<Page>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<Table>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-12
</Table>
<Table>
CAROLINA POWER & LIGHT CO.
- ------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- ------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</Table>
Payment of Filing Fee (Check the appropriate box):
<Table>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
----------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------
</Table>
<Page>
[GRAPHIC]
Carolina Power & Light Company
410 S. Wilmington Street
Raleigh, NC 27601
April 4, 2003
Dear Shareholder:
I am pleased to invite you to attend the 2003 Annual Meeting of the
Shareholders of Carolina Power & Light Company, now doing business as Progress
Energy Carolinas, Inc. The meeting will be held at 10:00 o'clock a.m. on
May 14, 2003, at the Asheville Community Theatre, 35 E. Walnut Street,
Asheville, North Carolina.
As described in the accompanying Notice of Annual Meeting of Shareholders
and Proxy Statement, the only matter scheduled to be acted upon at the meeting
is the election of directors.
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 IN ACCORDANCE WITH THE INSTRUCTIONS ON THE
ENCLOSED PROXY CARD AS SOON AS POSSIBLE. Voting by either 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 Carolina Power & Light
Company and look forward to seeing you at the meeting. On behalf of the
management and directors of Carolina Power & Light Company, thank you for your
continued support and confidence in 2003.
Sincerely,
[GRAPHIC]
William Cavanaugh III
Chairman of the Board, President and Chief Executive Officer
<Page>
VOTING YOUR PROXY IS IMPORTANT
Your vote is important. Please promptly SIGN, DATE and RETURN the enclosed
proxy card or VOTE BY TELEPHONE 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.
<Page>
CAROLINA POWER & LIGHT COMPANY
410 S. WILMINGTON STREET
RALEIGH, NORTH CAROLINA 27601-1849
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 14, 2003
The Annual Meeting of the Shareholders of Carolina Power & Light Company
will be held at 10:00 o'clock a.m. on May 14, 2003, at the Asheville Community
Theatre, 35 E. Walnut Street, Asheville, North Carolina. The meeting will be
held in order to:
(1) Elect five (5) Class II directors of the Company to serve three-year
terms.
(2) Transact any other business as may properly be brought before the
meeting.
All shareholders of $5 Preferred Stock, Serial Preferred Stock and Common
Stock of record at the close of business on March 7, 2003, will be entitled to
attend the meeting and to vote. The stock transfer books will remain open.
By order of the Board of Directors.
WILLIAM D. JOHNSON
Executive Vice President and Secretary
Raleigh, North Carolina
April 4, 2003
<Page>
CAROLINA POWER & LIGHT COMPANY
410 S. WILMINGTON STREET
RALEIGH, NORTH CAROLINA 27601-1849
---------------------
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Carolina Power & Light Company (Company) 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 14, 2003, at the Asheville Community Theatre, 35 E. Walnut
Street, Asheville, North Carolina. (For directions to the meeting location,
please see map included at the end of the Proxy Statement.) This Proxy Statement
and form of proxy were first sent to shareholders on or about April 4, 2003.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR 2002,
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 DELIVERY RULES CAN BE SATISFIED BY
DELIVERING A SINGLE PROXY STATEMENT AND ANNUAL REPORT TO SHAREHOLDERS TO AN
ADDRESS SHARED BY TWO OR MORE OF OUR SHAREHOLDERS. THIS DELIVERY METHOD IS
REFERRED TO AS HOUSEHOLDING. 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
<Page>
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, e-mail or other electronic media 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 by following the instructions
provided in the enclosed proxy form. The 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, you may also revoke your vote by any of the three methods noted
above, or you may change your vote by voting again by telephone. 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. You should address any written
notices of proxy revocation to: Carolina Power & Light Company, 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, and in the discretion of the named proxies, upon any other
business properly brought before the meeting.
VOTING SECURITIES
The Directors of the Company have fixed March 7, 2003 as the record date for
shareholders entitled to vote at the Annual Meeting. Only holders of the
Company's $5 Preferred Stock, Serial Preferred Stock and 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 7, 2003,
there were outstanding 236,997 shares of $5 Preferred Stock, 349,850 shares of
Serial Preferred Stock and 159,608,055 shares of Common Stock. Progress
Energy, Inc. (Progress Energy) owns all outstanding shares of the Company's
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 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
<Page>
ELECTION OF DIRECTORS
Based on the report of the Corporate Governance Committee (see page 8), the
Board of Directors nominates the five nominees listed below. The nominees to
serve as Directors in Class II for terms expiring in 2006 and until their
respective successors are elected and qualified are Edwin B. Borden, James E.
Bostic, Jr., David L. Burner, Richard L. Daugherty and Richard A. Nunis.
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 five 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 five 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 of public companies are set
forth below. (The Company is a direct subsidiary of Progress Energy and a
sibling of Florida Progress Corporation, both of which are noted in the
descriptions below.) Information concerning the number of shares of Progress
Energy's Common Stock beneficially owned, directly or indirectly, by all current
Directors appears on page 6 of this Proxy Statement.
NOMINEES FOR ELECTION--CLASS II
(Terms Expiring in 2006)
EDWIN B. BORDEN, age 69, is President of The Borden Manufacturing Company, a
textile management services company. He has served as a Director of the Company
since 1985 and also serves as a director of Progress Energy, Florida Progress
Corporation, Jefferson-Pilot Financial, Jefferson-Pilot Life Insurance Company,
Ruddick Corporation and Winston Hotels, Inc.
JAMES E. BOSTIC, Jr., age 55, is Executive Vice President of Georgia-Pacific
Corporation, a manufacturer and distributor of tissue paper, packaging, building
products, pulp and related chemicals (since January 2001). He previously served
as Senior Vice President of Georgia-Pacific Corporation (from January 1995 to
December 2000). He has served as a Director of the Company since July 10, 2002
and also serves as a director of Progress Energy and Florida Progress
Corporation.
DAVID L. BURNER, age 63, is Chairman and Chief Executive Officer of the
Goodrich Corporation, a provider of aerospace components, systems and services
(since July 1997). He has served as a Director of the Company since 1999 and
also serves as a director of Progress Energy, Florida Progress Corporation,
Milacron, Inc., Lance, Inc. and Briggs & Stratton Corporation.
RICHARD L. DAUGHERTY, age 67, formerly Executive Director of NCSU Research
Corporation, a development corporation of the Centennial Campus of North
Carolina State University. He previously served as Vice President of IBM PC
Company and Senior State Executive of IBM Corp. He has served as a Director of
the Company since 1992 and also serves as a director of Progress Energy and
Florida Progress Corporation.
3
<Page>
RICHARD A. NUNIS, age 70, 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 2000 and also serves as a director of Progress
Energy and Florida Progress Corporation.
DIRECTORS CONTINUING IN OFFICE--CLASS I
(Terms Expiring in 2005)
W. D. FREDERICK, JR., age 68, is a citrus grower and rancher. He is a
retired partner in the law firm of Holland & Knight and a former mayor of
Orlando. He has served as a Director of the Company since 2000 and also serves
as a director of Progress Energy, Florida Progress Corporation and Blue
Cross/Blue Shield of Florida.
WILLIAM O. MCCOY, age 69, is a partner in Franklin Street Partners, an
investment management firm (since 1997). He previously served as Interim
Chancellor of the University of North Carolina at Chapel Hill from April 1999 to
August 2000 and as Vice President-Finance of the University of North Carolina at
Chapel Hill from 1995 to 1998. He is also formerly Vice Chairman of the Board,
BellSouth Corp., and President and Chief Executive Officer, BellSouth
Enterprises. He has served as a Director of the Company since 1996 and also
serves as a director of Progress Energy, Florida Progress Corporation, Duke
Realty Corporation, Acterna Corp., The Liberty Corporation and North Carolina
Capital Management Trust and as a Trustee of Fidelity Investments.
JOHN H. MULLIN, III, age 61, is Chairman of Ridgeway Farm, LLC, a limited
liability company engaged in farming, timber and agricultural activities. He is
a former Managing Director of Dillon, Read & Co. (investment bankers). He has
served as a Director of the Company since 1999 and also serves as a director of
Progress Energy, Florida Progress Corporation, The Liberty Corporation, Sonoco
Products Company and Alex Brown Realty, Inc., and as a Trustee of The Putnam
Funds.
CARLOS A. SALADRIGAS, age 54, is Chairman of Premier American Bank in Miami,
Florida. He is also a retired Chief Executive Officer of ADP TotalSource
(previously The Vincam Group, Inc.), a Miami-based human resources outsourcing
company that provides human resource functions to small and mid-sized
businesses. He has served as a Director of the Company since 2001 and also
serves as a director of Progress Energy and Florida Progress Corporation.
J. TYLEE WILSON, age 71, is retired Chairman and Chief Executive Officer of
RJR Nabisco, Inc. He has served as a Director of the Company since 1987 and also
serves as a director of Progress Energy and Florida Progress Corporation.
DIRECTORS CONTINUING IN OFFICE--CLASS III
(Terms Expiring in 2004)
WILLIAM CAVANAUGH III, age 64, is Chairman, President and Chief Executive
Officer of the Company (since May 1999). He also serves as Chairman and Chief
Executive Officer, Progress Energy (August 1999 to present); Chairman, Progress
Energy Service Company, LLC (July 2000 to present); Chairman, Florida Power
Corporation (November 30, 2000 to present); and Chairman, President and Chief
Executive Officer, Florida Progress Corporation (November 30, 2000 to present);
Chairman, Progress Energy Ventures, Inc. (March 2000 to present). He previously
served in various executive positions at Carolina Power & Light Company. He has
served as a Director of the Company since 1993 and also serves as a director of
Duke Realty Corporation.
CHARLES W. COKER, age 69, 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 1975 and also serves as a director of Progress Energy,
Florida Progress Corporation, Bank of America Corporation and Sara Lee
Corporation.
4
<Page>
E. MARIE MCKEE, age 52, is Senior Vice President of Corning Incorporated, a
developer of technologies for glass, ceramics, fiber optics and photonics. She
also serves as President and Chief Executive Officer of Steuben Glass. She has
served as a Director of the Company since 1999 and also serves as a director of
Progress Energy and Florida Progress Corporation.
JEAN GILES WITTNER, age 68, 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
2000 and also serves as a director of Progress Energy, Florida Progress
Corporation and Raymond James Bank, FSB.
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, 2002. The Company does not know of any
shareholder that owned more than 5% of any class of its other voting securities
as of December 31, 2002.
<Table>
<Caption>
NAME AND ADDRESS OF NUMBER OF SHARES PERCENTAGE OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
- -------------- -------------------------------------- ------------------ -------------
Common Stock Progress Energy, Inc. 159,608,055 100 %
410 S. Wilmington Street
Raleigh, North Carolina 27601-1849
</Table>
5
<Page>
MANAGEMENT OWNERSHIP OF COMMON STOCK
None of the Company's directors or officers owns any shares of the Company's
Common or Preferred Stock.
The following table describes the beneficial ownership of the Common Stock
of Progress Energy and ownership of Common Stock units as of February 28, 2003,
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 Progress Energy
and possesses no voting rights, but is equal in value at all times to a share of
Progress Energy Common Stock. As of February 28, 2003, none of the individuals
or group in the above categories owned one percent (1%) or more of the Progress
Energy's voting securities.
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------
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 5,632 Common Stock
30,216(2) Units
James E. Bostic, Jr. 400 Common Stock
381(3) Units
David L. Burner 200 Common Stock
7,320(2) Units
William Cavanaugh III 397,344(8) Common Stock
243,238(4,5,6,7) Units
Charles W. Coker 7,498(9) Common Stock
35,292(2) Units
Richard L. Daugherty 1,058 Common Stock
21,691(2) Units
W. D. Frederick, Jr. 1,000 Common Stock
4,210(2) Units
William D. Johnson 76,526(11) Common Stock
25,687(5,6,7) Units
William O. McCoy 1,000 Common Stock
13,386(2) Units
Robert B. McGehee 80,309(12) Common Stock
32,755(5,6,7) Units
E. Marie McKee 1,000 Common Stock
7,757(2) Units
John H. Mullin, III 4,000(10) Common Stock
9,097(2) Units
Richard A. Nunis 5,000 Common Stock
2,085(2) Units
William S. Orser 79,349(13) Common Stock
59,259(4,5,6) Units
Carlos A. Saladrigas 4,600 Common Stock
549(3) Units
Peter M. Scott III 78,196(14) Common Stock
25,465(5,6) Units
J. Tylee Wilson 6,000 Common Stock
9,893(2) Units
Jean Giles Wittner 3,000(15) Common Stock
4,143(2) Units
Shares of Common Stock(16) beneficially owned by 1,009,696 Common Stock
all directors and executive officers of the 683,055 Units
Company as a group (24 persons)
</Table>
6
<Page>
(1)Unless otherwise noted, all shares of Progress Energy 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 Progress Energy under
the Directors' Deferred Compensation Plan and the Progress Energy Non-Employee
Director Stock Unit Plan (see "Directors' Compensation" on page 10).
(3)Consists of units representing Common Stock of Progress Energy under
the Directors' Deferred Compensation Plan.
(4)Consists of performance units under Progress Energy's Long-Term
Compensation Program.
(5)Consists of performance shares awarded under the Performance Share
Sub-Plan of the Progress Energy 1997 and 2002 Equity Incentive Plans (see
"Long-Term Incentive Plan Awards Table" on page 15 and footnote 1 thereunder for
performance shares awarded in 2002).
(6)Consists of replacement units to replace the value of Company
contributions to the Progress Energy 401(k) Savings & Stock Ownership Plan that
would have been made but for the deferral of salary under the Progress Energy
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 12 and footnote 5 thereunder).
(7)Consists of performance units recorded to reflect awards deferred
under the Progress Energy Management Incentive Compensation Plan.
(8)Includes 258,500 shares of Progress Energy Restricted Stock, 8,255
shares of Progress Energy Common Stock with shared voting and investment power
owned by members of immediate family to which beneficial ownership has not been
disclaimed, and 67,366 shares of Progress Energy Common Stock Mr. Cavanaugh has
the right to acquire beneficial ownership of within 60 days through the exercise
of certain stock options.
(9)Includes 7,298 shares of Progress Energy Common Stock with shared
voting and investment power owned by members of immediate family to which
beneficial ownership has not been disclaimed.
(10)Includes 3,000 shares of Progress Energy Common Stock with shared
voting and investment power owned by members of immediate family to which
beneficial ownership has not been disclaimed.
(11)Includes 54,134 shares of Progress Energy Restricted Stock and
14,166 shares of Progress Energy Common Stock Mr. Johnson has the right to
acquire beneficial ownership of within 60 days through the exercise of certain
stock options.
(12)Includes 55,634 shares of Progress Energy Restricted Stock and
18,366 shares of Progress Energy Common Stock Mr. McGehee has the right to
acquire beneficial ownership of within 60 days through the exercise of certain
stock options.
(13)Includes 29,400 shares of Progress Energy Restricted Stock and
16,666 shares of Progress Energy Common Stock Mr. Orser has the right to acquire
beneficial ownership of within 60 days through the exercise of certain stock
options.
(14)Includes 63,300 shares of Progress Energy Restricted Stock and
14,166 shares of Progress Energy Common Stock Mr. Scott has the right to acquire
beneficial ownership of within 60 days through the exercise of certain stock
options.
(15)Includes 1,000 shares of Progress Energy Common Stock with shared
voting and investment power owned by members of immediate family to which
beneficial ownership has not been disclaimed.
(16)Includes shares each group member has the right to acquire
beneficial ownership of within 60 days through the exercise of certain stock
options.
7
<Page>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 2002, five of the Company's Directors had indirect interests in
routine commercial transactions for the sale of goods and services to which the
Company or one of its affiliates was a party; however, none of those interests
were material, and thus are not required to be disclosed.
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
2002 fiscal year were met.
BOARD OF DIRECTORS
The Board of Directors is currently comprised of fourteen (14) members. The
Board of Directors met six times in 2002. Average attendance of the Directors at
the meetings of the Board and its Committees held during 2002 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,
2002, 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 conducted its business by two
written consents to actions without meeting during 2002.
AUDIT AND CORPORATE PERFORMANCE COMMITTEE
The Audit and Corporate Performance Committee is presently composed of seven
non-employee Directors--Messrs. Richard L. Daugherty, Chairman, James E. Bostic,
Jr., David L. Burner, W. D. Frederick, Jr., John H. Mullin, III and Carlos A.
Saladrigas and Ms. Jean Giles Wittner. The work of this Committee includes
oversight responsibilities relating to the integrity of the Company's financial
statements, compliance with legal and regulatory requirements, the independent
auditor's qualifications and independence, performance of the internal audit
function and independent auditors and the Corporate Ethics Program. The
Committee held five meetings in 2002.
CORPORATE GOVERNANCE COMMITTEE
The Corporate Governance Committee is presently composed of four independent
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
8
<Page>
recommending to the Board nominees for election. The Committee is responsible
for conducting investigations into or studies of matters within the scope of its
responsibilities and to retain outside advisors to identify director candidates.
The Committee will consider qualified candidates for 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 eight meetings in 2002.
FINANCE COMMITTEE
The Finance Committee is presently composed of six non-employee
Directors--Messrs. William O. McCoy, Chairman, David L. Burner, Charles W.
Coker, John H. Mullin, III, Richard A. Nunis and J. Tylee Wilson. The Committee
reviews and oversees the Company's financial policies and planning, financial
position, strategic planning and investments, pension funds and financing plans.
The Committee also monitors the Company's risk management activities, financial
position and recommends changes to the Company's dividend policy and proposed
budget. The Committee held six meetings in 2002.
COMMITTEE ON OPERATIONS, ENVIRONMENTAL, HEALTH AND SAFETY ISSUES
The Committee on Operations, Environmental, Health and Safety Issues is
presently composed of seven non-employee Directors--Messrs. Edwin B. Borden,
Chairman, James E. Bostic, Jr., Richard L. Daugherty, W. D. Frederick, Jr., and
Carlos A. Saladrigas, and Ms. E. Marie McKee and Ms. Jean Giles Wittner. The
Committee reviews the Company's load forecasts and plans for generation,
transmission and distribution, fuel production and transportation, customer
service, energy trading and term marketing, and other Company operations. The
Committee reviews and assesses Company policies, procedures, and practices
relative to the protection of the environment and the health and 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 three
meetings in 2002.
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 verifies 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, evaluates the performance of the Chief
Executive Officer and oversees plans for management succession. The Committee
held five meetings in 2002.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
ALL COMPENSATION PAID TO OUTSIDE DIRECTORS OF PROGRESS ENERGY IS FOR
SERVICES RENDERED ON BEHALF OF THE BOARDS OF PROGRESS ENERGY, FLORIDA PROGRESS
CORPORATION AND THE COMPANY. 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. A DESCRIPTION OF THE COMPENSATION PAID
TO SAID OUTSIDE DIRECTOR FOLLOWS.
9
<Page>
DIRECTORS' COMPENSATION
Directors who are not employees of the Company or its affiliates receive an
annual retainer of $45,000, of which $15,000 is automatically deferred under the
Progress Energy 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 or its affiliates also receive an
attendance fee for committee meetings of $1,500. The Chairman of each Committee
receives an additional retainer of $5,000 per year. Directors who are not
employees of the Company or its affiliates receive an attendance fee of $1,500
for each day of a visit to a plant or office of the Company or its subsidiaries,
or for attendance at any other business meeting to which the Director is invited
by the Company. Directors who are officers of the Company or its affiliates 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 Progress Energy Directors' Deferred Compensation
Plan. Any deferred fees are deemed to be invested in a number of Units of Common
Stock of Progress Energy, but participating Directors receive no equity interest
or voting rights in any shares of 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 Progress Energy's 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 Progress Energy 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 Progress Energy'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 of Progress Energy and used as the basis for a matching contribution
of shares of Common Stock for participating employees in the Progress Energy
401(k) Savings & Stock Ownership 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 Progress Energy 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.
Pursuant to the Progress Energy 2002 Equity Incentive Compensation Plan,
Directors are also eligible to receive grants of up to 2,000 non-qualified stock
options on May 1 of each year, subject to the Board's approval. The grants will
be made pursuant to individual award agreements between Progress Energy and each
Director. In order to be eligible for an annual grant, an individual must have
been an outside member of the Company's Board of Directors on May 1 of the year
in which the award is granted. Each annual grant will vest on the first
anniversary of the grant date, and will be exercisable for ten years from the
grant date. Stock options granted to Directors will vest early in the event of a
change-in-control of Progress Energy.
Effective January 1, 1998, the Board of Directors Retirement Plan was
replaced by the Progress Energy 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" 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 to be awarded to those
10
<Page>
Directors for each year in which certain incentive goals established by the
Board are met. Each unit is equal in economic value to one share of Progress
Energy Common Stock, but does not represent an equity interest or entitle its
holder to vote. The number of units is adjusted from time to time to reflect the
payment of dividends with respect to the Common Stock of Progress Energy.
Benefits under the Progress Energy Non-Employee Director Stock Unit 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 (Educational Plan). The Educational Plan is funded by policies of
corporate-owned life insurance on the lives of pairs of Directors, with proceeds
payable to Progress Energy at the death of the second to die in each pair. All
costs of the Educational Plan are expected to be covered from the life insurance
proceeds to be received by Progress Energy. Pursuant to this Educational Plan,
Progress Energy 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 Educational 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, Progress Energy 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 $500,000.
The Educational Plan was discontinued September 16, 1998 and is not offered
as a benefit for any Director who joins the Board subsequent to that date. The
Educational Plan may be terminated at any time in the discretion of the
Executive Committee without recourse or obligation to Progress Energy.
SERVICE ON BOARDS OF SUBSIDIARIES
All compensation paid to outside Directors is for services rendered on
behalf of the Company's Board of Directors and the boards of Progress Energy and
Florida Progress Corporation.
11
<Page>
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
LONG-TERM
COMPENSATION
--------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------------------------- ------------- ----------
OTHER RESTRICTED
ANNUAL STOCK LTIP ALL OTHER
NAME AND SALARY(1) BONUS(2) COMPENSATION(3) AWARD(S)(4,5) PAYOUTS(6) COMPENSATION(7)
PRINCIPAL POSITION YEAR ($) ($) ($) ($) ($) ($)
- ----------------------------------------------------------------------------------------------------------------------------
William Cavanaugh III, 2002 $1,134,231 $ 900,000 $181,661(8) $5,938,322(9) $1,162,641 $414,377(10)
Chairman, President and 2001 1,043,380 1,300,000 126,616 46,824 296,949 329,140
Chief Executive Officer 2000 871,483 1,657,640 76,991 3,871,402 N/A 258,389
William S. Orser, 2002 $ 559,846 $ 215,000 $ 23,972 $ 469,631(11) $ 435,990 $155,413(12)
Group President 2001 548,225 350,000 5,943 624,194 113,124 128,367
2000 469,789 416,963 7,144 178,624 N/A 105,758
Robert B. McGehee, 2002 $ 524,923 $ 225,000 $ 42,995 $1,257,073(13) $ 280,972 $106,122(14)
Executive Vice 2001 487,110 328,000 15,484 598,246 73,530 93,785
President 2000 337,513 444,281 15,901 280,030 N/A 74,807
William D. Johnson, 2002 $ 433,885 $ 170,000 $ 22,700 $1,194,325(15) $ 193,773 $ 74,381(16)
Executive Vice 2001 378,776 255,000 78,698 394,701 21,352 56,923
President and 2000 247,009 265,803 26,734 405,131 N/A 38,012
Secretary
Peter M. Scott III, 2002 $ 434,846 $ 160,000 $ 4,586 $1,195,496(17) N/A $100,491(18)
Executive Vice 2001 422,283 275,000 7,635 138,990 N/A 80,707
President and 2000 206,613 304,000 50,350 1,126,195 N/A 50,485
Chief Financial
Officer
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
(1)Consists of base salary prior to (i) employee contributions to the
Progress Energy 401(k) Savings & Stock Ownership Plan and (ii) voluntary
deferrals, if any, under the Progress Energy 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 Progress Energy Management Incentive
Compensation Plan. See "Other Annual Compensation Opportunities" on page 22.
(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 Progress Energy's
unrestricted stock on the date of grant by the number of shares awarded) granted
pursuant to Progress Energy's 1997 and 2002 Equity Incentive Plans. 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 Progress
Energy 401(k) Savings & Stock Ownership Plan that would have been made on behalf
of the participant but for the deferral of salary under the Progress Energy
Management Deferred Compensation Plan (MDCP) and compensation limitations under
Section 415 of the Internal Revenue Code of 1986, as amended. Previously,
matchable deferrals were provided only in Phantom Stock Units, but effective
January 1, 2003 and thereafter, the value of matchable deferrals is credited to
a deemed stable value fund, rather than Phantom Stock Units to eliminate
reporting requirements for de minimus incremental derivative security additions.
Phantom Stock Units do not represent an equity interest in Progress Energy 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 Progress Energy Common Stock. Additional Phantom Stock Units are
credited from time to time to reflect the payment of dividends on the underlying
Progress Energy Common Stock. Participants with one or more years of service
with Progress Energy or its affiliates are 100% vested in all matchable
deferrals credited to their account under the MDCP
12
<Page>
Plan. Payment of the value of the Phantom Stock Units and deemed investment
funds 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 MDCP 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 fair market value of notational deemed investment funds on the
valuation date multiplied by the number of units credited to the account of the
participant for each fund. See "Other Benefit Opportunities" on page 26.
(6)Consists of the value of payouts of awards granted under the
Performance Share Sub-Plan of Progress Energy's 1997 and 2002 Equity Incentive
Plans (Progress Energy Performance Share Sub-Plan).
(7)Amounts reported in this column include dividends earned in 2002 on
awards granted under Progress Energy's Long-Term Compensation Program and
dividends allocated in 2002 on awards granted under the Performance Share
Sub-Plan.
(8)Consists of (i) $105,676 in gross-up payments for certain federal
and state income tax obligations; and (ii) certain perquisites, including
company airplane expenses of $37,296 which exceed thresholds for footnote
disclosure.
(9)Consists of (i) 33,500 shares of Progress Energy Restricted Stock
valued at $1,744,710 as of May 8, 2002 (one third of these shares of Restricted
Stock will vest on each of the first, second and third anniversaries of the
grant date); (ii) 100,000 shares of Progress Energy Restricted Stock valued at
$4,145,996 as of October 1, 2002 (these shares are all scheduled to vest on
February 1, 2005); and (iii) 1,034 Phantom Stock Units based on the market value
of a share of Progress Energy Common Stock on the date such units were credited
to the account of the participant. Mr. Cavanaugh owns a total of 283,500 shares
of Restricted Stock, which were valued at $12,289,725 as of December 31, 2002.
(10)Consists of (i) $61,468 which represents dividends earned in 2002
on performance units awarded under the Progress Energy Long-Term Compensation
Program; (ii) $268,157 which represents dividends allocated in 2002 on
performance shares awarded under the Progress Energy Performance Share Sub-Plan;
(iii) $9,825 which represents Company contributions under the Progress Energy
401(k) Savings & Stock Ownership Plan; and (iv) $74,927 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)Consists of (i) 9,404 shares of Progress Energy Restricted Stock
valued at $449,208 as of March 20, 2002; and (ii) 442 Phantom Stock Units based
on the market value of a share of Progress Energy Common Stock on the date such
units were credited to the account of the participant. Mr. Orser owns a total of
42,734 shares of Progress Energy Restricted Stock which were valued at
$1,852,519 as of December 31, 2002.
(12)Consists of (i) $24,975 which represents dividends earned in 2002
on performance units awarded under the Progress Energy Long-Term Compensation
Program; (ii) $83,885 which represents dividends allocated in 2002 on
performance shares awarded under the Progress Energy Performance Share Sub-Plan;
(iii) $10,335 which represents Company contributions under the Progress Energy
401(k) Savings & Stock Ownership Plan; and (iv) $36,218 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.
(13)Consists of (i) 8,600 shares of Progress Energy Restricted Stock
valued at $410,978 as of March 20, 2002; (ii) 20,000 shares of Progress Energy
Restricted Stock valued at $829,194 as of October 1, 2002; and (iii) 368 Phantom
Stock Units based on the market value of a share of Progress Energy Common Stock
on the date such units were credited to the account of the participant.
Mr. McGehee owns a total of 61,834 shares of Progress Energy Restricted Stock
which were valued at $2,680,504 as of December 31, 2002.
(14)Consists of (i) $61,281 which represents dividends allocated in
2002 on performance shares awarded under the Progress Energy Performance Share
Sub-Plan; (ii) $9,825 which represents Company contributions under the Progress
Energy 401(k) Savings & Stock Ownership Plan; and (iii) $35,016 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.
(15)Consists of (i) 7,400 shares of Progress Energy Restricted Stock
valued at $353,632 as of March 20, 2002; (ii) 20,000 shares of Progress Energy
Restricted Stock valued at $829,199 as of October 1, 2002; and (iii) 251 Phantom
13
<Page>
Stock Units based on the market value of a share of Progress Energy Common Stock
on the date such units were credited to the account of the participant.
Mr. Johnson owns a total of 55,834 shares of Progress Energy Restricted Stock,
which were valued at $2,420,404 as of December 31, 2002.
(16)Consists of (i) $47,931 which represents dividends allocated in
2002 on performance shares awarded under the Progress Energy Performance Share
Sub-Plan; (ii) $9,825 which represents Company contributions under the Progress
Energy 401(k) Savings & Stock Ownership Plan; and (iii) $16,625 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.
(17)Consists of (i) 7,400 shares of Progress Energy Restricted Stock
valued at $353,632 as of March 20, 2002; (ii) 20,000 shares of Progress Energy
Restricted Stock valued at $829,199 as of October 1, 2002; and (iii) 275 Phantom
Stock Units based on the market value of a share of Progress Energy Common Stock
on the date such units were credited to the account of the participant.
Mr. Scott owns a total of 63,300 shares of Progress Energy Restricted Stock,
which were valued at $2,744,055 as of December 31, 2002.
(18)Consists of (i) $47,855 which represents dividends allocated in
2002 on performance shares awarded under the Progress Energy Performance Share
Sub-Plan; (ii) $9,825 which represents Company contributions under the Progress
Energy 401(k) Savings & Stock Ownership Plan; and (iii) $42,811 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
<Page>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<Table>
<Caption>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
----------------------------------------------------------- ------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES IN EXERCISE OR BASE EXPIRATION
NAME GRANTED FISCAL YEAR* PRICE DATE 5% 10%
- ------------------------ ------------ ------------ ---------------- ---------- ------------- --------------
William Cavanaugh III 228,000 7.95% $41.97 9/30/2012 $6,017,993 $15,250,777
William S. Orser 55,000 1.92% $41.97 9/30/2012 $1,451,709 $ 3,678,915
Robert B. McGehee 92,100 3.21% $41.97 9/30/2012 $2,430,953 $ 6,160,511
William D. Johnson 50,500 1.76% $41.97 9/30/2012 $1,332,933 $ 3,377,913
Peter M. Scott III 46,000 1.60% $41.97 9/30/2012 $1,214,157 $ 3,076,911
</Table>
*Excludes 24,000 stock options that were granted to non-employee directors in
the last fiscal year.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<Table>
<Caption>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
UNDERLYING THE-MONEY OPTIONS/
SHARES UNEXERCISED OPTIONS/SARS AT SARS
ACQUIRED FY-END AT FY-END
ON VALUE --------------------------- EXERCISABLE/
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE UNEXERCISABLE*
- ---------------------------------- -------- -------- ----------- ------------- ------------------------
William Cavanaugh III 0 $ 0.00 67,366 362,734 $314,640
William S. Orser 0 $ 0.00 16,666 88,334 $ 75,900
Robert B. McGehee 0 $ 0.00 18,366 128,834 $127,098
William D. Johnson 0 $ 0.00 14,166 78,834 $ 69,690
Peter M. Scott III 0 $ 0.00 14,166 74,334 $ 63,480
</Table>
*The values reported in this column relate to options that were unexercisable at
December 31, 2002.
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
<Table>
<Caption>
NUMBER OF PERFORMANCE
NAME UNITS(1) PERIOD ENDS
- ---- --------- -----------
William Cavanaugh III,
Chairman, President and
Chief Executive Officer................................... 36,428 2004
William S. Orser,
Group President--CP&L..................................... 9,415 2004
Robert B. McGehee,
Executive Vice President.................................. 8,581 2004
William D. Johnson,
Executive Vice President and Secretary.................... 7,332 2004
Peter M. Scott III,
Executive Vice President and
Chief Financial Officer................................... 7,332 2004
</Table>
15
<Page>
- ------------------------
(1)Consists of the number of performance shares awarded in 2002 under the
Performance Share Sub-Plan of the Progress Energy 2002 Equity Incentive Plan,
based on the closing price of a share of Progress Energy's Common Stock on
March 19, 2002, as published in THE WALL STREET JOURNAL. Performance Share
awards may range from up to 40% to up to 150% 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 Progress
Energy'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 Progress Energy are compared to the TSR and EBITDA growth of a
Peer Group comprised of the major electric utility companies currently
comprising the Standard & Poor's Electric Index. The differences between
Progress Energy's 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 account multiplied by the closing price of Progress
Energy's Common Stock, as published in THE WALL STREET JOURNAL on March 31
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 during the month of April 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, retirement or a divestiture, 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 Progress Energy's 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 23.
16
<Page>
PENSION PLAN TABLE
<Table>
<Caption>
- -----------------------------------------------------------------------
AVERAGE ESTIMATED ANNUAL PENSION AT NORMAL RETIREMENT
COMPENSATION (YEARS OF CREDITED SERVICE)
- -----------------------------------------------------------------------
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
1,080,000 432,000 648,000 669,600
1,140,000 456,000 684,000 706,800
1,200,000 480,000 720,000 744,000
1,260,000 504,000 756,000 781,200
1,320,000 538,000 792,000 818,400
1,380,000 552,000 828,000 855,600
- -----------------------------------------------------------------------
</Table>
The above table demonstrates senior executive pension benefits payable upon
normal retirement under the Progress Energy Pension Plan and the Progress Energy
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 Progress Energy Pension Plan, a defined
benefit plan, benefits are partially offset by Social Security payments and the
monthly pension benefit payable upon retirement is based on base pay earnings,
age, and years of credited service. Benefits under the Progress Energy
Supplemental Senior Executive Retirement Plan are fully offset by Social
Security benefits and by benefits paid under the Progress Energy Pension Plan.
The monthly 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 Progress Energy 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, Messrs. Cavanaugh and Johnson each
have more than 15 1/2 years of credited service as well as three or more years
of service or deemed service on the Senior Management Committee, and are thereby
entitled to the maximum percentage allowable in the benefit formula under these
plans. Mr. Orser has eight years of credited service, Mr. McGehee has 15 years
of credited service, and Mr. Scott has 11 years of credited service.
17
<Page>
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 Progress Energy or one of its subsidiaries. These agreements provide for
base salary, bonuses, perquisites and participation in the various executive
compensation plans offered to senior executives of Progress Energy or one of its
subsidiaries. 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. Progress Energy 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. Executive benefit plan targets, termination and other key provisions of
the agreements are discussed below.
AGREEMENT WITH MR. CAVANAUGH
Pursuant to the terms of his agreement, Mr. Cavanaugh's target compensation
under Progress Energy's Management Incentive Compensation Plan (MICP) increased
to 85% of base salary earnings, effective January 1, 2003. Mr. Cavanaugh's
target compensation under the Performance Share Sub-Plan (PSSP) of Progress
Energy's 2002 Equity Incentive Plan is 147% of his base salary. 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, Progress Energy 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 Progress Energy 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 which he is entitled under Progress
Energy's Management Change-in-Control Plan. If Progress Energy 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
Pursuant to the terms of his agreement, Mr. Orser's target compensation
under Progress Energy's MICP increased to 55% of base salary earnings, effective
January 1, 2003. Mr. Orser's target compensation under the PSSP is 78% of his
base salary. Mr. Orser's agreement notes that pursuant to a 1993 employment
agreement with the Company, 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
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eligible for early retirement benefits under the SERP at age 60, assuming his
continued employment at Progress Energy 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 Progress
Energy 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 Progress Energy's Management Change-in-Control Plan. If
Progress Energy 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 Progress
Energy Pension 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
Pursuant to the terms of his agreement, Mr. McGehee's target compensation
under Progress Energy's MICP increased to 70% of base salary earnings, effective
January 1, 2003. Mr. McGehee's target compensation under the PSSP is 115% of his
base salary. 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, 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, Progress Energy 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 Progress
Energy 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 Progress Energy's Management Change-in-Control Plan. If
Progress Energy 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.
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AGREEMENT WITH MR. JOHNSON
Pursuant to the terms of his agreement, Mr. Johnson's target compensation
under the Progress Energy MICP increased to 55% of base salary earnings,
effective January 1, 2003. Mr. Johnson's target compensation under the PSSP is
78% of his base salary. 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, Progress Energy 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 Progress
Energy 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 Progress Energy's Management
Change-in-Control Plan. If Progress Energy 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.
AGREEMENT WITH MR. SCOTT
Pursuant to the terms of his agreement, Mr. Scott's target compensation
under Progress Energy's MICP increased to 55% of base salary earnings, effective
January 1, 2003. Mr. Scott's target compensation under the PSSP is 78% of his
base salary. 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, Progress Energy 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 Progress
Energy 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 Progress Energy's Management Change-in-Control
Plan. If Progress Energy 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.
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REPORT OF BOARD COMMITTEE ON ORGANIZATION
AND COMPENSATION
The composition of the Boards of Directors of the Company, Florida Progress
and Progress Energy is identical, as is the composition of the Committees on
Organization and Compensation of those Boards (collectively, the "Committees").
The Committees are composed entirely of the same six independent outside
directors who are not eligible to participate in any compensation program in
which Progress Energy executives participate other than the Progress Energy 2002
Equity Incentive Plan. The following report is the joint report of the
Committees with respect to the compensation of the executive officers of
Progress Energy. Progress Energy's executive officers serve as officers and/or
directors of various Progress Energy subsidiaries. They have multiple
responsibilities within and provide various services to Progress Energy and its
subsidiaries. The total compensation of Progress Energy's executive officers is
designed to cover the full range of services they provide to Progress Energy and
its subsidiaries. It is not the policy of Progress Energy to allocate
compensation paid to its executive officers among the various subsidiaries to
which they provide services.
COMPENSATION PRINCIPLES
COMPARISON GROUPS
Progress Energy uses an independent executive benefits consulting firm to
assist Progress Energy in meeting its compensation objectives. Each year this
consulting firm provides the Committees with an analysis comparing overall
compensation paid to Progress Energy's executives with overall compensation paid
to executives of two comparison groups of electric utility companies. One
comparison group consists of fifteen of the 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, the Committees believe these electric utility
companies are appropriate for overall compensation comparisons because they
reflect the most appropriate labor markets for Progress Energy's executives.
Progress Energy's executive compensation program consists of four major
elements: base salary; other annual compensation opportunities; long-term
compensation opportunities; and other benefit opportunities. The Committees'
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 75th percentile of overall compensation paid to
executives of the comparison group. Overall compensation paid to Progress
Energy's executives in 2002 met this objective.
STOCK OWNERSHIP GUIDELINES
In an effort to more closely link the interests of Progress Energy's
management with those of its shareholders, in 1996 the Board of Directors
adopted stock ownership guidelines which are designed to ensure that Progress
Energy's management has a significant financial equity investment in Progress
Energy. Those guidelines require Progress Energy's officers to own from 1 to 4
times their base salary in the form of Progress Energy Common 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 or deferral 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.
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SECTION 162(M)
Section 162(m) of the Internal Revenue Code of 1986, as amended (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 of
outside directors, (2) based on achieving objective performance goals and
(3) disclosed to and approved by the shareholders.
The Committees believe the current design of Progress Energy's compensation
program is sound in linking pay to performance and to the interests of
shareholders, and allowing appropriate flexibility in determining amounts to be
awarded. Therefore, Progress Energy does not have a policy that requires the
Committees to qualify compensation awarded to executive officers for
deductibility under Section 162(m) of the Code. The Committees do, however,
consider the impact of Section 162(m) when determining executive compensation,
and the Progress Energy 2002 Equity Incentive Plan is intended to minimize the
effect of this provision. Although the Committees are not required to qualify
executive compensation paid to Company executives for exemption from
Section 162(m), they 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 Progress Energy's
executive compensation program and their relationship to corporate performance,
as well as a summary of the actions taken by the Committees with respect to the
compensation of Progress Energy's Chief Executive Officer.
BASE SALARY
Executives within Progress Energy receive a base salary determined by the
Committees based upon the value of their position compared to competitively
established salary ranges, their individual performance and overall corporate
performance. The Committees do not utilize a specific mathematical formula in
determining base salaries. The Committees in their 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 within Progress Energy, the competitive 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
Progress Energy sponsors the Management Incentive Compensation Plan (MICP)
for its senior executives, department heads and selected key employees. In order
for awards to be made under the MICP, two conditions must be satisfied. First, a
contribution must be earned by one or more groups of employees under the
corporate incentive feature of Progress Energy's 401(k) Savings & Stock
Ownership Plan, a tax qualified 401(k) plan. Incentive matching allocations are
earned by participating employees if at least five out of ten annual corporate
and business unit goals are met. (See the description of Progress Energy's
401(k) Savings & Stock Ownership Plan, under "Other Benefit Opportunities"
below.) Second, Progress Energy'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 electric utility companies currently
comprising the Standard & Poor's Electric Index.
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If participants at the senior executive level of Progress Energy are
eligible for awards, then the Committees in their discretion determine whether
awards are to be made and, if so, in what amounts. If participants below the
senior executive level of Progress Energy are eligible for awards, then the
Chief Executive Officer of Progress Energy 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 Progress Energy. 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 Progress Energy's Common Stock.
The threshold requirements for award eligibility, as discussed above, were
met and exceeded in 2002. At meetings of the Committees on March 18, 2003,
awards were made at the discretion of the Committees 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
2002 EQUITY INCENTIVE PLAN
The Progress Energy 2002 Equity Incentive Plan (the "Plan"), which was
approved by Progress Energy's shareholders in 2002, allows the Progress Energy
Committee on Organization and Compensation (the "Progress Energy Committee") to
make various types of awards to officers, other key employees, and also
Directors of Progress Energy, its affiliates and subsidiaries. Selection of
non-Director participants is within the sole discretion of the Progress Energy
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
May 8, 2002, and will expire on May 8, 2012. The Plan was further amended and
restated effective July 10, 2002. All awards granted under Progress Energy's
1997 Equity Incentive Plan prior to and outstanding on May 8, 2002 remain valid
in accordance with their terms and conditions.
The Plan is a broad umbrella plan that allows Progress Energy 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 15,000,000 shares of Progress Energy Common Stock, which may be in any
combination of options, restricted stock, performance shares or any other right
or option which is payable in the form of stock. This limit does not apply to
grants made to replace or assume existing awards in connection with the
acquisition of a business. Also, shares of stock that remained available for
issuance under the Progress Energy 1997 Equity Incentive Plan (approximately
1,700,000 shares) were transferred to the Plan.
Under the terms of the Plan, the Progress Energy 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.
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PERFORMANCE SHARE SUB-PLAN
Pursuant to the provisions of the Plan, the Progress Energy Committee
adopted the Performance Share Sub-Plan, which governs the issuance of
performance share awards to officers and key employees within Progress Energy,
as selected by the Progress Energy 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 Progress Energy's Common Stock. The Progress
Energy Committee may grant performance share awards subject to a limit that
ranges from up to 40% to up to 150% 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 is recorded in
a separate account for each participant, and is adjusted to reflect dividends,
stock splits or other adjustments in Progress Energy'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 Progress Energy for each
year during the performance period is determined; 2) those annual figures are
averaged to determine Progress Energy 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 currently
comprised of the 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 Progress Energy TSR and EBITDA
growth, respectively, for the performance period; 6) the differences between the
Progress Energy 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 Progress Energy's Common Stock, as
published in THE WALL STREET JOURNAL on the March 31 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 during the month of April 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, retirement or divestiture, 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 Progress Energy 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.
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RESTRICTED STOCK AWARDS
Section 9 of the Plan provides for the granting of shares of restricted
stock by the Progress Energy Committee to "key employees" within Progress Energy
in such amounts and for such duration and/or consideration as it shall
determine. 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 Progress Energy 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 Progress Energy 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 except as
noted below. 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 retirement or under certain situations following 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. The maximum number of shares of Progress Energy's Common Stock that
may be granted in the form of Restricted Stock is 3,000,000 shares. The maximum
number of shares of Progress Energy Common Stock that may be granted in the form
of restricted stock in a single calendar year to any one participant is 250,000.
STOCK OPTIONS
Pursuant to Section 7 of the Plan, the Progress Energy Committee is
authorized to grant stock options to "key employees." Grants of stock options to
directors of Progress Energy must be approved by the full Board of Progress
Energy, and must consist only of "Nonqualified Stock Options" (options that are
not intended to be "Incentive Stock Options" within the meaning of Section 422A
of the Internal Revenue Code of 1986, as amended). Subject to the terms and
provisions of the Plan, the Progress Energy Committee has sole and complete
discretion to determine the type of option granted, the option price, the
duration of the option, the number of shares to which an option pertains, any
conditions on the exercisability of the option and the conditions under which
the option may be terminated. The specific terms and conditions applicable to
each option will be detailed in an Award Agreement.
The exercise price per share of stock covered by an option will be
determined by the Progress Energy Committee at the time of grant; provided,
however that the option price shall not be less than 100% of the fair market
value of Progress Energy's Common Stock on the grant date.
Options granted under the Plan are exercisable at such times and subject to
such restrictions and conditions as the Progress Energy Committee determines at
the time of grant; provided, however, that no option may be exercisable more
than ten years from the grant date.
Options must be exercised by the delivery of a notice from the grantee to
Progress Energy or its designee in the form prescribed by the Progress Energy
Committee. The notice must set forth the number of shares with respect to which
the option is to be exercised. The option price is payable to Progress Energy in
cash and/or by the delivery of shares of Progress Energy Common Stock valued at
fair market value at
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the time of exercise. In addition, at the request of the grantee, and subject to
applicable laws and regulation, Progress Energy may permit the cashless exercise
of the option.
The maximum number of shares of Progress Energy Common Stock that may be
granted in the form of Incentive Stock Options is 10,000,000 shares. The maximum
number of shares of Progress Energy Common Stock that may be granted in the form
of options in a single calendar year to any one participant is 2,000,000.
OTHER BENEFIT OPPORTUNITIES
The following additional benefit opportunities are also available to
Progress Energy's senior executives:
- Progress Energy sponsors the Management Deferred Compensation Plan (MDCP),
an unfunded, deferred compensation arrangement established for the benefit
of a select group of management and highly compensated employees of
Progress Energy and its participating subsidiaries. Under the MDCP, 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 MDCP 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 MDCP 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 MDCP. Additionally, qualifying participants will receive matching
allocations from Progress Energy or one of its affiliates (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 a stable value fund.
Pursuant to the terms of the MDCP, the participant may reallocate any part
of such account among the deemed investment funds chosen by the
participant.
- Progress Energy sponsors 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 of
$3,000,000 for those officers of Progress Energy who are also members of
the Progress Energy Board of Directors. Progress Energy is in the process
of evaluating its split dollar life insurance program in connection with
recently proposed regulations and the Sarbanes-Oxley Act's prohibition on
loans to corporate officers.
- Progress Energy also sponsors broad-based employee benefit plans for
senior executives of participating subsidiaries. Under the Progress Energy
401(k) Savings & Stock Ownership Plan, a salary reduction plan under
Section 401(k) of the Internal Revenue Code of 1986, as amended ("Code"),
eligible, highly compensated employees of participating companies may
invest up to 18% of eligible base salary earnings (up to a maximum of
$11,000 in 2002 on a before-tax basis) in Progress Energy's Common Stock
and other investment options. Progress Energy makes a matching allocation
of 50% of such investment (up to 3% of eligible base salary earnings),
which is invested in Progress Energy Common Stock. Under an incentive
feature, Progress Energy'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. Progress Energy also sponsors the Progress Energy Pension Plan (the
"Pension Plan"), a defined benefit plan (cash balance formula) which
covers eligible employees of participating subsidiaries who have been
employed within Progress Energy for at least one year. The right to
receive pension benefits under the Pension Plan is vested after five
years.
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- Progress Energy sponsors the Restoration Retirement Plan (the "Restoration
Plan"), an unfunded retirement plan for a select group of management or
highly compensated employees of participating subsidiaries. The
Restoration Plan "restores" the full benefit that would be provided under
the Pension 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 Pension Plan without regard to the
Internal Revenue Service compensation and benefit limits and (ii) a
participant's accrued benefit as calculated under the Pension Plan. The
Restoration Plan also applies to any employee who defers more than 10% of
his base salary under the MDCP. The eligibility and vesting requirement
for the Restoration Plan are the same as those for the Pension Plan.
Participants eligible to receive benefits under the Supplemental Senior
Executive Retirement Plan forego participation in and rights under the
Restoration Plan.
- Progress Energy sponsors the Supplemental Senior Executive Retirement Plan
which 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 Progress Energy up
to a maximum of 62%. Benefits under the Supplemental Senior Executive
Retirement Plan are fully offset by Social Security benefits and by
benefits paid under Progress Energy's Pension Plan.
- Progress Energy's senior executives also receive certain perquisites and
other personal benefits. In addition, executives received gross-up
payments in 2002 for related federal and state income tax obligations, as
disclosed in the Summary Compensation Table on page 12.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Compensation in 2002 for the Chief Executive Officer was consistent with the
compensation principles described above and reflected performance of Progress
Energy and the individual in 2002, as well as services in 2002. 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, earnings per
share and other financial and operating performance, individual performance and
other factors. Specific mathematical weights were not assigned to these factors.
Overall compensation in 2002 fell within the targeted level (75th percentile) of
overall compensation paid to chief executive officers in the comparison groups.
The Committee considered Progress Energy's significant regulatory successes
in both Florida and North Carolina. The settlement of the Florida rate
proceeding provides for rate stability without a cap on return on equity through
2005. The enactment of the North Carolina Clean Air Bill provides for a five
year rate freeze in North Carolina and accelerated amortization of the capital
costs associated with the new clean air requirements. Together, these two
successes provide certainty and clarity regarding the rate environment for
Progress Energy's utility operations over the next several years. The Committee
also took into account the continued excellent operational performance of
Progress Energy's generating units and transmission and distribution facilities,
as evidenced by their availability, safe operation, short, well-managed outages
and good material condition. The Committee also considered the success of
Progress Energy in negotiating a competitive labor agreement with Progress
Energy Florida employees represented by the International Brotherhood of
Electric Workers. The Committee considered the fact that while Progress Energy
did not meet its earnings per share target for 2002, it maintained its
investment-grade credit rating despite difficult conditions in the capital
markets and significantly out-performed other utility companies in terms of
total shareholder return. Additionally, the Committee took into account Progress
Energy's solid corporate governance reputation, noting that Standard & Poors
named it one of the top three corporations in the S&P 500 for transparency in
its disclosures regarding finances, operations and corporate governance.
27
<Page>
The Committee considered the fact that the leadership provided by
Mr. Cavanaugh contributed significantly to Progress Energy's success in
achieving corporate goals, implementing strategic initiatives with revised
points of emphasis that reflected changing market conditions, 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 Progress Energy's work force,
improving employee morale and customer and community relations and supporting
the economic growth and quality of life in Progress Energy'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
EQUITY COMPENSATION PLAN INFORMATION
<Table>
<Caption>
(A) (C)
NUMBER OF NUMBER OF SECURITIES
SECURITIES TO REMAINING AVAILABLE
BE ISSUED UPON (B) FOR FUTURE ISSUANCE
EXERCISE WEIGHTED-AVERAGE UNDER EQUITY
OF OUTSTANDING EXERCISE PRICE OF COMPENSATION PLANS
OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (A))
- ------------- ------------------- --------------------- ------------------------
Equity compensation plans approved by
security holders 5,157,195 $42.84 13,746,663
Equity compensation plans not approved by
security holders N/A* N/A* N/A*
Total 5,157,195 $42.84 13,746,663
</Table>
*N/A--Not Applicable, as Progress Energy does not sponsor any equity
compensation plans that have not been approved by its security holders.
28
<Page>
REPORT OF THE AUDIT AND CORPORATE
PERFORMANCE COMMITTEE
UNLESS SPECIFICALLY STATED OTHERWISE 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, 2002 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 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, 2002 for filing with the
Securities and Exchange Commission.
The Board of Directors has determined that the members of the Audit and
Corporate Performance Committee are "independent" for purposes of the New York
Stock Exchange listing standards. During 2002, three members of the Audit and
Corporate Performance Committee had indirect interests in commercial
transactions for the sale of goods or services to which the Company or one of
its subsidiaries was a party; however, all of those interests were immaterial
and the Board of Directors has determined that the relationships do not
interfere with the Committee members' independent judgment.
The Audit Committee has recently amended its written charter. The amended
charter is included as Exhibit A to this proxy statement.
Audit and Corporate Performance
Committee:
Richard L. Daugherty, Chairman
James E. Bostic, Jr.
David L. Burner
W. D. Frederick, Jr.
John H. Mullin, III
Carlos A. Saladrigas
Jean Giles Wittner
29
<Page>
DISCLOSURE OF AUDITORS' FEES
The Audit and Corporate Performance Committee of the Company's Board of
Directors ("Audit Committee") has actively monitored all fees charged by its
independent auditors, Deloitte & Touche LLP, the member firms of Deloitte &
Touche Tohmatsu, and their respective affiliates (collectively, "Deloitte") and
the relationship between audit and non-audit services provided by Deloitte. The
Securities and Exchange Commission ("SEC") recently adopted rules that require
audit committees to pre-approve all services rendered by a company's external
auditors, effective May 6, 2003. In keeping with its proactive approach to
corporate governance matters, the Company has adopted policies and procedures
for approving all audit and non-audit services rendered by Deloitte, and the
fees billed for those services beginning January 1, 2003. The Audit Committee
specifically pre-approved the use of Deloitte for audit and audit-related
services, subject to certain limitations. Audit and audit-related services
include assurance and related activities, services associated with internal
control reviews, reports related to regulatory filings, certain due diligence
services pertaining to acquisitions and general accounting and reporting advice.
The pre-approval policy requires management to obtain specific pre-approval from
the Audit Committee for the use of Deloitte for any permissible non-audit
services, including tax services. The policy also requires management to update
the Audit Committee throughout the year as to the services provided by Deloitte
and the costs of those services.
Set forth below is certain information relating to the aggregate fees billed
by Deloitte for professional services rendered for the fiscal years ended
December 31, 2001 and December 31, 2002. The information is being reported in
accordance with the new SEC disclosure rules that will become effective on
May 6, 2003.
AUDIT FEES
The aggregate fees billed by Deloitte for professional services rendered in
connection with (i) the audits of the annual financial statements of the
Company; (ii) the reviews of the financial statements included in the Quarterly
Reports on Form 10-Q of the Company; and (iii) SEC filings, accounting
consultations arising as part of the audits and comfort letters for the years
ended December 31, 2001 and December 31, 2002 were $408,630 and $532,510,
respectively.
AUDIT-RELATED FEES
The aggregate fees billed by Deloitte for audit-related services rendered to
the Company for the years ended December 31, 2001 and December 31, 2002 were
$67,140 and $36,990, respectively. The services comprising the fees billed in
this category included letter reports and certain accounting consultations.
TAX FEES
The aggregate fees billed by Deloitte for tax services rendered to the
Company for the years ended December 31, 2001 and December 31, 2002 were
$770,070 and $422,830 respectively. The services comprising the fees billed in
this category included those related to tax planning and advisory services.
ALL OTHER FEES
The aggregate fees billed by Deloitte for services rendered to the Company,
other than services described above under Audit Fees, Audit-Related Fees and Tax
Fees for the year ended December 31, 2001 were $90,090. Deloitte did not render
any services in this category to the Company for the year ended December 31,
2002. The services comprising the fees billed in this category during 2001 were
for cash management consulting.
30
<Page>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Deloitte & Touche LLP has been appointed by the Audit Committee
of the Board of Directors to serve as independent public accountants for the
Company for the current year, having served in that capacity for the Company
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 2002 Annual Report, which includes financial statements for
the fiscal years ended December 31, 2002, and 2001, 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 7, 2003.
FUTURE SHAREHOLDER PROPOSALS
Shareholder proposals submitted for inclusion in the proxy statement for the
Company's 2004 Annual Meeting must be received no later than December 2, 2003 at
the Company's principal executive offices, addressed to the attention of:
<Table>
William D. Johnson
Executive Vice President and Secretary
Carolina Power & Light Company
Post Office Box 1551
Raleigh, North Carolina 27602-1551
</Table>
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.
31
<Page>
EXHIBIT A
AUDIT AND CORPORATE PERFORMANCE COMMITTEE
CHARTER
PURPOSE AND COMPOSITION
The Audit and Corporate Performance Committee ("Committee") shall be a standing
committee of the Board of Directors ("Board"). The Committee shall assist,
advise, and report regularly to the Board in fulfilling its oversight
responsibilities related to:
- The integrity of the Company's financial statements
- The Company's compliance with legal and regulatory requirements
- The independent auditor's qualifications and independence
- The performance of the Company's internal audit function and independent
auditors, 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 Listing Standards of the New York Stock
Exchange (NYSE). Committee members shall be appointed and/or removed by the
Board. No member of the Committee shall be removed except by a majority vote of
the independent directors then in office. 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 Listing Standards of the NYSE.
Furthermore, at least one member of the Committee shall have sufficient
accounting or financial expertise and be designated as a "financial expert" in
compliance with the Listing Standards of the NYSE. Committee members shall be
appointed by the Board normally at the Annual Organizational Meeting of the
Board.
Director's fees shall be the only compensation an audit committee member may
receive from the Company. 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 and quarterly
financial results for the Company, including the disclosures under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Discussions with management will also include earnings press
releases, as well as financial information and earnings guidance provided to
analysts and rating agencies. The review should focus on appropriate
disclosure of key events, risk assessment and management, 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/quarterly reports on Forms
10-K/10-Q 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 policies and practices used by the Company, any alternative
treatments of financial information, their ramifications and the external
auditors' preferred treatments.
A-1
<Page>
2. Oversee and monitor the work of the external auditors to ensure they are
independent of management and their objectivity is not impaired, recognizing
that the external auditors are accountable to the Board and the Committee.
In determining the independence of the external auditors, the Committee will
annually obtain and review a formal report from the external auditors
affirming their independence as prescribed by the NYSE. Review with the
external auditors any audit problems or difficulties and management's
response.
The Committee has sole authority to retain and terminate the Company's
external auditors and will set clear hiring policies for employees or former
employees of the independent auditors. Annually obtain and review a report
from the external auditors describing the internal quality control process,
including material issues raised by the most recent internal quality control
review or by any inquiry or investigation by government, regulatory or
professional authorities within the past five years.
Annually report to the Board the external audit firm(s) to be retained and
preapprove all audit and non-audit services and fees as noted in the
Committee's Preapproval Procedure. The Committee will review the scope of
any non-audit services to be performed by the external auditors and
determine 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 each regular meeting.
3. Oversee and monitor the activities of the Audit Services Department to
ensure the internal 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 prior year's plan; significant audit findings and recommendations and
management's action plans; the adequacy of the budget and staffing for the
Department; and the appointment or dismissal of the Chief Audit Executive.
Meet with the Chief Audit Executive privately, without management present,
at each regular meeting.
4. Assess and monitor the overall control environment of the Company through
discussion with management, the external auditors and the Chief Audit
Executive. Assess the extent to which the audit plans of the external and
internal auditors can be relied on to identify material internal control
weaknesses or fraud.
5. Oversee and monitor the activities of the Corporate Ethics Program. As noted
in the Committee's Complaint Procedure, the Committee will review and take
appropriate action on any complaints received by the Company regarding
questionable accounting, internal controls or auditing matters.
6. Request the external auditors, the internal auditors, or management to
conduct special reviews or studies, as appropriate. Also, the Committee may
obtain advice and assistance from outside legal, accounting or other
advisors, at Company expense.
7. 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.
8. Reassess annually the effectiveness of this Committee and adequacy of this
Charter. This Charter and the Company's Code of Ethics will be published on
the Company's website. In addition, the disclosure of this Charter will be
stated annually in the proxy, which will contain a copy of the Charter in an
appendix, as required.
A-2
<Page>
MEETINGS
The Committee shall hold at least three regular meetings and four quarterly
conference call 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. The
Committee may form subcommittees for any purpose that the Committee deems
appropriate and may delegate to such subcommittees such power and authority as
the Audit and Corporate Performance Committee deems appropriate. As deemed
necessary by the Committee, meetings shall be attended by appropriate Company
personnel.
Following each of its meetings, the Committee shall deliver a report on the
meeting to the Board, including a description of all actions taken by the
Committee at the meeting. The Committee shall keep written minutes of its
meetings, which minutes shall be maintained with the books and records of the
Company.
The President of the Service Company 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-3
<Page>
DIRECTIONS TO CAROLINA POWER & LIGHT COMPANY'S
2003 ANNUAL SHAREHOLDERS' MEETING
(to be held at the Asheville Community Theatre, 35 E. Walnut Street, Asheville)
[GRAPHIC]
3701-PS-03
<Page>
CAROLINA POWER & LIGHT COMPANY
d/b/a Progress Energy Carolinas, Inc.
C/O EQUISERVE TRUST COMPANY, N.A.
P.O. BOX 8694
EDISON, NJ 08818-8694
Voter Control Number
____________________
Your vote is important. Please vote immediately.
VOTE-BY-TELEPHONE
1. Call toll-free
1-877-PRX-VOTE (1-877-779-8683)
2. Enter your Control Number listed above and
follow the easy recorded instructions.
If you vote by telephone, please do not mail your card.
DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
/X/ PLEASE MARK VOTE AS IN THIS EXAMPLE
DIRECTORS RECOMMEND VOTE FOR
1. Election of Directors as set forth in the proxy statement
Nominees: (01) E. Borden, (02) J. Bostic, (03) D. Burner
(04) R. Daugherty, (05) R. Nunis
FOR ALL NOMINEES / / / / WITHHELD FROM ALL NOMINEES
FOR
ALL NOMINEES / /
EXCEPT _____________________________________________
NOTE: If you do not wish your shares voted "FOR" a particular nominee, mark the
"For All Nominees Except" box and write the name(s) on the line above. Your
shares will be voted "FOR" the remaining nominee(s).
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS THAT IS PROPERLY BROUGHT BEFORE THE MEETING OR ANY ADJOURNMENT
THEREOF.
Mark box at right if an address change has been noted on the
reverse side of this card. / /
PLEASE BE SURE TO SIGN AND DATE THIS PROXY.
(Shareholder sign here) Date:
----------------------------- -----------------------
(Co-owner sign here) Date:
-------------------------------- -----------------------
<Page>
CAROLINA POWER & LIGHT COMPANY
d/b/a Progress Energy Carolinas, Inc.
Dear Shareholder,
Please take note of the important information enclosed with the Proxy Card.
That information relates to the management and operation of your Company and
requires 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 box on this Proxy Card to indicate how you would like your
shares to be voted, then sign the card, detach it and return your proxy card
in the enclosed postage paid envelope. Or you may vote by telephone by
following the instructions on the proxy.
Your vote must be submitted prior to the Annual Meeting of Shareholders, May
14, 2003 unless you plan to vote in person at the meeting.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Carolina Power & Light Company
CAROLINA POWER & LIGHT COMPANY
d/b/a Progress Energy Carolinas, Inc.
410 S. WILMINGTON STREET, RALEIGH, NORTH CAROLINA 27601
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 Carolina Power & Light Company (d/b/a Progress Energy
Carolinas, 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 14 2003, at 10:00 a.m., and at any adjournment
thereof, for the election of directors, 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 AS
SET FORTH IN THE PROXY STATEMENT. THE NOMINEES FOR DIRECTOR ARE: E. BORDEN, J.
BOSTIC, D. BURNER, R. DAUGHERTY AND R. NUNIS. IF ANY DIRECTOR BECOMES
UNAVAILABLE, THE PROXIES WILL VOTE FOR A SUBSTITUTE DESIGNATED BY THE BOARD.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
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.
HAS YOUR ADDRESS CHANGED? IF SO, COMPLETE BELOW.
NEW ADDRESS: