[LOGO]
Progress Energy, Inc.
PO Box 1551
Raleigh, NC 27602
April 2, 2001
Dear Shareholder:
I am pleased to invite you to attend the 2001 Annual Meeting of the
Shareholders of Progress Energy, Inc. The meeting will be held at 10:00
o'clock a.m. on May 9, 2001, at the North Carolina Museum of Art, 2110 Blue
Ridge Road, Raleigh, North Carolina.
As described in the accompanying Notice of Annual Meeting of Shareholders
and Proxy Statement, the matters scheduled to be acted upon at the meeting are
the election of directors and one shareholder proposal.
Regardless of the size of your holdings, it is important that your shares be
represented at the meeting. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING
ENVELOPE OR VOTE BY TELEPHONE OR THE INTERNET IN ACCORDANCE WITH THE
INSTRUCTIONS ON THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE. Voting by any of
these methods will ensure that your vote is counted at the Annual Meeting if you
do not attend in person.
I am delighted that you have chosen to invest in Progress Energy, Inc. and
look forward to seeing you at the meeting. On behalf of the management and
directors of Progress Energy, Inc., thank you for your continued support and
confidence in 2001.
Sincerely,
/s/ William Cavanaugh III
William Cavanaugh III
Chairman of the Board, President and Chief Executive Officer
VOTING YOUR PROXY IS IMPORTANT
Your vote is important. Please promptly SIGN, DATE and RETURN the enclosed
proxy card or VOTE BY TELEPHONE OR THE INTERNET in accordance with the
instructions on the enclosed proxy card so that as many shares as possible will
be represented at the Annual Meeting.
A self-addressed envelope, which requires no postage if mailed in the United
States, is enclosed for your convenience.
PROGRESS ENERGY, INC.
410 S. WILMINGTON STREET
RALEIGH, NORTH CAROLINA 27601-1849
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 9, 2001
The Annual Meeting of the Shareholders of Progress Energy, Inc. will be held
at 10:00 o'clock a.m. on May 9, 2001, at the North Carolina Museum of Art, 2110
Blue Ridge Road, Raleigh, North Carolina. The meeting will be held in order to:
(1) Elect (i) two Class I directors of the Company to serve one-year terms;
(ii) one Class II director of the Company to serve a two-year term; and
(iii) four Class III directors of the Company to serve three-year terms.
(2) Vote on a shareholder proposal requiring the Company to invest in solar
and wind powered sources of electrical generation.
(3) Transact any other business, including consideration of shareholder
proposals, as may properly be brought before the meeting.
All shareholders of Common Stock of record at the close of business on
March 9, 2001, will be entitled to vote. The stock transfer books will remain
open.
By order of the Board of Directors.
WILLIAM D. JOHNSON
Executive Vice President,
General Counsel and Secretary
Raleigh, North Carolina
April 2, 2001
PROGRESS ENERGY, INC.
410 S. WILMINGTON STREET
RALEIGH, NORTH CAROLINA 27601-1849
------------------------
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the Board of Directors'
of Progress Energy, Inc. (Company) solicitation of proxies to be used at the
Annual Meeting of Shareholders. That meeting will be held at 10:00 o'clock a.m.
on May 9, 2001, at the North Carolina Museum of Art, 2110 Blue Ridge Road,
Raleigh, North Carolina. (For directions to the meeting location, please see map
included at the end of the Proxy Statement.) The Proxy Statement and form of
proxy were first sent to shareholders on or about April 2, 2001.
On June 19, 2000, Progress Energy, Inc. completed its holding company
restructuring and all of the shares of common stock of Carolina Power & Light
Company were exchanged for an equal number of shares of common stock of CP&L
Energy, Inc. On November 30, 2000, CP&L Energy, Inc. acquired all of the
outstanding shares of Florida Progress' common stock in accordance with the
Amended and Restated Plan of Exchange, including the related Plan of Share
Exchange, dated as of August 22, 1999, as amended and restated as of March 3,
2000 among the Company, Florida Progress Corporation and Carolina Power & Light
Company. On December 4, 2000, CP&L Energy, Inc. changed its name to Progress
Energy, Inc. The information provided in this proxy statement reflects the
consummation of the holding company restructuring. Information is included with
respect to Carolina Power & Light Company for the period prior to the
consummation of the holding company restructuring on June 19, 2000 and with
respect to Progress Energy, Inc. for the period following the consummation of
the holding company restructuring on June 19, 2000.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR 2000,
INCLUDING FINANCIAL STATEMENTS AND SCHEDULES, ARE AVAILABLE UPON WRITTEN
REQUEST, WITHOUT CHARGE, TO THE PERSONS WHOSE PROXIES ARE SOLICITED. ANY EXHIBIT
TO FORM 10-K IS ALSO AVAILABLE UPON WRITTEN REQUEST AT A REASONABLE CHARGE FOR
COPYING AND MAILING. WRITTEN REQUESTS SHOULD BE MADE TO MR. THOMAS R. SULLIVAN,
TREASURER, P. O. BOX 1551, RALEIGH, NORTH CAROLINA 27602.
THE SECURITIES AND EXCHANGE COMMISSION RECENTLY ADOPTED AMENDMENTS TO ITS
RULES REGARDING DELIVERY OF PROXY STATEMENTS AND ANNUAL REPORTS TO SHAREHOLDERS
SHOWING THE SAME ADDRESS. THE NEW DELIVERY RULES CAN BE SATISFIED BY DELIVERING
A SINGLE PROXY STATEMENT AND ANNUAL REPORT TO AN ADDRESS SHARED BY TWO OR MORE
OF OUR SHAREHOLDERS. THIS DELIVERY METHOD IS REFERRED TO AS HOUSEHOLDING. FOR
SHAREHOLDERS WHOSE SHARES OF PROGRESS ENERGY COMMON STOCK ARE HELD IN BROKERAGE
ACCOUNTS, A SINGLE COPY OF THE ANNUAL REPORT AND OF THE PROXY STATEMENT WILL BE
SENT TO MULTIPLE SHAREHOLDERS WHO SHARE THE SAME ADDRESS IF THEY HAVE PROVIDED
THEIR WRITTEN OR IMPLIED CONSENT TO SUCH DELIVERY.
IF YOU PREFER TO RECEIVE A SEPARATE COPY OF THE PROXY STATEMENT OR THE
ANNUAL REPORT, PLEASE WRITE TO SHAREHOLDER RELATIONS, P. O. BOX 1551, RALEIGH,
NORTH CAROLINA 27602 OR TELEPHONE US AT 800-662-7232, AND WE WILL PROMPTLY SEND
YOU SEPARATE COPIES.
1
PROXIES
The accompanying proxy is solicited by the Board of Directors of the Company
and the entire cost of solicitation will be borne by the Company. The Company
expects to solicit proxies primarily by mail. Proxies may also be solicited by
telephone, telegraph or personally by officers and employees of the Company, who
will not be specially compensated for such services.
You may vote shares either in person or by duly authorized proxy. In
addition, you may vote your shares by telephone or through the Internet by
following the instructions provided in the enclosed proxy form. Please be aware
that if you vote over the Internet, you may incur costs such as
telecommunication and Internet access charges for which you will be responsible.
The Internet and telephone voting facilities for shareholders of record will
close at 12:01 a.m. E.D.T. on the morning of the meeting. Any shareholder who
has executed a proxy and attends the meeting may elect to vote in person rather
than by proxy. You may revoke any proxy given by you in response to this
solicitation at any time before the proxy is exercised by delivering a written
notice of revocation, by filing with the Secretary of the Company a subsequently
dated, properly executed proxy or by attending the Annual Meeting and electing
to vote in person. Your attendance at the Annual Meeting, by itself, will not
constitute a revocation of a proxy. If you voted by telephone or through the
Internet, you may also revoke your vote by any of these three methods or you may
change your vote by voting again by telephone or through the Internet. If you
decide to vote by completing and mailing the enclosed proxy card, you should
retain a copy of the voter control number found on the proxy card in the event
that you decide later to change or revoke your proxy by accessing the Internet.
You should address any written notices of proxy revocation to: Progress
Energy, Inc., P.O. Box 1551, Raleigh, North Carolina 27602, Attention:
Secretary.
All shares represented by effective proxies received by the Company at or
before the Annual Meeting, and not revoked before they are exercised, will be
voted in the manner specified therein. Proxies that do not contain
specifications will be voted "FOR" the election of Directors as set forth in
this Proxy Statement, "AGAINST" the shareholder proposal set forth in this Proxy
Statement and, in the discretion of the named proxies, upon any other business
properly brought before the meeting.
If you are a Participant in the Company's Stock Purchase-Savings Plan,
shares allocated to your Plan account will be voted by the Trustee only if you
execute and return your proxy, or vote by telephone or the Internet. Company
stock remaining in the ESOP Stock Suspense Account that has not been allocated
to employee accounts shall be voted by the Trustee in the same proportion as
shares voted by Participants.
VOTING SECURITIES
The Directors of the Company have fixed March 9, 2001, as the record date
for shareholders entitled to vote at the Annual Meeting. Only holders of the
Company's Common Stock of record at the close of business on that date will be
entitled to notice of and to vote at the Annual Meeting. Each share is entitled
to one vote. As of March 9, 2001, there were outstanding 206,082,949 shares of
Common Stock.
Pursuant to the provisions of the North Carolina Business Corporation Act,
Directors will be elected by a plurality of the votes cast by the shares
entitled to vote. Withheld votes or shares held in street name that are not
voted in the election of Directors will not be included in determining the
number of votes cast. Approval of the shareholder proposal and other matters to
be presented at the Annual Meeting, if any, generally will require the
affirmative vote of a majority of the shares voted on such matters. Abstentions
from voting and broker non-votes will not have the effect of a "negative" vote
with respect to any such matters.
2
ELECTION OF DIRECTORS
Based on the report of the Corporate Governance Committee (see page 9), the
Board of Directors nominates the seven nominees listed below. The nominees to
serve as Directors in Class I for terms expiring in 2002 and until their
respective successors are elected and qualified are W. D. Frederick, Jr. and
Richard Korpan. The nominee to serve as a Director in Class II for a term
expiring in 2003 and until his successor is elected and qualified is Richard A.
Nunis. The nominees to serve as Directors in Class III for terms expiring in
2004 and until their respective successors are elected and qualified are William
Cavanaugh III, Charles W. Coker, Jean Giles Wittner and E. Marie McKee.
(Ms. McKee will resign as a Class I Director upon her election to Class III.)
The exchange agreement among the Company, Carolina Power & Light Company,
and Florida Progress Corporation provided that, at the effective time of the
share exchange, the Progress Energy board of directors would consist of 14
directors, ten of whom would be designated by Progress Energy and four of whom
would be designated by Florida Progress from the Florida Progress board of
directors, and acceptable to Progress Energy. Florida Progress designated
Richard Korpan, W. D. Frederick, Jr., Richard A. Nunis and Jean Giles Wittner to
be directors of Progress Energy. The Board of Directors elected
Messrs. Frederick, Korpan and Nunis, and Ms. Wittner as Directors effective as
of November 30, 2000. The Board placed the directors designated by Florida
Progress among the three classes of directors of the Company so that, to the
extent possible, there are a proportionate number of Florida Progress
Corporation and Carolina Power & Light Company designees in each class.
Under the letter agreement between Florida Progress and Carolina Power &
Light, dated August 19, 1999, Carolina Power & Light Company agreed that,
following the initial terms, the Florida Progress Corporation designees would be
renominated to the Company's Board of Directors if they are interested in
continuing to serve, meet the requirements of the Company's bylaws, and their
performance and contributions have been satisfactory to the other members of the
Board. The Corporate Governance Committee of the Company's Board of Directors,
along with one director designated by Florida Progress Corporation, made the
initial assessment of whether new or existing directors would be nominated for
the Company's Board of Directors. Their assessment was then reviewed by the
entire Board of Directors.
There are no family relationships among any of the nominees for Director or
among any nominee and any Director or officer of the Company or its
subsidiaries, and except as described above, there is no arrangement or
understanding between any nominee and any other person pursuant to which the
nominee was selected.
Valid proxies received pursuant to this solicitation will be voted in the
manner specified. Where specifications are not made, the shares represented by
the accompanying proxy will be voted for the election of the seven nominees.
Votes (other than votes withheld) will be cast pursuant to the accompanying
proxy for the election of the nominees listed above unless, by reason of death
or other unexpected occurrence, one or more of such nominees shall not be
available for election, in which event it is intended that such votes will be
cast for such substitute nominee or nominees as may be determined by the persons
named in such proxy. The Board of Directors has no reason to believe that any of
the nominees listed above will not be available for election as a Director.
The names of the seven nominees for election to the Board of Directors and
of the other Directors, along with their ages, principal occupations or
employment for the past five years, and current directorships are set forth
below. Information concerning the number of shares of the Company's Common Stock
beneficially owned, directly or indirectly, by all current Directors appears on
pages 6 and 7 of this Proxy Statement.
3
NOMINEES FOR ELECTION--CLASS I
(Terms expiring in 2002)
W. D. FREDERICK, JR., age 66 is a citrus grower and rancher. He is a retired
partner in the law firm of Holland & Knight. He has served as a Director of the
Company since November 30, 2000 and also serves as a director of Carolina
Power & Light Company, Florida Progress Corporation, Blue Cross/Blue Shield of
Florida and SunTrust Bank, Central Florida, N.A.
RICHARD KORPAN, age 59, is retired Chairman, President and Chief Executive
Officer of Florida Progress Corporation. He served as that company's Chairman
from July 1, 1998 to November 30, 2000, and held the positions of President and
Chief Executive Officer from 1991 and June 1997, respectively, until
November 30, 2000. He has served as a Director of the Company since
November 30, 2000 and also serves as a director of Carolina Power & Light
Company and Florida Progress Corporation.
NOMINEE FOR ELECTION--CLASS II
(Term Expiring in 2003)
RICHARD A. NUNIS, age 68 is President of New Business Solutions, Inc. He
previously served as Chairman, Walt Disney Parks & Resorts. He has served as a
Director of the Company since November 30, 2000 and also serves as a director of
Carolina Power & Light Company and Florida Progress Corporation.
NOMINEES FOR ELECTION--CLASS III
(Terms Expiring in 2004)
WILLIAM CAVANAUGH III, age 62, is Chairman, President and Chief Executive
Officer of the Company (since August 1999). (The Company was formerly known as
(i) CP&L Holdings, Inc. from August 1999 to February 2000 and (ii)
CP&L Energy, Inc. from February 2000 to December 2000). He also serves
(July 2000 to present) as Chairman, Progress Energy Service Company, LLC,
(formerly known as CP&L Service Company LLC); Chairman, Florida Power
Corporation (November 30, 2000 to present); Chairman, Progress Energy
Ventures, Inc. (formerly known as CPL Energy Ventures, Inc.), (March 2000 to
present); and Chairman, President and Chief Executive Officer, Carolina Power &
Light Company ("CP&L") (May 1999 to present). He previously served as President
and Chief Executive Officer, CP&L, (from October 1996 to May 1999); and as
President and Chief Operating Officer of CP&L (from September 1992 to
October 1996). He has served as a Director of the Company since August 1999 and
also serves as a director of Florida Progress Corporation and Duke-Weeks Realty
Corporation.
CHARLES W. COKER, age 67, is Chairman of Sonoco Products Company, a
manufacturer of paperboard and paper and plastics packaging products (since
April 1998). He previously served as Chairman and Chief Executive Officer of
Sonoco Products Company (from 1976 to April 1998). He has served as a Director
of the Company since November 30, 2000 and also serves as a director of Carolina
Power & Light Company and Florida Progress Corporation, BankAmerica Corporation,
Sara Lee Corporation and Springs Industries, Inc.
E. MARIE MCKEE, age 50, is Senior Vice President of Corning Incorporated, a
developer of technologies for glass, ceramics, fiber optics and photonics. She
has served as a Director of the Company since November 30, 2000 and also serves
as a director of Carolina Power & Light Company and Florida Progress
Corporation.
4
JEAN GILES WITTNER, age 66, is President and Secretary of Wittner &
Co., Inc. a Florida holding company for companies that provide life insurance
products, employee benefit insurance programs, and commercial office leasing and
property management services. She has served as a director of the Company since
November 30, 2000 and also serves as a director of Carolina Power & Light
Company, Florida Progress Corporation and Raymond James Bank, FSB.
DIRECTORS CONTINUING IN OFFICE--CLASS I
(Terms Expiring in 2002)
JOHN H. MULLIN, III, age 59, is Chairman of Ridgeway Farm, LLC, a limited
liability company engaged in timber and agricultural activities. He has served
as a Director of the Company since November 30, 2000 and also serves as a
director of Carolina Power & Light Company, Florida Progress Corporation,
Graphic Packaging International Corp. and The Liberty Corporation, and as a
Trustee of The Putnam Funds.
WILLIAM O. MCCOY, age 67, is a partner in Franklin Street Partners, an
investment management firm (since 1998). He previously served as Interim
Chancellor of the University of North Carolina from April 1999 to August 14,
2000 and as Vice President-Finance of the University of North Carolina from 1995
to 1998. He has served as a Director of the Company since November 30, 2000 and
also serves as a director of Carolina Power & Light Company and Florida Progress
Corporation, The Kenan Corporation, Liberty Corporation, Duke-Weeks Realty
Corporation, TeraGlobal Communications Corp., Acterna Corp. and North Carolina
Capital Management Trust and as a Trustee of Fidelity Investments.
J. TYLEE WILSON, age 69, is retired Chairman and Chief Executive Officer of
RJR Nabisco, Inc. He has served as a Director of the Company since November 30,
2000 and also serves as a director of Carolina Power & Light Company and Florida
Progress Corporation.
DIRECTORS CONTINUING IN OFFICE--CLASS II
(Terms Expiring in 2003)
EDWIN B. BORDEN, age 67, is President of The Borden Manufacturing Company, a
textile management services company. He has served as a Director of the Company
since November 30, 2000 and also serves as a director of Carolina Power & Light
Company, Florida Progress Corporation, Jefferson-Pilot Corporation, Ruddick
Corporation and Winston Hotels, Inc.
DAVID L. BURNER, age 61, is Chairman, President and Chief Executive Officer
of The BFGoodrich Company (since July 1997). He previously served as President
and Chief Executive Officer (from December 1996 to July 1997) and President
(from December 1995 to December 1996) of The BFGoodrich Company and as
President, BFGoodrich Aerospace and Executive Vice President of The BFGoodrich
Company (from January 1995 to December 1995). He has served as a Director of the
Company since November 30, 2000 and also serves as a director of Carolina
Power & Light Company, Florida Progress Corporation, Brush Engineered
Materials, Inc., Milacron, Inc. and Briggs & Stratton Corporation.
RICHARD L. DAUGHERTY, age 65, is the Executive Director of NCSU Research
Corporation, a development corporation of the Centennial Campus of North
Carolina State University (since March 1995). He has served as a Director of the
Company since November 30, 2000 and also serves as a director of Carolina
Power & Light Company and Florida Progress Corporation.
5
PRINCIPAL SHAREHOLDERS
The following table sets forth the only shareholder known to the Company to
beneficially own more than 5% of the outstanding shares of the Common Stock of
the Company as of December 31, 2000. The Company has no other class of voting
securities.
NAME AND ADDRESS OF NUMBER OF SHARES PERCENTAGE OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
- -------------- ----------------------------------- ------------------- -------------------
Common Stock State Street Bank and Trust Company 23,425,119(1) 11.4%
225 Franklin Street
Boston, MA 02110
(1)Consists of shares of Common Stock held by State Street Bank and Trust
Company, acting in various fiduciary capacities. State Street Bank has sole
power to vote with respect to 3,439,729 shares, shared power to vote with
respect to 19,581,238 shares, sole power to dispose of 23,412,485 shares and
shared power to dispose of 12,634 shares.
MANAGEMENT OWNERSHIP OF COMMON STOCK
The following table describes the beneficial ownership of the Common Stock
of the Company and ownership of Common Stock units as of December 31, 2000, of
(i) all current Directors and nominees for Director, (ii) each executive officer
of the Company named in the Summary Compensation Table presented later in this
document and (iii) all Directors and executive officers as a group. A unit of
Common Stock does not represent an equity interest in the Company and possesses
no voting rights, but is equal in value at all times to a share of Common Stock.
As of December 31, 2000, none of the individuals or group in the above
categories owned one percent (1%) or more of the Company's voting securities.
- -----------------------------------------------------------------------------
NUMBER OF SHARES OF COMMON STOCK
BENEFICIALLY OWNED(1) AND UNITS
REPRESENTING
NAME SHARES OF COMMON STOCK(2,3,4,5,6,7)
- -----------------------------------------------------------------------------
Edwin B. Borden 5,042 Common Stock
22,333(2) Units
David L. Burner 0 Common Stock
2,689(3) Units
William Cavanaugh III 219,989(8) Common Stock
144,116(4,5,6,7) Units
Charles W. Coker 4,448(9) Common Stock
26,785(2) Units
Richard L. Daugherty 947 Common Stock
15,020(2) Units
W. D. Frederick, Jr. 1,000 Common Stock
74(3) Units
William D. Johnson 27,157(10) Common Stock
10,198(5,6,7) Units
Richard Korpan 1,000 Common Stock
0 Units
Estell C. Lee 4,484(11) Common Stock
21,952(2) Units
William O. McCoy 1,000 Common Stock
7,461(2) Units
Robert B. McGehee 36,179(12) Common Stock
16,167(5,6,7) Units
6
- -----------------------------------------------------------------------------
NUMBER OF SHARES OF COMMON STOCK
BENEFICIALLY OWNED(1) AND UNITS
REPRESENTING
NAME SHARES OF COMMON STOCK(2,3,4,5,6,7)
- -----------------------------------------------------------------------------
E. Marie McKee 600 Common Stock
2,869(3) Units
John H. Mullin, III 1,000 Common Stock
3,525(2) Units
Richard A. Nunis 2,000 Common Stock
0 Units
William S. Orser 51,615(13) Common Stock
33,171(4,5,6) Units
Peter M. Scott III 32,802(14) Common Stock
5,329(5,6) Units
J. Tylee Wilson 5,000 Common Stock
6,518(2) Units
Jean Giles Wittner 1,000 Common Stock
0 Units
Shares of Common Stock beneficially
owned by all directors and executive
officers of the Company as a group
(28 persons) 615,936 Common Stock
- ------------------------------
(1)Unless otherwise noted, all shares of Common Stock set forth in the table
are beneficially owned, directly or indirectly, with sole voting and investment
power, by such shareholder.
(2)Consists of units representing Common Stock of the Company under the
Directors' Deferred Compensation Plan and the Non-Employee Director Stock Unit
Plan (see "Directors' Compensation" on page 11).
(3)Consists of units representing Common Stock of the Company under the
Directors' Deferred Compensation Plan.
(4)Consists of performance units under the Long-Term Compensation Program.
(5)Consists of performance shares awarded under the Performance Share
Sub-Plan of the 1997 Equity Incentive Plan (see "Long-Term Incentive Plan Awards
Table" on page 16 and footnote 1 thereunder for performance shares awarded in
2000).
(6)Consists of replacement units to replace the value of Company
contributions to the Stock Purchase-Savings Plan that would have been made but
for the deferral of salary under the Management Deferred Compensation Plan and
contribution limitations under Section 415 of the Internal Revenue Code of 1986,
as amended (see "Summary Compensation Table" on page 13 and footnote 5
thereunder).
(7)Consists of performance units recorded to reflect awards deferred under
the Management Incentive Compensation Plan.
(8)Includes 200,000 shares of Restricted Stock and 7,823 shares with shared
voting and investment power owned by members of immediate family to which
beneficial ownership has not been disclaimed.
(9)Includes 4,248 shares with shared voting and investment power owned by
members of immediate family to which beneficial ownership has not been
disclaimed.
(10)Includes 24,600 shares of Restricted Stock.
(11)Includes 160 shares with shared voting and investment power owned by
members of immediate family to which beneficial ownership has not been
disclaimed.
(12)Includes 33,200 shares of Restricted Stock.
(13)Includes 45,000 shares of Restricted Stock.
(14)Includes 32,700 shares of Restricted Stock.
7
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On November 30, 2000, CP&L Energy, Inc., a North Carolina corporation,
acquired all of the outstanding common stock of Florida Progress Corporation, a
Florida corporation, in accordance with the Amended and Restated Plan of
Exchange, including the related Plan of Share Exchange, dated as of August 22,
1999, as amended and restated as of March 3, 2000, among CP&L Energy (renamed
Progress Energy, Inc. effective December 4, 2000), Florida Progress Corporation
and Carolina Power & Light Company, a North Carolina corporation.
Mr. Korpan, a nominee to the Company's Board of Directors and formerly an
officer and director of Florida Progress Corporation had interests in the share
exchange that were different from and in addition to his rights as a Florida
Progress Corporation shareholder. He received the following consideration as a
result of those interests: $11,551,588 representing payouts under the
change-in-control provisions of the Long-Term Incentive Plan; $4,182,000
representing severance payments; and 79,033 Progress Energy Contingent Value
Obligations (CVOs). (Each contingent value obligation represents the right to
receive contingent payments based upon the net after-tax cash flow to Progress
Energy generated by certain synthetic fuel plants.) Mr. Korpan is also entitled
to receive continuation of welfare benefits comparable to those in place before
the transaction for 36 months following termination, with lifetime access to
medical insurance at his expense thereafter; and reimbursement for reasonable
legal fees and disbursements related to the taxation of payments made to the
individual, not to exceed $15,000.
Messrs. Frederick and Nunis, and Ms. Wittner, nominees to the Company's
Board of Directors who were formerly directors of Florida Progress Corporation
each had interests in the transaction based upon their prior ownership of
Florida Progress Corporation common stock and/or phantom stock units awarded
pursuant to the Florida Progress Corporation Phantom Stock Plan for Non-Employee
Directors. Mr. Frederick received $343,116 and 6,350 CVOs; Mr. Nunis received
$1,498,401 and 27,749 CVOs; and Ms. Wittner received $673,639 and 12,475 CVOs.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
On September 27, 1999, Florida Progress Corporation and its directors were
served with a purported class action complaint, Case No. 99-6167CI-20, styled
Lisa Fruchter, on behalf of herself and all others similarly situated, v.
Florida Progress Corporation; Richard Korpan; Clarence V. McKee; Richard A.
Nunis, Jean Giles Wittner; Michael P. Graney; Joan D. Ruffier, Robert T. Stuart,
Jr.; W. D. Frederick; and Vincent J. Naimoli. The complaint was filed in the
Circuit Court of the 6th Judicial Circuit in and for Pinellas County, Florida on
September 14, 1999. The complaint seeks class action status and injunctive
relief (1) declaring that the agreement and plan of exchange was entered into in
breach of the fiduciary duties of the Florida Progress Corporation board of
directors, (2) enjoining Florida Progress Corporation from proceeding with the
share exchange, (3) rescinding the agreement and plan of exchange;
(4) enjoining any other business combination until an auction is conducted to
obtain the highest price possible for Florida Progress Corporation,
(5) directing the Florida Progress Corporation board of directors to commence
such an auction, and (6) awarding the class an unspecified amount of damages.
The complaint also seeks an award of costs and attorneys' fees. Florida Progress
Corporation believes this action is without merit and intends to vigorously
defend itself against this action. The share exchange was consummated on
November 30, 2000.
8
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and executive officers to file reports of their holdings and
transactions in the Company's securities with the Securities and Exchange
Commission and the New York Stock Exchange. Based on Company records and other
information, the Company believes that all Section 16(a) filing requirements
applicable to its Directors and executive officers with respect to the Company's
2000 fiscal year were met.
BOARD OF DIRECTORS
The Board of Directors is currently comprised of fourteen (14) members. The
Board of Directors met eight times in 2000. Average attendance of the Directors
at the meetings of the Board and its Committees held during 2000 was 96%.
The Board of Directors appoints from its members an Executive Committee, a
Committee on Audit and Corporate Performance, a Committee on Finance, a
Committee on Operations, Environmental, Health and Safety Issues, a Committee on
Organization and Compensation, and a Corporate Governance Committee. The
membership and functions of the standing Board Committees, as of December 31,
2000, are discussed below.
EXECUTIVE COMMITTEE
The Executive Committee is presently composed of one Officer/Director and
five Directors--Messrs. William Cavanaugh III, Chairman, Edwin B. Borden,
Charles W. Coker, Richard L. Daugherty, William O. McCoy and J. Tylee Wilson.
The authority and responsibility of the Executive Committee are provided in the
Company's Charter and By-Laws. The Committee held one meeting in 2000.
AUDIT AND CORPORATE
PERFORMANCE COMMITTEE
The Audit and Corporate Performance Committee is presently composed of seven
non-employee Directors--Messrs. Richard L. Daugherty, Chairman, David L. Burner,
W. D. Frederick, Jr., Richard Korpan and John H. Mullin, III and Ms. Estell C.
Lee and Ms. Jean Giles Wittner. The work of this Committee includes reviewing
the annual financial results of the Company and monitoring the activities of the
independent auditors and the internal audit department. The Committee also
reviews corporate goals established by the Company and the Company's progress in
achieving these goals. The Committee held three meetings in 2000.
CORPORATE GOVERNANCE COMMITTEE
The Corporate Governance Committee is presently composed of four
non-employee Directors--Messrs. J. Tylee Wilson, Chairman, Edwin B. Borden,
Charles W. Coker and John H. Mullin, III. This Committee is responsible for
making recommendations to the Board with respect to the governance of the
Company and the Board. Its responsibilities include recommending amendments to
the Company's Charter and By-Laws, making recommendations regarding the
structure, charter, practices and policies of the Board, ensuring that processes
are in place for annual CEO performance appraisal and review of succession
planning and management development, recommending a process for the annual
assessment of Board performance, recommending criteria for Board membership,
reviewing the qualifications of and recommending to the Board nominees for
election. The Committee will consider qualified candidates for
9
director nominated by shareholders at an annual meeting of shareholders;
provided, however, that written notice of any shareholder nominations must be
received by the Secretary of the Company no later than the close of business on
the 60th day prior to the first anniversary of the immediately preceding year's
annual meeting. The Committee held four meetings in 2000.
FINANCE COMMITTEE
The Finance Committee is presently composed of seven non-employee
Directors--Messrs. William O. McCoy, Chairman, David L. Burner, Charles W.
Coker, Richard Korpan, John H. Mullin, III, Richard A. Nunis and J. Tylee
Wilson. The Committee reviews and oversees the Company's financial policies and
planning, strategic planning and investments and pension funds. The Committee
also monitors the Company's risk management activities and reviews the Company's
dividend policy and proposed budget. The Committee held six meetings in 2000.
COMMITTEE ON OPERATIONS, ENVIRONMENTAL,
HEALTH AND SAFETY ISSUES
The Committee on Operations, Environmental, Health and Safety Issues is
presently composed of six non-employee Directors--Messrs. Edwin B. Borden,
Chairman, Richard L. Daugherty and W. D. Frederick, Jr. and Ms. Estell C. Lee,
Ms. E. Marie McKee and Ms. Jean Giles Wittner. The Committee reviews the
Company's load forecasts and plans to carry out its development program and
reviews and assesses Company policies, procedures, and practices relative to the
protection of the environment and the safety of employees, customers,
contractors, and the public. The Committee advises the Board and makes
recommendations for the Board's consideration regarding operational,
environmental, and safety-related issues. The Committee held two meetings in
2000.
COMMITTEE ON ORGANIZATION
AND COMPENSATION
The Committee on Organization and Compensation is presently composed of six
non-employee Directors--Messrs. Charles W. Coker, Chairman, Edwin B. Borden,
William O. McCoy, Richard A. Nunis and J. Tylee Wilson and Ms. E. Marie McKee.
The Committee ascertains that personnel policies and procedures are in keeping
with all governmental rules and regulations and are designed to attract and
retain competent, talented employees and develop the potential of these
employees. The Committee reviews all executive development plans, makes
executive compensation decisions and oversees plans for management succession.
The Committee held nine meetings in 2000.
10
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
SPONSORSHIP OF THE VARIOUS BENEFIT PLANS DISCUSSED IN THIS SECTION WAS
TRANSFERRED FROM CAROLINA POWER & LIGHT COMPANY TO PROGRESS ENERGY, INC.,
EFFECTIVE AUGUST 1, 2000.
DIRECTORS' COMPENSATION
Directors who are not employees of the Company receive an annual retainer of
$35,000, of which $15,000 is automatically deferred under the Directors'
Deferred Compensation Plan (see below), and an attendance fee of $1,500 per
meeting for regularly scheduled Board meetings. Directors who are not employees
of the Company also receive an attendance fee for committee meetings of $1,000.
The Chairman of each Committee receives an additional retainer of $3,000 per
year. Directors who are officers do not receive an annual retainer or attendance
fees. All Directors are reimbursed for expenses incident to their service as
Directors.
In addition to the $15,000 annual retainer and any matching contributions
under the incentive compensation program that are automatically deferred,
outside Directors may elect to defer any portion of the remainder of their
annual retainer and Board attendance fees until after the termination of their
service on the Board under the Directors' Deferred Compensation Plan. Any
deferred fees are deemed to be invested in a number of Units of Common Stock of
the Company, but participating Directors receive no equity interest or voting
rights in the Common Stock. The number of Units credited to the account of a
participating Director is equal to the dollar amount of the deferred fees
divided by the average of the high and low selling prices (i.e., market value)
of the Common Stock on the day the deferred fees would otherwise be payable to
the participating Director. The number of Units in each account is adjusted from
time to time to reflect the payment of dividends on the number of shares of
Common Stock represented by the Units. Unless otherwise agreed to by the
participant and the Board, when the participant ceases to be a member of the
Board of Directors, he or she will receive cash equal to the market value of a
share of the Company's Common Stock on the date of payment multiplied by the
number of Units credited to the participant's account.
Directors are also eligible for matching contributions of up to $15,000
under an incentive compensation program. Awards under this program are based
upon the achievement of the corporate incentive goals established each year by
the Board and used as the basis for a matching contribution of shares of Common
Stock for participating employees in the Company's Stock Purchase-Savings Plan.
In the event that five of the corporate incentive goals are met, the $15,000
portion of the annual retainer that is automatically deferred pursuant to the
Directors' Deferred Compensation Plan will be increased by 50 percent, with an
additional 10 percent increase for each corporate incentive goal met in excess
of five (up to a maximum matching contribution of 100 percent). Such matching
contribution is automatically deferred until the Director's retirement.
Effective January 1, 1998, the Board of Directors Retirement Plan was
replaced by the Non-Employee Director Stock Unit Plan. Directors had the option
of rolling the value of their benefits under the Retirement Plan into the Stock
Unit Plan. Effective January 1, 2001, the Stock Unit Plan provides for an annual
grant of 350 "stock units" (previously 150 stock units) to each non-employee
Director who has served on the Board for at least one year and for matching
grants of up to 350 additional units (previously up to 150 additional units) to
be awarded to those Directors for each year in which certain incentive goals
established by the Board are met. Each unit is equal in value to one share of
the Company's Common Stock. The number of units is adjusted from time to time to
reflect the payment of dividends with respect
11
to the Common Stock of the Company. Benefits under the Plan vest after a
participant has been a member of the Board for five years, and are payable
solely in cash.
All of the Directors who were existing Directors or retired Directors on or
prior to September 16, 1998 participate in a Directors' Educational Contribution
Plan. The Plan is funded by policies of corporate-owned life insurance on the
lives of pairs of Directors, with proceeds payable to the Company at the death
of the second to die in each pair. All costs of the Plan are expected to be
covered from the life insurance proceeds to be received by the Company. Pursuant
to this Plan, the Company will make a contribution in the name of each Director
to an educational institution or approved educational foundation or fund in
North Carolina or South Carolina selected by the Director and approved by the
Executive Committee of the Board of Directors. The contribution will be made at
the later to occur of the retirement of the Director from the Board of Directors
or ten years from the date of adoption of the Plan. If a Director has served as
a Director for at least five but less than ten years at the time the
contribution is to be made, the Company will contribute $250,000 in the name of
the Director. If the Director has served for ten or more years, the amount of
the contribution will be $500,000. The Plan was discontinued September 16, 1998
and will not be offered as a benefit for any Director who joins the Board
subsequent to that date. The Plan may be terminated at any time in the
discretion of the Executive Committee without recourse or obligation to the
Company.
Mr. Sherwood H. Smith, Jr., a former member of the Board and former Chief
Executive Officer of the Company, retired from the Company on December 31, 1996.
In April of 1999, Mr. Smith entered into an Agreement with the Company pursuant
to which he agreed to provide various services to the Company beginning
September 30, 1999 as requested by and at a level of compensation to be approved
by the Company's Chief Executive Officer. Pursuant to this agreement, the
Company provided Mr. Smith perquisites valued at approximately $78,791 during
the fiscal year ended December 31, 2000.
STOCK OWNERSHIP GUIDELINES
In an effort to more closely link the interests of the Company's Directors
with those of its shareholders, in December 2000, the Board of Directors adopted
stock ownership guidelines which are designed to ensure that the Company's
outside Directors have a significant financial equity investment in the Company.
Those guidelines require the outside Directors to own Company common stock or
Units whose value is equivalent to the value of that stock with a total value
equal to five times the annual retainer paid to outside Directors. The stock
and/or Units may be acquired over a five-year period and may include Units
acquired under the Directors' Deferred Compensation Plan and the Non-Employee
Director Stock Unit Plan.
SERVICE ON BOARDS OF SUBSIDIARIES
All compensation paid to outside Directors is for services rendered on
behalf of the Company's Board of Directors and the boards of Carolina Power &
Light Company and Florida Progress Corporation.
12
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------------------------------------------------------
OTHER RESTRICTED
ANNUAL STOCK LTIP ALL OTHER
NAME AND SALARY(1) BONUS(2) COMPENSATION(3) AWARD(S)(4,5) PAYOUTS(6) COMPENSATION(7)
PRINCIPAL POSITION YEAR ($) ($) ($) ($) ($) ($)
- ---------------------------------------------------------------------------------------------------------------------
William Cavanaugh III, 2000 $871,483 $1,285,000 $126,616(8) $3,871,402(9) N/A $258,389(10)
Chairman, President 1999 778,849 610,000(11) 76,991 34,046 N/A 497,305
and Chief Executive 1998 700,027 400,000(12) 90,228 4,240,076 N/A 199,614
Officer
William S. Orser, 2000 $469,789 $ 275,000 $ 7,144 $ 178,624(13) N/A $105,758(14)
Group President-- 1999 436,759 220,000 1,735 15,683 N/A 203,193
CP&L 1998 397,345 160,000 4,537 1,698,088 N/A 67,243
Robert B. McGehee, 2000 $337,513 $ 352,000(15) $ 15,901 $ 280,030(16) N/A $ 74,807(17)
Executive Vice 1999 282,056 150,000 54,734 258,518 N/A 151,357
President 1998 259,158 90,000 2,216 789,588 N/A 63,062
Peter M. Scott III, 2000 $206,613 $ 304,000(18) $ 50,350 $1,126,195(19) N/A $ 50,485(20)
Executive Vice 1999 N/A N/A N/A N/A N/A N/A
President and 1998 N/A N/A N/A N/A N/A N/A
Chief Financial
Officer (employed
as of May 8, 2000)
William D Johnson, 2000 $247,009 $ 239,000(21) $ 26,734 $ 405,131(22) N/A $ 38,012(23)
Executive Vice 1999 192,052 100,000 56 288,450(24) N/A 22,206(25)
President, General 1998 164,462 46,000 23 213,797(26) N/A 15,960(27)
Counsel and
Secretary
(1)Consists of base salary prior to (i) employee contributions to the Stock
Purchase-Savings Plan and (ii) voluntary deferrals, if any, under the Management
Deferred Compensation Plan. See "Other Benefit Opportunities" on page 26.
(2)Except as otherwise noted, consists of amounts awarded with respect to
performance in the stated year under the Management Incentive Compensation Plan.
See "Other Annual Compensation Opportunities" on page 23.
(3)Consists of gross-up payments for certain federal and state income tax
obligations, and where indicated by footnote disclosure, certain perquisites.
(4)Includes the value of restricted stock awards as of the grant date
(calculated by multiplying the closing market price of the Company's
unrestricted stock on the date of grant by the number of shares awarded) granted
pursuant to the Company's 1997 Equity Incentive Plan. None of the restricted
stock awards will vest, in whole or in part, in under three years from the date
of grant. During the period for which the shares are restricted, the grantee
will receive all voting rights and cash dividends associated with the restricted
stock.
(5)Includes the value of matchable deferrals credited to the account of a
participant to replace the value of Company contributions to the Stock
Purchase-Savings Plan that would have been made on behalf of the participant but
for the deferral of salary under the Management Deferred Compensation Plan and
compensation limitations
13
under Section 415 of the Internal Revenue Code of 1986, as amended ("Phantom
Stock Units"). Phantom Stock Units do not represent an equity interest in the
Company and the crediting of such Units to a participant's account does not
convey any voting rights. However, a Phantom Stock Unit is equal in value at all
times to a share of the Company's Common Stock. Additional Phantom Stock Units
are credited from time to time to reflect the payment of dividends on the
underlying Common Stock. For participants with less than five years of service
with the Company, these Phantom Stock Units vest two years from the end of the
calendar year in which they are granted. Participants with five or more years of
service with the Company are 100% vested in all Phantom Stock Units credited to
their accounts. Phantom Stock Units are not deemed "Matured" and therefore
available for reallocation to other deemed investment funds chosen by the
participant until two years after the end of the Plan Year for which they were
allocated. Payment of the value of the Phantom Stock Units will be made in cash
and will generally be made on one of the following dates in accordance with the
participant's deferral election: (i) the April 1 following the date that is five
or more years from the last day of the Plan Year for which the participant's
salary deferral is made, (ii) the April 1 following the participant's
retirement, or (iii) the April 1 following the first anniversary of the
participant's retirement. The amount of the payment will equal the market value
of a share of the Company's Common Stock on the payment date of payout
multiplied by the number of units credited to the account of the participant.
See "Other Benefit Opportunities" on page 26.
(6)Consists of the value of payouts of awards granted under the Company's
Long-Term Compensation Program.
(7)Amounts reported in this column include dividends earned in 2000 on
awards granted under the Long-Term Compensation Program and dividends allocated
in 2000 on awards granted under the Performance Share Sub-Plan.
(8)Consists of (i) $48,569 in gross-up payments for certain federal and
state income tax obligations; and (ii) certain perquisites, including spousal
travel expenses of $24,371, which exceed thresholds for footnote disclosure.
(9)Consists of (i) 100,000 shares of Restricted Stock valued at $3,837,594
on September 25, 2000; and (ii) 1,012 Phantom Stock Units based on the market
value of a share of Common Stock on the date such units were credited to the
account of the participant. Mr. Cavanaugh owns a total of 200,000 shares of
Restricted Stock which were valued at $9,837,500 as of December 31, 2000.
(10)Consists of (i) $52,486 which represents dividends earned in 2000 on
performance units awarded under the Long-Term Compensation Program;
(ii) $94,576 which represents dividends allocated in 2000 on performance shares
awarded under the Performance Share Sub-Plan; (iii) $8,460 which represents
Company contributions under the Stock Purchase-Savings Plan; and (iv) $102,867
which represents the dollar value of the premium relating to the term portion
and the present value of the premium relating to the whole life portion of the
benefit to be received pursuant to the Executive Permanent Life Insurance
Program.
(11)Mr. Cavanaugh has elected to defer receipt of this award until after his
date of retirement.
(12)Mr. Cavanaugh has elected to defer receipt of this award until after his
date of retirement.
(13)Consists of (i) 5,000 shares of Restricted Stock valued at $162,133 as
of July 12, 2000; and (ii) 499 Phantom Stock Units based on the market value of
a share of Common Stock on the date such units were credited to the account of
the participant. Mr. Orser owns a total of 45,000 shares of Restricted Stock
which were valued at $2,213,438 as of December 31, 2000.
(14)Consists of (i) $21,326 which represents dividends earned in 2000 on
performance units awarded under the Long-Term Compensation Program;
(ii) $35,087 which represents dividends allocated in 2000 on performance shares
awarded under the Performance Share Sub-Plan; (iii) $9,420 which represents
Company contributions under the Stock Purchase-Savings Plan; and (iv) $39,925
which represents the dollar value of the premium relating to the term portion
and the present value of the premium relating to the whole life portion of the
benefit to be received pursuant to the Executive Permanent Life Insurance
Program.
14
(15)Consists of amounts awarded under the Management Incentive Compensation
Plan and as a result of the Progress Energy/Florida Progress transaction.
(16)Consists of (i) 8,400 shares of Restricted Stock valued at $272,383 as
of July 12, 2000; and (ii) 225 Phantom Stock Units based on the market value of
a share of Common Stock on the date such units were credited to the account of
the participant. Mr. McGehee owns a total of 33,200 shares of Restricted Stock
which were valued at $1,633,026 as of December 31, 2000.
(17)Consists of (i) $23,854 which represents dividends allocated in 2000 on
performance shares awarded under the Performance Share Sub-Plan; (ii) $8,460
which represents Company contributions under the Stock Purchase Savings Plan;
and (iii) $42,493 which represents the dollar value of the premium relating to
the term portion and the present value of the premium relating to the whole life
portion of the benefit to be received pursuant to the Executive Permanent Life
Insurance Program.
(18)Consists of (i) transition compensation paid pursuant to Mr. Scott's
employment agreement, and (ii) amounts awarded under the Management Incentive
Compensation Plan and as a result of the Progress Energy/Florida Progress
transaction.
(19)Consists of (i) 32,700 shares of Restricted Stock valued at $1,608,431
as of December 31, 2000; and (ii) 70 Phantom Stock Units based on the market
value of a share of Common Stock on the date such units were credited to the
account of the particpant.
(20)Consists of (i) $5,295 which represents dividends allocated in 2000 on
performance shares awarded under the Performance Share Sub-Plan; (ii) $3,094
which represents Company contributions under the Stock Purchase-Savings Plan;
and (iii) $42,096 which represents the dollar value of the premium relating to
the term portion and the present value of the premium relating to the whole life
portion of the benefit to be received pursuant to the Executive Permanent Life
Insurance Program.
(21)Consists of amounts awarded under the Management Incentive Compensation
Plan and as a result of the Progress Energy/Florida Progress transaction.
(22)Consists of (i) 12,400 shares of Restricted Stock valued at $402,090 as
of July 12, 2000; and (ii) 87 Phantom Stock Units based on the market value of a
share of Common Stock on the date such units were credited to the account of the
participant. Mr. Johnson owns a total of 24,600 shares of Restricted Stock which
were valued at $1,210,012 as of December 31, 2000.
(23)Consists of (i) $14,276 which represents dividends allocated in 2000 on
performance shares awarded under the Performance Share Sub-Plan; (ii) $8,460
which represents Company contributions under the Stock Purchase-Savings Plan;
and (iii) $15,276 which represents the dollar value of the premium relating to
the term portion and the present value of the premium relating to the whole life
portion of the benefit to be received pursuant to the Executive Permanent Life
Insurance Program.
(24)Consists of (i) 7,100 shares of Restricted Stock valued at $286,911 as
of March 17, 1999; and (ii) 40 Phantom Stock Units based on the market value of
a share of Common Stock on the date such units were credited to the account of
the participant.
(25)Consists of (i) $7,580 which represents dividends allocated in 1999 on
performance shares awarded under the Performance Share Sub-Plan; (ii) $8,588
which represents Company contributions under the Stock Purchase-Savings Plan;
and (iii) $6,038 which represents the dollar value of the premium relating to
the term portion and the present value of the premium relating to the whole life
portion of the benefit to be received pursuant to the Executive Permanent Life
Insurance Program.
(26)Consists of (i) 5,100 shares of Restricted Stock valued at $212,785 as
of February 13, 1998; and (ii) 24 Phantom Stock Units based on the market value
of a share of Common Stock on the date such units were credited to the account
of the participant.
15
(27)Consists of (i) $3,486 which represents dividends allocated in 1998 on
performance shares awarded under the Performance Share Sub-Plan; (ii) $6,582
which represents Company contributions under the Stock Purchase-Savings Plan;
and (iii) $5,892 which represents the dollar value of the premium relating to
the term portion and the present value of the premium relating to the whole life
portion of the benefit to be received pursuant to the Executive Permanent Life
Insurance Program.
LONG-TERM INCENTIVE PLAN
AWARDS IN LAST FISCAL YEAR
NUMBER OF PERFORMANCE
NAME UNITS(1) PERIOD ENDS
- ---- --------- -----------
William Cavanaugh III,
Chairman, President and
Chief Executive Officer................................... 22,759 2002
William S. Orser,
Group President -- CP&L................................... 8,190 2002
Robert B. McGehee,
Executive Vice President.................................. 6,034 2002
Peter M. Scott III,
Executive Vice President and
Chief Financial Officer................................... 5,102 2002
William D. Johnson,
Executive Vice President,
General Counsel and Secretary............................. 4,483 2002
- --------------------------
(1)Consists of the number of performance shares awarded in 2000 under the
Performance Share Sub-Plan of the 1997 Equity Incentive Plan, based on the
closing price of a share of the Company's Common Stock on March 1, 2000, as
published in THE WALL STREET JOURNAL. Performance Share awards may range from
20% to 75% of a participant's base salary depending on the participant's
position and job value. The number of performance shares awarded is recorded in
a separate account for each participant, and is adjusted to reflect dividends,
stock splits or other adjustments in the Company's Common Stock. The performance
period for an award under the Sub-Plan is the three-consecutive-year period
beginning in the year in which the award is granted. There are two equally
weighted performance measures under the Sub-Plan. One performance measure is
Total Shareholder Return ("TSR"), which is defined in the Sub-Plan as the
appreciation or depreciation in the value of stock (which is equal to the
closing value of the stock on the last trading day of the relevant period minus
the closing value of the stock on the last trading day of the preceding year)
plus dividends declared during the relevant period divided by the closing value
of the stock on the last trading day of the preceding year. The other
performance measure is EBITDA (Earnings Before Interest, Taxes, Depreciation and
Amortization) growth. Awards under the Sub-Plan vest on January 1 following the
end of the three-year performance period, provided, however, that to determine
each award vested under the Sub-Plan, the TSR and EBITDA growth of the Company
are compared to the TSR and EBITDA growth of a Peer Group comprised of the
twenty-six electric utility companies compromising the Standard & Poor's
Electric Index. The differences between the Company TSR and EBITDA growth, and
the Peer Group TSR and EBITDA growth, respectively, are used to determine the
multipliers that will be used to calculate the number of vested performance
shares in each participant's account. (Differences in TSR can range from a low
of (2.0%) or less to a high of 5% or more, and correspond to multipliers of 0%
to 200%. Differences in EBITDA growth can range from a low of less than 0% to a
high of 5% or more and correspond to multipliers of 0% to 200%). The multiplier
is applied to the number of performance shares in the participant's performance
share account to determine the actual number of vested performance shares in
that account. The aggregate value of vested performance shares is equal to the
number of vested performance shares in the participant's
16
account multiplied by the closing price of the Company's Common Stock, as
published in THE WALL STREET JOURNAL on the last trading day before payment of
the award.
Awards are paid in cash after expiration of the performance period. Payment
can be made in either (i) lump sum on or about April 1 of the year immediately
following the performance period or (ii) in accordance with an election to defer
in 25% increments, made during the first year of the performance period. In the
event of death, disability, retirement or a change-in-control of the Company,
any award granted under the Sub-Plan immediately becomes vested. The aggregate
value of the vested award is determined using multipliers that are based on the
difference between the Company TSR and EBITDA growth and the Peer Group TSR and
EBITDA growth, respectively over the portion of the performance period that was
completed before the terminating event occurred. See "Long-Term Compensation
Opportunities" on page 24.
PENSION PLAN TABLE
- -----------------------------------------------------------------------
ESTIMATED ANNUAL PENSION AT NORMAL RETIREMENT
(YEARS OF CREDITED SERVICE)
AVERAGE COMPENSATION
- -----------------------------------------------------------------------
15 1/2 OR MORE
10 YEARS 15 YEARS YEARS
- -----------------------------------------------------------------------
$ 190,000 $ 76,000 $114,000 $117,800
255,000 102,000 153,000 158,100
320,000 128,000 192,000 198,400
385,000 154,000 231,000 238,700
450,000 180,000 270,000 279,000
515,000 206,000 309,000 319,300
555,000 222,000 333,000 344,100
595,000 238,000 357,000 368,900
635,000 254,000 381,000 393,700
675,000 270,000 405,000 418,500
715,000 286,000 429,000 443,300
760,000 304,000 456,000 471,200
795,000 318,000 477,000 492,900
840,000 336,000 504,000 520,800
900,000 360,000 540,000 558,000
960,000 384,000 576,000 595,200
1,020,000 408,000 612,000 632,400
- -----------------------------------------------------------------------
The above table demonstrates senior executive pension benefits payable upon
normal retirement under the Supplemental Retirement Plan and Supplemental Senior
Executive Retirement Plan at age 65 as a function of average annual income and
years of service. Covered compensation under these plans consists only of the
amounts in the Salary and Bonus columns of the Summary Compensation Table.
Pursuant to the Supplemental Retirement Plan, a defined benefit plan, benefits
are partially offset by Social Security payments and the monthly pension benefit
payable upon retirement is based on final five years average compensation (base
pay earnings only) multiplied by 1.7% for each year of service up to a maximum
of 60%. Benefits under the Supplemental Senior Executive Retirement Plan are
fully offset by Social Security benefits and by benefits paid under the
Supplemental Retirement Plan. The monthly
17
benefit payable upon retirement under this plan is equal to 4% of the average of
a participant's highest three years of eligible earnings for each year of
credited service with the Company up to a maximum of 62%. Benefits listed in the
table above do not reflect the Social Security or other offset. For purposes of
benefits under these plans, Mr. Cavanaugh has more than 15 1/2 years of credited
service as well as three or more years of service on the Senior Management
Committee, and is thereby entitled to the maximum percentage allowable in the
benefit formula under these plans. Mr. Orser has seven years of credited
service, Mr. McGehee has 13 years of credited service, Mr. Scott has seven years
of credited service and Mr. Johnson has 15 years of credited service, three of
which are deemed service on the Senior Management Committee.
EMPLOYMENT AGREEMENTS
Messrs. Cavanaugh, Orser, McGehee, Scott and Johnson have entered into
employment agreements, each of which has an effective date of August 1, 2000,
with the Company or one of its subsidiaries referred to collectively in this
section as the "Company". These agreements provide for base salary, bonuses,
perquisites and participation in the various executive compensation plans
offered to senior executives of the Company. The agreements all provide that
they will remain in effect for three years from the effective date. Each
agreement also includes an "Evergrow provision" which provides that each year,
the agreement will be extended such that the prospective term will always be
three years forward on the anniversary date of the effective date. The Company
may elect not to extend an executive officer's agreement and must notify the
officer of such an election at least sixty days prior to the annual anniversary
date of his agreement's effective date. Plan targets, termination and other key
provisions of the agreements are discussed below.
AGREEMENT WITH MR. CAVANAUGH
Mr. Cavanaugh's agreement provides that his target compensation under the
Company's Management Incentive Compensation Plan (MICP) was 60% of base salary
earnings and increased to 65% effective January 1, 2001. The agreement also
provides that Mr. Cavanaugh's target compensation under the Performance Share
Sub-Plan (PSSP) of the Company's 1997 Equity Incentive Plan was 75% of his base
salary, but increased to 150% effective January 1, 2001. Mr. Cavanaugh's
agreement notes that he received a recruitment bonus under the now suspended
Deferred Compensation Plan for Key Management Employees that included a payment
of $150,000 deferred for calendar year 1992. That amount will be used to provide
retirement income to him of $121,368 per year for 15 years commencing January 1
following his attainment of age 65. The agreement with Mr. Cavanaugh also
provides that as of September 2, 1992, Mr. Cavanaugh was granted 14 years of
deemed service for purposes of the Supplemental Senior Executive Retirement Plan
(SERP).
The agreement with Mr. Cavanaugh provides that upon termination of
employment without cause or constructive termination of employment, he will be
provided with his base salary at the current rate for the remainder of the term
of the agreement and will be eligible to retain all benefits in which he has
vested under existing benefit plans. Additionally, the Company will reimburse
him for certain health benefits for up to 18 months after the termination of his
employment. The agreement provides that a constructive termination will be
deemed to occur if (i) there is a change in the form of ownership of the Company
and (ii) Mr. Cavanaugh is offered a new position with a material change in
authority, duty, wages or benefits, or Mr. Cavanaugh is asked to relocate more
than 50 miles. If Mr. Cavanaugh's employment is constructively terminated, he
will be entitled to the greater of the benefits described above or the benefits,
if any, to
18
which he is entitled under the Company's Management Change-in-Control Plan. If
the Company terminates Mr. Cavanaugh's employment for cause, he will be eligible
to retain all benefits in which he has vested under existing benefit plans, but
he shall not be entitled to any form of salary continuance or any form of
severance benefits. He will also be entitled to any earned but unpaid salary.
The agreement with Mr. Cavanaugh provides that if he terminates his employment
voluntarily at any time, he shall retain all vested benefits but shall not be
entitled to any form of salary continuance or any form of severance benefit.
AGREEMENT WITH MR. ORSER
Mr. Orser's agreement provides that his target compensation under the
Company's MICP was 40% of base salary earnings and increased to 45% effective
January 1, 2001. The agreement also provides that Mr. Orser's target
compensation under the PSSP was 50% of his base salary, and increased to 100%
effective January 1, 2001. Mr. Orser's agreement notes that pursuant to a 1993
employment agreement with CP&L, he received a recruitment bonus under the now
suspended Deferred Compensation Plan for Key Management Employees, and that he
is credited with nine years of service solely for purposes of determining
benefits in connection with that bonus. The agreement also notes that Mr. Orser
is automatically deemed vested for his benefits under the SERP, and will be
deemed eligible for early retirement benefits under the SERP at age 60, assuming
his continued employment at the Company until age 60.
The agreement with Mr. Orser provides that upon termination of employment
without cause or constructive termination of employment, he will be provided
with his base salary at the current rate for the remainder of the term of the
agreement, and will be eligible to retain all benefits in which he has vested
under existing benefit plans. Additionally, he will be entitled to certain
health benefits. The agreement provides that a constructive termination will be
deemed to occur if (i) there is a change in the form of ownership of the Company
and (ii) Mr. Orser is offered a new position with a material change in
authority, duty, wages or benefits, or is asked to relocate more than 50 miles.
If Mr. Orser's employment is constructively terminated, he will be entitled to
the greater of the benefits described above or the benefits, if any, to which he
is entitled under the Company's Management Change-in-Control Plan. If the
Company terminates Mr. Orser's employment for cause, he will be eligible to
retain all benefits in which he has vested under existing benefit plans, but he
shall not be entitled to any form of salary continuance or any form of severance
benefits. He will also be entitled to any earned but unpaid salary. The
agreement with Mr. Orser provides that if he terminates his employment
voluntarily at any time, he shall retain all vested benefits but shall not be
entitled to any form of salary continuance or any form of severance benefit. The
agreement also provides that if, while Mr. Orser is between the ages of 55 and
60, his employment is terminated without cause, or constructively terminated or
if he voluntarily terminates his employment, he will receive $153,912 (less
applicable taxes) a year for life, less benefits payable under the Supplemental
Retirement Plan and in lieu of any SERP benefit. Additionally, Mr. Orser will be
eligible to retain all benefits in which he has vested under existing benefit
plans.
AGREEMENT WITH MR. MCGEHEE
Mr. McGehee's agreement provides that his target compensation under the
Company's MICP was 40% of base salary earnings and increased to 45% effective
January 1, 2001. The agreement also provides that Mr. McGehee's target
compensation under the PSSP was 50% of his base salary, and increased to 100%
effective January 1, 2001. Mr. McGehee's agreement notes that he received a
retention agreement bonus under the now suspended Deferred Compensation Plan for
Key Management Employees which vests based on his continued employment beyond
age 60. The agreement also notes that upon hire,
19
Mr. McGehee was awarded 10 years of service toward the benefits and vesting
requirements of the SERP, three years of which were deemed to have been in
service on the Senior Management Committee, solely for purposes of the SERP.
The agreement with Mr. McGehee provides that upon termination of employment
without cause or constructive termination of employment, he will be provided
with his base salary at the current rate for the remainder of the term of the
agreement, and will be eligible to retain all benefits in which he has vested
under existing benefit programs. Additionally, the Company will reimburse him
for certain health benefits for up to 18 months after the termination of his
employment. The agreement provides that a constructive termination will be
deemed to occur if (i) there is a change in the form of ownership of the Company
and (ii) Mr. McGehee is offered a new position with a material change in
authority, duty, wages or benefits, or is asked to relocate more than 50 miles.
If Mr. McGehee's employment is constructively terminated, he will be entitled to
the greater of the benefits described above or the benefits, if any, to which he
is entitled under the Company's Management Change-in-Control Plan. If the
Company terminates Mr. McGehee's employment for cause, he will be eligible to
retain all benefits in which he has vested under existing benefit plans, but he
shall not be entitled to any form of salary continuance or any form of severance
benefits. He will also be entitled to any earned but unpaid salary. The
agreement with Mr. McGehee provides that if he terminates his employment
voluntarily at any time, he shall retain all vested benefits but shall not be
entitled to any form of salary continuance or any form of severance benefit.
AGREEMENT WITH MR. SCOTT
Mr. Scott's agreement provides that his target compensation under the MICP
was 40% of base salary earnings and increased to 45% effective January 1, 2001.
The agreement also provides that Mr. Scott's target compensation under the PSSP
of the Company's 1997 Equity Incentive Plan was 50% of his base salary, but
increased to 100% effective January 1, 2001. Pursuant to the terms of his
agreement, Mr. Scott received transition compensation of $100,000, and has been
awarded seven years of deemed service toward the benefits and vesting
requirements of the SERP.
The agreement with Mr. Scott provides that upon termination of employment
without cause or constructive termination of employment, he will be provided
with his base salary at the current rate for the remainder of the term of the
agreement and will be eligible to retain all benefits in which he has vested
under existing benefit plans. Additionally, the Company will reimburse him for
certain health benefits for up to 18 months after the termination of his
employment. The agreement provides that a constructive termination will be
deemed to occur if (i) there is a change in the form of ownership of the Company
and (ii) Mr. Scott is offered a new position with a material change in
authority, duty, wages or benefits, or Mr. Scott is asked to relocate more than
50 miles. If Mr. Scott's employment is constructively terminated, he will be
entitled to the greater of the benefits described above or the benefits, if any,
to which he is entitled under the Company's Management Change-in-Control Plan.
If the Company terminates Mr. Scott's employment for cause, he will be eligible
to retain all benefits in which he has vested under existing benefit plans, but
he shall not be entitled to any form of salary continuance or any form of
severance benefits. He will also be entitled to any earned but unpaid salary.
The agreement with Mr. Scott provides that if he terminates his employment
voluntarily at any time, he shall retain all vested benefits but shall not be
entitled to any form of salary continuance or any form of severance benefit.
20
AGREEMENT WITH MR. JOHNSON
Mr. Johnson's agreement provides that his target compensation under the MICP
was 35% of base salary earnings and increased to 45% effective January 1, 2001.
The agreement also provides that Mr. Johnson's target compensation under the
PSSP of the Company's 1997 Equity Incentive Plan was 50% of his base salary, but
increased to 100% effective January 1, 2001. The agreement with Mr. Johnson also
notes that he was awarded seven years of deemed service toward the benefits and
vesting requirements of the SERP. Three of those years will also be deemed
service on the Senior Management Committee.
The agreement with Mr. Johnson provides that upon termination of employment
without cause or constructive termination of employment, he will be provided
with his base salary at the current rate for the remainder of the term of the
agreement and will be eligible to retain all benefits in which he has vested
under existing benefit plans. Additionally, the Company will reimburse him for
certain health benefits for up to 18 months after the termination of his
employment. The agreement provides that a constructive termination will be
deemed to occur if (i) there is a change in the form of ownership of the Company
and (ii) Mr. Johnson is offered a new position with a material change in
authority, duty, wages or benefits, or Mr. Johnson is asked to relocate more
than 50 miles. If Mr. Johnson's employment is constructively terminated, he will
be entitled to the greater of the benefits described above or the benefits, if
any, to which he is entitled under the Company's Management Change-in-Control
Plan. If the Company terminates Mr. Johnson's employment for cause, he will be
eligible to retain all benefits in which he has vested under existing benefit
plans, but he shall not be entitled to any form of salary continuance or any
form of severance benefits. He will also be entitled to any earned but unpaid
salary. The agreement with Mr. Johnson provides that if he terminates his
employment voluntarily at any time, he shall retain all vested benefits but
shall not be entitled to any form of salary continuance or any form of severance
benefit.
21
REPORT OF BOARD COMMITTEE ON ORGANIZATION
AND COMPENSATION
The Company's executive compensation program is administered by the
Committee on Organization and Compensation of the Board of Directors (the
"Committee"). The six-member Committee is composed entirely of independent
outside Directors who are not eligible to participate in any compensation
program in which Company executives participate other than the 1997 Equity
Incentive Plan.
COMPENSATION PRINCIPLES
COMPARISON GROUPS
The Company uses an independent executive benefits consulting firm to assist
the Company in meeting its compensation objectives. Each year this consulting
firm provides the Committee with an analysis comparing overall compensation paid
to the Company's executives with overall compensation paid to executives of two
comparison groups of electric utility companies. One comparison group consists
of the twenty-two electric utility companies with fossil fuel and nuclear
operations in the eastern portion of the United States. The other comparison
group consists of a broad group of electric utilities across the United States.
While these comparison groups are different from the group of companies
comprising the Standard & Poor's Electric Index, which is a published industry
index shown in the performance graph on page 31, the Committee believes these
electric utility companies are appropriate for overall compensation comparisons
because they reflect the appropriate labor markets for the Company's executives.
The Company's executive compensation program consists of four major
elements: base salary; other annual compensation opportunities; long-term
compensation opportunities; and other benefit opportunities. The Committee's
objective in administering this program is to structure, through a combination
of these elements, an overall compensation package for executives which
approximates in value the median level to third quartile of overall compensation
paid to executives of the comparison group. Overall compensation paid to the
Company's executives in 2000 met this objective.
STOCK OWNERSHIP GUIDELINES
In an effort to more closely link the interests of the Company's management
with those of its shareholders, in 1997 the Board of Directors adopted stock
ownership guidelines which are designed to ensure that the Company's management
has a significant financial equity investment in the Company. Those guidelines
require the Company's officers and department heads to own from 1 to 4 times
their base salary in the form of Company stock within five years. (The specific
multiplier applied to base salary depends upon the individual's position.) In
addition to shares owned outright, the following are considered stock owned by
executives and department heads for purposes of the guidelines: (1) stock held
in any defined benefit, defined contribution, ESOP or other stock-based plan;
(2) performance units or phantom stock ("derivative securities") deferred under
an annual incentive plan; (3) performance units or phantom stock earned and
deferred in any long-term incentive plan account; (4) restricted stock awards;
and (5) stock held in a family trust or immediate family holdings.
SECTION 162(M)
Section 162(m) of the Internal Revenue Code imposes a limit, with certain
exceptions, on the amount a publicly held corporation may deduct for
compensation over $1 million paid or accrued with respect to the Company's Chief
Executive Officer and any of the other four most highly compensated officers.
Certain performance-based compensation is, however, specifically exempt from the
deduction limit. To qualify as exempt, compensation must be made pursuant to a
plan that is (1) administered by a committee
22
of outside directors, (2) based on achieving objective performance goals and
(3) disclosed to and approved by the shareholders. The 2000 compensation
disclosed in this proxy statement does not exceed the limit, except in the case
of Mr. Cavanaugh, who had nondeductible compensation of approximately $467,979,
which was attributable to restricted stock dividends, miscellaneous income and a
non-deferred bonus.
The Committee believes the current design of the Company's compensation
program is sound in linking pay to performance, and allowing appropriate
flexibility in determining amounts to be awarded. Therefore, the Company does
not have a policy that requires the Committee to qualify compensation awarded to
executive officers for deductibility under Section 162(m) of the Code. The
Committee does, however, consider the impact of Section 162(m) when determining
executive compensation, and the 1997 Equity Incentive Plan is intended to
minimize the effect of this provision. Although the Committee is not required to
qualify executive compensation paid to Company executives for exemption from
Section 162(m), it will continue to consider the effects of Section 162(m) when
making compensation decisions.
ELEMENTS OF EXECUTIVE COMPENSATION PROGRAM
Set forth below is a description of the major elements of the Company's
executive compensation program and their relationship to corporate performance,
as well as a summary of the actions taken by the Committee with respect to the
compensation of the Chief Executive Officer.
BASE SALARY
Executives within the Company receive a base salary determined by the
Committee based upon the value of their position compared to competitively
established salary ranges, their individual performance and overall corporate
performance. The Committee does not utilize specific targets or a specific
mathematical formula in determining base salaries. The Committee in its
discretion approved the base salaries of the Chief Executive Officer and the
named executives, as set forth in the Summary Compensation Table. These salaries
were based on each executive's level of responsibility in the Company, the
competitive (median to third quartile) level of compensation for executives in
the comparison group of utilities, the achievement of corporate goals and
individual merit performance as qualitatively determined by the Committee.
OTHER ANNUAL COMPENSATION OPPORTUNITIES
MANAGEMENT INCENTIVE COMPENSATION PLAN
The Company sponsors the Management Incentive Compensation Plan for its
senior executives, department heads and selected key employees. In order for
awards to be made under the plan, two conditions must be satisfied. First, a
contribution must be earned by one or more groups of employees under the
corporate incentive feature of the Company's Stock Purchase-Savings Plan, a tax
qualified 401(k) plan. Incentive matching contributions are earned by
participating employees if at least five out of ten annual corporate and
business unit goals are met. (See the description of the Stock Purchase-Savings
Plan under "Other Benefit Opportunities" below.) Second, the Company's return on
common equity and EBITDA (Earnings Before Interest, Taxes, Depreciation and
Amortization) growth for the most recent three-year period must be above the
median of those companies in a comparison group that is comprised of the
twenty-six electric utility companies comprising Standard & Poor's Electric
Index shown in the performance graph on page 31.
If participants at or above the department head level of the Company are
eligible for awards, then the Committee in its discretion determines whether
awards are to be made and, if so, in what amounts. If
23
participants below the department head level of the Company are eligible for
awards, then the Chief Executive Officer has sole and complete authority to
approve such awards.
Awards consist of both a corporate component and a noncorporate component.
Award opportunities, expressed as a percentage of annual base salary earnings,
are applicable to both components of an award. The corporate component of an
award is based upon the overall performance of the Company. The noncorporate
component of an award is based upon the level of attainment of business
unit/subsidiary, departmental and individual performance measures. Those
measures are evaluated in terms of three levels of performance--outstanding,
target and threshold--each of which is related to a particular payout
percentage. If earned, awards are either paid in cash in the succeeding year or
deferred to a later date, as elected by each individual participant. Deferred
awards are recorded in the form of performance units. Each performance unit is
generally equivalent to a share of the Company's Common Stock.
The threshold requirements for award eligibility, as discussed above, were
met and exceeded in 2000. At a meeting of the Committee on March 21, 2001, based
on highly commendable performance, awards were made at the discretion of the
Committee to the named executives, including the Chief Executive Officer, as set
forth in the Summary Compensation Table under the Bonus column.
LONG-TERM COMPENSATION OPPORTUNITIES
1997 EQUITY INCENTIVE PLAN
The 1997 Equity Incentive Plan, which was approved by the Company's
shareholders in 1997, allows the Committee to make various types of awards to
officers, other key employees, and also Directors of the Company, its affiliates
and subsidiaries. Selection of participants is within the sole discretion of the
Committee. Thus, the number of persons eligible to participate in the Plan and
the number of grantees may vary from year to year. The Plan was effective as of
January 1, 1997, and will expire on January 1, 2007, provided, however, that all
awards made prior to and outstanding on that date shall remain valid in
accordance with their terms and conditions.
The 1997 Equity Incentive Plan is a broad umbrella plan that allows the
Company to enter into Award Agreements with participants and adopt various
individual Sub-Plans that will permit the grant of the following types of
awards: nonqualified stock options, incentive stock options, stock appreciation
rights, restricted stock, performance units, performance shares and other stock
unit awards or stock-based forms of awards. The Plan sets forth certain minimum
requirements for each type of award, with detailed provisions regarding awards
to be set out either in Award Agreements or in the Sub-Plans adopted under the
Plan. Subject to adjustment as provided in the Plan, the maximum aggregate
number of shares that may be issued over the years pursuant to awards made under
the Plan cannot exceed 5,000,000 shares of Common Stock, which may be in any
combination of options, restricted stock, performance shares, or any other right
or option.
Under the terms of the Plan, the Committee may grant awards in a manner that
qualifies them for the performance-based exception to Section 162(m) of the
Internal Revenue Code of 1986, as amended, or it may grant awards that do not
qualify for the exemption.
PERFORMANCE SHARE SUB-PLAN
Pursuant to the provisions of the 1997 Equity Incentive Plan, the Committee
adopted the Performance Share Sub-Plan, which governs the issuance of
performance share awards to Company officers and key employees, as selected by
the Committee in its sole discretion. A "performance share" is a unit granted to
a participant, the value of which is equal to the value of a share of the
Company's Common Stock. The
24
Committee may grant performance share awards which range from 20% to 75% (from
40% to 150%, effective January 1, 2001) of a participant's base salary,
depending upon the participant's position and job value. (For purposes of the
Sub-Plan, base salary is not reduced to reflect salary deferrals and does not
include incentive compensation.) The number of performance shares awarded are
recorded in a separate account for each participant, and are adjusted to reflect
dividends, stock splits or other adjustments in the Company's Common Stock.
The performance period for an award under the Sub-Plan is the three
consecutive year period beginning in the year in which the award is granted.
There are two equally weighted performance measures under the Sub-Plan. One
performance measure is Total Shareholder Return ("TSR"), which is defined in the
Sub-Plan as the appreciation or depreciation in the value of stock (which is
equal to the closing value of the stock on the last trading day of the relevant
period minus the closing value of the stock on the last trading day of the
preceding year) plus dividends declared during the relevant period, divided by
the closing value of the stock on the last trading day of the preceding year.
The other performance measure is EBITDA growth. Awards under the Sub-Plan vest
on January 1 following the end of a three-year performance period; provided,
however, that the following methodology is used to determine each award vested
under the Sub-Plan: 1) the TSR and EBITDA growth for the Company for each year
during the performance period is determined; 2) those annual figures are
averaged to determine the Company TSR and EBITDA growth, respectively; 3) the
average TSR and EBITDA growth for all Peer Group utilities for each year during
the performance period is determined (the Peer Group is comprised of the
twenty-six major electric utility companies within the Standard & Poor's
Electric Index); 4) those figures are averaged, respectively, to determine the
Peer Group TSR and EBITDA growth; 5) the Peer Group TSR and EBITDA growth for
the performance period is subtracted from the Company TSR and EBITDA growth,
respectively, for the performance period; 6) the differences between the Company
TSR and EBITDA growth and the Peer Group TSR and EBITDA growth, respectively,
are used to determine the multipliers that will be used to calculate the number
of vested performance shares in each participant's account. (Differences in TSR
can range from a low of (2.0%) or less to a high of 5% or more, and correspond
to multipliers of 0 to 200%. Differences in EBITDA growth can range from a low
of less than 0% to a high of 5% or more and correspond to multipliers of 0 to
200%.); and 7) the multipliers are each applied independently to one-half of the
number of performance shares in the participant's performance share account to
determine the actual number of vested performance shares in that account. The
aggregate value of vested performance shares is equal to the number of vested
performance shares in the participant's account multiplied by the closing price
of the Company's Common Stock, as published in THE WALL STREET JOURNAL on the
last trading day before payment of the award.
Awards are paid in cash after expiration of the performance period. Payment
can be made in either (i) lump sum on or about April 1 of the year immediately
following the performance period or (ii) in accordance with an election to defer
in 25% increments, made during the first year of the performance period. In the
event of death, disability, retirement or a change-in-control of the Company,
any award granted under the Sub-Plan immediately becomes vested. The aggregate
value of the vested award is determined using multipliers that are based on the
difference between the Company TSR and EBITDA growth and the Peer Group TSR and
EBITDA growth, respectively, over the portion of the performance period that was
completed before the terminating event occurred.
Prior to 1997, the Company sponsored a Long-Term Compensation Program;
however, that Program was terminated upon the shareholders' approval of the
Company's 1997 Equity Incentive Plan. (All awards made and outstanding under the
Long-Term Compensation Program prior to its termination remain valid in
accordance with their terms and conditions.)
25
RESTRICTED STOCK AWARDS
Section 9 of the 1997 Equity Incentive Plan provides for the granting of
shares of restricted stock by the Committee to "key employees" within the
Company in such amounts and for such duration and/or consideration as it shall
determine. The Plan defines "key employee" as an officer or other employee
within the Company, who, in the opinion of the Committee, can contribute
significantly to the growth and profitability of, or perform services of major
importance to, the Company. Each restricted stock grant must be evidenced by an
agreement specifying the period of restriction, the conditions that must be
satisfied prior to removal of the restriction, the number of shares granted, and
such other provisions as the Committee shall determine.
Restricted stock covered by each award made under the Plan will be provided
to and become freely transferable by the recipient after the last day of the
period of restriction and/or upon the satisfaction of other conditions as
determined by the Committee. If the grant of restricted stock is performance
based, the total period of restriction for any or all shares or units of
restricted stock granted shall be no less than one (1) year. Any other shares of
restricted stock issued pursuant to the Plan must provide that the minimum
period of restrictions shall be three (3) years, which period of restriction may
permit the removal of restrictions on no more than one-third (1/3) of the shares
of restricted stock at the end of the first year following the grant date, and
the removal of the restrictions on an additional one-third (1/3) of the shares
at the end of each subsequent year. The Plan provides that in no event shall any
restrictions be removed from shares of restricted stock during the first year
following the grant date, except in the event of a change-in-control.
During the period of restriction, recipients of shares of restricted stock
granted under the Plan may exercise full voting rights with respect to those
shares, and shall be entitled to receive all dividends and other distributions
paid with respect to those shares. If any such dividends or distributions are
paid in shares, those shares shall be subject to the same restrictions on
transferability as the restricted stock with respect to which they were
distributed.
OTHER BENEFIT OPPORTUNITIES
The following additional benefit opportunities are also available to the
Company's senior executives:
- Effective January 1, 2000, the Company established the Management Deferred
Compensation Plan, an unfunded, deferred compensation arrangement
established for the benefit of a select group of management and highly
compensated employees of the Company and its participating subsidiaries.
(The Plan has replaced the Deferred Compensation Plan for Key Management
Employees and the Executive Deferred Compensation Plan.) Under the Plan,
an eligible employee may elect to defer a portion of his or her salary
until the April 1 following the date that is five or more years from the
last day of the Plan Year for which the deferral is made, the April 1
following his or her date of retirement, or the April 1 following the
first anniversary of his or her date of retirement. Deferrals will be made
to deferral accounts administered pursuant to the Plan in the form of
deemed investments in certain deemed investment funds individually chosen
by each participating employee from a list of investment options provided
pursuant to the Plan. Additionally, qualifying participants will receive
matching allocations from the Company (generally reflecting foregone
Company allocations to participants' 401(k) accounts due to such salary
deferrals, and/or foregone Company allocations to the participants' 401(k)
accounts due to certain Internal Revenue Code limits), which will be
allocated to a Company account that will be deemed initially to be
invested in hypothetical shares of the Company's Common Stock. These
allocations do not represent an equity interest in the Company and convey
no voting rights to their owners. However, additional allocations are
26
credited from time to time to reflect the payment of dividends on the
Company's Common Stock. When a participant's Company account has matured,
pursuant to the terms of the Plan, the participant may reallocate any part
of such account among the deemed investment funds chosen by the
participant.
- The Company has implemented an executive split dollar life insurance
program which consists of two separate plans. The first plan provides life
insurance coverage approximately equal to three times salary for senior
executives. The second plan provides additional life insurance coverage
approximately equal to three times salary for those officers of the
Company who are also members of the Board of Directors.
- The Company also provides broad-based employee benefit plans for senior
executives of participating companies. Under the Stock Purchase-Savings
Plan, a salary reduction plan under Section 401(k) of the Internal Revenue
Code of 1986, as amended ("Code"), full-time, highly compensated employees
of participating companies may invest up to 12% of earnings (up to a
maximum of $10,500 in 2000) on a before-tax basis in the Company's Common
Stock and other investment options. The Company makes a matching
allocation of 50% of such investment (up to 3% of eligible earnings) which
is invested in Company Common Stock. Under an incentive feature, the
Company's allocation may be increased by up to an additional 50% if
certain strategic corporate and business unit financial, operating,
safety, customer satisfaction, and other performance goals are met. The
Company also sponsors the Supplemental Retirement Plan, a defined benefit
plan which covers eligible full-time employees of participating companies
who have been employed within the Company for at least one year. The right
to receive pension benefits under this plan is vested after five years.
The monthly pension benefit payable upon retirement is based on final five
years average compensation (base pay earnings only) multiplied by 1.7% for
each year of service up to a maximum of 60%, less projected age 65 Social
Security benefits multiplied by 1.43% for each year of service up to a
maximum of 50%. Effective January 1, 1999, the Supplemental Retirement
Plan was amended to implement a cash balance formula feature. Accruals
will continue under both formulas for eligible participants through
December 31, 2003. At that time, benefit accruals based upon the "five
years average compensation" formula will be frozen.
- The Restoration Retirement Plan is an unfunded retirement plan for a
select group of management or highly compensated employees of
participating companies. The Plan "restores" the full benefit that would
be provided under the Supplemental Retirement Plan but for certain Code
limits imposed on the benefit levels of highly compensated employees.
Generally, the benefit for participants is a monthly benefit payment equal
to the difference between (i) a participant's accrued benefit under the
Supplemental Retirement Plan without regard to the Internal Revenue
Service compensation and benefit limits and (ii) a participant's accrued
benefit as calculated under the Supplemental Retirement Plan. (Effective
January 1, 2000, this Plan also applies to any employee who defers more
than 10% of his salary under the new Management Deferred Compensation
Plan.) The eligibility and vesting requirement for this Plan are the same
as those for the Supplemental Retirement Plan. Participants eligible to
receive benefits under the Supplemental Executive Retirement Plan forego
participation in and rights under this Plan.
- The Supplemental Senior Executive Retirement Plan provides a retirement
benefit for eligible senior executives equal to 4% of the average of their
highest three years of base salary earnings and annual bonus for each year
of credited service with the Company up to a maximum of 62%. Benefits
under this Plan are fully offset by Social Security benefits and by
benefits paid under the Company's Supplemental Retirement Plan.
27
- The Company's senior executives also receive certain perquisites and other
personal benefits. In addition, executives received gross-up payments in
2000 for related federal and state income tax obligations, as disclosed in
the Summary Compensation Table on page 13.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Compensation in 2000 for the Chief Executive Officer was consistent with the
compensation principles described above and reflected performance of the Company
and the individual in 2000, as well as services in 2000. The determination of
his compensation by the Committee was qualitative in nature and based on a
variety of factors, including comparison group compensation data, attainment of
various corporate goals, total shareholder return, financial and operating
performance, individual performance and other factors. Specific mathematical
weights were not assigned to these factors. Overall compensation in 2000 fell
within the targeted level (median to third quartile) of overall compensation
paid to chief executive officers in the comparison groups.
The Committee considered the substantial progress the Company made towards
implementing its strategy of becoming a super-regional energy provider for the
Southeast. Specifically, the Committee considered the progress made toward
completion of the Company's acquisition of Florida Progress Corporation, noting
that this transaction would double the size of the Company. Additionally, the
Committee considered the Company's progress towards its goal of creating a
holding company, noting that the new structure would provide the Company with
the flexibility and speed needed to act swiftly and decisively in the
increasingly competitive utility industry. The Committee also took into account
the success of the Company's expansion efforts, including the additions of new
gas units at the Asheville and Lee plants and the on-going construction of new
plants in Rowan and Richmond counties in North Carolina and in Monroe, Georgia.
The Committee noted that these additions would have a key role in the Company's
ability to develop its wholesale business. The Committee took into account the
success of the Company in dealing with important regulatory issues, including
industry restructuring, at the state and federal levels. The Committee
considered the fact that the leadership provided by Mr. Cavanaugh contributed
significantly to the Company's success in achieving corporate goals,
implementing strategic initiatives, achieving national leadership in the fields
of nuclear power and electric utility operations, focusing on leadership
development and succession planning, implementing programs designed to enhance
the diversity of the Company's work force, improving customer and community
relations and supporting the economic growth and quality of life in the
Company's service area.
Committee on Organization and
Compensation
Charles W. Coker, Chairman
Edwin B. Borden
William O. McCoy
E. Marie McKee
Richard A. Nunis
J. Tylee Wilson
28
REPORT OF THE AUDIT AND CORPORATE
PERFORMANCE COMMITTEE
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
FILINGS UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934,
THE FOLLOWING REPORT OF THE AUDIT COMMITTEE SHALL NOT BE INCORPORATED BY
REFERENCE INTO ANY SUCH FILINGS AND SHALL NOT OTHERWISE BE DEEMED FILED UNDER
SUCH ACTS.
The Audit and Corporate Performance Committee has reviewed and discussed the
audited financial statements of the Company for the fiscal year ended
December 31, 2000 with the Company's management and with Deloitte & Touche LLP,
the Company's independent auditors. The Committee discussed with Deloitte &
Touche LLP the matters required to be discussed by Statement on Auditing
Standards No. 61 (Communication with Audit Committees).
The Committee has received the written disclosures and the letter from
Deloitte & Touche LLP required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and has discussed the
independence of Deloitte & Touche LLP with that firm.
Based upon the review and discussions noted above, the Audit and Corporate
Performance Committee recommended to the Board of Directors that the Company's
audited financial statements be included in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2000 for filing with the
Securities and Exchange Commission.
The Board of Directors has determined that with the exception of Richard
Korpan, the members of the Audit and Corporate Performance Committee are
"independent" for purposes of the New York Stock Exchange listing standards.
Mr. Korpan is the former Chairman, President and Chief Executive Officer of
Florida Progress Corporation. Having served in those capacities, he acquired
tremendous expertise regarding financial management matters and audit
responsibilities, including having direct management oversight of the audit
function at Florida Progress Corporation. Progress Energy has recently
reorganized its internal audit organization. The Securities and Exchange
Commission and the various stock exchanges have all increased their focus on the
role of audit committees. Mr. Korpan possesses substantial expertise and recent
direct practice in addressing audit related matters and the Board believes this
will provide valuable guidance and direction to the Audit Committee. For these
reasons, the Board, in its business judgment, has determined that Mr. Korpan's
membership on the Committee is required by the best interests of the Company and
its shareholders.
The Audit Committee has adopted a written policy statement (charter), which
is included as Exhibit A to this proxy statement.
Audit and Corporate Performance
Committee:
Richard L. Daugherty, Chairman
David L. Burner
W. D. Frederick, Jr.
Richard Korpan
Estell C. Lee
John H. Mullin, III
Jean Giles Wittner
29
DISCLOSURE OF AUDITORS' FEES
Set forth below is certain information relating to the aggregate fees billed
by Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and
their respective affiliates (collectively, "Deloitte") for professional services
rendered for the fiscal year ended December 31, 2000.
AUDIT FEES
The aggregate fees billed by Deloitte for professional services rendered for
the audit of the Company's annual financial statements for the fiscal year ended
December 31, 2000 and for the reviews of the financial statements included in
the Company's Quarterly Reports on Form 10-Q for that fiscal year were $704,467.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
During the fiscal year ending December 31, 2000, there were no professional
services rendered by Deloitte relating to financial information systems design
and implementation.
ALL OTHER FEES
The aggregate fees billed by Deloitte for services rendered to the Company,
other than the services described above under "Audit Fees" and "Financial
Information Systems Design and Implementation Fees" for the fiscal year ended
December 31, 2000 were $1,248,836.
The Audit and Corporate Performance Committee has considered whether the
provision of non-audit services is compatible with maintaining the principal
accountant's independence.
30
PERFORMANCE GRAPH
The following line graph compares the yearly percentage change in the
Company's cumulative total shareholder return on its Common Stock with the
cumulative total return of the Standard & Poor's 500 Stock Index and the
Standard & Poor's Electric Index.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG PROGRESS ENERGY, INC., S&P 500 STOCK INDEX
AND S&P ELECTRIC INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
1995 1996 1997 1998 1999 2000
Progress Energy, Inc. 100 111 136 158 107 185
S&P Electric Index 100 100 126 145 117 180
S&P 500 Index 100 123 164 211 255 232
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MEASUREMENT PERIOD (FISCAL YEAR
COVERED) 1995 1996 1997 1998 1999 2000
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Progress Energy, Inc. 100 111 136 158 107 185
S&P Electric Index 100 100 126 145 117 180
S&P 500 Index 100 123 164 211 255 232
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- ------------------------
* $100 Invested on 12/31/95 in Stock or Index.
Including reinvestment of dividends.
Fiscal Year Ending December 31.
31
SHAREHOLDER PROPOSAL
Robert B. Mills, with an address of 1233 12th Street, N.W., Washington,
D.C., beneficial owner of 60 Common Shares of the Company, has proposed the
adoption of the following resolution and has furnished the following statement
in support of its proposal:
RESOLUTION
Be it resolved that the Carolina Power & Light Company shall invest
sufficient resources to build new electrical generation from solar and wind
power sources to replace approximately one percent (1%) of system capacity
yearly for the next twenty years with the goal of having the company producing
twenty percent (20%) of generation capacity from clean renewable sources in
20 years.
SUPPORTING STATEMENT
Utility deregulation demands the company present a good public image, and
the public is demanding progress towards clean energy.
Efforts must be made to slow down changes in global climate so that we can
continue to survive on planet earth.
The proposal allows flexibility in schedule for the Board of Directors to
implement this proposal. The 20% figure is just a reasonable and conservative
goal to aim for.
A one percent yearly addition to generation capacity allows for small pilot
plants to be built and tried as the program advances.
Although initial building costs might be larger, solar and wind power
sources do not require the purchase of fuel, which can make these additions to
generation capacity very attractive economically over the long term, especially
if the cost of fossil fuels rises. The company should look to building
facilities that are made to last a long time.
A one percent annual building program of solar and wind power generation
facilities would translate to annual additions in the 100 to 200 megawatt range.
Solar power towers, wind farms, solar photovoltaic arrays and parabolic solar
troughs already exist in other places in this range of power production, proving
that CP&L could realistically build such facilities in the Carolinas and
elsewhere.
We urge you to vote FOR this proposal.
COMPANY RESPONSE
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THIS PROPOSAL.
The Board believes that the above shareholder proposal is NOT in the best
interests of the Company and that the proposal will NOT enhance the long-term
value of your stock in the Company.
The proposal would require Carolina Power & Light Company ("CP&L"), a
wholly-owned subsidiary of Progress Energy, to install arbitrary amounts of
solar and wind electric generation facilities, without regard to their effect on
reliability, efficiency, cost, or return to shareholders. CP&L, as part of its
planning process, regularly considers such non-traditional resource options, but
has found that they are not currently appropriate means of meeting its
obligation to provide reliable and reasonably priced utility
32
service. Installation of such generation would make the CP&L system less
reliable and would increase the cost of power that it produces. The proposal,
therefore, is not in the best interests of our customers or our shareholders.
The proposal also ignores the fact that CP&L, as a public utility in North
Carolina and South Carolina, cannot build any generating facility in either of
those states without first obtaining a Certificate of Public Convenience and
Necessity from the states' utilities commissions. Additionally, state laws and
regulations in both North Carolina and South Carolina require CP&L to prepare
and file, annually, an Integrated Resource Plan ("IRP") with the utility
regulators in those states. The IRP sets forth CP&L's plan to add generation and
describes its consideration of various types of generation, including solar and
wind options. It also includes CP&L's explanation of why it has selected the
kinds of generation it plans to build. When reviewing CP&L's IRP, the utility
regulators consider several factors, including construction and operating costs,
reliability and environmental impact. The same is true when they review requests
for certificates to construct new generation facilities. Thus, the regulatory
processes in place include consideration of the viability of a range of
generating options, including non-traditional generation. As an integral part of
those processes, CP&L and the state regulators evaluate all generation options
in light of the factors noted above, not upon achieving mandated arbitrary goals
for installing a certain percentage of particular types of generation resources.
Through its resource planning process, CP&L has considered wind and solar
options, including an assessment of the economic potential for those options.
Previous assessments have shown limited viable sites for wind generation in the
Carolinas. Ongoing economic analysis continues to show that other options are
more cost effective than wind or solar resources to meet our customer's demand
for electricity. Requiring CP&L to construct wind and solar generation resources
in spite of this fact would significantly impair CP&L's ability to offer
competitive prices to its customers, potentially harming the Company, its
customers, and ultimately, its shareholders.
In sum, the proposal would require CP&L to pursue construction of specific
types of capacity without regard to costs, viability, reliability, market
factors, or environmental impact. Such a course would be inconsistent with the
regulatory processes in which those factors are carefully weighed by CP&L and
the state regulators in evaluating which types of new generation will best serve
the interests of customers and shareholders. For those reasons, the Board
recommends a vote AGAINST the proposal. Proxies solicited by the Board of
Directors will be so voted unless shareholders specify otherwise in their
proxies.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Deloitte & Touche LLP has been selected by the Board of
Directors to serve as independent public accountants for the Company for the
current year, having served in that capacity since 1930. A representative of
Deloitte & Touche LLP will be present at the Annual Meeting of Shareholders,
will have the opportunity to make a statement and will be available to respond
to appropriate questions.
FINANCIAL STATEMENTS
The Company's 2000 Annual Report, which includes financial statements for
the fiscal years ended December 31, 2000, and 1999, together with related notes,
audited statements of income and changes in financial position for the three
most recent years, and the report of Deloitte & Touche LLP, independent public
accountants, was mailed to shareholders of record as of the close of business on
March 9, 2001.
33
FUTURE SHAREHOLDER PROPOSALS
Shareholder proposals submitted for inclusion in the proxy statement for the
Company's 2002 Annual Meeting must be received no later than December 3, 2001 at
the Company's principal executive offices, addressed to the attention of:
William D. Johnson
Executive Vice President,
General Counsel and Secretary
Progress Energy, Inc.
Post Office Box 1551
Raleigh, North Carolina 27602-1551
Any other proposal which a shareholder desires to be presented for action at
an Annual Meeting must be received by the Secretary of the Company no later than
the close of business on the 60th day prior to the first anniversary of the
immediately preceding year's annual meeting. The proposal must include a brief
description of the business desired to be brought before the meeting, the
shareholder's name and address, the class and number of shares owned by the
shareholder and disclosure of any material interest the shareholder may have in
the matter proposed.
OTHER BUSINESS
The Board of Directors does not intend to bring any business before the
meeting other than that stated in this Proxy Statement. The Board knows of no
other matter to come before the meeting. If other matters are properly brought
before the meeting, it is the intention of the Board of Directors that the
persons named in the enclosed Proxy will vote on such matters pursuant to the
Proxy in accordance with their best judgment.
34
EXHIBIT A
POLICY STATEMENT OF THE
AUDIT AND CORPORATE PERFORMANCE COMMITTEE
PURPOSE AND COMPOSITION
The Audit Committee ("Committee") shall be a standing committee of the Board
of Directors ("Board"). The Committee shall assist and advise the Board in
fulfilling its oversight responsibilities related to the financial information
that will be provided to the shareholders and others, the business and financial
controls that management has established, internal/external audit activities,
and the Corporate Ethics Program. In meeting its responsibilities, the Committee
is expected to provide an open channel of communication with management,
internal audit, the external auditors, and the Board.
The Committee is composed of at least three members of the Board who are
independent within the meaning of the Rules of the New York Stock Exchange
("NYSE"). Committee members shall be free from any relationships that would
interfere with or give the appearance of interfering with the exercise of
independent judgment as a Committee member. All members shall have a requisite
working familiarity with basic finance and accounting practices in compliance
with the Rules of the NYSE. Furthermore, at least one member of the Committee
shall have accounting or related financial management expertise in compliance
with the Rules of the NYSE. Committee members shall be appointed by the Board
normally at the Annual Organizational Meeting of the Board. The Board shall
designate one Committee member as chairman, who shall preside over the meetings
of the Committee and report Committee actions to the Board.
DUTIES AND RESPONSIBILITIES
Duties and responsibilities of the Committee shall include, but are not
limited to the following:
1. Review with management and the external auditors the annual financial
results for the Company. The review should focus on appropriate disclosure
of key events, risks and actual or contingent liabilities that could
materially impact the Company's financial results or cause the reported
information to be misleading. Also review the annual report to shareholders,
the annual report on Form 10-K filed with the Securities and Exchange
Commission, and legal and regulatory matters having a material impact on the
financial statements. The external auditors will have discussions with the
Committee on the quality of the accounting principles used by the Company.
2. Oversee and monitor relations with the external auditors to ensure that they
are independent of management and that their objectivity is not impaired,
recognizing that the external auditors are accountable to the Board and the
Committee. The independence of the external auditors should include a formal
written affirmation from the external auditors. Annually recommend to the
Board the external audit firm(s) to be nominated and review the audit fees.
Review the scope of any non-audit services to be performed by the external
auditors and its impact on the auditors' independence. Review the scope of
the external audit plan and upon completion of the audit, review significant
changes made in the scope of the audit plan. Meet with the external auditors
privately, without management present, at least annually.
3. Oversee and monitor the activities of the Audit Services Department to
ensure the audit function maintains appropriate independence and objectivity
in the fulfillment of its responsibilities. The Committee should review: the
audit plan for the upcoming year and the results/changes made to the
A-1
prior year's plan; significant audit findings and recommendations and
management's action plan; the adequacy of the budget and staffing for the
Department; and the appointment or dismissal of the manager of Audit
Services. Meet with the manager of Audit Services privately, without
management present, at least annually.
4. Assess and monitor the overall control environment of the Company through
discussion with management, the external auditors and the manager of Audit
Services. Additionally, oversee and monitor the activities of the Corporate
Ethics Program.
5. Request the external auditors, the internal auditors, or management to
conduct special reviews or studies, as appropriate. Also, the Committee may
employ, at Company expenses, outside counsel or consultants to conduct such
reviews or studies.
6. Provide a report in the proxy statement stating that the Committee has
reviewed and discussed the financial statements with management and the
auditors. In addition, this report will include a recommendation to the
Board that the audited financial statements be included in the Company's
annual report on Form 10-K.
7. Reassess annually the adequacy of this Policy Statement (charter) which has
been approved by the Board. The disclosure of the written charter will be
stated annually in the proxy, which will contain a copy of the charter in an
appendix to the proxy every three years.
MEETINGS
The Committee shall hold at least three meetings each year in order to
accomplish the aforementioned duties and responsibilities. The Committee's
chairman may call additional meetings as needed, to review matters of interest
to the Committee. As deemed necessary by the Committee, meetings shall be
attended by appropriate Company personnel.
The Executive Vice President and Chief Financial Officer or his designee
shall, at the request of the chairman of the Committee, arrange meetings,
prepare meeting agendas, and serve as secretary to the Committee.
A-2
DIRECTIONS TO PROGRESS ENERGY'S
2001 ANNUAL SHAREHOLDERS' MEETING
(to be held at the North Carolina Museum of Art in Raleigh, NC)
[MAP]
CPLCM-PS-01
[Progress Energy Logo]
VOTE BY TELEPHONE
It's fast, convenient, and immediate! Call Toll Free on a Touch-Tone Phone.
FOLLOW THESE FOUR EASY STEPS:
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1. READ THE ACCOMPANYING PROXY STATEMENT AND THIS PROXY CARD.
2. CALL THE TOLL FREE NUMBER (1-877-779-8683).
THERE IS NO CHARGE FOR THIS CALL.
3. ENTER YOUR CONTROL NUMBER LOCATED ON THIS PROXY CARD.
4. FOLLOW THE RECORDED INSTRUCTIONS.
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Your vote is important! Call 1-877-779-8683 anytime!
VOTE BY INTERNET
It's fast, convenient, and your vote is immediately confirmed and posted.
FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING PROXY STATEMENT AND THIS PROXY CARD.
2. GO TO THE WEBSITE
HTTP://WWW.EPROXYVOTE.COM/PGN
3. ENTER YOUR CONTROL NUMBER LOCATED ON THIS PROXY CARD.
4. FOLLOW THE INSTRUCTIONS PROVIDED.
Your vote is important!
Go to HTTP://WWW.EPROXYVOTE.COM/PGN anytime!
DO NOT RETURN THIS PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
UNLESS YOU INTEND TO REVOKE YOUR PRIOR VOTE.
DETACH CARD DETACH CARD
|X| PLEASE MARK VOTES
AS IN THIS EXAMPLE
Directors Recommend Vote FOR
----------------------------
PROGRESS ENERGY, INC. 1. ELECTION OF DIRECTORS AS SET FORTH
- --------------------- IN THE PROXY STATEMENT.
NOMINEES For All With- For all
MARK BOX AT RIGHT IF AN ADDRESS CHANGE HAS (01) W. CAVANAUGH Nominees hold Except
BEEN NOTED ON THE REVERSE SIDE OF THIS CARD. | | (02) C. COKER | | | | | |
(03) W. FREDERICK
(04) R. KORPAN
(05) E. MCKEE
(06) R. NUNIS
(07) J. WITTNER
NOTE: If you do not wish your shares voted "FOR" a
particular nominee, mark the "For All Except" box and
strike a line through the name(s) of the nominee(s).
Your shares will be voted for the remaining
CONTROL NUMBER: nominee(s).
Directors Recommend Vote AGAINST
For Against Abstain
2. SHAREHOLDER PROPOSAL AS SET FORTH | | | | | |
IN THE PROXY STATEMENT.
3. IN THEIR DISCRETION THE PROXIES ARE AUTHORIZED TO
VOTE UPON SUCH OTHER BUSINESS THAT IS PROPERLY
BROUGHT BEFORE THE MEETING OR ANY ADJOURNMENT
THEREOF.
Please be sure to sign and date this Proxy. Date
------------------------------------------- ----
---------------------------------------------------
Shareholder sign here Co-owner sign here
PROGRESS ENERGY, INC.
DEAR SHAREHOLDER,
PLEASE TAKE NOTE OF THE IMPORTANT INFORMATION ENCLOSED WITH THE PROXY CARD.
THESE ISSUES RELATE TO THE MANAGEMENT AND OPERATION OF YOUR COMPANY THAT REQUIRE
YOUR IMMEDIATE ATTENTION AND APPROVAL. DETAILS ARE DISCUSSED IN THE ENCLOSED
PROXY MATERIALS.
YOUR VOTE COUNTS, AND YOU ARE STRONGLY ENCOURAGED TO EXERCISE YOUR RIGHT TO VOTE
YOUR SHARES.
PLEASE MARK THE BOXES ON THIS PROXY CARD TO INDICATE HOW YOUR SHARES WILL BE
VOTED, THEN SIGN THE CARD, DETACH IT AND RETURN YOUR PROXY VOTE IN THE ENCLOSED
POSTAGE PAID ENVELOPE. OR YOU MAY VOTE BY TELEPHONE OR INTERNET BY FOLLOWING THE
INSTRUCTIONS ON THE PROXY.
YOUR VOTE MUST BE RECEIVED PRIOR TO THE ANNUAL MEETING OF SHAREHOLDERS, MAY 9,
2001.
THANK YOU IN ADVANCE FOR YOUR PROMPT CONSIDERATION OF THESE MATTERS.
SINCERELY,
PROGRESS ENERGY, INC.
PROGRESS ENERGY, INC.
410 SOUTH WILMINGTON STREET, RALEIGH, NORTH CAROLINA 27601-1849
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
PROXY. The undersigned hereby appoints William Cavanaugh III and Robert B.
McGehee, and each of them as Proxies, with full power of substitution, to vote
the shares of stock of Progress Energy, Inc. registered in the name of the
undersigned, or which the undersigned has the power to vote, at the Annual
Meeting of Shareholders of the Company to be held Wednesday, May 9, 2001, at
10:00 a.m., and at any adjournment thereof, for the election of directors, and
upon the proposal set forth on the reverse side hereof, and upon other matters
properly brought before the meeting. The undersigned acknowledges receipt of the
notice of said Annual Meeting and the proxy statement.
THIS PROXY WILL BE VOTED AS DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER(S).
UNLESS OTHERWISE SPECIFIED, IT WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND
AGAINST THE SHAREHOLDER PROPOSAL, ALL AS SET FORTH IN THE PROXY STATEMENT. THE
NOMINEES FOR DIRECTOR ARE: W. CAVANAUGH, C. COKER, W. FREDERICK, R. KORPAN, E.
MCKEE, R. NUNIS AND J. WITTNER. IF ANY DIRECTOR BECOMES UNAVAILABLE, THE PROXIES
WILL VOTE FOR A SUBSTITUTE DESIGNATED BY THE BOARD.
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PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE
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NOTE: Please sign exactly as name(s) appear(s) hereon. When signing as attorney,
executor, administrator, trustee or guardian, or as custodian for a minor,
please give full title as such. If a corporation, please have signed in full
corporate name by any authorized officer, giving full title. If a partnership,
sign in full partnership name by an authorized person, giving full title.
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HAS YOUR ADDRESS CHANGED? COMPLETE BELOW.
NEW ADDRESS:
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