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Carolina Power & LightProxy Statement |
Carolina Power & Light Company
410 S. Wilmington Street
Raleigh, NC 27601-1849
March 31, 2011
Dear Shareholder:
I am pleased to invite you to attend the 20112012 Annual Meeting of the Shareholders of Carolina Power & Light Company. The meetingCompany, which will be held on May 7, 2012 at 10:9:00 a.m. This year, our Annual Meeting will be a completely virtual meeting of shareholders and will be conducted via live webcast on May 11, 2011, at the Progress Energy Center forInternet. You will be able to attend the Performing Arts, 2 East South Street, Raleigh, North Carolina.
As described in the accompanying Notice of Annual Meeting of Shareholders and Proxy Statement, the matters scheduled to be acted upon at the meeting for Carolina Power & Light Company are the election of eight (8) directors; an advisory (nonbinding) vote on executive compensation; an advisory (nonbinding) vote to determine whether to approve executive compensation every one, two or three years; and the ratification of the selection of the independent registered public accounting firm for Carolina Power & Light Company.
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 ONLINE, 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 anyeither of these methods will ensure that your vote is counted at the Annual Meeting if you do not attend in person.the meeting online.
I am delighted that you have chosen to invest in Carolina Power & Light Company and look forward to seeing you atyour participation in the meeting. On behalf of the management and directors of Carolina Power & Light Company, thank you for your continued support and confidence in 2011.2012.
Sincerely,
William D. Johnson
Chairman of the Board
PROXY STATEMENT |
Your vote is important. Please promptlySIGN, DATE and RETURN the enclosed proxy card orVOTE 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.
Carolina Power & LightProxy Statement |
CAROLINA POWER & LIGHT COMPANY
d/b/a Progress Energy Carolinas, Inc.
410 S. Wilmington Street
Raleigh, North Carolina 27601-1849
____________________________
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
MAY 11, 2011
This notice, along with our Proxy Statement and Annual Report to Shareholders, is available at
The Annual Meeting of the Shareholders of Carolina Power & Light Company d/b/a Progress Energy Carolinas, Inc. (the “Company”) will be held at 10:9:00 a.m. on May 11, 2011,7, 2012, via live webcast on the Internet at the Progress Energy Center for the Performing Arts, 2 East South Street, Raleigh, North Carolina.www.media-server.com/m/p/q2v8ud37.
The meeting will be held in order to:
(1) | Elect eight (8) directors of the Company, each to serve a one-year term. The Board of Directors recommends a voteFOReach of the nominees for director. | ||
(2) | Vote on an advisory (nonbinding) proposal to approve executive compensation. The Board of Directors recommends a voteFORthis proposal. | ||
(3) | |||
Ratify the selection of Deloitte & Touche LLP as the independent registered public accounting firm for the Company. The Board of Directors recommends a voteFORthe ratification of the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm. | |||
Transact any other business as may properly be brought before the meeting. |
All holders of the Company’s $5 Preferred Stock, Serial Preferred Stock and Common Stock of record at the close of business on March 4, 2011,2, 2012, are entitled to attend the meeting and to vote. The stock transfer books will remain open.
By order of the Board of Directors | |
David B. Fountain | |
Corporate Secretary |
Raleigh, North Carolina
March 30, 2012
PROXY STATEMENT |
PROXY STATEMENT
TABLE OF CONTENTS
Page | ||
Annual Meeting and Voting Information | 1 | |
Proposal 1—Election of Directors | 4 | |
Principal Shareholders | 7 | |
Management Ownership of Common Stock | 8 | |
Changes in Control | ||
Transactions with Related Persons | 9 | |
Section 16(a) Beneficial Ownership Reporting Compliance | 10 | |
Code of Ethics | 10 | |
Director Independence | 10 | |
Board, Board Committee and Annual Meeting Attendance | 10 | |
Board Committees | ||
Compensation Committee Interlocks and Insider Participation | 11 | |
Director Nominating Process and Communications with Board of Directors | 11 | |
Board Diversity | 12 | |
Board Leadership Structure and Role in Risk Oversight | 12 | |
Compensation Discussion and Analysis | 14 | |
Compensation Tables | ||
Summary Compensation | ||
2011 Grants of Plan-Based Awards | ||
Outstanding Equity Awards at 2011 Fiscal Year-End | ||
Option Exercises and Stock Vested in 2011 | ||
Pension Benefits | ||
Nonqualified Deferred Compensation | ||
Cash Compensation and Value of Vesting Equity | ||
Potential Payments Upon Termination | ||
Director Compensation | ||
Equity Compensation Plan Information | ||
Proposal 2—Advisory (Nonbinding) Vote on Executive Compensation | ||
Report of the Audit and Corporate Performance Committee | 63 | |
Disclosure of Independent Registered Public Accounting Firm’s Fees | 64 | |
Proposal | 66 | |
Financial Statements | 67 | |
Future Shareholder Proposals | 67 | |
Other Business | 68 | |
Exhibit A—Policy and Procedures with Respect to Related Person Transactions | A-1 |
Carolina Power & LightProxy Statement |
CAROLINA POWER & LIGHT COMPANY
d/b/a Progress Energy Carolinas, Inc.
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 (at times referred to as the “Board”) of proxies to be used at the Annual Meeting of Shareholders. That meeting will be held at 10:9:00 a.m. on May 11, 2011,7, 2012, via live webcast at the Progress Energy Center for the Performing Arts, 2 East South Street, Raleigh, North Carolina. (For directions to the meeting location, please see the map included at the end of this Proxy Statement.)www.media-server.com/m/p/q2v8ud37. Throughout this Proxy Statement, Carolina Power & Light Company is at times referred to as “we,” “our,” “us” or “PEC” and our parent company, Progress Energy, Inc., is referred to as “Progress Energy” or the “Parent.” This Proxy Statement and form of proxy were first sent to shareholders on or about March 31, 2011.
An audio webcast of the Annual Meeting of Shareholders will be available online in Windows Media Player format atwww.progress-energy.com/investor. The webcast will be archived on the site for three months following the date of the meeting.
CopiesA copy of our Annual Report on Form 10-K as amended, for the year ended December 31, 2010,2011, including financial statements and schedules, is attached to this Proxy Statement. Additional copies are available upon written request, without charge, to the persons whose proxies are solicited. Any exhibit to the Form 10-K as amended, is also available upon written request at a reasonable charge for copying and mailing. Written requests should be made to Ms. Sherri L. Green, Treasurer, Carolina Power & Light Company d/b/a Progress Energy Carolinas, Inc., P.O. Box 1551, Raleigh, North Carolina 27602-1551. Our Form 10-K as amended, is also available through the Securities and Exchange Commission’s (the “SEC”) website atwww.sec.gov or through our website atwww.progress-energy.com/investor. The contents of these websites are not, and shall not be deemed to be, a part of this Proxy Statement or proxy solicitation materials.
We have adopted a procedure approved by the SEC called “householding.” Under this procedure, shareholders of record who have the same address and last name will receive only one copy of our Proxy Statement and Annual Report, unless one or more of the shareholders at that address notify us that they wish to continue receiving individual copies. We believe this procedure provides greater convenience for our shareholders and saves money by reducing our printing and mailing costs and fees.
If you prefer to receive a separate copy of our Proxy Statement and Annual Report, please write to Shareholder Relations, Carolina Power & Light Company d/b/a Progress Energy Carolinas, Inc., P.O. Box 1551, Raleigh, North Carolina 27602-1551 or telephone our Shareholder Relations Section at 919-546-3014, and we will promptly send you a separate copy. If you are currently receiving multiple copies of the Proxy Statement and Annual Report at your address and would prefer that a single copy be delivered there, you may contact us at the address or telephone number provided in this paragraph.
PROXY STATEMENT |
PROXIES
The accompanying proxy is solicited by our Board of Directors, and we will bear the entire cost of solicitation. We expect to solicit proxies primarily by mail. Proxies may also be solicited by telephone, e-mailemail or other electronic media or personally by our and our affiliates’ officers and employees, who will not be specially compensated for such services.
You may vote shares either in personduring the meeting or by duly authorized proxy. In addition, you may vote your shares by telephone by following the instructions provided on the enclosed proxy card. The telephone voting facilities for shareholders of record will close at 12:0110:00 a.m. E.D.T. on the morningday of the meeting. Any shareholder who has executed a proxy and attends the meeting online may elect to vote in personduring the meeting 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 (i) delivering a written notice of revocation to our Corporate Secretary, (ii) timely filing, with our Corporate Secretary, a subsequently dated, properly executed proxy, or (iii) attending the Annual Meeting online and electing to vote in person.at that time. Your attendance atparticipation in the Annual Meeting, by itself, will not constitute a revocation of a proxy. If you vote 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 certain identifying information 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 d/b/a Progress Energy Carolinas, Inc., P.O. Box 1551, Raleigh, North Carolina 27602-1551, Attention: Corporate 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. Executed proxies that do not contain voting instructions will be voted“FOR” the election of all directors as set forth in this Proxy Statement;“FOR” the proposal approving the Company’s executive compensation, as set forth in this Proxy Statement; and“FOR” the option of one year for the frequency of the advisory “nonbinding” vote on executive compensation, as set forth in this Proxy Statement; and “FOR” the ratification of the selection of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2011,2012, as set forth in this Proxy Statement. Proxies will be voted at the discretion of the named proxies on any other business properly brought before the meeting.
Special Note for Shares Held in “Street Name”
If your shares are held by a brokerage firm, bank or other nominee (i.e., in “street name”), you will receive directions from your nominee that you must follow in order to have your shares voted. “Street name” shareholders who wish to attend and vote in person atduring the online meeting will need to obtain a special proxy form from the brokerage firm, bank or other nominee that holds their shares of record. You should contact your brokerage firm, bank or other nominee for details regarding how you may obtain this special proxy form.
If your shares are held in “street name” and you do not give instructions as to how you want your shares voted (a “nonvote”), the brokerage firm, bank or other nominee who holds the Company’s shares on your behalf may vote the shares at its discretion on “routine” matters only. However, such brokerage firm, bank or other nominee is not required to vote your shares and therefore these unvoted shares would be counted as “broker nonvotes.”
With respect to “routine” matters, such as the ratification of the selection of the independent registered public accounting firm, a brokerage firm, bank or other nominee has authority (but is not required), under the rules governing self-regulatory organizations (the “SRO rules”), to vote its clients’ shares if the clients do not provide instructions. When a brokerage firm, bank or other nominee votes its clients’ securities on routine matters without receiving voting instructions, these shares are counted both for establishing a quorum to conduct business at the meeting and in determining the number of shares voted“FOR” or“AGAINST” such routine matters. The New
Carolina Power & LightProxy Statement |
had previously amended its rules to make any matter relating to executive compensation a “nonroutine” matter. Matters relating to executive compensation include advisory votes to approve the compensation of executives and to determine how frequently to hold an advisory vote to approve executive compensation.
With respect to “nonroutine” matters, including the election of directors, matters relating to executive compensation and shareholder proposals, a brokerage firm, bank or other nominee is not permitted under the SRO rules to vote its clients’ shares if the clients do not specifically instruct their brokerage firm, bank or other nominee on how to vote their shares. The brokerage firm, bank or other nominee will so note on the vote card, and this constitutes a “broker nonvote.” “Broker nonvotes” will be counted for purposes of establishing a quorum to conduct business at the meeting but not for determining the number of shares voted“FOR,” “AGAINST”or“ABSTAINING” from such nonroutine matters. At the 20112012 Annual Meeting of Shareholders, the following threetwo nonroutine matters will be presented for a vote: the election of eight (8) directors of the Company with terms expiring in 2012;2013; and an advisory (nonbinding) vote on executive compensation; and an advisory (nonbinding) vote to determine whether the vote on executive compensation will occur every one, two or three years.compensation.
Accordingly, if you do not vote your proxy, your brokerage firm, bank or other nominee may either: (i) vote your shares on routine matters and cast a “broker nonvote” on nonroutine matters, or (ii) leave your shares unvoted altogether. Therefore, we encourage you to provide instructions to your brokerage firm, bank or other nominee by voting your proxy. This action ensures that your shares and voting preferences will be fully represented at the meeting.
VOTING SECURITIES
Our directors have fixed March 4, 2011,2, 2012, as the record date for shareholders entitled to vote at the Annual Meeting. Only holders of our $5 Preferred Stock, Serial Preferred Stock and Common Stock (collectively referred to as “shares”) of record at the close of business on that date are entitled to notice of and to vote at the Annual Meeting. Each share is entitled to one vote. As of March 4, 2011,2, 2012, 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 owns all outstanding shares of our Common Stock.
Consistent with state law and our By-Laws, the presence, in person or by proxy, of holders of at least a majority of the total number of shares entitled to vote is necessary to constitute a quorum for the transaction of business at the Annual Meeting. Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and any adjournment thereof, unless a new record date is or must be set in connection with any adjournment. Shares held of record by shareholders or their nominees who do not vote by proxy or attend the live webcast of the Annual Meeting in person will not be considered present or represented at the Annual Meeting and will not be counted in determining the presence of a quorum. Proxies that withhold authority or reflect abstentions or “broker nonvotes” will be counted for purposes of determining whether a quorum is present.
Pursuant to the provisions of the North Carolina Business Corporation Act, directors will be elected by a plurality of the votes cast by the holders of shares entitled to vote. Accordingly, assuming a quorum is present, the nominee(s) receiving the highest number of“FOR” votes will be elected. 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. Progress Energy intends to vote all of its shares of Common Stock“FOR”FOR” each nominee.
Approval of an advisory (nonbinding) proposal regarding executive compensation as disclosed in this Proxy Statement will require the affirmative vote of a majority of votes actually cast by the holders of shares entitled to vote. Assuming a quorum is present, the number of“FOR” votes cast for this proposal at the meeting must exceed the number of“AGAINST”AGAINST” votes cast at the meeting in order for this proposal to be approved. Abstentions from voting and “broker nonvotes” will not count as votes cast and will not have the effect of a “negative” vote with respect to the vote on this proposal.
PROXY STATEMENT |
Approval of the proposal to ratify the selection of our independent registered public accounting firm, and other matters properly brought before the Annual Meeting, if any, generally will require the affirmative vote of a majority of votes actually cast by holders of shares entitled to vote. Assuming a quorum is present, the number of“FOR” votes cast at the meeting for this proposal must exceed the number of“AGAINST” votes cast at the meeting in order for the proposal to be approved. Abstentions from voting and “broker nonvotes” will not count as votes cast and will not have the effect of a “negative” vote with respect to any such matters. Progress Energy intends to vote all of its shares of Common Stock“FOR” this proposal.
We will announce preliminary voting results at the conclusion of the Annual Meeting. We will publish the final results in a Current Report on Form 8-K within four (4) business days of the Annual Meeting. In addition, we will disclose the decision about how frequently the Company will conduct future votes on executive compensation in a Current Report on Form 8-K within 150 calendar days of our Annual Meeting, but no later than October 3, 2011. A copy of these Formsthis Form 8-K may be obtained without charge by any of the means outlined above for obtaining a copy of our Annual Report on Form 10-K, as amended.10-K.
PROPOSAL 1—ELECTION OF DIRECTORS
The Company’s amended By-Laws provide that the number of directors of the Company shall be not less than five nor more than nine. The amended By-Laws also provide for the annual election of each director. Directors will serve one-year terms upon election at the 20112012 Annual Meeting of Shareholders.
The Board of Directors nominates the following eight (8) nominees to serve as directors with terms expiring in 20122013 and until their respective successors are elected and qualified: Jeffrey A. Corbett, William D. Johnson, Jeffrey J. Lyash, John R. McArthur, Mark F. Mulhern, James Scarola, Paula J. Sims, and Lloyd M. Yates. Proxies cannot be voted for a greater number of persons than nominees named.
There are no family relationships between any of the directors, any executive officers or nominees for director of the Company or its subsidiaries, and there is no arrangement or understanding between any director or director nominee and any other person pursuant to which the director or director nominee was selected.
The election of directors will be determined by a plurality of the votes cast at the Annual Meeting at which a quorum is present. This means that nominees receiving the highest number of“FOR” votes will be elected. Abstentions and broker nonvotes, if any, are not treated as votes cast and, therefore, will have no effect on the proposal to elect directors. Shareholders do not have cumulative voting rights in connection with the election of directors.
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 each of the eight (8) nominees. Votes (other than abstentions) 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 eight (8) nominees for election to the Board of Directors, along with their ages, principal occupations or employment for the past five years, directorships of public companies held during the past five years, and disclosures regarding the specific experience, qualifications, attributes or skills that led the Board to conclude
Carolina Power & LightProxy Statement |
The Board of Directors recommends a vote“FOR” each nominee for director.
Nominees for Election
JEFFREY A. CORBETT, age 51,52, is Senior Vice President, Energy Delivery, of the Company, since January 2008. In his current role, Mr. Corbett oversees operations and services in the Carolinas, including engineering, distribution, construction, metering, power restoration, community relations and customer service. He has served as a director of the Company since September 2008. Mr. Corbett previously served as Senior Vice President, Energy Delivery, of PEF, from June 2006 to January 2008; Vice President, Distribution, of the Company, from January 2005 to June 2006; Vice President, Eastern Region, of the Company, from September 2002 to January 2005; General Manager, Eastern Region, of the Company, from January 2001 to August 2002; and Director, Distribution Power Quality and Reliability, from 1999 to December 2000. Before joining Progress Energy in 1999, Mr. Corbett spent 17 years with Virginia Power, serving in a variety of engineering and leadership roles. Mr. Corbett’s broad experience and knowledge in operations, customer service, energy efficiency and demand-side management will be critical assets as the Company pursues its strategy of makingundertaking the long-range investments that enable usand initiatives necessary to meet the growing energy needs of our customers, control costs and satisfy new governmentcomply with public policies while creating long-term value.
WILLIAM D. JOHNSON, age 57,58, is Chairman, President and Chief Executive Officer of Progress Energy, since October 2007. Mr. Johnson is also Chairman of PEC and PEF. He has served as Chairman of the Company since July 2007. Mr. Johnson previously served as President and Chief Operating Officer of Progress Energy, from January 2005 to October 2007. In that role, he oversaw the generation and delivery of electricity by PEC and PEF. Mr. Johnson has been with Progress Energy (formerly CP&L) in a number of roles since 1992, including Group President for Energy Delivery, President and Chief Executive Officer for Progress Energy Service Company, LLC and General Counsel and Corporate Secretary for Progress Energy. Before joining Progress Energy, Mr. Johnson was a partner with the Raleigh, N.C., law office of Hunton & Williams LLP, where he specialized in the representation of utilities. Mr. Johnson has served in a variety of senior management positions during his tenure with the Company. His background as a lawyer representing utilities, coupled with his years of hands-on experience at the Company, provides him with a unique perspective and a keen understanding of the opportunities and challenges facing the Company and our industry. Mr. Johnson’s breadth of knowledge and experience in addressing key operational, policy, legislative and strategic issues, and his proven leadership skills will be significant assets to the Company as it focuses on optimizing its balanced solution strategy for meeting our customers’ futuregrowing energy needs and complying with public policies in the face of a challenging economy, and a changing regulatory and legislative environment.
JEFFREY J. LYASH, age 49,50, is Executive Vice President, Energy Supply, of Progress Energy, since June 2010. In his role, Mr. Lyash oversees allProgress Energy’s diverse fleet of generating resources, including nuclear, coal, oil, natural gas and hydroelectric stations. In addition, he oversees fuel procurement for our generating fleet and the Company’s power generation plants in the Carolinas and Florida.trading operations. Mr. Lyash has served as Executive Vice President and as a director of the Company since 2009. He previously served as Executive Vice President of Corporate Development, Progress Energy, from July 2009 to June 2010; President and Chief Executive Officer, PEF, from June 2006 to July 2009; Senior Vice President, PEF, from November 2003 to June 2006; and Vice President, Transmission in Energy Delivery, PEC, from January 2002 to October 2003. Mr. Lyash joined Progress Energy (formerly CP&L) in 1993 and spent his first eight years at the Brunswick Nuclear Plant in Southport, N.C., in a number of management roles. His last position at Brunswick was as Director of site operations. Before joining Progress Energy, Mr. Lyash worked withfor the U.S. Nuclear Regulatory Commission (NRC) between 1984 and 1993 in a number of capacities between 1984senior technical and 1993.management positions. Mr. Lyash’s breadth of experience and leadership abilities will continue to be valuable in the Company’s efforts to make the investments that are necessary for optimizingto optimize its balanced solution strategy for meeting the future energy needs of its customers, controlling costs and satisfying governmentpublic policies in a challenging economy and changing business environment.
PROXY STATEMENT |
JOHN R. MCARTHUR, age 55,56, is Executive Vice President of Progress Energy, since September 2008. In that role, Mr. McArthur is responsible for corporate and utility support functions, including Audit Services, Corporate Communications, Corporate Services, External Relations, Human Resources and Legal. He has served as a director of the Company since July 2007. Mr. McArthur also serves as General Counsel, since April 2010, and previously from 2004 until 2009, and as Corporate Secretary since 2004, of Progress Energy.Energy since 2004. He is also Executive Vice President of the Company since September 2008, Executive Vice President of PEF since November 2008 and SeniorExecutive Vice President and Corporate Secretary of Florida Progress Corporation since January 2004.2010. Mr. McArthur has been with Progress Energy in a number of roles since 2001, including Senior Vice President, Corporate Relations, and Vice President, Public Affairs. Before joining Progress Energy, he was a senior adviser to N.C. Governor Mike Easley, handling major policy initiatives as well as media and legal affairs. Mr. McArthur’s extensive legal, policy and legislative experience will be critical assets to the Company as we address new lawsoptimize our balanced solution strategy of investments and regulations in the areas ofinitiatives that meet customers’ growing energy policy, environmental compliance, renewable energy standardsneeds and corporate governance.comply with public policies, while creating long-term value.
MARK F. MULHERN, age 51,52, is Senior Vice President and Chief Financial Officer of the Company, PEF and Progress Energy, since September 2008. Mr. Mulhern has served as a director of the Company since September 2008. He previously served as Senior Vice President, Finance, of the Company and PEF, from November 2007 to September 2008, and Senior Vice President, Finance, of Progress Energy, from July 2007 to September 2008. Mr. Mulhern also served as President of Progress Ventures (the unregulated subsidiary of Progress Energy), from 2005 to 2008; Senior Vice President of Competitive Commercial Operations of Progress Ventures, from 2003 to 2005; Vice President, Strategic Planning, of Progress Energy, from 2000 to 2003; Vice President and Treasurer of Progress Energy, from 1997 to 2000; and Vice President and Controller of Progress Energy, from 1996 to 1997. Before joining Progress Energy (formerly CP&L) in 1996, Mr. Mulhern was the Chief Financial Officer at Hydra Co. Enterprises, the independent power subsidiary of Niagara Mohawk. He also spent eight years at Price Waterhouse, serving a wide variety of manufacturing and service businesses. Mr. Mulhern has worked in every financial management function at Progress Energy. He understands the Company and our industry. Mr. Mulhern’s experience and qualifications in corporate finance will be important to the Company’s efforts to meet its financial commitments and attract capital for funding the investments and initiatives that are necessary to implement the Company’s balanced solution strategy, while creating long-term strategyvalue in a challenging economy and changing business environment.
Other public directorships in past five years:
EXCO Resources, Inc. (February 2010 to present)
Highwoods Properties, Inc. (January 2012 to present)
JAMES SCAROLA, age 55,56, is Senior Vice President and Chief Nuclear Officer of the Company and PEF, since January 2008. In that role, he oversees all aspects of the Company’s nuclear program. Mr. Scarola has served as a director of the Company since January 2008. He previously served as Vice President at the Brunswick Nuclear Plant, from October 2005 to December 2007. Mr. Scarola joined Progress Energy (formerly CP&L) in 1998, where he served as Vice President at the Harris Nuclear Power Plant until October 2005. Mr. Scarola entered the nuclear power field in 1978 as a design engineer and has held positions in construction, start-up testing, maintenance, engineering and operations. HePrior to joining Progress Energy, he was the Plant General Manager at the St. Lucie Nuclear Plant withof Florida Power & Light Company prior to joining Progress Energy.Company’s St. Lucie Nuclear Plant. Mr. Scarola has served in leadership positions at the Company at the plant level and throughout Progress Energy’s Nuclear Generation Group. He has been instrumental in developing a culture of performance. Mr. Scarola’s extensive technical knowledge and proven capabilities in the nuclear arena will be an asset in the years ahead, as the Company focuses on improving nuclear fleet performance and optimizing its balanced solution to meeting its customers’ growing electric energy needs, controlling costs and complying with new governmentpublic policies while creating long-term value.
Carolina Power & LightProxy Statement |
PAULA J. SIMS, age 49,50, is Senior Vice President, Corporate Development and Improvement, of Progress Energy, since June 2010. In this role, Ms. Sims is responsible for implementing our balanced solution strategy for meeting the future energy needs of our customers. In addition, she oversees program development and construction of new generation projects, renewable energy and energy-efficiency programs, supply chain, information technology and wholesale power operations. Ms. Sims is the executive sponsor for Continuous Business Excellence, Progress Energy’s framework for improving processes, efficiency and overall cost management, and has responsibility for environmental, health and safety. She has served as a director of the Company since September 2008. Ms. Sims previously served as Senior Vice President, Power Operations, of the Company and PEF, from July 2007 to June 2010; Senior Vice President, Regulated Services, of the Company, from January 2006 to July 2007; Vice President, Fossil Fuel Generation, of the Company and PEF, from January 2006 to April 2006; Vice President, Regulated Fuels, of the Company, from December 2004 to December 2005; Chief Operating Officer of Progress Fuels Corporation, from February 2002 to December 2004; and Vice President, Business Operations & Strategic Planning, of Progress Fuels Corporation, from June 2001 to February 2002. Before joining Progress Energy in 1999, Ms. Sims was with GE Aircraft Engines, where she served in a number of engineering, operations and plant management roles for over 15 years. Ms. Sims’ depth of knowledge and experience will continue to be valuable to the Company as it navigates a challenging economy and changing business environment. Ms. Sims’ leadership in creating a culture offocused on improving productivityefficiency and efficiencyservice while achieving sustainable savings will be important to the Company’s efforts to meet its financial commitments and attract the capital necessary for optimizing its balanced solution strategy for meeting customer needs and complying with public policies, while creating long-term strategy.value.
LLOYD M. YATES
, ageOther public directorships in past five years:
Marsh & McLennan Companies, Inc. (May 2011 to present)
PRINCIPAL SHAREHOLDERS
The table below sets forth the only shareholders we know to beneficially own more than 5 percent (5%) of the outstanding shares of our Common Stock as of December 31, 2010.February 29, 2012. We are not aware of any person owning more than 5 percent (5%) of either our $5 Preferred Stock or our Serial Preferred Stock. Other than the previously noted three classes of stock, we do not have any other class of voting securities outstanding.
Number of Shares | Percentage of | ||||||
Title of Class | Name and Address of Beneficial Owner | Beneficially Owned | Class | ||||
Common Stock | �� | Progress Energy, Inc. | 159,608,055 | 100 | |||
410 S. Wilmington Street | |||||||
Raleigh, NC 27601-1849 |
Number of Shares | Percentage of | |||||||
Title of Class | Name and Address of Beneficial Owner | Beneficially Owned | Class | |||||
Common Stock | Progress Energy, Inc. | 159,608,055 | 100 | |||||
410 S. Wilmington Street | ||||||||
Raleigh, NC 27601-1849 |
PROXY STATEMENT |
MANAGEMENT OWNERSHIP OF COMMON STOCK
None of our Directors or Officers owns any of the Company’s Common Stock or either series of our Preferred Stock.
The following table describes the beneficial ownership of the Common Stock of Progress Energy as of February 28, 2011,29, 2012, of (i) all current directors and nominees for director, (ii) each executive officer named in the Summary Compensation Table presented later in this Proxy Statement, and (iii) all directors and nominees for director and executive officers as a group. As of February 28, 2011,29, 2012, none of the individuals or the group in the above categories owned 1 percent (1%) or more of Progress Energy’s voting securities. 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.
Number of Shares | ||
of Common Stock | ||
Name | Beneficially Owned1 | |
Jeffrey A. Corbett | 24,836 | 1 |
William D. Johnson | 204,278 | 1 |
Jeffrey J. Lyash | 24,930 | 1 |
John R. McArthur | 66,718 | 1 |
Mark F. Mulhern | 50,874 | 1 |
James Scarola | 43,223 | 1 |
Paula J. Sims | 27,141 | 1 |
Lloyd M. Yates | 48,784 | 1 |
Shares of Progress Energy Common Stock beneficially owned by all directors and executive | ||
officers of the Company as a group (9 persons) | 501,554 | 2 |
Officer and/or Director | Restricted Stock | Stock Options |
Jeffrey A. Corbett | — | — |
William D. Johnson | 5,534 | — |
Jeffrey J. Lyash | 1,367 | — |
John R. McArthur | 1,667 | — |
Mark F. Mulhern | 1,167 | 7,000 |
James Scarola | 1,100 | 34,600 |
Paula J. Sims | 1,000 | — |
Lloyd M. Yates | 1,367 | — |
of Common Stock | |
Name | Beneficially Owned |
Jeffrey A. Corbett | 25,772 |
William D. Johnson | 240,142 |
Jeffrey J. Lyash | 28,087 |
John R. McArthur | 76,535 |
Mark F. Mulhern | 51,918 |
James Scarola | 5,183 |
Paula J. Sims | 33,360 |
Lloyd M. Yates | 51,837 |
Shares of Progress Energy Common Stock beneficially owned by all directors and executive | |
officers of the Company as a group(9 persons) | 520,822 |
Management Ownership of Units Representing Common Stock
The table below shows ownership as of February 28, 2011,29, 2012, of (i) performance units under Progress Energy’s Long-Term Compensation Program; (ii) performance units recorded to reflect awards deferred under the Progress Energy Management Incentive Compensation Plan (“MICP”); (iii)(ii) performance shares awarded under the Performance Share Sub-Plan of Progress Energy’s 1997, 2002 and 2007 Equity Incentive Plans (“PSSP”) (see “Outstanding Equity Awards at 2011 Fiscal Year-End Table” on page 41)42); (iv)(iii) units recorded to reflect awards deferred under the PSSP; (v)(iv) replacement units representing the value of our contributions to the Progress Energy 401(k) Savings & Stock Ownership Plan that would have been made but for the deferral of salary under Progress Energy’s Management Deferred Compensation Plan and contribution limitations under Section 415 of the Internal Revenue Code of 1986, as amended; and (vi)(v) Restricted Stock Units (“RSUs”) awarded under the 2002 and 2007 Progress Energy Equity Incentive Plans. A unit of Common Stock does not represent an equity interest in Progress Energy, and possesses no voting rights, but is equal in economic value at all times to one share of Progress Energy Common Stock.
Officer | MICP | PSSP | PSSP Deferred | MDCP | RSUs |
William D. Johnson | 1,890 | 117,490 | — | 1,170 | 73,938 |
Jeffrey L. Lyash | — | 26,996 | — | 3,898 | 19,195 |
John R. McArthur | — | 29,083 | — | — | 19,999 |
Mark F. Mulhern | 949 | 26,030 | — | — | 18,765 |
Lloyd M. Yates | 2,952 | 26,699 | 7,043 | 175 | 19,066 |
Long-Term | ||||||
Compensation | PSSP | |||||
Officer | Program | MICP | PSSP | Deferred | MDCP | RSUs |
William D. Johnson | — | 1,812 | 122,314 | — | 1,121 | 66,714 |
Jeffrey L. Lyash | — | — | 28,446 | — | 3,726 | 16,192 |
John R. McArthur | — | — | 30,665 | — | — | 16,632 |
Mark F. Mulhern | — | 1,808 | 25,611 | 911 | — | 14,558 |
Lloyd M. Yates | — | 2,829 | 28,129 | 6,749 | 168 | 16,087 |
Carolina Power & LightProxy Statement |
CHANGES IN CONTROL
On January 8, 2011, Duke Energy Corporation (“Duke Energy”) and our Parent entered into a Merger Agreement, pursuant to which our Parent will be acquired by Duke Energy in a stock-for-stock transaction and become a wholly owned subsidiary of Duke Energy (the “Merger”). Both companies’ shareholders have approved the Merger. However, consummation of the Merger is subject to customary conditions, including, among other things, expiration or termination of the applicable Hart-Scott-Rodino Act waiting period, and receipt of approval, to the extent required, from the Federal Energy Regulatory Commission, the Federal Communications Commission, the Nuclear Regulatory Commission, the North Carolina Utilities Commission, the Kentucky Public Service Commission, and the South Carolina Public Service Commission. Although there are no merger-specific regulatory approvals required in Indiana, Ohio or Florida, the companies will continue to update the public service commissions in those states on the Merger, as applicable and as required.
TRANSACTIONS WITH RELATED PERSONS
There were no transactions in 20102011 and there are no currently proposed transactions involving more than $120,000 in which the Company or any of its subsidiaries was or is to be a participant and in which any of the Company’s directors, executive officers, nominees for director or any of their immediate family members had a direct or indirect material interest except for compensation earned pursuant to their employment agreements for services they provide to the Company and its affiliates.
Our Parent’s Board of Directors has adopted policies and procedures for the review, approval or ratification of Related Person Transactions under Item 404(a) of Regulation S-K (the “Policy”), which is attached to this Proxy Statement as Exhibit A. Progress Energy’s Board has determined that its Corporate Governance Committee (the “Governance Committee”) is best suited to review and approve Related Person Transactions because that Committee oversees Progress Energy’s Board of Directors’ assessment of its directors’ independence. Progress Energy’s Governance Committee will review and may recommend to the Board amendments to this Policy from time to time.
For the purposes of the Policy, a “Related Person Transaction” is a transaction, arrangement or relationship, including any indebtedness or guarantee of indebtedness (or any series of similar transactions, arrangements or relationships), in which Progress Energy (including any of its subsidiaries) was, is or will be a participant and the amount involved exceeds $120,000, and in which any Related Person had, has or will have a direct or indirect material interest. The term “Related Person” is defined under the Policy to include our directors, executive officers, nominees to become directors and any of their immediate family members.
Progress Energy’s general policy is to avoid Related Person Transactions. Nevertheless, Progress Energy recognizes that there are situations where Related Person Transactions might be in, or might not be inconsistent with, our best interests and those of our shareholders. These situations could include (but are not limited to) situations where we might obtain products or services of a nature, quantity or quality, or on other terms, that are not readily available from alternative sources or when we provide products or services to Related Persons on an arm’s length basis on terms comparable to those provided to unrelated third parties or on terms comparable to those provided to employees generally. In determining whether to approve or disapprove each Related Person Transaction, the Governance Committee considers various factors, including (i) the identity of the Related Person; (ii) the nature of the Related Person’s interest in the particular transaction; (iii) the approximate dollar amount involved in the transaction; (iv) the approximate dollar value of the Related Person’s interest in the transaction; (v) whether the Related Person’s interest in the transaction conflicts with his obligations to the Company and its shareholders; (vi) whether the transaction will provide the Related Person with an unfair advantage in his dealings with the Company; and (vii) whether the transaction will affect the Related Person’s ability to act in the best interests of the Company and its shareholders. The Governance Committee will approve only approve those Related Person Transactions that are in, or are not inconsistent with, the best interests of the Company and its shareholders.
PROXY STATEMENT |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers to file reports of their holdings and transactions in our securities and those of our Parent with the SEC and the NYSE. Based on our records and other information, we believe that all Section 16(a) filing requirements applicable to our directors and executive officers with respect to the Company’s 20102011 fiscal year were met, except as previously disclosed in our 2010 Annual Meeting Proxy Statement, dated March 31, 2010, asfollows: Jeffrey M. Stone inadvertently failed to file on a timely basis a Form 4 with respect to an ad hoc restricted stock unit award granted under the Progress Energy 2007 Equity Incentive Plan. A Form 4 reporting the transaction was filed with the SEC.
CODE OF ETHICS
In keeping with its commitment to sound corporate governance, the Board of Directors of Progress Energy has adopted a comprehensive written Code of Ethics that incorporates an effective reporting and enforcement mechanism. The Code of Ethics is applicable to all employees of Progress Energy and its subsidiaries, including our Chief Executive Officer, our Chief Financial Officer and our Controller. The Board has adopted Progress Energy’s Code of Ethics as its own standard. Board members, our officers and our employees certify their compliance with Progress Energy’s Code of Ethics on an annual basis.
Progress Energy’s Code of Ethics is posted on our Parent’s Internet website and can be accessed atwww.progress-energy.com/investorand is available in print at no cost to any shareholder upon written request.
www.progress-energy.com/investor.Our Parent intends to satisfy the disclosure requirements under Item 5.05 of Form 8-K relating to amendments to or waivers from any provision of the Code of Ethics applicable to our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and Controller by posting such information on its website cited above.
DIRECTOR INDEPENDENCE
The Board of Directors has determined that none of the persons who served as directors for any portion of 20102011 was, and none of the current directors or nominees for director is, independent, as that term is defined under the general independence standards contained in the listing standards of the NYSE because they are all employees of the Company and/or its affiliates. Neither the NYSE rules nor the SEC rules require our directors to be independent.
BOARD, BOARD COMMITTEE AND ANNUAL MEETING ATTENDANCE
The Board of Directors is currently comprised of eight (8) members. The Board of Directors met four (4)three (3) times in 2010.2011. Average attendance of the directors at the meetings of the Board held in 20102011 was 8992 percent, and no directors attended less than 75100 percent of all Board meetings held in 2010.2011 except for Mr. Scarola, who, due to travel obligations on behalf of the Company, did not attend two of the three meetings that were held. As a result, his average attendance was 33 percent.
Our Company expects all directors to attend its annual meetings of shareholders. All directors who were serving as directors as of May 12, 2010,11, 2011, the date of the 20102011 Annual Meeting of Shareholders, attended that meeting.
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In conjunction with the restructuring of the Company’s Board in 2007 to include only employees of the Company and its affiliates, the Board determined that it was not necessary to establish committees of the Board. Therefore, the Company does not have a separately standing audit committee, compensation committee or nominating committee. The Board believes that this approach increases efficiency and permits the Company to better execute its business strategy.
Carolina Power & LightProxy Statement |
The full Board participates in the consideration of director nominees.
The Organization and Compensation Committee of Progress Energy’s Board of Directors has been delegated authority on behalf of the Company to approve senior management compensation, including making senior executive compensation recommendations to our Board, as appropriate. The following individuals are members of the Organization and Compensation Committee of Progress Energy’s Board: Ms. E. Marie McKee—Chair, and Messrs. John D. Baker II, Harris E. DeLoach, Jr., James B. Hyler, Jr., Robert W. Jones, Melquiades R. “Mel” Martinez, and John H. Mullin, III.
The Audit and Corporate Performance Committee of Progress Energy’s Board is responsible for the pre-approval of audit and non-auditnonaudit services provided to the Company by its independent registered accounting firm. The following individuals are members of the Audit and Corporate Performance Committee of Progress Energy’s Board: Ms. Theresa M. Stone—Chair, and Messrs. James E. Bostic, Jr., W. Steven Jones, Charles W. Pryor, Jr., Carlos A. Saladrigas, and Alfred C. Tollison, Jr. Ms. Stone and Mr. Saladrigas have been designated by the Progress Energy Board of Directors as the “Audit Committee Financial Experts,” as that term is defined in the SEC rules.
Compensation Committee Interlocks and Insider Participation
The Company’s Board does not have a compensation committee. As noted above, the Organization and Compensation Committee of Progress Energy’s Board of Directors has been delegated authority on behalf of the Company to approve senior management compensation. William D. Johnson, our Parent’s Chief Executive Officer and our Chairman of the Board, is responsible for conducting annual performance evaluations of the other executive officers and making recommendations to the Organization and Compensation Committee of Progress Energy’s Board regarding those executives’ compensation.
There are no relationships that require disclosure under Item 407(e)(4)(iii) of Regulation S-K.
DIRECTOR NOMINATING PROCESS AND COMMUNICATIONS
WITH BOARD OF DIRECTORS
Director Candidate Recommendations and Nominations by Shareholders
Shareholders should submit any director candidate recommendations in writing in accordance with the method described under “Communications with the Board of Directors” below. Any director candidate recommendation that is submitted by one of our shareholders will be acknowledged, in writing, by the Corporate Secretary. The recommendation will be promptly forwarded to the Chairman of the Board, who will place consideration of the recommendation on the agenda for the Board’s regular November meeting. The Board will discuss candidates recommended by shareholders at its November meeting, and will determine whether it will nominate a particular candidate for election to the Board.
Additionally, in accordance with Section 10 of our By-Laws, any shareholder of record entitled to vote for the election of directors at the applicable meeting of shareholders may nominate persons for election to the Board of Directors if that shareholder complies with the notice procedure set forth in the By-Laws and summarized in “Future Shareholder Proposals” on page 67 of this Proxy Statement.
Process for Identifying and Evaluating Director Candidates
The full Board evaluates all director candidates, including those nominated or recommended by shareholders, in accordance with the Board’s qualification standards. The Board evaluates each candidate’s qualifications and assesses them against the perceived needs of the Board. Qualification standards for all Board members include: integrity; sound judgment; financial acumen; strategic thinking; ability to work effectively as a
PROXY STATEMENT |
team member; demonstrated leadership; experience in a field of business; professional or other activities that bear a relationship to our mission and operations; appreciation of the business and social environment in which we operate; and an understanding of our responsibilities to shareholders, employees, customers and the communities we serve. The Company does not have a nominating committee.
Communications with the Board of Directors
The Board has approved a process for shareholders to send communications to the Board. That process provides that shareholders can send communications to the Board or to specified individual directors in writing c/o David B. Fountain, Corporate Secretary, Carolina Power & Light Company d/b/a Progress Energy Carolinas, Inc., P.O. Box 1551, Raleigh, North Carolina 27602-1551.
We screen mail addressed to the Board or any specified individual director for security purposes and to ensure that the mail relates to discrete business matters relevant to the Company. Mail that satisfies these screening criteria is forwarded to the appropriate director.
BOARD DIVERSITY
The Company’s Board does not have a separately standing nominating committee. Rather, the full Board participates in the consideration of director nominees. The Board does not have a policy with regard to the consideration of diversity in identifying director nominees; however, diversity and inclusion is an integral part of the Company’s culture. The Company recognizes that its success is dependent upon a sound corporate strategy and highly motivated employees who bring diverse perspectives, experiences and abilities to the workplace.
BOARD LEADERSHIP STRUCTURE AND ROLE IN RISK OVERSIGHT
Board Leadership Structure
Our By-Laws require the Board to appoint a Chief Executive Officer who shall also be either the Chairman, the Vice Chairman or the President of the Company. Currently, the Board believes that the Company’s interests are best served by separating the roles of Chairman and Chief Executive Officer. William D. Johnson serves as Chairman, and Lloyd M. Yates serves as President and Chief Executive Officer. Although the two roles are separate, the individuals who serve in the roles are both employees of the Company or its affiliates. Indeed, the Company’s Board is comprised entirely of employees of the Company or its affiliates. The Company believes that this structure simplifies the decision-making process, increases efficiency and permits the Company to better execute its business strategy. This is particularly beneficial for the Board at this time given the rapidly evolving nature of the energy industry and the complexity of the projects being undertaken by the Company, including the implementation of its coal-to-gas strategy.
As a result of the restructuring of the Company’s Board in 2007, none of the current directors is independent, as that term is defined under the general independence standards contained in the listing standards of the NYSE, because they are all employees of the Company or its affiliates. Neither the NYSE rules nor the SEC rules require our directors to be independent. The Company does not have a Lead Director.
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Our Parent has established a framework that supports the risk management activities that occur across Progress Energy, including the Company. The framework establishes processes for identifying, measuring, managing and monitoring risk across our Parent and its subsidiaries. Our Parent also maintains an ongoing oversight structure that details risk types and the internal organizations and Committees of our Parent’s Board that have oversight and governance responsibility for each risk type. Progress Energy’s Chief Executive Officer and Senior Management have responsibility for assessing and managing the Company’s exposure to risk. In this
Carolina Power & LightProxy Statement |
regard, our Parent has established a Risk Management Committee, comprised of various senior executives, that provides guidance and direction in the identification and management of financial risks. The Company’s Board is not involved in the Company’s day-to-day risk management activities; however, our Parent’s Board and its various Committees are involved in different aspects of overseeing those activities.
The risks associated with our strategic plan are discussed annually with Progress Energy’s Board of Directors.Board. Because overseeing risk is an ongoing process and inherent in our Parent’s strategic decisions, Progress Energy’s Board also discusses risk throughout the year at other meetings in relation to specific proposed actions.
The Audit and Corporate Performance Committee of Progress Energy’s Board is responsible for ensuring that appropriate risk management guidelines and controls are in place and reviews the oversight structure for managing risk. The Audit and Corporate Performance Committee reviews and discusses with management our Parent’s guidelines and policies governing risk assessment and risk management. The Audit and Corporate Performance Committee is also responsible for oversight of the risks associated with financial reporting and our Parent’s compliance with legal and regulatory requirements.
The Finance Committee of Progress Energy’s Board is responsible for the oversight of the Risk Management Committee Policy and Guidelines. It oversees the financial risks associated with guarantees, risk capital, corporate financing activities and debt structure. The Finance Committee ensures that dollar amounts and limits are managed within the established framework. The Finance Committee reports to the full Board of Progress Energy at least once a quarter.
The Operations and Nuclear Oversight Committee of Progress Energy’s Board is charged with oversight of risks related to operations, major capital projects and environmental, health and safety issues.
The Organization and Compensation Committee of Progress Energy’s Board is responsible for the oversight of risks that can result from personnel issues and misalignment between compensation and performance plans and the interests of Progress Energy’s shareholders.
Our Parent’s risk management structure is designed to enable Progress Energy’s Board to stay informed about and understand the key risks facing the Company, understand how those risks relate to the Company’s business and strategy, and the steps our Parent is taking to manage those risks.
PROXY STATEMENT |
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (“CD&A”) relates to the compensation of the executive officers of the Company. The officers of the Company’s parent, Progress Energy, Inc. (the “Parent” or “Progress Energy”) also serve as officers and/or directors of various Progress Energy subsidiaries, including the Company. They have multiple responsibilities within and provide various services to Progress Energy and its subsidiaries.Company, in 2011.
The total compensation of Progress Energy’s executive officers iswas designed to cover the full range of services they provideprovided 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 in which they provide services. The Organization and Compensation Committee of Progress Energy’s Board of Directors (throughout this CD&A, the “Committee”) has beenis designated authority on behalf of the Company to approve senior management compensation, including making senior executive compensation recommendations to subsidiary boards, as appropriate.
EXECUTIVE SUMMARY
Progress EnergyThe Company is an integrated electric utility primarily engaged in the regulated utility business. As a wholly-ownedwholly owned subsidiary of Progress Energy, our executive compensation philosophy alignshas been aligned with that of our Parent. It is designed to provide competitive compensation consistent with key principles that we believe are critical to our long-term success. The Committee took into account the affirmative shareholder advisory vote on executive compensation at the 2011 Annual Meeting. Because a vast majority (over 99%) of our shareholders approved the compensation described in the proxy statement for the 2011 Annual Meeting, the Committee did not implement changes to our compensation program as a result of the shareholder advisory vote.
We are committed to providing an executive compensation program that supports the following goals and philosophies:
Highlights of the 20102011 executive compensation program are:were:
Carolina Power & LightProxy Statement |
For 2010,2011, the Company’s NEOs were:
I. COMPENSATION OVERVIEW
ASSESSMENT OF RISK
Progress Energy isEnergy’s subsidiaries, including the Company, are highly regulated at both the federal and state levels; therefore, significant swings in earnings performance or growth over timelevels. Risks which are less influencedundertaken outside the normal course of business are carefully evaluated by any particular individual or groupssenior management and our Parent’s Board of individuals.Directors. We believe our compensation program for executive officers does not incentivize excessive risk taking for the following reasons:
PROXY STATEMENT |
We have determined that the compensation program for executive officers who are in senior management positions does not encourage excessive risk taking for all the reasons stated above.
PROGRAM ADMINISTRATION
Our executive compensation program iswas administered by the Committee which is composedcomprised of seven independent directors (as defined under the NYSE Corporate Governance Rules). The Committee may form and delegate to subcommittees such power and authority as the Committee deems appropriate. Members of the Committee currently dohave not receivereceived compensation under any compensation program in which our executive officers participate. For a discussion of director compensation, see the “Director Compensation” section on page 5960 of this Proxy Statement.
The Committee’s charter authorizes the Committee to hire outside consultants. The Committee evaluates the performance of its compensation consultant annually to assess the consultant’s effectiveness in assisting the Committee with implementing the Company’s compensation program and principles. The Committee retained Meridian Compensation Partners, LLC (“Meridian”) as its independent executive compensation consultant to assist the Committee in meeting the Company’s compensation objectives. The Committee met regularly meets with its consultant in executive session to discuss matters independent of management. Under the terms of its engagement, in 20102011 Meridian reported directly to the Committee. Meridian solely providesMeridian’s only professional service is executive compensation advisory services, which it provided to the Committee and providesCommittee. Meridian provided no other services to the Committee or the Company.
Our executive officers and other membersMembers of management met periodically meet with the compensation consultant to ensure the consultant understands our business strategy and that of our Parent’s business strategy. Our executive officers and other Company employees provideParent. On an as-needed basis, our Parent provided the consultant with information regarding our executive compensation and benefit plans and how we administer them on an as-needed basis.them. In addition, the executive officers ensureensured that the Committee receivesreceived administrative support and assistance, and makemade recommendations to the Committee to ensure that compensation plans arewere aligned with our business strategy and meetmet the principles described above. John R. McArthur, our Executive Vice President, servesserved as management’s liaison to the Committee. William D. Johnson, our Parent’s Chief Executive Officer, is responsible for conducting annual performance evaluations of the other executive officers and making recommendations to the Committee regarding those executives’ compensation. The independent directors of theour Parent’s Board conduct an annual performance evaluation of Mr. Johnson. The Committee discusses the results of the evaluation with Mr. Johnson and makes compensation decisions for him giving consideration to the evaluation results.
Carolina Power & LightProxy Statement |
COMPETITIVE POSITIONING PHILOSOPHY
The Committee’s and our Parent’s philosophy is to target the midpoint (i.e., 50th percentile) of the marketplace in setting compensation levels. Also consistent with 50th percentile market practices, it is our philosophy to deliver a preponderance of total compensation to executives in the form of short- and long-term incentive compensation. The Committee believes itsthis compensation philosophy balances the need for competitiveness in attracting, engaging and retaining top talent while being measured and cost effective. This philosophy is also aligned with our executive compensation objective of linking pay to performance. When we benchmark and set compensation for our executives against a peer group, we focus on “target” compensation. Target compensation is the value of a pay opportunity as of the beginning of the year. For short-term incentives, this means the value of that incentive opportunity based on the target percentage of salary if our performance objectives are achieved. For example, our Parent’s Chief Executive Officer’s target annual incentive opportunity is 85%100% of salary. This means if we reach our targeted financial objectives for the year, a target incentive award would likely be paid. Correspondingly, if performance should fall short or rise above these goals, then the earned incentive award would typically be lesser or greater than targeted. In any event, target annual incentive opportunities are not a certainty but are a function of business results.
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What ultimately might be earned from either short- or long-term incentives is a function of performance and extended service. With respect to our variable pay programs, it is generally not the Company’s purpose to deliver comparable pay outcomes versus that of other companies sincebecause outcomes can differ by company based on their performance. Rather, our general compensation objective is to deliver comparable pay opportunities. Realized results will then be a significant function of performance and continued service. This is a common convention among companies; nonetheless, it is an important context to consider when reviewing the remainder of this CD&A where regular references to targetstarget award opportunities and/or grant date values for our compensation programs appear.
Target total compensation opportunities are intended to approximate the 50th percentile of our Parent’s peer group (as defined below) with flexibility to pay higher or lower amounts based on individual contribution, competition, retention, succession planning and the uniqueness and complexity of a position. To assessreview overall compensation delivered, the Committee utilizes tally sheets that provide a summary of the elements of compensation for each senior executive. The tally sheets indicate targetcompensation opportunities and actual pay earned. They also summarize potential retirement benefits at age 65, current equity holdings and potential value from severance.
The compensation opportunities vary significantly from individual to individual based on the specific nature of the executive position. For example, our Parent’s CEOChief Executive Officer is responsible for the overall performance of Progress Energy and, as such, his position has a greater scope of responsibility than our other executive positions and is benchmarked accordingly. From a market perspective, the position of chief executive officerChief Executive Officer receives a greater compensation opportunity than other executive positions. The Committee therefore sets our Parent’s CEO’sChief Executive Officer’s compensation opportunity at a level that reflects the responsibilities of his position and the Committee’s expectations.
PROXY STATEMENT |
COMPETITIVE BENCHMARKING
On an annual basis, the Committee’s compensation consultant provides the Committee with a written analysis comparing base salaries, target annual incentives and the grant date value of long-term incentives of our executive officers to compensation opportunities provided to executive officers of our Parent’s peers. The comparative analysis is based on the 50th percentile (i.e., the median) values of the peer group. For 2010,2011, the Committee approved the use of a peer group of 1821 integrated utilities used in the prior year and added three new companies: CenterPoint Energy, Inc., CMS Energy Corporation, and NiSource, Inc. (the “Benchmarking Peer Group”). These companies were added to further the Benchmarking Peer Group’s alignment with the executive market in which our Parent competes for talent. Further, the addition of the new companies positioned our Parent’s revenue more closely to the overall median than the previous peer group. The Benchmarking Peer Group is comprised of utilities that have transmission, distributionregulated and generation assetsnon-regulated business and was chosen based primarily on revenues.comparability of business, similarity in size, and likely competitors for talent. The 2010 median revenue of the Benchmarking Peer Group is $10.3$10.9 billion compared to our Parent’s $10.2 billion. These companies would likely be companies with which we primarily compete for executive talent. The table below lists the companies in the Benchmarking Peer Group.
Benchmarking Peer Group | ||
Allegheny Energy, Inc.1 | Duke Energy Corporation | PG&E Corporation |
Ameren Corporation | Edison International | Pinnacle West Capital Corporation |
American Electric Power Co., Inc. | Entergy Corporation | PPL Corporation |
CenterPoint Energy, Inc. | Exelon Corporation | SCANA Corporation |
CMS Energy Corporation | FirstEnergy Corporation | Southern Company |
Dominion Resources, Inc. | NextEra Energy, Inc. | TECO Energy, Inc. |
DTE Energy Company | NiSource, Inc. | Xcel Energy, Inc. |
1 Allegheny Energy, Inc. merged with FirstEnergy Corporation on February 25, 2011.
The electric utility industry has subsectors identified frequently as competitive merchant, regulated delivery, regulated integrated, and unregulated integrated (typically state-regulated delivery and unregulated generation). Each of these subsectors typically differs in financial performance and market valuation characteristics such as earnings multiples, earnings growth prospects and dividend yields. Progress Energy generally is identified as being in the regulated integrated subsector. This means Progress Energy and its peer companies are primarily rate-of-return regulated, operate in the full range of the value chain (generation, transmission and/or delivery), and typically have requirements to serve all customers under state utility regulations. The Committee annually evaluates the Benchmarking Peer Group to ensure that it remains appropriate for compensation comparisons.
SECTION 162(m) IMPACTS
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits with(with certain exceptions,exceptions) the amount a publicly held company may deduct each year for compensation over $1 million paid or accrued with respect to its chief executive officer and any of the other three most highly compensated officers (excluding the chief financial officer). Certain performance-based compensation is, however, specifically exempt from the deduction limit. To qualify as performance-based, compensation must be paid pursuant to a plan that is:
Carolina Power & LightProxy Statement |
The Committee considers the impact of Section 162(m) when designing executive compensation elements and attempts to minimize nondeductible compensation. The PSSP under the 2007 Equity Incentive Plan (the “Equity Incentive Plan”) approved by our Parent’s shareholders in 2007 is designed to meet the deductibility requirements of Section 162(m) as performance-based pay. Our Parent also received shareholder approval of the Progress Energy 2009 Executive Incentive Plan (the “EIP”), an annual cash incentive plan for our Parent’s named executive officers, at its 2009 Annual Meeting of Shareholders.NEOs, in 2009. The MICP and EIP were designed to work together to enable the Company to preserve the tax deductibility of incentive awards under Section 162(m) of the Internal Revenue Code, as amended, to the extent practicable. The sole purpose of the EIP is to preserve the tax deductibility of incentive awards that are qualified performance-based compensation.
STOCK OWNERSHIP GUIDELINES
To align the interests of our executives with the interests of our Parent’s shareholders, the Committee utilizes stock ownership guidelines for all executive officers. The guidelines are designed to ensure that our management maintains a significant financial stake in Progress Energy’s long-term success. The guidelines require each senior executive to own a multiple of his or her base salary in the form of Progress Energy common stock within five years of assuming his or her position. The required levels of ownership are designed to reflect the level of responsibility that the executive positions entail.entail and to be consistent with prevailing market practices.
The Committee benchmarked both the position levels and the multiples inof our guidelines against those of the Benchmarking Peer Group and general industry practices. The benchmarking for 20102011 indicated that our Parent’s guidelines were “at market” with respect to ownership levels, the types of equity that count toward ownership, and the timeframe for compliance. The Committee also considered the results of the vote on a shareholder proposal included in Progress Energy’s 2010 Proxy Statement that proposed the Committee adopt a policy requiring senior executives to retain no less than 75% of net after-tax shares acquired through equity compensation programs until the year following termination of employment through retirement or otherwise. The
Position Level | Stock Ownership Guidelines |
Chief Executive Officer | 5.0 times Base Salary |
Chief Operating Officer | 4.0 times Base Salary |
Chief Financial Officer | 3.0 times Base Salary |
Presidents/Executive Vice Presidents/Senior Vice Presidents | 3.0 times Base Salary |
For purposes of meeting the applicable guidelines, the following are considered as common stock owned by an executive: (i) shares owned outright by the executive; (ii) stock held in a defined contribution, Employee Stock Ownership Plan, or other stock-based plan; (iii) phantom stock deferred under an annual incentive or base salary deferral plan; (iv) stock earned and deferred in any long-term incentive plan account; (v) restricted stock awards and RSUs; and (vi) stock held in a family trust or immediate family holdings.
Directors and employees, including the NEOs, are not permitted to enter into hedging transactions involving our Parent’s stock.
As of February 25, 2011,22, 2012, our named executive officersNEOs exceeded the guidelines (see Management Ownership table on page 8 of this Proxy Statement for specific details).
PROXY STATEMENT |
II. ELEMENTS OF COMPENSATION
The table below summarizes the current elements of our Parent’s executive compensation program.
Short- or | |||
Long-Term | |||
Element | Brief Description | Primary Purpose | Focus |
Base Salary | Fixed compensation. Annual merit increases reward individual performance and growth in the position. | Basic element of compensation that | |
pays for expertise and experience and | |||
is necessary to attract, engage and | |||
Short-term (annual) | |||
Annual Incentive | Variable compensation based on achievement of annual performance goals. | Rewards operating performance | |
results that are consistent with providing safe, reliable | |||
and efficient electric service. | Short-term (annual) | ||
Long-Term Incentives — Performance Shares | Variable compensation based on achievement of long-term performance goals. | Align interests of shareholders and | |
management and aid in attracting, engaging and | |||
retaining executives. | Long-term | ||
Long-Term Incentives — Restricted Stock/ Restricted Stock Units | Variable compensation based on target levels. Service-based vesting. | Align interests of shareholders | |
and management and essential in | |||
attracting, engaging and retaining executives. | Long-term | ||
Supplemental Senior Executive Retirement Plan | Formula-based compensation, based on salary, annual incentives and eligible years of service. | Provides long-term retirement | |
benefit influenced by service and | |||
performance. Aids in attracting, engaging and | |||
retaining executives. | Long-term | ||
Management Change-In- Control Plan | Defines our Parent’s and Company’s relationship with executives in the event of a change-in-control. | Aligns interests of shareholders and | |
management and aids in (i) attracting | |||
executives; (ii) engaging and retaining executives | |||
during transition following a | |||
change-in-control; and (iii) focusing | |||
executives on maximizing value for | |||
shareholders. | Long-term | ||
Employment Agreements | Define | ||
Company’s relationship with its | |||
executives and provide | |||
protection to each of the | |||
parties in the event of | |||
termination of employment. | Aid in attracting, engaging and retaining executives. | Long-term | |
Executive Perquisites | Personal benefits awarded | ||
outside of base pay and incentives. | Aid in attracting, engaging and retaining executives and allowing executives | ||
to focus their energies on Company | |||
priorities. | Short-term (annual) | ||
Other Broad-Based Benefits | Employee benefits such as health and welfare benefits, 401(k) and pension plan. | Basic elements of compensation | |
expected in the marketplace. Aid in | |||
attracting, engaging and retaining executives. | Both Short- and Long-term | ||
Deferred Compensation | Provides executives with tax | ||
deferral options in addition | |||
to those available under our | |||
qualified plans. | Aids in attracting, engaging and retaining executives. | Long-term |
Carolina Power & LightProxy Statement |
The table below shows the target awards of short-term and long-term incentives to each NEO for 2010. Percentages2011. Target opportunities for incentives are expressed as a percentage of base salary. Additional elements of compensation are discussed further in this section.
Long-Term Incentive | ||||||
Short-Term | Targets as a Percentage | |||||
(annual) | of Salary | Total | ||||
Named Executive | Base Salary | Incentive | Performance | Restricted | Incentive | |
Officer | (as of 1/1/11) | Target1 | Shares2 | Stock | Target | |
William D. Johnson | $990,000 | 85% | 233% | 117% | 435% | |
Mark F. Mulhern | $450,000 | 55% | 117% | 58% | 230% | |
Jeffrey J. Lyash | $453,000 | 55% | 117% | 58% | 230% | |
Lloyd M. Yates | $448,000 | 55% | 117% | 58% | 230% | |
John R. McArthur | $488,000 | 55% | 117% | 58% | 230% |
Short-Term | Long-Term Incentive | ||||||
(annual) | Targets | Total | |||||
Named Executive | Base Salary | Incentive | Performance | Restricted | Incentive | ||
Officer | (as of 1/1/12) | Target1 | Shares2 | Stock Units | Target | ||
William D. Johnson | $1,030,000 | 100% | 233% | 117% | 450% | ||
Mark F. Mulhern | $495,945 | 55% | 117% | 58% | 230% | ||
Jeffrey J. Lyash | $466,590 | 55% | 117% | 58% | 230% | ||
Lloyd M. Yates | $461,440 | 55% | 117% | 58% | 230% | ||
John R. McArthur | $502,640 | 55% | 117% | 58% | 230% |
1Annual incentive awards can range from 0%-200% of target percentages. | |
2Payout opportunities can range from 0%-200% of target percentages. |
1 Annual incentive awards can range from 0%-200% of target percentages.
The primary purpose of base salaries is to provide a basic element of compensation necessary to attract and retain executives. Base salary levels are established based on data from the Benchmarking Peer Group identified above and in consideration of each executive officer’s skills, experience, responsibilities and performance. Market compensation levels that approximate the 50th percentile of the Benchmarking Peer Group are used to assist in establishing each executive’s job value (commonly called the “midpoint” at other companies). JobThese job values serve as the market reference for determining base salaries.
Each year, the compensation consultant provides the market values for our executive officer positions. Based, in part, on these market values and, in part, on the executives’ achievement of individual and Company goals, our Parent’s Chief Executive Officer then recommends to the Committee base salary adjustments for our executive officers (excluding himself). The Committee reviews the proposed base salaries and adjusts them as it deems appropriate based on the executives’ achievement of individual and Company goals and market trends that result in changes to job values, andvalues. The Committee approves them in the first quarter of each year. The Committee meets in executive session with the compensation consultant to review and establish our Parent’s Chief Executive Officer’s base salary.
2. ANNUAL INCENTIVE
Progress Energy sponsors theThe MICP is an annual cash incentive plan in which our executives, managers and supervisors participate. The Company includes managers and supervisors in the MICP to increase accountability for all levels of the Company’s management team and to better align compensation with management performance. Annual incentive opportunities are provided to executive officers to promote the achievement of annual performance objectives. MICP targets are based on a percentage of each executive’s base salary and are intended to offer target award opportunities that approximate the 50th percentile of the market for the Benchmarking Peer Group.
PROXY STATEMENT |
Each year, the Committee establishes, based on the recommendations of our Parent’s CEO,Chief Executive Officer, the threshold, target and outstanding levels for the performance measures applicable to the named executive officers.NEOs. The 20102011 MICP performance measures were ongoing earnings per share (Ongoing EPS)(“Ongoing EPS”) and legal entity net income for the Company and PEF as shown in the table below:
2010 MICP Financial Performance Goals | |||
(in millions except Ongoing EPS) | Threshold | Target | Outstanding |
Progress Energy Ongoing EPS | $2.75 | $2.95 | $3.05 |
Company Net Income | $572 | $605 | $623 |
PEF Net Income | $405 | $429 | $441 |
2011 MICP Financial Performance Goals | |||
(in millions except Ongoing EPS) | Threshold | Target | Outstanding |
Progress Energy Ongoing EPS | $2.90 | $3.10 | $3.20 |
Company Net Income | $568 | $600 | $616 |
PEF Net Income | $467 | $493 | $506 |
The MICP’s performance targets are designed to align with our financial plan and are intended to appropriately motivate the executive officers to achieve the desired corporate financial objectives. Effective January 1, 2010, theobjectives by focusing on legal entity net income performance measure was implemented as a result of our Parent’s desire to increase its legal entity focus on net income results. The potential MICP funding for each performance measure is 50% at threshold, 100% at target and 200% at outstanding (maximum). Interpolation is applied when actual performance is between the identified levels. Each performance measure is assigned a weight based on the relative importance of that measure to Progress Energy’s performance. During the year, updates are provided to the Committee on Progress Energy’s performance as compared to the performance measures. For 2010,2011, the named executive officers’NEOs’ performance measures under the MICP were weighted among Ongoing EPS and legal entity net income as follows:
Performance Measures | ||||
(Relative Percentage Weight) | ||||
Company | Company | PEF | ||
Named Executive | Target | Ongoing | Net | Net |
Officer | Opportunity | EPS | Income | Income |
William D. Johnson | 85% | 100% | — | — |
Mark F. Mulhern | 55% | 100% | — | — |
Jeffrey J. Lyash | 55% | 35% | 32.5% | 32.5% |
Lloyd M. Yates | 55% | 45% | 55% | — |
John R. McArthur | 55% | 100% | — | — |
Performance Measures | ||||
(Relative Percentage Weight) | ||||
Progress | ||||
Energy, Inc. | Company | PEF | ||
Named Executive | Target | Ongoing | Net | Net |
Officer | Opportunity | EPS | Income | Income |
William D. Johnson | 100% | 100% | — | — |
Mark F. Mulhern | 55% | 100% | — | — |
Jeffrey J. Lyash | 55% | 35% | 32.5% | 32.5% |
Lloyd M. Yates | 55% | 45% | 55% | — |
John R. McArthur | 55% | 100% | — | — |
The determination of the annual MICP award that each named executive officerNEO receives has two steps: i) funding the MICP awards based on the performance as compared to the financial goals specified above; and ii) determining individual MICP awards.
First, the Committee approves the total amount that will be made available to fund MICP awards to managers and executives, including the NEOs. To determine the total amount available to fund all MICP awards, we calculateour Parent calculates an amount for each MICP participant by multiplying each participant’s base salary by a performance factor (based on the sum of a participant’s weighted target award achievements). The performance factor ranges between 0 and 200% of a participant’s target award, depending upon the results of each applicable performance measure. The sum of these amounts for all participants is the total amount of funds available to pay to all participants, including the named executive officers.NEOs.
Second, our Parent’s CEOChief Executive Officer recommends to the Committee an MICP award payment for executives (excluding himself) based on the executive’s target award opportunity, the degree to which Progress Energy achieved certain goals, and the executive’s individual performance based on achieving individual goals and operating results. The Committee reviews our Parent’s CEO’sChief Executive Officer’s recommendations and approves and/or makes adjustments as appropriate. Our Parent’s CEO’sChief Executive Officer’s MICP award payment is determined by the Committee based upon the Committee’s annual evaluation of his performance. The Committee may reduce but cannot increase the amount payable to a participant according to business factors determined by the Committee, including the performance measures under the MICP.
Carolina Power & LightProxy Statement |
As allowed by the MICP, the Committee uses discretion to adjust funding amounts up or down depending on factors that it deems appropriate, such as weather, storm costs, impairments, restructuring costs, and gains/losses on sales of assets. The Committee uses Ongoing EPS as defined and reported by Progress Energy in its annual earnings release.
Based on management’s recommendations, with respect to 2010,2011, the Committee exercised discretion for the three performance measures: our Parent’s Ongoing EPS, Company net income, and PEF net income. The Committee approved adjusting Progress Energy’s Ongoing EPS results downwardupward by $0.22a net $0.11 to account for favorable weather, storm costs, regulatory costs and regulatory costs.discretionary spending. The Committee approved adjusting the Company’s net income for favorable weather, storm andcosts, regulatory costs and discretionary spending for a net upward adjustment of $35 million. The Committee approved adjusting PEF’s net income for favorable weather, tax expense and the results of a litigation settlement for a net downward adjustment of $32$26 million. The Committee approved adjusting PEF net income downward by $42 million to account for favorable weather and regulatory costs. These adjustments resulted in Progress Energy’s Ongoing EPS, Company net income and PEF net income performance at 73%, 74% and 82% of target, respectively. As a result of these downward adjustments, the 2010 MICP payments were below the target award opportunity for each of the NEOs.
3. LONG-TERM INCENTIVES
The 2007 Equity Incentive Plan (the “Equity Incentive Plan”) was approved by Progress Energy’s shareholders in 2007 and allows the Committee to make various types of long-term incentive awards to Equity Incentive Plan participants, including the named executive officers.NEOs. The awards are provided to the named executive officersNEOs to align the interests of each executive with those of our Parent’s shareholders. Long-term incentive awards are intended to offer target award opportunities that approximate the 50th percentile of the peer group.Benchmarking Peer Group. Currently, the Committee utilizes two types of equity-based incentives: restricted stock unitsRSUs and performance shares.
The Committee has determined that to accomplish our compensation program’s purposes effectively, equity-based awards should consist of one-third restricted stock unitsRSUs and two-thirds performance shares. This allocation reflects the Committee’s strategy of utilizing long-term incentives to retain officers, align officers’ interests with those of our and our Parent’s shareholders and drive specific financial performance.
Performance shares are intended to focus executive officers on the multi-year sustained achievement of financial and shareholder value objectives. RSUs are intended to further align executives’ interests with shareholder interests while providing strong retention for the executive to remain with the Company long enough for the restricted stock unitsRSUs to vest.
TheSee the table below showson page 21 for the 20102011 long-term incentive targets for the NEOs’ positions.NEOs.
Long-Term Incentive Award Target1
Restricted Stock | ||
Performance Shares | Units | |
Target Award | Target Award | |
Position2 | 2010 | 20103 |
Chief Executive Officer | 233% | 117% |
Executive Vice President | 117% | 58% |
Chief Financial Officer | 117% | 58% |
President of the Company | 117% | 58% |
Performance Shares
The Performance Share Sub-PlanPSSP under the Equity Incentive Plan authorizes the Committee to issue performance shares to executives as selected by the Committee in its sole discretion. The value of a performance share is equal to the value of a share of Progress Energy’s common stock, and earned performance share awards are paid in Progress Energy common stock. The performance period for a performance share is the three-consecutive-calendar-year period beginning in the year in which it is granted. Dividends or dividend equivalents are not paid on unvested performance shares. Rather, dividend equivalents accrue quarterly and are reinvested in additional shares that are only paid on earned performance shares at the end of each three-year performance cycle.
PROXY STATEMENT |
To determine the number of performance shares granted at the beginning of each performance cycle, the Companyour Parent divides the target award value by the closing stock price on the last trading day of the year prior to the beginning of the performance period. The performance shares must then be earned over the three-year performance cycle. The granting of performance shares does not provide the participant with any guarantee of actually receiving the awards.
Notwithstanding the above calculation, the Committee may exercise discretion in determining the size of each performance share grant, with the maximum grant size at 125% of target. In 2010,2011, the Committee did not exercise this discretion with respect to any grant ofto the named executive officers.NEOs.
2007 Performance Share Sub-Plan (the “2007 PSSP”)
The 2007 PSSP provides for an adjusted measure of total shareholder return (referred to as “Total Business Return” or TBR) to be utilized as the sole measure for determining the amount of a performance share award upon vesting. TBR is computed assuming a constant price to earnings ratio, which was set at the beginning of each performance period. During a period when our Parent was undergoing transformation of its underlying operating portfolio, this measure was intended to filter out external or market-based variations in Progress Energy’s stock price and focus on internal restructuring. The performance measure also uses Progress Energy’s publicly reported ongoing earningsOngoing EPS as the earnings component for determining performance share awards. The Committee chose this method as the sole performance measure to support its desire to better align the long-term incentives with the interests of our and our Parent’s shareholders and to emphasize our focus on dividend and Ongoing EPS growth. TBR was used for the 2007 – 2009 and 2008 – 2010 performance share grants made under the 2007 PSSP. The performance measures for the 2008 – 2010 performance cyclescycle are shown in the table below.
Threshold | Target | Outstanding | ||||
2007 Total Business Return1 | 5% | 8% | ≥10.5% | |||
2007 Percentage of Target Award Earned | 50% | 100% | 200% | |||
2008 Total Business Return1 | 5% | 8% | ≥11% | |||
2008 Percentage of Target Award Earned | 25% | 100% | 200% |
Threshold | Target | Outstanding | |
2008 Total Business Return1 | 5% | 8% | ≥11% |
2008 Percentage of Target Award Earned | 25% | 100% | 200% |
1Total shareholder return, adjusted to reflect a constant price to earnings ratio set at January 1 of the grant year and to reflect the Company’s ongoing earnings per shareProgress Energy’s Ongoing EPS for each year of the performance period.
Additionally, the Committee retained the discretion to reduce the number of performance shares awarded if it determines that the payouts resulting from the TBR do not appropriately reflect the Company’s actual performance.
In the first quarter of 2010,2011, the Committee approved a payout of 125%100% of the target value for the 20072008 – 20092010 PSSP grants.
|
The 2009 PSSP uses two equally weighted performance measures: relative total shareholder return (TSR) and earnings growth. TSR, unlike the previously discussed TBR, is based on the conventional metric of annual share price appreciation and dividends. By using a combination of relative TSR and absoluteongoing earnings growth, the 2009 PSSP allows the Committee to consider Progress Energy’s performance as compared to the PSSP Peer Group (as defined below), and management’s achievement of internal goals.
Carolina Power & LightProxy Statement |
Relative TSR
The relative TSR performance is calculated using Progress Energy’s three-year annualized TSR ranked against the PSSP Peer Group. TSR is defined as the appreciation or depreciation in the value of the stock, plus dividends paid during the year, divided by the closing value of the stock on the last trading day of the preceding year. A 30-day opening/closing average stock value is used in determining the results to moderate the impact of wide swings in the stock value. The table below shows the percent of target awards that may be earned based on Progress Energy’s relative TSR percentile ranking:
Performance and Award Structure (50%) | |||
Percentile Ranking | Percent of Target Award Earned | ||
80th | 200% | ||
50th | 100% | ||
40th | 50% | ||
<40th | 0% |
However, regardless of the relative ranking, if Progress Energy’s TSR is negative for the performance period, no award above the threshold can be earned.
In making awards under the 2009 PSSP, the Committee used a group of highly regulated companiesutilities with a business strategy similar to our Parent’s based on a percentage of regulated earnings (the “PSSP Peer Group”). These companies have a significant amount of their earnings generated from regulated assets. In addition, the PSSP Peer Group was selected based on other factors including revenues, market capitalization, and enterprise value. The PSSP Peer Group differs from the Benchmarking Peer Group the Committee uses for purposes of benchmarking compensation. The Benchmarking Peer Group is a broader group that represents those companies with which we primarily compete for executive talent and includes companies that are not regulated integrated utilities. The Committee believes that for purposes of our long-term incentive plan, it is more appropriate to use the PSSP Peer Group comprised of companies that derive a significant percentage of their earnings from regulated businesses. The table below lists the companies in the PSSP Peer Group.
PSSP Peer Group | ||
Alliant Energy Corporation | ||
NV Energy, Inc. | Southern Company | |
PG&E Corporation | Westar Energy, Inc. | |
Pinnacle West Capital Corporation | Wisconsin Energy Corp. | |
Duke Energy Corporation | Portland General Electric Company | Xcel Energy, Inc. |
SCANA Corporation |
Earnings Growth
Earnings growth is based on Progress Energy’s annual Ongoing EPS. Ongoing EPS is determined in accordance with our Parent’s “Policy for Press Release Earnings Disclosure of Non-GAAP Measures.” See the reconciliation of Ongoing EPS to GAAP EPS attributable to controlling interests under the caption “Results of Operations” in Item 7 of our Parent’s Form 10-K for the year ended December 31, 2011, filed on February 29, 2012. The earnings growth component of the PSSP award is based on Progress Energy’s earnings growth performance as measured against pre-established goals set at the beginning of the performance period. The Committee determined the earnings growth
PROXY STATEMENT |
targets for the 20102011 annual grant were appropriate in consideration of a challenging economy, consistency with analysts’ expectations and the 20102011 projected analysts’ consensus on earnings growth for the PSSP Peer Group, and continued uncertainties of the Florida regulatory environment.Group. The table below shows the percent of target awards that may be earned based on the Company’sProgress Energy’s earnings growth performance:
Performance and Award Structure (50%) | |||
Three-Year Average Ongoing | Percent of Target Award | ||
Performance | EPS Growth | Earned | |
2009-2011 | 2010-2012 | ||
Threshold | 2% | 1% | 50% |
Target | 4% | 3% | 100% |
Maximum | 6% | 5% | 200% |
Performance and Award Structure (50%) | ||||
Three-Year Average Ongoing | Percent of Target Award | |||
Performance | EPS Growth | Earned | ||
2009-2011 | 2010-2012 | 2011-2013 | ||
Threshold | 2% | 1% | 1% | 50% |
Target | 4% | 3% | 2% | 100% |
Maximum | 6% | 5% | 5% | 200% |
Restricted Stock Units
The restricted stock unitRSU component of the current long-term incentive program helps us retain executives and aligns the interests of management with those of our and our Parent’s shareholders and management by rewarding executives for increasing and sustaining shareholder value. The Committee believes that the service-based nature of RSUs is essential in retaining an experienced and capable management team.
Executive officers typically receive a grant of service-based RSUs in the first quarter of each year, which areis subject to a three-year graded vesting schedule. The size of each grant is based on the executive officer’s target award percentageopportunity and is determined by using the closing stock price of our Parent’s common stock on the last trading day of the year prior to the date of the award. The Committee establishes target levels based on the peer group information discussed under the caption “Competitive Positioning Philosophy” on page 1617 above. The 20102011 RSU targets for the NEOs are shown in the “Long-Term Incentive Award Target” table on page 2321 above. The granting of RSUs does not provide the participant with any guarantee of actually receiving the awards. Holders of RSUs receive quarterly cash dividend equivalents equal to the amount of any quarterly dividends paid on our Parent’s common stock.
To further accent the retention quality of the Equity Incentive Plan and to recognize the contribution of the officer team, including the named executive officers,NEOs, the Committee may also issue in its discretion service-based ad hoc grants of restricted stock unitsRSUs to executives. No adAd hoc grants were awarded by the Committee during 2010.2011 to each of our NEOs as described under the caption “2011 Compensation Decisions” on page 33 below.
4. SUPPLEMENTAL SENIOR EXECUTIVE RETIREMENT PLAN
The Supplemental Senior Executive Retirement Plan (“SERP”) sponsored by Progress Energy provides a supplemental, unfunded pension benefit for executive officers who have at least 10 years of service with at least three years of service on our Senior Management Committee (“SMC”), i.e., service as a Senior Vice President or above. The SERP is designed to provide pension benefits above those earned under our qualified pension plan. Current tax laws place various limits on the benefits payable under our qualified pension plan, including a limit on the amount of annual compensation that can be taken into account when applying the plan’s benefit formulas. Therefore, the retirement incomes provided to the named executive officersNEOs by the qualified plans generally constitute a smaller percentage of final pay than is typically the case for other Company employees. To make up for this shortfall and to maintain the market-competitiveness of our Parent’s executive retirement benefits, we maintain the SERP for members of the SMC, including the NEOs.
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Carolina Power & LightProxy Statement |
The Committee believes that the SERP is a valuable and effective tool for attraction and retention due to its significant benefit and vesting requirements. It is also a common tool among the Benchmarking Peer Group and utilities in general. Total years of service attributable to an eligible executive officer may consist of actual or deemed years. The Committee grants deemed years of service on a case-by-case basis depending upon our need to attract and retain a particular executive officer. All of our named executive officersNEOs participate in the SERP and are fully vested in the SERP other than John R. McArthur, who will begin participation and vest on January 1, 2012.
Payments under the SERP are made in the form of an annuity, payable at age 65. The monthly SERP payment is calculated using a formula that equates to 4% per year of service (capped at 62%) multiplied by the average monthly eligible pay for the highest completed 36 months of eligible pay within the preceding 120-month period. Eligible pay includes base salary and annual incentive. (For those executives who became SERP participants on or after January 1, 2009, other than executives who were members of SMC on December 31, 2008, the target benefit percentage is 2.25% rather than 4% per year of service. None of the named executive officersNEOs for 2010 is2011 are subject to the new benefit percentage.) Benefits under the SERP are fully offset by Social Security benefits and by benefits paid under our Parent’s qualified pension plan. An executive officer who is age 55 or older with at least 15 years of service may elect to retire and commence his or her SERP benefit prior to age 65. The early retirement benefit will be reduced by 2.5% for each year the participant receives the benefit prior to reaching age 65.
On March 16, 2011, the Board amended the SERP in two respects. The SERP was amended to provide that all service with Progress Energy and its affiliates, including Duke Energy and its affiliates, after completion of the merger will be treated as service as a Senior Vice President or above for purposes of meeting the SERP’s eligibility requirements. Second, the SERP was amended to limit participation in the SERP to executives who were members of the SMC on January 8, 2011. On March 14, 2012, the SERP was further amended to clarify that for all members of our Parent’s SMC on December 31, 2008, the target benefit percentage is 4%.
5. MANAGEMENT CHANGE-IN-CONTROL PLAN
Our Parent sponsors a Management Change-In-Control Plan (the “CIC Plan”) for selected employees. The purpose of the CIC Plan is to to:
Providing such protection to executive officers in general minimizes disruption during a pending or anticipated CIC. Under our CIC Plan, our Parent generally defines a CIC as occurring at the earliest of the following:
PROXY STATEMENT |
The Committee has the sole authority and discretion to designate employees and/or positions for participation in the CIC Plan. TheConsistent with the level of responsibility inherent in their roles and consistent with market practice, the Committee has designated certain positions, including all of the NEO positions, for participation in the CIC Plan. The benefits provided under the CIC Plan do not duplicate the employment agreement severance benefits in the case of CIC Plan participants. Participants are not eligible to receive any of the CIC Plan’s benefits absent both a CIC of our Parent and an involuntary termination of the participant’s employment without cause, including voluntary termination for good reason. Good reason termination includes changes in employment circumstances such as a:
Rather than allowing benefit amounts to be determined at the discretion of the Committee, the CIC Plan has specified multipliers designed to be competitive with current market practices. With the assistance of its compensation consultant, the Committee has reviewed the design of the CIC Plan to ensure that it meets our Parent’s business objectives and falls within competitive parameters. The Committee has determined that the current CIC Plan is effective at meeting the goals described above.
The CIC Plan provides separate tiers of severance benefits based on the position a participant holds within our Parent. The continuation of health and welfare benefits coverage and the degree of excise tax gross-up for terminated participants align with the length of time during which they will receive severance benefits.
Carolina Power & LightProxy Statement |
The following table sets forth the key provisions of the CIC Plan benefits as it relates to our NEOs:
Tier I | Tier II | |
Eligible Positions | Chief Executive Officer, Chief Operating Officer, Presidents and Executive Vice Presidents | Senior Vice Presidents |
Cash Severance | 300% of base salary and annual incentive1 | 200% of base salary and |
annual incentive1 | ||
Health & Welfare Coverage Period | Coverage up to 36 months | Coverage up to 24 months |
Gross-ups | Full gross-up of excise tax | Conditional gross-up of excise tax |
1The cash severance payment will be equal to the sum of the applicable percentage of annual base salary and the greater of the average of the participant’s annual incentive award for the three years immediately preceding the participant’s employment termination date, or the participant’s target annual incentive award for the year the participant’s employment with the Company terminates.
Additionally, the CIC Plan has the following key provisions:
Benefit | Description |
Annual Incentive | 100% of target incentive if terminated within coverage period after CIC. |
Restricted Stock Agreements | Restrictions are fully waived on all outstanding grants if terminated during coverage period (unless outstanding awards are not assumed by the acquiring company in which case they would vest at CIC). |
Performance Share Sub-Plan | Outstanding awards vest (at the target level) as of the termination date (unless outstanding awards are not assumed by the acquiring company in which case they would vest at CIC). |
Supplemental Senior Executive Retirement Plan | Participant shall be deemed to have met minimum service requirements for benefit purposes, and participant shall be entitled to payment of benefit under the SERP. |
Deferred Compensation | Entitled to payment of accrued benefits in all accrued nonqualified deferred compensation plans. |
The CIC Plan also permits the Progress Energy Board to establish a nonqualified trust to protect the benefits of the impacted participants. This type of trust generally is established and funded to protect nonqualified and/or deferred compensation against various risks such as a CIC or a management change-of-heart. Any such trust the Board establishes willwould be irrevocable and inaccessible to future or current management,management. In July, 2011, the CIC Plan was amended to eliminate the Progress Energy Board’s right to establish such a trust in the event of a merger with Duke Energy.
Application of the CIC Plan and mayOther Compensation Related Consequences of the Proposed Merger with Duke Energy
On January 8, 2011, Duke Energy and Progress Energy entered into an Agreement and Plan of Merger (the “Merger Agreement”). Pursuant to the Merger Agreement, if the merger is consummated, our Parent will become a wholly owned subsidiary of Duke Energy and shareholders of our Parent will receive shares of Duke Energy common stock. Consummation of the merger is subject to customary conditions, including among other things, regulatory approval. The shareholders of Duke Energy and Progress Energy approved the proposed merger in August, 2011.
PROXY STATEMENT |
Our NEOs will not receive additional compensation or benefits under their employment agreements or the CIC Plan solely on account of the consummation of the merger with Duke Energy. However, subject to the limitations described below, if an NEO is terminated without “cause” or resigns with “good reason” within twenty-four months after consummation of the merger, they will be currently funded. To date, noentitled to severance benefits under the CIC Plan as set forth in the “Involuntary or Good Reason Termination (CIC)” column of the tables captioned “Potential Payments Upon Termination,” on pages 50 through 59 below. The eligibility of certain NEOs to receive the CIC Plan benefits is limited by the following:
Upon consummation of the merger, outstanding options to purchase shares of our Parent’s common stock and outstanding awards of restricted stock, RSUs, phantom shares and performance shares will be converted into equity or equity-based awards in respect of a number of shares of Duke Energy common stock equal to the number of shares of Progress Energy common stock represented by such award multiplied by the exchange ratio under the Merger Agreement and will remain subject to the same vesting requirements as were applicable to such awards prior to consummation of the merger with Duke Energy. In other words, the vesting of options and other equity awards held by our NEOs will not be accelerated on account of the completion of the merger. The outstanding annual incentive awards of our NEOs also will remain subject to their original vesting requirements and will remain subject
Carolina Power & LightProxy Statement |
to performance criteria. The compensation committee of the Duke Energy board of directors will adjust the original performance criteria for outstanding performance shares and annual incentive awards as it determines is appropriate and equitable to reflect the merger, Progress Energy’s performance prior to completion of the merger and the performance criteria of awards made to similarly situated Duke Energy employees.
Notwithstanding the provisions of the CIC Plan, the SERP, the MICP, the PSSP, and the Management Deferral Compensation Plan (the “MDCP”) providing for the funding of a nonqualified trust to protect the benefits of the impacted participants, the terms of the Merger Agreement prohibit the funding of any such trust has been fundedand stipulate that all applicable plans must be amended prior to the consummation of the merger to eliminate any funding requirement. Each of these plans was amended on July 12, 2011, to eliminate any requirement to establish or fund a nonqualified trust in connection with respect to any of our NEOs.a merger with Duke Energy.
6. EMPLOYMENT AGREEMENTS
Each named executive officerNEO has an employment agreement that documents ourthe Company’s and our Parent’s relationship with that executive. We provide these agreements to the executives as a means of attracting and retaining them. Each agreement has a term of three years. When an agreement’s remaining term diminishes to two years, the agreement automatically adds another year to the term, unless we give a 60-day advance notice that we do not want to extend the agreement. If a named executive officeran NEO is terminated without cause during the term of the agreement, he is entitled to severance payments equal to his base salary times 2.99, as well as up to 18 months of COBRA reimbursement. A description of each named executive officer’sNEOs’ employment agreement is discussed under the “Employment Agreement” section of the “Discussion of Summary Compensation Table and Grants of Plan-Based Awards Table” on page 4041 of this Proxy Statement.
In anticipation of the closing of the proposed merger with Duke Energy and the transition to Duke Energy’s employment practices for executives, in October, 2011, the Company notified its NEOs that it would not renew their employment agreements to the named executive officers because it believes that such agreements are important for the Company and Progress Energy to be competitive and retain a cohesive management team. The employment agreements also provide for a defined employment arrangement with the executives and provide various protections for us and our Parent, such as prohibiting competition with us or our Parent, solicitation of our or our Parent’s employees and disclosure of confidential information or trade secrets. The Committee believes that the termsupon expiration of the employment agreements are in line with general industry practice.
7. EXECUTIVE PERQUISITES
We provide limited perquisites and other benefits to our executives. Amounts attributable to perquisites are disclosed in the “All Other Compensation” column of the Summary Compensation Table on page 35.
The Committee has determined that the current perquisites are appropriate and consistent with market practices. The perquisites available to the named executive officersNEOs during 20102011 include:
Perquisites for | Description |
Personal Travel on Corporate Aircraft and “Business-Related” Spousal Travel1 | Personal and spousal travel on corporate aircraft is permitted under very limited circumstances. |
Financial and Estate Planning | An annual allowance of up to $16,500 for the purpose of purchasing financial and estate planning counseling and services and preparation of personal tax return. |
Luncheon and Health Club Dues | Membership in an approved luncheon club and membership in a health club of executive officer’s choice. |
Executive Physical | Reimbursement of up to $2,500 for an extensive physical at a clinic specializing in executive physicals, every other year. |
Internet and Telecom Service2 | Monthly fees for Internet and telecom access. |
Home Security | An installed home security system and payment of monitoring fees. |
Accidental Death and Dismemberment Insurance | $500,000 of AD&D insurance for each executive officer. |
PROXY STATEMENT |
1 Personal travel on Progress Energy’s aircraft in the event of a family emergency or similar situation is permitted with the approval of Progress Energy’s Chief Executive Officer. Executives’ spouses may also travel on Progress Energy’s aircraft to accompany the executives to “business-related” events that executives’ spouses are requested to attend. For 2010,2011, the named executive officersNEOs whose perquisites included spousal travel on corporate aircraft for business purposes were Messrs. Johnson, Lyash and Yates.
2 Including home use of Company-owned computer.
The Committee believes that the perquisites we provide to our executives are reasonable, competitive and consistent with our overall executive compensation program in that they help us attract and retain skilled and qualified executives. We believe that these benefits generally allow our executives to work more efficiently and, in the case of the tax and financial planning services, help them to optimize the value received from all of the compensation and benefits programs offered. The costs of these benefits constitute only a small percentage of each named executive officer’sNEOs’ total compensation.
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The named executive officersNEOs receive our general corporate benefits provided to all of our regular, full-time, nonbargaining employees. These broad-based benefits include the following:
9. DEFERRED COMPENSATION
Progress Energy sponsors the Management Deferred Compensation Plan (the “MDCP”),MDCP, an unfunded, deferred compensation arrangement. The plan is designed to provide executives with tax deferral options, in addition to those available under the existing qualified plans. An executive may elect to defer, on a pre-tax basis, payment of up to 50% of his or her salary for a minimum of five years or until his or her date of retirement. As a make-up for the 401(k) statutory compensation limits, executives receive deferred compensation credits of 6% of their base salary over the Internal Revenue Code statutory compensation limit on 401(k) retirement plans. The Committee views the matching feature as a restoration benefit designed to restore the matching contribution the executive would have received under the 401(k) retirement plan in the absence of the Internal Revenue Service compensation limits. Each executive may allocate his or her deferred compensation among available deemed investment funds that mirror those options available under the Progress Energy 401(k) plan. Executives may elect to receive distributions, either in a lump sum or installments of 2 to 10 years, on (1) the April 1 following the date that is 5 years from the last day of the plan year in which the deferral was made; or (2) upon separation from employment.
Executives can elect to defer up to 100% of their MICP and/or performance share awards. The deferral option is provided as an additional benefit to executive officers to provide flexibility in the receipt of compensation. Deferred awards may be allocated among deemed investment options that mirror the Progress Energy 401(k) Plan. Effective September 1, 2010, the named executive officersNEOs cannot allocate deferred awards to the deemed Progress Energy stock investment fund. In anticipation of the merger with Duke Energy, the MICP was amended to eliminate the deferral option for awards earned in 2012. Executives may elect to receive distributions any date that is 5 years subsequent to when the award would otherwise be payable or any date that is within 2 years of the executive’s retirement date. Executives will receive a distribution upon separation of employment other than by reason of death or retirement.
Carolina Power & LightProxy Statement |
III. 20102011 COMPENSATION DECISIONS
Chief Executive Officer Compensation
Lloyd M. Yates
In March 2010,2011, Mr. Johnson recommended no increasethe Committee approve a merit-based adjustment to Mr. Yates’ base salary supported by market data prepared by the Committee’s independent compensation consultant. The Committee approved a base salary of $448,000 primarily due$461,440, representing a 3% merit increase to the Company’s performance and the difficult external economic climate.his previous salary of $448,000. For 2010,2011, Mr. Yates’ MICP target award was set at 55% of base salary. The payout of the 20102011 MICP award was based on the extent to which Mr. Yates achieved his performance goals, which were focused on the following general areas of Companyfor our Parent’s success:
In recognition of his accomplishments in 2010,2011, and on Mr. Johnson’s recommendation, the Committee awarded Mr. Yates an MICP paymentaward of $195,000,$220,000, which is equal to 79%87% of Mr. Yates’ target award opportunity. The Committee considered, among other things, Mr. Yates’ significant role in achieving the successful financial and operational performance of the Company which contributed to our Parent achieving its ongoing EPS goal; effectively managing the Company’s operations and maintenance (“O&M&M”) expenses particularly forthat were impacted by higher nuclear outagesmaintenance costs to improve the Robinson Nuclear Plant performance and in the supply chain business unit; and effectively communicatingby storm restoration costs; successfully completing the Company’s climate change policyfirst audit of the North American Electric Reliability Corporation’s cyber security standards by the SERC Reliability Corporation; and Balanced Solution Strategy to external stakeholderscompleting the new combined cycle plant at the Sherwood H. Smith, Jr. Energy Complex on time and industrial customers.
With respect to his long-term incentive compensation in 2010,2011, Mr. Yates was granted 5,069 restricted stock units5,976 RSUs and 12,78212,055 performance shares in accordance with his pre-established targets of 58% and 117%, respectively, of base salary. The performance shares are earned based on performance over the three years ending December 31, 2012.2013. Additionally, 9,5359,663 shares of the 20072008 annual grant vested in 20102011 and were paid out at 125%100% of target. On Mr. Johnson’s recommendation, the Committee also awarded Mr. Yates an ad hoc grant of 4,000 RSUs that vest in 2014. The purpose of this grant was to address shortfalls in compensation compared to the Company’s Benchmarking Peer Group and to provide a retention incentive for the pending merger with Duke Energy. Mr. Yates’ total compensation as shown in the “Summary Compensation Table” on page 3537 of this Proxy Statement decreased 3.2%increased 35.6% from the amount of total compensation he received in 2009.2010, largely due to an increase in his accrued pension benefits.
Chief Financial Officer Compensation
Mark F. Mulhern
In March 2010,2011, Mr. Johnson recommended the Committee approve a merit and market-based adjustment to Mr. Mulhern’s base salary.salary supported by market data prepared by the Committee’s independent compensation consultant. The Committee approved a base salary of $450,000$495,945 for Mr. Mulhern, representing a 5.9%3% merit increase and 7.2% market-based adjustment increase to his previous salary of $425,000.$450,000. The new base salary was set at 15.9%9% below the 50th percentile of the Benchmarking Peer Group. Mr. Mulhern’s base salary was established at this level due to his relatively short tenure inmore closely align with the Chief Financial Officer position, and more significantly, the challenging economic environment.market. It is the Committee’s intention to increase Mr. Mulhern’s salary over time to a level that is at the 50th percentile of the Benchmarking Peer Group.
PROXY STATEMENT |
For 2010,2011, Mr. Mulhern’s MICP target award was set at 55% of his base salary. This target award is the same target Mr. Mulhern had in 2009 after he assumed the Chief Financial Officer position and represents a target award opportunity that is below the 50th percentile of the market. Mr. Mulhern’s performance goals for 20102011 focused on the following general areas offor our Parent’s success:
In recognition of the achievements he accomplished in 20102011 and on Mr. Johnson’s recommendation, the Committee awarded Mr. Mulhern an MICP payoutaward of $205,000,$250,000, which is equal to 84%94% of Mr. Mulhern’s target award. The Committee considered, among other things, Mr. Mulhern’s significant role in our Parent achievingParent’s achievement of a 12.6%36% total shareholder return as of the end of the year; implementation of an integrated strategic planning process including appropriate focus on capital discipline, O&M expense management, and long-term workforce planning; supportingrepresenting a successful rate settlement for PEF requiring adaptation offirst place ranking position in our Parent’s financial planBenchmarking Peer Group; the execution of a tender offer to absorb no new cash revenue duringrepurchase our Parent’s outstanding contingent value obligations issued in 2000; developing common baseline numbers to provide a foundation for tracking synergies associated with the settlement period;proposed merger with Duke Energy; and negotiating and executinga sublease of a building utilized by our Parent as one of its headquarters facilities that will mitigate a substantial liability after the Merger Agreementproposed merger with Duke Energy. The Committee also noted Mr. Mulhern’s leadership in coordinating the development of the financial components for our Parent’s regulatory strategy and strategic scenario planning.
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Compensation of Other Named Executive Officers
For 2010,2011, Mr. Johnson recommended and the Committee approved no increasesmerit-based adjustments to the base salaries for Messrs. Lyash and McArthur. The Committee also approved a merit-based adjustment to Mr. Johnson’s base salary. These increases to base salaries were supported by market data prepared by the Committee’s independent compensation consultant. Mr. McArthur’s base salary was adjusted to $502,640, representing a 3% increase to his previous salary of $488,000. Mr. Lyash’s base salary was adjusted to $466,590, representing a 3% increase to his previous salary of $453,000. Mr. Johnson’s base salary was adjusted to $1,030,000, representing a 4% increase to his previous salary of $990,000.
Carolina Power & LightProxy Statement |
The Committee awarded Mr. Johnson, and on Mr. Johnson’s recommendation, the Committee awarded Messrs. Lyash and McArthur 20102011 MICP awards as described in the table below.
Named Executive | 2010 MICP | Percent of | |
Officer | Award | Target | Explanation of Award |
William D. Johnson | $715,000 | 85% | Mr. Johnson led Progress Energy in achieving Ongoing EPS of $3.06 which was higher than the upper end of Progress Energy’s guidance range of $3.00 to $3.05; managing 21 major capital projects that collectively came in 6% under budget for the year end; increasing renewable energy capacity; successfully applying the Continuous Business Excellence initiative resulting in all business units, except nuclear, holding operations and maintenance expenses flat at 2009 levels; and guiding the strategic direction of Progress Energy resulting in the execution of the Merger Agreement with Duke Energy Corporation. |
Jeffrey J. Lyash | $195,000 | 78% | Mr. Lyash played a significant role in developing and implementing a comprehensive nuclear fleet renewal plan; accelerating the CBE initiative into nuclear outages; improving performance of the Brunswick Nuclear Plant; and maintaining regulatory confidence in the Company’s nuclear generation group’s leadership. |
John R. McArthur | $220,000 | 82% | Mr. McArthur played a significant role in developing a North Carolina legislative approach for 2011 to support consistent regulated earnings and cost recovery for nuclear investment; improving our business planning process through better alignment and deeper understanding of our business objectives and cost drivers; achieving success in all clause recovery dockets in Florida; recovering all fuel and efficiency and renewable costs and incentives in North Carolina and South Carolina; and negotiating and executing the Merger Agreement with Duke Energy. |
Named Executive Officer | 2011 MICP Award | Percent of Target | Explanation of Award | ||||
William D. Johnson | $1,223,000 | 120% | Mr. Johnson led Progress Energy in achieving a record low in the OSHA recordable injury rate and lost days due to injury; achieving strong financial performance; managing capital projects within budget; improving the overall reliability and financial performance of the nuclear fleet; receiving positive customer feedback for system stability in the face of sustained summer heat and for storm restoration efforts after Hurricane Irene; improving efficiency while achieving sustainable savings and effective workforce plans through the Continuous Business Excellence initiative; and positioning our Parent for a successful merger with Duke Energy to create long-term benefits for shareholders and customers. | ||||
Jeffrey J. Lyash | $220,000 | 86% | Mr. Lyash played a significant role in improving the overall reliability and financial performance of the nuclear fleet; implementing our Parent’s balanced solution strategy through the effective shutdown of the Weatherspoon Coal Plant and the start-up of a combined cycle plant; and managing the Energy Supply organization’s O&M expenses below budget. | ||||
John R. McArthur | $305,000 | 111% | Mr. McArthur played a significant role in negotiating a favorable regulatory settlement in Florida to increase base rates through 2016, ensure cost recovery of expenditures associated with the proposed Levy Nuclear Plant, and resolve substantial portions of the prudence case for the Crystal River 3 Nuclear Plant; promoting reasonable environmental regulation with adequate compliance timeframes; and substantially achieving favorable regulatory approvals for the proposed merger of our Parent with Duke Energy. |
With respect to long-term compensation, in 20102011 each of the other named executive officersNEOs received annual grants of restricted stock unitsRSUs and performance shares in accordance with their pre-established targets. The table below describes those grants.
Restricted | |||||||
Stock Units Vesting | Performance | Ad Hoc | |||||
Named Executive | in 1/3 Increments in | Shares | Restricted Stock Units | ||||
Officer | 2012, 2013 and 2014 | Vesting in 2014 | Vesting in 2014 | ||||
William D. Johnson | 26,640 | 53,052 | 10,000 | ||||
Jeffrey J. Lyash | 6,043 | 12,190 | 4,000 | ||||
John R. McArthur | 6,510 | 13,132 | 4,000 |
Restricted | ||
Stock Units Vesting | Performance | |
Named Executive | in 1/3 Increments in | Shares Vesting |
Officer | 2011, 2012 and 2013 | 2013 |
William D. Johnson | 22,596 | 56,248 |
Jeffrey J. Lyash | 5,126 | 12,924 |
John R. McArthur | 5,522 | 13,923 |
PROXY STATEMENT |
Mr. Johnson’s total year-over-year compensation to Mr. Johnson for 2010, as compared to 2009, as notedshown in the “Summary Compensation Table” on page 3537 of this Proxy Statement wasincreased by 52.8% from the amount of total compensation he received in 2010, largely flat.
Mr. Lyash’s total compensation as shown in the “Summary Compensation Table” on page 3537 of this Proxy Statement decreased 10.6%increased 36.2% from the amount of total compensation he received in 2009.
Mr. McArthur’s total compensation as shown in the “Summary Compensation Table” on page 3537 of this Proxy Statement decreased 3.3%increased 23.4% from the amount of total compensation he received in 2009.2010, largely due to an increase in his stock awards.
IV. COMPENSATION COMMITTEE REPORT
The Committee has reviewed and discussed this CD&A with management as required by Item 402(b)407(e)(5) of Regulation S-K. Based on such review and discussions, the Committee recommended to the Company’s Board of Directors that the CD&A be included in this Proxy Statement.
Organization and Compensation Committee |
E. Marie McKee, Chair |
John D. Baker II |
Harris E. DeLoach, Jr. |
James B. Hyler, Jr. |
Robert W. Jones |
Melquiades R. “Mel” Martinez |
John H. Mullin, III |
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 foregoing Compensation Committee Report shall not be deemed soliciting material, shall not be incorporated by reference into any such filings and shall not otherwise be deemed filed under such Acts.
Carolina Power & LightProxy Statement |
SUMMARY COMPENSATION TABLE FOR 2010
The following Summary Compensation Table discloses the compensation during 20102011 and the prior two fiscal years of our Chief Executive Officer, Chief Financial Officer, and the other three most highly paid executive officers who were serving at the end of 2010.2011. Additionally, column (h) is dependent upon actuarial assumptions for determining the amounts included. A change in these actuarial assumptions would impact the values shown in this column. Where appropriate, we have indicated the major assumptions in the footnote to column (h).
Change in | |||||||||
Pension Value | |||||||||
and | |||||||||
Nonqualified | |||||||||
Non-Equity | Deferred | ||||||||
Stock | Option | Incentive Plan | Compensation | All Other | |||||
Name and | Salary1 | Bonus | Awards2 | Awards3 | Compensation4 | Earnings5 | Compensation6 | Total | |
Principal Position | Year | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) |
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) |
William D. Johnson, | 2010 | $990,000 | N/A | $3,109,607 | — | $715,000 | $1,096,829 | $316,051 | $6,227,487 |
Chairman7 | 2009 | 979,231 | 3,090,605 | — | 950,000 | 1,144,448 | 289,726 | 6,454,010 | |
2008 | 950,000 | 2,911,701 | — | 929,000 | 1,091,256 | 304,571 | 6,186,528 | ||
Mark F. Mulhern, | 2010 | $443,269 | N/A | $667,916 | — | $205,000 | $517,696 | $77,672 | $1,911,553 |
Senior Vice President and | 2009 | 414,231 | 655,990 | — | 225,000 | 369,822 | 102,137 | 1,767,180 | |
Chief Financial Officer | 2008 | 355,385 | 433,473 | — | 200,000 | 820,419 | 141,354 | 1,950,631 | |
Jeffrey J. Lyash, | 2010 | $453,000 | N/A | $711,892 | — | $195,000 | $281,882 | $102,290 | $1,744,064 |
Executive Vice President – | 2009 | 450,846 | 728,120 | — | 235,000 | 244,369 | 292,061 | 1,950,396 | |
Energy Supply | 2008 | 432,885 | 612,952 | — | 225,000 | 323,904 | 140,812 | 1,735,553 | |
Lloyd M. Yates, | 2010 | $448,000 | N/A | $704,043 | — | $195,000 | $342,925 | $80,548 | $1,770,516 |
President and Chief | 2009 | 445,846 | 720,683 | — | 235,000 | 308,815 | 119,432 | 1,829,776 | |
Executive Officer | 2008 | 429,231 | 612,952 | — | 210,000 | 777,983 | 155,042 | 2,185,208 | |
John R. McArthur, | 2010 | $488,000 | N/A | $766,911 | — | $220,000 | $81,601 | $92,677 | $1,649,189 |
Executive Vice President, | 2009 | 485,846 | 780,070 | — | 250,000 | 74,001 | 116,381 | 1,706,298 | |
General Counsel and | 2008 | 459,423 | 571,390 | — | 250,000 | 46,028 | 137,536 | 1,464,377 | |
Corporate Secretary |
Change in | |||||||
Pension Value | |||||||
and | |||||||
Nonqualified | |||||||
Non-Equity | Deferred | ||||||
Stock | Incentive Plan | Compensation | All Other | ||||
Name and | Salary1 | Awards2 | Compensation3 | Earnings4 | Compensation5 | Total | |
Principal Position | Year | ($) | ($) | ($) | ($) | ($) | ($) |
(a) | (b) | (c) | (e) | (g) | (h) | (i) | (j) |
William D. Johnson, | 2011 | $1,019,231 | $3,995,779 | $1,223,000 | $2,887,591 | $389,087 | $9,514,688 |
Chairman6 | 2010 | 990,000 | 3,109,607 | 715,000 | 1,096,829 | 316,051 | 6,227,487 |
2009 | 979,231 | 3,090,605 | 950,000 | 1,144,448 | 289,726 | 6,454,010 | |
Mark F. Mulhern, | 2011 | $483,575 | $985,090 | $250,000 | $874,620 | $81,855 | $2,675,140 |
Senior Vice President and | 2010 | 443,269 | 667,916 | 205,000 | 517,696 | 77,672 | 1,911,553 |
Chief Financial Officer | 2009 | 414,231 | 655,990 | 225,000 | 369,822 | 102,137 | 1,767,180 |
Jeffrey J. Lyash, | 2011 | $462,931 | $990,481 | $220,000 | $583,916 | $117,902 | $2,375,230 |
Executive Vice President – | 2010 | 453,000 | 711,892 | 195,000 | 281,882 | 102,290 | 1,744,064 |
Energy Supply | 2009 | 450,846 | 728,120 | 235,000 | 244,369 | 292,061 | 1,950,396 |
Lloyd M. Yates, | 2011 | $457,822 | $981,481 | $220,000 | $644,644 | $97,533 | $2,401,480 |
President and Chief | 2010 | 448,000 | 704,043 | 195,000 | 342,925 | 80,548 | 1,770,516 |
Executive Officer | 2009 | 445,846 | 720,683 | 235,000 | 308,815 | 119,432 | 1,829,776 |
John R. McArthur, | 2011 | $498,699 | $1,053,252 | $305,000 | $100,633 | $78,080 | $2,035,664 |
Executive Vice President, | 2010 | 488,000 | 766,911 | 220,000 | 81,601 | 92,677 | 1,649,189 |
General Counsel and | 2009 | 485,846 | 780,070 | 250,000 | 74,001 | 116,381 | 1,706,298 |
Corporate Secretary |
1 Consists of base salary earnings prior to (i) employee contributions to the Progress Energy 401(k) Savings & Stock Ownership Plan and (ii) voluntary deferrals, if any, under the Management Deferred Compensation Plan.MDCP. See “Deferred Compensation” discussion in Part II of the CD&A. Salary adjustments, if deemed appropriate, generally occur in March of each year.
2 Includes the fair value of stock awards as of the grant date computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718. Assumptions made in the valuation of material stock awards are discussed in Note 9.B. to our consolidated financial statements for the year ended December 31, 2010. The values reflected for 2008 in columns (e) and (j) are different than originally disclosed because these values representtable below shows the fair value of stock awards as of the grant date rather than the expense related to equity awards for financial statement reporting purposes in accordance with ASC Topic 718. Fair value of stock awards granted in 20102011 and the maximum potential payout for the performance shares granted in 20102011, which are based on the March 16, 20102011 closing stock price of $39.44 as shown in the table below:$44.55.
2010 Stock Awards (column (e)) | Maximum Potential Payout | ||||
Grant Date Fair Value | for Performance Shares | ||||
Restricted | Performance | Total | Maximum | Maximum | |
Name | Stock Units | Shares | (column (e)) | Percentage | Value |
William D. Johnson | $891,186 | $2,218,421 | $3,109,607 | 200% | $4,436,842 |
Mark F. Mulhern | 189,667 | 478,249 | 667,916 | 200% | 956,498 |
Jeffrey J. Lyash | 202,169 | 509,723 | 711,892 | 200% | 1,019,446 |
Lloyd M. Yates | 199,921 | 504,122 | 704,043 | 200% | 1,008,244 |
John R. McArthur | 217,788 | 549,123 | 766,911 | 200% | 1,098,246 |
2011 Stock Awards (column (e)) | Maximum Potential Payout | ||||
Grant Date Fair Value | for Performance Shares | ||||
Restricted | Performance | Total | Maximum | Maximum | |
Name | Stock Units | Shares | (column (e)) | Percentage | Value |
William D. Johnson | $1,632,312 | $2,363,467 | $3,995,779 | 200% | $4,726,934 |
Mark F. Mulhern | 445,634 | 539,456 | 985,090 | 200% | 1,078,912 |
Jeffrey J. Lyash | 447,416 | 543,065 | 990,481 | 200% | 1,086,130 |
Lloyd M. Yates | 444,431 | 537,050 | 981,481 | 200% | 1,074,100 |
John R. McArthur | 468,221 | 585,031 | 1,053,252 | 200% | 1,170,062 |
3 We ceased granting stock options in 2004. No additional expense remains with respect to our stock option program.
PROXY STATEMENT |
54 Includes the change in present value of the accrued benefit under Progress Energy’s Pension Plan, SERP, and/or the Progress Energy, Inc. Restoration Retirement Plan (“Restoration Plan”) where applicable. The current incremental present values were determined using actuarial present value factors as provided by our actuarial consultants, Buck Consultants, based on FAS mortality assumptions post-age 65 and FAS discount rates for the years shown as follows:
FAS Discount Rates | FAS Discount Rates | FAS Discount Rates | ||||
Restoration | Restoration | |||||
Year | Pension Plan | SERP | Retirement Plan | Pension Plan | SERP | Retirement Plan |
2011 | 4.70% | 4.85% | 4.45% | |||
2010 | 5.50% | 5.70% | 5.00% | 5.50% | 5.70% | 5.00% |
2009 | 5.95% | 6.10% | 5.45% | 5.95% | 6.10% | 5.45% |
2008 | 6.30% | 6.30% | 6.25% |
All NEOs participate in the Progress Energy Pension Plan (“Pension Plan”), a noncontributory defined benefit pension plan sponsored by Progress Energy for eligible non-bargaining employees. The Pension Plan was amended and restated as of January 1, 1999, to become a “cash balance” defined benefit plan. The cash balance benefit accrues each year with pay credits and interest credits. Pay credits range from 3% to 7% depending on the participants’ age at the beginning of each plan year, January 1. Interest credits are added to cash balance accounts on December 31 of each year based on account balances as of January 1. Our Parent’s Board of Directors approved the interest credit rate for the Pension Plan to be set at 5% for 2011. Generally, employees become vested under the Pension Plan on the earlier of the date they complete three years of vesting service or the date they reach normal retirement age, which is age 65. All of the NEOs have satisfied the eligibility requirements to receive their account benefit upon termination of employment. At benefit commencement, an employee has several lump sum and annuity payment options.
The Restoration Plan is a nonqualified deferred compensation plan that provides retirement benefits which otherwise would be provided under the Pension Plan, in the absence of limits imposed by applicable law on benefits which may be provided under the Pension Plan. The Restoration Plan is intended to constitute an unfunded retirement plan for a select group of management or highly compensated employees. Mr. McArthur is the only NEO who was a participant in the Restoration Plan in 2011. His accumulated benefit under the Restoration Plan was forfeited when he became a participant in the SERP on January 1, 2012.
In addition, itcolumn (h) includes the above market earnings on deferred compensation under the Deferred Compensation Plan for Key Management Employees. The 1996-1999 Deferred Compensation Plan for Key Management Employees provided a fixed rate of return of 10.0% on deferred amounts, which was 2.7% above the market interest rate of 7.3% at the time the plan was frozen in 1996. The Deferred Compensation Plan for Key Management Employees was discontinued in 2000 and replaced with the Management Deferred Compensation Plan,MDCP, which does not have a guaranteed rate of return. Named executive officersNEOs who were participants in the 1996-1999 Deferred Compensation Plan for Key Management Employees continue to receive plan benefits with respect to amounts deferred prior to its discontinuance in 2000. The above market earnings under the Deferred Compensation Plan for Key Management Employees are included in this column for Mr. Johnson. Changes in the accrued benefit under each plan for named executive officersNEOs are shown in the table below:
2011 Change in Pension Value and Nonqualified Deferred Compensation Earnings (column (h)) | |||||
Change in | Above Market | ||||
Change in | Change in | Restoration | Earnings on Deferred | Total | |
Name | Pension Plan | SERP | Plan | Compensation Plan | (column (h)) |
William D. Johnson | $99,263 | $2,775,430 | — | $12,898 | $2,887,591 |
Mark F. Mulhern | 84,410 | 790,210 | — | — | 874,620 |
Jeffrey J. Lyash | 87,921 | 495,995 | — | — | 583,916 |
Lloyd M. Yates | 62,002 | 582,642 | — | — | 644,644 |
John R. McArthur | 52,951 | — | $47,682 | — | 100,633 |
2010 Change in Pension Value and Nonqualified Deferred Compensation Earnings (column (h)) | |||||
Change in | Above Market | ||||
Change in | Change in | Restoration | Earnings on Deferred | Total | |
Name | Pension Plan | SERP | Plan | Compensation Plan | (column (h)) |
William D. Johnson | $80,055 | $1,005,387 | — | $11,387 | $1,096,829 |
Mark F. Mulhern | 57,308 | 460,388 | — | — | 517,696 |
Jeffrey J. Lyash | 60,279 | 221,603 | — | — | 281,882 |
Lloyd M. Yates | 41,092 | 301,833 | — | — | 342,925 |
John R. McArthur | 41,256 | — | 40,345 | — | 81,601 |
Carolina Power & LightProxy Statement |
65 Includes the following items: Company match contributions under the Progress Energy 401(k) Savings & Stock Ownership Plan; deferred credits under Management Deferred Compensation Plan (MDCP);the MDCP; perquisites; our Parent’s payment of the FICA tax on the non-qualified retirement accrual and the tax gross-up on the imputed income of that tax payment; and cash dividends and cash dividend equivalents paid under provisionsas the result of the Restricted Stock Award/Unit Plans.outstanding restricted stock or RSUs held in Company Plan accounts. The total value of perquisites and personal benefits received by Messrs. Mulhern and YatesMcArthur was less than $10,000 each. Thus, those amounts are excluded from this column. Named executive officersNEOs were compensated for these items as follows:
2010 All Other Compensation (column (i)) | ||||||
Deferred | Imputed | |||||
Company | Credits | Perquisites | Income | |||
Contributions | under the | (detailed in | and Tax | Total | ||
Name | under 401(k) | MDCP | table below) | Gross-ups | Dividends | (column (i)) |
William D. Johnson | $14,700 | $44,700 | $65,145 | $6,201 | $185,305 | $316,051 |
Mark F. Mulhern | 14,700 | 11,601 | — | 5,521 | 45,850 | 77,672 |
Jeffrey J. Lyash | 14,700 | 12,480 | 24,012 | 315 | 50,784 | 102,291 |
Lloyd M. Yates | 14,700 | 12,180 | — | 3,125 | 50,543 | 80,548 |
John R. McArthur | 13,569 | 14,580 | 11,058 | 722 | 52,748 | 92,677 |
2011 All Other Compensation (column (i)) | ||||||
Deferred | Imputed | |||||
Company | Credits | Perquisites | Income | |||
Contributions | under the | (detailed in | and Tax | Total | ||
Name | under 401(k) | MDCP | table below) | Gross-ups | Dividends | (column (i)) |
William D. Johnson | $14,700 | $46,049 | $128,616 | $17,404 | $182,318 | $389,087 |
Mark F. Mulhern | 14,700 | 13,850 | — | 8,653 | 44,652 | 81,855 |
Jeffrey J. Lyash | 14,700 | 12,938 | 42,964 | 711 | 46,589 | 117,902 |
Lloyd M. Yates | 14,700 | 12,633 | 18,700 | 5,216 | 46,284 | 97,533 |
John R. McArthur | 13,663 | 15,074 | — | 799 | 48,544 | 78,080 |
Perquisites that exceed the greater of $25,000 or 10% of the total amount of perquisites and personal benefits for each officer are quantified in the table below. “Other” perquisites include luncheon and health club dues, spousal meals, spousal travel, Internet and telecom access, AD&D insurance, residential telephone, meals (family other than spouse),phone lines, and registration fee (family other than spouse).
2010 Perquisites (Component of column (i)) | ||||||||||||
Spousal | ||||||||||||
2011 Perquisites (Component of column (i)) | 2011 Perquisites (Component of column (i)) | |||||||||||
Travel on | Travel on | |||||||||||
Luncheon | Financial/Tax | Home | Corporate | Total | Spousal | Financial/Tax | Home | Corporate | Total | |||
Name | Club Dues | Planning | Security | Aircraft* | Other | Perquisites | Travel | Planning | Security | Aircraft* | Other | Perquisites |
William D. Johnson | $1,508 | $7,500 | $30,128 | $20,228 | $5,781 | $65,145 | $24,807 | $6,000 | $18,281 | $73,226 | $6,302 | $128,616 |
Jeffrey J. Lyash | 2,088 | 6,583 | 918 | 11,934 | 2,489 | 24,012 | — | 3,150 | 860 | 34,188 | 4,766 | 42,964 |
John R. McArthur | 1,476 | 7,500 | 840 | 0 | 1,242 | 11,058 | ||||||
Lloyd M. Yates | — | 2,000 | 250 | 14,276 | 2,174 | 18,700 |
* Executives’ spouses mayReflects spousal travel on corporate aircraft for business-related purposes. It also includes personal travel for Mr. Johnson on corporate aircraft by him and his spouse valued at $26,488. Personal and spousal travel on corporate aircraft included in the table above is valued at the incremental cost to our Parent’s aircraft only to accompany executives on “business-related” events that spouses are requested to attend.
76 Mr. Johnson did not receive additional compensation for his service on the Board of Directors of Progress Energy.
PROXY STATEMENT |
2011 GRANTS OF PLAN-BASED AWARDS
All | |||||||||
Estimated | Estimated | Other | |||||||
Future Payouts Under | Future Payouts Under | Stock | |||||||
Non-Equity Incentive | Equity Incentive | Awards: | Grant Date | ||||||
Plan Awards1 | Plan Awards2 | Number | Fair Value | ||||||
of Shares | of Stock | ||||||||
of Stock | and Option | ||||||||
Grant | Threshold | Target | Maximum | Threshold | Target | Maximum | or Units3 | Awards4 | |
Name | Date | ($) | ($) | ($) | (#) | (#) | (#) | (#) | ($) |
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) |
William D. Johnson, Chairman, President and Chief Executive Officer | MICP | ||||||||
3/4/11 | $420,750 | $841,500 | $1,683,000 | ||||||
Restricted | |||||||||
Stock | |||||||||
Units | |||||||||
3/16/10 | 22,596 | $891,186 | |||||||
PSSP | |||||||||
3/16/10 | 28,124 | 56,248 | 112,496 | $2,218,421 | |||||
Mark F. Mulhern, Senior Vice President and Chief Financial Officer | MICP | ||||||||
3/4/11 | $121,899 | $243,798 | $487,596 | ||||||
Restricted | |||||||||
Stock | |||||||||
Units | |||||||||
3/16/10 | 4,809 | $189,667 | |||||||
PSSP | |||||||||
3/16/10 | 6,063 | 12,126 | 24,252 | $478,249 | |||||
Jeffrey J. Lyash, Executive Vice President – Energy Supply | MICP | ||||||||
3/4/11 | $124,575 | $249,150 | $498,300 | ||||||
Restricted | |||||||||
Stock | |||||||||
Units | |||||||||
3/16/10 | 5,126 | $202,169 | |||||||
PSSP | |||||||||
3/16/10 | 6,462 | 12,924 | 25,848 | $509,723 | |||||
Lloyd M. Yates, President and Chief Executive Officer | MICP | ||||||||
3/4/11 | $123,200 | $246,400 | $492,800 | ||||||
Restricted | |||||||||
Stock | |||||||||
Units | |||||||||
3/16/10 | 5,069 | $199,921 | |||||||
PSSP | |||||||||
3/16/10 | 6,391 | 12,782 | 25,564 | $504,122 | |||||
John R. McArthur, Executive Vice President, General Counsel and Corporate Secretary | MICP | ||||||||
3/4/11 | $134,200 | $268,400 | $536,800 | ||||||
Restricted | |||||||||
Stock | |||||||||
Units | |||||||||
3/16/10 | 5,522 | $217,788 | |||||||
PSSP | |||||||||
3/16/10 | 6,962 | 13,923 | 27,846 | $549,123 |
All | |||||||||
Estimated | Estimated | Other | |||||||
Future Payouts Under | Future Payouts Under | Stock | |||||||
Non-Equity Incentive | Equity Incentive | Awards: | Grant Date | ||||||
Plan Awards1 | Plan Awards2 | Number | Fair Value | ||||||
of Shares | of Stock | ||||||||
of Stock | and Option | ||||||||
Grant | Threshold | Target | Maximum | Threshold | Target | Maximum | or Units3 | Awards4 | |
Name | Date | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) |
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) |
William D. Johnson, | MICP | $509,615 | $1,019,231 | $2,038,461 | |||||
RSUs | |||||||||
3/16/11 | 36,640 | $1,632,312 | |||||||
PSSP | |||||||||
3/16/11 | 26,526 | 53,052 | 106,104 | $2,363,467 | |||||
Mark F. Mulhern, Senior Vice President and Chief Financial Officer | MICP | $132,983 | $265,966 | $531,933 | |||||
RSUs | |||||||||
3/16/11 | 10,003 | $445,634 | |||||||
PSSP | |||||||||
3/16/11 | 6,055 | 12,109 | 24,218 | $539,456 | |||||
Jeffrey J. Lyash, Executive Vice President – Energy Supply | MICP | $127,306 | $254,612 | $509,224 | |||||
RSUs | |||||||||
3/16/11 | 10,043 | $447,416 | |||||||
PSSP | |||||||||
3/16/11 | 6,095 | 12,190 | 24,380 | $543,065 | |||||
Lloyd M. Yates, | MICP | $125,901 | $251,802 | $503,604 | |||||
RSUs | |||||||||
3/16/11 | 9,976 | $444,431 | |||||||
PSSP | |||||||||
3/16/11 | 6,028 | 12,055 | 24,110 | $537,050 | |||||
John R. McArthur, Executive Vice President, General Counsel and Corporate Secretary | MICP | $137,142 | $274,284 | $548,568 | |||||
RSUs | |||||||||
3/16/11 | 10,510 | $468,221 | |||||||
PSSP | |||||||||
3/16/11 | 6,566 | 13,132 | 26,264 | $585,031 |
1 The Management Incentive Compensation Plan is considered a non-equity incentive compensation plan. Award amounts are shown at threshold, target, and maximum levels. The target award is calculated using the 20102011 eligible earnings times the executive’s target percentage. See target percentage in table on page 22 of the CD&A. Threshold is calculated at 50% of target and maximum is calculated at 200% of target. Actual award amounts paid are reflected in the Summary of Compensation Table under the “Non-Equity Incentive Plan Compensation” column.
2 Reflects the potential payouts in shares of the 20102011 PSSP grants. The grant size was calculated by multiplying the executive’s salary as of January 1, 2010,2011, times his 20102011 PSSP target and dividing by the December 31, 2009,2010, closing stock price of $41.01.$43.48. The Threshold column reflects the minimum payment level under ourthe PSSP which isat 50% of the target amount shown in the Target column. The amount shown in the maximum column is 200% of the target amount.
3 Reflects the number of restricted stock unitsRSUs granted during 20102011 under the 2007 Equity Incentive Plan. The number of shares granted was determined by multiplying the executive’s salary as of January 1, 2010,2011, times his 2010 restricted stock2011 RSU target and dividing by the December 31, 2009,2010, closing stock price of $41.01.$43.48.
4 Reflects the grant date fair value of the award based on the following assumptions: Marketmarket value of restricted stockRSUs granted on March 16, 2010,2011, based on the closing price of $39.44$44.55 per share, times the shares granted in column (i). Market; market value of PSSP awards granted on March 16, 2010,2011, based on the closing stock price on March 16, 2010,2011, of $39.44$44.55 times the target number of shares in column (g). The 20102011 PSSP grant payout is expected to be 100% of target.
DISCUSSION OF SUMMARY COMPENSATION TABLE AND GRANTS OF
PLAN-BASED AWARDS TABLE
EMPLOYMENT AGREEMENTS
In 2007, Messrs. Johnson, Mulhern, Lyash, Yates and McArthur entered into employment agreements with Progress Energy or one of its subsidiaries, referred to collectively in this section as the “Company.” The employment agreements replaced the previous employment agreements in effect for each of these officers.
The employment agreements provide for base salary, annual incentives, perquisites and participation in the various executive compensation plans offered to our senior executives. Upon expiration, the agreements are automatically extended by an additional year on January 1 of each year. We may elect not to extend an executive officer’s agreement and must notify the officer of such an election at least 60 days prior to the automatic extension date. Each employment agreement contains restrictive covenants imposing non-competition obligations, restricting solicitation of employees and protecting our confidential information and trade secrets for specified periods if the applicable officer is terminated without cause or otherwise becomes eligible for the benefits under the agreement.
Except for the application of previously granted years of service credit to our post-employment health and welfare plans as discussed below, the employment agreements do not affect the compensation, benefits or incentive targets payable to the applicable officers.
With respect to Mr. Johnson, the Employment Agreement specifies that the years of service credit we previously granted to him for purposes of determining eligibility and benefits in the SERP will also be applicable for purposes of determining eligibility and benefits in our post-employment health and welfare benefit plans. Mr. Johnson was awarded seven years of deemed service toward the benefits and vesting requirements of the SERP. However, as of 2008, Mr. Johnson reached the maximum service accrual and therefore benefit augmentation for deemed service is $0. Three of those years also were deemed to have been in service on the Senior Management CommitteeSMC for purposes of SERP eligibility.
Each Employment Agreement provides that if the applicable officer is terminated without cause or is constructively terminated (as defined in Paragraph 8(a)(i) of the agreement), then the officer will receive (i) severance equal to 2.99 times the officer’s then-current base salary and (ii) reimbursement for the costs of continued coverage under certain of our health and welfare benefit plans for a period of up to 18 months.
In anticipation of the closing of the proposed merger with Duke Energy and the transition to Duke Energy’s employment practices for executives, in October, 2011, the Company notified its NEOs that it would not renew their employment agreements upon expiration of the current terms. All of the NEOs’ employment agreements expire on December 31, 2012.
OUTSTANDING EQUITY AWARDS AT 2011 FISCAL YEAR-END
Option Awards1 | Stock Awards | ||||||||
Equity | |||||||||
Equity | Incentive | ||||||||
Incentive | Plan | ||||||||
Plan | Awards: | ||||||||
Awards: | Market or | ||||||||
Equity | Number | Number | Payout | ||||||
Incentive | of | of | Value of | ||||||
Plan | Shares | Unearned | Unearned | ||||||
Number | Awards: | or | Market | Shares, | Shares, | ||||
of | Number of | Number of | Units of | Value of | Units or | Units or | |||
Securities | Securities | Securities | Stock | Shares or | Other | Other | |||
Underlying | Underlying | Underlying | That | Units of | Rights | Rights | |||
Unexercised | Unexercised | Unexercised | Option | Have | Stock That | That | That | ||
Options | Options | Unearned | Exercise | Option | Not | Have Not | Have Not | Have Not | |
(#) | (#) | Options | Price | Expiration | Vested | Vested | Vested | Vested | |
Name | Exercisable | Unexercisable | (#) | ($) | Date | (#) | ($) | (#) | ($) |
(a) | (b) | (c) | (d) | (e) | (f) | (g)2 | (h)3 | (i)4 | (j)4 |
William D. | — | — | — | — | — | 72,248 | $3,141,343 | 112,869 | $4,907,526 |
Johnson, | |||||||||
Chairman, | |||||||||
President and | |||||||||
Chief Executive | |||||||||
Officer | |||||||||
Mark F. Mulhern, | 7,000 | — | — | $44.75 | 9/30/2013 | 15,725 | $683,723 | 20,733 | $901,486 |
Senior Vice | |||||||||
President and | |||||||||
Chief Financial | |||||||||
Officer | |||||||||
Jeffrey J. Lyash, | — | — | — | — | — | 17,559 | $763,465 | 24,941 | $1,084,416 |
Executive Vice | |||||||||
President – | |||||||||
Energy Supply | |||||||||
Lloyd M. Yates, | — | — | — | — | — | 17,454 | $758,900 | 24,792 | $1,077,968 |
President and | |||||||||
Chief Executive | |||||||||
Officer | |||||||||
John R. McArthur, | — | — | — | — | — | 18,299 | $795,641 | 25,178 | $1,094,716 |
Executive | |||||||||
Vice President, | |||||||||
General Counsel | |||||||||
and Corporate | |||||||||
Secretary |
Stock Awards | ||||
Equity Incentive | Equity Incentive | |||
Plan Awards: | Plan Awards: | |||
Number of | Market or Payout | |||
Number of | Market Value of | Unearned Shares, | Value of Unearned | |
Shares or Units of | Shares or Units of | Units or Other | Shares, Units or | |
Stock That | Stock That | Rights That | Other Rights That | |
Have Not Vested | Have Not Vested | Have Not Vested | Have Not Vested | |
Name | ($) | ($) | ($) | ($) |
(a) | (g)1 | (h)2 | (i)3 | (j)3 |
William D. Johnson, | 73,938 | $4,142,007 | 182,126 | $8,376,699 |
Chairman | ||||
Mark F. Mulhern, | 18,765 | $1,051,215 | 39,175 | $1,822,975 |
Senior Vice President and | ||||
Chief Financial Officer | ||||
Jeffrey J. Lyash, | 19,195 | $1,075,304 | 42,203 | $1,934,707 |
Executive Vice President – | ||||
Energy Supply | ||||
Lloyd M. Yates, | 19,066 | $1,068,077 | 41,734 | $1,913,279 |
President and Chief | ||||
Executive Officer | ||||
John R. McArthur, | 19,999 | $1,120,344 | 45,486 | $2,084,840 |
Executive Vice President, | ||||
General Counsel and | ||||
Corporate Secretary |
1 All outstanding stock options were vested as of December 31, 2006. Our Parent ceased granting stock options in 2004.
Number of Shares or Units of Stock That Have Not Vested (column (g)) | ||||||
William D. | Mark F. | Jeffrey J. | Lloyd M. | John R. | ||
Stock Award | Vesting Date | Johnson | Mulhern | Lyash | Yates | McArthur |
Restricted Stock | March 14, 2011 | 5,534 | 1,167 | 1,367 | 1,367 | 1,667 |
Restricted Stock Units | March 16, 2011 | 7,532 | 1,603 | 1,708 | 1,689 | 1,840 |
Restricted Stock Units | March 17, 2011 | 9,297 | 1,868 | 2,159 | 2,135 | 2,329 |
Restricted Stock Units | March 18, 2011 | 7,651 | 1,136 | 1,597 | 1,597 | 1,497 |
Restricted Stock Units | March 20, 2011 | 4,936 | 1,189 | 1,576 | 1,576 | 1,477 |
Restricted Stock Units | March 16, 2012 | 7,532 | 1,603 | 1,709 | 1,690 | 1,841 |
Restricted Stock Units | March 17, 2012 | 17,298 | 4,368 | 4,159 | 4,135 | 4,329 |
Restricted Stock Units | March 20, 2012 | 4,936 | 1,188 | 1,575 | 1,575 | 1,478 |
Restricted Stock Units | March 16, 2013 | 7,532 | 1,603 | 1,709 | 1,690 | 1,841 |
Total (column (g)) | 72,248 | 15,725 | 17,559 | 17,454 | 18,299 |
Number of Units of Stock That Have Not Vested (column (g)) | ||||||
William D. | Mark F. | Jeffrey J. | Lloyd M. | John R. | ||
Stock Award | Vesting Date | Johnson | Mulhern | Lyash | Yates | McArthur |
Restricted Stock Units | March 16, 2012 | 16,412 | 3,604 | 3,723 | 3,682 | 4,011 |
Restricted Stock Units | March 17, 2012 | 17,298 | 4,368 | 4,159 | 4,135 | 4,329 |
Restricted Stock Units | March 20, 2012 | 4,936 | 1,188 | 1,575 | 1,575 | 1,478 |
Restricted Stock Units | March 16, 2013 | 16,412 | 3,604 | 3,723 | 3,682 | 4,011 |
Restricted Stock Units | March 16, 2014 | 18,880 | 6,001 | 6,015 | 5,992 | 6,170 |
Total (column (g)) | 73,938 | 18,765 | 19,195 | 19,066 | 19,999 |
32 Market value of shares or units of stock that have not vested is based on a December 31, 2010,2011, closing price of $43.48$56.02 per share.
Carolina Power & LightProxy Statement |
43 The 20082009 PSSP grant vests on January 1, 2011; the 2009 grant vests on January 1, 2012; and the 2010 grant vests on January 1, 2013.2013; and the 2011 grant vests on January 1, 2014. Performance share value for the 2009 annual grant is expected to be at 0%50% of target while the 20082010 annual grant and 20102011 annual grant are expected to be 100% of target. The value in Column (j) is derived by multiplying the shares (rounded to the nearest whole share) times the December 31, 20102011 closing stock price ($43.48)56.02). The difference between the calculated value and the noted value is attributable to fractional shares. See further discussion under “Performance Shares” in Part II of the CD&A. Outstanding performance shares for named executive officersNEOs are shown in the table below:
Number of Unearned Shares, Units or Other Rights That Have Not Vested (column (i)) | ||||||
William D. | Mark F. | Jeffrey J. | Lloyd M. | John R. | ||
Stock Award | Vesting Date | Johnson | Mulhern | Lyash | Yates | McArthur |
Performance Shares | January 1, 2012 | 65,191 | 13,267 | 15,334 | 15,161 | 16,540 |
Performance Shares | January 1, 2013 | 61,838 | 13,332 | 14,209 | 14,053 | 15,307 |
Performance Shares | January 1, 2014 | 55,097 | 12,576 | 12,660 | 12,520 | 13,639 |
Total (column (i)) | 182,126 | 39,175 | 42,203 | 41,734 | 45,486 |
Number of Unearned Shares, Units or Other Rights That Have Not Vested (column (i)) | ||||||
William D. | Mark F. | Jeffrey J. | Lloyd M. | John R. | ||
Stock Award | Vesting Date | Johnson | Mulhern | Lyash | Yates | McArthur |
Performance Shares | January 1, 2011 | 54,125 | 8,069 | 11,443 | 11,443 | 10,637 |
Performance Shares | January 1, 2012 | 0 | 0 | 0 | 0 | 0 |
Performance Shares | January 1, 2013 | 58,744 | 12,664 | 13,498 | 13,349 | 14,541 |
Total (column (i)) | 112,869 | 20,733 | 24,941 | 24,792 | 25,178 |
OPTION EXERCISES AND STOCK VESTED
Option Awards | Stock Awards | |||
Number of | Number of | |||
Shares | Value | Shares | ||
Acquired | Realized | Acquired | Value Realized | |
on Exercise | on Exercise | on Vesting | on Vesting | |
Name | (#) | ($) | (#) | ($) |
(a) | (b) | (c) | (d)1 | (e)2 |
William D. Johnson, | — | — | 76,448 | $3,080,112 |
Chairman | ||||
Mark F. Mulhern, | — | — | 26,504 | $1,064,791 |
Senior Vice President and Chief Financial Officer | ||||
Jeffrey J. Lyash, | — | — | 31,031 | $1,248,972 |
Executive Vice President – Energy Supply | ||||
Lloyd M. Yates, | — | — | 31,006 | $1,247,986 |
President and Chief Executive Officer | ||||
John R. McArthur, | — | — | 30,632 | $1,231,050 |
Executive Vice President, General Counsel and | ||||
Corporate Secretary |
Option Awards | Stock Awards | |||
Number of | Number of | |||
Shares | Value | Shares | ||
Acquired | Realized | Acquired | Value Realized | |
on Exercise | on Exercise | on Vesting | on Vesting | |
Name | ($) | ($) | ($) | ($) |
(a) | (b)1 | (c)2 | (d)3 | (e)4 |
William D. Johnson, | — | — | 89,811 | $4,066,089 |
Chairman | ||||
Mark F. Mulhern, | 7,000 | $57,750 | 15,142 | $684,966 |
Senior Vice President and Chief Financial Officer | ||||
Jeffrey J. Lyash, | — | — | 20,006 | $905,221 |
Executive Vice President – Energy Supply | ||||
Lloyd M. Yates, | — | — | 19,963 | $903,293 |
President and Chief Executive Officer | ||||
John R. McArthur, | — | — | 19,592 | $886,572 |
Executive Vice President, General Counsel and | ||||
Corporate Secretary |
1 Reflects the number of shares of stock for options that were exercised in 2011.
2 The value realized upon exercise is equal to the difference between the market price of the underlying securities at exercise and the exercise price of the options.
13Reflects the number of restricted stock shares, restricted stock units,RSUs, and performance shares that vested in 20102011 for named executive officersNEOs as shown in the table below.
Number of Shares Acquired on Vesting (column (d)) | ||||||||
2011 | 2011 | |||||||
Vesting | Distribution | Stock | William D. | Mark F. | Jeffrey J. | Lloyd M. | John R. | |
Stock Award | Date | Date | Price | Johnson | Mulhern | Lyash | Yates | McArthur |
Performance Shares | January 1 | February 23 | $45.59 | 54,861 | 8,179 | 11,599 | 11,599 | 10,782 |
Restricted Stock | March 14 | March 14 | $46.12 | 5,534 | 1,167 | 1,367 | 1,367 | 1,667 |
RSUs | March 16 | March 16 | $45.21 | 7,532 | 1,603 | 1,708 | 1,689 | 1,840 |
RSUs | March 17 | March 17 | $44.55 | 9,297 | 1,868 | 2,159 | 2,135 | 2,329 |
RSUs | March 18 | March 18 | $44.03 | 7,651 | 1,136 | 1,597 | 1,597 | 1,497 |
RSUs | March 20 | March 21 | $44.20 | 4,936 | 1,189 | 1,576 | 1,576 | 1,477 |
Total (column (d)) | 89,811 | 15,142 | 20,006 | 19,963 | 19,592 |
Number of Shares Acquired on Vesting (column (d)) | |||||||
Vesting | William D. | Mark F. | Jeffrey | Lloyd M. | John R. | ||
Stock Award | Vesting Date | Price | Johnson | Mulhern | J. Lyash | Yates | McArthur |
Performance Shares | January 1, 2010 | $41.01 | 43,965 | 10,644 | 14,232 | 14,232 | 13,229 |
Restricted Stock | March 14, 2010 | $38.60 | 5,533 | 1,167 | 1,367 | 1,367 | 1,667 |
Restricted Stock | March 15, 2010 | $38.60 | 5,067 | — | 1,100 | 1,100 | 1,434 |
Restricted Stock | March 21, 2010 | $39.45 | — | 3,500 | — | — | — |
Restricted Stock Units | March 17, 2010 | $39.44 | 9,297 | 1,868 | 2,159 | 2,134 | 2,328 |
Restricted Stock Units | March 18, 2010 | $39.82 | 7,650 | 1,136 | 1,597 | 1,597 | 1,497 |
Restricted Stock Units | March 22, 2010 | $39.84 | 4,936 | 8,189 | 10,576 | 10,576 | 10,477 |
Total (column (d)) | 76,448 | 26,504 | 31,031 | 31,006 | 30,632 |
Value Realized on Vesting (column (e)) | |||||||
Vesting | William D. | Mark F. | Jeffrey J. | Lloyd M. | John R. | ||
Stock Award | Vesting Date | Price | Johnson | Mulhern | Lyash | Yates | McArthur |
Performance Shares | January 1, 2010 | $41.01 | $1,803,005 | $436,510 | $583,654 | $583,654 | $542,521 |
Restricted Stock | March 14, 2010 | $38.60 | $213,574 | $45,046 | $52,766 | $52,766 | $64,346 |
Restricted Stock | March 15, 2010 | $38.60 | $195,586 | — | $42,460 | $42,460 | $55,352 |
Restricted Stock | March 21, 2010 | $39.45 | — | $138,075 | — | — | — |
Restricted Stock Units | March 17, 2010 | $39.44 | $366,674 | $73,674 | $85,151 | $84,165 | $91,816 |
Restricted Stock Units | March 18, 2010 | $39.82 | $304,623 | $45,236 | $63,593 | $63,593 | $59,611 |
Restricted Stock Units | March 22, 2010 | $39.84 | $196,650 | $326,250 | $421,348 | $421,348 | $417,404 |
Total (column (e)) | $3,080,112 | $1,064,791 | $1,248,972 | $1,247,986 | $1,231,050 |
Number of | Present | |||||
Years | Value of | Payments | ||||
Credited | Accumulated | During Last | ||||
Service | Benefit1 | Fiscal Year | ||||
Name | Plan Name | (#) | ($) | ($) | ||
(a) | (b) | (c) | (d) | (e) | ||
William D. Johnson, | Progress Energy Pension Plan | 18.3 | $528,633 | $0 | ||
Chairman, President and | Supplemental Senior Executive | |||||
Chief Executive Officer | Retirement Plan | 25.3 | 2 | $8,287,871 | 3 | $0 |
Mark F. Mulhern, | Progress Energy Pension Plan | 14.8 | $326,707 | $0 | ||
Senior Vice President and | Supplemental Senior Executive | |||||
Chief Financial Officer | Retirement Plan | 14.8 | $1,605,155 | 4 | $0 | |
Jeffrey J. Lyash, | Progress Energy Pension Plan | 17.6 | $334,696 | $0 | ||
Executive Vice President – | Supplemental Senior Executive | |||||
Energy Supply | Retirement Plan | 17.6 | $1,640,811 | 5 | $0 | |
Lloyd M. Yates, | Progress Energy Pension Plan | 12.1 | $198,700 | $0 | ||
President and | Supplemental Senior Executive | 12.1 | $1,367,539 | 6 | $0 | |
Chief Executive | Retirement Plan | |||||
Officer | ||||||
John R. McArthur, | Progress Energy Pension Plan | 9.1 | $192,479 | $0 | ||
Executive Vice President, | Restoration Retirement Plan | 9.1 | $162,615 | $0 | ||
General Counsel and | ||||||
Corporate Secretary |
Carolina Power & LightProxy Statement |
4 The table below shows the nonqualified deferred compensation for eachvalue of the named executive officers. Information regarding details of2008 performance share units was calculated using the deferred compensation plans currently in effect can be found underclosing stock price for Progress Energy Common Stock on the heading “Deferred Compensation” in the CD&A on page 31 of this Proxy Statement. In addition, the Deferred Compensation Plan for Key Management Employees is discussed in footnote 5 to the “Summary Compensation Table.”
Executive | Registrant | Aggregate | Aggregate | Aggregate | |||
Contributions | Contributions | Earnings | Withdrawals/ | Balance | |||
in Last FY1 | in Last FY2 | in Last FY3 | Distributions | at Last FYE4 | |||
Name and Position | ($) | ($) | ($) | ($) | ($) | ||
(a) | (b) | (c) | (d) | (e) | (f) | ||
William D. Johnson, | |||||||
Chairman | $0 | $44,700 | $68,932 | 5 | $0 | $849,703 | |
Mark F. Mulhern, | |||||||
Senior Vice President and | |||||||
Chief Financial Officer | $22,163 | $11,601 | $20,715 | ($147,094) | 6 | $233,261 | |
Jeffrey J. Lyash, | |||||||
Executive Vice President – | |||||||
Energy Supply | $0 | $12,480 | $20,359 | $0 | $168,012 | ||
Lloyd M. Yates, | |||||||
President and | |||||||
Chief Executive Officer | $22,400 | $12,180 | $66,737 | $0 | $601,121 | ||
John R. McArthur, | |||||||
Executive Vice President, | |||||||
General Counsel and | |||||||
Corporate Secretary | $73,200 | $14,580 | $29,600 | $0 | $301,215 |
Aggregate Balance at Last FYE (column (f)) | |||||
Management | Management | Deferred | |||
Deferred | Incentive | Compensation for | |||
Compensation | Compensation | Key Management | Performance | Total | |
Name | Plan | Plan | Employees | Share Sub-Plan | (column (f)) |
William D. Johnson | $492,740 | $77,712 | $279,251 | — | $849,703 |
Mark F. Mulhern | $116,631 | $77,537 | — | $39,093 | $233,261 |
Jeffrey J. Lyash | $168,012 | — | — | — | $168,012 |
Lloyd M. Yates | $190,251 | $121,356 | — | $289,514 | $601,121 |
John R. McArthur | $301,215 | — | — | — | $301,215 |
Deferred | ||||||||||
Annual | Compensation | |||||||||
Incentive | under | Restricted | Performance | Restricted | Stock | Tax | ||||
Base | (paid in | MDCP and | Stock / Units | Shares | Stock / Unit | Options | Gross- | |||
Name and | Salary | 2010) | MICP | Vesting | Vesting | Dividends | Vesting | Perquisite | ups | |
Position | (a)1 | (b)2 | (c)3 | (d)4 | (e)5 | (f)6 | (g)7 | (h)8 | (i)9 | Total |
William D. Johnson, Chairman | $990,000 | $950,000 | $0 | $1,277,107 | $1,803,005 | $185,305 | $0 | $65,145 | $6,201 | $5,276,763 |
Mark F. Mulhern, Senior Vice President and Chief Financial Officer | $443,269 | $225,000 | $22,163 | $628, 280 | $436,510 | $45,850 | $0 | $8,408 | $5,521 | $1,792,838 |
Jeffrey J. Lyash, Executive Vice President – Energy Supply | $453,000 | $235,000 | $0 | $665,318 | $583,654 | $50,784 | $0 | $24,012 | $315 | $2,012,083 |
Lloyd M. Yates, President and Chief Executive Officer | $448,000 | $235,000 | $22,400 | $664,332 | $583,654 | $50,543 | $0 | $9,874 | $3,125 | $1,994,528 |
John R. McArthur, Executive Vice President, General Counsel and Corporate Secretary | $488,000 | $250,000 | $73,200 | $688,529 | $542,521 | $52,748 | $0 | $11,058 | $722 | $2,033,578 |
Value Realized on Vesting (column (e)) | ||||||||
2011 | 2011 | |||||||
Vesting | Distribution | Stock | William D. | Mark F. | Jeffrey J. | Lloyd M. | John R. | |
Stock Award | Date | Date | Price | Johnson | Mulhern | Lyash | Yates | McArthur |
Performance Shares | January 1 | February 23 | $45.59 | $2,501,113 | $372,881 | $528,798 | $528,798 | $491,551 |
Restricted Stock | March 14 | March 14 | 46.12 | 255,228 | 53,822 | 63,046 | 63,046 | 76,882 |
RSUs | March 16 | March 16 | 45.21 | 340,522 | 72,472 | 77,219 | 76,360 | 83,186 |
RSUs | March 17 | March 17 | 44.55 | 414,181 | 83,219 | 96,183 | 95,114 | 103,757 |
RSUs | March 18 | March 18 | 44.03 | 336,874 | 50,018 | 70,316 | 70,316 | 65,913 |
RSUs | March 20 | March 21 | 44.20 | 218,171 | 52,554 | 69,659 | 69,659 | 65,283 |
Total (column (e)) | $4,066,089 | $684,966 | $905,221 | $903,293 | $886,572 |
PROXY STATEMENT |
PENSION BENEFITS
Number of | Present | |||||
Years | Value of | Payments | ||||
Credited | Accumulated | During Last | ||||
Service | Benefit1 | Fiscal Year | ||||
Name | Plan Name | ($) | ($) | ($) | ||
(a) | (b) | (c) | (d) | (e) | ||
William D. Johnson, | Progress Energy Pension Plan | 19.3 | $627,896 | $0 | ||
Chairman | Supplemental Senior Executive | |||||
Retirement Plan | 26.3 | 2 | $11,063,301 | 3 | $0 | |
Mark F. Mulhern, | Progress Energy Pension Plan | 15.8 | $411,117 | $0 | ||
Senior Vice President and | Supplemental Senior Executive | |||||
Chief Financial Officer | Retirement Plan | 15.8 | $2,395,365 | 4 | $0 | |
Jeffrey J. Lyash, | Progress Energy Pension Plan | 18.6 | $422,617 | $0 | ||
Executive Vice President – | Supplemental Senior Executive | |||||
Energy Supply | Retirement Plan | 18.6 | $2,136,806 | 5 | $0 | |
Lloyd M. Yates, | Progress Energy Pension Plan | 13.1 | $260,702 | $0 | ||
President and | Supplemental Senior Executive | |||||
Chief Executive Officer | Retirement Plan | 13.1 | $1,950,181 | 6 | $0 | |
John R. McArthur, | Progress Energy Pension Plan | 10.1 | $245,431 | $0 | ||
Executive Vice President, | Restoration Retirement Plan | 10.1 | $210,297 | $0 | ||
General Counsel and | ||||||
Corporate Secretary |
1 Actuarial present value factors as provided by our actuarial consultants, Buck Consultants, based on FAS mortality assumptions post-age 65 and FAS discount rates as of December 31, 2011, for computation of accumulated benefit under the SERP and the Progress Energy Pension Plan were 4.85% and 4.70%, respectively. Additional details on the formulas for computing benefits under the SERP and Progress Energy Pension Plan can be found under the headings “Supplemental Senior Executive Retirement Plan” and “Other Broad-Based Benefits,” respectively, in the CD&A.
2 Includes seven years of deemed service. However, as of 2008, Mr. Johnson reached the maximum service accrual and therefore benefit augmentation for deemed service is $0.
3 Based on an estimated annual benefit payable at age 65 of $1,153,308.
4 Based on an estimated annual benefit payable at age 65 of $331,774.
5Based on estimated annual benefit payable at age 65 of $325,367.
6 Based on estimated annual benefit payable at age 65 of $283,214.
Carolina Power & LightProxy Statement |
NONQUALIFIED DEFERRED COMPENSATION
The table below shows the nonqualified deferred compensation for each of the NEOs. Information regarding details of the deferred compensation plans currently in effect can be found under the heading “Deferred Compensation” in Part II of the CD&A. In addition, the Deferred Compensation Plan for Key Management Employees is discussed in footnote 4 to the “Summary Compensation Table.”
Executive | Registrant | Aggregate | Aggregate | Aggregate | |
Contributions | Contributions | Earnings | Withdrawals/ | Balance | |
in Last FY1 | in Last FY2 | in Last FY3 | Distributions | at Last FYE4 | |
Name and Position | ($) | ($) | ($) | ($) | ($) |
(a) | (b) | (c) | (d) | (e) | (f) |
William D. Johnson, | |||||
Chairman | $0 | $46,049 | $71,800 | $0 | $967,553 |
Mark F. Mulhern, | |||||
Senior Vice President and | |||||
Chief Financial Officer | $0 | $13,850 | $16,097 | ($83,467)5 | $179,741 |
Jeffrey J. Lyash, | |||||
Executive Vice President – | |||||
Energy Supply | $0 | $12,938 | $55,770 | $0 | $236,721 |
Lloyd M. Yates, | |||||
President and | |||||
Chief Executive Officer | $22,891 | $12,633 | $145,409 | $0 | $782,054 |
John R. McArthur, | |||||
Executive Vice President, | |||||
General Counsel and | |||||
Corporate Secretary | $24,935 | $15,074 | ($5,446) | $0 | $335,778 |
1 Reflects salary deferred under the MDCP, which is reported as “Salary” in the Summary Compensation Table. For 2011, NEOs deferred the following percentages of their base salary: (i) Mr. Yates – 5%; and Mr. McArthur – 5%.
2 Reflects registrant contributions under the MDCP, which is reported as “All Other Compensation” in the Summary Compensation Table.
3 Includes aggregate earnings in the last fiscal year under the following nonqualified plans: MICP, MDCP, PSSP, and Deferred Compensation Plan for Key Management Employees. For Mr. Johnson, aggregate earnings includes above market earnings of $12,898 under the Deferred Compensation Plan for Key Management Employees, which is reported as “Change in Pension Value and Nonqualified Deferred Compensation Earnings” in the Summary Compensation Table.
PROXY STATEMENT |
4 Includes December 31, 2011 balances under the following deferred compensation plans: MICP, PSSP, MDCP, and Deferred Compensation Plan for Key Management Employees. Balances for NEOs under each deferral plan are shown in the table below. The aggregate balances as of December 31, 2011 for each NEO includes the following aggregate amounts of prior deferrals of base salary, employer matching contributions, and above market earnings for nonqualified deferred compensation earnings that were previously earned and reported as compensation on the Summary Compensation Table for 2009 and 2010: (i) Mr. Johnson - $136,717; (ii) Mr. Mulhern - $64,158; (iii) Mr. Lyash - $24,736; (iv) Mr. Yates - $46,536; and (v) Mr. McArthur - $175,013. These amounts have been adjusted, pursuant to the terms of the Progress Energy Deferred Compensation Plans for investment performance (e.g. earnings and losses), deferrals, contributions, and distributions.
Aggregate Balance at Last FYE (column (f)) | |||||
Deferred | |||||
Compensation for | |||||
Key Management | Total | ||||
Name | MDCP | MICP | Employees | PSSP | (column (f)) |
William D. Johnson | $554,999 | $105,398 | $307,156 | — | $967,553 |
Mark F. Mulhern | 126,806 | 52,935 | — | — | 179,741 |
Jeffrey J. Lyash | 236,721 | — | — | — | 236,721 |
Lloyd M. Yates | 224,807 | 164,591 | — | 392,656 | 782,054 |
John R. McArthur | 335,778 | — | — | — | 335,778 |
5 Mr. Mulhern received distributions from his Management Incentive Deferred Compensation Plan: $41,418; and PSSP: $42,049.
Carolina Power & LightProxy Statement |
CASH COMPENSATION AND VALUE OF VESTING EQUITY TABLE
The following table shows the actual cash compensation and value of vesting equity received in 2011 by the NEOs. The Committee believes that this table is important in order to distinguish between the actual cash and vested value received by each NEO as opposed to the grant date fair value of equity awards as shown in the Summary Compensation Table.
Value | |||||||||
Annual | Restricted | Realized | |||||||
Incentive | Stock/ | Performance | Restricted | on Stock | |||||
Base | (paid in | Units | Shares | Stock/Unit | Option | Tax | |||
Name and | Salary | 2011) | Vesting | Vesting | Dividends | Exercises | Perquisites | Gross-ups | |
Position | (a)1 | (b)2 | (c)3 | (d)4 | (e)5 | (f)6 | (g)7 | (h)8 | Total |
William D. Johnson, | |||||||||
Chairman | $1,019,231 | $715,000 | $1,564,976 | $2,501,113 | $182,318 | — | $64,273 | $17,404 | $6,064,318 |
Mark F. Mulhern, | |||||||||
Senior Vice | |||||||||
President and Chief | |||||||||
Financial Officer | $483,575 | $205,000 | $312,085 | $372,881 | $44,652 | $57,750 | $8,027 | $8,653 | $1,492,623 |
Jeffrey J. Lyash, | |||||||||
Executive Vice | |||||||||
President – | |||||||||
Energy Supply | $462,931 | $195,000 | $376,423 | $528,798 | $46,589 | — | $11,499 | $711 | $1,621,951 |
Lloyd M. Yates, | |||||||||
President and Chief | |||||||||
Executive Officer | $457,822 | $195,000 | $374,495 | $528,798 | $46,284 | — | $5,619 | $5,216 | $1,613,234 |
John R. McArthur, | |||||||||
Executive Vice | |||||||||
President, General | |||||||||
Counsel and | |||||||||
Corporate Secretary | $498,699 | $220,000 | $395,022 | $491,551 | $48,544 | — | $9,557 | $799 | $1,664,172 |
1 Consists of the total 2011 base salary earnings prior to (i) employee contributions to the Progress Energy 401(k) Plan and (ii) voluntary deferrals, if applicable, under the MDCP. For 2011, NEOs deferred the following amounts under the MDCP: (i) Mr. Yates – $22,891; and Mr. McArthur – $24,935.
2 Reflects awards given under the MICP attributable to Plan Year 2010 and paid in 2011.
3 Reflects the value of performance sharesrestricted stock and RSUs vesting on January 1, 2010.in 2011. The value of the 2007restricted stock was calculated using the opening stock price for Progress Energy Common Stock three days prior to the day vesting occurred. The value of the RSUs was calculated using the closing stock price for Progress Energy Common Stock on the business day prior to when vesting occurred.
4 Reflects performance shares vested on January 1, 2011. The value of the 2008 performance share units wereis calculated using the closing stock price for Progress Energy Common Stock on the business day prior to when distribution occurred.
65 Reflects cash dividends and cash dividend equivalents paid as the result of outstanding restricted stock or restricted stock unitsRSUs held in Company Plan accounts.
76 Reflects the value realized upon exercise for options that were exercised in 2011. The value realized upon exercise is equal to the difference between the market price of any stock options vesting in 2010. Since we ceased granting stock options under our Incentive Plans in 2004, all outstanding options had fully vested by 2006.the underlying securities at exercise and the exercise price of the options.
87Reflects the value of all perquisites provided during 2010.2011. For a complete listing of the perquisites, see the “Executive Perquisites” sectionin Part II of the “Elements of Compensation” discussion of the CD&A on page 30 of this Proxy Statement.&A. Perquisite details for each named executive officerNEO are discussed in the Summary Compensation Table footnotes. Personal and spousal travel on corporate aircraft included in the table above is valued at the amounts imputed as income to the NEOs for tax purposes using the Standard Industry Fare Level (“SIFL”) formula in accordance with IRS guidelines.
98Reflects our Parent’s payment of the Medicare portion of the FICA tax on the non-qualified retirement accrual and the tax gross-up on the imputed income of that tax payment provided during 2010.2011.
POTENTIAL PAYMENTS UPON TERMINATION
William D. Johnson, Chairman
Involuntary | |||||||
Involuntary | or Good | ||||||
Not for | Reason | ||||||
Voluntary | Early | Cause | For Cause | Termination | |||
Termination | Retirement1 | Termination | Termination | (CIC) | Disability | Death | |
($) | ($) | ($) | ($) | ($) | ($) | ($) | |
Compensation | |||||||
Base Salary—$990,0002 | $0 | $0 | $2,960,100 | $0 | $5,712,500 | $594,000 | $0 |
Annual Incentive3 | $0 | $715,000 | $0 | $0 | $841,500 | $715,000 | $715,000 |
Long-term Incentives: | |||||||
Performance Shares (PSSP)4 | |||||||
2008 PSSP Grant | $0 | $2,353,332 | $0 | $0 | $2,353,332 | $2,353,332 | $2,353,332 |
2009 PSSP Grant | $0 | $0 | $0 | $0 | $2,692,674 | $0 | $1,795,116 |
2010 PSSP Grant | $0 | $851,398 | $0 | $0 | $2,554,194 | $851,398 | $851,398 |
Restricted Stock Units5 | |||||||
2007 RSU Grant | $0 | $362,188 | $0 | $0 | $429,235 | $429,235 | $429,235 |
2008 RSU Grant | $0 | $304,925 | $0 | $0 | $332,665 | $332,665 | $332,665 |
2009 RSU Grant | $0 | $792,466 | $0 | $0 | $1,156,351 | $1,156,351 | $1,156,351 |
2010 RSU Grant | $0 | $450,322 | $0 | $0 | $982,474 | $0 | $0 |
Restricted Stock6 | |||||||
2006 RS Grant | $0 | $240,618 | $0 | $0 | $240,618 | $240,618 | $240,618 |
Benefits and Perquisites | |||||||
Incremental Nonqualified | |||||||
Pension7 | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
Deferred Compensation8 | $849,703 | $849,703 | $849,703 | $849,703 | $849,703 | $849,703 | $849,703 |
Post-retirement Health Care9 | $0 | $0 | $24,682 | $0 | $48,396 | $0 | $0 |
Executive AD&D Proceeds10 | $0 | $0 | $0 | $0 | $0 | $500,000 | $500,000 |
280G Tax Gross-up11 | $0 | $0 | $0 | $0 | $5,488,512 | $0 | $0 |
TOTAL | $849,703 | $6,919,952 | $3,834,485 | $849,703 | $23,682,154 | $8,022,302 | $9,223,418 |
Amounts reflected in the following table assume a triggering event occurred on December 31, 2011.
Involuntary | |||||||
Involuntary | or Good | ||||||
Not for | Reason | ||||||
Voluntary | Early | Cause | For Cause | Termination | |||
Termination1 | Retirement1 | Termination1 | Termination1 | (CIC) | Disability | Death | |
($) | ($) | ($) | ($) | ($) | ($) | ($) | |
Compensation | |||||||
Base Salary—$1,030,0002 | $0 | $0 | $3,079,700 | $0 | $6,180,000 | $618,000 | $0 |
Annual Incentive3 | $0 | $1,223,000 | $0 | $0 | $1,030,000 | $1,223,000 | $1,223,000 |
Long-term Incentives: | |||||||
Performance Shares (PSSP)4 | |||||||
2009 PSSP Grant | $0 | $1,826,000 | $0 | $0 | $3,652,000 | $1,826,000 | $1,826,000 |
2010 PSSP Grant | $0 | $2,309,443 | $0 | $0 | $3,464,165 | $2,309,443 | $2,309,443 |
2011 PSSP Grant | $0 | $1,028,845 | $0 | $0 | $3,086,534 | $1,028,845 | $1,028,845 |
Restricted Stock Units (RSU)5 | |||||||
2007 RSU Grant | $0 | $262,689 | $0 | $0 | $276,515 | $276,515 | $276,515 |
2009 RSU Grant | $0 | $888,281 | $0 | $0 | $969,034 | $969,034 | $969,034 |
2010 RSU Grant | $0 | $615,333 | $0 | $0 | $843,885 | $843,885 | $843,885 |
2011 RSU Grant | $0 | $824,054 | $0 | $0 | $2,052,573 | $0 | $0 |
Benefits and Perquisites | |||||||
Deferred Compensation6 | $967,552 | $967,552 | $967,552 | $967,552 | $967,552 | $967,552 | $967,552 |
Post-retirement Health Care7 | $0 | $0 | $26,475 | $0 | $51,911 | $0 | $0 |
Executive AD&D Proceeds8 | $0 | $0 | $0 | $0 | $0 | $500,000 | $500,000 |
280G Tax Gross-up9 | $0 | $0 | $0 | $0 | $7,441,493 | $0 | $0 |
TOTAL | $967,552 | $9,945,197 | $4,073,727 | $967,552 | $30,015,662 | $10,562,274 | $9,944,274 |
1 Mr. Johnson became eligible for early retirement at age 55 in January 2009. Therefore, under the voluntary termination, and involuntary not for cause termination, and for cause termination scenarios, Mr. Johnson would be treated as having met the early retirement criteria under the Equity Incentive Plan, and would be paid out under the early retirement provisions of that plan. The payout would equal amounts listed under early retirement in the table above for performance shares and RSUs ($7,754,645). This amount would be added to the totals above for combined totals as follows: $8,722,197 under voluntary termination; $11,828,372 under involuntary not for cause termination; and $8,722,197 under for cause termination. Mr. Johnson is not eligible for normal retirement.
2 There is no provision for payment of salary under voluntary termination, early retirement, for cause termination or death. In the event of involuntary not for cause termination, the salary continuation provision of Mr. Johnson’s employment agreement requires a severance equal to 2.99 times his then current base salary ($990,000)1,030,000) payable in equal installments over a period of 2.99 years. In the event of involuntary or good reason termination (CIC), the maximum benefit allowed under the cash payment provision of the Management Change-in-Control Plan equals three times the sum of annual salary plus averagetarget MICP award for the three years prior (($990,0001,030,000 + $914,167)$1,030,000) x 3). In the event of a long-term disability, Mr. Johnson would receive 60% of base salary during the period of his disability, offset by any Social Security benefits and Progress Energy Pension Plan payments. The long-term disability payment as shown in the table above represents an annual amount before offsets.
3 There is no provision for payment of annual incentive under voluntary termination, involuntary not for cause termination, or for cause termination. In the event of involuntary or good reason termination (CIC), Mr. Johnson would receive 100% of his target award under the Annual Cash Incentive Compensation Plan provisions of the Management Change-in-Control Plan, calculated as 85%100% times $990,000.$1,030,000. In the event of early retirement, death or disability, Mr. Johnson would receive a pro-rata incentive award for the period worked during the year. For December 31, 2010,2011, this is based on the full award. For 2010,2011, Mr. Johnson’s MICP award was $715,000.$1,223,000.
4 Amounts shown for performance shares are based on a December 31, 2010,2011, closing price of $43.48$56.02 per share. Unvested performance shares would be forfeited under for cause termination. Voluntary termination, and involuntary not for cause termination, and for cause termination are not applicable. Seeapplicable, but see footnote 1.1 with respect to early retirement eligibility under these scenarios. In the event of early retirement or disability, a pro rata percentage of performance shares would vest based upon the period of employment during the performance measurement period and the extent that the performance factors are satisfied. In the event of involuntary or good reason termination (CIC), unvested performance shares vest as of the date of Management Change-in-Control and payment is made based upon the target value of the award. In the event of death, the 20082009 performance shares would vest 100% and be paid in an amount using performance factors determined at the time of the event. For the 20092010 and 20102011 performance grants, a pro-rata payment would be made based upon the target value of the award and time in the plan.
5 Amounts shown for restricted stock unitsRSUs are based on a December 31, 2010,2011, closing price of $43.48$56.02 per share. For a detailed description of outstanding restricted stock units,RSUs, see the “Outstanding Equity Awards at 2011 Fiscal Year-End Table.Year-End.” Unvested units would be forfeited under for cause termination. Voluntary termination, and involuntary not for cause termination, and for cause termination are not applicable. Seeapplicable, but see footnote 1.1 with respect to early retirement eligibility under these scenarios. In the event of early retirement, Mr. Johnson would receive a pro-rata percentage of all unvested units,RSUs, based upon the number of full months elapsed between the grant date and the date of early retirement. In the event of involuntary or good reason termination (CIC), all outstanding restricted stock unitsRSUs would vest immediately. Upon death or disability, all outstanding restricted stock unitsRSUs that are more than one year past their grant date would vest immediately. SharesRSUs that are less than one year past their grant date would be forfeited. Mr. Johnson would immediately vest restricted stock unitsRSUs granted in 2007, 2008,2009, and 2009,2010, and would forfeit restricted stock unitsRSUs granted in 2010.2011.
6 Amounts shown for restricted stock shares are based on a December 31, 2010, closing price of $43.48 per share. For a detailed description of outstanding restricted stock shares, see “Outstanding Equity Awards at Fiscal Year-End Table.” Unvested shares would be forfeited under voluntary termination, involuntary not for cause termination, or for cause termination. In the event of early retirement, all outstanding shares may vest at the Committee’s discretion. In the event of involuntary or good reason termination (CIC), all outstanding shares would vest immediately. Upon death or disability, all outstanding restricted stock shares that are more than one year past their grant date would vest immediately. Shares that are less than one year past their grant date would be forfeited. All of Mr. Johnson’s restricted stock grant dates are beyond the one-year threshold; therefore, all outstanding restricted stock shares would vest immediately.
97No post-retirement health care benefits apply under voluntary termination, for cause termination, death or disability. In the event of early retirement, Mr. Johnson would receive no additional benefits above what all full-time, nonbargaining employees would receive. Under involuntary not for cause termination, Mr. Johnson would be reimbursed for 18 months of COBRA premiums at $1,371.22$1,470.83 per month as provided in his employment agreement. In the event of involuntary or good reason termination (CIC), the Management Change-in-Control Plan provides for Company-paidProgress Energy-paid medical, dental and vision coverage in the same plan Mr. Johnson was participating in prior to termination for 36 months at $1,344.33$1,441.99 per month.
108 Mr. Johnson would be eligible to receive $500,000 proceeds from the executive AD&D policy.
119 Upon a change in control, the Management Change-in-Control Plan provides for our Parent to pay all excise taxes under IRC Section 280G plus applicable gross-up amounts for Mr. Johnson. Under IRC Section 280G, Mr. Johnson would be subject to excise tax on $10,222,095$13,328,855 of excess parachute payments above his base amount. Those excess parachute payments result in $2,044,419$2,665,771 of excise taxes, $3,365,647$4,669,363 of tax gross-ups, and $78,446$106,359 of employer Medicare tax related to the excise tax payment.
POTENTIAL PAYMENTS UPON TERMINATION
Mark F. Mulhern, Senior Vice President and Chief Financial Officer
Involuntary | |||||||
Involuntary | or Good | ||||||
Not for | Reason | ||||||
Voluntary | Early | Cause | For Cause | Termination | |||
Termination | Retirement | Termination | Termination | (CIC) | Disability | Death | |
($) | ($) | ($) | ($) | ($) | ($) | ($) | |
Compensation | |||||||
Base Salary—$450,0001 | $0 | $0 | $1,345,500 | $0 | $1,395,000 | $270,000 | $0 |
Annual Incentive2 | $0 | $0 | $0 | $0 | $247,500 | $205,000 | $205,000 |
Long-term Incentives: | |||||||
Performance Shares (PSSP)3 | |||||||
2008 PSSP Grant | $0 | $0 | $0 | $0 | $350,850 | $350,850 | $350,850 |
2009 PSSP Grant | $0 | $0 | $0 | $0 | $547,978 | $0 | $365,319 |
2010 PSSP Grant | $0 | $0 | $0 | $0 | $550,636 | $183,545 | $183,545 |
Restricted Stock Units4 | |||||||
2007 RSU Grant | $0 | $0 | $0 | $0 | $103,352 | $103,352 | $103,352 |
2008 RSU Grant | $0 | $0 | $0 | $0 | $49,393 | $49,393 | $49,393 |
2009 RSU Grant | $0 | $0 | $0 | $0 | $271,141 | $271,141 | $271,141 |
2010 RSU Grant | $0 | $0 | $0 | $0 | $209,095 | $0 | $0 |
Restricted Stock5 | |||||||
2006 RS Grant | $0 | $0 | $0 | $0 | $50,741 | $50,741 | $50,741 |
Benefits and Perquisites | |||||||
Incremental Nonqualified Pension6 | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
Deferred Compensation7 | $233,262 | $0 | $233,262 | $233,262 | $233,262 | $233,262 | $233,262 |
Post-retirement Health Care8 | $0 | $0 | $15,249 | $0 | $19,934 | $0 | $0 |
Executive AD&D Proceeds9 | $0 | $0 | $0 | $0 | $0 | $500,000 | $500,000 |
280G Tax Gross-up10 | $0 | $0 | $0 | $0 | $1,141,872 | $0 | $0 |
TOTAL | $233,262 | $0 | $1,594,011 | $233,262 | $5,170,754 | $2,217,284 | $2,312,603 |
Amounts reflected in the following table assume a triggering event occurred on December 31, 2011.
Involuntary | ||||||
Involuntary | or Good | |||||
Not for | Reason | |||||
Voluntary | Cause | For Cause | Termination | |||
Termination | Termination | Termination | (CIC) | Disability | Death | |
($) | ($) | ($) | ($) | ($) | ($) | |
Compensation | ||||||
Base Salary—$495,9451 | $0 | $1,482,876 | $0 | $1,537,430 | $297,567 | $0 |
Annual Incentive2 | $0 | $0 | $0 | $272,770 | $250,000 | $250,000 |
Long-term Incentives: | ||||||
Performance Shares (PSSP)3 | ||||||
2009 PSSP Grant | $0 | $0 | $0 | $743,217 | $371,609 | $371,609 |
2010 PSSP Grant | $0 | $0 | $0 | $746,859 | $497,906 | $497,906 |
2011 PSSP Grant | $0 | $0 | $0 | $704,508 | $234,836 | $234,836 |
Restricted Stock Units (RSU)4 | ||||||
2007 RSU Grant | $0 | $0 | $0 | $66,552 | $66,552 | $66,552 |
2009 RSU Grant | $0 | $0 | $0 | $244,695 | $244,695 | $244,695 |
2010 RSU Grant | $0 | $0 | $0 | $179,600 | $179,600 | $179,600 |
2011 RSU Grant | $0 | $0 | $0 | $560,368 | $0 | $0 |
Benefits and Perquisites | ||||||
Deferred Compensation5 | $179,741 | $179,741 | $179,741 | $179,741 | $179,741 | $179,741 |
Post-retirement Health Care6 | $0 | $16,028 | $0 | $20,952 | $0 | $0 |
Executive AD&D Proceeds7 | $0 | $0 | $0 | $0 | $500,000 | $500,000 |
280G Tax Gross-up8 | $0 | $0 | $0 | $1,626,271 | $0 | $0 |
TOTAL | $179,741 | $1,678,645 | $179,741 | $6,882,963 | $2,822,506 | $2,524,939 |
1 There is no provision for payment of salary under voluntary termination, for cause termination or death. Mr. Mulhern is not eligible for early retirement or normal retirement. In the event of involuntary not for cause termination, the salary continuation provision of Mr. Mulhern’s employment agreement requires a severance equal to 2.99 times his then current base salary ($450,000)495,945) payable in equal installments over a period of 2.99 years. In the event of involuntary or good reason termination (CIC), the maximum benefit allowed under the cash payment provision of the Management Change-in-Control Plan equals two times the sum of annual salary plus annual target MICP award (($450,000495,945 + $247,500)$272,770) x 2). In the event of a long-term disability, Mr. Mulhern would receive 60% of base salary during the period of his disability, offset by any Social Security benefits and Progress Energy Pension Plan payments. The long-term disability payment as shown in the table above represents an annual amount before offsets.
2 There is no provision for payment of annual incentive under voluntary termination, involuntary not for cause termination, or for cause termination. Mr. Mulhern is not eligible for early retirement or normal retirement. In the event of involuntary or good reason termination (CIC), Mr. Mulhern would receive 100% of his target award under the Annual Cash Incentive Compensation Plan provisions of the Management Change-in-Control Plan, calculated as 55% times $450,000.$495,945. In the event of death or disability, Mr. Mulhern would receive a pro-rata incentive award for the period worked during the year. For December 31, 2010,2011, this is based on the full award. For 2010,2011, Mr. Mulhern’s MICP award was $205,000.$250,000.
3 Amounts shown for performance shares are based on a December 31, 2010,2011, closing price of $43.48$56.02 per share. Unvested performance shares would be forfeited under voluntary termination, involuntary not for cause termination, or for cause termination. Mr. Mulhern is not eligible for early retirement or normal retirement. In the event of involuntary or good reason termination (CIC), unvested performance shares vest as of the date of Management Change-in-Control and payment is made based upon the target value of the award. In the event of disability, a pro rata percentage of performance shares would vest based upon the period of employment during the performance measurement period and the extent that the performance factors are satisfied. In the event of death, the 20082009 performance shares would vest 100% and be paid in an amount using performance factors determined at the time of the event. For the 20092010 and 20102011 performance grants, the target value of the award would be paid based upon time in the plan.
52
4 Amounts shown for restricted stock unitsRSUs are based on a December 31, 2010,2011, closing price of $43.48$56.02 per share. For a detailed description of outstanding restricted stock units,RSUs, see the “Outstanding Equity Awards at 2011 Fiscal Year-End Table.Year-End.” Unvested restricted stock unitsRSUs would be forfeited under voluntary termination, involuntary not for cause termination, or for cause termination. Mr. Mulhern is not eligible for early retirement or normal retirement. In the event of involuntary or good reason termination (CIC), all outstanding restricted stock unitsRSUs would vest immediately. Upon death or disability, all outstanding restricted stock unitsRSUs that are more than one year past their grant date would vest immediately. SharesRSUs that are less than one year past their grant date would be forfeited. Mr. Mulhern would immediately vest restricted stock unitsRSUs granted in 2007, 2008,2009, and 2009;2010; and would forfeit restricted stock unitsRSUs granted in 2010.2011.
5 Amounts shown for restricted stock shares are based on a December 31, 2010, closing price of $43.48 per share. For a detailed description of outstanding restricted stock shares, see the “Outstanding Equity Awards at Fiscal Year-End Table.” Unvested restricted stock would be forfeited under voluntary termination, involuntary not for cause termination, or for cause termination. Mr. Mulhern is not eligible for early retirement or normal retirement. In the event of involuntary or good reason termination (CIC), all outstanding restricted stock shares would vest immediately. Upon death or disability, all outstanding restricted stock shares that are more than one year past their grant date would vest immediately. Shares that are less than one year past their grant date would be forfeited. All of Mr. Mulhern’s restricted stock grant dates are beyond the one-year threshold; therefore, all outstanding restricted stock shares would vest immediately.
86 No post-retirement health care benefits apply under voluntary termination, for cause termination, death or disability. Mr. Mulhern is not eligible for early retirement or normal retirement. Under involuntary not for cause termination, Mr. Mulhern would be reimbursed for 18 months of COBRA premiums at $847.18$890.45 per month as provided in his employment agreement. In the event of involuntary or good reason termination (CIC), the Management Change-in-Control Plan provides for Company-paidProgress Energy-paid medical, dental and vision coverage in the same plan Mr. Mulhern was participating in prior to termination for 24 months at $830.57$872.99 per month.
97 Mr. Mulhern would be eligible to receive $500,000 proceeds from the executive AD&D policy.
108 Upon a change in control, the Management Change-in-Control Plan provides for our Parent to pay all excise taxes under IRC Section 280G plus applicable gross-up amounts for Mr. Mulhern. Under IRC Section 280G, Mr. Mulhern would be subject to excise tax on $2,126,683$2,912,901 of excess parachute payments above his base amount. Those excess parachute payments result in $425,337$582,580 of excise taxes, $700,215$1,020,447 of tax gross-ups, and $16,320$23,244 of employer Medicare tax related to the excise tax payment.
POTENTIAL PAYMENTS UPON TERMINATION
Jeffrey J. Lyash, Executive Vice President – Energy Supply
Involuntary | |||||||
Involuntary | or Good | ||||||
Not for | Reason | ||||||
Voluntary | Early | Cause | For Cause | Termination | |||
Termination | Retirement | Termination | Termination | (CIC) | Disability | Death | |
($) | ($) | ($) | ($) | ($) | ($) | ($) | |
Compensation | |||||||
Base Salary—$453,0001 | $0 | $0 | $1,354,470 | $0 | $2,106,450 | $271,800 | $0 |
Annual Incentive2 | $0 | $0 | $0 | $0 | $249,150 | $195,000 | $195,000 |
Long-term Incentives: | |||||||
Performance Shares (PSSP)3 | |||||||
2008 PSSP Grant | $0 | $0 | $0 | $0 | $497,544 | $497,544 | $497,544 |
2009 PSSP Grant | $0 | $0 | $0 | $0 | $633,345 | $0 | $422,230 |
2010 PSSP Grant | $0 | $0 | $0 | $0 | $586,872 | $195,624 | $195,624 |
Restricted Stock Units4 | |||||||
2007 RSU Grant | $0 | $0 | $0 | $0 | $137,005 | $137,005 | $137,005 |
2008 RSU Grant | $0 | $0 | $0 | $0 | $69,438 | $69,438 | $69,438 |
2009 RSU Grant | $0 | $0 | $0 | $0 | $274,707 | $274,707 | $274,707 |
2010 RSU Grant | $0 | $0 | $0 | $0 | $222,878 | $0 | $0 |
Restricted Stock5 | |||||||
2006 RS Grant | $0 | $0 | $0 | $0 | $59,437 | $59,437 | $59,437 |
Benefits and Perquisites | |||||||
Incremental Nonqualified Pension6 | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
Deferred Compensation7 | $168,012 | $0 | $168,012 | $168,012 | $168,012 | $168,012 | $168,012 |
Post-retirement Health Care8 | $0 | $0 | $17,420 | $0 | $34,158 | $0 | $0 |
Executive AD&D Proceeds9 | $0 | $0 | $0 | $0 | $0 | $500,000 | $500,000 |
280G Tax Gross-up10 | $0 | $0 | $0 | $0 | $1,565,051 | $0 | $0 |
TOTAL | $168,012 | $0 | $1,539,902 | $168,012 | $6,604,047 | $2,368,567 | $2,518,997 |
Amounts reflected in the following table assume a triggering event occurred on December 31, 2011.
Involuntary | ||||||
Involuntary | or Good | |||||
Not for | Reason | |||||
Voluntary | Cause | For Cause | Termination | |||
Termination | Termination | Termination | (CIC) | Disability | Death | |
($) | ($) | ($) | ($) | ($) | ($) | |
Compensation | ||||||
Base Salary—$466,5901 | $0 | $1,395,104 | $0 | $2,169,644 | $279,954 | $0 |
Annual Incentive2 | $0 | $0 | $0 | $256,625 | $220,000 | $220,000 |
Long-term Incentives: | ||||||
Performance Shares (PSSP)3 | ||||||
2009 PSSP Grant | $0 | $0 | $0 | $859,011 | $429,505 | $429,505 |
2010 PSSP Grant | $0 | $0 | $0 | $795,988 | $530,659 | $530,659 |
2011 PSSP Grant | $0 | $0 | $0 | $709,213 | $236,404 | $236,404 |
Restricted Stock Units (RSU)4 | ||||||
2007 RSU Grant | $0 | $0 | $0 | $88,232 | $88,232 | $88,232 |
2009 RSU Grant | $0 | $0 | $0 | $232,987 | $232,987 | $232,987 |
2010 RSU Grant | $0 | $0 | $0 | $191,476 | $191,476 | $191,476 |
2011 RSU Grant | $0 | $0 | $0 | $562,609 | $0 | $0 |
Benefits and Perquisites | ||||||
Deferred Compensation5 | $236,721 | $236,721 | $236,721 | $236,721 | $236,721 | $236,721 |
Post-retirement Health Care6 | $0 | $18,716 | $0 | $36,697 | $0 | $0 |
Executive AD&D Proceeds7 | $0 | $0 | $0 | $0 | $500,000 | $500,000 |
280G Tax Gross-up8 | $0 | $0 | $0 | $1,961,904 | $0 | $0 |
TOTAL | $236,721 | $1,650,541 | $236,721 | $8,101,107 | $2,945,938 | $2,665,984 |
1 There is no provision for payment of salary under voluntary termination, for cause termination or death. Mr. Lyash is not eligible for early retirement or normal retirement. In the event of involuntary not for cause termination, the salary continuation provision of Mr. Lyash’s employment agreement requires a severance equal to 2.99 times his then current base salary ($453,000)466,590) payable in equal installments over a period of 2.99 years. In the event of involuntary or good reason termination (CIC), the maximum benefit allowed under the cash payment provision of the Management Change-in-Control Plan equals three times the sum of annual salary plus annual target MICP award (($453,000466,590 + $249,150)$256,625) x 3). In the event of a long-term disability, Mr. Lyash would receive 60% of base salary during the period of his disability, offset by any Social Security benefits and Progress Energy Pension Plan payments. The long-term disability payment as shown in the table above represents an annual amount before offsets.
2 There is no provision for payment of annual incentive under voluntary termination, involuntary not for cause termination, or for cause termination. Mr. Lyash is not eligible for early retirement or normal retirement. In the event of involuntary or good reason termination (CIC), Mr. Lyash would receive 100% of his target award under the Annual Cash Incentive Compensation Plan provisions of the Management Change-in-Control Plan, calculated as 55% times $453,000.$466,590. In the event of death or disability, Mr. Lyash would receive a pro-rata incentive award for the period worked during the year. For December 31, 2010,2011, this is based on the full award. For 2010,2011, Mr. Lyash’s MICP award was $195,000.$220,000.
3 Amounts shown for performance shares are based on a December 31, 2010,2011, closing price of $43.48$56.02 per share. Unvested performance shares would be forfeited under voluntary termination, involuntary not for cause termination, or for cause termination. Mr. Lyash is not eligible for early retirement or normal retirement. In the event of involuntary or good reason termination (CIC), unvested performance shares vest as of the date of Management Change-in-Control and payment is made based upon the target value of the award. In the event of disability, a pro rata percentage of performance shares would vest based upon the period of employment during the performance measurement period and the extent that the performance factors are satisfied. In the event of death, the 20082009 performance shares would vest 100% and be paid in an amount using performance factors determined at the time of the event. For the 20092010 and 20102011 performance grants, the target value of the award would be paid based upon time in the plan.
4 Amounts shown for restricted stock unitsRSUs are based on a December 31, 2010,2011, closing price of $43.48$56.02 per share. For a detailed description of outstanding restricted stock units,RSUs, see the “Outstanding Equity Awards at 2011 Fiscal Year-End Table.Year-End.” Unvested restricted stock unitsRSUs would be forfeited under voluntary termination, involuntary not for cause termination, or for cause termination. Mr. Lyash is not eligible for early retirement or normal retirement. In the event of involuntary or good reason termination (CIC), all outstanding restricted stock unitsRSUs would vest immediately. Upon death or disability, all outstanding restricted stock unitsRSUs that are more than one year past their grant date would vest immediately. SharesRSUs that are less than one year past their grant date would be forfeited. Mr. Lyash would immediately vest restricted stock unitsRSUs granted in 2007, 2008,2009, and 2009;2010; and would forfeit restricted stock unitsRSUs granted in 2010.2011.
5 Amounts shown for restricted stock shares are based on a December 31, 2010, closing price of $43.48 per share. For a detailed description of outstanding restricted stock shares, see the “Outstanding Equity Awards at Fiscal Year-End Table.” Unvested restricted stock would be forfeited under voluntary termination, involuntary not for cause termination, or for cause termination. Mr. Lyash is not eligible for early retirement or normal retirement. In the event of involuntary or good reason termination (CIC), all outstanding restricted stock shares would vest immediately. Upon death or disability, all outstanding restricted stock shares that are more than one year past their grant date would vest immediately. Shares that are less than one year past their grant date would be forfeited. All of Mr. Lyash’s restricted stock grant dates are beyond the one-year threshold; therefore, all outstanding restricted stock shares would vest immediately.
86 No post-retirement health care benefits apply under voluntary termination, for cause termination, death or disability. Mr. Lyash is not eligible for early retirement or normal retirement. Under involuntary not for cause termination, Mr. Lyash would be reimbursed for 18 months of COBRA premiums at $967.80$1,039.75 per month as provided in his employment agreement. In the event of involuntary or good reason termination (CIC), the Management Change-in-Control Plan provides for Company-paidProgress Energy-paid medical, dental and vision coverage in the same plan Mr. Lyash was participating in prior to termination for 36 months at $948.83$1,019.37 per month.
97 Mr. Lyash would be eligible to receive $500,000 proceeds from the executive AD&D policy.
108 Upon a change in control, the Management Change-in-Control Plan provides for our Parent to pay all excise taxes under IRC Section 280G plus applicable gross-up amounts for Mr. Lyash. Under IRC Section 280G, Mr. Lyash would be subject to excise tax on $2,914,834$3,514,070 of excess parachute payments above his base amount. Those excess parachute payments result in $582,967$702,814 of excise taxes, $959,715$1,231,049 of tax gross-ups, and $22,369$28,041 of employer Medicare tax related to the excise tax payment.
POTENTIAL PAYMENTS UPON TERMINATION
Lloyd M. Yates, President and Chief Executive Officer
Involuntary | |||||||
Involuntary | or Good | ||||||
Not for | Reason | ||||||
Voluntary | Early | Cause | For Cause | Termination | |||
Termination | Retirement | Termination | Termination | (CIC) | Disability | Death | |
($) | ($) | ($) | ($) | ($) | ($) | ($) | |
Compensation | |||||||
Base Salary—$448,0001 | $0 | $0 | $1,339,520 | $0 | $2,083,200 | $268,800 | $0 |
Annual Incentive2 | $0 | $0 | $0 | $0 | $246,400 | $195,000 | $195,000 |
Long-term Incentives: | |||||||
Performance Shares (PSSP)3 | |||||||
2008 PSSP Grant | $0 | $0 | $0 | $0 | $497,544 | $497,544 | $497,544 |
2009 PSSP Grant | $0 | $0 | $0 | $0 | $626,219 | $0 | $417,479 |
2010 PSSP Grant | $0 | $0 | $0 | $0 | $580,424 | $193,475 | $193,475 |
Restricted Stock Units4 | |||||||
2007 RSU Grant | $0 | $0 | $0 | $0 | $137,005 | $137,005 | $137,005 |
2008 RSU Grant | $0 | $0 | $0 | $0 | $69,438 | $69,438 | $69,438 |
2009 RSU Grant | $0 | $0 | $0 | $0 | $272,620 | $272,620 | $272,620 |
2010 RSU Grant | $0 | $0 | $0 | $0 | $220,400 | $0 | $0 |
Restricted Stock5 | |||||||
2006 RS Grant | $0 | $0 | $0 | $0 | $59,437 | $59,437 | $59,437 |
Benefits and Perquisites | |||||||
Incremental Nonqualified Pension6 | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
Deferred Compensation7 | $601,121 | $0 | $601,121 | $601,121 | $601,121 | $601,121 | $601,121 |
Post-retirement Health Care8 | $0 | $0 | $24,682 | $0 | $48,396 | $0 | $0 |
Executive AD&D Proceeds9 | $0 | $0 | $0 | $0 | $0 | $500,000 | $500,000 |
280G Tax Gross-up10 | $0 | $0 | $0 | $0 | $1,554,752 | $0 | $0 |
TOTAL | $601,121 | $0 | $1,965,323 | $601,121 | $6,996,956 | $2,794,440 | $2,943,119 |
Amounts reflected in the following table assume a triggering event occurred on December 31, 2011.
Involuntary | ||||||
Involuntary | or Good | |||||
Not for | Reason | |||||
Voluntary | Cause | For Cause | Termination | |||
Termination | Termination | Termination | (CIC) | Disability | Death | |
($) | ($) | ($) | ($) | ($) | ($) | |
Compensation | ||||||
Base Salary—$461,4401 | $0 | $1,379,706 | $0 | $2,145,696 | $276,864 | $0 |
Annual Incentive2 | $0 | $0 | $0 | $253,792 | $220,000 | $220,000 |
Long-term Incentives: | ||||||
Performance Shares (PSSP)3 | ||||||
2009 PSSP Grant | $0 | $0 | $0 | $849,319 | $424,660 | $424,660 |
2010 PSSP Grant | $0 | $0 | $0 | $787,249 | $524,833 | $524,833 |
2011 PSSP Grant | $0 | $0 | $0 | $701,370 | $233,790 | $233,790 |
Restricted Stock Units (RSU)4 | ||||||
2007 RSU Grant | $0 | $0 | $0 | $88,232 | $88,232 | $88,232 |
2009 RSU Grant | $0 | $0 | $0 | $231,643 | $231,643 | $231,643 |
2010 RSU Grant | $0 | $0 | $0 | $189,348 | $189,348 | $189,348 |
2011 RSU Grant | $0 | $0 | $0 | $558,856 | $0 | $0 |
Benefits and Perquisites | ||||||
Deferred Compensation5 | $782,054 | $782,054 | $782,054 | $782,054 | $782,054 | $782,054 |
Post-retirement Health Care6 | $0 | $26,475 | $0 | $51,911 | $0 | $0 |
Executive AD&D Proceeds7 | $0 | $0 | $0 | $0 | $500,000 | $500,000 |
280G Tax Gross-up8 | $0 | $0 | $0 | $1,952,354 | $0 | $0 |
TOTAL | $782,054 | $2,188,235 | $782,054 | $8,591,824 | $3,471,424 | $3,194,560 |
1 There is no provision for payment of salary under voluntary termination, for cause termination or death. Mr. Yates is not eligible for early retirement or normal retirement. In the event of involuntary not for cause termination, the salary continuation provision of Mr. Yates’ employment agreement requires a severance equal to 2.99 times his then current base salary ($448,000)461,440) payable in equal installments over a period of 2.99 years. In the event of involuntary or good reason termination (CIC), the maximum benefit allowed under the cash payment provision of the Management Change-in-Control Plan equals three times the sum of annual salary plus annual target MICP award (($448,000461,440 + $246,400)$253,792) x 3). In the event of a long-term disability, Mr. Yates would receive 60% of base salary during the period of his disability, offset by any Social Security benefits and Progress Energy Pension Plan payments. The long-term disability payment as shown in the table above represents an annual amount before offsets.
2 There is no provision for payment of annual incentive under voluntary termination, involuntary not for cause termination, or for cause termination. Mr. Yates is not eligible for early retirement or normal retirement. In the event of involuntary or good reason termination (CIC), Mr. Yates would receive 100% of his target award under the Annual Cash Incentive Compensation Plan provisions of the Management Change-in-Control Plan, calculated as 55% times $448,000.$461,440. In the event of death or disability, Mr. Yates would receive a pro-rata incentive award for the period worked during the year. For December 31, 20102011 this is based on the full award. For 2010,2011, Mr. Yates’ MICP award was $195,000.$220,000.
3 Amounts shown for performance shares are based on a December 31, 2010,2011, closing price of $43.48$56.02 per share. Unvested performance shares would be forfeited under voluntary termination, involuntary not for cause termination, or for cause termination. Mr. Yates is not eligible for early retirement or normal retirement. In the event of involuntary or good reason termination (CIC), unvested performance shares vest as of the date of Management Change-in-Control and payment is made based upon the target value of the award. In the event of disability, a pro rata percentage of performance shares would vest based upon the period of employment during the performance measurement period and the extent that the performance factors are satisfied. In the event of death, the 20082009 performance shares would vest 100% and be paid in an amount using performance factors determined at the time of the event. For the 20092010 and 20102011 performance grants, the target value of the award would be paid based upon time in the plan.
4 Amounts shown for restricted stock unitsRSUs are based on a December 31, 2010,2011, closing price of $43.48$56.02 per share. For a detailed description of outstanding restricted stock units,RSUs, see the “Outstanding Equity Awards at 2011 Fiscal Year-End Table.Year-End.” Unvested restricted stock unitsRSUs would be forfeited under voluntary termination, involuntary not for cause termination, or for cause termination. Mr. Yates is not eligible for early retirement or normal retirement. In the event of involuntary or good reason termination (CIC), all outstanding restricted stock unitsRSUs would vest immediately. Upon death or disability, all outstanding restricted stock unitsRSUs that are more than one year past their grant date would vest immediately. SharesRSUs that are less than one year past their grant date would be forfeited. Mr. Yates would immediately vest restricted stock unitsRSUs granted in 2007, 2008,2009, and 2009;2010; and would forfeit restricted stock unitsRSUs granted in 2010.2011.
5 Amounts shown for restricted stock shares are based on a December 31, 2010, closing price of $43.48 per share. For a detailed description of outstanding restricted stock shares, see the “Outstanding Equity Awards at Fiscal Year-End Table.” Unvested restricted stock would be forfeited under voluntary termination, involuntary not for cause termination, or for cause termination. Mr. Yates is not eligible for early retirement or normal retirement. In the event of involuntary or good reason termination (CIC), all outstanding restricted stock shares would vest immediately. Upon death or disability, all outstanding restricted stock shares that are more than one year past their grant date would vest immediately. Shares that are less than one year past their grant date would be forfeited. All of Mr. Yates’ restricted stock grant dates are beyond the one-year threshold; therefore, all outstanding restricted stock shares would vest immediately.
86 No post-retirement health care benefits apply under voluntary termination, for cause termination, death or disability. Mr. Yates is not eligible for early retirement or normal retirement. Under involuntary not for cause termination, Mr. Yates would be reimbursed for 18 months of COBRA premiums at $1,371.22$1,470.83 per month as provided in his employment agreement. In the event of involuntary or good reason termination (CIC), the Management Change-in-Control Plan provides for Company-paidProgress Energy-paid medical, dental and vision coverage in the same plan Mr. Yates was participating in prior to termination for 36 months at $1,344.33$1,441.99 per month.
97 Mr. Yates would be eligible to receive $500,000 proceeds from the executive AD&D policy.
108 Upon a change in control, the Management Change-in-Control Plan provides for our Parent to pay all excise taxes under IRC Section 280G plus applicable gross-up amounts for Mr. Yates. Under IRC Section 280G, Mr. Yates would be subject to excise tax on $2,895,652$3,496,965 of excess parachute payments above his base amount. Those excess parachute payments result in $579,130$699,393 of excise taxes, $953,400$1,225,056 of tax gross-ups, and $22,222$27,905 of employer Medicare tax related to the excise tax payment.
POTENTIAL PAYMENTS UPON TERMINATION
John R. McArthur, Executive Vice President, General Counsel and Corporate Secretary
Involuntary | |||||||
Involuntary | or Good | ||||||
Not for | Reason | ||||||
Voluntary | Early | Cause | For Cause | Termination | |||
Termination | Retirement | Termination | Termination | (CIC) | Disability | Death | |
($) | ($) | ($) | ($) | ($) | ($) | ($) | |
Compensation | |||||||
Base Salary—$488,0001 | $0 | $0 | $1,459,120 | $0 | $2,269,200 | $292,800 | $0 |
Annual Incentive2 | $0 | $0 | $0 | $0 | $268,400 | $220,000 | $220,000 |
Long-term Incentives: | |||||||
Performance Shares (PSSP)3 | |||||||
2008 PSSP Grant | $0 | $0 | $0 | $0 | $462,480 | $462,480 | $462,480 |
2009 PSSP Grant | $0 | $0 | $0 | $0 | $683,179 | $0 | $455,453 |
2010 PSSP Grant | $0 | $0 | $0 | $0 | $632,237 | $210,746 | $210,746 |
Restricted Stock Units4 | |||||||
2007 RSU Grant | $0 | $0 | $0 | $0 | $128,483 | $128,483 | $128,483 |
2008 RSU Grant | $0 | $0 | $0 | $0 | $65,090 | $65,090 | $65,090 |
2009 RSU Grant | $0 | $0 | $0 | $0 | $289,490 | $289,490 | $289,490 |
2010 RSU Grant | $0 | $0 | $0 | $0 | $240,097 | $0 | $0 |
Restricted Stock5 | |||||||
2006 RS Grant | $0 | $0 | $0 | $0 | $72,481 | $72,481 | $72,481 |
Benefits and Perquisites | |||||||
Incremental Nonqualified Pension6 | $0 | $0 | $0 | $0 | $1,483,339 | $0 | $0 |
Deferred Compensation7 | $301,215 | $0 | $301,215 | $301,215 | $301,215 | $301,215 | $301,215 |
Post-retirement Health Care8 | $0 | $0 | $16,626 | $0 | $32,599 | $0 | $0 |
Executive AD&D Proceeds9 | $0 | $0 | $0 | $0 | $0 | $500,000 | $500,000 |
280G Tax Gross-up10 | $0 | $0 | $0 | $0 | $2,347,525 | $0 | $0 |
TOTAL | $301,215 | $0 | $1,776,961 | $301,215 | $9,275,815 | $2,542,785 | $2,705,438 |
Amounts reflected in the following table assume a triggering event occurred on December 31, 2011.
Involuntary | |||||||
Involuntary | or Good | ||||||
Not for | Reason | ||||||
Voluntary | Early | Cause | For Cause | Termination | |||
Termination1 | Retirement1 | Termination1 | Termination1 | (CIC) | Disability | Death | |
($) | ($) | ($) | ($) | ($) | ($) | ($) | |
Compensation | |||||||
Base Salary—$502,6402 | $0 | $0 | $1,502,894 | $0 | $2,337,276 | $301,584 | $0 |
Annual Incentive3 | $0 | $0 | $0 | $0 | $276,452 | $305,000 | $305,000 |
Long-term Incentives: | |||||||
Performance Shares (PSSP)4 | |||||||
2009 PSSP Grant | $0 | $463,285 | $0 | $0 | $926,571 | $463,285 | $463,285 |
2010 PSSP Grant | $0 | $571,665 | $0 | $0 | $857,498 | $571,665 | $571,665 |
2011 PSSP Grant | $0 | $254,686 | $0 | $0 | $764,057 | $254,686 | $254,686 |
Restricted Stock Units (RSU)5 | |||||||
2007 RSU Grant | $0 | $78,658 | $0 | $0 | $82,798 | $82,798 | $82,798 |
2009 RSU Grant | $0 | $222,301 | $0 | $0 | $242,511 | $242,511 | $242,511 |
2010 RSU Grant | $0 | $150,402 | $0 | $0 | $206,266 | $206,266 | $206,266 |
2011 RSU Grant | $0 | $223,170 | $0 | $0 | $588,770 | $0 | $0 |
Benefits and Perquisites | |||||||
Incremental Nonqualified Pension6 | $0 | $0 | $0 | $0 | $1,915,600 | $0 | $0 |
Deferred Compensation7 | $335,778 | $335,778 | $335,778 | $335,778 | $335,778 | $335,778 | $335,778 |
Post-retirement Health Care8 | $0 | $0 | $17,837 | $0 | $34,975 | $0 | $0 |
Executive AD&D Proceeds9 | $0 | $0 | $0 | $0 | $0 | $500,000 | $500,000 |
280G Tax Gross-up10 | $0 | $0 | $0 | $0 | $3,162,063 | $0 | $0 |
TOTAL | $335,778 | $2,299,945 | $1,856,509 | $335,778 | $11,730,615 | $3,263,573 | $2,961,989 |
1 Mr. McArthur became eligible for early retirement at age 55 with 10 years of service in December 2011 under the Equity Incentive Plan only. Therefore, under the voluntary termination, involuntary not for cause termination, and for cause termination scenarios, Mr. McArthur would be treated as having met the early retirement criteria under the Equity Incentive Plan and would be paid out under the early retirement provisions of that plan. The payout would equal amounts listed under early retirement in the table above for performance shares and RSUs ($1,964,167). This amount would be added to the totals above for combined totals as follows: $2,299,945 under voluntary termination; $3,820,676 under involuntary not for cause termination, and $2,299,945 under for cause termination. Mr. McArthur is not eligible for early retirement under the MICP as he has less than 15 years of service at December 31, 2011. Mr. McArthur is not eligible for normal retirement.
1 2There is no provision for payment of salary under voluntary termination, early retirement, for cause termination or death. Mr. McArthur is not eligible for early retirement or normal retirement. In the event of involuntary not for cause termination, the salary continuation provision of Mr. McArthur’s employment agreement requires a severance equal to 2.99 times his then current base salary ($488,000)502,640) payable in equal installments over a period of 2.99 years. In the event of involuntary or good reason termination (CIC), the maximum benefit allowed under the cash payment provision of the Management Change-in-Control Plan equals three times the sum of annual salary plus annual target MICP award (($488,000502,640 + $268,400)$276,452) x 3). In the event of a long-term disability, Mr. McArthur would receive 60% of base salary during the period of his disability, offset by any Social Security benefits and Progress Energy Pension Plan payments. The long-term disability payment as shown in the table above represents an annual amount before offsets.
23 There is no provision for payment of annual incentive under voluntary termination, involuntary not for cause termination, or for cause termination. Mr. McArthur is not eligible for early retirement or normal retirement. In the event of involuntary or good reason termination (CIC), Mr. McArthur would receive 100% of his target bonus under the Annual Cash Incentive Compensation Plan provisions of the Management Change-in-Control Plan, calculated as 55% times $488,000.$502,640. In the event of death or disability, Mr. McArthur would receive a pro-rata incentive award for the period worked during the year. For December 31, 2010,2011, this is based on the full award. For 2010,2011, Mr. McArthur’s MICP award was $220,000.$305,000.
Carolina Power & LightProxy Statement |
34 Amounts shown for performance shares are based on a December 31, 2010,2011, closing price of $43.48$56.02 per share. Unvested performance shares would be forfeited under voluntaryVoluntary termination, involuntary not for cause termination, orand for cause termination.termination are not applicable, but see footnote 1 with respect to early retirement eligibility under these scenarios. Mr. McArthur is not eligible for early retirement or normal retirement. In the event of involuntary or good reason termination (CIC), unvested performance shares vest as of the date of Management Change-in-Control and payment is made based upon the target value of the award. In the event of early retirement or disability, a pro rata percentage of performance shares would vest based upon the period of employment during the performance measurement period and the extent that the performance factors are satisfied. In the event of death, the 20082009 performance shares would vest 100% and be paid in an amount using performance factors determined at the time of the event. For the 20092010 and 20102011 performance grants, the target value of the award would be paid based upon time in the plan.
4 5Amounts shown for restricted stock unitsRSUs are based on a December 31, 2010,2011, closing price of $43.48$56.02 per share. For a detailed description of outstanding restricted stock units,RSUs, see the “Outstanding Equity Awards at 2011 Fiscal Year-End Table.Year-End.” Unvested restricted stock units would be forfeited under voluntaryVoluntary termination, involuntary not for cause termination, orand for cause termination.termination are not applicable, but see footnote 1 with respect to early retirement eligibility under these scenarios. In the event of early retirement, Mr. McArthur would receive a pro rata percentage of all unvested RSUs, based upon the number of full months elapsed between the grant date and the date of early retirement. Mr. McArthur is not eligible for early retirement or normal retirement. In the event of involuntary or good reason termination (CIC), all outstanding restricted stock unitsRSUs would vest immediately. Upon death or disability, all outstanding restricted stock unitsRSUs that are more than one year past their grant date would vest immediately. SharesRSUs that are less than one year past their grant date would be forfeited. Mr. McArthur would immediately vest restricted stock unitsRSUs granted in 2007, 2008,2009, and 2009;2010; and would forfeit restricted stock unitsRSUs granted in 2010.2011.
5 Amounts shown for restricted stock shares are based on a December 31, 2010, closing price of $43.48 per share. For a detailed description of outstanding restricted stock shares, see the “Outstanding Equity Awards at Fiscal Year-End Table.” Unvested restricted stock would be forfeited under voluntary termination, involuntary not for cause termination, or for cause termination. Mr. McArthur is not eligible for early retirement or normal retirement. In the event of involuntary or good reason termination (CIC), all outstanding restricted stock shares would vest immediately. Upon death or disability, all outstanding restricted stock shares that are more than one year past their grant date would vest immediately. Shares that are less than one year past their grant date would be forfeited. All of Mr. McArthur’s restricted stock grant dates are beyond the one-year threshold; therefore, all outstanding restricted stock shares would vest immediately.
7All outstanding deferred compensation balances will be paid immediately following termination, subject to IRC Section 409(a) regulations, under voluntary termination, involuntary not for cause termination, for cause termination, involuntary or good reason termination (CIC), death and disability.each scenario. Mr. McArthur is not eligible for early retirement or normal retirement. Unvested MICP deferral premiums would be forfeited. Mr. McArthur would forfeit $0 of unvested deferred MICP premiums.
8No post-retirement health care benefits apply under voluntary termination, for cause termination, death or disability. Mr. McArthur is not eligible for early retirement or normal retirement. Under involuntary not for cause termination, Mr. McArthur would be reimbursed for 18 months of COBRA premiums at $923.64$990.95 per month as provided in his employment agreement. In the event of involuntary or good reason termination (CIC), the Management Change-in-Control Plan provides for Company-paidProgress Energy-paid medical, dental and vision coverage in the same plan Mr. McArthur was participating in prior to termination for 36 months at $905.53$971.52 per month.
9Mr. McArthur would be eligible to receive $500,000 proceeds from the executive AD&D policy.
10Upon a change in control, the Management Change-in-Control Plan provides for our Parent to pay all excise taxes under IRC Section 280G plus applicable gross-up amounts for Mr. McArthur. Under IRC Section 280G, Mr. McArthur would be subject to excise tax on $4,372,154$5,663,739 of excess parachute payments above his base amount. Those excess parachute payments result in $874,431$1,132,748 of excise taxes, $1,439,541$1,984,120 of tax gross-ups, and $33,553$45,195 of employer Medicare tax related to the excise tax payment.
DIRECTOR COMPENSATION
Our Board of Directors is comprised of employees of Progress Energy and its affiliates. 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, including the Company. Therefore, they do not receive an annual retainer, attendance fees or any additional compensation for their service as directors of the Company.
EQUITY COMPENSATION PLAN INFORMATION
There are no compensation plans under which equity securities of the Company are authorized for issuance. Our Parent sponsors an equity compensation plan in which certain employees of the Company participate.
PROPOSAL 2—ADVISORY (NONBINDING) VOTE ON
EXECUTIVE COMPENSATION
Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“the Dodd-Frank Act”) requires that companies seek a nonbinding shareholder vote to approve the compensation package of their named executive officers (“NEOs”), as disclosed in the annual proxy statement. On January 25, 2011, the SEC adopted final rules to implement the provisions of the Dodd-Frank Act that relate to shareholder approval of executive compensation arrangements. This proposal, commonly known as a “say-on-pay” proposal, gives you as a shareholder the opportunity to express your views on the Company’s executive compensation program.
The advisory vote on executive compensation is a nonbinding vote on the compensation of the Company’s NEOs, as described in the Compensation Discussion and Analysis section, the tabular disclosure regarding such compensation and the accompanying narrative disclosure set forth in this Proxy Statement. The advisory vote is not a vote on the compensation of the Company’s Board of Directors or the Company’s compensation policies as they relate to risk management. Your vote will not directly affect or otherwise limit any existing compensation or award arrangements of any of our NEOs. Your vote is advisory and is not binding on the Board of Directors; however, the Compensation Committee of our Parent’s Board will take the outcome of the vote into account when considering future executive compensation arrangements.
At the Company’s 2011 Annual Meeting of Shareholders, a substantial majority of the votes cast on the say-on-pay proposal were voted in favor of the proposal. The Compensation Committee of our Parent’s Board believes this affirms our shareholders’ support of the Company’s approach to executive compensation.
The Company’s executive compensation philosophy aligns with that of our Parent, and is designed to provide competitive compensation consistent with key principles we believe are critical to our long-term success. The Company is committed to providing an executive compensation program that aligns our management team’s interests with shareholders’ expectations of earnings per share growth and a competitive dividend yield; effectively compensates our management team for actual performance over the short- and long-term; rewards operating performance results that are sustainable and consistent with reliable and efficient electric service; attracts and retains an experienced and effective management team; motivates and rewards our management team to produce growth and performance for our shareholders that are sustainable, consistent with prudent risk-taking, and based on sound corporate governance practices; and provides market competitive levels of target (i.e., opportunity) compensation.
We urge you to consider the following highlights of our 20102011 executive compensation program in connection with your vote on this proposal:
See pages 20 to 3436 of this Proxy Statement for more information regarding these elements of our executive program and decisions.
FOR THESE REASONS, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT THE SHAREHOLDERS VOTE, ON AN ADVISORY BASIS, “FOR” THE FOLLOWING
FOLLOWING RESOLUTION:
RESOLVED, THAT OUR SHAREHOLDERS APPROVE, ON AN ADVISORY BASIS, THE
COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THE
COMPENSATION DISCUSSION AND ANALYSIS, THE COMPENSATION TABLES AND ANY
RELATED NARRATIVE DISCUSSION CONTAINED IN THIS PROXY STATEMENT.
Carolina Power & LightProxy Statement |
REPORT OF THE AUDIT AND CORPORATE
PERFORMANCE COMMITTEE
The Audit and Corporate Performance Committee of Progress Energy’s Board of Directors (the “Audit Committee”) has reviewed and discussed the audited financial statements of the Company for the fiscal year ended December 31, 2010,2011, with the Company’s management and with Deloitte & Touche LLP, the Company’s independent registered public accounting firm. The Audit Committee discussed with Deloitte & Touche LLP the matters required to be discussed by Statement on Auditing Standards No. 114, as amended (AICPA, Professional Standards, Vol. 1 AU Section 380) as adopted by the Public Company Accounting Oversight Board in Rule 3200T, by the SEC’s Regulation S-X, Rule 2-07, and by the NYSE’s Corporate Governance Rules, as may be modified, amended or supplemented.
The Audit Committee has received the written disclosures and the letter from Deloitte & Touche LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence and has discussed with Deloitte & Touche LLP its independence.
Based upon the review and discussions noted above, the Audit 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, 2010,2011, for filing with the SEC.
Audit and Corporate Performance Committee | |
of the Progress Energy Board of Directors | |
Theresa M. Stone, Chair | |
James E. Bostic, Jr. | |
W. Steven Jones | |
Charles W. Pryor, Jr. | |
Carlos A. Saladrigas | |
Alfred C. Tollison, Jr. |
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 foregoing 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.
PROXY STATEMENT |
DISCLOSURE OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S FEES
The Audit and Corporate Performance Committee of Progress EnergyEnergy’s Board of Directors (the “Audit Committee”) has actively monitored all services provided by its independent registered public accounting firm, Deloitte & Touche LLP, the member firms of Deloitte & Touche Tohmatsu, and their respective affiliates (collectively, “Deloitte”) and the relationship between audit and non-auditnonaudit services provided by Deloitte. Progress Energy has adopted policies and procedures for pre-approvingpreapproving all audit and permissible non-auditnonaudit services rendered by Deloitte, and the fees billed for those services. Those policies and procedures apply to Progress Energy and its subsidiaries, including the Company. Progress Energy’s Controller is responsible to the Audit Committee for enforcement of this procedure, and for reporting noncompliance. Pursuant to the pre-approvalpreapproval policy, the Audit Committee specifically pre-approvedpreapproved the use of Deloitte for audit, audit-related and tax services.
The pre-approvalpreapproval policy requires management to obtain specific pre-approvalpreapproval from the Audit Committee for the use of Deloitte for any permissible non-auditnonaudit services, which generally are limited to tax services, including tax compliance, tax planning, and tax advice services such as return review and consultation and assistance. Other types of permissible non-auditnonaudit services will not be considered for approval except in limited instances, which could include circumstances in which proposed services provide significant economic or other benefits to us. In determining whether to approve these services, the Audit Committee will assess whether these services adversely impair the independence of Deloitte. Any permissible non-auditnonaudit services provided during a fiscal year that (i) do not aggregate to more than 5 percent of the total fees paid to Deloitte for all services rendered during that fiscal year and (ii) were not recognized as non-auditnonaudit services at the time of the engagement must be brought to the attention of Progress Energy’s Controller for prompt submission to the Audit Committee for approval. Thesede minimisnon-auditnonaudit services must be approved by the Audit Committee or its designated representative before the completion of the services. Non-auditNonaudit services that are specifically prohibited under the Sarbanes-Oxley Act Section 404, SEC rules, and Public Company Accounting Oversight Board (“PCAOB”) rules are also specifically prohibited under the policy.
Prior to approval of permissible tax services by the Audit Committee, the policy requires Deloitte to (1) describe in writing to the Audit Committee (a) the scope of the service, the fee structure for the engagement and any side letter or other amendment to the engagement letter or any other agreement between the Company and Deloitte relating to the service and (b) any compensation arrangement or other agreement, such as a referral agreement, a referral fee or fee-sharing arrangement, between Deloitte and any person (other than the Company) with respect to the promoting, marketing or recommending of a transaction covered by the service; and (2) discuss with the Audit Committee the potential effects of the services on the independence of Deloitte.
The policy requires Progress Energy’s Controller to update the Audit Committee throughout the year as to the services provided by Deloitte and the costs of those services. The policy also requires Deloitte to annually confirm its independence in accordance with SEC and NYSE standards. The Audit Committee will assess the adequacy of this policy as it deems necessary and revise accordingly.
Set forth in the table below is certain information relating to the aggregate fees billed by Deloitte for professional services rendered to us for the fiscal years ended December 31, 20102011 and 2009.
2011 | 2010 | |||||
Audit fees | $ | 1,901,000 | $ | 1,628,000 | ||
Audit-related fees | 1,000 | 1,000 | ||||
Tax fees | 15,000 | 18,000 | ||||
Other fees | – | – | ||||
Total fees | $ | 1,917,000 | $ | 1,647,000 |
2010 | 2009 | |||||
Audit fees | $ | 1,628,000 | $ | 1,776,000 | ||
Audit-related fees | 1,000 | 1,000 | ||||
Tax fees | 18,000 | 15,000 | ||||
Other fees | — | — | ||||
Total fees | $ | 1,647,000 | $ | 1,792,000 | ||
Carolina Power & LightProxy Statement |
Audit fees include fees billed for services rendered in connection with (i) the audits of our annual financial statements; (ii) the reviews of the financial statements included in our Quarterly Reports on Form 10-Q; (iii) accounting consultations arising as part of the audits; and (iv) audit services in connection with statutory, regulatory or other filings, including comfort letters and consents in connection with SEC filings and financing transactions.
Audit-related fees include fees billed for (i) special procedures and letter reports; (ii) benefit plan audits when fees are paid by us rather than directly by the plan; and (iii) accounting consultations for prospective transactions not arising directly from the audits.research tool subscriptions.
Tax fees include fees billed for tax compliance matters and tax planning and advisory services.matters.
The Audit Committee has concluded that the provision of the non-auditnonaudit services listed above as “Tax fees” is compatible with maintaining Deloitte’s independence.
None of the services provided required approval by the Audit Committee pursuant to thede minimis waiver provisions described above.
PROXY STATEMENT |
PROPOSAL 4—3—RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Audit and Corporate Performance Committee of Progress Energy’s Board of Directors (the “Audit Committee”) has selected Deloitte & Touche LLP (“Deloitte & Touche”) as our independent registered public accounting firm for the fiscal year ending December 31, 2011,2012, and has directed that managementthe Company’s Board submit the selection of that independent registered public accounting firm for ratification by our shareholders at the 20112012 Annual Meeting of the Shareholders. Deloitte & Touche has served as the independent registered public accounting firm for our Company and its predecessors since 1930. In selecting Deloitte & Touche, the Audit Committee considered carefully Deloitte & Touche’s previous performance for us, its independence with respect to the services to be performed and its general reputation for adherence to professional auditing standards. A representative of Deloitte & Touche 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. Shareholder ratification of the selection of Deloitte & Touche as our independent registered public accounting firm is not required by our By-Laws or otherwise. However, we are submitting the selection of Deloitte & Touche to the shareholders for ratification as a matter of good corporate practice. If the shareholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain Deloitte & Touche. Even if the shareholders ratify the selection, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if it is determined that such a change would be in the best interest of the Company and its shareholders.
Valid proxies received pursuant to this solicitation will be voted in the manner specified. Where no specification is made, the shares represented by the accompanying proxy will be voted“FOR” the ratification of the selection of Deloitte & Touche as our independent registered public accounting firm. Votes (other than votes withheld) will be cast pursuant to the accompanying proxy for the ratification of the selection of Deloitte & Touche.
The proposal to ratify the selection of Deloitte & Touche to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2011,2012, requires approval by a majority of the votes actually cast by holders of shares present in person or represented by proxy at the online Annual Meeting of Shareholders and entitled to vote thereon. Abstentions from voting and broker nonvotes will not count as shares voted and will not have the effect of a “negative” vote, as described in more detail under the heading “PROXIES” on page 2.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE
RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE AS OUR INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM.
Carolina Power & LightProxy Statement |
FINANCIAL STATEMENTS
Our 20102011 Annual Report, which includes our Parent’s consolidated financial statements as of December 31, 2010,2011, and 2009,2010, and for each of the three years in the period ended December 31, 2010,2011, together with the report of Deloitte & Touche LLP, our independent registered public accounting firm, was provided to those who were shareholders of record as of the close of business on March 4, 2011.
FUTURE SHAREHOLDER PROPOSALS
Shareholder proposals submitted for inclusion in the proxy statement for our 20122013 Annual Meeting must be received no later than December 2, 2011,1, 2012, at our principal executive offices, addressed to the attention of:
Corporate Secretary | |
Carolina Power & Light Company d/b/a | |
Progress Energy Carolinas, Inc. | |
P.O. Box 1551 | |
Raleigh, North Carolina 27602-1551 |
Upon receipt of any such proposal, we will determine whether or not to include such proposal in the proxy statement and proxy in accordance with regulations governing the solicitation of proxies.
In order for a shareholder to nominate a candidate for director, under our By-Laws timely notice of the nomination must be received by the Corporate Secretary of the Company either by personal delivery or by United States registered or certified mail, postage pre-paid, not later than the close of business on the 120th calendar day before the date our proxy statement was released to shareholders in connection with the previous year’s annual meeting. In no event shall the public announcement of an adjournment or postponement of an annual meeting or the fact that an annual meeting is held after the anniversary of the preceding annual meeting commence a new time period for a shareholder’s giving of notice as described above. The shareholder filing the notice of nomination must include:
– | the name and address of record of the shareholder who intends to make the nomination, the beneficial owner, if any, on whose behalf the nomination is made and of the person or persons to be nominated; | |
– | the class and number of our shares that are owned by the shareholder and such beneficial owner; | |
– | a representation that the shareholder is a holder of record of our shares entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; and | |
– | a description of all arrangements, understandings or relationships between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder. |
– | the name, age, business address and, if known, residence address of such person; | |
– | the principal occupation or employment of such person; |
– | the class and number of shares of our stock that are beneficially owned by such person; |
PROXY STATEMENT |
– | any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors or is otherwise required by the rules and regulations of the SEC promulgated under the Securities Exchange Act of 1934; and | |
– | the written consent of such person to be named in the proxy statement as a nominee and to serve as a director if elected. |
In order for a shareholder to bring other business before a shareholder meeting, we must receive timely notice of the proposal not later than the close of business on the 60th day before the first anniversary of the immediately preceding year’s annual meeting. Such notice must include:
These requirements are separate from the requirements a shareholder must meet to have a proposal included in our proxy statement.
Any shareholder desiring a copy of our By-Laws will be furnished one without charge upon written request to the Corporate Secretary. A copy of the By-Laws, as amended and restated on May 13, 2009, was filed as an exhibit to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, and is available through the SEC’s website atwww.sec.gov.
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.
Carolina Power & LightProxy Statement |
Exhibit A
POLICY AND PROCEDURES WITH RESPECT TO
RELATED PERSON TRANSACTIONS
A. Policy Statement
The Company’s Board of Directors (the “Board”) recognizes that Related Person Transactions (as defined below) can present heightened risks of conflicts of interest or improper valuation or the perception thereof. Accordingly, the Company’s general policy is to avoid Related Person Transactions. Nevertheless, the Company recognizes that there are situations where Related Person Transactions might be in, or might not be inconsistent with, the best interests of the Company and its stockholders. These situations could include (but are not limited to) situations where the Company might obtain products or services of a nature, quantity or quality, or on other terms, that are not readily available from alternative sources or when the Company provides products or services to Related Persons (as defined below) on an arm’s length basis on terms comparable to those provided to unrelated third parties or on terms comparable to those provided to employees generally. The Company, therefore, has adopted the procedures set forth below for the review, approval or ratification of Related Person Transactions.
This Policy has been approved by the Board. The Corporate Governance Committee (the “Committee”) will review and may recommend to the Board amendments to this Policy from time to time.
B. Related Person Transactions
For the purposes of this Policy, a “Related Person Transaction” is a transaction, arrangement or relationship, including any indebtedness or guarantee of indebtedness, (or any series of similar transactions, arrangements or relationships) in which the Company (including any of its subsidiaries) was, is or will be a participant and the amount involved exceeds $120,000, and in which any Related Person had, has or will have a direct or indirect material interest.
For purposes of this Policy, a “Related Person” means:
1. | any person who is, or at any time since the beginning of the Company’s last fiscal year was, a director or executive officer (i.e. members of the Senior Management Committee and the Controller) of the Company, Progress Energy Carolinas, Inc., or Progress Energy Florida, Inc. or a nominee to become a director of the Company, Progress Energy Carolinas, Inc., or Progress Energy Florida, Inc.; | ||
2. | any person who is known to be the beneficial owner of more than 5% of any class of the voting securities of the Company or its subsidiaries; | ||
3. | any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of the director, executive officer, nominee or more than 5% beneficial owner, and any person (other than a tenant or employee) sharing the household of such director, executive officer, nominee or more than 5% beneficial owner; and | ||
4. | any firm, corporation or other entity in which any of the foregoing persons is employed or is a general partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest. |
PROXY STATEMENT |
C. Approval Procedures
1. | The Board has determined that the Committee is best suited to review and approve Related Person Transactions. Accordingly, at each calendar year’s first regularly scheduled Committee meeting, management shall recommend Related Person Transactions to be entered into by the Company for that calendar year, including the proposed aggregate value of such transactions if applicable. After review, the Committee shall approve or disapprove such transactions and at each subsequently scheduled meeting, management shall update the Committee as to any material change to those proposed transactions. | ||
2. | In determining whether to approve or disapprove each related person transaction, the Committee will consider various factors, including the following: |
The Committee will only approve those related person transactions that are in, or are not inconsistent with, the best interests of the Company and its shareholders. | |||
3. | In the event management recommends any further Related Person Transactions subsequent to the first calendar year meeting, such transactions may be presented to the Committee for approval at the next Committee meeting. In these instances in which the Legal Department, in consultation with the President and Chief Operating Officer, determines that it is not practicable or desirable for the Company to wait until the next Committee meeting, any further Related Person Transactions shall be submitted to the Chair of the Committee (who will possess delegated authority to act between Committee meetings). The Chair of the Committee shall report to the Committee at the next Committee meeting any approval under this Policy pursuant to his/her delegated authority. | ||
4. | No member of the Committee shall participate in any review, consideration or approval of any Related Person Transaction with respect to which such member or any of his or her immediate family members is the Related Person. The Committee (or the Chair) shall approve only those Related Person Transactions that are in, or are not inconsistent with, the best interests of the Company and its stockholders, as the Committee (or the Chair) determines in good faith. The Committee or Chair, as applicable, shall convey the decision to the President and Chief Operating Officer, who shall convey the decision to the appropriate persons within the Company. |
Carolina Power & LightProxy Statement |
D. Ratification Procedures
In the event the Company’s Chief Executive Officer, President and Chief Operating Officer, Chief Financial Officer or General Counsel becomes aware of a Related Person Transaction that has not been previously approved or previously ratified under this Policy, said officer shall immediately notify the Committee or Chair of the Committee, and the Committee or Chair shall consider all of the relevant facts and circumstances regarding the Related Person Transaction. Based on the conclusions reached, the Committee or the Chair shall evaluate all options, including but not limited to ratification, amendment, termination or recession of the Related Person Transaction, and determine how to proceed.
E. Review of Ongoing Transactions
At the Committee’s first meeting of each calendar year, the Committee shall review any previously approved or ratified Related Person Transactions that remain ongoing and have a remaining term of more than six months or remaining amounts payable to or receivable from the Company of more than $120,000. Based on all relevant facts and circumstances, taking into consideration the Company’s contractual obligations, the Committee shall determine if it is in the best interests of the Company and its stockholders to continue, modify or terminate the Related Person Transaction.
F. Disclosure
All Related Person Transactions are to be disclosed in the filings of the Company, Progress Energy Carolinas, Inc. or Progress Energy Florida, Inc., as applicable, with the Securities and Exchange Commission as required by the Securities Act of 1933 and the Securities Exchange Act of 1934 and related rules. Furthermore, all Related Person Transactions shall be disclosed to the Corporate Governance Committee of the Board and anymaterial Related Person Transaction shall be disclosed to the full Board of Directors.
The material features of this Policy shall be disclosed in the Company’s annual report on Form 10-K or in the Company’s proxy statement, as required by applicable laws, rules and regulations.
IMPORTANT ANNUAL MEETING INFORMATION |
Vote by telephone
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Using ablack ink pen, mark your votes with anX as shown in this example. Please do not write outside the designated areas. | X |
Annual Meeting Proxy Card |
6IF YOU HAVE NOT VOTED VIA THE |
A | Proposals — | The Board of Directors recommends a voteFOR all the nominees listed in Proposal 1,FOR Proposal 2 andFOR |
1. Election of Directors: | |||||||||||||||||||||||
For | Withhold | For | Withhold | For | Withhold | For | Withhold | ||||||||||||||||
01 - J. Corbett | c | c | 02 - W. Johnson | c | c | 03 - J. Lyash | c | c | 04 - J. McArthur | c | c | ||||||||||||
05 - M. Mulhern | c | c | 06 - J. Scarola | c | c | 07 - P. Sims | c | c | 08 - L. Yates | c | c |
For | Against | Abstain | 1 Yr | 2 Yrs | 3 Yrs | Abstain | For | Against | Abstain | For | Against | Abstain | |||||||
2. | Advisory (nonbinding) vote on executive compensation. | c | c | c | 3. | Advisory (nonbinding) vote on the frequency of the advisory (nonbinding) vote on executive compensation. | c | c | c | Advisory (nonbinding) vote to approve the Company’s executive compensation. | c | c | c | 3. | Ratification of the selection of Deloitte & Touche LLP as Carolina Power & Light Company’s independent registered public accounting firm for 2012. | c | c | c | |
4. | Ratification of the selection of Deloitte & Touche LLP as Carolina Power & Light Company’s independent registered public accounting firm for 2011. | c | c | c | 5. | In their discretion the proxies are authorized to vote upon such other business that is properly brought before the meeting or any adjournment thereof. | In their discretion the proxies are authorized to vote upon such other business that is properly brought before the meeting or any adjournment thereof. |
B | Non-Voting Items |
Change of Address— Please print new address below. | |
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C | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below |
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. |
Date (mm/dd/yyyy) — Please print date below. | Signature 1 — Please keep signature within the box. | Signature 2 — Please keep signature within the box. | ||
Dear Shareholder,
Please take note of the important information enclosed with the Proxy Card. That information relates to the management and operations 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 boxes on this Proxy Card to indicate how you would like your shares to be voted, then sign the card and return it in the enclosed postage paid envelope. If you prefer, you may vote by telephone by following the instructions in the proxy materials.
Your vote must be submitted prior to the Annual Meeting of Shareholders to be held May 11, 2011,7, 2012, unless you plan to vote in person atduring the Meeting.
Thank you in advance for your prompt consideration of these matters.
6IF YOU HAVE NOT VOTED VIA THE |
Annual Meeting Proxy Card |