment or association with the Corporation or any of its affiliates,
or any predecessors to its business, or use any such information for his own
personal benefit or gain. The term "Confidential Information" includes, without
limitation, information not previously disclosed to the public or to the trade
by the Corporation's management with respect to the products, facilities and
methods, trade secrets and other intellectual property, systems, procedures,
manuals, confidential reports, fee or rate information, customer lists,
financial information (including without limitation the revenues, costs or
profits associated with any of the Corporation's (or any of its affiliates')
activities or products), business plans, prospects, opportunities or other
information of the Corporation or any of its affiliates. Confidential
Information shall not include information which (i) is or becomes generally
available to the public other than as a result of disclosure by the Executive in
violation of this Section 4.3(b) or (ii) the Executive is required to disclose
under any applicable laws, regulations or directives of any government agency,
tribunal or authority having jurisdiction in the matter or under subpoena or
other process of law. The Executive understands and agrees that the rights and
obligations set forth in this Section 4.3 (b) shall extend beyond the Term.
(c) Exclusive Property. The Executive confirms that all
Confidential Information is and shall remain the exclusive property of the
Corporation or any of its affiliates. All business records, papers and documents
kept or made by the Executive relating to the business of the Corporation (or
any of its affiliates) or any Confidential Information shall be and remain the
property of the Corporation and/or any such affiliates. Upon termination of
employment or upon the request of the Corporation at any time, the Executive
shall promptly deliver to the Corporation, and shall not without the prior
express written consent of the Corporation retain, any and all copies of (i) any
written materials not previously made available to the public, or (ii) records
and documents made by the Executive or coming into his possession concerning any
Confidential Information or the business or affairs of the Corporation or any
predecessors to its business, or any of its affiliates. The Executive
understands and agrees that the rights and obligations set forth in this Section
4.3(c) shall extend beyond the Term.
(d) Covenant Not to Compete. During the employment period and
for one (1) year after termination of the Executive's employment for any reason
after a Change in Control, the Executive shall not compete, directly or
indirectly, with the Corporation or its affiliates within fifty (50) miles of
any geographic area in which the Corporation or its affiliates has material
business interests with which the Executive is involved at the time of the
termination of the Executive's employment. If it is judicially determined that
this provision, or any portion thereof, is unenforceable under applicable law(s)
(statute, common law or otherwise), then it is hereby agreed by the Executive
and the Corporation that the unenforceable portion shall be redrafted to the
extent necessary to render it enforceable, while leaving the remaining portions
intact. By agreeing to this contractual modification prospectively at this time,
the parties intend to make this provision enforceable under the law(s) of all
applicable states so that the entire agreement not to compete and/or this
Agreement as prospectively modified shall remain in full force and effect and
shall not be rendered void or illegal. Such modifications shall not affect the
payments made to the Executive under this Agreement. The Executive acknowledges
that his skills are such that he can be gainfully employed in noncompetitive
employment and that the agreement not to compete will in no way prevent him from
earning a living. The Executive understands and agrees that the rights and
obligations set forth in this Section 4.3(d) shall extend beyond the Term.
(e) Injunctive Relief. Without intending to limit the remedies
available to the Corporation, the Executive acknowledges that a breach of any of
the covenants contained in this Section 4.3 may result in material irreparable
injury to the Corporation or its affiliates for which there is no adequate
remedy at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of such a breach or threat thereof, the
Corporation shall be entitled to obtain a temporary restraining order and/or a
preliminary or permanent injunction restraining the Executive from engaging in
activities prohibited by this Section 4.3 or such other relief as may be
required to specifically enforce any of the covenants in this Section 4.3.
5. Compensation Other Than Severance Payments.
5.1 Disability. Following a Potential Change in Control and
during the Term, during any period that the Executive fails to perform the
Executive's full-time duties with the Corporation as a result of incapacity due
to physical or mental illness, the Executive's full salary shall be paid to the
Executive at a rate no less than the rate in effect at the commencement of any
such disability period, together with all compensation and benefits payable to
the Executive under the terms of any compensation or benefit plan, program or
arrangement maintained by the Corporation or its subsidiaries during such
disability period, until the Executive's employment is terminated by the
Corporation for Disability.
5.2 Base Salary. If the Executive's employment shall be
terminated for any reason following a Potential Change in Control and during the
Term, the Executive's full salary shall be paid to the Executive through the
Date of Termination (as defined below in Section 7.2) at the rate in effect at
the time the Notice of Termination is given, together with all compensation and
benefits payable to or with respect to the Executive through the Date of
Termination under the terms of any compensation or benefit plan, program or
arrangement maintained by the Corporation or its subsidiaries during such
period.
5.3 Benefits. If the Executive's employment shall be
terminated for any reason following a Potential Change in Control and during the
Term, the Executive's normal post-termination compensation and benefits shall be
paid to the Executive as such payments become due. Such post-termination
compensation and benefits shall be determined under, and paid in accordance
with, the retirement, health insurance, life insurance and other compensation
(including without limitation any bonus and/or incentive compensation) or
benefit plans, programs and arrangements maintained by the Corporation or its
subsidiaries or affiliates.
6. Severance Payments.
6.1 Severance. The Corporation shall pay the Executive the
payments and benefits described in Section 6.1(a), (b) and (c) (the "Severance
Payments") upon the termination of the Executive's employment following a Change
in Control and during the Term, in addition to the payments and benefits
described in Section 5 hereof, unless such termination is (i) by the Corporation
for Cause, (ii) by reason of Retirement, (iii) by the Executive without Good
Reason, (iv) due to death, or (v) due to Disability. In addition, the
Executive's employment shall be deemed to have been terminated following a
Change in Control by the Corporation without Cause or by the Executive with Good
Reason (a) if the Executive reasonably demonstrates that the Executive's
employment was terminated prior to a Change in Control without Cause (1) at the
request of a Person who has entered into an agreement with the Corporation the
consummation of which will constitute a Change in Control (or who has taken
other steps reasonably calculated to effect a Change in Control) or (2)
otherwise in connection with, as a result of or in anticipation of a Change in
Control, or (b) if the Executive terminates his employment for Good Reason prior
to a Change in Control and the Executive reasonably demonstrates that the
circumstance(s) or event(s) which constitute such Good Reason occurred (1) at
the request of such Person or (2) otherwise in connection with, as a result of
or in anticipation of a Change in Control. The Executive's right to terminate
the Executive's employment for Good Reason shall not be affected by the
Executive's incapacity due to physical or mental illness. The Executive's
continued employment shall not constitute consent to, or a waiver of rights with
respect to, any act or failure to act constituting Good Reason hereunder. In the
event of Disability or death of the Executive after the Date of Termination in
respect of any termination without Cause or any termination for Good Reason,
payments and benefits shall be made to the Executive, or the Executive's
beneficiaries or legal representative, as the case may be.
(a) Lump Sum Payment. A lump sum payment equal to
three (3) times the highest "total 12-month compensation" of the
Executive (whether or not deferred) for any 12-month period during the
five (5) completed calendar years prior to the Date of Termination,
where "total 12-month compensation" means the sum of the Executive's
Annual Base Salary during such 12-month period and the full amount of
the Executive's MICP award (target or actual, whichever is greater)
that was payable during such 12-month period (or annualized 12-month
period if the Executive has not completed 12 months of employment).
(b) Welfare Plan Continuation. For a thirty-six (36)
month period after the Date of Termination, or if sooner, until the
Executive reaches the age of sixty-five (65) years, the Corporation
shall provide the Executive (at no cost to the Executive) with life,
disability, accident and health insurance benefits substantially
similar to those that the Executive is receiving immediately prior to
any related Potential Change in Control or the receipt of the Notice of
Termination (without giving effect to any reduction in such benefits
subsequent to a Change in Control which reduction constitutes Good
Reason), whichever is greater; provided, however, that the final 18
months of the continued coverage period hereunder shall be deemed to
constitute the full amount of the Executive's entitlement to COBRA
benefits as a result of the Executive's termination of employment. Upon
the termination of the Executive's continued benefits provided under
the prior sentence, the Executive shall be eligible to continue such
benefits (at the Executive's cost) to the same extent that such
benefits are provided by the Corporation thereafter (the "Continued
Access Period") to comparable executives and, after the Executive
attains age 65, to retired executives. Benefits otherwise receivable by
the Executive pursuant to the first sentence of this Section 6.1(b)
shall be reduced to the extent comparable benefits are actually
received by or made available to the Executive without cost during such
period following the Executive's termination of employment (and any
such benefits actually received by the Executive shall be reported to
the Corporation by the Executive). Continued coverage during the
Continued Access Period shall terminate if comparable benefits are made
available to the Executive under any other policy or program (and the
availability of any such benefits shall be reported to the Corporation
by the Executive).
(c) LTIP. Performance shares granted to the Executive
under the LTIP for performance cycles commencing after a Change in
Control has occurred and remaining uncompleted will be deemed earned as
of the Date of Termination to the extent of one hundred fifty percent
(150%) of target under each award agreement, and the value of each such
award will be paid out to the Executive in a lump-sum cash payment.
Performance shares granted to the Executive under the LTIP for
performance cycles which commenced after a Change in Control occurred
and were completed before the Date of Termination will be paid out to
the extent earned, and the value of such award will be paid out to the
Executive in a lump-sum cash payment.
(d) SERP; Other Deferred Compensation. The Executive
shall receive credit under the Corporation's Supplemental Executive
Retirement Plan ("SERP") for five (5) additional years of service and
shall immediately become 100% vested in the Executive's accrued benefit
and/or account balance to date under the SERP and any non-qualified
deferred compensation plan, and any amendment, modification or
termination of any such plan occurring during the Term of this
Agreement after any Change in Control shall not be effective against
the Executive to decrease or change any of the Executive's rights
thereunder.
(e) Relocation and Other Assistance. Should the
Executive be required to move his or her primary residence in order to
pursue other business opportunities within three (3) years of the Date
of Termination, the Company will reimburse the Executive for any
expenses (not in excess of $10,000) incurred in that relocation that
are not reimbursed by another employer, including, without limitation,
assistance in selling the Executive's home and all other assistance and
benefits that were customarily provided by the Corporation to
transferred executives prior to the Change in Control. In addition, if
the Executive retains legal counsel with respect to the taxation of
payments to be made to the Executive under this Agreement, the
Corporation shall reimburse the Executive for such reasonable legal
fees and disbursements (but not in excess of $15,000).
6.2 Special Reimbursement. (a) Notwithstanding any other
provisions of this Agreement, in the event that any payment or benefit received
or to be received by the Executive in connection with a Change in Control or the
termination of the Executive's employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Corporation or
any of its subsidiaries, any Person whose actions result in a Change in Control
or any Person affiliated with the Corporation or such Person) (all such payments
and benefits, including the Severance Payments, being hereinafter called "Total
Payments") would subject the Executive to the excise tax imposed under Section
4999 of the Code or any successor section thereto (the "Excise Tax"), the
Corporation shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Executive, after deduction of
any Excise Tax on the Total Payments and any federal, state and local income tax
and Excise Tax upon the payment provided for by this Section 6.2(a), shall be
equal to the Total Payments.
(b) For purposes of determining whether any of the
Total Payments will be subject to the Excise Tax and the amount of such Excise
Tax, (i) the Total Payments shall be treated as "parachute payments" within
the meaning of section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of section 280G(b)(1) of the Code shall be treated
as subject to the Excise Tax, unless in the opinion of tax counsel selected by
the Corporation's general counsel and reasonably acceptable to the Executive
such Total Payments (in whole or in part) do not constitute parachute payments,
including by reason of Section 280G(b)(4)(A) of the Code, or such excess
parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered, within the meaning of section 280G(b)(4)(B) of the
Code, in excess of the Base Amount allocable to such reasonable compensation,
or are otherwise not subject to the Excise Tax, and (ii) the value of any
non-cash benefits or any deferred payment or benefit shall be determined by
the Corporation's independent auditors in accordance with the principles of
sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount
of the Gross-Up Payment, the Executive shall be deemed to pay federal income
taxes at the highest marginal rate of federal income taxation in the calendar
year in which the Gross-Up Payment is to be made and applicable state and local
income taxes at the highest marginal rate of taxation, net of the maximum
reduction in federal income taxes which could be obtained from deduction of such
state and local taxes.
(c) In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at the time
of termination of the Executive's employment, the Executive shall repay to the
Corporation, at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment attributable to such
reduction plus interest on the amount of such repayment at the rate provided in
section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any payment
the existence or amount of which cannot be determined at the time of the
Gross-Up Payment), the Corporation shall make an additional Gross-Up Payment
in respect of such excess (plus any interest, penalties or additions
payable by the Executive with respect to such excess) at the time that the
amount of such excess is finally determined. The Executive and the
Corporation shall each reasonably cooperate with the other in connection with
any administrative or judicial proceedings concerning the existence or
amount of any such subsequent liability for Excise Tax with respect to the Total
Payments.
6.3 Date of Payment. The payments provided for in Section 6.2
hereof shall be made not later than the fifteenth (15th) day following the Date
of Termination; provided, however, that if the amounts of such payments cannot
be finally determined on or before such day, the Corporation shall pay to the
Executive on such day an estimate, as determined in good faith by the
Corporation, of the minimum amount of such payments to which the Executive is
likely to be entitled to and shall pay the remainder of such payments (together
with interest at the rate provided in section 1274(b)(2)(B) of the Code) as soon
as the amount thereof can be determined but in no event later than the sixtieth
(60th) day after the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Corporation to the Executive, payable
on the tenth (10th) business day after demand by the Corporation (together with
interest at the rate provided in section 7872(f)(2)(A) of the Code). At the time
that payments are made under this Section 6.3, the Corporation shall provide the
Executive with a detailed written statement setting forth the manner in which
such payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Corporation has received
from outside counsel, auditors or consultants (and any such opinions or advice
which are in writing shall be attached to the statement).
6.4 Legal Costs. The Corporation shall reimburse the Executive
for reasonable legal fees and expenses incurred in good faith by the Executive
as a result of any dispute with any party (including, but not limited to, the
Corporation or any subsidiary of the Corporation) regarding the payment or
receipt of any benefit provided for in this Agreement (including, but not
limited, all such fees and expenses incurred in disputing any termination or in
seeking in good faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code) plus in each case
interest on any delayed payment at the applicable Federal rate provided for in
section 7872(f)(2)(A) of the Code. Such payments shall be made within five (5)
business days after delivery of the Executive's written requests for payment
accompanied by such evidence of fees and expenses incurred as the Corporation
reasonably may require.
7. Termination Procedures and Compensation During Dispute.
7.1 Notice of Termination. After a Change in Control and
during the Term, any purported termination of the Executive's employment (other
than by reason of death) shall be communicated by written Notice of Termination
from one party hereto to the other party hereto in accordance with Section 10
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated. Further, a Notice of Termination for Cause is
required to include 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 at a
meeting of the Board which was called and held for the purpose of considering
such termination (which meeting may be a regular meeting of the Board where
prior notice of consideration of such termination is given to members of the
Board) finding that, in the good faith opinion of the Board, (i) the Executive
engaged in conduct set forth in clause (i) or (ii) of the definition of Cause
herein, and specifying the particulars thereof in detail, or (ii) one of the
events set forth in clause (ii) of such definition has occurred. For purposes of
this Agreement, any purported termination not effected in accordance with this
Section 7.1 shall not be considered effective.
7.2 Date of Termination. "Date of Termination", with respect
to any purported termination of the Executive's employment after a Potential
Change in Control and during the Term, shall mean (i) if the Executive's
employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
full-time performance of the Executive's duties during such thirty (30) day
period), and (ii) if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination (which, in the case of a
termination by the Corporation, shall not be less than thirty (30) days (except
in the case of a termination for Cause) and, in the case of a termination by the
Executive, shall not be less than fifteen (15) days nor more than sixty (60)
days, respectively, after the date such Notice of Termination is given).
7.3 Dispute Concerning Termination. If within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved either by mutual written agreement of the
parties or by a final judgement, order, or decree of an arbitrator or a court of
competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected);
provided, however, that the Date of Termination shall not be extended by a
notice of dispute if the basis for such notice, as determined in good faith by
the party receiving such notice is not given in good faith or the party giving
such notice does not pursue the resolution of such dispute with reasonable
diligence. Subject to the rights granted by Section 4.3, any controversy or
claim arising out of, or relating to, any provision of this Agreement shall be
settled by binding arbitration in accordance with the laws of The State of
Florida by three arbitrators, one of whom shall be appointed by the Corporation,
one by the Executive, and the third by the first two arbitrators. If the first
two arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association.
Such arbitration shall be conducted in Florida in accordance with the rules of
the American Arbitration Association, except with respect to the selection of
arbitrators which shall be as provided in this Section. Judgment on the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
7.4 Compensation During Dispute. If a purported termination
occurs following a Change in Control and during the Term, and such termination
is disputed in accordance with Section 7.3 above (and pursuant thereto the Date
of Termination is extended), the Corporation shall continue to pay the Executive
the full Annual Base Salary in effect at the time of any related Potential
Change in Control or when the notice giving rise to the dispute was given
(whichever is greater). Amounts paid under this Section 7.4 are in addition to
all other amounts due under this Agreement (other than those due under Section
5.2 hereof) and shall not be offset against or reduce any other amounts due
under this Agreement or any other plan, agreement or arrangement.
8. No Mitigation. The Corporation agrees that, if the Executive's
employment is terminated during the Term, the Executive is not required to seek
other employment or to attempt in any way to reduce any amounts payable to the
Executive by the Corporation pursuant to Section 6 or Section 7.4. Further, the
amount of any payment or benefit provided for in Section 6 (other than pursuant
to Section 6.1.(b)) or Section 7.4 shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, or offset against any amount claimed to be owed by the
Executive to the Corporation or any of its subsidiaries, or otherwise.
9. Successors; Binding Agreement.
9.1 Successors. In addition to any obligations imposed by law
upon any successor to the Corporation, the Corporation will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Corporation to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Corporation would be required to perform
it if no such succession had taken place. Failure of the Corporation to obtain
such assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle the Executive to
compensation from the Corporation in the same amount and on the same terms as
the Executive would be entitled to hereunder if the Executive were to terminate
employment with the Corporation for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination.
9.2 Binding Agreement. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would still
be payable to the Executive hereunder (other than amounts which, by their terms,
terminate upon the death of the Executive) if the Executive had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the beneficiary (or
beneficiaries) designated by the Executive from time to time in accordance with
the procedures for notice set out in Section 10; provided, however, that if
there shall be no effective designation of beneficiary by the Executive, such
amounts shall be paid to the executors, personal representatives or
administrators of the Executive's estate.
10. Notices; Other Communications. For the purpose of this Agreement,
notices and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or mailed by
United States certified mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth below, or to such other address
as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
actual receipt:
To the Corporation: Florida Progress Corporation
P.O. Box 33042
St. Petersburg, Florida 33733
With a copy to: Mr. William G. Kelley
Vice President, Human Resources
Florida Progress Corporation
3201 34th Street South
St. Petersburg, Florida 33711
To the Executive: Mr. Stanley I. Garnett
401 First Avenue North
Tierra Verde, Florida 33715
11. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Florida without regard to the principles of conflict
of laws thereof. All references to sections of the Exchange Act or the Code (or
the rules and/or regulations under either) shall be deemed also to refer to and
include any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding required under
federal, state or local law and any additional withholding to which the
Executive has agreed. The rights and obligations of the Corporation and the
Executive under this Agreement shall survive the expiration of the Term and the
Employment Period.
12. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, all of which shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. No Limitation. Nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any plan, program, policy or
practice provided by the Corporation or any of its affiliated companies and for
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement with the Corporation or any of its affiliated companies. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan, policy, practice or program of or any contract or agreement with
the Corporation or any of its affiliated companies at or subsequent to the Date
of Termination shall be payable in accordance with such plan, policy, practice
or program or contract or agreement as in effect from time to time except as
explicitly modified by this Agreement.
15. Other Agreements. This Agreement contains the entire agreement
between the parties concerning the subject matter hereof and supersedes all
prior agreements understandings, discussions, negotiations and undertakings,
whether written or oral, between the parties with respect thereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
FLORIDA PROGRESS CORPORATION
By: /s/ Richard Korpan
---------------------------------
RICHARD KORPAN
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
/s/ Stanley I. Garnett, II
---------------------------------
Executive
EXHIBIT 10.(d)
AGREEMENT
THIS AGREEMENT, dated as of January 30, 1998 (this
"Agreement"), is made by and between Florida Progress Corporation, having its
principal offices at One Progress Plaza, St. Petersburg, Florida 33701 (the
"Corporation"), and Jeffrey R. Heinicka, residing at 7373 Watersilk Drive,
Pinellas Park, Florida 33782 (the "Executive").
WHEREAS, the Corporation considers it essential to the best
interests of its shareholders to foster the continued employment of key
executive and management personnel; and
WHEREAS, the Board of Directors of the Corporation (the
"Board") recognizes that the possibility of a Change in Control (as defined in
Section 1.3 below) of the Corporation exists from time to time and that such
possibility, and the uncertainty, instability and questions that it may raise
for and among key executive and management personnel, may result in the
premature departure or significant distraction of such individuals to the
material detriment of the Corporation and its shareholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce, focus and encourage the continued attention and
dedication of key executive and management personnel of the Corporation and its
subsidiaries, such as the Executive, to their assigned duties without
distraction in the face of potentially disturbing or unsettling circumstances
arising from the possibility of a Change in Control of the Corporation;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Corporation and the Executive hereby agree as
follows:
1. Definitions. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
1.1 "Annual Base Salary" shall mean the Executive's rate of
regular base annual compensation (prior to any reduction under (i) a salary
reduction agreement pursuant to section 401(k) or section 125 of the Internal
Revenue Code of 1986, as amended from time to time (the "Code") or (ii) any plan
or arrangement deferring any base salary or bonus payments), and shall not
include (without limitation) allowances, fees, retainers, reimbursements,
bonuses, incentive awards, prizes or similar payments.
1.2 "Cause" shall mean:
(i) the Executive engaging in fraud, misappropriation
or willful misconduct that is demonstrably and materially injurious to
the property or business of the Corporation and/or its subsidiaries,
monetarily or otherwise; or
(ii) the Executive's conviction of, or plea of no
contest to, a felony.
For purposes of clause (i) of this definition, no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or omitted to be done,
by the Executive in bad faith and without reasonable belief that the Executive's
act, or failure to act, was in the best interest of the Corporation or its
subsidiaries. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board or upon the instructions of the Board (or
a committee thereof), the Corporation's chief executive officer or other duly
authorized senior officer of the Corporation (as appropriate) or based upon the
advice of counsel for the Corporation shall be conclusively presumed to be done,
or omitted to be done, by the Executive in good faith and in the best interests
of the Corporation or its subsidiaries. The cessation of employment of the
Executive shall not be deemed to be for Cause unless and until there shall have
been delivered to the Executive 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 at a meeting of the Board called and held for such purpose (after
reasonable notice of any such meeting is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board) finding that, in the good faith opinion of the Board, (a) the Executive
has acted in a manner described in clause (i) above, and specifying the
particulars thereof in detail, or (b) one of the events set forth in (ii) has
occurred.
1.3 "Change in Control" shall mean and be deemed to have
occurred if:
(i) any Person is or becomes, after the date of this
Agreement, the Beneficial Owner (as that term is defined in Rule 13d-3
under the Securities Exchange Act of 1934 (the "Exchange Act")),
directly or indirectly, of securities of the Corporation (not including
in the securities beneficially owned by such Person any securities
acquired directly from the Corporation) representing twenty-five
percent (25%) or more of the combined voting power of the Corporation's
then outstanding securities; or
(ii) during any period of twenty-four (24)
consecutive months (not including any period prior to January 1, 1998),
individuals who at the beginning of such period constitute the Board
and any new director (other than a director designated by a Person who
has entered into an agreement with the Corporation to effect a
transaction described in clause (i), (iii) or (iv) of this definition
or any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents) whose election by the Board or nomination for election by the
Corporation's stockholders 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 of the Board; or
(iii) the shareholders of the Corporation approve a
reorganization, merger or consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially all
of the individuals and entities who were Beneficial Owners, immediately
prior to such reorganization, merger or consolidation, of the combined
voting power of the Corporation's then outstanding securities
beneficially own, directly or indirectly, immediately after such
reorganization, merger or consolidation, more than seventy-five percent
(75%) of the combined voting power of the securities of the corporation
resulting from such reorganization, merger or consolidation in
substantially the same proportions as their respective ownership,
immediately prior to such reorganization, merger or consolidation, of
the combined voting power of the Corporation's securities; or
(iv) the shareholders of the Corporation approve (a)
the sale or disposition by the Corporation (other than to a subsidiary
of the Corporation) of all or substantially all of the assets of the
Corporation (or any such sale or disposition is effected through
condemnation proceedings), or (b) a complete liquidation or dissolution
of the Corporation.
Notwithstanding the foregoing, a Change in Control shall not include any event,
circumstance or transaction which results from the action (excluding the
Executive's employment activities with the Corporation, Florida Power
Corporation or any of their respective subsidiaries) of any Person or group of
Persons which includes, is directly affiliated with or is wholly or partly
controlled by one or more executive officers of the Corporation or its
subsidiaries and in which the Executive actively participates.
1.4 "Corporation" shall include Florida Progress Corporation
and any successor to its business and/or assets which assumes (either expressly,
by operation of law or otherwise) and/or agrees to perform this Agreement by
operation of law or otherwise (except in determining, under Section 1.3 hereof,
whether or not any Change in Control of the Corporation has occurred in
connection with such succession).
1.5 "Disability" shall mean and be deemed the reason for the
termination by the Corporation of the Executive's employment, if, as a result of
the Executive's incapacity due to physical and/or mental illness, (i) the
Executive shall have been absent from the full-time performance of the
Executive's duties with the Corporation or any affiliate of the Corporation for
a period of six (6) consecutive months, (ii) the Corporation and/or such
affiliate gives the Executive a Notice of Termination for Disability, and (iii)
within thirty (30) days after such Notice of Termination is given, the Executive
does not return to the full-time performance of the Executive's duties.
1.6 "Employment Period" shall mean the period commencing on
the date of any Change in Control until the earliest to occur of (i) the date
which is thirty-six (36) months from the date of any such Change in Control,
(ii) the date of termination by the Executive of the Executive's employment for
Good Reason, or (iii) the termination by the Corporation of the Executive's
employment for any reason.
1.7 "Good Reason" shall mean the occurrence (without the
Executive's express written consent) of any one of the following acts, or
failures to act, unless, in the case of any act or failure to act described in
clauses (i), (iv), (v) or (vi) below, such act or failure to act is corrected by
the Corporation prior to the Date of Termination specified in the Notice of
Termination given by the Executive in respect thereof not later than six (6)
months after the occurrence of the event that serves as the basis for the Notice
of Termination:
(i) the assignment to the Executive of any duties or
responsibilities inconsistent with those described in Section 3.2 below
or with the Executive's position(s) or status (including, without
limitation, offices, titles, and reporting relationships) as an
executive officer of the Corporation and/or its primary subsidiaries or
a substantial adverse alteration in the nature of the Executive's
authorities, duties, responsibilities, position(s) or status from those
described in Section 3.2 below or otherwise;
(ii) a reduction in the Executive's Annual Base
Salary or annual bonus opportunity as in effect on the date of this
Agreement or as the same may be increased at any time thereafter and
from time to time;
(iii) the relocation of the Corporation's principal
executive offices to a location more than thirty (30) miles from its
location on the date of this Agreement (or, if different, more than
thirty (30) miles from where such offices are located immediately prior
to any Potential Change in Control) or the Corporation's requiring the
Executive to be based anywhere other than the Corporation's principal
Florida executive offices, except for required travel on the
Corporation's business to an extent substantially consistent with the
Executive's business travel obligations as of the date of this
Agreement;
(iv) the failure by the Corporation or a subsidiary
to continue in effect any pension benefit or deferred compensation plan
in which the Executive participates immediately prior to any Potential
Change in Control which is material to the Executive's total
compensation, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan or arrangement) has been made with
respect to such plan, or the failure by the Corporation or a subsidiary
to continue the Executive's participation therein (or in such
substitute or alternative plan or arrangement) on a basis not
materially less favorable, both in terms of the amount of benefits
provided and the level of the Executive's participation relative to
other participants, as existed at the time of the Potential Change in
Control;
(v) the failure by the Corporation or a subsidiary to
continue to provide the Executive with health and welfare benefits
substantially similar to those enjoyed by the Executive under any
retirement, life insurance, medical, health and accident, or disability
or similar plan of the Corporation or a subsidiary in which the
Executive was participating at the time of any Potential Change in
Control, the taking of any action by the Corporation or a subsidiary
which would directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of the Potential Change in
Control, or the failure by the Corporation or a subsidiary to provide
the Executive with the greater number of paid vacation days to which
the Executive is entitled pursuant to the terms of the Executive's
employment agreement or in accordance with the Corporation's or a
subsidiary's normal vacation policy, in either case, as in effect at
the time of the Potential Change in Control;
(vi) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 7.1;
(vii) the failure of the Corporation to obtain a
written agreement reasonably satisfactory to the Executive from any
successor to the Corporation (as described in Section 9.1) to perform
this Agreement; and/or
(viii) any termination of employment by the Executive
which occurs during the one-month period commencing on the first
anniversary of the consummation of the transaction that produced the
Change in Control.
1.8 "Person" shall have the meaning ascribed thereto in
Section 3(a)(9) of the Exchange Act, as modified, applied and used in Sections
13(d) and 14(d) thereof; provided, however, that a Person shall not include (i)
the Corporation or any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Corporation or any of
its subsidiaries (in its capacity as such), (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the
Corporation in substantially the same character and proportions as their
ownership of stock of the Corporation.
1.9 "Potential Change in Control" shall mean and be deemed to
have occurred if:
(i) the Corporation enters into an agreement, the
consummation of which would result in the occurrence of a Change in
Control;
(ii) the Corporation or any Person publicly announces
an intention to take actions which, if consummated, would constitute a
Change in Control; and/or
(iii) any Person becomes the Beneficial Owner,
directly or indirectly, of securities of the Corporation representing
fifteen (15) percent or more of the combined voting power of the
Corporation's then outstanding securities, or any Person increases such
Person's beneficial ownership of such securities by ten (10) percentage
points or more over the percentage so owned by such Person on December
31, 1997.
1.10 "Retirement" shall mean and be deemed the reason for the
termination by the Executive of the Executive's employment if such employment is
terminated upon or after normal retirement age pursuant to the pension plan of
the Corporation or any subsidiary of the Corporation in which the Executive
participates, not including any early retirement or so-called "window period"
retirements, generally applicable to its officers, as in effect immediately
prior to any Potential Change in Control.
2. Term of this Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 2001; provided,
however, that the term of this Agreement shall automatically be extended each
January 1 after the date hereof for an additional period of one (1) year unless,
not later than 6 months prior to such January 1, the Corporation gives written
notice to the Executive that it does not wish to continue such automatic
extension; and provided, further, however, that if a Change in Control shall
have occurred during the term of this Agreement, this Agreement shall continue
in effect for a period of not less than thirty-six (36) months beyond the month
in which such Change in Control occurred or, if later, eighteen (18) months
after the consummation within such thirty-six (36) month period of the
transaction that produced the Change in Control (the "Term"). Notwithstanding
the foregoing provisions of this Section 2, the Term shall terminate upon
attainment of normal retirement age as defined in the pension plan of the
Corporation.
3. Corporation's Covenants.
3.1 Severance Payments. In order to induce the Executive to
remain in the employ of the Corporation and/or one or more of its subsidiaries
and in consideration of the Executive's covenants set forth in Section 4 below,
the Corporation agrees, under the terms and conditions described herein and in
addition to the amounts payable to the Executive under Section 5 below, to pay
the Executive the "Severance Payments" described in Section 6.1 below and the
other payments and benefits described herein in the event the Executive's
employment is terminated during the Employment Period or under the other
circumstances set forth in Section 6.1 below.
3.2 Position and Duties. During the Employment Period, (i) the
Executive's position (including status, offices, titles and reporting
relationships), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of those held,
exercised and assigned at any time during the one hundred eighty (180) day
period immediately preceding any related Potential Change in Control, and (ii)
the Executive's services shall be performed at the location where the Executive
was employed immediately preceding any such Potential Change in Control, or any
office or location less than thirty (30) miles from such location.
3.3 Base Salary. During the Employment Period, the Executive
shall receive Annual Base Salary at least equal to twenty-six (26) times the
highest bi-weekly base salary paid or payable, including (without limitation)
any base salary which has been earned but deferred, to the Executive by the
Corporation and its affiliated companies in respect of the twelve (12) month
period immediately preceding the month in which any related Potential Change in
Control occurs. The Executive's Annual Base Salary shall be reviewed annually
for potential increase. In addition, Annual Base Salary shall not be reduced
after the occurrence of a Potential Change in Control. As used in this
Agreement, the term "affiliated companies" shall include any company controlled
by, controlling or under common control with the Corporation.
3.4 Incentive Plans.
a. MICP. The Executive shall be awarded for each
fiscal year ending within the Employment Period an annual bonus (the "Annual
Bonus") in cash at least equal to the target annual bonus incentive award
received by the Executive under the Corporation's Management Incentive
Compensation Plan, or any other annual incentive bonus plan maintained by
the Corporation from time to time (the "MICP") for the fiscal year in which
the Change in Control occurs. Each Annual Bonus shall be paid no later than the
end of the third month of the fiscal year next following the fiscal year for
which the Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus in accordance with rules established by the
Corporation for that purpose.
b. LTIP. The Executive shall be awarded for each
award period that begins within the Employment Period a grant of performance
shares at least equal to the annual long-term incentive award received by the
Executive (not taking into account any pro-ration) under the Corporation's
Long-Term Incentive Plan or any other long-term incentive bonus plan
maintained by the Corporation from time to time (the "LTIP") for the fiscal year
in which the Change in Control occurs, and such shares shall be subject to
performance goals consistent with those established by the Corporation for the
fiscal years prior to the fiscal year in which the Change in Control occurs.
3.5 Savings and Retirement Plans. During the Employment
Period, the Executive (in addition to the Incentive Plans) shall be entitled to
participate in all other incentive, savings and retirement plans, practices,
policies and programs applicable generally to other peer executives of the
Corporation and its subsidiaries, but in no event shall such plans, practices,
policies and programs provide the Executive with incentive opportunities
(measured with respect to both regular and special incentive opportunities, to
the extent, if any, that such distinction is applicable), savings opportunities
and retirement benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Corporation and its
affiliated companies for the Executive under such plans, practices, policies and
programs as in effect at any time during the one hundred eighty (180) day period
immediately preceding any related Potential Change in Control or, if more
favorable to the Executive, those provided generally at any time thereafter to
other peer executives of the Corporation and its affiliated companies.
3.6 Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be entitled
to participate in and shall receive all benefits under all of the health and
welfare benefit plans, practices, policies and programs provided by the
Corporation and its affiliated companies (including, without limitation,
medical, prescription, dental, disability, employee life, group life, accidental
death and travel accident insurance plans and programs) to the extent (and at
the same cost, excluding increases in the employee contribution amounts which
are consistent with and equivalent to the historical rates of increase imposed
by the Corporation in respect thereof) applicable generally to other peer
executives of the Corporation and its subsidiaries, but in no event shall such
plans, practices, policies and programs provide the Executive with benefits that
are less favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for the Executive at any time during
the one hundred eighty (180) day period immediately preceding any related
Potential Change in Control or, if more favorable to the Executive, those
provided generally at any time thereafter to other peer executives of the
Corporation and its affiliated companies.
3.7 Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable business
expenses incurred by the Executive in accordance with the most favorable
policies, practices and procedures of the Corporation and its affiliated
companies in effect for the Executive at any time during the one hundred eighty
(180) day period immediately preceding any related Potential Change in Control
or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Corporation and its
affiliated companies.
3.8 Office Support; Perquisites. During the Employment Period,
the Executive shall be entitled to secretarial support and other facilities,
perquisites and programs to enable the Executive to be able to discharge the
Executive's responsibilities hereunder in accordance with the most favorable
plans, practices, programs and policies of the Corporation and its affiliated
companies in effect for the Executive at any time during the one hundred eighty
(180) day period immediately preceding any related Potential Change in Control
or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Corporation and its
affiliated companies.
3.9 Vacation. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Corporation and its affiliated
companies, or pursuant to the terms and provisions of any employment agreement,
as in effect for the Executive at any time during the one hundred eighty (180)
day period immediately preceding any related Potential Change in Control or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Corporation and its affiliated
companies.
4. The Executive's Covenants.
4.1 Employment. The Executive agrees that, subject to the
terms and conditions of this Agreement, in the event of a Change in Control
during the Term the Executive will remain in the employ of the Corporation
during any related Employment Period.
4.2 Time and Attention. During the Employment Period, and
excluding any periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of the Corporation and to use
the Executive's reasonable best efforts to perform faithfully and efficiently
the responsibilities and duties assigned to the Executive hereunder. During the
Employment Period it shall not be a violation of this Agreement for the
Executive to (i) serve on corporate, civic or charitable boards or committees,
(ii) deliver lectures and fulfill speaking engagements and (iii) manage personal
investments, so long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the
Corporation and its subsidiaries in accordance with this Agreement. It is
expressly understood and agreed that to the extent that any such activities have
been conducted by the Executive prior to any Potential Change in Control, the
reinstatement or continued conduct of such activities (or the reinstatement or
conduct of activities similar in nature and scope thereto) subsequent to any
related Potential Change in Control shall not thereafter be deemed to interfere
with the performance of the Executive's responsibilities to the Corporation and
its subsidiaries.
4.3. Non-interference; Confidential Information;
Non-Competition
(a) No Interference. For so long as the Executive is employed
by the Corporation, and for a period of one (1) year after termination of the
Executive's employment for any reason after a Change in Control, the Executive
shall not, whether for his own account or for the account of any other
individual, partnership, firm, corporation or other business organization (other
than the Corporation or one of its affiliates), directly or indirectly,
intentionally solicit, endeavor to entice away from the Corporation (or any of
its affiliates), or otherwise interfere with the relationship of the Corporation
(or any of its affiliates) with, any person who is employed by or otherwise
engaged to perform services for the Corporation (or any of its affiliates)
including, but not limited to, any independent representatives or organizations,
or any person or entity that is a customer of the Corporation (or any of its
affiliates); provided, however, that if a customer of the Corporation (or any of
its affiliates) also engages in business in areas outside of Florida that are
not served by the business of the Corporation (and/or any of its affiliates)
with which the Executive is involved, the Board of Directors may determine, in
an appropriate situation, that the solicitation of such customer in such areas
does not violate the restrictions of this Section 4.3(a). The Executive
understands and agrees that the rights and obligations set forth in this Section
4.3(a) could extend beyond the Term.
(b) Confidential Information. The Executive covenants and
agrees with the Corporation that he will not at any time, during or after
employment with the Corporation, except in performance of the Executive's
obligations to the Corporation or with the prior express written consent of the
Board of Directors, directly or indirectly, intentionally or unintentionally,
disclose any Confidential Information that he may learn or has learned by reason
of his employment or association with the Corporation or any of its affiliates,
or any predecessors to its business, or use any such information for his own
personal benefit or gain. The term "Confidential Information" includes, without
limitation, information not previously disclosed to the public or to the trade
by the Corporation's management with respect to the products, facilities and
methods, trade secrets and other intellectual property, systems, procedures,
manuals, confidential reports, fee or rate information, customer lists,
financial information (including without limitation the revenues, costs or
profits associated with any of the Corporation's (or any of its affiliates')
activities or products), business plans, prospects, opportunities or other
information of the Corporation or any of its affiliates. Confidential
Information shall not include information which (i) is or becomes generally
available to the public other than as a result of disclosure by the Executive in
violation of this Section 4.3(b) or (ii) the Executive is required to disclose
under any applicable laws, regulations or directives of any government agency,
tribunal or authority having jurisdiction in the matter or under subpoena or
other process of law. The Executive understands and agrees that the rights and
obligations set forth in this Section 4.3 (b) shall extend beyond the Term.
(c) Exclusive Property. The Executive confirms that all
Confidential Information is and shall remain the exclusive property of the
Corporation or any of its affiliates. All business records, papers and documents
kept or made by the Executive relating to the business of the Corporation (or
any of its affiliates) or any Confidential Information shall be and remain the
property of the Corporation and/or any such affiliates. Upon termination of
employment or upon the request of the Corporation at any time, the Executive
shall promptly deliver to the Corporation, and shall not without the prior
express written consent of the Corporation retain, any and all copies of (i) any
written materials not previously made available to the public, or (ii) records
and documents made by the Executive or coming into his possession concerning any
Confidential Information or the business or affairs of the Corporation or any
predecessors to its business, or any of its affiliates. The Executive
understands and agrees that the rights and obligations set forth in this Section
4.3(c) shall extend beyond the Term.
(d) Covenant Not to Compete. During the Employment Period and
for one (1) year after termination of the Executive's employment for any reason
after a Change in Control, the Executive shall not compete, directly or
indirectly, with the Corporation or its affiliates within fifty (50) miles of
any geographic area in which the Corporation or its affiliates has material
business interests with which the Executive is involved at the time of the
termination of the Executive's employment. If it is judicially determined that
this provision, or any portion thereof, is unenforceable under applicable law(s)
(statute, common law or otherwise), then it is hereby agreed by the Executive
and the Corporation that the unenforceable portion shall be redrafted to the
extent necessary to render it enforceable, while leaving the remaining portions
intact. By agreeing to this contractual modification prospectively at this time,
the parties intend to make this provision enforceable under the law(s) of all
applicable states so that the entire agreement not to compete and/or this
Agreement as prospectively modified shall remain in full force and effect and
shall not be rendered void or illegal. Such modifications shall not affect the
payments made to the Executive under this Agreement. The Executive acknowledges
that his skills are such that he can be gainfully employed in noncompetitive
employment and that the agreement not to compete will in no way prevent him from
earning a living. The Executive understands and agrees that the rights and
obligations set forth in this Section 4.3(d) shall extend beyond the Term.
(e) Injunctive Relief. Without intending to limit the remedies
available to the Corporation, the Executive acknowledges that a breach of any of
the covenants contained in this Section 4.3 may result in material irreparable
injury to the Corporation or its affiliates for which there is no adequate
remedy at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of such a breach or threat thereof, the
Corporation shall be entitled to obtain a temporary restraining order and/or a
preliminary or permanent injunction restraining the Executive from engaging in
activities prohibited by this Section 4.3 or such other relief as may be
required to specifically enforce any of the covenants in this Section 4.3.
5. Compensation Other Than Severance Payments.
5.1 Disability. Following a Potential Change in Control and
during the Term, during any period that the Executive fails to perform the
Executive's full-time duties with the Corporation as a result of incapacity due
to physical or mental illness, the Executive's full salary shall be paid to the
Executive at a rate no less than the rate in effect at the commencement of any
such disability period, together with all compensation and benefits payable to
the Executive under the terms of any compensation or benefit plan, program or
arrangement maintained by the Corporation or its subsidiaries during such
disability period, until the Executive's employment is terminated by the
Corporation for Disability.
5.2 Base Salary. If the Executive's employment shall be
terminated for any reason following a Potential Change in Control and during the
Term, the Executive's full salary shall be paid to the Executive through the
Date of Termination (as defined below in Section 7.2) at the rate in effect at
the time the Notice of Termination is given, together with all compensation and
benefits payable to or with respect to the Executive through the Date of
Termination under the terms of any compensation or benefit plan, program or
arrangement maintained by the Corporation or its subsidiaries during such
period.
5.3 Benefits. If the Executive's employment shall be
terminated for any reason following a Potential Change in Control and during the
Term, the Executive's normal post-termination compensation and benefits shall be
paid to the Executive as such payments become due. Such post-termination
compensation and benefits shall be determined under, and paid in accordance
with, the retirement, health insurance, life insurance and other compensation
(including without limitation any bonus and/or incentive compensation) or
benefit plans, programs and arrangements maintained by the Corporation or its
subsidiaries or affiliates.
6. Severance Payments.
6.1 Severance. The Corporation shall pay the Executive the
payments and benefits described in Section 6.1(a), (b) and (c) (the "Severance
Payments") upon the termination of the Executive's employment following a Change
in Control and during the Term, in addition to the payments and benefits
described in Section 5 hereof, unless such termination is (i) by the Corporation
for Cause, (ii) by reason of Retirement, (iii) by the Executive without Good
Reason, (iv) due to death, or (v) due to Disability. In addition, the
Executive's employment shall be deemed to have been terminated following a
Change in Control by the Corporation without Cause or by the Executive with Good
Reason (a) if the Executive reasonably demonstrates that the Executive's
employment was terminated prior to a Change in Control without Cause (1) at the
request of a Person who has entered into an agreement with the Corporation the
consummation of which will constitute a Change in Control (or who has taken
other steps reasonably calculated to effect a Change in Control) or (2)
otherwise in connection with, as a result of or in anticipation of a Change in
Control, or (b) if the Executive terminates his employment for Good Reason prior
to a Change in Control and the Executive reasonably demonstrates that the
circumstance(s) or event(s) which constitute such Good Reason occurred (1) at
the request of such Person or (2) otherwise in connection with, as a result of
or in anticipation of a Change in Control. The Executive's right to terminate
the Executive's employment for Good Reason shall not be affected by the
Executive's incapacity due to physical or mental illness. The Executive's
continued employment shall not constitute consent to, or a waiver of rights with
respect to, any act or failure to act constituting Good Reason hereunder. In the
event of Disability or death of the Executive after the Date of Termination in
respect of any termination without Cause or any termination for Good Reason,
payments and benefits shall be made to the Executive, or the Executive's
beneficiaries or legal representative, as the case may be.
(a) Lump Sum Payment. A lump sum payment equal to two
and one-half (2.50) times the highest "total 12-month compensation" of
the Executive (whether or not deferred) for any 12-month period during
the five (5) completed calendar years prior to the Date of Termination,
where "total 12-month compensation" means the sum of the Executive's
Annual Base Salary during such 12-month period and the full amount of
the Executive's MICP award (target or actual, whichever is greater)
that was payable during such 12-month period (or annualized 12-month
period if the Executive has not completed 12 months of employment).
(b) Welfare Plan Continuation. For a thirty (30)
month period after the Date of Termination, or if sooner, until the
Executive reaches the age of sixty-five (65) years, the Corporation
shall provide the Executive (at no cost to the Executive) with life,
disability, accident and health insurance benefits substantially
similar to those that the Executive is receiving immediately prior to
any related Potential Change in Control or the receipt of the Notice of
Termination (without giving effect to any reduction in such benefits
subsequent to a Change in Control which reduction constitutes Good
Reason), whichever is greater; provided, however, that the final 18
months of the continued coverage period hereunder shall be deemed to
constitute the full amount of the Executive's entitlement to COBRA
benefits as a result of the Executive's termination of employment. Upon
the termination of the Executive's continued benefits provided under
the prior sentence, the Executive shall be eligible to continue such
benefits (at the Executive's cost) to the same extent that such
benefits are provided by the Corporation thereafter (the "Continued
Access Period") to comparable executives and, after the Executive
attains age 65, to retired executives. Benefits otherwise receivable by
the Executive pursuant to the first sentence of this Section 6.1(b)
shall be reduced to the extent comparable benefits are actually
received by or made available to the Executive without cost during such
period following the Executive's termination of employment (and any
such benefits actually received by the Executive shall be reported to
the Corporation by the Executive). Continued coverage during the
Continued Access Period shall terminate if comparable benefits are made
available to the Executive under any other policy or program (and the
availability of any such benefits shall be reported to the Corporation
by the Executive).
(c) LTIP. Performance shares granted to the Executive
under the LTIP for performance cycles commencing after a Change in
Control has occurred and remaining uncompleted will be deemed earned as
of the Date of Termination to the extent of one hundred fifty percent
(150%) of target under each award agreement, and the value of each such
award will be paid out to the Executive in a lump-sum cash payment.
Performance shares granted to the Executive under the LTIP for
performance cycles which commenced after a Change in Control occurred
and were completed before the Date of Termination will be paid out to
the extent earned, and the value of such award will be paid out to the
Executive in a lump-sum cash payment.
(d) SERP; Other Deferred Compensation. The Executive
shall receive credit under the Corporation's Supplemental Executive
Retirement Plan ("SERP") for five (5) additional years of service and
shall immediately become 100% vested in the Executive's accrued benefit
and/or account balance to date under the SERP and any non-qualified
deferred compensation plan, and any amendment, modification or
termination of any such plan occurring during the Term of this
Agreement after any Change in Control shall not be effective against
the Executive to decrease or change any of the Executive's rights
thereunder.
(e) Relocation and Other Assistance. Should the
Executive be required to move his or her primary residence in order to
pursue other business opportunities within thirty (30) months of the
Date of Termination, the Company will reimburse the Executive for any
expenses (not in excess of $10,000) incurred in that relocation that
are not reimbursed by another employer, including, without limitation,
assistance in selling the Executive's home and all other assistance and
benefits that were customarily provided by the Corporation to
transferred executives prior to the Change in Control. In addition, if
the Executive retains legal counsel with respect to the taxation of
payments to be made to the Executive under this Agreement, the
Corporation shall reimburse the Executive for such reasonable legal
fees and disbursements (but not in excess of $15,000).
6.2 Special Reimbursement. (a) Notwithstanding any other
provisions of this Agreement, in the event that any payment or benefit received
or to be received by the Executive in connection with a Change in Control or the
termination of the Executive's employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Corporation or
any of its subsidiaries, any Person whose actions result in a Change in Control
or any Person affiliated with the Corporation or such Person) (all such payments
and benefits, including the Severance Payments, being hereinafter called "Total
Payments") would subject the Executive to the excise tax imposed under Section
4999 of the Code or any successor section thereto (the "Excise Tax"), the
Corporation shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Executive, after deduction of
any Excise Tax on the Total Payments and any federal, state and local income tax
and Excise Tax upon the payment provided for by this Section 6.2(a), shall be
equal to the Total Payments.
(b) For purposes of determining whether any of the
Total Payments will be subject to the Excise Tax and the amount of such Excise
Tax, (i) the Total Payments shall be treated as "parachute payments" within
the meaning of section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of section 280G(b)(1) of the Code shall be treated
as subject to the Excise Tax, unless in the opinion of tax counsel selected by
the Corporation's general counsel and reasonably acceptable to the Executive
such Total Payments (in whole or in part) do not constitute parachute payments,
including by reason of Section 280G(b)(4)(A) of the Code, or such excess
parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered, within the meaning of section 280G(b)(4)(B) of the
Code, in excess of the Base Amount allocable to such reasonable compensation,
or are otherwise not subject to the Excise Tax, and (ii) the value of any
non-cash benefits or any deferred payment or benefit shall be determined by the
Corporation's independent auditors in accordance with the principles of
sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount
of the Gross-Up Payment, the Executive shall be deemed to pay federal income
taxes at the highest marginal rate of federal income taxation in the calendar
year in which the Gross-Up Payment is to be made and applicable state and local
income taxes at the highest marginal rate of taxation, net of the maximum
reduction in federal income taxes which could be obtained from deduction of such
state and local taxes.
(c) In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at the time
of termination of the Executive's employment, the Executive shall repay to
the Corporation, at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment attributable to such
reduction plus interest on the amount of such repayment at the rate provided in
section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any payment
the existence or amount of which cannot be determined at the time of the
Gross-Up Payment), the Corporation shall make an additional Gross-Up Payment
in respect of such excess (plus any interest, penalties or additions
payable by the Executive with respect to such excess) at the time that the
amount of such excess is finally determined. The Executive and the
Corporation shall each reasonably cooperate with the other in connection with
any administrative or judicial proceedings concerning the existence or
amount of any such subsequent liability for Excise Tax with respect to the Total
Payments.
6.3 Date of Payment. The payments provided for in Section 6.2
hereof shall be made not later than the fifteenth (15th) day following the Date
of Termination; provided, however, that if the amounts of such payments cannot
be finally determined on or before such day, the Corporation shall pay to the
Executive on such day an estimate, as determined in good faith by the
Corporation, of the minimum amount of such payments to which the Executive is
likely to be entitled to and shall pay the remainder of such payments (together
with interest at the rate provided in section 1274(b)(2)(B) of the Code) as soon
as the amount thereof can be determined but in no event later than the sixtieth
(60th) day after the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Corporation to the Executive, payable
on the tenth (10th) business day after demand by the Corporation (together with
interest at the rate provided in section 7872(f)(2)(A) of the Code). At the time
that payments are made under this Section 6.3, the Corporation shall provide the
Executive with a detailed written statement setting forth the manner in which
such payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Corporation has received
from outside counsel, auditors or consultants (and any such opinions or advice
which are in writing shall be attached to the statement).
6.4 Legal Costs. The Corporation shall reimburse the Executive
for reasonable legal fees and expenses incurred in good faith by the Executive
as a result of any dispute with any party (including, but not limited to, the
Corporation or any subsidiary of the Corporation) regarding the payment or
receipt of any benefit provided for in this Agreement (including, but not
limited, all such fees and expenses incurred in disputing any termination or in
seeking in good faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code) plus in each case
interest on any delayed payment at the applicable Federal rate provided for in
section 7872(f)(2)(A) of the Code. Such payments shall be made within five (5)
business days after delivery of the Executive's written requests for payment
accompanied by such evidence of fees and expenses incurred as the Corporation
reasonably may require.
7. Termination Procedures and Compensation During Dispute.
7.1 Notice of Termination. After a Change in Control and
during the Term, any purported termination of the Executive's employment (other
than by reason of death) shall be communicated by written Notice of Termination
from one party hereto to the other party hereto in accordance with Section 10
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated. Further, a Notice of Termination for Cause is
required to include 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 at a
meeting of the Board which was called and held for the purpose of considering
such termination (which meeting may be a regular meeting of the Board where
prior notice of consideration of such termination is given to members of the
Board) finding that, in the good faith opinion of the Board, (i) the Executive
engaged in conduct set forth in clause (i) or (ii) of the definition of Cause
herein, and specifying the particulars thereof in detail, or (ii) one of the
events set forth in clause (ii) of such definition has occurred. For purposes of
this Agreement, any purported termination not effected in accordance with this
Section 7.1 shall not be considered effective.
7.2 Date of Termination. "Date of Termination", with respect
to any purported termination of the Executive's employment after a Potential
Change in Control and during the Term, shall mean (i) if the Executive's
employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
full-time performance of the Executive's duties during such thirty (30) day
period), and (ii) if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination (which, in the case of a
termination by the Corporation, shall not be less than thirty (30) days (except
in the case of a termination for Cause) and, in the case of a termination by the
Executive, shall not be less than fifteen (15) days nor more than sixty (60)
days, respectively, after the date such Notice of Termination is given).
7.3 Dispute Concerning Termination. If within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved either by mutual written agreement of the
parties or by a final judgement, order, or decree of an arbitrator or a court of
competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected);
provided, however, that the Date of Termination shall not be extended by a
notice of dispute if the basis for such notice, as determined in good faith by
the party receiving such notice is not given in good faith or the party giving
such notice does not pursue the resolution of such dispute with reasonable
diligence. Subject to the rights granted by Section 4.3, any controversy or
claim arising out of, or relating to, any provision of this Agreement shall be
settled by binding arbitration in accordance with the laws of The State of
Florida by three arbitrators, one of whom shall be appointed by the Corporation,
one by the Executive, and the third by the first two arbitrators. If the first
two arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association.
Such arbitration shall be conducted in Florida in accordance with the rules of
the American Arbitration Association, except with respect to the selection of
arbitrators which shall be as provided in this Section. Judgment on the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
7.4 Compensation During Dispute. If a purported termination
occurs following a Change in Control and during the Term, and such termination
is disputed in accordance with Section 7.3 above (and pursuant thereto the Date
of Termination is extended), the Corporation shall continue to pay the Executive
the full Annual Base Salary in effect at the time of any related Potential
Change in Control or when the notice giving rise to the dispute was given
(whichever is greater). Amounts paid under this Section 7.4 are in addition to
all other amounts due under this Agreement (other than those due under Section
5.2 hereof) and shall not be offset against or reduce any other amounts due
under this Agreement or any other plan, agreement or arrangement.
8. No Mitigation. The Corporation agrees that, if the Executive's
employment is terminated during the Term, the Executive is not required to seek
other employment or to attempt in any way to reduce any amounts payable to the
Executive by the Corporation pursuant to Section 6 or Section 7.4. Further, the
amount of any payment or benefit provided for in Section 6 (other than pursuant
to Section 6.1.(b)) or Section 7.4 shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, or offset against any amount claimed to be owed by the
Executive to the Corporation or any of its subsidiaries, or otherwise.
9. Successors; Binding Agreement.
9.1 Successors. In addition to any obligations imposed by law
upon any successor to the Corporation, the Corporation will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Corporation to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Corporation would be required to perform
it if no such succession had taken place. Failure of the Corporation to obtain
such assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle the Executive to
compensation from the Corporation in the same amount and on the same terms as
the Executive would be entitled to hereunder if the Executive were to terminate
employment with the Corporation for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination.
9.2 Binding Agreement. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would still
be payable to the Executive hereunder (other than amounts which, by their terms,
terminate upon the death of the Executive) if the Executive had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the beneficiary (or
beneficiaries) designated by the Executive from time to time in accordance with
the procedures for notice set out in Section 10; provided, however, that if
there shall be no effective designation of beneficiary by the Executive, such
amounts shall be paid to the executors, personal representatives or
administrators of the Executive's estate.
10. Notices; Other Communications. For the purpose of this Agreement,
notices and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or mailed by
United States certified mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth below, or to such other address
as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
actual receipt:
To the Corporation: Florida Progress Corporation
P.O. Box 33042
St. Petersburg, Florida 33733
With a copy to: Mr. William G. Kelley
Vice President, Human Resources
Florida Progress Corporation
3201 34th Street South
St. Petersburg, Florida 33711
To the Executive: Mr. Jeffrey R. Heinicka
7373 Watersilk Drive
Pinellas Park, Florida 33782
11. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Florida without regard to the principles of conflict
of laws thereof. All references to sections of the Exchange Act or the Code (or
the rules and/or regulations under either) shall be deemed also to refer to and
include any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding required under
federal, state or local law and any additional withholding to which the
Executive has agreed. The rights and obligations of the Corporation and the
Executive under this Agreement shall survive the expiration of the Term and the
Employment Period.
12. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, all of which shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. No Limitation. Nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any plan, program, policy or
practice provided by the Corporation or any of its affiliated companies and for
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement with the Corporation or any of its affiliated companies. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan, policy, practice or program of or any contract or agreement with
the Corporation or any of its affiliated companies at or subsequent to the Date
of Termination shall be payable in accordance with such plan, policy, practice
or program or contract or agreement as in effect from time to time except as
explicitly modified by this Agreement.
15. Other Agreements. This Agreement contains the entire agreement
between the parties concerning the subject matter hereof and supersedes all
prior agreements understandings, discussions, negotiations and undertakings,
whether written or oral, between the parties with respect thereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
FLORIDA PROGRESS CORPORATION
By: /s/ Richard Korpan
----------------------------------
RICHARD KORPAN
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
/s/ Jeffrey R. Heinicka
----------------------------------
Executive
EXHIBIT 10.(e)
AGREEMENT
THIS AGREEMENT, dated as of January 30, 1998 (this
"Agreement"), is made by and between Florida Progress Corporation, having its
principal offices at One Progress Plaza, St. Petersburg, Florida 33701 (the
"Corporation"), and Richard D. Keller, residing at 7352 Watersilk Drive,
Pinellas Park, Florida 33782 (the "Executive").
WHEREAS, the Corporation considers it essential to the best
interests of its shareholders to foster the continued employment of key
executive and management personnel; and
WHEREAS, the Board of Directors of the Corporation (the
"Board") recognizes that the possibility of a Change in Control (as defined in
Section 1.3 below) of the Corporation exists from time to time and that such
possibility, and the uncertainty, instability and questions that it may raise
for and among key executive and management personnel, may result in the
premature departure or significant distraction of such individuals to the
material detriment of the Corporation and its shareholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce, focus and encourage the continued attention and
dedication of key executive and management personnel of the Corporation and its
subsidiaries, such as the Executive, to their assigned duties without
distraction in the face of potentially disturbing or unsettling circumstances
arising from the possibility of a Change in Control of the Corporation;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Corporation and the Executive hereby agree as
follows:
1. Definitions. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
1.1 "Annual Base Salary" shall mean the Executive's rate of
regular base annual compensation (prior to any reduction under (i) a salary
reduction agreement pursuant to section 401(k) or section 125 of the Internal
Revenue Code of 1986, as amended from time to time (the "Code") or (ii) any plan
or arrangement deferring any base salary or bonus payments), and shall not
include (without limitation) allowances, fees, retainers, reimbursements,
bonuses, incentive awards, prizes or similar payments.
1.2 "Cause" shall mean:
(i) the Executive engaging in fraud, misappropriation
or willful misconduct that is demonstrably and materially injurious to
the property or business of the Corporation and/or its subsidiaries,
monetarily or otherwise; or
(ii) the Executive's conviction of, or plea of no
contest to, a felony.
For purposes of clause (i) of this definition, no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or omitted to be done,
by the Executive in bad faith and without reasonable belief that the Executive's
act, or failure to act, was in the best interest of the Corporation or its
subsidiaries. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board or upon the instructions of the Board (or
a committee thereof), the Corporation's chief executive officer or other duly
authorized senior officer of the Corporation (as appropriate) or based upon the
advice of counsel for the Corporation shall be conclusively presumed to be done,
or omitted to be done, by the Executive in good faith and in the best interests
of the Corporation or its subsidiaries. The cessation of employment of the
Executive shall not be deemed to be for Cause unless and until there shall have
been delivered to the Executive 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 at a meeting of the Board called and held for such purpose (after
reasonable notice of any such meeting is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board) finding that, in the good faith opinion of the Board, (a) the Executive
has acted in a manner described in clause (i) above, and specifying the
particulars thereof in detail, or (b) one of the events set forth in (ii) has
occurred.
1.3 "Change in Control" shall mean and be deemed to have
occurred if:
(i) any Person is or becomes, after the date of this
Agreement, the Beneficial Owner (as that term is defined in Rule 13d-3
under the Securities Exchange Act of 1934 (the "Exchange Act")),
directly or indirectly, of securities of the Corporation (not including
in the securities beneficially owned by such Person any securities
acquired directly from the Corporation) representing twenty-five
percent (25%) or more of the combined voting power of the Corporation's
then outstanding securities; or
(ii) during any period of twenty-four (24)
consecutive months (not including any period prior to January 1, 1998),
individuals who at the beginning of such period constitute the Board
and any new director (other than a director designated by a Person who
has entered into an agreement with the Corporation to effect a
transaction described in clause (i), (iii) or (iv) of this definition
or any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents) whose election by the Board or nomination for election by the
Corporation's stockholders 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 of the Board; or
(iii) the shareholders of the Corporation approve a
reorganization, merger or consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially all
of the individuals and entities who were Beneficial Owners, immediately
prior to such reorganization, merger or consolidation, of the combined
voting power of the Corporation's then outstanding securities
beneficially own, directly or indirectly, immediately after such
reorganization, merger or consolidation, more than seventy-five percent
(75%) of the combined voting power of the securities of the corporation
resulting from such reorganization, merger or consolidation in
substantially the same proportions as their respective ownership,
immediately prior to such reorganization, merger or consolidation, of
the combined voting power of the Corporation's securities; or
(iv) the shareholders of the Corporation approve (a)
the sale or disposition by the Corporation (other than to a subsidiary
of the Corporation) of all or substantially all of the assets of the
Corporation (or any such sale or disposition is effected through
condemnation proceedings), or (b) a complete liquidation or dissolution
of the Corporation.
Notwithstanding the foregoing, a Change in Control shall not include any event,
circumstance or transaction which results from the action (excluding the
Executive's employment activities with the Corporation, Florida Power
Corporation or any of their respective subsidiaries) of any Person or group of
Persons which includes, is directly affiliated with or is wholly or partly
controlled by one or more executive officers of the Corporation or its
subsidiaries and in which the Executive actively participates.
1.4 "Corporation" shall include Florida Progress Corporation
and any successor to its business and/or assets which assumes (either expressly,
by operation of law or otherwise) and/or agrees to perform this Agreement by
operation of law or otherwise (except in determining, under Section 1.3 hereof,
whether or not any Change in Control of the Corporation has occurred in
connection with such succession).
1.5 "Disability" shall mean and be deemed the reason for the
termination by the Corporation of the Executive's employment, if, as a result of
the Executive's incapacity due to physical and/or mental illness, (i) the
Executive shall have been absent from the full-time performance of the
Executive's duties with the Corporation or any affiliate of the Corporation for
a period of six (6) consecutive months, (ii) the Corporation and/or such
affiliate gives the Executive a Notice of Termination for Disability, and (iii)
within thirty (30) days after such Notice of Termination is given, the Executive
does not return to the full-time performance of the Executive's duties.
1.6 "Employment Period" shall mean the period commencing on
the date of any Change in Control until the earliest to occur of (i) the date
which is thirty-six (36) months from the date of any such Change in Control,
(ii) the date of termination by the Executive of the Executive's employment for
Good Reason, or (iii) the termination by the Corporation of the Executive's
employment for any reason.
1.7 "Good Reason" shall mean the occurrence (without the
Executive's express written consent) of any one of the following acts, or
failures to act, unless, in the case of any act or failure to act described in
clauses (i), (iv), (v) or (vi) below, such act or failure to act is corrected by
the Corporation prior to the Date of Termination specified in the Notice of
Termination given by the Executive in respect thereof not later than six (6)
months after the occurrence of the event that serves as the basis for the Notice
of Termination:
(i) the assignment to the Executive of any duties or
responsibilities inconsistent with those described in Section 3.2 below
or with the Executive's position(s) or status (including, without
limitation, offices, titles, and reporting relationships) as an
executive officer of the Corporation and/or its primary subsidiaries or
a substantial adverse alteration in the nature of the Executive's
authorities, duties, responsibilities, position(s) or status from those
described in Section 3.2 below or otherwise;
(ii) a reduction in the Executive's Annual Base
Salary or annual bonus opportunity as in effect on the date of this
Agreement or as the same may be increased at any time thereafter and
from time to time;
(iii) the relocation of the Corporation's principal
executive offices to a location more than thirty (30) miles from its
location on the date of this Agreement (or, if different, more than
thirty (30) miles from where such offices are located immediately prior
to any Potential Change in Control) or the Corporation's requiring the
Executive to be based anywhere other than the Corporation's principal
Florida executive offices, except for required travel on the
Corporation's business to an extent substantially consistent with the
Executive's business travel obligations as of the date of this
Agreement;
(iv) the failure by the Corporation or a subsidiary
to continue in effect any pension benefit or deferred compensation plan
in which the Executive participates immediately prior to any Potential
Change in Control which is material to the Executive's total
compensation, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan or arrangement) has been made with
respect to such plan, or the failure by the Corporation or a subsidiary
to continue the Executive's participation therein (or in such
substitute or alternative plan or arrangement) on a basis not
materially less favorable, both in terms of the amount of benefits
provided and the level of the Executive's participation relative to
other participants, as existed at the time of the Potential Change in
Control;
(v) the failure by the Corporation or a subsidiary to
continue to provide the Executive with health and welfare benefits
substantially similar to those enjoyed by the Executive under any
retirement, life insurance, medical, health and accident, or disability
or similar plan of the Corporation or a subsidiary in which the
Executive was participating at the time of any Potential Change in
Control, the taking of any action by the Corporation or a subsidiary
which would directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of the Potential Change in
Control, or the failure by the Corporation or a subsidiary to provide
the Executive with the greater number of paid vacation days to which
the Executive is entitled pursuant to the terms of the Executive's
employment agreement or in accordance with the Corporation's or a
subsidiary's normal vacation policy, in either case, as in effect at
the time of the Potential Change in Control;
(vi) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 7.1;
(vii) the failure of the Corporation to obtain a
written agreement reasonably satisfactory to the Executive from any
successor to the Corporation (as described in Section 9.1) to perform
this Agreement; and/or
(viii) any termination of employment by the Executive
which occurs during the one-month period commencing on the first
anniversary of the consummation of the transaction that produced the
Change in Control.
1.8 "Person" shall have the meaning ascribed thereto in
Section 3(a)(9) of the Exchange Act, as modified, applied and used in Sections
13(d) and 14(d) thereof; provided, however, that a Person shall not include (i)
the Corporation or any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Corporation or any of
its subsidiaries (in its capacity as such), (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the
Corporation in substantially the same character and proportions as their
ownership of stock of the Corporation.
1.9 "Potential Change in Control" shall mean and be deemed to
have occurred if:
(i) the Corporation enters into an agreement, the
consummation of which would result in the occurrence of a Change in
Control;
(ii) the Corporation or any Person publicly announces
an intention to take actions which, if consummated, would constitute a
Change in Control; and/or
(iii) any Person becomes the Beneficial Owner,
directly or indirectly, of securities of the Corporation representing
fifteen (15) percent or more of the combined voting power of the
Corporation's then outstanding securities, or any Person increases such
Person's beneficial ownership of such securities by ten (10) percentage
points or more over the percentage so owned by such Person on December
31, 1997.
1.10 "Retirement" shall mean and be deemed the reason for the
termination by the Executive of the Executive's employment if such employment is
terminated upon or after normal retirement age pursuant to the pension plan of
the Corporation or any subsidiary of the Corporation in which the Executive
participates, not including any early retirement or so-called "window period"
retirements, generally applicable to its officers, as in effect immediately
prior to any Potential Change in Control.
2. Term of this Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 2001; provided,
however, that the term of this Agreement shall automatically be extended each
January 1 after the date hereof for an additional period of one (1) year unless,
not later than 6 months prior to such January 1, the Corporation gives written
notice to the Executive that it does not wish to continue such automatic
extension; and provided, further, however, that if a Change in Control shall
have occurred during the term of this Agreement, this Agreement shall continue
in effect for a period of not less than thirty-six (36) months beyond the month
in which such Change in Control occurred or, if later, eighteen (18) months
after the consummation within such thirty-six (36) month period of the
transaction that produced the Change in Control (the "Term"). Notwithstanding
the foregoing provisions of this Section 2, the Term shall terminate upon
attainment of normal retirement age as defined in the pension plan of the
Corporation.
3. Corporation's Covenants.
3.1 Severance Payments. In order to induce the Executive to
remain in the employ of the Corporation and/or one or more of its subsidiaries
and in consideration of the Executive's covenants set forth in Section 4 below,
the Corporation agrees, under the terms and conditions described herein and in
addition to the amounts payable to the Executive under Section 5 below, to pay
the Executive the "Severance Payments" described in Section 6.1 below and the
other payments and benefits described herein in the event the Executive's
employment is terminated during the Employment Period or under the other
circumstances set forth in Section 6.1 below.
3.2 Position and Duties. During the Employment Period, (i) the
Executive's position (including status, offices, titles and reporting
relationships), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of those held,
exercised and assigned at any time during the one hundred eighty (180) day
period immediately preceding any related Potential Change in Control, and (ii)
the Executive's services shall be performed at the location where the Executive
was employed immediately preceding any such Potential Change in Control, or any
office or location less than thirty (30) miles from such location.
3.3 Base Salary. During the Employment Period, the Executive
shall receive Annual Base Salary at least equal to twenty-six (26) times the
highest bi-weekly base salary paid or payable, including (without limitation)
any base salary which has been earned but deferred, to the Executive by the
Corporation and its affiliated companies in respect of the twelve (12) month
period immediately preceding the month in which any related Potential Change in
Control occurs. The Executive's Annual Base Salary shall be reviewed annually
for potential increase. In addition, Annual Base Salary shall not be reduced
after the occurrence of a Potential Change in Control. As used in this
Agreement, the term "affiliated companies" shall include any company controlled
by, controlling or under common control with the Corporation.
3.4 Incentive Plans.
a. MICP. The Executive shall be awarded for each
fiscal year ending within the Employment Period an annual bonus (the "Annual
Bonus") in cash at least equal to the target annual bonus incentive award
received by the Executive under the Corporation's Management Incentive
Compensation Plan, or any other annual incentive bonus plan maintained by
the Corporation from time to time (the "MICP") for the fiscal year in which the
Change in Control occurs. Each Annual Bonus shall be paid no later than the end
of the third month of the fiscal year next following the fiscal year for which
the Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus in accordance with rules established by the
Corporation for that purpose.
b. LTIP. The Executive shall be awarded for each
award period that begins within the Employment Period a grant of performance
shares at least equal to the annual long-term incentive award received by the
Executive (not taking into account any pro-ration) under the Corporation's
Long-Term Incentive Plan or any other long-term incentive bonus plan
maintained by the Corporation from time to time (the "LTIP") for the fiscal year
in which the Change in Control occurs, and such shares shall be subject to
performance goals consistent with those established by the Corporation for the
fiscal years prior to the fiscal year in which the Change in Control occurs.
3.5 Savings and Retirement Plans. During the Employment
Period, the Executive (in addition to the Incentive Plans) shall be entitled to
participate in all other incentive, savings and retirement plans, practices,
policies and programs applicable generally to other peer executives of the
Corporation and its subsidiaries, but in no event shall such plans, practices,
policies and programs provide the Executive with incentive opportunities
(measured with respect to both regular and special incentive opportunities, to
the extent, if any, that such distinction is applicable), savings opportunities
and retirement benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Corporation and its
affiliated companies for the Executive under such plans, practices, policies and
programs as in effect at any time during the one hundred eighty (180) day period
immediately preceding any related Potential Change in Control or, if more
favorable to the Executive, those provided generally at any time thereafter to
other peer executives of the Corporation and its affiliated companies.
3.6 Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be entitled
to participate in and shall receive all benefits under all of the health and
welfare benefit plans, practices, policies and programs provided by the
Corporation and its affiliated companies (including, without limitation,
medical, prescription, dental, disability, employee life, group life, accidental
death and travel accident insurance plans and programs) to the extent (and at
the same cost, excluding increases in the employee contribution amounts which
are consistent with and equivalent to the historical rates of increase imposed
by the Corporation in respect thereof) applicable generally to other peer
executives of the Corporation and its subsidiaries, but in no event shall such
plans, practices, policies and programs provide the Executive with benefits that
are less favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for the Executive at any time during
the one hundred eighty (180) day period immediately preceding any related
Potential Change in Control or, if more favorable to the Executive, those
provided generally at any time thereafter to other peer executives of the
Corporation and its affiliated companies.
3.7 Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable business
expenses incurred by the Executive in accordance with the most favorable
policies, practices and procedures of the Corporation and its affiliated
companies in effect for the Executive at any time during the one hundred eighty
(180) day period immediately preceding any related Potential Change in Control
or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Corporation and its
affiliated companies.
3.8 Office Support; Perquisites. During the Employment Period,
the Executive shall be entitled to secretarial support and other facilities,
perquisites and programs to enable the Executive to be able to discharge the
Executive's responsibilities hereunder in accordance with the most favorable
plans, practices, programs and policies of the Corporation and its affiliated
companies in effect for the Executive at any time during the one hundred eighty
(180) day period immediately preceding any related Potential Change in Control
or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Corporation and its
affiliated companies.
3.9 Vacation. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Corporation and its affiliated
companies, or pursuant to the terms and provisions of any employment agreement,
as in effect for the Executive at any time during the one hundred eighty (180)
day period immediately preceding any related Potential Change in Control or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Corporation and its affiliated
companies.
4. The Executive's Covenants.
4.1 Employment. The Executive agrees that, subject to the
terms and conditions of this Agreement, in the event of a Change in Control
during the Term the Executive will remain in the employ of the Corporation
during any related Employment Period.
4.2 Time and Attention. During the Employment Period, and
excluding any periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of the Corporation and to use
the Executive's reasonable best efforts to perform faithfully and efficiently
the responsibilities and duties assigned to the Executive hereunder. During the
Employment Period it shall not be a violation of this Agreement for the
Executive to (i) serve on corporate, civic or charitable boards or committees,
(ii) deliver lectures and fulfill speaking engagements and (iii) manage personal
investments, so long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the
Corporation and its subsidiaries in accordance with this Agreement. It is
expressly understood and agreed that to the extent that any such activities have
been conducted by the Executive prior to any Potential Change in Control, the
reinstatement or continued conduct of such activities (or the reinstatement or
conduct of activities similar in nature and scope thereto) subsequent to any
related Potential Change in Control shall not thereafter be deemed to interfere
with the performance of the Executive's responsibilities to the Corporation and
its subsidiaries.
4.3. Non-interference; Confidential Information;
Non-Competition
(a) No Interference. For so long as the Executive is employed
by the Corporation, and for a period of one (1) year after termination of the
Executive's employment for any reason after a Change in Control, the Executive
shall not, whether for his own account or for the account of any other
individual, partnership, firm, corporation or other business organization (other
than the Corporation or one of its affiliates), directly or indirectly,
intentionally solicit, endeavor to entice away from the Corporation (or any of
its affiliates), or otherwise interfere with the relationship of the Corporation
(or any of its affiliates) with, any person who is employed by or otherwise
engaged to perform services for the Corporation (or any of its affiliates)
including, but not limited to, any independent representatives or organizations,
or any person or entity that is a customer of the Corporation (or any of its
affiliates). The Executive understands and agrees that the rights and
obligations set forth in this Section 4.3(a) could extend beyond the Term.
(b) Confidential Information. The Executive covenants and
agrees with the Corporation that he will not at any time, during or after
employment with the Corporation, except in performance of the Executive's
obligations to the Corporation or with the prior express written consent of the
Board of Directors, directly or indirectly, intentionally or unintentionally,
disclose any Confidential Information that he may learn or has learned by reason
of his employment or association with the Corporation or any of its affiliates,
or any predecessors to its business, or use any such information for his own
personal benefit or gain. The term "Confidential Information" includes, without
limitation, information not previously disclosed to the public or to the trade
by the Corporation's management with respect to the products, facilities and
methods, trade secrets and other intellectual property, systems, procedures,
manuals, confidential reports, fee or rate information, customer lists,
financial information (including without limitation the revenues, costs or
profits associated with any of the Corporation's (or any of its affiliates')
activities or products), business plans, prospects, opportunities or other
information of the Corporation or any of its affiliates. Confidential
Information shall not include information which (i) is or becomes generally
available to the public other than as a result of disclosure by the Executive in
violation of this Section 4.3(b) or (ii) the Executive is required to disclose
under any applicable laws, regulations or directives of any government agency,
tribunal or authority having jurisdiction in the matter or under subpoena or
other process of law. The Executive understands and agrees that the rights and
obligations set forth in this Section 4.3 (b) shall extend beyond the Term.
(c) Exclusive Property. The Executive confirms that all
Confidential Information is and shall remain the exclusive property of the
Corporation or any of its affiliates. All business records, papers and documents
kept or made by the Executive relating to the business of the Corporation (or
any of its affiliates) or any Confidential Information shall be and remain the
property of the Corporation and/or any such affiliates. Upon termination of
employment or upon the request of the Corporation at any time, the Executive
shall promptly deliver to the Corporation, and shall not without the prior
express written consent of the Corporation retain, any and all copies of (i) any
written materials not previously made available to the public, or (ii) records
and documents made by the Executive or coming into his possession concerning any
Confidential Information or the business or affairs of the Corporation or any
predecessors to its business, or any of its affiliates. The Executive
understands and agrees that the rights and obligations set forth in this Section
4.3(c) shall extend beyond the Term.
(d) Covenant Not to Compete. During the employment period and
for one (1) year after termination of the Executive's employment for any reason
after a Change in Control, the Executive shall not compete, directly or
indirectly, with the Corporation or its affiliates within fifty (50) miles of
any geographic area in which the Corporation or its affiliates has material
business interests with which the Executive is involved at the time of the
termination of the Executive's employment. If it is judicially determined that
this provision, or any portion thereof, is unenforceable under applicable law(s)
(statute, common law or otherwise), then it is hereby agreed by the Executive
and the Corporation that the unenforceable portion shall be redrafted to the
extent necessary to render it enforceable, while leaving the remaining portions
intact. By agreeing to this contractual modification prospectively at this time,
the parties intend to make this provision enforceable under the law(s) of all
applicable states so that the entire agreement not to compete and/or this
Agreement as prospectively modified shall remain in full force and effect and
shall not be rendered void or illegal. Such modifications shall not affect the
payments made to the Executive under this Agreement. The Executive acknowledges
that his skills are such that he can be gainfully employed in noncompetitive
employment and that the agreement not to compete will in no way prevent him from
earning a living. The Executive understands and agrees that the rights and
obligations set forth in this Section 4.3(d) shall extend beyond the Term.
(e) Injunctive Relief. Without intending to limit the remedies
available to the Corporation, the Executive acknowledges that a breach of any of
the covenants contained in this Section 4.3 may result in material irreparable
injury to the Corporation or its affiliates for which there is no adequate
remedy at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of such a breach or threat thereof, the
Corporation shall be entitled to obtain a temporary restraining order and/or a
preliminary or permanent injunction restraining the Executive from engaging in
activities prohibited by this Section 4.3 or such other relief as may be
required to specifically enforce any of the covenants in this Section 4.3.
5. Compensation Other Than Severance Payments.
5.1 Disability. Following a Potential Change in Control and
during the Term, during any period that the Executive fails to perform the
Executive's full-time duties with the Corporation as a result of incapacity due
to physical or mental illness, the Executive's full salary shall be paid to the
Executive at a rate no less than the rate in effect at the commencement of any
such disability period, together with all compensation and benefits payable to
the Executive under the terms of any compensation or benefit plan, program or
arrangement maintained by the Corporation or its subsidiaries during such
disability period, until the Executive's employment is terminated by the
Corporation for Disability.
5.2 Base Salary. If the Executive's employment shall be
terminated for any reason following a Potential Change in Control and during the
Term, the Executive's full salary shall be paid to the Executive through the
Date of Termination (as defined below in Section 7.2) at the rate in effect at
the time the Notice of Termination is given, together with all compensation and
benefits payable to or with respect to the Executive through the Date of
Termination under the terms of any compensation or benefit plan, program or
arrangement maintained by the Corporation or its subsidiaries during such
period.
5.3 Benefits. If the Executive's employment shall be
terminated for any reason following a Potential Change in Control and during the
Term, the Executive's normal post-termination compensation and benefits shall be
paid to the Executive as such payments become due. Such post-termination
compensation and benefits shall be determined under, and paid in accordance
with, the retirement, health insurance, life insurance and other compensation
(including without limitation any bonus and/or incentive compensation) or
benefit plans, programs and arrangements maintained by the Corporation or its
subsidiaries or affiliates.
6. Severance Payments.
6.1 Severance. The Corporation shall pay the Executive the
payments and benefits described in Section 6.1(a), (b) and (c) (the "Severance
Payments") upon the termination of the Executive's employment following a Change
in Control and during the Term, in addition to the payments and benefits
described in Section 5 hereof, unless such termination is (i) by the Corporation
for Cause, (ii) by reason of Retirement, (iii) by the Executive without Good
Reason, (iv) due to death, or (v) due to Disability. In addition, the
Executive's employment shall be deemed to have been terminated following a
Change in Control by the Corporation without Cause or by the Executive with Good
Reason (a) if the Executive reasonably demonstrates that the Executive's
employment was terminated prior to a Change in Control without Cause (1) at the
request of a Person who has entered into an agreement with the Corporation the
consummation of which will constitute a Change in Control (or who has taken
other steps reasonably calculated to effect a Change in Control) or (2)
otherwise in connection with, as a result of or in anticipation of a Change in
Control, or (b) if the Executive terminates his employment for Good Reason prior
to a Change in Control and the Executive reasonably demonstrates that the
circumstance(s) or event(s) which constitute such Good Reason occurred (1) at
the request of such Person or (2) otherwise in connection with, as a result of
or in anticipation of a Change in Control. The Executive's right to terminate
the Executive's employment for Good Reason shall not be affected by the
Executive's incapacity due to physical or mental illness. The Executive's
continued employment shall not constitute consent to, or a waiver of rights with
respect to, any act or failure to act constituting Good Reason hereunder. In the
event of Disability or death of the Executive after the Date of Termination in
respect of any termination without Cause or any termination for Good Reason,
payments and benefits shall be made to the Executive, or the Executive's
beneficiaries or legal representative, as the case may be.
(a) Lump Sum Payment. A lump sum payment equal to
three (3) times the highest "total 12-month compensation" of the
Executive (whether or not deferred) for any 12-month period during the
five (5) completed calendar years prior to the Date of Termination,
where "total 12-month compensation" means the sum of the Executive's
Annual Base Salary during such 12-month period and the full amount of
the Executive's MICP award (target or actual, whichever is greater)
that was payable during such 12-month period (or annualized 12-month
period if the Executive has not completed 12 months of employment).
(b) Welfare Plan Continuation. For a thirty-six (36)
month period after the Date of Termination, or if sooner, until the
Executive reaches the age of sixty-five (65) years, the Corporation
shall provide the Executive (at no cost to the Executive) with life,
disability, accident and health insurance benefits substantially
similar to those that the Executive is receiving immediately prior to
any related Potential Change in Control or the receipt of the Notice of
Termination (without giving effect to any reduction in such benefits
subsequent to a Change in Control which reduction constitutes Good
Reason), whichever is greater; provided, however, that the final 18
months of the continued coverage period hereunder shall be deemed to
constitute the full amount of the Executive's entitlement to COBRA
benefits as a result of the Executive's termination of employment. Upon
the termination of the Executive's continued benefits provided under
the prior sentence, the Executive shall be eligible to continue such
benefits (at the Executive's cost) to the same extent that such
benefits are provided by the Corporation thereafter (the "Continued
Access Period") to comparable executives and, after the Executive
attains age 65, to retired executives. Benefits otherwise receivable by
the Executive pursuant to the first sentence of this Section 6.1(b)
shall be reduced to the extent comparable benefits are actually
received by or made available to the Executive without cost during such
period following the Executive's termination of employment (and any
such benefits actually received by the Executive shall be reported to
the Corporation by the Executive). Continued coverage during the
Continued Access Period shall terminate if comparable benefits are made
available to the Executive under any other policy or program (and the
availability of any such benefits shall be reported to the Corporation
by the Executive).
(c) LTIP. Performance shares granted to the Executive
under the LTIP for performance cycles commencing after a Change in
Control has occurred and remaining uncompleted will be deemed earned as
of the Date of Termination to the extent of the maximum award that
could be earned under each award agreement, and the value of each such
award will be paid out to the Executive in a lump-sum cash payment.
Performance shares granted to the Executive under the LTIP for
performance cycles which commenced after a Change in Control occurred
and were completed before the Date of Termination will be paid out to
the extent earned, and the value of such award will be paid out to the
Executive in a lump-sum cash payment. If any of the Executive's LTIP
award agreements were paid out as a result of the occurrence of a
Change in Control at less than the maximum award that could have been
earned thereunder, then the difference between (i) the maximum award
that could have been earned thereunder and (ii) the award that was paid
out as a result of the occurrence of the Change in Control, shall be
paid out to the Executive and the value of such difference (calculated
as of the same date that the Change in Control payout was calculated)
will be paid out to the Executive in a lump-sum cash payment.
(d) SERP; Other Deferred Compensation. The Executive
shall receive credit under the Corporation's Supplemental Executive
Retirement Plan ("SERP") for five (5) additional years of service and
shall immediately become 100% vested in the Executive's accrued benefit
and/or account balance to date under the SERP and any non-qualified
deferred compensation plan, and any amendment, modification or
termination of any such plan occurring during the Term of this
Agreement after any Change in Control shall not be effective against
the Executive to decrease or change any of the Executive's rights
thereunder.
(e) Relocation and Other Assistance. Should the
Executive be required to move his or her primary residence in order to
pursue other business opportunities within three (3) years of the Date
of Termination, the Company will reimburse the Executive for any
expenses (not in excess of $10,000) incurred in that relocation that
are not reimbursed by another employer, including, without limitation,
assistance in selling the Executive's home and all other assistance and
benefits that were customarily provided by the Corporation to
transferred executives prior to the Change in Control. In addition, if
the Executive retains legal counsel with respect to the taxation of
payments to be made to the Executive under this Agreement, the
Corporation shall reimburse the Executive for such reasonable legal
fees and disbursements (but not in excess of $15,000).
6.2 Special Reimbursement. (a) Notwithstanding any other
provisions of this Agreement, in the event that any payment or benefit received
or to be received by the Executive in connection with a Change in Control or the
termination of the Executive's employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Corporation or
any of its subsidiaries, any Person whose actions result in a Change in Control
or any Person affiliated with the Corporation or such Person) (all such payments
and benefits, including the Severance Payments, being hereinafter called "Total
Payments") would subject the Executive to the excise tax imposed under Section
4999 of the Code or any successor section thereto (the "Excise Tax"), the
Corporation shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Executive, after deduction of
any Excise Tax on the Total Payments and any federal, state and local income tax
and Excise Tax upon the payment provided for by this Section 6.2(a), shall be
equal to the Total Payments.
(b) For purposes of determining whether any of the
Total Payments will be subject to the Excise Tax and the amount of such Excise
Tax, (i) the Total Payments shall be treated as "parachute payments" within
the meaning of section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of section 280G(b)(1) of the Code shall be treated
as subject to the Excise Tax, unless in the opinion of tax counsel selected by
the Corporation's general counsel and reasonably acceptable to the Executive
such Total Payments (in whole or in part) do not constitute parachute payments,
including by reason of Section 280G(b)(4)(A) of the Code, or such excess
parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered, within the meaning of section 280G(b)(4)(B) of the
Code, in excess of the Base Amount allocable to such reasonable compensation, or
are otherwise not subject to the Excise Tax, and (ii) the value of any non-cash
benefits or any deferred payment or benefit shall be determined by the
Corporation's independent auditors in accordance with the principles of
sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount
of the Gross-Up Payment, the Executive shall be deemed to pay federal income
taxes at the highest marginal rate of federal income taxation in the calendar
year in which the Gross-Up Payment is to be made and applicable state and local
income taxes at the highest marginal rate of taxation, net of the maximum
reduction in federal income taxes which could be obtained from deduction ofsuch
state and local taxes.
(c) In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at the time
of termination of the Executive's employment, the Executive shall repay to
the Corporation, at the time that the amount of such reduction in Excise Tax
is finally determined, the portion of the Gross-Up Payment attributable to such
reduction plus interest on the amount of such repayment at the rate provided in
section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any payment
the existence or amount of which cannot be determined at the time of the
Gross-Up Payment), the Corporation shall make an additional Gross-Up Payment in
respect of such excess (plus any interest, penalties or additions payable by
the Executive with respect to such excess) at the time that the amount of such
excess is finally determined. The Executive and the Corporation shall each
reasonably cooperate with the other in connection with any administrative or
judicial proceedings concerning the existence or amount of any such subsequent
liability for Excise Tax with respect to the Total Payments.
6.3 Date of Payment. The payments provided for in Section 6.2
hereof shall be made not later than the fifteenth (15th) day following the Date
of Termination; provided, however, that if the amounts of such payments cannot
be finally determined on or before such day, the Corporation shall pay to the
Executive on such day an estimate, as determined in good faith by the
Corporation, of the minimum amount of such payments to which the Executive is
likely to be entitled to and shall pay the remainder of such payments (together
with interest at the rate provided in section 1274(b)(2)(B) of the Code) as soon
as the amount thereof can be determined but in no event later than the sixtieth
(60th) day after the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Corporation to the Executive, payable
on the tenth (10th) business day after demand by the Corporation (together with
interest at the rate provided in section 7872(f)(2)(A) of the Code). At the time
that payments are made under this Section 6.3, the Corporation shall provide the
Executive with a detailed written statement setting forth the manner in which
such payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Corporation has received
from outside counsel, auditors or consultants (and any such opinions or advice
which are in writing shall be attached to the statement).
6.4 Legal Costs. The Corporation shall reimburse the Executive
for reasonable legal fees and expenses incurred in good faith by the Executive
as a result of any dispute with any party (including, but not limited to, the
Corporation or any subsidiary of the Corporation) regarding the payment or
receipt of any benefit provided for in this Agreement (including, but not
limited, all such fees and expenses incurred in disputing any termination or in
seeking in good faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code) plus in each case
interest on any delayed payment at the applicable Federal rate provided for in
section 7872(f)(2)(A) of the Code. Such payments shall be made within five (5)
business days after delivery of the Executive's written requests for payment
accompanied by such evidence of fees and expenses incurred as the Corporation
reasonably may require.
7. Termination Procedures and Compensation During Dispute.
7.1 Notice of Termination. After a Change in Control and
during the Term, any purported termination of the Executive's employment (other
than by reason of death) shall be communicated by written Notice of Termination
from one party hereto to the other party hereto in accordance with Section 10
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated. Further, a Notice of Termination for Cause is
required to include 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 at a
meeting of the Board which was called and held for the purpose of considering
such termination (which meeting may be a regular meeting of the Board where
prior notice of consideration of such termination is given to members of the
Board) finding that, in the good faith opinion of the Board, (i) the Executive
engaged in conduct set forth in clause (i) or (ii) of the definition of Cause
herein, and specifying the particulars thereof in detail, or (ii) one of the
events set forth in clause (ii) of such definition has occurred. For purposes of
this Agreement, any purported termination not effected in accordance with this
Section 7.1 shall not be considered effective.
7.2 Date of Termination. "Date of Termination", with respect
to any purported termination of the Executive's employment after a Potential
Change in Control and during the Term, shall mean (i) if the Executive's
employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
full-time performance of the Executive's duties during such thirty (30) day
period), and (ii) if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination (which, in the case of a
termination by the Corporation, shall not be less than thirty (30) days (except
in the case of a termination for Cause) and, in the case of a termination by the
Executive, shall not be less than fifteen (15) days nor more than sixty (60)
days, respectively, after the date such Notice of Termination is given).
7.3 Dispute Concerning Termination. If within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved either by mutual written agreement of the
parties or by a final judgement, order, or decree of an arbitrator or a court of
competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected);
provided, however, that the Date of Termination shall not be extended by a
notice of dispute if the basis for such notice, as determined in good faith by
the party receiving such notice is not given in good faith or the party giving
such notice does not pursue the resolution of such dispute with reasonable
diligence. Subject to the rights granted by Section 4.3, any controversy or
claim arising out of, or relating to, any provision of this Agreement shall be
settled by binding arbitration in accordance with the laws of The State of
Florida by three arbitrators, one of whom shall be appointed by the Corporation,
one by the Executive, and the third by the first two arbitrators. If the first
two arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association.
Such arbitration shall be conducted in Florida in accordance with the rules of
the American Arbitration Association, except with respect to the selection of
arbitrators which shall be as provided in this Section. Judgment on the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
7.4 Compensation During Dispute. If a purported termination
occurs following a Change in Control and during the Term, and such termination
is disputed in accordance with Section 7.3 above (and pursuant thereto the Date
of Termination is extended), the Corporation shall continue to pay the Executive
the full Annual Base Salary in effect at the time of any related Potential
Change in Control or when the notice giving rise to the dispute was given
(whichever is greater). Amounts paid under this Section 7.4 are in addition to
all other amounts due under this Agreement (other than those due under Section
5.2 hereof) and shall not be offset against or reduce any other amounts due
under this Agreement or any other plan, agreement or arrangement.
8. No Mitigation. The Corporation agrees that, if the Executive's
employment is terminated during the Term, the Executive is not required to seek
other employment or to attempt in any way to reduce any amounts payable to the
Executive by the Corporation pursuant to Section 6 or Section 7.4. Further, the
amount of any payment or benefit provided for in Section 6 (other than pursuant
to Section 6.1.(b)) or Section 7.4 shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, or offset against any amount claimed to be owed by the
Executive to the Corporation or any of its subsidiaries, or otherwise.
9. Successors; Binding Agreement.
9.1 Successors. In addition to any obligations imposed by law
upon any successor to the Corporation, the Corporation will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Corporation to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Corporation would be required to perform
it if no such succession had taken place. Failure of the Corporation to obtain
such assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle the Executive to
compensation from the Corporation in the same amount and on the same terms as
the Executive would be entitled to hereunder if the Executive were to terminate
employment with the Corporation for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination.
9.2 Binding Agreement. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would still
be payable to the Executive hereunder (other than amounts which, by their terms,
terminate upon the death of the Executive) if the Executive had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the beneficiary (or
beneficiaries) designated by the Executive from time to time in accordance with
the procedures for notice set out in Section 10; provided, however, that if
there shall be no effective designation of beneficiary by the Executive, such
amounts shall be paid to the executors, personal representatives or
administrators of the Executive's estate.
10. Notices; Other Communications. For the purpose of this Agreement,
notices and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or mailed by
United States certified mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth below, or to such other address
as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
actual receipt:
To the Corporation: Florida Progress Corporation
P.O. Box 33042
St. Petersburg, Florida 33733
With a copy to: Mr. William G. Kelley
Vice President, Human Resources
Florida Progress Corporation
3201 34th Street South
St. Petersburg, Florida 33711
To the Executive: Mr. Richard D. Keller
7373 Watersilk Drive
Pinellas Park, Florida 33782
11. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Florida without regard to the principles of conflict
of laws thereof. All references to sections of the Exchange Act or the Code (or
the rules and/or regulations under either) shall be deemed also to refer to and
include any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding required under
federal, state or local law and any additional withholding to which the
Executive has agreed. The rights and obligations of the Corporation and the
Executive under this Agreement shall survive the expiration of the Term and the
Employment Period.
12. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, all of which shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. No Limitation. Nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any plan, program, policy or
practice provided by the Corporation or any of its affiliated companies and for
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement with the Corporation or any of its affiliated companies. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan, policy, practice or program of or any contract or agreement with
the Corporation or any of its affiliated companies at or subsequent to the Date
of Termination shall be payable in accordance with such plan, policy, practice
or program or contract or agreement as in effect from time to time except as
explicitly modified by this Agreement.
15. Other Agreements. This Agreement contains the entire agreement
between the parties concerning the subject matter hereof and supersedes all
prior agreements understandings, discussions, negotiations and undertakings,
whether written or oral, between the parties with respect thereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
FLORIDA PROGRESS CORPORATION
By: /s/ Richard Korpan
-------------------------------
RICHARD KORPAN
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
/s/ Richard D. Keller
--------------------------------
Executive
EXHIBIT 10.(f)
AGREEMENT
THIS AGREEMENT, dated as of January 30, 1998 (this
"Agreement"), is made by and between Florida Progress Corporation, having its
principal offices at One Progress Plaza, St. Petersburg, Florida 33701 (the
"Corporation"), and Richard Korpan, residing at 4993 Turtle Creek Trail,
Oldsmar, Florida 34677 (the "Executive").
WHEREAS, the Corporation considers it essential to the best
interests of its shareholders to foster the continued employment of key
executive and management personnel; and
WHEREAS, the Board of Directors of the Corporation (the
"Board") recognizes that the possibility of a Change in Control (as defined in
Section 1.3 below) of the Corporation exists from time to time and that such
possibility, and the uncertainty, instability and questions that it may raise
for and among key executive and management personnel, may result in the
premature departure or significant distraction of such individuals to the
material detriment of the Corporation and its shareholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce, focus and encourage the continued attention and
dedication of key executive and management personnel of the Corporation and its
subsidiaries, such as the Executive, to their assigned duties without
distraction in the face of potentially disturbing or unsettling circumstances
arising from the possibility of a Change in Control of the Corporation;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Corporation and the Executive hereby agree as
follows:
1. Definitions. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
1.1 "Annual Base Salary" shall mean the Executive's rate of
regular base annual compensation (prior to any reduction under (i) a salary
reduction agreement pursuant to section 401(k) or section 125 of the Internal
Revenue Code of 1986, as amended from time to time (the "Code") or (ii) any plan
or arrangement deferring any base salary or bonus payments), and shall not
include (without limitation) allowances, fees, retainers, reimbursements,
bonuses, incentive awards, prizes or similar payments.
1.2 "Cause" shall mean:
(i) the Executive engaging in fraud, misappropriation
or willful misconduct that is demonstrably and materially injurious to
the property or business of the Corporation and/or its subsidiaries,
monetarily or otherwise; or
(ii) the Executive's conviction of, or plea of no
contest to, a felony.
For purposes of clause (i) of this definition, no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or omitted to be done,
by the Executive in bad faith and without reasonable belief that the Executive's
act, or failure to act, was in the best interest of the Corporation or its
subsidiaries. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board or upon the instructions of the Board (or
a committee thereof), the Corporation's chief executive officer or other duly
authorized senior officer of the Corporation (as appropriate) or based upon the
advice of counsel for the Corporation shall be conclusively presumed to be done,
or omitted to be done, by the Executive in good faith and in the best interests
of the Corporation or its subsidiaries. The cessation of employment of the
Executive shall not be deemed to be for Cause unless and until there shall have
been delivered to the Executive 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 at a meeting of the Board called and held for such purpose (after
reasonable notice of any such meeting is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board) finding that, in the good faith opinion of the Board, (a) the Executive
has acted in a manner described in clause (i) above, and specifying the
particulars thereof in detail, or (b) one of the events set forth in (ii) has
occurred.
1.3 "Change in Control" shall mean and be deemed to have
occurred if:
(i) any Person is or becomes, after the date of this
Agreement, the Beneficial Owner (as that term is defined in Rule 13d-3
under the Securities Exchange Act of 1934 (the "Exchange Act")),
directly or indirectly, of securities of the Corporation (not including
in the securities beneficially owned by such Person any securities
acquired directly from the Corporation) representing twenty-five
percent (25%) or more of the combined voting power of the Corporation's
then outstanding securities; or
(ii) during any period of twenty-four (24)
consecutive months (not including any period prior to January 1, 1998),
individuals who at the beginning of such period constitute the Board
and any new director (other than a director designated by a Person who
has entered into an agreement with the Corporation to effect a
transaction described in clause (i), (iii) or (iv) of this definition
or any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents) whose election by the Board or nomination for election by the
Corporation's stockholders 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 of the Board; or
(iii) the shareholders of the Corporation approve a
reorganization, merger or consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially all
of the individuals and entities who were Beneficial Owners, immediately
prior to such reorganization, merger or consolidation, of the combined
voting power of the Corporation's then outstanding securities
beneficially own, directly or indirectly, immediately after such
reorganization, merger or consolidation, more than seventy-five percent
(75%) of the combined voting power of the securities of the corporation
resulting from such reorganization, merger or consolidation in
substantially the same proportions as their respective ownership,
immediately prior to such reorganization, merger or consolidation, of
the combined voting power of the Corporation's securities; or
(iv) the shareholders of the Corporation approve (a)
the sale or disposition by the Corporation (other than to a subsidiary
of the Corporation) of all or substantially all of the assets of the
Corporation (or any such sale or disposition is effected through
condemnation proceedings), or (b) a complete liquidation or dissolution
of the Corporation.
Notwithstanding the foregoing, a Change in Control shall not include any event,
circumstance or transaction which results from the action (excluding the
Executive's employment activities with the Corporation, Florida Power
Corporation or any of their respective subsidiaries) of any Person or group of
Persons which includes, is directly affiliated with or is wholly or partly
controlled by one or more executive officers of the Corporation or its
subsidiaries and in which the Executive actively participates.
1.4 "Corporation" shall include Florida Progress Corporation
and any successor to its business and/or assets which assumes (either expressly,
by operation of law or otherwise) and/or agrees to perform this Agreement by
operation of law or otherwise (except in determining, under Section 1.3 hereof,
whether or not any Change in Control of the Corporation has occurred in
connection with such succession).
1.5 "Disability" shall mean and be deemed the reason for the
termination by the Corporation of the Executive's employment, if, as a result of
the Executive's incapacity due to physical and/or mental illness, (i) the
Executive shall have been absent from the full-time performance of the
Executive's duties with the Corporation or any affiliate of the Corporation for
a period of six (6) consecutive months, (ii) the Corporation and/or such
affiliate gives the Executive a Notice of Termination for Disability, and (iii)
within thirty (30) days after such Notice of Termination is given, the Executive
does not return to the full-time performance of the Executive's duties.
1.6 "Employment Period" shall mean the period commencing on
the date of any Change in Control until the earliest to occur of (i) the date
which is thirty-six (36) months from the date of any such Change in Control,
(ii) the date of termination by the Executive of the Executive's employment for
Good Reason, or (iii) the termination by the Corporation of the Executive's
employment for any reason.
1.7 "Good Reason" shall mean the occurrence (without the
Executive's express written consent) of any one of the following acts, or
failures to act, unless, in the case of any act or failure to act described in
clauses (i), (iv), (v) or (vi) below, such act or failure to act is corrected by
the Corporation prior to the Date of Termination specified in the Notice of
Termination given by the Executive in respect thereof not later than six (6)
months after the occurrence of the event that serves as the basis for the Notice
of Termination:
(i) the assignment to the Executive of any duties or
responsibilities inconsistent with those described in Section 3.2 below
or with the Executive's position(s) or status (including, without
limitation, offices, titles, and reporting relationships) as an
executive officer of the Corporation and/or its primary subsidiaries or
a substantial adverse alteration in the nature of the Executive's
authorities, duties, responsibilities, position(s) or status from those
described in Section 3.2 below or otherwise;
(ii) a reduction in the Executive's Annual Base
Salary or annual bonus opportunity as in effect on the date of this
Agreement or as the same may be increased at any time thereafter and
from time to time;
(iii) the relocation of the Corporation's principal
executive offices to a location more than thirty (30) miles from its
location on the date of this Agreement (or, if different, more than
thirty (30) miles from where such offices are located immediately prior
to any Potential Change in Control) or the Corporation's requiring the
Executive to be based anywhere other than the Corporation's principal
Florida executive offices, except for required travel on the
Corporation's business to an extent substantially consistent with the
Executive's business travel obligations as of the date of this
Agreement;
(iv) the failure by the Corporation or a subsidiary
to continue in effect any pension benefit or deferred compensation plan
in which the Executive participates immediately prior to any Potential
Change in Control which is material to the Executive's total
compensation, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan or arrangement) has been made with
respect to such plan, or the failure by the Corporation or a subsidiary
to continue the Executive's participation therein (or in such
substitute or alternative plan or arrangement) on a basis not
materially less favorable, both in terms of the amount of benefits
provided and the level of the Executive's participation relative to
other participants, as existed at the time of the Potential Change in
Control;
(v) the failure by the Corporation or a subsidiary to
continue to provide the Executive with health and welfare benefits
substantially similar to those enjoyed by the Executive under any
retirement, life insurance, medical, health and accident, or disability
or similar plan of the Corporation or a subsidiary in which the
Executive was participating at the time of any Potential Change in
Control, the taking of any action by the Corporation or a subsidiary
which would directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of the Potential Change in
Control, or the failure by the Corporation or a subsidiary to provide
the Executive with the greater number of paid vacation days to which
the Executive is entitled pursuant to the terms of the Executive's
employment agreement or in accordance with the Corporation's or a
subsidiary's normal vacation policy, in either case, as in effect at
the time of the Potential Change in Control;
(vi) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 7.1;
(vii) the failure of the Corporation to obtain a
written agreement reasonably satisfactory to the Executive from any
successor to the Corporation (as described in Section 9.1) to perform
this Agreement; and/or
(viii) any termination of employment by the Executive
which occurs during the one-month period commencing on the first
anniversary of the consummation of the transaction that produced the
Change in Control.
1.8 "Person" shall have the meaning ascribed thereto in
Section 3(a)(9) of the Exchange Act, as modified, applied and used in Sections
13(d) and 14(d) thereof; provided, however, that a Person shall not include (i)
the Corporation or any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Corporation or any of
its subsidiaries (in its capacity as such), (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the
Corporation in substantially the same character and proportions as their
ownership of stock of the Corporation.
1.9 "Potential Change in Control" shall mean and be deemed to
have occurred if:
(i) the Corporation enters into an agreement, the
consummation of which would result in the occurrence of a Change in
Control;
(ii) the Corporation or any Person publicly announces
an intention to take actions which, if consummated, would constitute a
Change in Control; and/or
(iii) any Person becomes the Beneficial Owner,
directly or indirectly, of securities of the Corporation representing
fifteen (15) percent or more of the combined voting power of the
Corporation's then outstanding securities, or any Person increases such
Person's beneficial ownership of such securities by ten (10) percentage
points or more over the percentage so owned by such Person on December
31, 1997.
1.10 "Retirement" shall mean and be deemed the reason for the
termination by the Executive of the Executive's employment if such employment is
terminated upon or after normal retirement age pursuant to the pension plan of
the Corporation or any subsidiary of the Corporation in which the Executive
participates, not including any early retirement or so-called "window period"
retirements, generally applicable to its officers, as in effect immediately
prior to any Potential Change in Control.
2. Term of this Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 2001; provided,
however, that the term of this Agreement shall automatically be extended each
January 1 after the date hereof for an additional period of one (1) year unless,
not later than 6 months prior to such January 1, the Corporation gives written
notice to the Executive that it does not wish to continue such automatic
extension; and provided, further, however, that if a Change in Control shall
have occurred during the term of this Agreement, this Agreement shall continue
in effect for a period of not less than thirty-six (36) months beyond the month
in which such Change in Control occurred or, if later, eighteen (18) months
after the consummation within such thirty-six (36) month period of the
transaction that produced the Change in Control (the "Term"). Notwithstanding
the foregoing provisions of this Section 2, the Term shall terminate upon
attainment of normal retirement age as defined in the pension plan of the
Corporation.
3. Corporation's Covenants.
3.1 Severance Payments. In order to induce the Executive to
remain in the employ of the Corporation and/or one or more of its subsidiaries
and in consideration of the Executive's covenants set forth in Section 4 below,
the Corporation agrees, under the terms and conditions described herein and in
addition to the amounts payable to the Executive under Section 5 below, to pay
the Executive the "Severance Payments" described in Section 6.1 below and the
other payments and benefits described herein in the event the Executive's
employment is terminated during the Employment Period or under the other
circumstances set forth in Section 6.1 below.
3.2 Position and Duties. During the Employment Period, (i) the
Executive's position (including status, offices, titles and reporting
relationships), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of those held,
exercised and assigned at any time during the one hundred eighty (180) day
period immediately preceding any related Potential Change in Control, and (ii)
the Executive's services shall be performed at the location where the Executive
was employed immediately preceding any such Potential Change in Control, or any
office or location less than thirty (30) miles from such location.
3.3 Base Salary. During the Employment Period, the Executive
shall receive Annual Base Salary at least equal to twenty-six (26) times the
highest bi-weekly base salary paid or payable, including (without limitation)
any base salary which has been earned but deferred, to the Executive by the
Corporation and its affiliated companies in respect of the twelve (12) month
period immediately preceding the month in which any related Potential Change in
Control occurs. The Executive's Annual Base Salary shall be reviewed annually
for potential increase. In addition, Annual Base Salary shall not be reduced
after the occurrence of a Potential Change in Control. As used in this
Agreement, the term "affiliated companies" shall include any company controlled
by, controlling or under common control with the Corporation.
3.4 Incentive Plans.
a. MICP. The Executive shall be awarded for each
fiscal year ending within the Employment Period an annual bonus (the "Annual
Bonus") in cash at least equal to the target annual bonus incentive award
received by the Executive under the Corporation's Management Incentive
Compensation Plan, or any other annual incentive bonus plan maintained by
the Corporation from time to time (the "MICP") for the fiscal year in which
the Change in Control occurs. Each Annual Bonus shall be paid no later than
the end of the third month of the fiscal year next following the fiscal year for
which the Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus in accordance with rules established by the
Corporation for that purpose.
b. LTIP. The Executive shall be awarded for each
award period that begins within the Employment Period a grant of performance
shares at least equal to the annual long-term incentive award received by the
Executive (not taking into account any pro-ration) under the Corporation's
Long-Term Incentive Plan or any other long-term incentive bonus plan
maintained by the Corporation from time to time (the "LTIP") for the fiscal
year in which the Change in Control occurs, and such shares shall be subject to
performance goals consistent with those established by the Corporation for the
fiscal years prior to the fiscal year in which the Change in Control occurs.
3.5 Savings and Retirement Plans. During the Employment
Period, the Executive (in addition to the Incentive Plans) shall be entitled to
participate in all other incentive, savings and retirement plans, practices,
policies and programs applicable generally to other peer executives of the
Corporation and its subsidiaries, but in no event shall such plans, practices,
policies and programs provide the Executive with incentive opportunities
(measured with respect to both regular and special incentive opportunities, to
the extent, if any, that such distinction is applicable), savings opportunities
and retirement benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Corporation and its
affiliated companies for the Executive under such plans, practices, policies and
programs as in effect at any time during the one hundred eighty (180) day period
immediately preceding any related Potential Change in Control or, if more
favorable to the Executive, those provided generally at any time thereafter to
other peer executives of the Corporation and its affiliated companies.
3.6 Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be entitled
to participate in and shall receive all benefits under all of the health and
welfare benefit plans, practices, policies and programs provided by the
Corporation and its affiliated companies (including, without limitation,
medical, prescription, dental, disability, employee life, group life, accidental
death and travel accident insurance plans and programs) to the extent (and at
the same cost, excluding increases in the employee contribution amounts which
are consistent with and equivalent to the historical rates of increase imposed
by the Corporation in respect thereof) applicable generally to other peer
executives of the Corporation and its subsidiaries, but in no event shall such
plans, practices, policies and programs provide the Executive with benefits that
are less favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for the Executive at any time during
the one hundred eighty (180) day period immediately preceding any related
Potential Change in Control or, if more favorable to the Executive, those
provided generally at any time thereafter to other peer executives of the
Corporation and its affiliated companies.
3.7 Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable business
expenses incurred by the Executive in accordance with the most favorable
policies, practices and procedures of the Corporation and its affiliated
companies in effect for the Executive at any time during the one hundred eighty
(180) day period immediately preceding any related Potential Change in Control
or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Corporation and its
affiliated companies.
3.8 Office Support; Perquisites. During the Employment Period,
the Executive shall be entitled to secretarial support and other facilities,
perquisites and programs to enable the Executive to be able to discharge the
Executive's responsibilities hereunder in accordance with the most favorable
plans, practices, programs and policies of the Corporation and its affiliated
companies in effect for the Executive at any time during the one hundred eighty
(180) day period immediately preceding any related Potential Change in Control
or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Corporation and its
affiliated companies.
3.9 Vacation. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Corporation and its affiliated
companies, or pursuant to the terms and provisions of any employment agreement,
as in effect for the Executive at any time during the one hundred eighty (180)
day period immediately preceding any related Potential Change in Control or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Corporation and its affiliated
companies.
4. The Executive's Covenants.
4.1 Employment. The Executive agrees that, subject to the
terms and conditions of this Agreement, in the event of a Change in Control
during the Term the Executive will remain in the employ of the Corporation
during any related Employment Period.
4.2 Time and Attention. During the Employment Period, and
excluding any periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of the Corporation and to use
the Executive's reasonable best efforts to perform faithfully and efficiently
the responsibilities and duties assigned to the Executive hereunder. During the
Employment Period it shall not be a violation of this Agreement for the
Executive to (i) serve on corporate, civic or charitable boards or committees,
(ii) deliver lectures and fulfill speaking engagements and (iii) manage personal
investments, so long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the
Corporation and its subsidiaries in accordance with this Agreement. It is
expressly understood and agreed that to the extent that any such activities have
been conducted by the Executive prior to any Potential Change in Control, the
reinstatement or continued conduct of such activities (or the reinstatement or
conduct of activities similar in nature and scope thereto) subsequent to any
related Potential Change in Control shall not thereafter be deemed to interfere
with the performance of the Executive's responsibilities to the Corporation and
its subsidiaries.
4.3. Non-interference; Confidential Information;
Non-Competition
(a) No Interference. For so long as the Executive is employed
by the Corporation, and for a period of one (1) year after termination of the
Executive's employment for any reason after a Change in Control, the Executive
shall not, whether for his own account or for the account of any other
individual, partnership, firm, corporation or other business organization (other
than the Corporation or one of its affiliates), directly or indirectly,
intentionally solicit, endeavor to entice away from the Corporation (or any of
its affiliates), or otherwise interfere with the relationship of the Corporation
(or any of its affiliates) with, any person who is employed by or otherwise
engaged to perform services for the Corporation (or any of its affiliates)
including, but not limited to, any independent representatives or organizations,
or any person or entity that is a customer of the Corporation (or any of its
affiliates). The Executive understands and agrees that the rights and
obligations set forth in this Section 4.3(a) could extend beyond the Term.
(b) Confidential Information. The Executive covenants and
agrees with the Corporation that he will not at any time, during or after
employment with the Corporation, except in performance of the Executive's
obligations to the Corporation or with the prior express written consent of the
Board of Directors, directly or indirectly, intentionally or unintentionally,
disclose any Confidential Information that he may learn or has learned by reason
of his employment or association with the Corporation or any of its affiliates,
or any predecessors to its business, or use any such information for his own
personal benefit or gain. The term "Confidential Information" includes, without
limitation, information not previously disclosed to the public or to the trade
by the Corporation's management with respect to the products, facilities and
methods, trade secrets and other intellectual property, systems, procedures,
manuals, confidential reports, fee or rate information, customer lists,
financial information (including without limitation the revenues, costs or
profits associated with any of the Corporation's (or any of its affiliates')
activities or products), business plans, prospects, opportunities or other
information of the Corporation or any of its affiliates. Confidential
Information shall not include information which (i) is or becomes generally
available to the public other than as a result of disclosure by the Executive in
violation of this Section 4.3(b) or (ii) the Executive is required to disclose
under any applicable laws, regulations or directives of any government agency,
tribunal or authority having jurisdiction in the matter or under subpoena or
other process of law. The Executive understands and agrees that the rights and
obligations set forth in this Section 4.3 (b) shall extend beyond the Term.
(c) Exclusive Property. The Executive confirms that all
Confidential Information is and shall remain the exclusive property of the
Corporation or any of its affiliates. All business records, papers and documents
kept or made by the Executive relating to the business of the Corporation (or
any of its affiliates) or any Confidential Information shall be and remain the
property of the Corporation and/or any such affiliates. Upon termination of
employment or upon the request of the Corporation at any time, the Executive
shall promptly deliver to the Corporation, and shall not without the prior
express written consent of the Corporation retain, any and all copies of (i) any
written materials not previously made available to the public, or (ii) records
and documents made by the Executive or coming into his possession concerning any
Confidential Information or the business or affairs of the Corporation or any
predecessors to its business, or any of its affiliates. The Executive
understands and agrees that the rights and obligations set forth in this Section
4.3(c) shall extend beyond the Term.
(d) Covenant Not to Compete. During the employment period and
for one (1) year after termination of the Executive's employment for any reason
after a Change in Control, the Executive shall not compete, directly or
indirectly, with the Corporation or its affiliates within fifty (50) miles of
any geographic area in which the Corporation or its affiliates has material
business interests with which the Executive is involved at the time of the
termination of the Executive's employment. If it is judicially determined that
this provision, or any portion thereof, is unenforceable under applicable law(s)
(statute, common law or otherwise), then it is hereby agreed by the Executive
and the Corporation that the unenforceable portion shall be redrafted to the
extent necessary to render it enforceable, while leaving the remaining portions
intact. By agreeing to this contractual modification prospectively at this time,
the parties intend to make this provision enforceable under the law(s) of all
applicable states so that the entire agreement not to compete and/or this
Agreement as prospectively modified shall remain in full force and effect and
shall not be rendered void or illegal. Such modifications shall not affect the
payments made to the Executive under this Agreement. The Executive acknowledges
that his skills are such that he can be gainfully employed in noncompetitive
employment and that the agreement not to compete will in no way prevent him from
earning a living. The Executive understands and agrees that the rights and
obligations set forth in this Section 4.3(d) shall extend beyond the Term.
(e) Injunctive Relief. Without intending to limit the remedies
available to the Corporation, the Executive acknowledges that a breach of any of
the covenants contained in this Section 4.3 may result in material irreparable
injury to the Corporation or its affiliates for which there is no adequate
remedy at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of such a breach or threat thereof, the
Corporation shall be entitled to obtain a temporary restraining order and/or a
preliminary or permanent injunction restraining the Executive from engaging in
activities prohibited by this Section 4.3 or such other relief as may be
required to specifically enforce any of the covenants in this Section 4.3.
5. Compensation Other Than Severance Payments.
5.1 Disability. Following a Potential Change in Control and
during the Term, during any period that the Executive fails to perform the
Executive's full-time duties with the Corporation as a result of incapacity due
to physical or mental illness, the Executive's full salary shall be paid to the
Executive at a rate no less than the rate in effect at the commencement of any
such disability period, together with all compensation and benefits payable to
the Executive under the terms of any compensation or benefit plan, program or
arrangement maintained by the Corporation or its subsidiaries during such
disability period, until the Executive's employment is terminated by the
Corporation for Disability.
5.2 Base Salary. If the Executive's employment shall be
terminated for any reason following a Potential Change in Control and during the
Term, the Executive's full salary shall be paid to the Executive through the
Date of Termination (as defined below in Section 7.2) at the rate in effect at
the time the Notice of Termination is given, together with all compensation and
benefits payable to or with respect to the Executive through the Date of
Termination under the terms of any compensation or benefit plan, program or
arrangement maintained by the Corporation or its subsidiaries during such
period.
5.3 Benefits. If the Executive's employment shall be
terminated for any reason following a Potential Change in Control and during the
Term, the Executive's normal post-termination compensation and benefits shall be
paid to the Executive as such payments become due. Such post-termination
compensation and benefits shall be determined under, and paid in accordance
with, the retirement, health insurance, life insurance and other compensation
(including without limitation any bonus and/or incentive compensation) or
benefit plans, programs and arrangements maintained by the Corporation or its
subsidiaries or affiliates.
6. Severance Payments.
6.1 Severance. The Corporation shall pay the Executive the
payments and benefits described in Section 6.1(a), (b) and (c) (the "Severance
Payments") upon the termination of the Executive's employment following a Change
in Control and during the Term, in addition to the payments and benefits
described in Section 5 hereof, unless such termination is (i) by the Corporation
for Cause, (ii) by reason of Retirement, (iii) by the Executive without Good
Reason, (iv) due to death, or (v) due to Disability. In addition, the
Executive's employment shall be deemed to have been terminated following a
Change in Control by the Corporation without Cause or by the Executive with Good
Reason (a) if the Executive reasonably demonstrates that the Executive's
employment was terminated prior to a Change in Control without Cause (1) at the
request of a Person who has entered into an agreement with the Corporation the
consummation of which will constitute a Change in Control (or who has taken
other steps reasonably calculated to effect a Change in Control) or (2)
otherwise in connection with, as a result of or in anticipation of a Change in
Control, or (b) if the Executive terminates his employment for Good Reason prior
to a Change in Control and the Executive reasonably demonstrates that the
circumstance(s) or event(s) which constitute such Good Reason occurred (1) at
the request of such Person or (2) otherwise in connection with, as a result of
or in anticipation of a Change in Control. The Executive's right to terminate
the Executive's employment for Good Reason shall not be affected by the
Executive's incapacity due to physical or mental illness. The Executive's
continued employment shall not constitute consent to, or a waiver of rights with
respect to, any act or failure to act constituting Good Reason hereunder. In the
event of Disability or death of the Executive after the Date of Termination in
respect of any termination without Cause or any termination for Good Reason,
payments and benefits shall be made to the Executive, or the Executive's
beneficiaries or legal representative, as the case may be.
(a) Lump Sum Payment. A lump sum payment equal to
three (3) times the highest "total 12-month compensation" of the
Executive (whether or not deferred) for any 12-month period during the
five (5) completed calendar years prior to the Date of Termination,
where "total 12-month compensation" means the sum of the Executive's
Annual Base Salary during such 12-month period and the full amount of
the Executive's MICP award (target or actual, whichever is greater)
that was payable during such 12-month period (or annualized 12-month
period if the Executive has not completed 12 months of employment).
(b) Welfare Plan Continuation. For a thirty-six (36)
month period after the Date of Termination, or if sooner, until the
Executive reaches the age of sixty-five (65) years, the Corporation
shall provide the Executive (at no cost to the Executive) with life,
disability, accident and health insurance benefits substantially
similar to those that the Executive is receiving immediately prior to
any related Potential Change in Control or the receipt of the Notice of
Termination (without giving effect to any reduction in such benefits
subsequent to a Change in Control which reduction constitutes Good
Reason), whichever is greater; provided, however, that the final 18
months of the continued coverage period hereunder shall be deemed to
constitute the full amount of the Executive's entitlement to COBRA
benefits as a result of the Executive's termination of employment. Upon
the termination of the Executive's continued benefits provided under
the prior sentence, the Executive shall be eligible to continue such
benefits (at the Executive's cost) to the same extent that such
benefits are provided by the Corporation thereafter (the "Continued
Access Period") to comparable executives and, after the Executive
attains age 65, to retired executives. Benefits otherwise receivable by
the Executive pursuant to the first sentence of this Section 6.1(b)
shall be reduced to the extent comparable benefits are actually
received by or made available to the Executive without cost during such
period following the Executive's termination of employment (and any
such benefits actually received by the Executive shall be reported to
the Corporation by the Executive). Continued coverage during the
Continued Access Period shall terminate if comparable benefits are made
available to the Executive under any other policy or program (and the
availability of any such benefits shall be reported to the Corporation
by the Executive).
(c) LTIP. Performance shares granted to the Executive
under the LTIP for performance cycles commencing after a Change in
Control has occurred and remaining uncompleted will be deemed earned as
of the Date of Termination to the extent of one hundred fifty percent
(150%) of target under each award agreement, and the value of each such
award will be paid out to the Executive in a lump-sum cash payment.
Performance shares granted to the Executive under the LTIP for
performance cycles which commenced after a Change in Control occurred
and were completed before the Date of Termination will be paid out to
the extent earned, and the value of such award will be paid out to the
Executive in a lump-sum cash payment.
(d) SERP; Other Deferred Compensation. The Executive
shall receive credit under the Corporation's Supplemental Executive
Retirement Plan ("SERP") for five (5) additional years of service and
shall immediately become 100% vested in the Executive's accrued benefit
and/or account balance to date under the SERP and any non-qualified
deferred compensation plan, and any amendment, modification or
termination of any such plan occurring during the Term of this
Agreement after any Change in Control shall not be effective against
the Executive to decrease or change any of the Executive's rights
thereunder.
(e) Relocation and Other Assistance. Should the
Executive be required to move his or her primary residence in order to
pursue other business opportunities within three (3) years of the Date
of Termination, the Company will reimburse the Executive for any
expenses (not in excess of $10,000) incurred in that relocation that
are not reimbursed by another employer, including, without limitation,
assistance in selling the Executive's home and all other assistance and
benefits that were customarily provided by the Corporation to
transferred executives prior to the Change in Control. In addition, if
the Executive retains legal counsel with respect to the taxation of
payments to be made to the Executive under this Agreement, the
Corporation shall reimburse the Executive for such reasonable legal
fees and disbursements (but not in excess of $15,000).
6.2 Special Reimbursement. (a) Notwithstanding any other
provisions of this Agreement, in the event that any payment or benefit received
or to be received by the Executive in connection with a Change in Control or the
termination of the Executive's employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Corporation or
any of its subsidiaries, any Person whose actions result in a Change in Control
or any Person affiliated with the Corporation or such Person) (all such payments
and benefits, including the Severance Payments, being hereinafter called "Total
Payments") would subject the Executive to the excise tax imposed under Section
4999 of the Code or any successor section thereto (the "Excise Tax"), the
Corporation shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Executive, after deduction of
any Excise Tax on the Total Payments and any federal, state and local income tax
and Excise Tax upon the payment provided for by this Section 6.2(a), shall be
equal to the Total Payments.
(b) For purposes of determining whether any of
the Total Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (i) the Total Payments shall be treated as "parachute
payments" within the meaning of section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of section 280G(b)(1) of the
Code shall be treated as subject to the Excise Tax, unless in the opinion of tax
counsel selected by the Corporation's general counsel and reasonably
acceptable to the Executive such Total Payments (in whole or in part) do not
constitute parachute payments, including by reason of Section 280G(b)(4)(A) of
the Code, or such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered, within the meaning of
section 280G(b)(4)(B) of the Code, in excess of the Base Amount allocable to
such reasonable compensation, or are otherwise not subject to the Excise Tax,
and (ii) the value of any non-cash benefits or any deferred payment or benefit
shall be determined by the Corporation's independent auditors in accordance
with the principles of sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, the Executive shall be deemed
to pay federal income taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to be made and
applicable state and local income taxes at the highest marginal rate of
taxation, net of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes.
(c) In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at the time
of termination of the Executive's employment, the Executive shall repay to
the Corporation, at the time that the amount of such reduction in Excise Tax
is finally determined, the portion of the Gross-Up Payment attributable to such
reduction plus interest on the amount of such repayment at the rate provided in
section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any payment
the existence or amount of which cannot be determined at the time of the
Gross-Up Payment), the Corporation shall make an additional Gross-Up Payment
in respect of such excess (plus any interest, penalties or additions
payable by the Executive with respect to such excess) at the time that the
amount of such excess is finally determined. The Executive and the
Corporation shall each reasonably cooperate with the other in connection with
any administrative or judicial proceedings concerning the existence or
amount of any such subsequent liability for Excise Tax with respect to the Total
Payments.
6.3 Date of Payment. The payments provided for in Section 6.2
hereof shall be made not later than the fifteenth (15th) day following the Date
of Termination; provided, however, that if the amounts of such payments cannot
be finally determined on or before such day, the Corporation shall pay to the
Executive on such day an estimate, as determined in good faith by the
Corporation, of the minimum amount of such payments to which the Executive is
likely to be entitled to and shall pay the remainder of such payments (together
with interest at the rate provided in section 1274(b)(2)(B) of the Code) as soon
as the amount thereof can be determined but in no event later than the sixtieth
(60th) day after the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Corporation to the Executive, payable
on the tenth (10th) business day after demand by the Corporation (together with
interest at the rate provided in section 7872(f)(2)(A) of the Code). At the time
that payments are made under this Section 6.3, the Corporation shall provide the
Executive with a detailed written statement setting forth the manner in which
such payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Corporation has received
from outside counsel, auditors or consultants (and any such opinions or advice
which are in writing shall be attached to the statement).
6.4 Legal Costs. The Corporation shall reimburse the Executive
for reasonable legal fees and expenses incurred in good faith by the Executive
as a result of any dispute with any party (including, but not limited to, the
Corporation or any subsidiary of the Corporation) regarding the payment or
receipt of any benefit provided for in this Agreement (including, but not
limited, all such fees and expenses incurred in disputing any termination or in
seeking in good faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code) plus in each case
interest on any delayed payment at the applicable Federal rate provided for in
section 7872(f)(2)(A) of the Code. Such payments shall be made within five (5)
business days after delivery of the Executive's written requests for payment
accompanied by such evidence of fees and expenses incurred as the Corporation
reasonably may require.
7. Termination Procedures and Compensation During Dispute.
7.1 Notice of Termination. After a Change in Control and
during the Term, any purported termination of the Executive's employment (other
than by reason of death) shall be communicated by written Notice of Termination
from one party hereto to the other party hereto in accordance with Section 10
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated. Further, a Notice of Termination for Cause is
required to include 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 at a
meeting of the Board which was called and held for the purpose of considering
such termination (which meeting may be a regular meeting of the Board where
prior notice of consideration of such termination is given to members of the
Board) finding that, in the good faith opinion of the Board, (i) the Executive
engaged in conduct set forth in clause (i) or (ii) of the definition of Cause
herein, and specifying the particulars thereof in detail, or (ii) one of the
events set forth in clause (ii) of such definition has occurred. For purposes of
this Agreement, any purported termination not effected in accordance with this
Section 7.1 shall not be considered effective.
7.2 Date of Termination. "Date of Termination", with respect
to any purported termination of the Executive's employment after a Potential
Change in Control and during the Term, shall mean (i) if the Executive's
employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
full-time performance of the Executive's duties during such thirty (30) day
period), and (ii) if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination (which, in the case of a
termination by the Corporation, shall not be less than thirty (30) days (except
in the case of a termination for Cause) and, in the case of a termination by the
Executive, shall not be less than fifteen (15) days nor more than sixty (60)
days, respectively, after the date such Notice of Termination is given).
7.3 Dispute Concerning Termination. If within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved either by mutual written agreement of the
parties or by a final judgement, order, or decree of an arbitrator or a court of
competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected);
provided, however, that the Date of Termination shall not be extended by a
notice of dispute if the basis for such notice, as determined in good faith by
the party receiving such notice is not given in good faith or the party giving
such notice does not pursue the resolution of such dispute with reasonable
diligence. Subject to the rights granted by Section 4.3, any controversy or
claim arising out of, or relating to, any provision of this Agreement shall be
settled by binding arbitration in accordance with the laws of The State of
Florida by three arbitrators, one of whom shall be appointed by the Corporation,
one by the Executive, and the third by the first two arbitrators. If the first
two arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association.
Such arbitration shall be conducted in Florida in accordance with the rules of
the American Arbitration Association, except with respect to the selection of
arbitrators which shall be as provided in this Section. Judgment on the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
7.4 Compensation During Dispute. If a purported termination
occurs following a Change in Control and during the Term, and such termination
is disputed in accordance with Section 7.3 above (and pursuant thereto the Date
of Termination is extended), the Corporation shall continue to pay the Executive
the full Annual Base Salary in effect at the time of any related Potential
Change in Control or when the notice giving rise to the dispute was given
(whichever is greater). Amounts paid under this Section 7.4 are in addition to
all other amounts due under this Agreement (other than those due under Section
5.2 hereof) and shall not be offset against or reduce any other amounts due
under this Agreement or any other plan, agreement or arrangement.
8. No Mitigation. The Corporation agrees that, if the Executive's
employment is terminated during the Term, the Executive is not required to seek
other employment or to attempt in any way to reduce any amounts payable to the
Executive by the Corporation pursuant to Section 6 or Section 7.4. Further, the
amount of any payment or benefit provided for in Section 6 (other than pursuant
to Section 6.1.(b)) or Section 7.4 shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, or offset against any amount claimed to be owed by the
Executive to the Corporation or any of its subsidiaries, or otherwise.
9. Successors; Binding Agreement.
9.1 Successors. In addition to any obligations imposed by law
upon any successor to the Corporation, the Corporation will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Corporation to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Corporation would be required to perform
it if no such succession had taken place. Failure of the Corporation to obtain
such assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle the Executive to
compensation from the Corporation in the same amount and on the same terms as
the Executive would be entitled to hereunder if the Executive were to terminate
employment with the Corporation for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination.
9.2 Binding Agreement. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would still
be payable to the Executive hereunder (other than amounts which, by their terms,
terminate upon the death of the Executive) if the Executive had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the beneficiary (or
beneficiaries) designated by the Executive from time to time in accordance with
the procedures for notice set out in Section 10; provided, however, that if
there shall be no effective designation of beneficiary by the Executive, such
amounts shall be paid to the executors, personal representatives or
administrators of the Executive's estate.
10. Notices; Other Communications. For the purpose of this Agreement,
notices and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or mailed by
United States certified mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth below, or to such other address
as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
actual receipt:
To the Corporation: Florida Progress Corporation
P.O. Box 33042
St. Petersburg, Florida 33733
With a copy to: Mr. William G. Kelley
Vice President, Human Resources
Florida Progress Corporation
3201 34th Street South
St. Petersburg, Florida 33711
To the Executive: Mr. Richard Korpan
4993 Turtle Creek Trail,
Oldsmar, FL 34677
11. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Florida without regard to the principles of conflict
of laws thereof. All references to sections of the Exchange Act or the Code (or
the rules and/or regulations under either) shall be deemed also to refer to and
include any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding required under
federal, state or local law and any additional withholding to which the
Executive has agreed. The rights and obligations of the Corporation and the
Executive under this Agreement shall survive the expiration of the Term and the
Employment Period.
12. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, all of which shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. No Limitation. Nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any plan, program, policy or
practice provided by the Corporation or any of its affiliated companies and for
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement with the Corporation or any of its affiliated companies. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan, policy, practice or program of or any contract or agreement with
the Corporation or any of its affiliated companies at or subsequent to the Date
of Termination shall be payable in accordance with such plan, policy, practice
or program or contract or agreement as in effect from time to time except as
explicitly modified by this Agreement.
15. Other Agreements. This Agreement contains the entire agreement
between the parties concerning the subject matter hereof and supersedes all
prior agreements understandings, discussions, negotiations and undertakings,
whether written or oral, between the parties with respect thereto; provided,
however, that the employment agreement between the Company and the Executive
dated as of June 1, 1995 (the "Employment Agreement") shall remain in full force
and effect. Any payments or benefits to which the Executive may become entitled
under this Agreement that are also provided under the Employment Agreement shall
be paid or provided to the Executive under the Employment Agreement and, to the
extent that any such payment or benefit is to be provided under the Employment
Agreement, the Executive shall not be entitled to such payment or benefit, as
the case may be, under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
FLORIDA PROGRESS CORPORATION
By: /s/ Jean Giles Wittner
------------------------------
JEAN GILES WITTNER
CHAIRMAN, COMPENSATION COMMITTEE
/s/ Richard Korpan
-------------------------------
Executive
EXHIBIT 10.(g)
AGREEMENT
THIS AGREEMENT, dated as of January 30, 1998 (this
"Agreement"), is made by and between Florida Progress Corporation, having its
principal offices at One Progress Plaza, St. Petersburg, Florida 33701 (the
"Corporation"), and Joseph H. Richardson, residing at 561 Palmetto Road,
Belleair, Florida 33757 (the "Executive").
WHEREAS, the Corporation considers it essential to the best
interests of its shareholders to foster the continued employment of key
executive and management personnel; and
WHEREAS, the Board of Directors of the Corporation (the
"Board") recognizes that the possibility of a Change in Control (as defined in
Section 1.3 below) of the Corporation exists from time to time and that such
possibility, and the uncertainty, instability and questions that it may raise
for and among key executive and management personnel, may result in the
premature departure or significant distraction of such individuals to the
material detriment of the Corporation and its shareholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce, focus and encourage the continued attention and
dedication of key executive and management personnel of the Corporation and its
subsidiaries, such as the Executive, to their assigned duties without
distraction in the face of potentially disturbing or unsettling circumstances
arising from the possibility of a Change in Control of the Corporation;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Corporation and the Executive hereby agree as
follows:
1. Definitions. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
1.1 "Annual Base Salary" shall mean the Executive's rate of
regular base annual compensation (prior to any reduction under (i) a salary
reduction agreement pursuant to section 401(k) or section 125 of the Internal
Revenue Code of 1986, as amended from time to time (the "Code") or (ii) any plan
or arrangement deferring any base salary or bonus payments), and shall not
include (without limitation) allowances, fees, retainers, reimbursements,
bonuses, incentive awards, prizes or similar payments.
1.2 "Cause" shall mean:
(i) the Executive engaging in fraud, misappropriation
or willful misconduct that is demonstrably and materially injurious to
the property or business of the Corporation and/or its subsidiaries,
monetarily or otherwise; or
(ii) the Executive's conviction of, or plea of no
contest to, a felony.
For purposes of clause (i) of this definition, no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or omitted to be done,
by the Executive in bad faith and without reasonable belief that the Executive's
act, or failure to act, was in the best interest of the Corporation or its
subsidiaries. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board or upon the instructions of the Board (or
a committee thereof), the Corporation's chief executive officer or other duly
authorized senior officer of the Corporation (as appropriate) or based upon the
advice of counsel for the Corporation shall be conclusively presumed to be done,
or omitted to be done, by the Executive in good faith and in the best interests
of the Corporation or its subsidiaries. The cessation of employment of the
Executive shall not be deemed to be for Cause unless and until there shall have
been delivered to the Executive 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 at a meeting of the Board called and held for such purpose (after
reasonable notice of any such meeting is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board) finding that, in the good faith opinion of the Board, (a) the Executive
has acted in a manner described in clause (i) above, and specifying the
particulars thereof in detail, or (b) one of the events set forth in (ii) has
occurred.
1.3 "Change in Control" shall mean and be deemed to have
occurred if:
(i) any Person is or becomes, after the date of this
Agreement, the Beneficial Owner (as that term is defined in Rule 13d-3
under the Securities Exchange Act of 1934 (the "Exchange Act")),
directly or indirectly, of securities of the Corporation (not including
in the securities beneficially owned by such Person any securities
acquired directly from the Corporation) representing twenty-five
percent (25%) or more of the combined voting power of the Corporation's
then outstanding securities; or
(ii) during any period of twenty-four (24)
consecutive months (not including any period prior to January 1, 1998),
individuals who at the beginning of such period constitute the Board
and any new director (other than a director designated by a Person who
has entered into an agreement with the Corporation to effect a
transaction described in clause (i), (iii) or (iv) of this definition
or any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents) whose election by the Board or nomination for election by the
Corporation's stockholders 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 of the Board; or
(iii) the shareholders of the Corporation approve a
reorganization, merger or consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially all
of the individuals and entities who were Beneficial Owners, immediately
prior to such reorganization, merger or consolidation, of the combined
voting power of the Corporation's then outstanding securities
beneficially own, directly or indirectly, immediately after such
reorganization, merger or consolidation, more than seventy-five percent
(75%) of the combined voting power of the securities of the corporation
resulting from such reorganization, merger or consolidation in
substantially the same proportions as their respective ownership,
immediately prior to such reorganization, merger or consolidation, of
the combined voting power of the Corporation's securities; or
(iv) the shareholders of the Corporation approve (a)
the sale or disposition by the Corporation (other than to a subsidiary
of the Corporation) of all or substantially all of the assets of the
Corporation (or any such sale or disposition is effected through
condemnation proceedings), or (b) a complete liquidation or dissolution
of the Corporation.
Notwithstanding the foregoing, a Change in Control shall not include any event,
circumstance or transaction which results from the action (excluding the
Executive's employment activities with the Corporation, Florida Power
Corporation or any of their respective subsidiaries) of any Person or group of
Persons which includes, is directly affiliated with or is wholly or partly
controlled by one or more executive officers of the Corporation or its
subsidiaries and in which the Executive actively participates.
1.4 "Corporation" shall include Florida Progress Corporation
and any successor to its business and/or assets which assumes (either expressly,
by operation of law or otherwise) and/or agrees to perform this Agreement by
operation of law or otherwise (except in determining, under Section 1.3 hereof,
whether or not any Change in Control of the Corporation has occurred in
connection with such succession).
1.5 "Disability" shall mean and be deemed the reason for the
termination by the Corporation of the Executive's employment, if, as a result of
the Executive's incapacity due to physical and/or mental illness, (i) the
Executive shall have been absent from the full-time performance of the
Executive's duties with the Corporation or any affiliate of the Corporation for
a period of six (6) consecutive months, (ii) the Corporation and/or such
affiliate gives the Executive a Notice of Termination for Disability, and (iii)
within thirty (30) days after such Notice of Termination is given, the Executive
does not return to the full-time performance of the Executive's duties.
1.6 "Employment Period" shall mean the period commencing on
the date of any Change in Control until the earliest to occur of (i) the date
which is thirty-six (36) months from the date of any such Change in Control,
(ii) the date of termination by the Executive of the Executive's employment for
Good Reason, or (iii) the termination by the Corporation of the Executive's
employment for any reason.
1.7 "Good Reason" shall mean the occurrence (without the
Executive's express written consent) of any one of the following acts, or
failures to act, unless, in the case of any act or failure to act described in
clauses (i), (iv), (v) or (vi) below, such act or failure to act is corrected by
the Corporation prior to the Date of Termination specified in the Notice of
Termination given by the Executive in respect thereof not later than six (6)
months after the occurrence of the event that serves as the basis for the Notice
of Termination:
(i) the assignment to the Executive of any duties or
responsibilities inconsistent with those described in Section 3.2 below
or with the Executive's position(s) or status (including, without
limitation, offices, titles, and reporting relationships) as an
executive officer of the Corporation and/or its primary subsidiaries or
a substantial adverse alteration in the nature of the Executive's
authorities, duties, responsibilities, position(s) or status from those
described in Section 3.2 below or otherwise;
(ii) a reduction in the Executive's Annual Base
Salary or annual bonus opportunity as in effect on the date of this
Agreement or as the same may be increased at any time thereafter and
from time to time;
(iii) the relocation of the Corporation's principal
executive offices to a location more than thirty (30) miles from its
location on the date of this Agreement (or, if different, more than
thirty (30) miles from where such offices are located immediately prior
to any Potential Change in Control) or the Corporation's requiring the
Executive to be based anywhere other than the Corporation's principal
Florida executive offices, except for required travel on the
Corporation's business to an extent substantially consistent with the
Executive's business travel obligations as of the date of this
Agreement;
(iv) the failure by the Corporation or a subsidiary
to continue in effect any pension benefit or deferred compensation plan
in which the Executive participates immediately prior to any Potential
Change in Control which is material to the Executive's total
compensation, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan or arrangement) has been made with
respect to such plan, or the failure by the Corporation or a subsidiary
to continue the Executive's participation therein (or in such
substitute or alternative plan or arrangement) on a basis not
materially less favorable, both in terms of the amount of benefits
provided and the level of the Executive's participation relative to
other participants, as existed at the time of the Potential Change in
Control;
(v) the failure by the Corporation or a subsidiary to
continue to provide the Executive with health and welfare benefits
substantially similar to those enjoyed by the Executive under any
retirement, life insurance, medical, health and accident, or disability
or similar plan of the Corporation or a subsidiary in which the
Executive was participating at the time of any Potential Change in
Control, the taking of any action by the Corporation or a subsidiary
which would directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of the Potential Change in
Control, or the failure by the Corporation or a subsidiary to provide
the Executive with the greater number of paid vacation days to which
the Executive is entitled pursuant to the terms of the Executive's
employment agreement or in accordance with the Corporation's or a
subsidiary's normal vacation policy, in either case, as in effect at
the time of the Potential Change in Control;
(vi) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 7.1;
(vii) the failure of the Corporation to obtain a
written agreement reasonably satisfactory to the Executive from any
successor to the Corporation (as described in Section 9.1) to perform
this Agreement; and/or
(viii) any termination of employment by the Executive
which occurs during the one-month period commencing on the first
anniversary of the consummation of the transaction that produced the
Change in Control.
1.8 "Person" shall have the meaning ascribed thereto in
Section 3(a)(9) of the Exchange Act, as modified, applied and used in Sections
13(d) and 14(d) thereof; provided, however, that a Person shall not include (i)
the Corporation or any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Corporation or any of
its subsidiaries (in its capacity as such), (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the
Corporation in substantially the same character and proportions as their
ownership of stock of the Corporation.
1.9 "Potential Change in Control" shall mean and be deemed to
have occurred if:
(i) the Corporation enters into an agreement, the
consummation of which would result in the occurrence of a Change in
Control;
(ii) the Corporation or any Person publicly announces
an intention to take actions which, if consummated, would constitute a
Change in Control; and/or
(iii) any Person becomes the Beneficial Owner,
directly or indirectly, of securities of the Corporation representing
fifteen (15) percent or more of the combined voting power of the
Corporation's then outstanding securities, or any Person increases such
Person's beneficial ownership of such securities by ten (10) percentage
points or more over the percentage so owned by such Person on December
31, 1997.
1.10 "Retirement" shall mean and be deemed the reason for the
termination by the Executive of the Executive's employment if such employment is
terminated upon or after normal retirement age pursuant to the pension plan of
the Corporation or any subsidiary of the Corporation in which the Executive
participates, not including any early retirement or so-called "window period"
retirements, generally applicable to its officers, as in effect immediately
prior to any Potential Change in Control.
2. Term of this Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 2001; provided,
however, that the term of this Agreement shall automatically be extended each
January 1 after the date hereof for an additional period of one (1) year unless,
not later than 6 months prior to such January 1, the Corporation gives written
notice to the Executive that it does not wish to continue such automatic
extension; and provided, further, however, that if a Change in Control shall
have occurred during the term of this Agreement, this Agreement shall continue
in effect for a period of not less than thirty-six (36) months beyond the month
in which such Change in Control occurred or, if later, eighteen (18) months
after the consummation within such thirty-six (36) month period of the
transaction that produced the Change in Control (the "Term"). Notwithstanding
the foregoing provisions of this Section 2, the Term shall terminate upon
attainment of normal retirement age as defined in the pension plan of the
Corporation.
3. Corporation's Covenants.
3.1 Severance Payments. In order to induce the Executive to
remain in the employ of the Corporation and/or one or more of its subsidiaries
and in consideration of the Executive's covenants set forth in Section 4 below,
the Corporation agrees, under the terms and conditions described herein and in
addition to the amounts payable to the Executive under Section 5 below, to pay
the Executive the "Severance Payments" described in Section 6.1 below and the
other payments and benefits described herein in the event the Executive's
employment is terminated during the Employment Period or under the other
circumstances set forth in Section 6.1 below.
3.2 Position and Duties. During the Employment Period, (i) the
Executive's position (including status, offices, titles and reporting
relationships), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of those held,
exercised and assigned at any time during the one hundred eighty (180) day
period immediately preceding any related Potential Change in Control, and (ii)
the Executive's services shall be performed at the location where the Executive
was employed immediately preceding any such Potential Change in Control, or any
office or location less than thirty (30) miles from such location.
3.3 Base Salary. During the Employment Period, the Executive
shall receive Annual Base Salary at least equal to twenty-six (26) times the
highest bi-weekly base salary paid or payable, including (without limitation)
any base salary which has been earned but deferred, to the Executive by the
Corporation and its affiliated companies in respect of the twelve (12) month
period immediately preceding the month in which any related Potential Change in
Control occurs. The Executive's Annual Base Salary shall be reviewed annually
for potential increase. In addition, Annual Base Salary shall not be reduced
after the occurrence of a Potential Change in Control. As used in this
Agreement, the term "affiliated companies" shall include any company controlled
by, controlling or under common control with the Corporation.
3.4 Incentive Plans.
a. MICP. The Executive shall be awarded for each
fiscal year ending within the Employment Period an annual bonus (the "Annual
Bonus") in cash at least equal to the target annual bonus incentive award
received by the Executive under the Corporation's Management Incentive
Compensation Plan, or any other annual incentive bonus plan maintained by
the Corporation from time to time (the "MICP") for the fiscal year in which
the Change in Control occurs. Each Annual Bonus shall be paid no later than the
end of the third month of the fiscal year next following the fiscal year for
which the Annual Bonus is awarded, unless the Executive shall elect to defer
the receipt of such Annual Bonus in accordance with rules established by the
Corporation for that purpose.
b. LTIP. The Executive shall be awarded for each
award period that begins within the Employment Period a grant of performance
shares at least equal to the annual long-term incentive award received by the
Executive (not taking into account any pro-ration) under the Corporation's
Long-Term Incentive Plan or any other long-term incentive bonus plan
maintained by the Corporation from time to time (the "LTIP") for the fiscal
year in which the Change in Control occurs, and such shares shall be subject to
performance goals consistent with those established by the Corporation for the
fiscal years prior to the fiscal year in which the Change in Control occurs.
3.5 Savings and Retirement Plans. During the Employment
Period, the Executive (in addition to the Incentive Plans) shall be entitled to
participate in all other incentive, savings and retirement plans, practices,
policies and programs applicable generally to other peer executives of the
Corporation and its subsidiaries, but in no event shall such plans, practices,
policies and programs provide the Executive with incentive opportunities
(measured with respect to both regular and special incentive opportunities, to
the extent, if any, that such distinction is applicable), savings opportunities
and retirement benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Corporation and its
affiliated companies for the Executive under such plans, practices, policies and
programs as in effect at any time during the one hundred eighty (180) day period
immediately preceding any related Potential Change in Control or, if more
favorable to the Executive, those provided generally at any time thereafter to
other peer executives of the Corporation and its affiliated companies.
3.6 Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be entitled
to participate in and shall receive all benefits under all of the health and
welfare benefit plans, practices, policies and programs provided by the
Corporation and its affiliated companies (including, without limitation,
medical, prescription, dental, disability, employee life, group life, accidental
death and travel accident insurance plans and programs) to the extent (and at
the same cost, excluding increases in the employee contribution amounts which
are consistent with and equivalent to the historical rates of increase imposed
by the Corporation in respect thereof) applicable generally to other peer
executives of the Corporation and its subsidiaries, but in no event shall such
plans, practices, policies and programs provide the Executive with benefits that
are less favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for the Executive at any time during
the one hundred eighty (180) day period immediately preceding any related
Potential Change in Control or, if more favorable to the Executive, those
provided generally at any time thereafter to other peer executives of the
Corporation and its affiliated companies.
3.7 Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable business
expenses incurred by the Executive in accordance with the most favorable
policies, practices and procedures of the Corporation and its affiliated
companies in effect for the Executive at any time during the one hundred eighty
(180) day period immediately preceding any related Potential Change in Control
or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Corporation and its
affiliated companies.
3.8 Office Support; Perquisites. During the Employment Period,
the Executive shall be entitled to secretarial support and other facilities,
perquisites and programs to enable the Executive to be able to discharge the
Executive's responsibilities hereunder in accordance with the most favorable
plans, practices, programs and policies of the Corporation and its affiliated
companies in effect for the Executive at any time during the one hundred eighty
(180) day period immediately preceding any related Potential Change in Control
or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Corporation and its
affiliated companies.
3.9 Vacation. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Corporation and its affiliated
companies, or pursuant to the terms and provisions of any employment agreement,
as in effect for the Executive at any time during the one hundred eighty (180)
day period immediately preceding any related Potential Change in Control or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Corporation and its affiliated
companies.
4. The Executive's Covenants.
4.1 Employment. The Executive agrees that, subject to the
terms and conditions of this Agreement, in the event of a Change in Control
during the Term the Executive will remain in the employ of the Corporation
during any related Employment Period.
4.2 Time and Attention. During the Employment Period, and
excluding any periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of the Corporation and to use
the Executive's reasonable best efforts to perform faithfully and efficiently
the responsibilities and duties assigned to the Executive hereunder. During the
Employment Period it shall not be a violation of this Agreement for the
Executive to (i) serve on corporate, civic or charitable boards or committees,
(ii) deliver lectures and fulfill speaking engagements and (iii) manage personal
investments, so long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the
Corporation and its subsidiaries in accordance with this Agreement. It is
expressly understood and agreed that to the extent that any such activities have
been conducted by the Executive prior to any Potential Change in Control, the
reinstatement or continued conduct of such activities (or the reinstatement or
conduct of activities similar in nature and scope thereto) subsequent to any
related Potential Change in Control shall not thereafter be deemed to interfere
with the performance of the Executive's responsibilities to the Corporation and
its subsidiaries.
4.3. Non-interference; Confidential Information;
Non-Competition
(a) No Interference. For so long as the Executive is employed
by the Corporation, and for a period of one (1) year after termination of the
Executive's employment for any reason after a Change in Control, the Executive
shall not, whether for his own account or for the account of any other
individual, partnership, firm, corporation or other business organization (other
than the Corporation or one of its affiliates), directly or indirectly,
intentionally solicit, endeavor to entice away from the Corporation (or any of
its affiliates), or otherwise interfere with the relationship of the Corporation
(or any of its affiliates) with, any person who is employed by or otherwise
engaged to perform services for the Corporation (or any of its affiliates)
including, but not limited to, any independent representatives or organizations,
or any person or entity that is a customer of the Corporation (or any of its
affiliates). The Executive understands and agrees that the rights and
obligations set forth in this Section 4.3(a) could extend beyond the Term.
(b) Confidential Information. The Executive covenants and
agrees with the Corporation that he will not at any time, during or after
employment with the Corporation, except in performance of the Executive's
obligations to the Corporation or with the prior express written consent of the
Board of Directors, directly or indirectly, intentionally or unintentionally,
disclose any Confidential Information that he may learn or has learned by reason
of his employment or association with the Corporation or any of its affiliates,
or any predecessors to its business, or use any such information for his own
personal benefit or gain. The term "Confidential Information" includes, without
limitation, information not previously disclosed to the public or to the trade
by the Corporation's management with respect to the products, facilities and
methods, trade secrets and other intellectual property, systems, procedures,
manuals, confidential reports, fee or rate information, customer lists,
financial information (including without limitation the revenues, costs or
profits associated with any of the Corporation's (or any of its affiliates')
activities or products), business plans, prospects, opportunities or other
information of the Corporation or any of its affiliates. Confidential
Information shall not include information which (i) is or becomes generally
available to the public other than as a result of disclosure by the Executive in
violation of this Section 4.3(b) or (ii) the Executive is required to disclose
under any applicable laws, regulations or directives of any government agency,
tribunal or authority having jurisdiction in the matter or under subpoena or
other process of law. The Executive understands and agrees that the rights and
obligations set forth in this Section 4.3 (b) shall extend beyond the Term.
(c) Exclusive Property. The Executive confirms that all
Confidential Information is and shall remain the exclusive property of the
Corporation or any of its affiliates. All business records, papers and documents
kept or made by the Executive relating to the business of the Corporation (or
any of its affiliates) or any Confidential Information shall be and remain the
property of the Corporation and/or any such affiliates. Upon termination of
employment or upon the request of the Corporation at any time, the Executive
shall promptly deliver to the Corporation, and shall not without the prior
express written consent of the Corporation retain, any and all copies of (i) any
written materials not previously made available to the public, or (ii) records
and documents made by the Executive or coming into his possession concerning any
Confidential Information or the business or affairs of the Corporation or any
predecessors to its business, or any of its affiliates. The Executive
understands and agrees that the rights and obligations set forth in this Section
4.3(c) shall extend beyond the Term.
(d) Covenant Not to Compete. During the employment period and
for one (1) year after termination of the Executive's employment for any reason
after a Change in Control, the Executive shall not compete, directly or
indirectly, with the Corporation or its affiliates within fifty (50) miles of
any geographic area in which the Corporation or its affiliates has material
business interests with which the Executive is involved at the time of the
termination of the Executive's employment. If it is judicially determined that
this provision, or any portion thereof, is unenforceable under applicable law(s)
(statute, common law or otherwise), then it is hereby agreed by the Executive
and the Corporation that the unenforceable portion shall be redrafted to the
extent necessary to render it enforceable, while leaving the remaining portions
intact. By agreeing to this contractual modification prospectively at this time,
the parties intend to make this provision enforceable under the law(s) of all
applicable states so that the entire agreement not to compete and/or this
Agreement as prospectively modified shall remain in full force and effect and
shall not be rendered void or illegal. Such modifications shall not affect the
payments made to the Executive under this Agreement. The Executive acknowledges
that his skills are such that he can be gainfully employed in noncompetitive
employment and that the agreement not to compete will in no way prevent him from
earning a living. The Executive understands and agrees that the rights and
obligations set forth in this Section 4.3(d) shall extend beyond the Term.
(e) Injunctive Relief. Without intending to limit the remedies
available to the Corporation, the Executive acknowledges that a breach of any of
the covenants contained in this Section 4.3 may result in material irreparable
injury to the Corporation or its affiliates for which there is no adequate
remedy at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of such a breach or threat thereof, the
Corporation shall be entitled to obtain a temporary restraining order and/or a
preliminary or permanent injunction restraining the Executive from engaging in
activities prohibited by this Section 4.3 or such other relief as may be
required to specifically enforce any of the covenants in this Section 4.3.
5. Compensation Other Than Severance Payments.
5.1 Disability. Following a Potential Change in Control and
during the Term, during any period that the Executive fails to perform the
Executive's full-time duties with the Corporation as a result of incapacity due
to physical or mental illness, the Executive's full salary shall be paid to the
Executive at a rate no less than the rate in effect at the commencement of any
such disability period, together with all compensation and benefits payable to
the Executive under the terms of any compensation or benefit plan, program or
arrangement maintained by the Corporation or its subsidiaries during such
disability period, until the Executive's employment is terminated by the
Corporation for Disability.
5.2 Base Salary. If the Executive's employment shall be
terminated for any reason following a Potential Change in Control and during the
Term, the Executive's full salary shall be paid to the Executive through the
Date of Termination (as defined below in Section 7.2) at the rate in effect at
the time the Notice of Termination is given, together with all compensation and
benefits payable to or with respect to the Executive through the Date of
Termination under the terms of any compensation or benefit plan, program or
arrangement maintained by the Corporation or its subsidiaries during such
period.
5.3 Benefits. If the Executive's employment shall be
terminated for any reason following a Potential Change in Control and during the
Term, the Executive's normal post-termination compensation and benefits shall be
paid to the Executive as such payments become due. Such post-termination
compensation and benefits shall be determined under, and paid in accordance
with, the retirement, health insurance, life insurance and other compensation
(including without limitation any bonus and/or incentive compensation) or
benefit plans, programs and arrangements maintained by the Corporation or its
subsidiaries or affiliates.
6. Severance Payments.
6.1 Severance. The Corporation shall pay the Executive the
payments and benefits described in Section 6.1(a), (b) and (c) (the "Severance
Payments") upon the termination of the Executive's employment following a Change
in Control and during the Term, in addition to the payments and benefits
described in Section 5 hereof, unless such termination is (i) by the Corporation
for Cause, (ii) by reason of Retirement, (iii) by the Executive without Good
Reason, (iv) due to death, or (v) due to Disability. In addition, the
Executive's employment shall be deemed to have been terminated following a
Change in Control by the Corporation without Cause or by the Executive with Good
Reason (a) if the Executive reasonably demonstrates that the Executive's
employment was terminated prior to a Change in Control without Cause (1) at the
request of a Person who has entered into an agreement with the Corporation the
consummation of which will constitute a Change in Control (or who has taken
other steps reasonably calculated to effect a Change in Control) or (2)
otherwise in connection with, as a result of or in anticipation of a Change in
Control, or (b) if the Executive terminates his employment for Good Reason prior
to a Change in Control and the Executive reasonably demonstrates that the
circumstance(s) or event(s) which constitute such Good Reason occurred (1) at
the request of such Person or (2) otherwise in connection with, as a result of
or in anticipation of a Change in Control. The Executive's right to terminate
the Executive's employment for Good Reason shall not be affected by the
Executive's incapacity due to physical or mental illness. The Executive's
continued employment shall not constitute consent to, or a waiver of rights with
respect to, any act or failure to act constituting Good Reason hereunder. In the
event of Disability or death of the Executive after the Date of Termination in
respect of any termination without Cause or any termination for Good Reason,
payments and benefits shall be made to the Executive, or the Executive's
beneficiaries or legal representative, as the case may be.
(a) Lump Sum Payment. A lump sum payment equal to
three (3) times the highest "total 12-month compensation" of the
Executive (whether or not deferred) for any 12-month period during the
five (5) completed calendar years prior to the Date of Termination,
where "total 12-month compensation" means the sum of the Executive's
Annual Base Salary during such 12-month period and the full amount of
the Executive's MICP award (target or actual, whichever is greater)
that was payable during such 12-month period (or annualized 12-month
period if the Executive has not completed 12 months of employment).
(b) Welfare Plan Continuation. For a thirty-six (36)
month period after the Date of Termination, or if sooner, until the
Executive reaches the age of sixty-five (65) years, the Corporation
shall provide the Executive (at no cost to the Executive) with life,
disability, accident and health insurance benefits substantially
similar to those that the Executive is receiving immediately prior to
any related Potential Change in Control or the receipt of the Notice of
Termination (without giving effect to any reduction in such benefits
subsequent to a Change in Control which reduction constitutes Good
Reason), whichever is greater; provided, however, that the final 18
months of the continued coverage period hereunder shall be deemed to
constitute the full amount of the Executive's entitlement to COBRA
benefits as a result of the Executive's termination of employment. Upon
the termination of the Executive's continued benefits provided under
the prior sentence, the Executive shall be eligible to continue such
benefits (at the Executive's cost) to the same extent that such
benefits are provided by the Corporation thereafter (the "Continued
Access Period") to comparable executives and, after the Executive
attains age 65, to retired executives. Benefits otherwise receivable by
the Executive pursuant to the first sentence of this Section 6.1(b)
shall be reduced to the extent comparable benefits are actually
received by or made available to the Executive without cost during such
period following the Executive's termination of employment (and any
such benefits actually received by the Executive shall be reported to
the Corporation by the Executive). Continued coverage during the
Continued Access Period shall terminate if comparable benefits are made
available to the Executive under any other policy or program (and the
availability of any such benefits shall be reported to the Corporation
by the Executive).
(c) LTIP. Performance shares granted to the Executive
under the LTIP for performance cycles commencing after a Change in
Control has occurred and remaining uncompleted will be deemed earned as
of the Date of Termination to the extent of one hundred fifty percent
(150%) of target under each award agreement, and the value of each such
award will be paid out to the Executive in a lump-sum cash payment.
Performance shares granted to the Executive under the LTIP for
performance cycles which commenced after a Change in Control occurred
and were completed before the Date of Termination will be paid out to
the extent earned, and the value of such award will be paid out to the
Executive in a lump-sum cash payment.
(d) SERP; Other Deferred Compensation. The Executive
shall receive credit under the Corporation's Supplemental Executive
Retirement Plan ("SERP") for five (5) additional years of service and
shall immediately become 100% vested in the Executive's accrued benefit
and/or account balance to date under the SERP and any non-qualified
deferred compensation plan, and any amendment, modification or
termination of any such plan occurring during the Term of this
Agreement after any Change in Control shall not be effective against
the Executive to decrease or change any of the Executive's rights
thereunder.
(e) Relocation and Other Assistance. Should the
Executive be required to move his or her primary residence in order to
pursue other business opportunities within three (3) years of the Date
of Termination, the Company will reimburse the Executive for any
expenses (not in excess of $10,000) incurred in that relocation that
are not reimbursed by another employer, including, without limitation,
assistance in selling the Executive's home and all other assistance and
benefits that were customarily provided by the Corporation to
transferred executives prior to the Change in Control. In addition, if
the Executive retains legal counsel with respect to the taxation of
payments to be made to the Executive under this Agreement, the
Corporation shall reimburse the Executive for such reasonable legal
fees and disbursements (but not in excess of $15,000).
6.2 Special Reimbursement. (a) Notwithstanding any other
provisions of this Agreement, in the event that any payment or benefit received
or to be received by the Executive in connection with a Change in Control or the
termination of the Executive's employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Corporation or
any of its subsidiaries, any Person whose actions result in a Change in Control
or any Person affiliated with the Corporation or such Person) (all such payments
and benefits, including the Severance Payments, being hereinafter called "Total
Payments") would subject the Executive to the excise tax imposed under Section
4999 of the Code or any successor section thereto (the "Excise Tax"), the
Corporation shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Executive, after deduction of
any Excise Tax on the Total Payments and any federal, state and local income tax
and Excise Tax upon the payment provided for by this Section 6.2(a), shall be
equal to the Total Payments.
(b) For purposes of determining whether any of
the Total Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (i) the Total Payments shall be treated as "parachute
payments" within the meaning of section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of section 280G(b)(1) of the
Code shall be treated as subject to the Excise Tax, unless in the opinion of tax
counsel selected by the Corporation's general counsel and reasonably
acceptable to the Executive such Total Payments (in whole or in part) do not
constitute parachute payments, including by reason of Section 280G(b)(4)(A) of
the Code, or such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered, within the meaning of
section 280G(b)(4)(B) of the Code, in excess of the Base Amount allocable to
such reasonable compensation, or are otherwise not subject to the Excise Tax,
and (ii) the value of any non-cash benefits or any deferred payment or benefit
shall be determined by the Corporation's independent auditors in accordance
with the principles of sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, the Executive shall be deemed
to pay federal income taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to be made and
applicable state and local income taxes at the highest marginal rate of
taxation, net of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes.
(c) In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at the
time of termination of the Executive's employment, the Executive shall repay
to the Corporation, at the time that the amount of such reduction in Excise
Tax is finally determined, the portion of the Gross-Up Payment attributable to
such reduction plus interest on the amount of such repayment at the rate
provided in section 1274(b)(2)(B) of the Code. In the event that the Excise
Tax is determined to exceed the amount taken into account hereunder at the
time of the termination of the Executive's employment (including by reason of
any payment the existence or amount of which cannot be determined at the time of
the Gross-Up Payment), the Corporation shall make an additional Gross-Up
Payment in respect of such excess (plus any interest, penalties or
additions payable by the Executive with respect to such excess) at the time that
the amount of such excess is finally determined. The Executive and the
Corporation shall each reasonably cooperate with the other in connection with
any administrative or judicial proceedings concerning the existence or
amount of any such subsequent liability for Excise Tax with respect to the Total
Payments.
6.3 Date of Payment. The payments provided for in Section 6.2
hereof shall be made not later than the fifteenth (15th) day following the Date
of Termination; provided, however, that if the amounts of such payments cannot
be finally determined on or before such day, the Corporation shall pay to the
Executive on such day an estimate, as determined in good faith by the
Corporation, of the minimum amount of such payments to which the Executive is
likely to be entitled to and shall pay the remainder of such payments (together
with interest at the rate provided in section 1274(b)(2)(B) of the Code) as soon
as the amount thereof can be determined but in no event later than the sixtieth
(60th) day after the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Corporation to the Executive, payable
on the tenth (10th) business day after demand by the Corporation (together with
interest at the rate provided in section 7872(f)(2)(A) of the Code). At the time
that payments are made under this Section 6.3, the Corporation shall provide the
Executive with a detailed written statement setting forth the manner in which
such payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Corporation has received
from outside counsel, auditors or consultants (and any such opinions or advice
which are in writing shall be attached to the statement).
6.4 Legal Costs. The Corporation shall reimburse the Executive
for reasonable legal fees and expenses incurred in good faith by the Executive
as a result of any dispute with any party (including, but not limited to, the
Corporation or any subsidiary of the Corporation) regarding the payment or
receipt of any benefit provided for in this Agreement (including, but not
limited, all such fees and expenses incurred in disputing any termination or in
seeking in good faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code) plus in each case
interest on any delayed payment at the applicable Federal rate provided for in
section 7872(f)(2)(A) of the Code. Such payments shall be made within five (5)
business days after delivery of the Executive's written requests for payment
accompanied by such evidence of fees and expenses incurred as the Corporation
reasonably may require.
7. Termination Procedures and Compensation During Dispute.
7.1 Notice of Termination. After a Change in Control and
during the Term, any purported termination of the Executive's employment (other
than by reason of death) shall be communicated by written Notice of Termination
from one party hereto to the other party hereto in accordance with Section 10
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated. Further, a Notice of Termination for Cause is
required to include 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 at a
meeting of the Board which was called and held for the purpose of considering
such termination (which meeting may be a regular meeting of the Board where
prior notice of consideration of such termination is given to members of the
Board) finding that, in the good faith opinion of the Board, (i) the Executive
engaged in conduct set forth in clause (i) or (ii) of the definition of Cause
herein, and specifying the particulars thereof in detail, or (ii) one of the
events set forth in clause (ii) of such definition has occurred. For purposes of
this Agreement, any purported termination not effected in accordance with this
Section 7.1 shall not be considered effective.
7.2 Date of Termination. "Date of Termination", with respect
to any purported termination of the Executive's employment after a Potential
Change in Control and during the Term, shall mean (i) if the Executive's
employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
full-time performance of the Executive's duties during such thirty (30) day
period), and (ii) if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination (which, in the case of a
termination by the Corporation, shall not be less than thirty (30) days (except
in the case of a termination for Cause) and, in the case of a termination by the
Executive, shall not be less than fifteen (15) days nor more than sixty (60)
days, respectively, after the date such Notice of Termination is given).
7.3 Dispute Concerning Termination. If within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved either by mutual written agreement of the
parties or by a final judgement, order, or decree of an arbitrator or a court of
competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected);
provided, however, that the Date of Termination shall not be extended by a
notice of dispute if the basis for such notice, as determined in good faith by
the party receiving such notice is not given in good faith or the party giving
such notice does not pursue the resolution of such dispute with reasonable
diligence. Subject to the rights granted by Section 4.3, any controversy or
claim arising out of, or relating to, any provision of this Agreement shall be
settled by binding arbitration in accordance with the laws of The State of
Florida by three arbitrators, one of whom shall be appointed by the Corporation,
one by the Executive, and the third by the first two arbitrators. If the first
two arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association.
Such arbitration shall be conducted in Florida in accordance with the rules of
the American Arbitration Association, except with respect to the selection of
arbitrators which shall be as provided in this Section. Judgment on the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
7.4 Compensation During Dispute. If a purported termination
occurs following a Change in Control and during the Term, and such termination
is disputed in accordance with Section 7.3 above (and pursuant thereto the Date
of Termination is extended), the Corporation shall continue to pay the Executive
the full Annual Base Salary in effect at the time of any related Potential
Change in Control or when the notice giving rise to the dispute was given
(whichever is greater). Amounts paid under this Section 7.4 are in addition to
all other amounts due under this Agreement (other than those due under Section
5.2 hereof) and shall not be offset against or reduce any other amounts due
under this Agreement or any other plan, agreement or arrangement.
8. No Mitigation. The Corporation agrees that, if the Executive's
employment is terminated during the Term, the Executive is not required to seek
other employment or to attempt in any way to reduce any amounts payable to the
Executive by the Corporation pursuant to Section 6 or Section 7.4. Further, the
amount of any payment or benefit provided for in Section 6 (other than pursuant
to Section 6.1.(b)) or Section 7.4 shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, or offset against any amount claimed to be owed by the
Executive to the Corporation or any of its subsidiaries, or otherwise.
9. Successors; Binding Agreement.
9.1 Successors. In addition to any obligations imposed by law
upon any successor to the Corporation, the Corporation will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Corporation to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Corporation would be required to perform
it if no such succession had taken place. Failure of the Corporation to obtain
such assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle the Executive to
compensation from the Corporation in the same amount and on the same terms as
the Executive would be entitled to hereunder if the Executive were to terminate
employment with the Corporation for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination.
9.2 Binding Agreement. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would still
be payable to the Executive hereunder (other than amounts which, by their terms,
terminate upon the death of the Executive) if the Executive had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the beneficiary (or
beneficiaries) designated by the Executive from time to time in accordance with
the procedures for notice set out in Section 10; provided, however, that if
there shall be no effective designation of beneficiary by the Executive, such
amounts shall be paid to the executors, personal representatives or
administrators of the Executive's estate.
10. Notices; Other Communications. For the purpose of this
Agreement, notices and all other communications provided for in this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
or mailed by United States certified mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth below, or to such other
address as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
actual receipt:
To the Corporation: Florida Progress Corporation
P.O. Box 33042
St. Petersburg, Florida 33733
With a copy to: Mr. William G. Kelley
Vice President, Human Resources
Florida Progress Corporation
3201 34th Street South
St. Petersburg, Florida 33711
To the Executive: Mr. Joseph H. Richardson
561 Palmetto Road
Belleair, FL 33757
11. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Florida without regard to the principles of conflict
of laws thereof. All references to sections of the Exchange Act or the Code (or
the rules and/or regulations under either) shall be deemed also to refer to and
include any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding required under
federal, state or local law and any additional withholding to which the
Executive has agreed. The rights and obligations of the Corporation and the
Executive under this Agreement shall survive the expiration of the Term and the
Employment Period.
12. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, all of which shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. No Limitation. Nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any plan, program, policy or
practice provided by the Corporation or any of its affiliated companies and for
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement with the Corporation or any of its affiliated companies. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan, policy, practice or program of or any contract or agreement with
the Corporation or any of its affiliated companies at or subsequent to the Date
of Termination shall be payable in accordance with such plan, policy, practice
or program or contract or agreement as in effect from time to time except as
explicitly modified by this Agreement.
15. Other Agreements. This Agreement contains the entire agreement
between the parties concerning the subject matter hereof and supersedes all
prior agreements understandings, discussions, negotiations and undertakings,
whether written or oral, between the parties with respect thereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
FLORIDA PROGRESS CORPORATION
By: /s/ Richard Korpan
-------------------------------
RICHARD KORPAN
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
/s/ Joseph H. Richardson
--------------------------------
Executive
EXHIBIT 10.(h)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered as of the 1st day
of March, 1998, by and between Florida Progress Corporation (the "Company") and
Richard Korpan (the "Employee").
WITNESSETH:
WHEREAS, the Employee is currently serving as the President and
Chief Executive Officer of the Company under an employment agreement entered
into as of June 1, 1995 (the "Existing Agreement"); and
WHEREAS, the Employee and the Company wish to amend the Existing
Agreement to extend the term thereof and to make certain other amendments to the
provisions of the Existing Agreement; and
WHEREAS, it is the desire of both parties that the arrangements
and understandings of the parties concerning the continued employment of the
Employee under the Existing Agreement as so amended be set forth in writing in
this restatement of the Existing Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Employment. The Company hereby agrees to continue the
employment of the Employee, and the Employee hereby accepts such continued
employment, upon the terms and subject to the conditions set forth in this
Agreement.
2. Term. The term of employment under this Agreement (the "Term
of Employment") shall begin as of March 1, 1998, and, subject to the provisions
of termination as hereinafter provided in Sections 6 and 7, shall terminate on
February 28, 2002; provided, however, that beginning on March 1, 2000 and on
each March 1 (the "Renewal Date") thereafter, the Term of Employment shall
automatically be extended for one additional year unless either party gives the
other written notice of termination at least ninety (90) days prior to any such
Renewal Date.
3. Duties.
(a) The Employee is now engaged as the President
and Chief Executive Officer of the Company, and will become the Chairman of the
Board of Directors of the Company upon the retirement of the current Chairman.
In addition, the Employee shall have such other duties and hold such offices as
may from time to time be reasonably assigned to him by the Board of Directors
of the Company (the "Board of Directors") with respect to the business and
affairs of the Company, consistent with his status as the most senior executive
officer of the Company.
(b) The Employee agrees to act within the scope
of authority delegated to him from time to time pursuant to this Agreement and,
so far as reasonably practicable, to observe and abide by every limitation
placed upon such authority from time to time by the Board of Directors. No
latitude, indulgence or forbearance granted by the Board of Directors to the
Employee shall be deemed a relinquishment of its right to direct or control
him or a waiver of its right to require performance and fulfillment of the
duties and responsibilities of his employment hereunder or of any other
provision hereof.
4. Extent of Services. During his Term of Employment, the
Employee shall devote his full time, energy and attention to, and actively
participate in, the management of the business and affairs of the Company and
shall not become employed, engaged or involved, in any capacity, in any
commercial or professional endeavor, business or business activity other than
the business and affairs of the Company, provided, however, that the foregoing
shall not prevent Employee from serving as a director or trustee of other
corporations or organizations if such service has been approved by the
Company's Board of Directors.
5. Compensation. The Company shall pay the Employee, and the
Employee agrees to accept from the Company, as compensation in full for the
Employee's services under this Agreement and the faithful performance and
observance of all of the Employee's obligations to the Company hereunder, the
following:
(a) Base Salary. Throughout the Term of
Employment the Employee shall be paid a base salary not less than Six Hundred
and Sixty Thousand as determined annually by the Board of Directors of the
Company, payable in accordance with the Company's standard pay practices.
(b) Incentive Plans. In addition to the base
salary provided for in paragraph 5(a), Employee shall be entitled to
participate in the Company's Management Incentive Compensation Plan (MICP),
and the Company's Long-Term Incentive Plan (LTIP), any other incentive
compensation plans that may be established by the Board of Directors;
participation in the MICP and LTIP shall be at a target level (expressed as a
percentage of base salary) not less than the level authorized for any other
executive officer of the Company.
(c) SERP. Employee will be entitled to continue
to participate in the Company's Supplemental Executive Retirement Plan (SERP),
or any successor plan thereto at not less than his current benefits together
with any improvements thereto, provided, however, that the annual retirement
benefits to be paid from the SERP, the Employees' Retirement Plan of Florida
Progress Corporation and the Florida Progress Corporation Retirement Benefit
Non-discrimination Plan for Excess Benefits and pursuant to this Agreement
shall not be less than the following amounts depending upon the date on which
the Employee's Term of Employment under this Agreement ends:
January 31, 2002 or later $600,000
January 31, 2001 or later $585,000
January 31, 2000 or later $570,000
January 31, 1999 or later $555,000
January 31, 1998 or later $540,000
provided, however, that if Employee is married at the expiration of the Term of
Employment:
(i) Employee's minimum retirement benefit provided in accordance with
the foregoing table shall be appropriately adjusted so as to provide him with an
actuarial equivalent benefit paid out as a 100% life annuity to him and a 100%
survivor annuity to his spouse, such adjustment to involve only the reduction
necessary to convert Employee's current retirement benefit under the SERP (which
is in the form of a 100% life annuity, with an unreduced 50% surviving spouse
annuity) into the foregoing form of payment; and
(ii) if the Term of Employment ends by virtue of the Employee's death,
his spouse shall receive an annuity equal to the minimum retirement benefit
provided in accordance with the foregoing table, but reduced to the same extent
that his retirement benefit would have been reduced under (i) above had Employee
retired as of the date of his death.
(d) Employee Benefits. Employee shall be
entitled to continue to participate in the Company's Retirement Plan, Savings
Plan, Executive Optional Deferred Compensation Plan and all other benefit plans
that are available to employees of the Company and, in addition, upon
termination of employment under this Agreement, the Employee shall, after
the expiration of any continued health insurance benefits provided by the
Company, be eligible to continue such benefits (at the Employee's cost) to
the same extent that such benefits are made available by the Company thereafter
to the senior executive officers of the Company and, after the Employee attains
age 65, to retired senior executive officers of the Company.
6. Termination by the Company. The Company, acting by a vote
of its Board of Directors, may terminate Employee's employment hereunder (and
consequently his Term of Employment) under the following circumstance:
(a) Termination for Cause.
(i) The willful, substantial, continued and
unjustified refusal of Employee to perform the duties
required of him by this Agreement to the extent of
his ability to do so.
(ii) The willful engaging by Employee in
conduct which is demonstrably and materially
injurious to the Company, financially or otherwise.
For purpose of this paragraph, no act, or failure to
act, on Employee's part shall be deemed "willful"
unless done, or omitted to be done, by Employee not
in good faith and without reasonable belief that
Employee's action or omission was in the best
interest of the Company.
(iii) Notwithstanding the foregoing, Employee
shall not be deemed to have been terminated for cause
unless and until there shall have been delivered to
Employee a copy of a resolution duly adopted by the
affirmative vote of not less than a majority of the
entire membership of the Board of Directors at a
meeting of the Board (after reasonable notice to
Employee and an opportunity for Employee, together
with Employee's counsel, to be heard before the
Board), finding that, in the good faith opinion of
the Board, Employee was guilty of engaging in such
conduct.
(b) Termination due to Disability. The Employee
shall be unable to perform his duties hereunder by reason of disability that
shall have continued for a period of at least one hundred and eighty (180)
consecutive days. Moreover, during any such 180-day period the Employee shall
receive the base salary pursuant to this Agreement and any MICP and LTIP award
as if he were not disabled. The word "disability" as used in this Agreement
shall mean the inability of the Employee, as determined by the Board of
Directors, by reason of physical or mental disability to perform the duties
required of him under this Agreement.
(c) Termination Without Cause. The Company,
acting by majority vote of its Board of Directors, terminate, the Term of
Employment without cause upon thirty (30) days' written notice to Employee.
Upon termination of Employee's employment under
paragraph 6(c) or by the Employee for Good Reason as defined in paragraph 8(d),
the Employee shall be entitled only to provisions of Section 8 and the
Company shall have no other obligation to the Employee. In the event of
termination of the Employee's employment under the provisions of paragraph
6(a) or 6(b) or if the Employee terminates his employment under this
Agreement for any reason other than "Good Reason" as defined in paragraph
8(d), all rights of the Employee under this Agreement shall terminate upon the
effective date of the termination of employment, the Employee shall have no
further rights to be employed or to receive any further benefit under this
Agreement, and the Company shall thereafter have no obligations to the Employee
under this Agreement, except for rights the Employee vested and accrued prior
thereto.
7. Death of Employee. If the Employee dies
during the Term of Employment, all rights of the Employee under this Agreement
shall terminate upon his death other than rights vested and accrued prior
thereto, including, without limitation, the SERP benefit provided in
paragraph 5(c) of this Agreement as if the Employee had retired on the date
of his death. The Company shall pay to the estate of the Employee the base
salary that otherwise would be payable to the Employee through the end of the
calendar year in which his death occurs as well as a target MICP payment, and
the Company shall have no additional obligation under this Agreement to
the Employee or his estate.
8. Severance Pay.
(a) If Employee's employment is terminated by
the Company without cause under the provisions of paragraph 6(c), or if
Employee's employment is terminated by the Employee for Good Reason, as defined
in paragraph 8(d) of this Agreement:
(i) the Employee shall be entitled to receive
and the Company shall be obligated to pay to the
Employee, an amount equal to three times the sum of
his annual base pay and the MICP target amount in
effect as of the date of termination,
(ii) the Employee shall receive the number of
shares equal to (1) the target award that he could
earn under his award agreement for each uncompleted
performance cycle under the LTIP, plus (2) the number
of shares earned and not yet paid out for any
performance cycle that has been completed.
(b) The Company shall pay the Employee the
amount due under paragraph 8(a)(i) in a lump-sum payment not later than
fifteen (15) days following the date of the Employee's termination of
employment. The shares referred to in Section 8(a)(ii) shall be issued to
the Employee as soon as practical.
(c) Any amount payable under this Section 8 is
in lieu of, and not in addition to, any further compensation payments for the
then remaining Term of Employment. Such amount shall be paid to the Employee
regardless of whether the Employee finds, seeks or receives an offer for
alternative employment or receives compensation from other sources. The
Employee shall be under no duty to mitigate damages or losses that he might
incur by reason of such termination of his employment by the Company.
(d) For purposes of this Agreement, "Good
Reason" shall mean, without the Employee's express written consent, the
occurrence of any one or more of the following:
(i) a change in the duties and
responsibilities of the Employee's position such that
a substantial reduction occurs from the duties and
responsibilities in effect either as of the date of
this Agreement or immediately prior to the change in
responsibilities;
(ii) a reduction by the Company of the
Employee's base salary as in effect on the date
hereof, as increased from time to time, except a
reduction consistent with salary reductions of all
personnel on the executive payroll;
(iii) the Company requiring the Employee to be
based in a city other than the city where the
Employee is based on the date hereof.
9. Restrictive Covenants.
(a) During the Term of Employment, and for a
period of two (2) years after the expiration of the Term of Employment or
other termination of the Employee's employment hereunder, whether by the
Employee, the Company or otherwise, for whatever reason or no reason at all,
the Employee shall maintain the confidentiality of all confidential and
proprietary information relating to the business of the Company and its
subsidiaries that he has previously acquired as an employee of the Company or
that he may acquire in the course of his engagement hereunder, and shall
not utilize such confidential and proprietary information to the detriment of
the Company or any of its subsidiaries, or otherwise knowingly disclose any
such confidential information to any third person. Following expiration of the
Term of Employment or other termination of the Employee's employment hereunder,
whether by the Employee, the Company or otherwise, for whatever reason or no
reason at all, the Employee shall promptly return to the Company all written
materials containing confidential and proprietary information regarding the
Company or any of its subsidiaries that the Employee has previously acquired
as an employee of the Company or that he obtained in the course of the
performance of his duties hereunder.
(b) During the Term of Employment, and for a
period of two (2) years after the expiration of the Term of Employment or
other termination of the Employee's employment hereunder, whether by the
Employee, the Company or otherwise, for whatever reason or no reason at all,
the Employee:
(i) shall not induce or attempt to
induce any employee of the Company to leave the
employ of the Company or any of its subsidiaries; and
(ii) shall not, directly or indirectly, own,
operate, manage, have a proprietary interest of any
kind in, extended financial assistance to, solicit,
encourage or handle patronage for, be employed by or
serve as a consultant, or in any other capacity, for
the principal or branch office or facilities of any
person engaged primarily in business the same as,
substantially similar to or in substantial direct
competition with the business of the Company or any
of its subsidiaries and located within the States of
Florida, Georgia, Alabama, North Carolina and South
Carolina, except that the Employee may own stock in
such a corporation so long as such stock is publicly
traded, the Employee does not own more than five
percent (5%) of the outstanding stock of said
corporation and the ownership of such stock does not
in any way represent any form of compensation for any
services rendered by the Employee to said
corporation.
(iii) The Employee acknowledges that his
skills are such that he can be gainfully employed in
noncompetitive employment and that the agreement not
to compete will in no way prevent him from earning a
living.
(c) It is understood by and between the parties
hereto that the covenants set forth in this Section 9 are essential elements of
this Agreement, and that, but for the agreement of the Employee to comply with
such covenants, the Company would not have agreed to enter into this
Agreement. Such covenants by the Employee shall be construed as agreements
independent of any other provision in this Agreement. The existence of any
claim or cause of action of the Employee against the Company, whether predicated
on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of such covenants, or any of them.
(d) The Employee agrees that damages at law will
be an insufficient remedy to the Company if the Employee violates the terms
of this Section 9 and that the Company would suffer irreparable damage as a
result of any such violation. Accordingly, it is agreed that the Company
shall be entitled, upon application to a court of competent jurisdiction, to
obtain injunctive relief to enforce the provisions of this Section 9, which
injunctive relief shall be in addition to any other rights or remedies available
to the Company.
(e) The Employee agrees to pay to the Company
all costs and expenses incurred by the Company relating to the enforcement of
the terms of this Section 9, including reasonable fees and disbursements of
counsel and legal assistants (whether incurred before trial, at trial, in
appellate proceedings, or otherwise).
(f) The restrictions of this Section 9 shall
extend to all activities of Employee, whether as a sole proprietor, an
independent contractor, partner or joint venture, or as an officer, director,
stockholder (except as otherwise specified in paragraph (b)(ii) above), agent,
employee or salesman for any individual, firm, partnership, corporation or other
entity, or otherwise.
(g) The period of time during which the Employee
is prohibited from engaging in certain business practices pursuant to the
provisions of paragraphs (a) or (b) of this Section 9 shall be extended by
any length of time during which the Employee is in breach of such covenants.
(h) It is agreed by the Company and the Employee
that if any portion of the covenants set forth in this Section 9 are held to be
invalid, unreasonable, arbitrary or against public policy, then such portion of
such covenants shall be considered divisible both as to time and geographical
area. The Company and the Employee agree that, if any court of competent
jurisdiction determines the specified time period or the specified geographical
area applicable to this Section 9 to be invalid, unreasonable, arbitrary or
against public policy, a lesser time period or geographical area that is
determined to be reasonable, non-arbitrary and not against public policy may be
enforced against the Employee. The Company and the Employee agree that the
foregoing covenants are appropriate and reasonable when considered in light of
the nature and position held by the Employee and the extent of the business
conducted by the Company.
10. Insider Trading Restrictions. The Employee acknowledges
and is aware that applicable state and federal securities laws prohibit any
person who has material non-public information about a company from purchasing
or selling the securities of that company. The Employee further acknowledges
that during the course of his employment by the Company he may become privy to
material non-public information regarding the Company or other companies. The
Employee agrees and acknowledges that such material non-public information will
be the property of the Company and such other companies. The Employee covenants
and agrees not to disclose, and will not suffer or permit any of the employees
or agents of the Company under his supervision to disclose, to any third person
or make use of any material non-public information about the Company or any
other company in connection with the purchase or sale of any securities,
including securities of the Company and its subsidiaries. The foregoing
covenants regarding material non-public information shall not apply to the
extent that such information is publicly disclosed by the Company or other
companies or otherwise publicly disclosed in accordance with law by a person
other than the Employee.
11. Compliance with Other Agreements. The Employee represents
and warrants that the execution of this Agreement by him and his performance of
his obligations hereunder will not conflict with, result in the breach of any
provision of or the termination of or constitute a default under any Agreement
to which the Employee is a party or by which the Employee is or may be bound.
12. Disputes. Should a "change in control", as defined in
Section 1.3 of the CIC Agreement described in Section 16, occur, the Employee
shall be entitled to recover all reasonable costs and expenses (including fees
and disbursements of counsel and legal assistants, whether incurred before
trial, at trial, in appellate proceedings, or otherwise) incurred with respect
to any action relating to this Agreement, whether brought by Employee, or by or
on behalf of the Company or any successor or affiliate; in all other cases, the
prevailing party in any action relating to this Agreement shall be entitled to
recover all such costs and expenses.
To the extent permitted by law, the Company shall pay to
Employee on demand, interest on any amount not paid in full when due under the
terms of this Agreement. The amount shall be computed by applying to the sum of
all delinquent amounts an interest rate. The interest rate shall be a fixed rate
per year which shall be the "prime rate" as listed daily in the Money Rates
column of the Wall Street Journal published the day on which Employee's
employment terminates.
13. Waiver of Breach. The waiver of the Company of a breach by
the Employee of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach by the Employee. No waiver shall
be valid unless in writing and approved by the Board of Directors of the
Company.
14. Notice. All notices, requests, demands and any other
communications that are required or that may be given under this Agreement shall
be in writing and shall be deemed to have been duly given when received, if
personally delivered; when transmitted, if transmitted by electronic fax,
telecopy or similar electronic transmission method (provided customary evidence
of receipt is obtained); the day after it is sent, if sent by recognized
overnight delivery service; and three days after it is sent, if mailed, first
class certified mail, return receipt requested, postage prepaid. In each case
notice shall be sent to the parties at the following addresses:
To the Company at: Florida Progress Corporation
P.O. Box 33042
St. Petersburg, FL 33733
Attn: Corporate Secretary
To the Employee at: Mr. Richard Korpan
4993 Turtle Creek Trail
Oldsmar, FL 34677
Personal delivery to the Company shall be only to an executive officer thereof
other than the Employee. Either party may change his or its address to which
notice is to be sent pursuant hereto by sending a notice of such change in
conformity with the foregoing requirements to the other party.
15. Binding Effect; Assignment. The rights and obligations of
the Company under this Agreement shall inure to the benefit of and shall be
binding upon the successors and assigns of the Company. This Agreement is a
personal employment contract, and the Employee acknowledges that the services to
be rendered by him are unique and personal. Accordingly, the Employee may not
assign or otherwise transfer any of his rights or delegate any of his duties or
obligations under this Agreement.
16. Entire Agreement. Except as otherwise provided in this
Section, the parties hereto agree that this Agreement constitutes the entire
agreement between the parties hereto pertaining to the employment of the
Employee, that this Agreement supersedes all prior and contemporaneous
agreements and understandings of the parties, and that there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof. The Employee and the Company agree that the Agreement
dated as of January 30, 1998 between the Employee and the Company (the "CIC
Agreement") shall remain in full force and effect. After a "change in control,"
as defined in paragraph 1.3 of the CIC Agreement, (i) any payment or benefit to
which the Employee may be or become entitled under this Agreement that is also
provided, in whole or in part, under the CIC Agreement shall be paid or provided
to the Employee under this Agreement, and the Employee shall be entitled to such
payment or benefit under the CIC Agreement only to the extent that such payment
or benefit is greater than the payment or benefit to be made under this
Agreement, and (ii) any duty or obligation to which the Employee may be or
become subject under this Agreement to which he may also be or become subject
under the CIC Agreement shall be determined under whichever of this Agreement or
the CIC Agreement imposes the lesser duty or obligation, as the case may be upon
the Employee.
17. Separability and Modification. In the event any provision
of this Agreement is invalid or unenforceable under the laws of the State of
Florida, such provision shall be deemed to be restricted in scope or otherwise
modified to the extent necessary to render the same valid and enforceable, or
shall be deemed excised from this Agreement if circumstances so require, and
this Agreement shall be constructed and enforced herein as so restricted or
modified, or as if such provision had not originally been contained herein, as
the case may be.
18. Amendment. The parties hereto may amend or modify this
Agreement in such manner as may be agreed upon only by a written instrument
executed by such parties.
19. Definition of "Person". For all purposes of this
Agreement, the word "person" shall refer not only to a natural person but also
to any corporation, partnership, joint venture, trust or other entity or
business arrangement.
20. Governing Law. This Agreement shall be construed
and enforced in accordance with the laws of the State of Florida.
21. Headings. The headings of the various sections in this
Agreement are inserted for the convenience of the parties and shall not affect
the meaning, construction or interpretation of this Agreement. They are not
intended to modify or explain or to be a full or accurate description of the
contents hereof.
22. Additional Payment. In the event that any payment or benefit
under this Agreement would subject the Employee to the excise tax imposed under
4999 of the Internal Revenue Code of 1986, as amended (or any successor section
thereto), the Employee shall be entitled to an additional payment determined
under the provisions of Section 6.3 of the CIC Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.
/s/ Terry L. Hipps /s/ Richard Korpan
- ------------------------------- ------------------------------
Witness RICHARD KORPAN
/s/ Carole L. Porter FLORIDA PROGRESS CORPORATION
- -------------------------------
Witness
/s/ Terry L. Hipps BY:/s/ Jean Giles Wittner
- ------------------------------- -------------------------------
Witness
/s/ Carole L. Porter
- -------------------------------
Witness
EXHIBIT 12
FLORIDA POWER CORPORATION
Statement of Computation of Ratios
(Dollars In Millions)
<TABLE>
<CAPTION>
Ratio of Earnings to Fixed Charges:
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net Income $135.9 $238.4 $227.0 $200.8 $194.9
Add:
Operating Income Taxes 69.9 135.8 129.5 114.7 104.5
Other Income Taxes -- (.1) .1 (.8) (.1)
------- ------- ------- ------- -------
Income Before Taxes 205.8 374.1 356.6 314.7 299.3
Total Interest Charges 117.3 98.4 104.5 108.4 105.8
------- ------- ------- ------- -------
Total Earnings (A) $323.1 $472.5 $461.1 $423.1 $405.1
------- ------- ------- ------- -------
Fixed Charges (B) $117.3 $ 98.4 $104.5 $108.4 $105.8
------- ------- ------- ------- -------
Ratio of Earnings to
Fixed Charges (A/B) 2.75 4.80 4.41 3.90 3.83
======= ======= ======= ======= =======
</TABLE>
EXHIBIT 21
Subsidiaries of Florida Progress Corporation
December 31, 1997
Name of Subsidiary * State of Incorporation
---------------------- ------------------------
Utility segment:
Florida Power Corporation Florida
Diversified segment:
Progress Capital Holdings, Inc. Florida
Electric Fuels Corporation Florida
MEMCO Barge Line, Inc. Delaware
Progress Rail Services Corporation Alabama
----------
* Each subsidiary does business under its own name.
EXHIBIT 23.(a)
The Shareholders
Florida Progress Corporation:
We consent to incorporation by reference in the registration statements No.
33-51573 on Form S-3, No. 33-47623 on Form S-8, No. 2-93111 on Form S-3, No.
333-19037 on Form S-8 and No. 333-07853 on Form S-3 of Florida Progress
Corporation of our report dated January 26, 1998, relating to the consolidated
balance sheets of Florida Progress Corporation and subsidiaries as of December
31, 1997 and 1996, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1997, and all related schedules, which report appears
in the December 31, 1997 annual report on Form 10-K of Florida Progress
Corporation.
/s/KPMG PEAT MARWICK LLP
- --------------------------------
KPMG PEAT MARWICK LLP
St. Petersburg, Florida
March 18, 1998
EXHIBIT 23.(b)
The Shareholders
Florida Power Corporation:
We consent to incorporation by reference in the registration statements No.
33-62210 on Form S-3, No. 33-55273 on Form S-3, and No. 333-29897 on Form S-3 of
Florida Power Corporation of our report dated January 26, 1998, relating to the
balance sheets of Florida Power Corporation as of December 31, 1997 and 1996,
and the related statements of income, shareholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1997, and all
related schedules which report appears in the December 31, 1997 annual report on
Form 10-K of Florida Power Corporation.
/s/KPMG PEAT MARWICK LLP
- ------------------------------
KPMG PEAT MARWICK LLP
St. Petersburg, Florida
March 18, 1998
<TABLE> <S> <C>
<ARTICLE> UT
<MULTIPLIER> 1,000,000
<CIK> 0000357261
<NAME> FLORIDA PROGRESS CORPORATION
<S> <C>
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<PERIOD-TYPE> YEAR
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,650
<OTHER-PROPERTY-AND-INVEST> 783
<TOTAL-CURRENT-ASSETS> 775
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 552
<TOTAL-ASSETS> 5,760
<COMMON> 1,209
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 567
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,776
0
34
<LONG-TERM-DEBT-NET> 2,378
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 215
<LONG-TERM-DEBT-CURRENT-PORT> 15
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,342
<TOT-CAPITALIZATION-AND-LIAB> 5,760
<GROSS-OPERATING-REVENUE> 3,316
<INCOME-TAX-EXPENSE> 66
<OTHER-OPERATING-EXPENSES> 3,043
<TOTAL-OPERATING-EXPENSES> 3,109
<OPERATING-INCOME-LOSS> 207
<OTHER-INCOME-NET> (2)
<INCOME-BEFORE-INTEREST-EXPEN> 205
<TOTAL-INTEREST-EXPENSE> 149
<NET-INCOME> 56
2
<EARNINGS-AVAILABLE-FOR-COMM> 54
<COMMON-STOCK-DIVIDENDS> 204
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 443
<EPS-PRIMARY> 0.56
<EPS-DILUTED> 0.56
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<MULTIPLIER> 1,000,000
<CIK> 0000037637
<NAME> FLORIDA POWER CORPORATION
<S> <C>
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<PERIOD-TYPE> YEAR
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,650
<OTHER-PROPERTY-AND-INVEST> 33
<TOTAL-CURRENT-ASSETS> 466
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 752
<TOTAL-ASSETS> 4,901
<COMMON> 1,004
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 763
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,767
0
34
<LONG-TERM-DEBT-NET> 1,745
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 180
<LONG-TERM-DEBT-CURRENT-PORT> 2
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,173
<TOT-CAPITALIZATION-AND-LIAB> 4,901
<GROSS-OPERATING-REVENUE> 2,448
<INCOME-TAX-EXPENSE> 70
<OTHER-OPERATING-EXPENSES> 2,131
<TOTAL-OPERATING-EXPENSES> 2,201
<OPERATING-INCOME-LOSS> 247
<OTHER-INCOME-NET> 2
<INCOME-BEFORE-INTEREST-EXPEN> 249
<TOTAL-INTEREST-EXPENSE> 113
<NET-INCOME> 136
2
<EARNINGS-AVAILABLE-FOR-COMM> 134
<COMMON-STOCK-DIVIDENDS> 192
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 433
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
