At the 1996 Annual Meeting, the Company's shareholders approved the
Stock Plan for Non- Employee Directors of Florida Progress Corporation and
Subsidiaries (the "Director Plan"). Under the terms of the Director Plan during
1997, 75% of each non-employee director's $30,000 retainer fee was paid
quarterly in arrears in Common Stock. In addition, non-employee directors were
paid $1,500 for attendance at each meeting of the Company's Board of Directors,
and effective May 15, 1997, a per meeting fee of $1,000 for attendance at each
subsidiary board or board committee meeting. A $750 meeting fee was also paid to
each Committee Chairman for each meeting chaired. Directors have also been paid
a $500 attendance fee for participation in strategic update conferences. The
cash portion of directors' compensation is allowed to be deferred.
In accordance with the six practices adopted by the Board in November
1995 with regard to director compensation, the Compensation Committee meets each
year to review all elements of director compensation. In May of 1997, the
Compensation Committee reviewed the total value of all forms of director
compensation and determined that its current objectives to increase stock
ownership and provide directors with a fair and competitive compensation package
are being met. The per meeting fee of $1,000 for attendance at each subsidiary
board or board committee meeting was changed from the previous per day meeting
fee of $1,500 to conform to standard practice based upon benchmarking studies.
Executive Compensation
The following table contains information with respect to compensation
awarded, earned or paid during the years 1995-1997 to (i) the former Chief
Executive Officer ("former CEO") of the Company; (ii) the current Chief
Executive Officer ("CEO") of the Company; and (iii) the other four most highly
compensated executive officers of the Company (the individuals referred to in
(i), (ii) and (iii) are referred to collectively as the "Named Executive
Officers") whose total remuneration paid in 1997 exceeded $100,000.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation (1) Payouts
(a) (b) (c) (d) (h) (i)
Name and Principal Position LTIP All Other
Year Salary Bonus Payouts(2) Compensation(3)
JACK B. CRITCHFIELD 1997 $685,006 $ 47,500 $527,363(4) $33,465
Chairman and former
Chief Executive Officer 1996 672,581 498,000 505,252 25,060
1995 589,992 382,500 465,654 22,715
RICHARD KORPAN 1997 $592,304 $ 41,500 $324,028(4) $26,490
President and Chief
Executive Officer 1996 535,610 333,500 339,107 18,900
1995 440,003 257,000 284,109 19,800
RICHARD D. KELLER 1997 $366,733 $173,500 $205,910(4) $16,227
Group Vice President
and President and Chief 1996 320,640 -0- 139,347 12,646
Executive Officer, Electric
Fuels Corporation 1995 284,466 108,500 146,882 9,813
STANLEY I. GARNETT, II 1997 $408,616 $ 21,500 $51,891(4) $5,063
Executive Vice President(5)
1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
JOSEPH H. RICHARDSON 1997 $384,619 $ -0- $162,091(4) $13,890
Group Vice President
and President and Chief 1996 288,884 214,000 128,858 16,585(6)
Executive Officer, Florida
Power Corporation 1995 215,009 113,000 110,473 8,835
JEFFREY R. HEINICKA 1997 $264,992 $ 15,500 $110,393(4) $12,315
Senior Vice President and
Chief Financial Officer 1996 258,456 169,000 113,139 8,595
1995 211,200 100,000 N/A 8,325
(1) All other annual compensation paid to the Named Executive
Officers during 1997, other than salary and annual incentive
compensation, does not exceed the minimum amounts required to
be reported pursuant to Securities and Exchange Commission
rules.
(2) The number of shares of restricted Common Stock held by the Named
Executive Officers as of December 31, 1997 as a result of awards
earned under the 1993-1995 and 1994-1996 performance cycles, and
the value of such shares, was as follows: Jack B. Critchfield
12,261 shares, $481,244; Richard Korpan 8,010 shares, $314,393;
Richard D. Keller 3,524 shares, $138,317; Stanley I. Garnett, II
-0- shares; Joseph H. Richardson 3,062 shares, $120,184; and
Jeffrey R. Heinicka 1,938 shares, $76,067. The restrictions were
removed from all shares effective January 1, 1998.
(3) Company contributions to its Savings Plan and Executive Optional
Deferred Compensation Plan on behalf of the Named Executive
Officers.
(4) Represents the dollar value as of February 18, 1998, the date of
award, of shares of Common Stock earned under the 1995-1997
performance cycle of the Company's Long-Term Incentive
Plan ("LTIP"), none of which are restricted. The total number of
shares earned, including dividend equivalent shares, is as
follows: Jack B. Critchfield, 13,720 shares; Richard Korpan,
8,430 shares; Richard D. Keller, 5,357 shares; Stanley I.
Garnett, II, 1,350 shares; Joseph H. Richardson, 4,217 shares;
and Jeffrey R. Heinicka, 2,872 shares.
See the discussion of the method of calculating payouts contained
in the Long- Term Incentive Compensation portion of the
Compensation Committee Report
of the Board of Directors on page 13.
(5) Stanley I. Garnett, II became an executive officer of the
Company effective June 1, 1997. Salary information for 1997
includes $182,075 paid to Mr. Garnett through a consulting firm
that was retained by the Company prior to his employment by
the Company. No compensation information is provided for 1995
and 1996 because he was not an executive officer of the Company
during those years.
(6) Represents $8,835 in Company Contributions to the Savings Plan of
Florida Progress and the Executive Optional Deferred Compensation
Plan and $7,750 of director fees for services as a director of
Echelon International Corporation, a former subsidiary of Florida
Progress.
The following table contains information with respect to
performance shares granted in 1997 to the Named Executive Officers of the
Company under the LTIP:
LONG-TERM INCENTIVE PLAN(1)
AWARDS IN 1997
Number of Performance
Performance Period Estimated Payout at End of Period (3)
----------------------------------------------
Name Shares (2) Covered Threshold Target Maximum
---- ------------ ----------- -------------- --------------- -----------
Jack B. Critchfield 15,406 1997-1999 3,852 shares 15,406 shares 30,812 shares
Richard Korpan 9,639 1997-1999 2,410 shares 9,639 shares 19,278 shares
Richard D. Keller 6,024 1997-1999 0 shares 6,024 shares 16,566 shares
Stanley I. Garnett, II 4,863 1997-1999 1,216 shares 4,863 shares 9,726 shares
3,242 1996-1998 1,080 shares 3,242 shares 5,944 shares
1,621 1995-1997 811 shares 1,621 shares 2,432 shares
Joseph H. Richardson 6,426 1997-1999 1,607 shares 6,426 shares 12,852 shares
Jeffrey R. Heinicka 3,406 1997-1999 852 shares 3,406 shares 6,812 shares
(1) The LTIP is a Common Stock and cash-based incentive plan to reward
participants for long-term performance of the Company. It was approved
by the shareholders in 1990. See the Long-Term Incentive Compensation
portion of the Report of the Compensation Committee of the Board of
Directors on page 13 for additional information.
(2) The number of performance shares granted is based on a percentage of
base salary in effect at the time of each award and is subject to
automatic increase or decrease on a prorated basis in accordance with
changes to a participant's base salary or LTIP percentages throughout
the performance cycle.
In the event of a change in control of the Company, 150% of all
performance shares granted to the Named Executive Officers under the
LTIP and then outstanding would automatically be considered earned and
would be paid in shares of unrestricted Common Stock together with
shares of unrestricted Common Stock payable for dividend equivalents
accrued through the date of the change in control.
(3) Payouts for the 1995-1997 performance cycle were based on achieving
return on equity ("ROE") and return on average invested capital
("ROIC") goals, equal to or exceeding the thresholds determined by the
Compensation Committee. Payouts for the 1996-1998 performance cycle
will be based on achieving ROE and total shareholder return ("TSR")
objectives and for Mr. Keller, based also on Electric Fuels' compound
annual earnings growth and ROIC. Payouts for the 1997-1999 performance
cycle will be based on TSR, and for Mr. Keller, based also on Electric
Fuels' compound annual earnings growth and ROIC.
Pension Plan Table
The table below illustrates the estimated annual benefits (computed as
a straight life annuity beginning at retirement at age 65) payable under the
Company's Retirement Plan, Nondiscrimination Plan and Supplemental Executive
Retirement Plan ("SERP") for specified final average compensation and years of
service levels.
The Named Executive Officers are entitled to benefits under the SERP.
These benefits are offset by the benefits payable under the Retirement Plan and
the Nondiscrimination Plan, as well as 50% of the executive's primary Social
Security benefit. The estimated annual SERP benefit for the Named Executive
Officers (prior to any offsets) may be determined using the Pension Plan Table
set forth above. For these purposes, the current compensation for each executive
that would be used in calculating benefits under the SERP is substantially the
same as the three year average of the salary and bonus reported in the summary
compensation table, and the number of years of deemed credited service that
would be used in calculating benefits under the SERP for each such executive is
as follows: Dr. Critchfield, 35 years of service; Mr. Korpan, 35 years of
service; Mr. Keller, 19 years of service; Mr. Garnett, 4 years of service; Mr.
Richardson, 22 years of service; and Mr. Heinicka, 20 years of service. Under
the formula used for calculating benefits under the SERP, the maximum benefit
payable to each Named Executive Officer is reached at 16 years of deemed
credited service unless the Named Executive Officer achieves 35 years of
service.
Accrued benefits may also be paid under each of the Retirement Plan,
Nondiscrimination Plan and SERP if a participant terminates employment before
age 65 and meets the requirements for early retirement, disability, death or
other termination of employment benefits after becoming vested under the rules
of the particular plan.
Under the Retirement Plan and the Nondiscrimination Plan, the
compensation taken into account in calculating benefits is salary only. The
years of credited service that would be used in calculating benefits under the
formula applicable to the Retirement Plan and the Nondiscrimination Plan (1.8%
of final average earnings for each year of service) for the Named Executive
Officers in the summary compensation table are as follows: Dr. Critchfield, 14
years of service; Mr. Korpan, 9 years of service; Mr. Keller, 19 years of
service; Mr. Garnett, -0- years of service; Mr. Richardson, 22 years of service;
and Mr. Heinicka, 20 years of service. The benefits
under the Retirement Plan and the Nondiscrimination Plan are subject to offset
by an amount equal to 1 1/7% of a participant's primary Social Security benefit
for each year of service (with a maximum offset of 40%).
In the event of a change in control, each Named Executive Officer would
receive credit under the SERP for five additional years of service. If a
participant's employment is terminated following a change in control, the
benefit payable from the SERP is as follows: (1) an annuity beginning at age 55
through 59, subject to early payment reductions in the amount of 3% for each
year prior to age 60, or age 60 without reduction; (2) the amount of any federal
excise taxes (and income taxes on any reimbursement under this provision)
imposed on the executive under Section 4999 of the Internal Revenue Code; and
(3) a 50% surviving spouse benefit payable upon death.
Employment Contracts, Termination of
Employment and Change-in-Control
Arrangements
In 1998, the Company amended its 1995 employment agreement with Mr.
Korpan. The term of the agreement is from March 1, 1998 through February 28,
2002. On each March 1, beginning with March 1, 2000, the agreement will
automatically be extended for one additional year, unless either party gives 90
days' written notice to the contrary. The agreement provides for an annual base
salary of not less than $660,000 with award opportunities as a participant in
the Management Incentive Compensation Plan ("MICP") and LTIP of not less than
the level authorized for any other executive officer of the Company. The
agreement establishes minimum annual retirement benefits to be paid in any case,
that increase with Mr. Korpan's tenure. The agreement also provides for the
payment of comparable retirement benefits to his surviving spouse as well as
payment to his estate of the base salary and MICP target bonus for the year in
which death occurs. Severance pay established in the agreement is three times
the sum of his annual base pay and MICP target bonus. Severance pay is due upon
termination by the Company without cause or upon termination by the employee for
good reason. The agreement contains restrictive covenants that apply for a
period of two years after termination of employment. The Company will pay the
employee's attorneys' fees in the event of an action to enforce the agreement
after a change in control. The employee will be entitled to an additional
payment in the event that any payment or benefit under the agreement would
subject the employee to the excise tax imposed under Section 4999 of the
Internal Revenue Code. To the extent that benefits are payable under both Mr.
Korpan's employment agreement and the agreement referred to in the next
paragraph, they are payable to the maximum extent under either, but not both, of
those agreements.
Change-in-control benefits were previously included in the SERP which
was originally adopted August 1, 1989 and which has been amended from time to
time. In 1998, the Company entered into individual agreements with each of the
Named Executive Officers, except Jack B. Critchfield, dealing with a change in
control as defined in each agreement. These agreements implement changes to the
change-in-control benefits previously included in the SERP and reduce the cost
to the Company in the event a change in control occurs. In the event of a change
in control, each Named Executive Officer would receive credit under the SERP for
five additional years of service. Each agreement establishes the conditions of
employment during an employment period which commence on the date of any change
in control until the earliest to occur of: (1) the date which is 36 months from
the date of any such change in control; or (2) the date of termination of
employment of the Named Executive Officer. In the event of termination of
employment following a change in control, each agreement provides for the
following: (1) a severance payment equal to two and a half or three times the
Named Executive Officer's base salary and annual bonus; (2) payout in cash at
150% or maximum of performance shares granted under the LTIP after a change in
control and, in one instance, payout of the difference between actual and
maximum of performance share awards paid out as a result of the occurrence of a
change in control; (3) welfare benefits for the Named Executive Officer for a
maximum of thirty months after termination with lifetime access to medical in-
surance with the executive paying the full cost thereafter; (4) the payment of
the premium for group executive excess liability insurance for 15 years; (5) tax
assistance up to $15,000; (6) the payment of reasonable attorneys' fees and
expenses related to disputes involving the agreement; and (7) reimbursement of
relocation expenses not covered by another employer and not in excess of $10,000
incurred within 30 months of termination.
Report of the Compensation
Committee of the Board of Directors
Executive Compensation Design
The Company's executive compensation system is intended to attract,
retain and motivate high quality executives with individually tailored market-
and performance-based compensation packages that reward protection of Company
assets and enhancement of shareholder value. The Compensation Committee of the
Board of Directors of Florida Progress Corporation (the "Committee"), comprised
solely of outside directors, approves total compensation opportunities and
awards for executive officers of the Company and Florida Power. The target
compensation for each executive officer is established annually by the Committee
and is made up of three principal components: base salary; annual incentive cash
compensation; and long-term incentive compensation payable in cash or Common
Stock. A significant portion of each executive officer's total target
compensation is variable, at risk and dependent upon the Company's annual and
long-term performance.
In determining target compensation, the Committee reviews market values
compiled by human resource professionals from several independent surveys based
upon an equal blend of compensation levels of both electric power and general
industry median rates, where possible. This philosophy is intended to reflect
the changing nature of the utility industry and to recognize the fact that pay
practices in the future must be adequate to attract talented employees from
industries other than solely electric utilities. In 1997, the Committee received
an updated competitive compensation analysis for total direct compensation
prepared by Towers and Perrin, a benefits consulting firm, for each executive
officer as well as a parallel study done at the Committee's request to ensure
that the survey data was accurate.
The Committee believes its "pay- for-performance" program, which
compensates an executive officer at his or her target level of compensation only
if specific goals are achieved, is a fair way to structure an executive
compensation program. The program rewards executives for meeting financial
targets, thus producing benefits for the entire Company and its shareholders.
A discussion of the three compensation components and the actions taken
by the Committee with respect to compensation reported for 1997 for the Named
Executive Officers, including the CEO and the former CEO follows.
Base Salary
The base salary component is based, in most instances, on an equal
weighting of market data from both utility and general industry sources. An
executive officer's base salary will vary within this competitive framework
based on experience, responsibilities, leadership and performance. As a result,
updated market data increases were appropriate for many of the executive
officers. These increases are reflected in the Summary Compensation Table. Mr.
Garnett's base salary was established based on market data evaluated at the time
he was appointed as an executive officer of the Company. The former CEO's base
salary was not increased from the previous year although updated market data and
the Committee's succession plans warranted an increase in the CEO's base salary.
Annual Incentive Cash Compensation
The Company's MICP provides annual incentive cash compensation
opportunities to officers and key employees of the Company and its subsidiaries
(including the Named Executive Officers) by creating performance award pools
associated with the achievement of corporate goals. The goals associated with
the threshold, target and maximum funding levels for each performance award pool
under the MICP are established by the Committee, based upon objective measures
of corporate performance. For 1997, the goals established by the
Committee for the performance award pools in which each of the Named Executive
Officers was a participant were based upon return on average invested capital
for the Company's principal operating subsidiaries as well as net income for
Electric Fuels. The Committee considers the projections and assumptions
contained in the relevant annual profit plan in establishing threshold, target
and maximum funding level goals for each performance award pool. Executive
officers having responsibility primarily for a single operating subsidiary were
assigned to subsidiary performance award pools having goals based solely on that
subsidiary's performance. Executive officers having Company-wide
responsibilities were assigned to the holding company performance award pool
whose goals were a composite of weighted, operating subsidiary goals. The
Committee explicitly retains discretion to take into account, in determining if
performance goals were met, whether assumptions contained in the relevant profit
plan were in fact valid, and if they were not, to make appropriate adjustments
to reported financial results for purposes of computing goal achievement levels.
Performance award pool funding levels typically are based upon a
mathematical function of pool participants' target annual incentive cash
compensation opportunity (expressed as a percentage of base salary) and the pool
goal level achieved. The Committee may exercise its discretion in approving
the amount of the award pool and the specific amount of the annual
incentive cash compensation to be paid to executive and other key
officers from the appropriate pools based upon the Committee's subjective
evaluation of the officer's overall contributions to the Company. The
Committee takes into account recommendations of the CEO in
approving annual incentive cash compensation for individual executive and key
officers (other than the CEO).
The 1997 annual incentive compensation targets for the Named Executive
Officers ranged from 50% to 60% of base salary. These targets were increased
from the 1996 percentages for all of the applicable Named Executive Officers,
except the former CEO, as part of the review of total compensation targets
taking into account the changes in market data. Mr. Garnett's target annual
incentive was established based on market data evaluated at the time he was
appointed as an executive officer of the Company. The CEO's 1997 target annual
incentive compensation was increased to 60% of his base salary for the same
reason.
The amounts contained in the bonus column of the Summary Compensation
Table for the Named Executive Officers (other than the CEO and former CEO) for
1997 are the result of the Committee's determination that 1997 results did not
meet the threshold MICP goals of Florida Power and that the 1997 results
exceeded the threshold goal for Electric Fuels for the Named Executive Officers.
The amount contained in the bonus column of the Summary Compensation Table for
the CEO and former CEO for 1997 is based on the same results since the holding
company's MICP goals were weighted 85% on the Florida Power goals and 15% on the
goals of Electric Fuels. The amounts contained in the bonus column for all the
Named Executive Officers were the result of the application of a mathematical
formula converting the goal levels achieved, which were above threshold levels,
into dollar amounts, without the Committee making any discretionary adjustments.
Long-Term Incentive Compensation
To facilitate executive stock ownership and align the interest of key
executives with that of the Company's other shareholders in the long-term
performance of the Company, the Committee awarded in 1997 the Named Executive
Officers the opportunity to earn Common Stock or cash through the grant of
performance shares under the Company's LTIP, as indicated in the table appearing
on page 9. To date, under the LTIP, the Committee has granted performance shares
for eight consecutive three-year performance cycles beginning with the 1991-1993
performance cycle.
In 1997, the Committee approved changes to the design and
administration of the LTIP and established stock ownership guidelines for
Company officers to be met within five years of entry into the LTIP. Stock
ownership guidelines range from one-half times base salary for a Vice President
to two times base salary for the CEO. To the extent earned, performance shares
will be converted into shares of un-
restricted Common Stock; however, if the stock ownership guidelines have been
met, the participant may elect to convert such performance shares into either
unrestricted Common Stock or cash.
The financial goals for the 1995- 1997 performance cycle of the LTIP
were established, in accordance with the administration policies previously
adopted by the Committee, to be the sum of the three annual ROE or ROIC goals
for 1995, 1996 and 1997 used as goals for the MICP (the "Cycle V goals"). The
goal weighting used in the MICP was also used for the Cycle V goals. As part of
the changes approved by the Committee in 1997, financial goals for later LTIP
performance cycles (Cycles VI, VII and VIII) will begin to measure the Company's
TSR against an industry peer group.
The payouts listed in the Long- Term Compensation column of the Summary
Compensation Table for the Named Executive Officers on page 8 for the 1995-1997
performance cycle are the result of (i) the Committee's determination that Cycle
V results did meet the threshold goals for Florida Power after adjusting for
strategic expenditures or expenses incurred in connection with the buyout of the
Tiger Bay purchase power contract, the nuclear replacement fuel costs, and
nuclear operating and maintenance outage costs that exceeded the Nuclear
Regulatory Commission mandated work for 1997; (ii) the Committee's determination
that the Cycle V results did meet the threshold goals for certain non-utility
subsidiaries, after adjusting for the exclusion of a provision for loss on coal
properties in determining Electric Fuels' ROE for 1996; (iii) the application of
a mathematical formula converting the goal level achieved into the number of
performance shares earned and (iv) adding dividend equivalents on shares earned
for the period of the performance cycle. All payouts to the Named Executive
Officers were made in shares of Common Stock. The LTIP payouts to the CEO and
former CEO were based on Florida Power achievement above threshold for its
three-year ROE and ROIC goals, weighted 82%, and achievement above threshold for
the three-year ROE and ROIC goals of certain non-utility subsidiaries weighted
18%.
During 1997, the Committee approved the number of performance shares
granted to each Named Executive Officer (other than the CEO and former CEO) for
the 1997-1999 performance cycle that had a value on the date of grant equal to
40% or 50% of 1997 base salary, depending on the total compensation opportunity
established by the Committee for each executive. None of the percentages were
increased from the previous performance cycle. In accordance with the new LTIP
design approved by the Committee in 1997, the grants are subject to automatic
increase or decrease on a prorated basis in accordance with changes to a
participant's base salary or LTIP percentage during the performance cycle.
During 1997, the Committee also approved performance share grants to Mr. Garnett
on a prorated basis for the 1995-1997, 1996-1998 and 1997-1999 performance
cycles based on the total compensation opportunity established by the Committee
at the time he was appointed as an executive officer. For the CEOs, the number
of performance shares granted to Dr. Critchfield for the 1997- 1999 performance
cycle had a value on the date of grant equal to 70% of his 1997 base salary.
This percentage was not increased from the previous performance cycle. For Mr.
Korpan, the number of performance shares granted for the 1997-1999 performance
cycle had a value on the date of grant equal to 50% of his 1997 base salary and
was increased on a prorated basis to 70% of base salary effective June 1, 1997,
following a review of updated market data in connection with Mr. Korpan's
promotion to CEO.
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code would deny the Company a
deduction for compensation paid to each Named Executive Officer in a taxable
year to the extent it exceeds $1 million per officer, unless the compensation
qualifies as "performance-based compensation." In 1997, the Committee rescinded
an amendment to the Company's MICP that provided for the mandatory deferral of
annual cash incentive compensation which would not qualify for a Company tax
deduction due to Section 162(m) of the Internal Revenue Code until such time as
it becomes deductible. The MICP deferral was no longer
effective in preserving the full deduction and the Committee has determined that
the amount of the foregone deduction for 1997 was not material.
Respectfully submitted,
Jean Giles Wittner, Chairman
W. D. ("Bill") Frederick, Jr.
Clarence V. McKee
Richard A. Nunis
Company Performance
The following graph compares the Company's performance, as measured by
the change in price of its Common Stock plus reinvested dividends, with the
Standard & Poor's ("S & P") 500 stock index and the S & P Electric Companies
stock index for the five years ended December 31, 1997:
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG FLORIDA PROGRESS CORPORATION, THE S & P 500 INDEX
AND THE S & P ELECTRIC COMPANIES INDEX
[GRAPH]
1992 1993 1994 1995 1996 1997
Florida Progress 100 109 104 131 131 170
S & P 500 100 110 112 153 189 252
S & P Electrics 100 113 98 128 128 162
* $100 invested on 12/31/92 in stock or index, including reinvestment of
dividends. Fiscal year ending December 31.
Relationship with Independent
Accountants
The firm of KPMG Peat Marwick LLP, which has been the Company's
independent certified public accountants since February 2, 1990, was recommended
by the Audit Committee and approved by the Board of Directors as the Company's
auditor for the year ended December 31, 1997. Representatives of KPMG Peat
Marwick are expected to be present at the Annual Meeting, will have the
opportunity to make a statement if they desire to do so and are expected to be
available to respond to appropriate questions.
The Company has not yet selected its independent auditors for the
current year. The Audit Committee presently intends to make its recommendation
concerning the Company's auditors no later than August 1998, in accordance with
past practice.
Shareholder Proposals
It is the intention of the persons named in the accompanying proxy,
unless otherwise directed, to vote all proxies AGAINST each of the following
shareholder proposals. Each shareholder proposal will be approved if the votes
cast for the proposal by holders of the shares represented at the Annual Meeting
and entitled to vote exceeds the votes cast against the proposal.
1. Joseph E. Deddo, 2935 E. Buck Court, Inverness, Florida 34452, a
holder of 150 shares of the Company's Common Stock, hereby notifies the Company
of his intention to present the following proposal for action at the Annual
Meeting:
"RESOLVED: that the shareholders request the Board of
Directors to adopt a policy that requires annual salary
increases for executive officers that are greater than 2%
of their prior year's salary to be approved by a
vote of the shareholders."
SHAREHOLDERS' SUPPORTING STATEMENT
Executive salaries are out of control and the Shareholders are paying for poor
performance or no performance. We see revenue growth with new customers, just to
see it wiped out by big write-offs. Shareholders shouldn't have to pay
entitlements such as high executive salaries, just to see their profits be given
out to baseball team owners, a seized insurance company or fines. Compensation
is earned not granted. THANK YOU FOR YOUR SUPPORT.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THIS PROPOSAL FOR THE
FOLLOWING REASONS:
The Company believes that decisions regarding executive salaries and
employee compensation, including its various performance incentive plans --
including the "Sharing the Success" incentive plan implemented in 1996 for
non-executive employees of the Company and Florida Power -- should remain the
responsibility of the Company's management and Board of Directors.
The proposal of Florida Power employee Deddo presents his grievances
with management to the shareholders in the form of a request to limit executive
compensation. However, in providing competitive base salaries and incentive
programs like Sharing the Success, the Management Incentive Compensation Plan,
and the Long-Term Incentive Plan, the Board of Directors believes it is creating
shareholder value by providing its workforce with appropriate incentives that
reward employees for the contributions they make to the successful financial
performance of the Company and its subsidiaries. Comparable compensation
programs are in place at similarly sized U.S. electric utilities.
The Board's Compensation Committee, comprised of four outside
directors, is charged with establishing target compensation levels for
executives based on data developed through research of national industry
standards and consultations with internal and external compensation
professionals. Executive compensation is primarily composed of salary and awards
under incentive compensation plans that together are targeted to provide a
competitive level of compensation. Incentive plan performance goals are tied to
financial performance and business unit and individual contributions, thereby
putting a significant portion of the executive's total compensation at risk.
It is the philosophy of the Board of Directors that executive
compensation for all Florida Progress companies be market driven. It is targeted
at levels that allow the Company to meet the demands of the competitive
marketplace for executive leadership. It is structured to provide a financial
stimulus and rewards for contributing to the continued success of the Company.
The recommended limitation put forward by the proponent would place the Company
at a competitive disadvantage to the detriment of you, its owners.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"AGAINST" THIS PROPOSAL.
2. Louis D. Putney, 485 South Himes Avenue, Tampa, Florida 33611,
holder of 81 shares of the Company's Common Stock, has notified the Company of
his intention to present the following proposal for action by the shareholders
at the Annual Meeting:
NOW, THEREFORE, BE IT RESOLVED that the shareholders request the
Board of Directors to make available to all stockholders within
six months of the 1998 stockholders' meeting a special report on
the Crystal River Nuclear Plant. More specifically, this report
shall include the following, provided that information directly
affecting the competitive position of the Corporation may be
omitted, and further provided that the cost of compiling this
report shall be limited to an amount deemed reasonable by the
Board of Directors:
1. A description of all significant deficiencies at the Nuclear
Plant which existed when the reactor was shut down in September,
1996, whether or not such deficiencies were identified by the NRC
as such, including deficiencies in management, engineering,
design, or training, and describing the operational and safety
implications of each such deficiency.
2. A description of the actions taken to remedy the deficiencies
identified above, including the cost of such actions, the cost of
replacement fuel during the outage, and whether such costs were
or are to be paid by the company or its ratepayers.
3. A description of all fines imposed and corrective actions
ordered by nRC since January 1, 1996, specifying those corrective
actions which have been completed by the Company and those which
have not.
4. An analysis of the advantages and disadvantages of the
continued operation of the Crystal River Nuclear Reactor versus a
planned decommissioning of the reactor within five years,
including an analysis of financial, liability and environmental
considerations.
5. A description of the expected financial losses, injuries and
loss of life likely to result from a catastrophic nuclear
accident at the Crystal River reactor, including a "worst case"
scenario, and the Company's expected financial liability in that
event.
SHAREHOLDERS' SUPPORTING STATEMENT
We believe the NRC's findings in its 1996 Notice of Violation in which
it imposed civil penalties of $500,000, and found that the Company committed
numerous violations "of significant potential safety consequence," and in which
the NRC stated, "The NRC is very concerned about the ineffective management
oversight of engineering, operations, and corrective action activities
demonstrated by these violations."
We believe that as a result of a settlement approved by the Florida
Public Service Commission in June, 1997, the Company will forego collection of
$440 million from its ratepayers in connection with the recent extended outage
at the nuclear plant, which has resulted in unprecedented losses to the Company,
and which is a result of poor management of the reactor.
We believe the catastrophic accident at Chernobyl clearly exhibited the
dangers of nuclear power. We believe that disaster caused the equivalent of $2.8
billion in damage, contaminated 400 square miles of land, and will result in the
deaths of 25,000 people.
As stockholders, we believe that corporations should act responsibly.
We believe a full review of our company's nuclear energy operations and policies
is necessary. A report will help stockholders and management assess our
corporation's social responsibilities and actions relating to its nuclear
reactor. These issues demand informed discussion and deliberation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THIS PROPOSAL FOR THE
FOLLOWING REASONS:
The Board of Directors agrees with Mr. Putney's assertion that
corporations must act responsibly. The Board fully supports Florida Power's
policy of placing safety first in the operation of its facilities and power
plants, particularly the Crystal River Nuclear Plant ("CR-3").
The Board believes that Mr. Putney's request for a special report is
both unnecessary and costly to prepare. Much of the information, which would be
included in such a report, already is available to the public from other
sources.
For example, the Company is required to disclose all material
information concerning CR-3 in its filings with the Securities and Exchange
Commission. In addition, Florida Power is required to provide the U.S. Nuclear
Regulatory Commission (NRC) with documentation, compliance reports and other
filings as part of maintaining the Company's operating license for CR-3.
Information contained in these filings is often voluminous and highly technical.
It is the opinion of the Board that preparing such a special report
would be of little or no value to the majority of our shareholders. The Company
does, however, take steps to inform the public -- including its shareholders and
other investors -- of significant developments in the nuclear plant's
operations. Special Company announcements and important updates related to CR-3
are issued regularly to the public and news media.
With respect to the operation of CR-3, here is a summary of key events
in recent years:
o On balance, CR-3 has been a steady
performer over its lifetime, since
coming into service in 1977. The
plant recorded its best three-year
performance ever in 1992, 1993, and
1994, averaging more than 80%
capacity during those years. (The
industry average for U.S. nuclear
plants is about 70% annually.) In
1995, CR-3 achieved a 100% capacity
factor.
o In September 1996, CR-3 was shut
down to repair a turbine oil leak. That
work was completed by mid-September,
and operation of the plant could have
continued later that month.
o During the September outage, Florida
Power discovered a problem with a
modification to the plant's emergency
feedwater system. At the same time,
the company identified other issues related
to the design of the plant that
needed to be resolved.
o NRC officials also expressed concern over
the condition of the plant, as well as some
of the plant's operating and management practices.
o Florida Power's management decided to
keep the plant shut down until all
issues could be addressed and corrections
be made. The Company was committed to
making the necessary changes to return
the plant to peak operating condition.
o Attention was focused on improving
five key areas at the plant: Leadership
Oversight and Involvement;
Engineering Performance;
Configuration Management and
Design Basis; Regulatory
Compliance; and Operating
Performance.
o As a first step toward improving
performance at CR-3 and restarting
the unit, Florida Power established a
new nuclear management team
experienced in returning units to
service following extended outages.
This action was taken to achieve
immediate improvement in the
performance of the Company's
nuclear program.
o In early 1997, Roy Anderson, formerly
of Carolina Power & Light, joined
Florida Power to lead the Company's
effort to restart CR-3 and prepare the
plant for another 20 years of
operation. Since January 1997, the
Company also has hired a new Site
Vice President, Site Director, Plant
Manager, Engineering Director,
Regulatory Affairs Director, Training
Director, and several new managers
in other areas of Nuclear Operations.
o During the extended outage of CR-3,
Florida Power took the opportunity to
make numerous, additional
improvements so that when the plant
returned to service it would be
prepared to operate safely, reliably
and with sustained excellent
performance over the next 20 years of
its operating license. Accomplishing
these improvements at the plant has
required a significant commitment of
resources by Florida Power over the
past year.
o Monthly meetings were held with NRC
officials to keep them informed of the
progress being made during the outage at
CR-3. The Company also held public
meetings in communities surrounding the
Crystal River Energy Complex.
o Florida Power received official NRC
permission to restart CR-3 on January
30, 1998.
The Board does not believe that preparing the requested special report
would result in any improvement in the safe operation of CR-3. In fact, the time
and effort deployed to produce such a report would divert valuable Company
resources from developing and implementing programs that improve the plant's
safety and performance. Therefore, it is the Board's opinion that it would not
be in the best interests of the Company or the Company's shareholders to incur
the expenses to prepare such a report.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"AGAINST" THIS PROPOSAL
1999 Shareholder Proposals
Proposals of shareholders intended to be included in the proxy
statement and presented at the 1999 Annual Meeting must be received on or before
November 12, 1998. The Company's Bylaws require timely notice by shareholders
for other business to be conducted at an annual meeting. To be timely, in
addition to other requirements, a shareholder's notice must be delivered to or
mailed and received at the principal executive offices of the Company not less
than 90 days nor more than 120 days prior to the date of the annual meeting;
provided, however, that in the event that less than 100 days' notice or prior
public disclosure of the date of the annual meeting is given or made to
shareholders, notice by the shareholder in order to be timely must be so
received not later than the close of business on the 10th day following the day
on which such notice of the date of the annual meeting was mailed or such public
disclosure of the date of the annual meeting was made, whichever occurs first.
Proposals should be sent to the Secretary of the Company, Florida Progress
Corporation, P.O. Box 33042, St. Petersburg, Florida 33733.
General
In the event that any other matters properly come before the Annual
Meeting, the persons named in the form of proxy intend to vote all proxies in
accordance with their judgment on such matters.
Enclosed is the Annual Report of the Company for the year ended
December 31, 1997. It is not to be regarded as proxy soliciting material.
By order of the Board of Directors,
Kathleen M. Haley
Corporate Secretary
[LOGO]
FLORIDA PROGRESS CORPORATION
I M P 0 R T A N T
YOUR PROXY CARD IS BELOW
Your proxy card is attached below. Please follow these steps:
1. Please clearly mark your voting selections on the reverse side.
2. Please sign and date your card on the reverse side.
3. Please detach and return to us in the enclosed postage-paid envelope.
4. Please help us avoid the expense of follow-up mailings by completing
and returning your proxy card promptly.
(DETACH HERE)
FLORIDA PROGRESS CORPORATION - Annual Meeting, April 17, 1998
Proxy solicited on behalf of the Board of Directors
The undersigned hereby appoints Jack B. Critchfield, Richard Korpan and Kathleen
M. Haley and each of them, with power of substitution, proxies to represent, and
to vote all shares of Common Stock of Florida Progress Corporation, which the
undersigned is entitled to vote, at the Annual Meeting of Shareholders to be
held in Clearwater, Florida on April 17, 1998, at 9 a.m. EDT, and at any and all
adjournments thereof, and hereby revokes any prior proxies given with respect to
such stock, and the undersigned authorizes the voting of such stock as follows
on the reverse side.
CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE SEE REVERSE
SIDE
[LOGO]
FLORIDA PROGRESS CORPORATION
I M P 0 R T A N T
YOUR PROXY CARD IS BELOW
Your proxy card is attached below. Please follow these steps:
1. Please clearly mark your voting selections.
2. Please sign and date your card.
3. Please detach and return to us in the enclosed postage-paid envelope.
4. Please help us avoid the expense of follow-up mailings by completing
and returning your proxy card promptly.
(DETACH HERE)
[X] Please mark your votes
as in this example.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no contrary specification is made,
this proxy will be voted "FOR" the nominees listed in the Election of Class II
Directors, and "AGAINST" the Shareholder Proposals.
1. Election of Class II Directors
Nominees: W.D. Frederick, Jr., Frank C. Logan,
Vincent J. Naimoli
FOR WITHHELD
[ ] [ ]
[ ] ------------------------
For all nominees except those written on the line above.
2. The Board of Directors recommends a vote "AGAINST" the following shareholder
proposals requesting the Board to:
FOR AGAINST ABSTAIN
A. Require shareholder approval of annual salary [ ] [ ] [ ]
increases for executive officers greater than
2%.
B. Prepare a special report on the Crystal River [ ] [ ] [ ]
Nuclear Plant to be available to shareholders
within six months of the 1998 Annual Meeting.
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournment thereof.
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
(Please mark, date, sign, detach and mail in the enclosed envelope.)
When signing as attorney, executor,
administrator, trustee or guardian,
please give title. For joint account,
each joint owner should sign. If the
signer is a corporation, please sign
full corporation name by duly authorized
officer. If a partnership, please sign
in partnership name by authorized
person.
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