December 19, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-1004
Re: Definitive Proxy Materials for Public
Service Company of North Carolina, Incorporated
Ladies and Gentlemen:
Pursuant to Rule 14a-6(b) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), transmitted herewith for filing on behalf of
Public Service Company of North Carolina, Incorporated (the "Company") is the
definitive copy of the Company's proxy statement and form of proxy which will be
first mailed on or about December 22, 1997 to security holders in connection
with the Company's Annual Meeting of Shareholders to be held on January 30,
1998. We have also included the amended Employee Stock Purchase Plan as Appendix
B in this filing. The Company will register the related shares on Form S-8
during fiscal 1998, prior to the issuance of any stock under the Plan.
In accordance with Rule 14a-3(c) under the Exchange Act, seven copies of
the Company's annual report to security holders will be sent under separate
cover on or about December 22, 1997 to the Securities and Exchange Commission
solely for informational purposes.
Sincerely,
/s/ Jack G. Mason
Jack G. Mason
Vice President -- Treasurer and
Chief Financial Officer
<PAGE>
PUBLIC SERVICE COMPANY OF NORTH CAROLINA,
INCORPORATED
----------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 30, 1998
----------------------------------------------------------------------
TO THE SHAREHOLDERS:
Notice is hereby given that the next annual meeting of shareholders
of Public Service Company of North Carolina, Incorporated (the "Company")
will be held at the Angus Barn, 9401 Glenwood Avenue, Raleigh, North
Carolina on Friday, January 30, 1998, at 9:00 a.m. A block of rooms has
been reserved at the Holiday Inn, Raleigh-Durham Airport, located adjacent
to Research Triangle Park on I-40 at exit #282 -- the New Page Road exit.
Room reservations may be made by telephoning the Holiday Inn at (919)
941-6000. The cost for rooms, single or double, is $109.00. The deadline
for reservations is January 14, 1998. A second informational meeting will
be held at the corporate office of the Company, 400 Cox Road, Gastonia,
North Carolina on Friday, February 6, 1998. The annual meeting will be
held for the following purposes:
1. To elect four directors, each to serve for a three-year term
expiring in 2001 or until their successors are elected and qualified;
2. To approve the amendments to the Company's Employee Stock
Purchase Plan increasing the number of shares available for issuance and
extending the term of the Plan;
3. To ratify the selection of Arthur Andersen LLP as the Company's
independent public accountants for the fiscal year ending September 30,
1998; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed December 10, 1997 as the record date
for the determination of shareholders entitled to notice of, and to vote
at, the meeting.
For the Board of Directors
/s/ CHARLES E. ZEIGLER, JR.
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
December 19, 1997
--------------------------------------------------------------------------
THE FORM OF PROXY IS ENCLOSED TO ENABLE YOU TO VOTE YOUR SHARES AT
THE MEETING. YOU ARE URGED TO PROMPTLY MARK, SIGN, DATE AND RETURN THE
PROXY IN THE ACCOMPANYING ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES. THIS IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES.
DELAY IN RETURNING YOUR PROXY MAY SUBJECT THE COMPANY TO ADDITIONAL
EXPENSE. IF YOU ATTEND THE MEETING IN PERSON, YOU MAY WITHDRAW YOUR PROXY
AND VOTE YOUR SHARES IN PERSON IF YOU SO CHOOSE.
<PAGE>
<PAGE>
PUBLIC SERVICE COMPANY OF NORTH CAROLINA,
INCORPORATED
400 Cox Road
Post Office Box 1398
Gastonia, North Carolina 28053-1398
----------------------
PROXY STATEMENT
----------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Public Service Company of North Carolina,
Incorporated (the "Company") for use at the annual meeting of shareholders of
the Company to be held on Friday, January 30, 1998, at 9:00 a.m., and at any
adjournment thereof. Unless the context requires otherwise, all references in
this Proxy Statement to the Company refer to Public Service Company of North
Carolina, Incorporated and its subsidiaries. This Proxy Statement and the
accompanying proxy card are first being mailed to shareholders on or about
December 22, 1997.
Only shareholders of record at the close of business on December 10, 1997
are entitled to vote at the meeting. As of November 30, 1997, the Company had
outstanding 19,908,078 shares of Common Stock, which shares constitute the only
class of stock of the Company entitled to notice of, and to vote at, the
meeting. As of the same date, the Company had approximately 12,700 shareholders
of record.
The holders of a majority of the shares entitled to vote, represented in
person or by proxy, will constitute a quorum for the transaction of business at
the annual meeting of shareholders. All proxies that are properly executed and
received prior to the meeting will be voted at the meeting. If a shareholder
specifies how the proxy is to be voted on any of the business to come before the
meeting, the proxy will be voted in accordance with such specification. If no
specification is made, the proxy will be voted for the election of directors and
the approval of proposals two, three and four. A shareholder may revoke a proxy,
to the extent it has not been exercised, at any time prior to its exercise, by
giving written notice to the Secretary of the Company, by executing and
delivering a proxy with a later date or by voting in person at the meeting. If a
shareholder is a participant in the Company's Stock Purchase and Automatic
Dividend Reinvestment Plan, the enclosed proxy includes any full and fractional
shares held in his or her account.
Directors are elected by a plurality of the votes cast by the holders of
the Common Stock of the Company at a meeting at which a quorum is present.
"Plurality" means that the individuals who receive the largest number of votes
cast are elected as directors up to the maximum number of directors to be chosen
at the meeting. Consequently, any shares not voted (whether by abstention,
broker non-vote or otherwise) have no impact in the election of directors except
to the extent the failure to vote for an individual results in another
individual receiving a larger number of votes. Approval of proposal two requires
the affirmative vote of the holders of a majority of the votes cast on such
proposal. In determining whether such proposal has received the requisite number
of affirmative votes, abstentions and broker non-votes will be disregarded and
will have no effect on the outcome of the vote.
The cost of soliciting proxies will be borne by the Company, including
expenses incurred in connection with preparing and mailing this Proxy Statement.
Such expenses will include charges by brokers, banks or their nominees, other
custodians and fiduciaries for forwarding proxy material to the beneficial
owners of shares held in the name of a nominee. The Company expects to solicit
proxies primarily by mail, but certain officers and employees of the Company may
also solicit in person, by telephone, telegram or other means without additional
compensation for their services other than their regular salaries. Additionally,
the Company has retained Innisfree M&A Incorporated to solicit proxies in the
same manner, at an anticipated cost to the Company of approximately $25,000.
ELECTION OF DIRECTORS
The Board of Directors is currently divided into three classes comprised
of: (i) four directors who are nominees for election with terms expiring in
January 2001; (ii) two directors whose terms expire in January 2000; and (ii)
four directors whose terms expire in January 1999. One director, H. Max Craig,
Jr., whose term was to expire in January 1999, died on June 25, 1997. The Board
has decided not to fill this vacancy until a later period. At the annual
meeting, four directors are to be elected to serve until the Company's annual
meeting to be held in January 2001 or until their successors are elected and
qualified. Four directors whose terms expire at this year's annual meeting have
been nominated by the Board to succeed themselves for terms expiring in January
2001. They are William C. Burkhardt, Van E. Eure, William L. O'Brien, Jr., and
Ben R. Rudisill, II. Each of the four nominees has consented to being named in
the Proxy Statement and to serve if elected. If, prior to the annual meeting,
any one of the nominees should become unable to serve, the proxies solicited
hereby will be
<PAGE>
voted for such additional person as shall be designated by the Board. The other
six members of the Board whose terms do not expire this year will continue to
serve in such capacity until their terms expire and their successors are elected
and qualified.
Set forth below is a table showing the names and ages of the four nominees
for election and of the six continuing members of the Board, together with
biographical information on each of them for the past five years.
<TABLE>
<CAPTION>
NAME, AGE AND YEAR
FIRST BECAME A DIRECTOR BIOGRAPHICAL INFORMATION
- -------------------------- ------------------------------------------------
<S> <C>
NOMINEES FOR ELECTION AS DIRECTORS WHOSE TERMS EXPIRE IN 2001
WILLIAM C. BURKHARDT (60) President and Chief Executive Officer of Austin
Director since 1989 Quality Foods, Inc., Cary, North Carolina, a
baker and distributor of Austin Quality
Snacks.
VAN E. EURE (42) Co-owner, General Manager and President, The
Director since 1993 Angus Barn, Ltd., which owns a restaurant
located in Raleigh, North Carolina.
WILLIAM L. O'BRIEN, JR. Senior Vice President, O'Brien/Atkins
(58) Associates, P.A., an architectural and
Director since 1986 engineering firm located in Research Triangle
Park, North Carolina.
BEN R. RUDISILL, II (54) President and Treasurer, Rudisill Enterprises,
Director since 1996 Inc., Gastonia, North Carolina, a beverage
distributor and food broker; Co-owner and Vice
President, Tar Heel Leasing Company, an auto
and equipment leasing company; and Director,
Gaston Federal Savings & Loan.
CONTINUING DIRECTORS WHOSE TERMS EXPIRE IN 2000
WILLIAM A. V. CECIL (69) Chairman and President, The Biltmore Company,
Director since 1985 which owns and operates the Biltmore House and
Gardens in Asheville, North Carolina.
G. SMEDES YORK (56) President and Treasurer, York Properties, Inc.
Director since 1984 and Sam Bass Camera Shop, Inc.; President,
York Inns, Inc., Raleigh, North Carolina; and
Director, Spectator Publications, Inc.
CONTINUING DIRECTORS WHOSE TERMS EXPIRE IN 1999
BERT COLLINS (63) President and Chief Executive Officer, North
Director since 1993 Carolina Mutual Life Insurance Company, an
insurance company located in Durham, North
Carolina; and Director, Wachovia Bank.
JOHN W. COPELAND (62) Retired President, Ruddick Corporation, the
Director since 1996 holding company for American & Efird, Inc. and
Harris-Teeter, Inc.; Director, Ruddick
Corporation; President and Director, Copeland
Business Service, Inc. and Copeland
Foundation, Inc.; and Director, First Union
National Bank, Charlotte, North Carolina.
D. WAYNE PETERSON (61) Retired President, National Integrated Services,
Director since 1996 Sprint, Kansas City, Missouri, a major
domestic and international telecommunications
company.
CHARLES E. ZEIGLER, JR. Chairman, President and Chief Executive Officer
(51) of the Company.
Director since 1988
</TABLE>
2
<PAGE>
COMMON STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is the number of shares of Common Stock of the Company
beneficially owned by the directors, the Chief Executive Officer, the other
executive officers named in the Summary Compensation Table, and the directors
and executive officers as a group, on November 30, 1997.
<TABLE>
<CAPTION>
PERCENT
OF
NAME SHARES (1)(2) CLASS
----- ------------- -------
<S> <C> <C>
William A. V. Cecil ........................................................ 7,940 *
G. Smedes York ............................................................. 6,479 *
Bert Collins ............................................................... 3,162 *
John W. Copeland ........................................................... 2,188 *
D. Wayne Peterson .......................................................... -- *
William C. Burkhardt ....................................................... 2,305 *
Van E. Eure ................................................................ -- *
William L. O'Brien, Jr. .................................................... 4,792 *
Ben R. Rudisill, II ........................................................ 2,185 *
Charles E. Zeigler, Jr. .................................................... 38,812(3) *
Robert D. Voigt ............................................................ 28,048(4) *
Jerry W. Richardson ........................................................ 21,684(5) *
Franklin H. Yoho ........................................................... 14,669(6) *
John D. Grawe .............................................................. 3,738(7) *
Directors and executive officers
as a group (20 persons) .................................................. 191,035(8) 1.0%
</TABLE>
- ---------------
* Indicates beneficial ownership of less than 1% of the shares of Common Stock
of the Company outstanding on November 30, 1997.
(1) Includes shares, if any, held by each person's spouse.
(2) Includes each person's beneficial interest in full shares of the Company's
Common Stock, if any, credited to his or her account in the Company's Stock
Purchase and Automatic Dividend Reinvestment Plan.
(3) Of this number, 14,387 shares are owned directly by Mr. Zeigler, Jr., 1,180
shares are owned by Mr. Zeigler, Jr.'s spouse and 2,168 shares are owned by
a trust over which Mr. Zeigler, Jr. as trustee has investment and voting
power. Also includes options to purchase 21,077 shares of Common Stock
exercisable within 60 days of November 30, 1997.
(4) Includes options to purchase 12,683 shares of Common Stock exercisable
within 60 days of November 30, 1997.
(5) Includes options to purchase 9,961 shares of Common Stock exercisable within
60 days of November 30, 1997.
(6) Includes options to purchase 12,683 shares of Common Stock exercisable
within 60 days of November 30, 1997.
(7) Includes options to purchase 3,738 shares of Common Stock exercisable within
60 days of November 30, 1997.
(8) Includes options to purchase 103,907 shares of Common Stock exercisable
within 60 days of November 30, 1997.
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The business of the Company is managed under the direction of the Board.
The Board meets regularly during the year to review the Company's operations,
strategic and business plans, major capital appropriations and other significant
developments affecting the Company and to act on matters requiring Board
approval. It also holds special meetings when important matters require Board
action. Members of senior management attend Board meetings as needed to discuss
the progress and plans relating to their areas of responsibility. During the
fiscal year ended September 30, 1997, there were four meetings of the Board.
Each incumbent director attended at least 75 percent of the aggregate of the
number of such meetings and the total number of meetings of all committees of
the Board on which he or she served.
Because of the number of matters requiring Board consideration and to make
the most effective use of individual directors' capabilities, the Board has
established committees to devote attention to specific subjects and to assist
the Board in the discharge of its responsibilities. The Board has created an
Executive Committee, an Audit Committee, an Executive Compensation Committee and
a Retirement Plans Committee. The Company has no nominating committee.
Information about the functions of each committee, its current members, and the
number of meetings held during the fiscal year ended September 30, 1997, is
provided below.
The Executive Committee acts as an advisory committee to the Chairman on
matters relating to the policies and business affairs of the Company and may
recommend nominees to be considered as successors to the Chairman or President
or as a
3
<PAGE>
director of the Company. During the intervals between meetings of the Board, the
Executive Committee has the same authority as the Board as to any matters
relating to the ordinary conduct of the business of the Company, but does not
have any authority as to any matters not relating to such ordinary conduct of
business such as, for example, the authority to authorize an amendment to the
Company's Articles of Incorporation or to fill a vacancy on the Board. The
members of the Executive Committee, which met once during the fiscal year ended
September 30, 1997, are Charles E. Zeigler, Jr. (Chairman), William C.
Burkhardt, William A. V. Cecil, John W. Copeland, and G. Smedes York.
The Audit Committee recommends to the Board the engagement of independent
public accountants, approves the professional services to be rendered by and
considers the possible effect of such services on the independence of the
accountants, determines whether the independent public accountants are
presenting their reports on the Company's financial statements in a competent
and adequate manner, reviews the scope and results of annual examinations and
recommendations of the independent public accountants and determines whether the
internal controls of the Company are adequate. The members of the Audit
Committee, which met two times during the fiscal year ended September 30, 1997,
are William A. V. Cecil (Chairman), Bert Collins, D. Wayne Peterson, and Ben R.
Rudisill, II.
The Executive Compensation Committee recommends to the Board the
compensation of the various officers of the Company that, in the judgment of
such committee's members, should from time to time be fixed by the Board and
performs such other duties as are assigned to it by the Board. The Executive
Compensation Committee also recommends to the Board persons for election as
officers (except Chairman or President) of the Company. The Board has assigned
to such committee the responsibility of administering the Company's Incentive
Compensation Plan and its stock option plans. None of the members of such
committee may be employees of the Company, and none are eligible to receive
options under the Company's stock option plans. The members of the Executive
Compensation Committee, which met three times during the fiscal year ended
September 30, 1997, are William C. Burkhardt (Chairman), John W. Copeland, Van
E. Eure, William L. O'Brien, Jr., and G. Smedes York.
The Retirement Plans Committee serves as the Board's liaison with the
Company's Qualified Plans Committee which is responsible for the administration
of all of the Company's qualified plans (covering employees of the Company's
subsidiaries as well as those of the Company), and shall ensure that the Board's
relationship with the Qualified Plans Committee is cooperative and satisfactory.
More specifically, the Retirement Plans Committee, subject to review by the
Board, shall review with the Qualified Plans Committee and appropriate members
of management, and approve where appropriate: (a) the selection, retention, or
termination of independent auditors and actuaries for the Company's qualified
plans; (b) the investment management of the qualified plans; (c) appropriate
investment controls, any significant recommendations made by the independent
auditors or actuaries, and any other matter of concern to the Committee relating
to such plans; and (d) any significant proposed changes to the qualified plans,
the competitiveness of such plans, and any other matter of concern to the
Committee or management relating to such plans. The members of the Retirement
Plans Committee, which met two times during the fiscal year ended September 30,
1997, are John W. Copeland (Chairman), William C. Burkhardt, Bert Collins and D.
Wayne Peterson.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive an annual retainer
fee of $18,000, plus $700 for each board meeting attended and $600 for each
committee meeting attended and reimbursement of expenses for attending each
meeting. The Company maintains a deferred compensation plan (the "Deferred
Compensation Plan") for its outside directors pursuant to which such directors
may elect to defer 50% or more of their annual compensation, such deferred
amount to be credited at the direction of the participating outside director in
the form of cash or stock units. Pursuant to the Deferred Compensation Plan,
during the fiscal year ended September 30, 1997, the following directors elected
to receive credit for stock units in lieu of cash compensation or to defer
receipt of cash compensation.
<TABLE>
<CAPTION>
VALUE OF
VALUE OF CASH
NAME STOCK UNITS STOCK UNITS COMPENSATION
----- ----------- ----------- ------------
<S> <C> <C> <C>
Mr. Burkhardt ............................................... 2,086 $41,858 $ --
Mr. Copeland ................................................ -- -- 28,833
Ms. Eure .................................................... 1,370 27,483 --
Mr. Peterson ................................................ 1,374 27,557 --
Mr. Rudisill ................................................ 1,064 21,342 --
Mr. York .................................................... 1,370 27,483 --
</TABLE>
4
<PAGE>
Upon retirement from the Board after age 65 and after serving as a director
for eight years or more, a director is entitled to lifetime retirement
compensation equal to the amount of the annual retainer fee in effect on the
date of retirement. The Company's By-laws provide that no director shall be
eligible for reelection who, on the date of his or her proposed election, shall
have reached, or who, within the twelve-month period immediately after such
date, would reach 70 years of age.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 1996, the Company entered into a contract with McDonald-York
for $659,000 for renovations to an office building located in Raleigh, North
Carolina. McDonald-York was paid $218,950 during fiscal 1996 and $462,834 during
fiscal 1997. The renovations were completed on May 1, 1997. Effective October 1,
1996, G. Smedes York entered into a consulting agreement with McDonald-York
whereby he participates in net income before taxes of McDonald-York.
COMPLIANCE WITH SECTION 16(A)
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than
10% of the Company's Common Stock, to file with the Securities and Exchange
Commission reports of ownership and changes in ownership of Common Stock.
Officers, directors and greater than 10% beneficial owners are required by
Securities and Exchange Commission regulation to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on review of the copies of such reports furnished to the
Company or written representations that no other reports were required, the
Company believes that, during fiscal 1997, all filing requirements applicable to
its officers, directors and greater than 10% beneficial owners were complied
with except that Mr. Craig was late filing one report on Form 4 with respect to
one transaction.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
The Company, under the supervision of the Executive Compensation Committee
of the Board, has developed and implemented merit and incentive compensation
programs which seek to provide a direct relationship between compensation
provided to executive officers, and other key employees in the upper job grades,
and corporate business performance. The Executive Compensation Committee is a
standing committee of the Board composed entirely of outside directors who are
not officers or employees of the Company or any of its subsidiaries and who have
no interlocking relationships with the Company's executive officers.
It is the philosophy of the Company's Board to set the base salaries of
executive officers at the average of a financial peer group of other mid-sized
natural gas local distribution companies ("LDCs"), with opportunities to earn
above the average based on superior individual and corporate performance. This
peer group includes neighboring and other similarly sized LDCs which share
operating and financial characteristics with the Company. The goal of the
Company's executive compensation programs is to create competitive compensation
that will attract and retain quality leadership at the Company and link
compensation directly to corporate performance. Further, the Board believes the
performance on which executive officer compensation is based should be assessed
both on an annual basis and also over a longer period of time to ensure that
executive officers work to support both the Company's current objectives as well
as its strategic objectives.
In the early part of each fiscal year, the Executive Compensation Committee
reviews the Chief Executive Officer's recommended base salary merit increases
for the Company's other executive officers, plus cash incentive plan and stock
option plan awards for the Company's other executive officers and other key
employees. Base salary merit increase and cash incentive award recommendations,
if any, are primarily based on corporate operating and financial performance, as
well as on individual performance, for the prior fiscal year. Merit increases
are also based on a review of peer group base salaries and executive officers'
individual contributions to the Company's strategic objectives. Stock option
recommendations, if any, are primarily based on executive officers' and other
key employees' individual performance during the prior fiscal year, but also
involve judgments as to each of their contributions to the Company's strategic
objectives. The Executive Compensation Committee then provides compensation
recommendations to the Board following review of (a) the Company's actual
performance as compared to its corporate financial goals for the prior fiscal
year, (b) individual executive officers' and other key employees' actual
performance as compared to their individual goals supporting the Company's
financial and operating objectives, (c) the Company's executive officer
compensation levels relative to its peer group, and (d) periodic reports from
independent compensation consultants regarding the compensation competitiveness
of the Company.
The Executive Compensation Committee also reviews the above types of
compensation for the Chief Executive Officer with the assistance of the
Company's human resources staff and recommends adjustments as deemed appropriate
based on
5
<PAGE>
the above compensation review criteria and its expectation as to his future
contributions in leading the Company. The Executive Compensation Committee's
compensation recommendations for all executive officers are acted on by the
Board. If prior fiscal year corporate financial goals are not achieved, (a)
executive officer and other key employee cash incentive awards are not paid,
even when individual goals are met, and (b) stock options awards may not be
granted.
Upon evaluating the Company's actual performance as compared to its fiscal
1997 corporate goals, the Executive Compensation Committee made the following
recommendation which was approved by the Board on November 13, 1997: to pay 12
executive officers and 97 other eligible employees $817,550, representing 71.6%
of the possible cash incentive awards. This was based on the attainment of 100%
of the earnings per share goal (60% weighting), 58% of the gross margin growth
goal (20% weighting) and 0% of the operating income/gross margin efficiency goal
(20% weighting). The first two payout percentages resulted from exceeding the
budgeted amounts for the first two goals. The minimum attainment level to earn a
100% payout of the first two goals was 105% of their budgeted amounts, whereas
100% payout of the third goal resulted if 100% or more of its budgeted amount
was achieved.
The Executive Compensation Committee recently employed a leading
independent compensation consulting firm to redesign the Company's cash
incentive plan for fiscal 1998. This redesigned plan was approved by the Board
of Directors on November 13, 1997, and better aligns key employees with
shareholder interests. The plan's four revised corporate goals are as follows:
(1) earnings per share; (2) operating and maintenance expenses as a percentage
of gross margin; (3) return on average assets; and (4) total shareholder return.
Goals 1 and 2 will be set relative to prior Company achievements. Goals 3 and 4
will compare the Company's performance against a peer group of representative
companies. Executive officers are subject to 40%, 20%, 20% and 20% respective
weighting for goals 1, 2, 3 and 4. Other key employees are subject to 30%, 30%,
30% and 10% respective weighting for goals 1, 2, 3 and 4. The four goals include
threshold, target and stretch objectives. Eligible employees are in various job
grades which have different target percentages of those employees' respective
base salaries in effect at the beginning of each fiscal year. Threshold
objectives are 50%, target objectives are 100% and stretch objectives are 200%
of eligible employees' respective target percentages. The four goals may be
achieved independently, but all are subject to the Company's achieving a minimum
level of earnings per share after paying incentive compensation.
Effective November 13, 1997, stock options totaling 309,042 shares at a
grant price of $20.03 (100% of the $20.03 average between the New York Stock
Exchange high and low selling prices on the grant date) were awarded by the
Board of Directors to 11 executive officers and 96 other key employees. These
stock option grants total 20% of the common shares authorized under the
Company's 1997 Nonqualified Stock Option Plan ("1997 Plan") which is effective
for the five-year period from October 1, 1997 through September 30, 2002. The
1997 Plan currently covers 107 executive officers and other key employees of the
Company's current 1,100 employees.
This report has been provided by the executive Compensation Committee:
William C. Burkhardt (Chairman) William L. O'Brien, Jr.
John W. Copeland G. Smedes York
Van E. Eure
6
<PAGE>
EXECUTIVE COMPENSATION
The Summary Compensation Table below includes compensation paid by the
Company for services rendered for the fiscal years ended September 30, 1997,
1996 and 1995 for the Chief Executive Officer and the four other most highly
compensated executive officers (as of September 30, 1997) as determined by total
salary and bonus payments.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------- AWARDS
OTHER ANNUAL ------------
NAME AND PRINCIPAL POSITION YEAR SALARY (1) BONUS COMPENSATION (2) OPTIONS (#)
- ------------------------------------------------------ ---- ---------- ------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Charles E. Zeigler, Jr. 1997 $310,020 $94,340 $ 26,440 5,889
Chairman, President and 1996 271,380 51,685 76,576 6,220
Chief Executive Officer 1995 256,200 29,455 30,523 7,559
Franklin H. Yoho 1997 160,020 32,255 27,086 3,539
Senior Vice President -- 1996 126,900 24,183 -- 3,738
Marketing and Gas Supply 1995 116,750 13,695 30,238 4,538
Robert D. Voigt 1997 155,040 32,195 59,583 3,539
Senior Vice President -- 1996 132,000 25,153 -- 3,738
Organizational Development 1995 124,896 14,275 15,954 4,538
John D. Grawe 1997 153,000 29,960 3,233 3,539
Senior Vice President -- 1996 126,900 24,183 37,296(4) 3,738
Operations 1995 111,675 23,695 4,012(4) --
Jerry W. Richardson 1997 138,660 22,190 58,292 2,949
Senior Vice President -- 1996 131,700 25,096 -- 2,576
Engineering 1995 131,700 11,205 16,606 3,750
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL POSITION COMPENSATION (3)
- ------------------------------------------------------ ----------------
<S> <C>
Charles E. Zeigler, Jr. $4,689
Chairman, President and 4,500
Chief Executive Officer 4,500
Franklin H. Yoho 4,689
Senior Vice President -- 3,807
Marketing and Gas Supply 3,503
Robert D. Voigt 4,613
Senior Vice President -- 3,960
Organizational Development 3,747
John D. Grawe 4,568
Senior Vice President -- 2,855
Operations --
Jerry W. Richardson 4,160
Senior Vice President -- 3,951
Engineering 3,951
</TABLE>
- ---------------
(1) Includes for the years indicated amounts contributed on a pre-tax basis to
the Special Savings and Retirement Plan (the Company's 401(k) plan) by each
of the named executive officers.
(2) Includes for the years indicated the difference between the price paid by
the named executive officers for Common Stock of the Company purchased from
the Company upon the exercise of stock options and the fair market value of
such Common Stock. Also includes for the years indicated the amount paid to
the named executive officers for dividend equivalents accrued from the grant
date.
(3) Consists of for the years indicated contributions by the Company to the
Special Savings and Retirement Plan.
(4) Reflects reimbursement of moving expenditures for the indicated year.
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows stock options granted in the fiscal year ending
September 30, 1997 to the Chief Executive Officer and the four other most highly
compensated executive officers (as of September 30, 1997):
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (1)
-------------------------------------------------------------
% OF
TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED MARKET
UNDERLYING TO EXERCISE PRICE ON
OPTIONS EMPLOYEES OR BASE DATE OF
GRANTED IN FISCAL PRICE GRANT EXPIRATION
NAME (#) YEAR ($/SH) ($/SH) DATE
----- ---------- --------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Charles E. Zeigler, Jr.................................... 5,889 5.0% $16.59 $18.38 11/13/01
Franklin H. Yoho.......................................... 3,539 3.0 16.59 18.38 11/13/01
Robert D. Voigt........................................... 3,539 3.0 16.59 18.38 11/13/01
John D. Grawe............................................. 3,539 3.0 16.59 18.38 11/13/01
Jerry W. Richardson....................................... 2,949 2.5 16.59 18.38 11/13/01
<CAPTION>
GRANT
DATE
PRESENT
VALUE
(BLACK-
SCHOLES)
NAME (2)
----- --------
<S> <C>
Charles E. Zeigler, Jr.................................... $ 45,345
Franklin H. Yoho.......................................... 27,250
Robert D. Voigt........................................... 27,250
John D. Grawe............................................. 27,250
Jerry W. Richardson....................................... 22,707
</TABLE>
- ---------------
(1) All options were granted on November 13, 1996 with an exercise price equal
to 90 percent of the average high and low selling price on the grant date,
as reported on the New York Stock Exchange. An optionee must remain employed
by the Company for at least two years from the date of grant before the
right to exercise an option accrues. Options become fully and immediately
exercisable in the event of a change in control of the Company, and in the
event of an optionee's retirement, disability or death. No option may be
exercised more than five years from the date of its grant. With respect to
options granted on November 13, 1996, dividend equivalents will accrue
quarterly on shares subject to such options and are paid by the Company
annually at the end of each option year if the Company's closing Common
Stock price on the dividend record date with respect to such quarter exceeds
$18.38 per share.
(2) The values shown in this column have been calculated through standard
application of the Black-Scholes pricing model. A risk free interest rate of
6.0%, a volatility rate of 23% and a dividend yield of 5.10% is assumed. The
actual value an executive officer receives from a stock option is dependent
on future market conditions, and there can be no assurance that the amount
reflected as "Grant Date Present Value" will actually be realized. In
addition, the value shown does not take into account risk factors such as
nontransferability, possible non-payment of dividend equivalents and limits
on exercise.
7
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
The following table shows the aggregated stock option exercises in the
fiscal year ended September 30, 1997 and the stock option values for the Chief
Executive Officer and the four other most highly compensated executive officers
(as of September 30, 1997):
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT
OPTIONS AT FY-END (#) FY-END ($)
SHARES ACQUIRED VALUE --------------------------- -----------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE
----- --------------- ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Charles E. Zeigler, Jr........................... -- -- 24,661 12,109 $78,466
Franklin H. Yoho................................. 3,677 $ 15,712 8,945 7,277 38,201
Robert D. Voigt.................................. 5,904 43,926 13,858 7,277 44,953
John D. Grawe.................................... -- -- -- 7,277 --
Jerry W. Richardson.............................. 5,904 43,926 12,914 5,525 40,001
<CAPTION>
NAME UNEXERCISABLE
----- -------------
<S> <C>
Charles E. Zeigler, Jr........................... $76,831
Franklin H. Yoho................................. 46,172
Robert D. Voigt.................................. 46,172
John D. Grawe.................................... 46,172
Jerry W. Richardson.............................. 35,441
</TABLE>
EMPLOYEE RETIREMENT PLANS
The table below illustrates the approximate amounts of annual normal
retirement benefits payable under the Company's retirement plans.
<TABLE>
<CAPTION>
ANNUAL BENEFITS AT RETIREMENT WITH
YEARS OF CREDITED SERVICE
AVERAGE -------------------------------------------------------------------
COMPENSATION 10 15 20 25 30 35
- ------------ ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$120,000 $25,095 $ 37,643 $ 50,190 $ 62,738 $ 75,286 $ 87,833
140,000 29,595 44,393 59,190 73,988 88,786 103,583
160,000 34,095 51,143 68,190 85,238 102,286 119,333
180,000 38,595 57,893 77,190 96,488 115,786 135,083
200,000 43,095 64,643 86,190 107,738 129,286 150,833
220,000 47,595 71,393 95,190 118,988 142,786 166,583
240,000 52,095 78,143 104,190 130,238 156,286 182,333
260,000 56,595 84,893 113,190 141,488 169,786 198,083
280,000 61,095 91,643 122,190 152,738 183,286 213,833
300,000 65,595 98,393 131,190 163,988 196,786 229,583
320,000 70,095 105,143 140,190 175,238 210,286 245,333
340,000 74,595 111,893 149,190 186,488 223,786 261,083
</TABLE>
The Company has a noncontributory, defined benefit retirement plan (the
"Retirement Plan") and a benefit restoration plan (the "Restoration Plan")
(collectively, the "Retirement Plans"), which cover all full-time employees,
including officers, upon their attaining age 21 and completing one year of
service. The purpose of the Restoration Plan is to provide certain employees
with retirement benefits which they otherwise would have received under the
Retirement Plan formula but which may not be paid to them under the Retirement
Plan due to limitations on benefits imposed by the Internal Revenue Code.
A participant in the Retirement Plans becomes fully vested prior to normal
retirement at age 65 upon the completion of five years of service. Benefits are
also provided under the Retirement Plans in the event of early retirement at or
after age 55 and the completion of at least ten years of service and in the
event of retirement for disability after completion of five years of service.
Benefits under the Retirement Plans are based upon application of a formula to
the specified average compensation and years of credited service (up to a
maximum of 35 years) at normal retirement age. Benefit amounts are computed on a
straight life annuity basis. Compensation covered by the Retirement Plans
consists of the amount shown as "Salary" in the Summary Compensation Table. The
benefits are not subject to any deduction for social security payments.
Estimated credited years of service under the Retirement Plans for the
individuals named in the Summary Compensation Table are as follows: Charles E.
Zeigler, Jr., 10.8 years, Franklin H. Yoho, 8.6 years, Robert D. Voigt, 22.2
years, John D. Grawe, 2.8 years, and Jerry W. Richardson, 29.0 years.
8
<PAGE>
PERFORMANCE GRAPH
The line graph set forth below charts performance (on an annual basis) of
an investment in the Company's Common Stock against each of the Standard &
Poor's 500 Index (the "S&P 500 Index") and the Standard & Poor's Utilities Index
(the "S&P Utilities Index"), in each case assuming an investment of $100 on
September 30, 1992 and cumulation and reinvestment of all dividends paid
thereafter through September 30, 1997. The following graph is presented pursuant
to rules of the Securities and Exchange Commission. The stock price performance
comparisons below shall not be deemed incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any filing under
the Securities Act of 1933, as amended, or under the Securities Exchange Act of
1934, as amended, except to the extent that the Company specifically
incorporates this graph by reference, and shall not otherwise be deemed filed
under such acts. While total stockholder return is an important criterion of
corporate performance, it is subject to the vagaries of the equity market, which
affect common stock price performance. There can be no assurance that the
Company's Common Stock price performance will continue into the future with the
same or similar trends depicted in the graph below.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
(graph appears here with plot points.)
Cumulative Total Return
-------------------------
9/92 9/93 9/94 9/95 9/96 9/97
Public Service Company of ---- ---- --- ---- ---- ----
North Carolina, Inc. $100 $106 $ 88 $103 $124 $142
S&P 500 Index $100 $113 $117 $152 $183 $257
S&P Utilities Index $100 $124 $108 $138 $147 $169
9
<PAGE>
SHAREHOLDER PROPOSALS AND NOMINATIONS
Shareholder proposals relating to the Company's 1999 annual meeting of
shareholders must be received by the Company no later than August 24, 1998, to
be considered for inclusion in the proxy statement to be furnished to
shareholders in connection with the solicitation of proxies by the Board for use
at such meeting.
The Executive Committee will consider nominees for the Board recommended by
shareholders. Recommendations by shareholders must be forwarded to the Secretary
of the Company and must identify the nominee by name and provide pertinent
information concerning his or her background and experience. A shareholder
recommendation must be received at least 90 days prior to the date of the annual
meeting of shareholders, which is regularly held on the last Friday in January.
Shareholders should send their proposals and names of proposed nominees to
the attention of the Company's Secretary at the Company's corporate office, 400
Cox Road, Post Office Box 1398, Gastonia, North Carolina 28053-1398.
PROPOSAL TO APPROVE THE AMENDED AND RESTATED STOCK PURCHASE PLAN
On July 24, 1997, the Board of Directors of the Company amended and
restated, effective as of January 1, 1998, the Public Service Company of North
Carolina, Incorporated and Subsidiaries Employee Stock Purchase Plan (the "Stock
Purchase Plan" or the "Plan"). However, the amendment and restatement of the
Stock Purchase Plan is subject to approval by both the shareholders of the
Company and the North Carolina Utilities Commission.
The Stock Purchase Plan authorizes the purchase of $1.00 par value common
stock of the Company ("Common Stock") by employees through payroll deductions.
The purpose of the Plan is to encourage equity ownership in the Company by its
employees thereby allowing the employees to share in the economic growth and
success of the Company.
The Board believes that the Stock Purchase Plan, as most recently amended
and restated on January 1, 1993, has been a significant factor in attracting and
retaining the competent and experienced employees that the Company requires. The
Stock Purchase Plan, however, is scheduled to terminate effective January 1,
1998. The Board believes that the term of the Stock Purchase Plan should be
extended to January 1, 2003, and additional shares of Common Stock should be
made available for purchase under the Plan in order to provide an appropriate
incentive program for the employees of the Company. Accordingly, the Board
recommends that the shareholders approve the proposed amendment and restatement
of the Stock Purchase Plan.
SUMMARY OF THE STOCK PURCHASE PLAN. Under the Stock Purchase Plan, an
eligible employee may purchase shares of Common Stock for an "offering period"
by making payroll deductions during the offering period. The offering period is
the 12-month period beginning each January 1. The following describes the
material terms of the Plan in more detail.
ELIGIBILITY. Any employee (including part-time employees) whose customary
employment with the Company is for more than five (5) months per calendar year
is eligible to participate in the Plan upon completion of six (6) months of
continuous service with the Company. (This represents a more liberal eligibility
standard compared to the Stock Purchase Plan as currently in effect, which
requires twelve (12) months of service and excludes some part-time employees.)
It is estimated that there are 1,066 employees eligible to participate in the
Stock Purchase Plan.
PURCHASE OF SHARES. Eligible employees may participate in the Stock
Purchase Plan by authorizing payroll deductions of any amount between 2% and 10%
of their compensation so long as the amount is a whole multiple of 1%.
Deductions are made on an after-tax basis. The authorization is given by
completing and signing a payroll deduction authorization form furnished by the
Company during the 45-day period preceding the applicable offering period. An
employee may increase or decrease the employee's deduction percentage only once
during each offering period, although an employee may withdraw from the plan at
any time by terminating the employee's payroll deductions.
The amounts deducted from the employee's compensation are credited to a
stock purchase account established in the employee's name. On the last day of
each offering period, the amount credited to the employee's Stock Purchase
Account will be used to purchase the maximum number of whole or fractional
shares of Common Stock that can be purchased at the offering price. An eligible
employee, however, may purchase only twenty (20) shares of Common Stock for each
$1,000 of compensation earned and may not purchase more than $25,000 of Common
Stock in any single calendar year.
The offering price at which Common Stock may be purchased under the Plan is
equal to 90% of the lesser of (i) the fair market value of a share of Common
Stock on the first day of the offering period or (ii) the fair market value of a
share of Common Stock on the last day of the offering period. The fair market
value of a share of Common Stock is defined as the
10
<PAGE>
mean between the highest and lowest price at which the Common Stock was sold on
the New York Stock Exchange for the given day. In no event, however, will the
purchase price be lower than the par value of the Common Stock.
Under the Stock Purchase Plan, the whole or fractional shares of Common
Stock purchased by an eligible employee will be automatically deposited in the
Company's Stock Purchase and Automatic Dividend Reinvestment Plan (the "DRIP").
(Under the Stock Purchase Plan as currently in effect only whole shares are
purchased and stock certificates are issued and delivered to each employee
representing the number of shares purchased.) DRIP accounts for each eligible
employee will be automatically established when any Common Stock is purchased
pursuant to the Stock Purchase Plan.
NUMBER OF SHARES. An aggregate of 1,020,000 shares of Common Stock may be
issued under the Plan. (This represents an increase of 300,000 shares compared
to the Stock Purchase Plan as currently in effect.) The number of shares of
Common Stock that may be issued under the Plan will automatically be adjusted in
the case of a stock split, stock dividend or similar adjustment to the
capitalization of the Company.
ADMINISTRATION. The Stock Purchase Plan is administered by a committee
selected by the Chief Executive Officer of the Company.
RESTRICTIONS ON RESALE. Employees who purchase shares of Common Stock under
the Stock Purchase Plan may freely resell the shares unless the employee is (i)
an "affiliate" of the Company, (ii) a "reporting officer" of the Company or
(iii) in possession of material information regarding the Company that has not
been disclosed to the public. Any employees who are "affiliates" of the Company
as defined in Rule 405 under the Securities Act of 1933 (the "Securities Act")
will be subject to the volume, manner of sale and reporting requirements of Rule
144 under the Securities Act unless the Company registers their shares under the
Securities Act for resale pursuant to a separate prospectus. Any employees who
are designated by the Company as "reporting officers" for purposes of Section
16(b) of the Securities and Exchange Act of 1934 (the "Exchange Act") are
subject to the "short-swing profits" recovery provisions of Section 16(b) of the
Exchange Act. Any employees who are in possession of material information
regarding the Company that has not been publicly disclosed may not sell their
shares of Common Stock.
AMENDMENT AND TERMINATION. The Company may terminate, suspend or amend in
whole or in part the Stock Purchase Plan at any time except that shareholder
approval is required for any amendment that serves to (i) increase the number of
shares of Common Stock reserved under the Plan, (ii) change the method for
determining the purchase price for shares of Common Stock, (iii) materially
increase the benefits accruing to the participants, or (iv) materially change
the eligibility requirements for participation in the Stock Purchase Plan. The
term of the Plan as amended and restated ends on January 1, 2003.
NEW PLAN BENEFITS TABLE. Because all purchases under the Stock Purchase
Plan are voluntary, benefits under the Plan are not determinable. However, the
following number of shares of Common Stock were purchased for the 1996 offering
period under the Stock Purchase Plan as currently in effect by the following
persons and groups:
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND POSITION PURCHASED
-------------------- -------------------------
<S> <C>
Charles E. Zeigler, Jr.
Chairman, President and Chief Executive Officer.................................................. 347
Franklin H. Yoho
Senior Vice President -- Marketing and Gas Supply................................................ 167
Robert D. Voigt
Senior Vice President -- Organizational Development.............................................. 850
John D. Grawe
Senior Vice President -- Operations.............................................................. --
Jerry W. Richardson
Senior Vice President -- Engineering............................................................. 164
Executive Group.................................................................................... 3,295
Non-Executive Director Group....................................................................... --
Non-Executive Officer Group........................................................................ 1,264
</TABLE>
11
<PAGE>
FEDERAL INCOME TAX TREATMENT. An eligible employee who purchases shares of
Common Stock under the Stock Purchase Plan will have basis in the shares equal
to the purchase price paid for them. If the employee sells the shares within 2
years of the first day of the offering period, the employee will be taxed as
ordinary income on the difference between the fair market value of the shares on
the last day of the offering period and the discounted purchase price paid for
the shares. Any additional increase in the value of the shares since the last
day of the offering period will be treated as a capital gain and any decrease in
the value will be treated as a capital loss. If the employee sells the shares
any time after the 2 year holding period, any increase in the value of the
shares over the employee's basis in the shares will be taxed as capital gain.
SHAREHOLDER APPROVAL. In order to become effective, the amendment and
restatement of the Stock Purchase Plan must be approved by a majority of the
votes cast by the shareholders. The Board recommends voting for approval of the
amendment and restatement.
RATIFICATION OF SELECTION OF AUDITORS
The Board has selected Arthur Andersen LLP as independent public
accountants to audit the accounts and financial statements of the Company for
the fiscal year ending September 30, 1998. Arthur Andersen LLP has acted for the
Company in this capacity since 1951. A representative of such firm is expected
to attend the annual meeting to answer appropriate questions from shareholders
and to make a statement if he or she so desires.
OTHER MATTERS
The Board of the Company knows of no matters that will be presented for
consideration at the annual meeting other than those set forth in this Proxy
Statement. However, if any other matters shall come before the meeting, it is
the intention of the persons named in the enclosed proxy to vote on such matters
in accordance with their best judgment.
We ask that you promptly execute the enclosed proxy and return it in the
enclosed envelope that requires no postage if mailed in the United States.
For the Board of Directors
/s/ CHARLES E. ZEIGLER, JR.
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
December 19, 1997
- --------------------------------------------------------------------------------
A COPY OF THE COMPANY'S LATEST ANNUAL REPORT ON FORM 10-K TO THE SECURITIES AND
EXCHANGE COMMISSION, INCLUDING THE FINANCIAL STATEMENTS AND THE SCHEDULES
THERETO, WILL BE PROVIDED WITHOUT CHARGE UPON WRITTEN REQUEST TO JACK G. MASON,
VICE PRESIDENT -- TREASURER AND CHIEF FINANCIAL OFFICER, PUBLIC SERVICE COMPANY
OF NORTH CAROLINA, INCORPORATED, POST OFFICE BOX 1398, GASTONIA, NORTH CAROLINA
28053-1398.
12
<PAGE>
*******************************************************************************
APPENDIX A
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS -- JANUARY 30, 1998
The undersigned hereby appoints CHARLES E. ZEIGLER, JR., WILLIAM A.V. CECIL
and WILLIAM C. BURKHARDT, and each of them, with full power of substitution,
attorneys and proxies to appear and vote, as indicated below, all of the shares
of Common Stock of Public Service Company of North Carolina, Incorporated that
the undersigned would be entitled to vote at the annual meeting of shareholders
to be held on January 30, 1998 and at any and all adjournments thereof. The
Board of Directors recommends a vote FOR the following items:
<TABLE>
<S> <C>
1. Election of Directors. FOR the nominees FOR the nominees listed below
listed below [ ] except as marked to the contrary [ ]
<CAPTION>
1. Election of Directors. WITHHOLD AUTHORITY to vote
for the nominees listed below [ ]
</TABLE>
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
strike a line through the nominee's name in the list below.)
William C. Burkhardt Van E. Eure William L. O'Brien Ben R. Rudisill, II
<TABLE>
<S> <C> <C> <C>
2. Proposal to approve the amendments to the Company's Employee Stock
Purchase Plan. FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Proposal to ratify the selection of Arthur Andersen LLP as independent
public accountants. FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments
thereof. FOR [ ] AGAINST [ ] ABSTAIN [ ]
</TABLE>
(continued and to be signed on reverse side)
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS and when
properly executed will be voted in the manner directed herein by the undersigned
shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES
FOR DIRECTOR AND FOR PROPOSALS 2, 3 AND 4.
Signed: ______________________________
Signed: ______________________________
Please sign exactly as your name
appears hereon. If the holder is a
corporation or partnership, please
sign its name and add your own name
and title. When signing as attorney,
executor, administrator, trustee or
guardian, please also give your full
title. If shares are held jointly
EACH holder must sign.
Dated: _______________________________
[ ] I PLAN TO ATTEND THE JANUARY 30,
1998 ANNUAL MEETING IN RALEIGH, NC.
PLEASE INDICATE THE NUMBER OF
PERSONS ATTENDING IN THE SPACE
PROVIDED. _________________________
IMPORTANT: Please mark, sign and date this proxy and return it promptly in the
enclosed envelope. No postage is required if mailed in the United
States.
<PAGE>
Appendix B
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
AND SUBSIDIARIES EMPLOYEE STOCK PURCHASE PLAN
(as amended and restated effective January 1, 1998)
WHEREAS, Public Service Company of North Carolina, Incorporated ("PSNC" or
"Company") and its subsidiaries (collectively referred to as the "Participating
Employers") sponsor the "Public Service Company of North Carolina, Incorporated
and Subsidiaries Employee Stock Purchase Plan" ("Plan") as set forth in an
Instrument of the Participating Employers dated November 5, 1992, which amended
and restated the Plan effective January 1, 1993; and
WHEREAS, the Plan currently provides that the Plan will terminate effective
as of January 1, 1998; and
WHEREAS, the Participating Employers desire to amend and restate the Plan
to (i) extend the term of the Plan to January 1, 2003, (ii) increase the maximum
number of shares of Common Stock of PSNC that may be issued under the Plan from
seven hundred twenty thousand (720,000) to one million twenty thousand
(1,020,000), (iii) reduce the waiting period for participation in the Plan from
one year to six months of continuous service; (iv) remove the Plan provision
that excludes part-time employees who work less than twenty (20) hours per week,
(v) provide that PSNC may deliver under the Plan either original issue shares or
shares purchased by PSNC on the open market, and (vi) provide that shares
purchased under the Plan will be delivered to an account in the Participant's
name in PSNC's Stock Purchase and Automatic Dividend Reinvestment Plan unless
PSNC elects instead to deliver a share certificate directly to the Participant.
and
WHEREAS, the Participating Employers believe that said amendments can best
be effected by amending and restating the Plan effective as of January 1, 1998;
and
WHEREAS, the amendment and restatement of the Plan set forth herein has
been approved by the Board of Directors of PSNC in accordance with Section 7.3
of the Plan;
NOW, THEREFORE, for the purposes aforesaid, the Participating Employers do
hereby amend and restate the Plan effective as of January 1, 1998 by deleting
Articles I through VIII thereof and substituting therefor the following Articles
I through VIII:
ARTICLE I
NAME, PURPOSE, CONSTRUCTION, AND DEFINITIONS
Section 1.1. Name. The Plan shall be known as the "Public Service Company
of North Carolina, Incorporated and Subsidiaries Employee Stock Purchase Plan."
Section 1.2. Purpose. The purpose of the Plan is to provide Participants in
the Plan with an opportunity to purchase Common Stock of PSNC through payroll
deductions, thereby encouraging Participants to share in the economic growth and
success of the Participating Employers through stock ownership.
Section 1.3. Construction. Article, Section and paragraph headings have
been inserted in the Plan for convenience of reference only and are to be
ignored in any construction of the provisions hereof. If any provision of the
Plan shall be invalid or unenforceable the remaining provisions shall
nevertheless be valid, enforceable and fully effective. It is the intent that
the Plan shall at all times constitute an "employee stock purchase plan" within
the meaning of Section 423(b) of the Code, and the Plan shall be construed and
interpreted to remain such. The Plan shall be construed, administered, regulated
and governed by the laws of the United States to the extent applicable, and to
the extent such laws are not applicable, by the laws of the State of North
Carolina.
Section 1.4. Definitions. Whenever used in the Plan, unless the context
clearly indicates otherwise, the following terms shall have the following
meanings:
(a) Beneficiary, with respect to a Participant, means such Participant's
"Beneficiary" under the group term life insurance plan maintained by the
Participating Employers.
(b) Board or Board of Directors means the Board of Directors of PSNC or any
Committee or Committees of said Board of Directors of PSNC to which, and to the
extent, said Board of Directors of PSNC has delegated some or all of its power,
authority, duties, or responsibilities with respect to the Plan.
(c) Chief Executive Officer means the Chief Executive Officer of PSNC
<PAGE>
designated as such by the Board of Directors of PSNC from time to time.
(d) Code means the Internal Revenue Code of 1986, as the same may be
amended from time to time, and references thereto shall include the valid
Treasury regulations issued thereunder.
(e) Committee means the committee described in Article VI.
(f) Common Stock means shares of the $1.00 par value common stock of PSNC
and any other stock or securities resulting from the adjustment thereof or
substitution therefor as described in Section 3.4.
(g) Company or PSNC means Public Service Company of North Carolina,
Incorporated, a North Carolina corporation.
(h) Compensation means, with respect to a Participant, the base salary or
wages, incentive remuneration, overtime pay and shift premium payable to such
Participant for employment by a Participating Employer prior to any reduction
pursuant to the Special Savings and Retirement Plan; provided, however,
Compensation, specifically shall not include:
(1) any compensation pursuant to any qualified employee benefit plan;
(2) any reimbursed expenses paid by a Participating Employer;
(3) any other sums paid by a Participating Employer on account of any
health, welfare or group insurance benefits; or
(4) the taxable value of the personal use by such Participant of a
vehicle provided by a Participating Employer.
(i) Continuous Service, with respect to an Employee, means such Employee's
continuous employment with a Participating Employer and shall include absences
from employment due to vacation, temporary illness or sickness.
(j) DRIP Account, with respect to a Participant, means an account in the
Participant's name in PSNC's Stock Purchase and Automatic Dividend Reinvestment
Plan.
(k) Effective Date means January 1, 1988.
(l) Employee means a person employed by a Participating Employer, including
part-time employees.
(m) Fair Market Value, with respect to a share of Common Stock from time to
time, means the mean between the highest price and the lowest price at which the
Common Stock shall have been sold regular way on the New York Stock Exchange (or
such other principal securities exchange on which the Common Stock is traded if
the Common Stock is no longer traded on the New York Stock Exchange) as reported
in THE WALL STREET JOURNAL (Eastern Edition) (or any other similar financial
publication selected by the Committee) for the applicable date or, if no sales
occur on such date, then on the next preceding date on which sales of the Common
Stock occurred.
(n) Offering means the offering of shares of Common Stock to Participants
pursuant to this Plan that occurs on each Offering Date.
(o) Offering Date means January 1, 1988, and each succeeding January 1.
(p) Offering Period means the period from an Offering Date through the next
succeeding Offering Date.
(q) Participant means an Employee who has become a Participant pursuant to
Section 2.2 of the Plan.
(r) Participating Employers means:
(1) PSNC;
(2) those Subsidiary Corporations which are Participating Employers in
the Plan as of December 31, 1997; and
(3) those Subsidiary Corporations which in the future adopt the Plan
pursuant to Section 8.1.
(s) Plan means the Public Service Company of North Carolina, Incorporated
and Subsidiaries Employee Stock Purchase Plan, as set forth herein, together
with any and all amendments thereto.
(t) Special Savings and Retirement Plan means the defined contribution plan
maintained by PSNC and certain of its subsidiaries known as the "Public Service
Company of North Carolina, Incorporated and Subsidiaries Special Savings and
Retirement Plan and Trust," as amended from time to time.
(u) Stock Purchase Account, with respect to a Participant, means the
account established on the books and records of the Participating Employers for
such
<PAGE>
Participant representing the payroll deductions credited to such account in
accordance with the provisions of the Plan.
(v) Subsidiary Corporation means any corporation (other than PSNC) in an
unbroken chain of corporations beginning with PSNC if each of the corporations
other than the last corporation in such unbroken chain owns stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such unbroken chain.
ARTICLE II
PARTICIPATION
Section 2.1. General. No person shall become a Participant unless or until
such person is or becomes an Employee and upon or following satisfaction of the
eligibility requirement set forth in the Plan. In addition, in no event shall
any person be eligible to participate in the Plan before the Effective Date.
Section 2.2. Participation Requirements.
(a) Eligibility Requirement. An Employee shall satisfy the eligibility
requirement of the Plan after such Employee completes six (6) months of
Continuous Service with the Participating Employers.
(b) Commencement of Participation. Each person who satisfies the
eligibility requirement of Section 2.2(a) on or before the Effective Date shall
become a Participant in the Plan:
(1) on the Offering Date coinciding with the Effective Date, if such
person is an Employee on such Offering Date; or
(2) if such person is not an Employee on such Offering Date, then on
the first Offering Date coinciding with or immediately following
the date (if any) on which such person again becomes an Employee
after the Effective Date.
Each person who satisfies the eligibility requirement of Section 2.2(a) after
the Effective Date shall become a Participant in the Plan:
(1) on the first Offering Date after such person satisfies the
eligibility requirement, if such person is an Employee on such
Offering Date; or
(2) if such person is not an Employee on the first Offering Date
after such person satisfies such eligibility requirement, then
on the first Offering Date coinciding with or immediately
following the date (if any) on which such person again becomes
an Employee.
(c) Exclusions. Notwithstanding any provision of the Plan to the contrary,
no Employee whose customary employment with a Participating Employer is for five
(5) months or less in any calendar year shall be eligible to participate in the
Plan.
Section 2.3. Eligibility of Former Participants. If a person terminates
employment with the Participating Employers after becoming a Participant and
subsequently resumes employment with a Participating Employer, such person shall
again become a Participant on the first Offering Date coinciding with or
immediately following such resumption of employment with a Participating
Employer without having to satisfy again the eligibility requirement of Section
2-2(a).
ARTICLE III
OFFERING OF COMMON STOCK
Section 3.1. Reservation of Common Stock. The Board of Directors shall
reserve one million twenty thousand (1,020,000) shares of Common Stock for the
Plan, subject to adjustment in accordance with Section 3.4. The aggregate number
of shares of Common Stock which may be purchased under the Plan by Participants
shall not exceed one million twenty thousand (1,020,000) shares, subject to
adjustment in accordance with Section 3.4.
Section 3.2 Offering of Common Stock.
(a) General. Subject to Section 3.2(b), each Participant in the Plan on an
Offering Date shall be entitled to purchase shares of Common Stock on the last
day of the Offering Period beginning with such Offering Date with the amounts
deducted from such Participant's Compensation during such Offering Period
pursuant to Article IV. The purchase price for such shares of Common Stock shall
be determined
<PAGE>
under Section 3.3; provided, however, the maximum number of shares of Common
Stock that may be purchased by a Participant during any single Offering Period
shall not exceed twenty (20) shares of Common Stock for each One Thousand
Dollars ($1,000.00) of Compensation earned during such Offering Period.
(b) Limitations. Notwithstanding Section 3.2(a), the maximum number of
shares of Common Stock a Participant may purchase pursuant to an Offering under
Section 3.2(a) shall be subject to the following limitations:
(1) If as of the Offering Date for such Offering, such Participant owns
stock (including stock which such Participant is considered to own
under Section 425(d) of the Code) (including the Common Stock such
Participant would be entitled to purchase pursuant to an Offering)
totaling five percent (5%) or more of the total combined voting power
or value of all classes of stock of PSNC or a Subsidiary Corporation,
then the maximum number of shares of Common Stock such Participant may
purchase pursuant to such Offering when added to the number of
shares of stock of the Company or a Subsidiary Corporation such
Participant owns (including stock which such Participant is considered
to own under section 425(d) of the Code) (excluding the Common Stock
such Participant would be entitled to purchase pursuant to such
Offering) is less than five percent (5%) of the total combined voting
power or value of all classes of stock of PSNC or a Subsidiary
Corporation; and
(2) If such Participant could acquire within the same calendar year as an
Offering shares of stock of PSNC or a Subsidiary Corporation under all
"employee stock ownership plans" within the meaning of Section 423(b)
of the Code sponsored by PSNC or a Subsidiary Corporation (including
the Common Stock such Participant would be entitled to purchase
pursuant to such Offering) having a total fair market value (determined
as of the date of such Offering) which exceeds Twenty-Five Thousand
Dollars ($25,000), then the maximum number of shares such Participant
may purchase pursuant to such Offering shall be reduced so that such
total fair market value does not exceed Twenty-Five Thousand
Dollars ($25,000).
Section 3.3. Determination of Purchase Price for Offered Common Stock. The
purchase price per share of the shares of Common Stock offered to Participants
pursuant to an Offering shall be equal to ninety percent (90%) of the lesser of:
(a) the Fair Market Value of a share of Common Stock as of the first day of
the Offering Period for such Offering; or
(b) the Fair Market Value of a share of Common Stock as of the last day of
the Offering Period for such Offering; provided, however, in no event shall the
purchase price be less than the par value of a share of Common Stock.
Section 3.4. Effect of Certain Transactions. The number of shares of Common
Stock reserved for the Plan pursuant to Section 3.1, the maximum number of
shares of Common Stock a Participant may purchase pursuant to an Offering under
Section 3.2(a), and the determination under Section 3.3 of the purchase price
per share of the shares of Common Stock offered to Participants pursuant to an
Offering shall be appropriately adjusted to reflect any increase or decrease in
the number of issued shares of Common Stock resulting from a stock split, a
consolidation of shares, the payment of a stock dividend, or any other capital
adjustment affecting the number of issued shares of Common Stock. In the event
that the outstanding shares of Common Stock shall be changed into or exchanged
for a different number or kind of shares of stock or other securities of PSNC or
another corporation, whether through reorganization, recapitalization, merger,
consolidation, or otherwise, then there shall be substituted for each share of
Common Stock reserved for issuance under the Plan but not yet purchased by
Participants, the number and kind of shares of stock or other securities into
which each outstanding share of Common Stock shall be so changed or for which
each such share shall be exchanged.
<PAGE>
ARTICLE IV
PAYROLL DEDUCTIONS
Section 4.1. Payroll Deduction Elections. A Participant in the Plan (or a
person who will become a Participant in the Plan on the next Offering Date if
such person is an Employee on such Offering Date) who wishes to purchase shares
of Common Stock to be offered to such Participant on the next Offering Date
shall elect to have the Participating Employers deduct from the Compensation
payable to such Participant during the Offering Period beginning on such
Offering Date any amount between two percent (2%) and ten percent (10%) of such
Participant's Compensation, in whole multiples of one percent (1%). Such
election shall be made by delivering to the Committee during the forty-five (45)
day period preceding such Offering Date a written direction to make such
deductions. Such election shall become effective as of the first day of such
Participant's first pay period that begins on or after such Offering Date and
shall remain effective for each successive pay period until changed or
terminated pursuant to this Article IV.
Section 4.2. Election to Increase or Decrease Payroll Deductions. Subject
to Section 4.5, a Participant who has a payroll deduction election in effect
under Section 4.1 may prospectively increase or decrease during an Offering
Period the percentage amount of the deductions being made by the Participating
Employers from such Participant's Compensation (including a decrease to zero
(0)) by delivering to the Committee a written direction to make such change.
Such change shall become effective as soon as practical after the Committee's
receipt of such written direction and shall remain in effect until changed or
terminated pursuant to this Article IV.
Section 4.3. Termination of Election Upon Termination of Employment. The
termination of employment of a Participant with the Participating Employers for
any reason shall automatically terminate the election (if any) of such
Participant to have amounts deducted from such Participant's Compensation
pursuant to this Article IV that is then in effect. Such termination shall be
effective immediately following the pay period during which such termination of
employment occurs, but shall not affect the deduction from Compensation for that
pay period.
Section 4.4. Change or Termination Not Retroactively Effective. Neither the
change nor the termination of any election to have amounts deducted from
Compensation under this Article IV shall increase, decrease, or otherwise affect
the deduction from the Compensation of a Participant for any pay period ending
prior to the effective date of such change or termination.
Section 4.5. Form, Timing, and Frequency of Elections. Any written
direction by any Participant with respect to any deductions from Compensation
pursuant to this Article IV shall be on a form furnished by the Committee for
such purpose and shall be made by such Participant's completing, signing, and
filing such form with the Committee in the manner prescribed from time to time
by the Committee. A Participant shall be permitted to increase or decrease the
percentage amount of the deductions being made by the Participating Employers
from such Participant's Compensation only once during an Offering Period and
such increase or decrease must be made by June 30 of such Offering Period;
provided, however, a Participant may terminate the deductions being made by the
Participating Employers from such Participant's Compensation at any time during
an Offering Period notwithstanding any prior change in the amount of such
Participant's Compensation deductions during such Offering Period.
ARTICLE V
STOCK PURCHASE ACCOUNTS AND PURCHASE OF COMMON STOCK
Section 5.1. Stock Purchase Accounts. A Stock Purchase Account shall be
established and maintained on the books and records of the Participating
Employers for each Participant. Amounts deducted from a Participant's
Compensation pursuant to Article IV shall be credited to such Participant's
Stock Purchase Account. No interest or other increment shall accrue or be
payable to any Participant with respect to any amounts credited to such Stock
Purchase Accounts. All amounts credited to such Stock Purchase Accounts shall be
withdrawn, paid or applied toward the purchase of Common Stock pursuant to the
provisions of this Article V.
Section 5.2. Purchase of Common Stock.
(a) General. As of the last day of each Offering Period, the amount to the
credit of a Participant in such Participant's Stock Purchase Account shall be
used to purchase from PSNC on such Participant's behalf the largest number of
whole
<PAGE>
shares and fractional shares (calculated to three decimal places) of Common
Stock which can be purchased at the price determined under Section 3.3 with the
amount then credited to such Participant's Stock Purchase Account subject to the
limitations set forth in Article III on the maximum number of shares of Common
Stock such Participant may purchase. As of such date, such Participant's Stock
Purchase Account shall be charged with the aggregate purchase price of the
shares of Common Stock purchased on such Participant's behalf. The remaining
balance (if any) credited to such Participant's Stock Purchase Account shall be
credited to such Participant's Stock Purchase Account for the immediately
succeeding Offering; provided, however, if such Participant has withdrawn from
the Plan pursuant to Section 5.3, such remaining balance shall be distributed to
such Participant as soon as administratively practical.
(b) Issuance of Common Stock. The shares of Common Stock
purchased for a Participant on the last day of an Offering Period shall be
either original issue shares of Common Stock of PSNC or shares of Common Stock
of PSNC purchased on the open market. Shares of PSNC Common Stock purchased by a
Participant under the Plan shall be deemed to have been issued by PSNC for all
purposes as of the close of business on the date of such purchase. Prior to such
date, none of the rights and privileges of a shareholder of PSNC shall exist
with respect to such shares of Common Stock for such Participant.
(c) DRIP Accounts and Stock Certificates. PSNC shall cause any shares of
Common Stock purchased by a Participant under the Plan to be deposited in the
Participant's DRIP Account on or as soon as practicable after the applicable
purchase date; provided, however, that in lieu of depositing such shares into
the Participant's DRIP Account, PSNC, in its sole discretion, may issue and
deliver, or cause its stock transfer agent to issue and deliver, a certificate
for the number of full shares of Common Stock purchased for a Participant on
such date, which such certificate shall be issued in the Participant's name.
Certificates representing fractional shares will not be issued under any
circumstances; the fair market value of such fractional shares will be credited
to the Participant's Stock Purchase Account for the immediately succeeding
Offering.
(d) Insufficient Common Stock Available. If as of the last day of any
Offering Period, the aggregate Stock Purchase Accounts available for the
purchase of shares of Common Stock pursuant to Section 5.2(a) would purchase a
number of shares of Common Stock in excess of the number of shares of Common
Stock then available for purchase under the Plan, (i) the number of shares of
Common Stock which would otherwise be purchased for each Participant on such
date shall be reduced proportionately to the extent necessary to eliminate such
excess, (ii) the remaining balance to the credit of each Participant in each
such Participant's Stock Purchase Account shall be distributed to each such
Participant, and (iii) the Plan shall terminate automatically upon the
distribution of the remaining balance in such Stock Purchase Accounts.
Section 5.3. Withdrawal From Plan Prior to Purchase of Common Stock. In the
event (i) a Participant terminates employment with the Participating Employers
for any reason during an Offering Period, or (ii) a Participant terminates
deductions from such Participant's Compensation pursuant to Article IV during an
Offering Period and such Participant elects to withdraw in writing from the
Plan, then the entire amount to the credit of such Participant in such
Participant's Stock Purchase Account shall be distributed to such Participant
(or if such Participant is deceased, to such Participant's Beneficiary) as soon
as administratively practical after such termination of employment or withdrawal
(as the case may be). If a Participant terminates deductions from such
Participant's Compensation pursuant to Article IV during an Offering Period but
such Participant does not elect to withdraw in writing from the Plan, the amount
to the credit of such Participant in such Participant's Stock Purchase Account
shall be used to purchase shares (including fractional shares) of Common Stock
for such Participant as of the last day of such Offering Period to the extent
provided in Section 5.2(a). Notwithstanding the preceding sentence, if a
Participant terminates deductions from such Participant's Compensation pursuant
to Article IV during an Offering Period and the amount to the credit of such
Participant in such Participant's Stock Purchase Account upon such termination
of Compensation deductions does not exceed One Hundred Dollars ($100.00), then
such Participant shall be deemed to have withdrawn from the Plan upon such
termination of
<PAGE>
Compensation deductions for purposes of this Section 5.3.
ARTICLE VI
COMMITTEE
Section 6.1. Appointment, Term of Office and Vacancies. The Committee shall
consist of four (4) or more individuals appointed by the Chief Executive Officer
who shall serve at the pleasure of the Chief Executive Officer. The Chief
Executive Officer shall have the absolute right to remove any member of the
Committee at any time, with or without cause, and any member of the Committee
shall have the right to resign at any time. If a vacancy in the Committee should
occur, from death, resignation, removal or otherwise, a successor shall be
appointed by the Chief Executive Officer.
Section 6.2. Organization of Committee. The Chief Executive Officer shall
designate one of the members of the Committee to serve as its Chairman, one
member as its Vice Chairman and one member as its Secretary. The Committee may
appoint such agents, who need not be members of the Committee, as it may deem
necessary for the effective performance of its duties, and may delegate to such
agents such powers and duties, whether administerial or discretionary, as the
Committee may deem expedient or appropriate. The Committee shall act by majority
vote and may adopt such bylaws, rules and regulations as it deems desirable for
the conduct of its affairs.
Section 6.3. Powers of Committee. The Committee shall administer the Plan.
The Committee shall have all powers necessary to enable it to carry out its
duties under the Plan properly. Not in limitation of the foregoing, the
Committee shall have the power to construe and interpret the Plan and to
determine all questions that shall arise thereunder. It shall decide all
questions relating to eligibility to participate in the Plan and to purchase
Common Stock under the Plan. The Committee shall have such other and further
specified duties, powers, authority and discretion as are elsewhere in the Plan
either expressly or by necessary implication conferred upon it. The decision of
the Committee upon all matters within the scope of its authority shall be final
and conclusive on all persons, except to the extent otherwise provided by law.
Section 6.4. Expenses of Committee. The reasonable expenses of the
Committee incurred by the Committee in the performance of its duties under the
Plan, including without limitation reasonable counsel fees and the expenses of
other agents, shall be paid by the Participating Employers.
Section 6.5. Indemnification of Committee. To the extent permitted by
applicable law, the Participating Employers shall indemnify and hold harmless
each member of the Committee from and against any and all liability, claims,
demands, costs, and expenses (including the costs and expenses of attorneys
incurred in connection with the investigation or defense of claims) in any
manner connected with or arising out of any actions or inactions in connection
with the administration of the Plan except for such actions or inactions which
are not in good faith or which constitute willful misconduct.
ARTICLE VII
AMENDMENT AND TERMINATION
Section 7.1. Amendment of Plan. The Participating Employers expressly
reserve the right, at any time and from time to time, to amend in whole or in
part any of the terms and provisions of the Plan for whatever reason(s) the
Participating Employers may deem appropriate; provided, however, no amendment,
without the approval of the shareholders of PSNC, may (i) increase the number of
shares of Common Stock reserved under the Plan, (ii) change the method of
determining the purchase price for shares of Common Stock, (iii) materially
increase the benefits accruing to Participants, or (iv) materially change the
eligibility requirement for participation of the Plan.
Section 7.2. Termination of Plan. The Participating Employers expressly
reserve the right, at any time and for whatever reason they may deem
appropriate, to terminate the Plan. If not sooner terminated (i) by the
Participating Employers pursuant to the preceding sentence or (ii) pursuant to
Section 5.2(c), the Plan shall continue in effect through January 1, 2003. Upon
any termination of the Plan, the entire amount credited to the Stock Purchase
Account of each Participant shall be distributed to each such Participant.
Section 7.3. Effective Date and Procedure for Amendment or Termination. Any
amendment to the Plan or termination of the Plan may be retroactive to the
extent not prohibited by applicable law. Any amendment to the Plan or
termination of the Plan shall
<PAGE>
be made by the Participating Employers by resolution of the Board of Directors
and shall not require the approval or consent of any Participant or Beneficiary
in order to be effective.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Adoption by a Subsidiary Corporation. A Subsidiary Corporation
may, with the approval of the Board of Directors and the board of directors of
such Subsidiary Corporation, elect to adopt the Plan and become a Participating
Employer as of a date mutually agreeable to the Board of Directors and the board
of directors of such Subsidiary Corporation. Any such adoption of the Plan by a
Subsidiary Corporation shall be evidenced by an appropriate instrument of
adoption by such Subsidiary Corporation.
Section 8.2. Authorization and Delegation to the Board of Directors. Each
Subsidiary Corporation which is or hereafter becomes a Participating Employer
authorizes and empowers the Board of Directors to (i) amend or terminate the
Plan without further action by said Subsidiary Corporation as provided in
Article VII and (ii) perform such other acts and to do such other things as the
Board of Directors is expressly directed, authorized or permitted to perform or
do as provided herein.
Section 8.3. Transferability of Rights. To the extent permitted by law,
rights to purchase shares of Common Stock are exercisable only by the
Participant to whom such rights are granted and are not transferable by such
Participant other than by will or the laws of descent and distribution.
Section 8.4. No Employment Rights. Participation in the Plan shall not give
any employee of the Participating Employers any right to remain in the employ of
the Participating Employers or upon termination of employment, any right or
interest in the Plan except as expressly provided herein.
Section 8.5. Compliance with Law. No shares of Common Stock shall be issued
under the Plan prior to compliance by PSNC to the satisfaction of its counsel
with any applicable laws.
Section 8.6. Repurchase of Common Stock. The Participating Employers shall
not be required to repurchase from any Participant any shares of Common Stock
which such Participant acquires under this Plan.
Section 8.7. Approval of Plan. The effectiveness of this amendment and
restatement of the Plan is subject to (i) its approval on or before December 31,
1998, by the shareholders of PSNC, and (ii) the approval on or before December
31, 1998, of the issuance of shares of Common Stock under the Plan by the North
Carolina Utilities Commission. In the event that this amendment and restatement
of the Plan is not approved in accordance with the preceding sentence, all
amounts deducted from the Compensation of Participants and credited to each
Participant's Stock Purchase Account shall be refunded to each such Participant
without interest as soon as administratively practical.
