December 16, 1998
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 17, 1998 to security holders in connection
with the Company's Annual Meeting of Shareholders to be held on January 29,
1999. 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 1999, 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 17, 1998 to the Securities and Exchange Commission
solely for informational purposes.
Sincerely,
/s/ Jack G. Mason
Jack G. Mason
Vice President -- Finance
<PAGE>
PUBLIC SERVICE COMPANY OF NORTH CAROLINA,
INCORPORATED
----------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 29, 1999
----------------------------------------
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 corporate office of the Company, 400 Cox Road, Gastonia, North
Carolina on Friday, January 29, 1999, at 9:00 a.m. for the following purposes:
1. To elect four directors, each to serve for a three-year term expiring
in 2002 or until their successors are elected and qualified;
2. To approve an amendment to the Company's Employee Stock Purchase Plan
restating the number of shares available for issuance;
3. To ratify the selection of Arthur Andersen LLP as the Company's
independent public accountants for the fiscal year ending September 30, 1999;
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, 1998 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.
CHARLES E. ZEIGLER, JR.
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
December 16, 1998
- --------------------------------------------------------------------------------
THE FORM OF PROXY IS ENCLOSED TO ENABLE YOU TO VOTE YOUR SHARES AT THE
MEETING. YOU ARE URGED TO MARK, SIGN, DATE AND RETURN THE PROXY PROMPTLY 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>
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 29, 1999, 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 17, 1998.
Only shareholders of record at the close of business on December 10, 1998
are entitled to vote at the meeting. As of November 30, 1998, the Company had
outstanding 20,368,862 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. Abstentions and broker non-votes will be
counted for purposes of determining whether a quorum exists. 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.
Each share of Common Stock is entitled to one vote. 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 proposals two and three require 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 2002; (ii) four directors whose terms expire in January 2001; and (iii)
two directors whose terms expire in January 2000. At the annual meeting, four
directors are to be elected to serve until the Company's annual meeting to be
held in January 2002 or until their successors are elected and qualified. Four
directors whose terms
<PAGE>
expire at this year's annual meeting have been nominated by the Board to
succeed themselves for terms expiring in January 2002. They are Bert Collins,
John W. Copeland, D. Wayne Peterson, and Charles E. Zeigler, Jr. 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 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 2002
BERT COLLINS (64) 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 (63) Retired President, Ruddick Corporation, the
Director since 1996 holding company for American & Efird,
Inc. and Harris-Teeter, Inc.; President and
Director, Copeland Business Service, Inc.
and Copeland Foundation, Inc.
D. WAYNE PETERSON (62) Retired President, National Integrated
Director since 1996 Services, Sprint, Kansas City, Missouri, a
major domestic and international telecom-
munications company.
CHARLES E. ZEIGLER, JR. (52) Chairman, President and Chief Executive
Director since 1988 Officer of the Company.
CONTINUING DIRECTORS WHOSE TERMS EXPIRE IN 2001
WILLIAM C. BURKHARDT (61) President and Chief Executive Officer of
Director since 1989 Austin Quality Foods, Inc., Cary, North
Carolina, a baker and distributor of Austin
Quality Snacks.
VAN E. EURE (43) 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. (59) Senior Vice President, O'Brien/Atkins
Director since 1986 Associates, P.A., an architectural and
engineering firm located in Research
Triangle Park, North Carolina.
BEN R. RUDISILL, II (55) 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 (70) Chairman and President, The Biltmore
Director since 1985 Company, which owns and operates the
Biltmore House and Gardens in Asheville,
North Carolina.
G. SMEDES YORK (57) President and Treasurer, York Properties, Inc.,
Director since 1984 Sam Bass Camera Shop, Inc., and York
Construction Company; President, York
Inns, Inc., Raleigh, North Carolina; and
Director, Spectator Publications, Inc.
</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, 1998. The directors also own
equivalent value Common Stock units as set forth in the Compensation of
Directors section of this Proxy Statement.
<TABLE>
<CAPTION>
PERCENT
OF
NAME SHARES (1)(2) CLASS
- ----------------------------------------- --------------- --------
<S> <C> <C>
William A. V. Cecil .............. 8,244 *
G. Smedes York ................... 6,774 *
William L. O'Brien, Jr. .......... 5,235 *
Bert Collins ..................... 5,169 *
John W. Copeland ................. 3,688 *
Ben R. Rudisill, II .............. 2,565 *
William C. Burkhardt ............. 2,333 *
D. Wayne Peterson ................ 2,000 *
Van E. Eure ...................... -- *
Charles E. Zeigler, Jr. .......... 45,969(3) *
Robert D. Voigt .................. 33,247(4) *
Jerry W. Richardson .............. 25,342(5) *
Franklin H. Yoho ................. 18,822(6) *
John D. Grawe .................... 7,664(7) *
Directors and executive officers
as a group (18 persons) ......... 202,748(8) 1.0%
</TABLE>
- ---------
* Indicates beneficial ownership of less than 1% of the shares of Common Stock
of the Company outstanding on November 30, 1998.
(1) Includes shares, if any, held by each person's immediate family members.
(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, 15,434 shares are owned directly by Mr. Zeigler, Jr., 1,233
shares are owned by Mr. Zeigler, Jr.'s spouse and 2,336 shares are owned by
a trust over which Mr. Zeigler, Jr. as trustee has investment and voting
power. Also includes options to purchase 26,966 shares of Common Stock
exercisable within 60 days of November 30, 1998.
(4) Includes options to purchase 16,222 shares of Common Stock exercisable
within 60 days of November 30, 1998.
(5) Includes options to purchase 12,910 shares of Common Stock exercisable
within 60 days of November 30, 1998.
(6) Includes options to purchase 16,222 shares of Common Stock exercisable
within 60 days of November 30, 1998.
(7) Includes options to purchase 7,277 shares of Common Stock exercisable within
60 days of November 30, 1998. Mr. Grawe's employment was terminated on
November 16, 1998.
(8) Includes options to purchase 108,763 shares of Common Stock exercisable
within 60 days of November 30, 1998.
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, 1998, there were five meetings of
the Board. Each incumbent director attended at least 75 percent of the
aggregate of the number of board meetings and the aggregate number of meetings
of all committees of the Board on which he or she served with the exception of
Mr. Cecil.
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, 1998, is
provided below.
3
<PAGE>
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 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 did not meet during
the fiscal year ended September 30, 1998, are Charles E. Zeigler, Jr.
(Chairman), William C. Burkhardt, Bert Collins, 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, 1998,
are Bert Collins (Chairman), William A. V. Cecil, 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 four times during the fiscal year ended
September 30, 1998, 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 retirement plans, 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 retirement plans; (b) the investment management of the
qualified retirement plans; (c) appropriate investment controls, any
significant recommendations made by the independent auditors or actuaries, and
any other matter of concern to the Retirement Plans Committee relating to such
plans; and (d) any significant proposed changes to the qualified retirement
plans, the competitiveness of such plans, and any other matter of concern to
the Retirement Plans 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, 1998, are John W. Copeland (Chairman), William
C. Burkhardt, Bert Collins and D. Wayne Peterson.
COMPENSATION OF DIRECTORS
During fiscal 1998, the Board of Directors increased their alignment with
general shareholder interests. At their July 30, 1998, meeting, they
unanimously converted their annual retainer fees, board and committee meeting
fees, and annual annuity retirement plan from cash compensation to common stock
units equivalent in value to shares of the Company's Common Stock ("Deferred
Compensation Plan for Outside Directors as Amended and Restated"). Quarterly
cash dividend equivalents are accrued on these common stock units. These
changes were made according to recommendations from independent
actuarial/compensation consultants and became effective July 1, 1998.
Directors who are not employees of the Company receive common stock units,
respectively, valued at $21,275 for each annual retainer fee, $800 for each
board meeting attended and $700 for each committee meeting attended.
Reimbursement of expenses for attending each meeting is still paid in cash. For
fiscal 1998, outside directors received a combination of cash and stock units
compensation. Prior to the Deferred Compensation Plan for Outside Directors as
Amended and Restated, each outside director received an annual retainer fee of
$18,000, $700 for each board meeting attended and $600 for each committee
meeting attended.
4
<PAGE>
Prior to the Deferred Compensation Plan for Outside Directors as Amended
and Restated becoming effective, certain directors elected to receive deferred
cash compensation or common stock units under the Company's Deferred
Compensation Plan for outside directors. Any associated common stock units for
those outside directors have been included in the following table.
Prior to the effective date of the Deferred Compensation Plan for Outside
Directors as Amended and Restated, upon retirement from the Board after age 65
and after serving as a director for eight years or more, a director was
entitled to lifetime retirement compensation equal to the amount of the annual
retainer fee in effect on the date of retirement. Retired directors remain
under this annual cash annuity plan. However, for current directors only, this
previous annual cash annuity plan was converted to actuarially equivalent
common stock units, respectively, for each director. Those common stock units
were granted on the effective date of the Deferred Compensation Plan for
Outside Directors as Amended and Restated and are included in the following
table.
<TABLE>
<CAPTION>
FISCAL 1998 CUMULATIVE
------------------------------------- -------------------------------------
STOCK VALUE OF VALUE OF CASH STOCK VALUE OF VALUE OF CASH
NAME UNITS STOCK UNITS COMPENSATION UNITS STOCK UNITS COMPENSATION
- -------------------------- ------- ------------- --------------- -------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Burkhardt ........ 6,612 $152,896 $ -- 20,686 $478,355 $ --
Mr. Cecil ............ 8,091 187,107 -- 8,091 187,107 --
Mr. Collins .......... 5,852 135,327 -- 5,852 135,327 --
Mr. Copeland ......... 5,531 127,897 20,763 5,531 127,897 63,234
Ms. Eure ............. 2,591 59,915 -- 4,728 109,342 --
Mr. O'Brien, Jr. ..... 4,465 103,262 -- 4,465 103,262 --
Mr. Peterson ......... 6,327 146,315 -- 8,432 194,988 --
Mr. Rudisill, II ..... 4,258 98,472 -- 5,719 132,243 --
Mr. York ............. 4,876 112,766 -- 7,014 162,193 --
Mr. Zeigler, Jr. ..... 2,373 54,868 -- 2,373 54,868 --
</TABLE>
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.
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 1998, all filing requirements applicable
to its officers, directors and greater than 10% beneficial owners were complied
with.
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 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.
5
<PAGE>
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 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 grants may not be awarded.
The Executive Compensation Committee 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 accruing incentive compensation.
Upon evaluating the Company's actual performance as compared to its fiscal
1998 corporate goals, the Executive Compensation Committee made the following
recommendation which was approved by the Board on November 18, 1998: to pay no
cash incentive compensation to 12 executive officers and 98 other eligible
employees, because the Company's fiscal 1998 earnings per share did not reach
the minimum level required to produce payouts under any of the cash incentive
plan's four goals.
Effective November 13, 1997, stock options totaling 309,042 shares at a
grant price of $20.03 (100% of the $20.03 average high and low selling prices
on the grant date as reported on the New York Stock Exchange) were awarded by
the Board 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
does not provide for any dividend equivalents accruals or payments.
Effective July 30, 1998, stock options totaling 312,000 shares at a grant
price of $21.25 (100% of the $21.25 average high and low selling prices on the
grant date as reported on the New York Stock Exchange) were awarded by the
Board to 11 executive officers and 99 other key employees. These stock option
grants total 20% of the common shares authorized under the Company's 1997 Plan.
The 1997 Plan currently covers 101 executive officers and other key employees
of the Company's current 1,024 employees.
6
<PAGE>
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
EXECUTIVE COMPENSATION
The Summary Compensation Table below includes compensation paid by the
Company for services rendered for the fiscal years ended September 30, 1998,
1997 and 1996 for the Chief Executive Officer and the four other most highly
compensated executive officers (as of September 30, 1998) as determined by
total salary and bonus payments.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY (1) BONUS COMPENSATION (2) OPTIONS (#) COMPENSATION (3)
- ----------------------------------- ------ ------------ --------- ----------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Charles E. Zeigler, Jr. 1998 $324,480 $ -- $ 75,536 32,319 $4,939
Chairman, President and 1997 310,020 94,340 26,440 5,889 4,689
Chief Executive Officer 1996 271,380 51,685 76,576 6,220 4,500
Franklin H. Yoho 1998 166,800 -- 16,284 18,791 4,939
Vice President -- 1997 160,020 32,255 27,086 3,539 4,689
Marketing and Gas Supply 1996 126,900 24,183 -- 3,738 3,807
Robert D. Voigt 1998 162,300 -- 37,480 17,683 4,838
Vice President -- 1997 155,040 32,195 59,583 3,539 4,613
Organizational Development 1996 132,000 25,153 -- 3,738 3,960
John D. Grawe (5) 1998 159,600 -- 5,771 15,209 4,777
Senior Vice President -- 1997 153,000 29,960 3,233 3,539 4,568
Operations 1996 126,900 24,183 37,296 (4) 3,738 2,855
Jerry W. Richardson 1998 144,060 -- 40,613 15,448 4,322
Vice President -- 1997 138,660 22,190 58,292 2,949 4,160
Engineering and System Logistics 1996 131,700 25,096 -- 2,576 3,951
</TABLE>
- ---------
(1) For the years indicated, includes 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) For the years indicated, includes 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 under the 1992 Nonqualified Stock Option Plan.
(3) For the years indicated, consists of contributions by the Company to the
Special Savings and Retirement Plan.
(4) Reflects reimbursement of moving expenditures for the indicated year.
(5) Mr. Grawe's employment was terminated November 16, 1998.
7
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows stock options granted in the fiscal year ending
September 30, 1998 to the Chief Executive Officer and the four other most
highly compensated executive officers (as of September 30, 1998):
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (1)
-----------------------------------------------------------
% OF
TOTAL GRANT
NUMBER OF OPTIONS DATE
SECURITIES GRANTED MARKET PRESENT
UNDERLYING TO EXERCISE PRICE ON VALUE
OPTIONS EMPLOYEES OR BASE DATE OF (BLACK-
GRANTED IN FISCAL PRICE GRANT EXPIRATION SCHOLES)
NAME (#) YEAR ($/SH) ($/SH) DATE (2)
- --------------------------------- ------------ ----------- ---------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Charles E. Zeigler, Jr. ......... 16,141 5.2% $ 20.03 $ 20.03 11/13/02 $40,353
16,178 5.2 21.25 21.25 07/30/03 42,872
Franklin H. Yoho ................ 9,083 2.9 20.03 20.03 11/13/02 22,708
9,708 3.1 21.25 21.25 07/30/03 25,726
Robert D. Voigt ................. 9,359 3.0 20.03 20.03 11/13/02 23,398
8,324 2.7 21.25 21.25 07/30/03 22,059
John D. Grawe ................... 8,823 2.9 20.03 20.03 11/13/02 22,058
6,386 2.0 21.25 21.25 07/30/03 16,923
Jerry W. Richardson ............. 7,357 2.4 20.03 20.03 11/13/02 18,393
8,091 2.6 21.25 21.25 07/30/03 21,441
</TABLE>
- ---------
(1) Options were granted on November 13, 1997 and July 30, 1998 with exercise
prices equal to 100 percent of the average high and low selling prices on
their respective grant dates, 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.
(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
5.50%, a volatility rate of 15.3% and a dividend yield of 4.53% 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 and limits on exercise.
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, 1998 and the stock option values for the Chief
Executive Officer and the four other most highly compensated executive officers
(as of September 30, 1998):
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AR FY-END (#) OPTIONS AT FY-END ($)
SHARES ACQUIRED VALUE ----------------------------- ----------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- ----------------- ------------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Charles E. Zeigler, Jr. ..... 9,804 $43,738 21,077 38,208 $63,150 $112,722
Franklin H. Yoho ............ -- -- 12,683 22,330 37,978 66,260
Robert D. Voigt ............. 4,413 19,688 12,683 21,222 37,978 63,280
John D. Grawe ............... -- -- 3,738 18,748 15,363 56,948
Jerry W. Richardson ......... 5,529 24,666 9,961 18,397 29,262 54,722
</TABLE>
8
<PAGE>
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 $24,977 $ 37,465 $ 49,953 $ 62,442 $ 74,930 $ 87,418
140,000 29,477 44,215 58,953 73,692 88,430 103,168
160,000 33,977 50,965 67,953 84,942 101,930 118,918
180,000 38,477 57,715 76,953 96,192 115,430 134,668
200,000 42,977 64,465 85,953 107,442 128,930 150,418
220,000 47,477 71,215 94,953 118,692 142,430 166,168
240,000 51,977 77,965 103,953 129,942 155,930 181,918
260,000 56,477 84,715 112,953 141,192 169,430 197,668
280,000 60,977 91,465 121,953 152,442 182,930 213,418
300,000 65,477 98,215 130,953 163,692 196,430 229,168
320,000 69,977 104,965 139,953 174,942 209,930 244,918
340,000 74,477 111,715 148,953 186,192 223,430 260,668
360,000 78,977 118,465 157,953 197,442 236,930 276,418
380,000 83,477 125,215 166,953 208,692 250,430 292,168
400,000 87,977 131,965 175,953 219,942 263,930 307,918
</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., 11.8 years, Franklin H. Yoho, 9.6 years, Robert D. Voigt, 23.2
years, John D. Grawe, 3.8 years, and Jerry W. Richardson, 30.0 years.
9
<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, 1993 and cumulation and reinvestment of all dividends paid
thereafter through September 30, 1998. 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 shareholder 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. Plot points are as follows:
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
------------------------------------------
9/93 9/94 9/95 9/96 9/97 9/98
------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Public Service Company of North Carolina, Inc. $100 $ 83 $ 97 $116 $133 $160
S&P 500 Index $100 $104 $135 $162 $227 $248
S&P Utilities Index $100 $ 87 $111 $118 $135 $176
</TABLE>
SHAREHOLDER PROPOSALS AND NOMINATIONS
Shareholder proposals relating to the Company's 2000 annual meeting of
shareholders must be received by the Company no later than August 18, 1999, 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. Any other proposal that a shareholder wishes to bring
before the 2000 annual meeting of shareholders must be received by the Company
no later than November 2, 1999.
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 AN AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN
At the January 1998 annual meeting of the shareholders of the Company, the
shareholders approved the amendment and restatement of the Public Service
Company of North Carolina, Incorporated and Subsidiaries Employee Stock
Purchase Plan (the "Plan") effective January 1, 1998.
One of the changes made by the amendment and restatement was to increase
by 300,000 shares the number of shares of $1.00 par value Common Stock of the
Company ("Common Stock") that may be issued under the Plan. The amendment and
restatement as approved by the shareholders stated that the total number of
authorized shares under the Plan after the 300,000 share increase was
1,020,000. This expression of the total number of authorized shares did not
take into account the 3-for-2 stock split of the Common Stock that occurred in
January 1993. After taking the stock split into account, the total authorized
shares under the Plan are 1,265,706.
The Plan has been amended by the Board during 1998 to clarify that the
total number of authorized shares after giving effect to the stock split is
1,265,706, and this total number of authorized shares has been approved by the
North Carolina Utilities Commission. The amendment to the Plan makes no other
changes. The following is a summary of the material terms of the Plan:
10
<PAGE>
OFFERING PERIODS. 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.
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. It is estimated that there are 1,079
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 thirty (30) 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 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").
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 1,265,706 shares of Common Stock may be
issued under the Plan. 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.
11
<PAGE>
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 1997 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 ............ 379
Franklin H. Yoho
Vice President -- Marketing and Gas Supply ................. 506
Robert D. Voigt
Vice President -- Organizational Development ............... 949
John D. Grawe
Senior Vice President -- Operations ........................ 374
Jerry W. Richardson
Vice President -- Engineering and System Logistics ......... 170
Executive Group ............................................. 3,558
Non-Executive Director Group ................................ --
Non-Executive Officer Group ................................. 833
</TABLE>
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
two 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 two-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. For this purpose, the employee's basis will also include the
difference between the fair market value of the Common Stock on the first day
of the offering period and the discounted purchase price (which will be taxed
as ordinary income).
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, 1999. 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.
12
<PAGE>
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.
CHARLES E. ZEIGLER,, JR.
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
December 16, 1998
- --------------------------------------------------------------------------------
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 -- FINANCE, PUBLIC SERVICE COMPANY OF NORTH CAROLINA,
INCORPORATED, POST OFFICE BOX 1398, GASTONIA, NORTH CAROLINA 28053-1398.
13
<PAGE>
********************************************************************************
APPENDIX A
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS -- JANUARY 29, 1999
The undersigned hereby appoints WILLIAM C. BURKHARDT, WILLIAM A.V. CECIL
and G. SMEDES YORK, 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 29, 1999 and at any and all adjournments thereof. The
Board of Directors recommends a vote FOR the following items:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. Election of Directors. FOR the nominees FOR the nominees listed below WITHHOLD AUTHORITY to vote
listed below [ ] except as marked to the contrary [ ] 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.)
Bert Collins John W. Copeland D. Wayne Peterson Charles E. Zeigler, Jr.
2. Proposal to approve an amendment 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 [ ]
(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 29,
1999 ANNUAL MEETING IN GASTONIA,
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
instrument 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 by three hundred thousand (300,000) shares from nine hundred sixty-five
thousand seven hundred six (965,706) shares (after taking into account the
effect of a stock split on January 4, 1993) to one million two hundred
sixty-five thousand seven hundred six (1,265,706) shares, (iii) shorten the
eligibility period from twelve (12) to six (6) months and (iv) otherwise meet
current needs; 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
designated as such by the Board of Directors of PSNC from time to time.
B-1
<PAGE>
(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.
(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 there are no sales on said date,
then on the next preceding date on which there were sales of the Common
Stock.
(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
immediately 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.
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(u) "STOCK PURCHASE ACCOUNT," with respect to a Participant, means the
account established on the books and records of the Participating Employers
for such 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 next 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 such Offering Date, then on the
first Offering Date coinciding with or next following the date (if any) on
which such person again becomes an Employee.
(c) EXCLUSIONS. Notwithstanding any provision of the Plan to the contrary,
in no event shall any Employee whose customary employment with a Participating
Employer is for not more than five (5) months in any calendar year 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 Offering Date coinciding with or next
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 two hundred sixty-five thousand seven hundred six
(1,265,706) 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 two hundred sixty-five thousand seven hundred six (1,265,706) 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
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of Common Stock shall be determined 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 thirty (30) 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
(including stock which such Participant is considered to own under Section
425(d) of the Code) stock (including the Common Stock such Participant
would be entitled to purchase pursuant to an Offering) possessing 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 shall be reduced so that the number of shares of Common Stock
such Participant may purchase pursuant to such Offering when added to the
number of shares of stock of PSNC 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.
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
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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 the 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 shares 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
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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 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 of Common Stock for such
Participant as of the last day of such Offering Period to the extent provided
in Section 5.2(a) and the remaining balance in such Participant's Stock
Purchase Account shall be distributed to such Participant as soon as
administratively practical. 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 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 ministerial 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
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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 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, with the approval of the Board of Directors and the board of
directors of such Subsidiary Corporation, may 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 executed 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 (i) to amend or terminate the
Plan without further action by said Subsidiary Corporation as provided in
Article VII and (ii) to 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.
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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 material terms of this amendment and
restatement have been previously approved by the shareholders of PSNC and the
North Carolina Utilities Commission, except that the aggregate number of shares
as set forth in this restatement (after taking into account the effect of the
3-for-2 stock split during 1993) is subject to the approval of the shareholders
of PSNC.
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