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[LOGO] TECO ENERGY*
March 4, 2002
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 17, 2002
The Annual Meeting of the Shareholders of TECO Energy, Inc. will be held at
the principal office of the Corporation, TECO Plaza, 702 North Franklin Street,
Tampa, Florida, on Wednesday, April 17, 2002 at 11:30 a.m., for the following
purposes:
1. To elect four directors.
2. To consider and act on such other matters as may properly come before
the meeting.
Shareholders of record at the close of business on February 8, 2002 will be
entitled to vote at the meeting and at any adjournments thereof.
Even if you plan to attend the meeting, you are requested to either mark,
sign and date the enclosed proxy card and return it promptly in the accompanying
envelope or vote by telephone or internet by following the instructions on the
proxy card. If you attend the meeting and wish to vote in person, your proxy
will not be used.
By order of the Board of Directors,
D. E. Schwartz, Secretary
TECO ENERGY, INC.
P.O. Box 111 Tampa, Florida 33601 (813) 228-4111
TECO ENERGY, INC.
P.O. Box 111, Tampa, Florida 33601
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Directors of TECO
Energy, Inc. (the "Corporation") to be voted at the Annual Meeting of
Shareholders of the Corporation to be held at the time and place and for the
purposes set forth in the foregoing notice. This proxy statement and the
enclosed proxy are being mailed to shareholders beginning on or about March 4,
2002.
VOTING OF SECURITIES
As of February 8, 2002, the record date for the determination of
shareholders entitled to vote at the meeting, the Corporation had outstanding
139,667,978 shares of Common Stock, $1 par value ("Common Stock"), the only
class of stock of the Corporation outstanding and entitled to vote at the
meeting. The holders of Common Stock are entitled to one vote for each share
registered in their names on the record date with respect to all matters to be
acted upon at the meeting.
The presence at the meeting, in person or by proxy, of a majority of the
shares outstanding on the record date will constitute a quorum. Abstentions and
broker non-votes will be considered as shares present for purposes of
determining the presence of a quorum.
A shareholder submitting a proxy may revoke it at any time before it is
exercised at the meeting by filing with the Secretary of the Corporation a
written notice of revocation, submitting a proxy bearing a later date or
attending the meeting and voting in person.
Shares represented by valid proxies received will be voted in the manner
specified on the proxies. If no instructions are indicated on the proxy, the
proxy will be voted for the election of the nominees for director named below.
The affirmative vote of a majority of the Common Stock represented at the
meeting in person or by proxy will be required to elect directors. Abstentions
will be considered as represented at the meeting and, therefore, will be the
equivalent of a negative vote; broker non-votes will not be considered as
represented at the meeting.
ELECTION OF DIRECTORS
The Corporation's Bylaws provide for the Board of Directors to be divided
into three classes, with each class to be as nearly equal in number as possible.
As the term of one class of directors expires, their successors are elected for
a term of three years at each annual meeting of shareholders. Messrs. Ausley,
Ferman, Hall and Welch have been nominated for terms expiring in 2005. Each of
these nominees has consented to serve if elected. If any nominee is unable to
serve, the shares represented by valid proxies will be voted for the election of
such other person as the Board may designate.
The following table contains certain information as to the nominees and
each person whose term of office as a director will continue after the meeting.
Information on the share ownership of each of these individuals is included
under "Share Ownership" on page 4.
Name Age Principal Occupation During Director Present Term
---- --- Last Five Years and Other Since (1) Expires
-------- -------
Directorships Held (1)
---------------------
*DuBose Ausley 64 Chairman, Ausley & McMullen 1992 2002
(attorneys), Tallahassee, Florida; also a
director of Sprint Corporation and
Chairman of Capital City Bank Group,
Inc.
Sara L. Baldwin 70 Private Investor; formerly Vice President, 1980 2003
Baldwin and Sons, Inc. (insurance
agency), Tampa, Florida
Robert D. Fagan 57 Chairman of the Board, President and 1999 2003
Chief Executive Officer, TECO Energy,
Inc.; formerly President, PP&L Global,
Inc. (diversified energy company), Fairfax,
Virginia
*James L. Ferman, Jr. 58 President, Ferman Motor Car Company, 1985 2002
Inc. (automobile dealerships), Tampa,
Florida; also a director of Florida
Investment Advisers, Inc. and Chairman
of The Bank of Tampa and its holding
company, The Tampa Banking Company
Luis Guinot, Jr. 66 Partner, Shapiro Sher & Guinot, P.A. 1999 2003
(attorneys), Washington, D.C.; formerly
United States Ambassador to the Republic
of Costa Rica
*Ira D. Hall 57 Private Investor; formerly Treasurer, 2001 2002
Texaco Inc. (integrated oil company),
White Plains, New York; prior thereto,
General Manager, Alliance Management,
Texaco Inc.; and prior thereto, Director of
Business Development, IBM Global
Services, IBM Corp. (information
technology products and services
company), Armonk, New York; also a
director of American Express Funds,
Imagistics International, Inc., Reynolds
and Reynolds Company and The Williams
Companies, Inc.
2
Name Age Principal Occupation During Director Present Term
---- --- Last Five Years and Other Since (1) Expires
-------- -------
Directorships Held (1)
---------------------
Tom L. Rankin 61 Independent Investment Manager; 1997 2004
formerly Chairman of the Board and Chief
Executive Officer, Lykes Energy, Inc. (the
former holding company for Peoples Gas
System) and Lykes Bros. Inc.; also a
director of Media General, Inc.
William D. Rockford 56 President, Private Power, LLC (power 2000 2004
generation), Oak Brook, Illinois; formerly
Managing Director, Chase Securities Inc.
(financial services), New York, New York
William P. Sovey 68 Chairman of the Board and former Chief 1996 2003
Executive Officer, Newell Rubbermaid
Inc. (consumer products), Freeport,
Illinois; also a director of Acme Metals,
Inc. and Actuant Corporation
J. Thomas Touchton 63 Managing Partner, The Witt-Touchton 1987 2004
Company (private investment
partnership), Tampa, Florida; also a
director of 26 Merrill Lynch-sponsored
mutual funds
John A. Urquhart 73 President, John A. Urquhart Associates 1991 2004
(management consultants), Fairfield,
Connecticut; formerly Senior Advisor to
the Chairman, Enron Corp. (energy and
communications), Houston, Texas; prior
thereto, Senior Vice President/Executive
Vice President, G.E. Industrial & Power
Systems, General Electric Company; also
a director of Catalytica Energy Systems,
Inc. and Hubbell Incorporated
*James O. Welch, Jr. 70 Retired; formerly Vice Chairman, RJR 1976 2002
Nabisco, Inc. and Chairman, Nabisco
Brands, Inc.
____________
*Nominee for election as director
(1) All of the directors of the Corporation also serve as directors of Tampa
Electric Company, and the period of service shown includes service on Tampa
Electric Company's Board prior to the formation of the Corporation on
January 15, 1981. On April 15, 1981, the Corporation became the corporate
parent of Tampa Electric Company as a result of a reorganization.
The Board of Directors held six meetings in 2001. All directors attended
at least 75 percent of the meetings of the Board and Committees on which they
served, except for Mr. Sovey who attended 70 percent. The Corporation has
standing Audit, Compensation, Finance, and Governance and Nominating Committees
of the Board of Directors.
3
The Audit Committee met twice in 2001; its members are Messrs. Ferman,
Hall, Rankin and Touchton (Chairman). Additional information about the Audit
Committee is included in the Audit Committee Report on page 13.
The Compensation Committee, which met four times in 2001, is composed of
Mrs. Baldwin and Messrs. Sovey, Urquhart and Welch (Chairman). For additional
information about the Compensation Committee, see the Compensation Committee
Report on Executive Compensation on page 7.
The Finance Committee, which assists the Board in formulating the financial
policies of the Corporation and evaluating significant investments and other
financial commitments by the Corporation, met seven times in 2001; its members
are Messrs. Ausley, Fagan, Guinot, Rankin, Rockford and Urquhart (Chairman).
The Governance and Nominating Committee assists the Board with respect to
corporate governance matters, including the composition and functioning of the
Board. It met twice in 2001, and its members are Messrs. Touchton (Chairman),
Urquhart and Welch, each of whom is an independent director. Shareholder
recommendations for nominees for membership on the Board will be given due
consideration by the Committee for recommendation to the Board based on the
nominee's qualifications. Shareholder nominee recommendations should be
submitted in writing to the Chairman of the Governance and Nominating Committee
in care of the Corporate Secretary.
The Corporation paid legal fees of $1,184,890 for 2001 to Ausley &
McMullen, of which Mr. Ausley serves as Chairman. The Corporation also paid
legal fees of $72,146 for 2001 to Shapiro Sher & Guinot, of which Mr. Guinot
serves as a partner.
In 2000, the Corporation guaranteed a $250,000 loan made by a commercial
bank to Richard Lehfeldt, Senior Vice President-External Affairs, in connection
with Mr. Lehfeldts's purchase of a home in Tampa. The loan was repaid in full
in 2001.
Compensation of Directors
Directors who are not employees or former employees of the Corporation or
any of its subsidiaries are paid an annual retainer of $27,000 and attendance
fees of $750 for each meeting of the Board of the Corporation, $750 for each
meeting of the Board of Tampa Electric Company and $1,000 for each meeting of a
Committee of the Board on which they serve. Each director who serves as a
Committee Chairman receives an additional annual retainer of $5,000. Directors
may elect to receive all or a portion of their compensation in the form of
Common Stock. Directors may also elect to defer any of their cash compensation
with a return calculated at either one percent above the prime rate or a rate
equal to the total return on the Corporation's Common Stock.
All non-employee directors participate in the Corporation's 1997 Director
Equity Plan, which allows for a variety of equity-based awards. Currently, each
new non-employee director receives an option for 10,000 shares of Common Stock
and each reelected non-employee director receives an annual grant consisting of
500 shares and an option for 2,500 shares of Common Stock. The exercise price
for these options is the fair market value on the date of grant. They are
exercisable immediately and expire ten years after grant or earlier as provided
in the plan following termination of service on the Board.
SHARE OWNERSHIP
There is no person known to the Corporation to be the beneficial owner of
more than five percent of the outstanding Common Stock as of December 31, 2001.
The following table sets forth the shares of Common Stock beneficially
owned as of January 31, 2002 by the Corporation's directors and nominees, its
executive officers named in the summary compensation table below and its
directors and executive officers as a group. Except as otherwise noted, such
persons have sole investment and voting power over the shares. The number of
shares of the Corporation's Common Stock beneficially owned by any director
4
or executive officer does not exceed 1% of such shares outstanding at January
31, 2002; the percentage beneficially owned by all directors and executive
officers as a group as of such date is 1.8%.
Name Shares (1) Name Shares (1)
---- ---------- ---- ----------
DuBose Ausley 39,719 John A. Urquhart 30,318 (7)
Sara L. Baldwin 37,170 (2) James O. Welch, Jr. 46,236 (8)
Robert D. Fagan 294,187 (3) John B. Ramil 123,149 (3)(9)
James L. Ferman, Jr. 60,295 (4)(5) Richard E. Ludwig 144,127 (3)(5)
Luis Guinot, Jr. 16,325 William N. Cantrell 167,126 (3)(10)
Ira D. Hall 10,000 Gordon L. Gillette 78,870 (3)
Tom L. Rankin 942,152 (5)(6) All directors and
William D. Rockford 14,113 executive officers
William P. Sovey 24,082 as a group (21 persons) 2,459,468 (3)(5)(11)
J. Thomas Touchton 51,950 (5)
(1) The amounts listed include the following shares that are subject to options
granted under the Corporation's stock option plans that are exercisable
within 60 days of January 31, 2002: Mrs. Baldwin and Messrs. Ausley,
Ferman, Rankin and Urquhart, 18,500 shares each; Mr. Fagan, 136,437 shares;
Messrs Guinot and Touchton, 14,500 shares each; Mr. Hall, 10,000 shares;
Mr. Rockford, 9,500 shares; Messrs. Sovey and Welch, 20,500 shares each;
Mr. Ramil, 77,361 shares; Mr. Ludwig, 84,319 shares; Mr. Cantrell, 76,837
shares; Mr. Gillette, 43,462 shares and all directors and executive
officers as a group, 806,797.
(2) Includes 350 shares held by a trust of which Mrs. Baldwin is a trustee.
(3) The amounts listed include the following shares that are held by benefit
plans of the Corporation for an officer's account: Mr. Fagan, 540 shares;
Mr. Ramil, 4,478 shares; Mr. Ludwig, 4,834 shares; Mr. Cantrell, 9,379
shares; Mr. Gillette, 6,182 shares and all directors and executive officers
as a group, 48,786 shares.
(4) Includes 27,420 shares owned jointly by Mr. Ferman and his wife. Also
includes 1,050 shares owned by Mr. Ferman's wife, as to which shares he
disclaims any beneficial interest.
(5) The amounts listed include the following shares that the following holders
of equity security units are entitled to receive upon the early settlement
of the purchase contracts issued as part of such units: Mr. Ferman, 8,305
shares; Mr. Rankin, 208 shares; Mr. Touchton, 5,814 shares; Mr. Ludwig
6,623 shares and all directors and executive officers as a group, 20,950
shares.
(6) Includes 1,343 shares owned by Mr. Rankin's wife, as to which shares he
disclaims any beneficial interest.
(7) Includes 1,000 shares owned by Mr. Urquhart's wife, as to which shares he
disclaims any beneficial interest.
(8) Includes 2,000 shares owned by a charitable foundation of which Mr. Welch
is a trustee. Also includes 2,500 shares owned by Mr. Welch's wife, as to
which shares he disclaims any beneficial interest.
(9) Includes 1,761 shares owned jointly by Mr. Ramil and other family members.
(10) Includes 16,600 shares owned by Mr. Cantrell's wife, as to which shares he
disclaims any beneficial interest.
(11) Includes a total of 53,480 shares owned jointly. Also includes a total of
22,493 shares owned by spouses, as to which shares beneficial interest is
disclaimed.
5
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following graph shows the cumulative total shareholder return on the
Corporation's Common Stock on a yearly basis over the five-year period ended
December 31, 2001, and compares this return with that of the S&P 500 Composite
Index and the S&P Electric Utilities Index. The graph assumes that the value of
the investment in the Corporation's Common Stock and each index was $100 on
December 31, 1996 and that all dividends were reinvested.
[GRAPH]
-------------------------------------------------------------------------
December 31,
-------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001
-------------------------------------------------------------------------
TECO Energy, Inc. $ 100 $ 122 $ 128 $ 90 $ 165 $ 142
-------------------------------------------------------------------------
S&P Electric Utilities Index $ 100 $ 126 $ 146 $ 118 $ 180 $ 165
-------------------------------------------------------------------------
S&P 500 Index $ 100 $ 133 $ 171 $ 208 $ 189 $ 166
------------------------------------------------------------------------
6
EXECUTIVE COMPENSATION
Compensation Committee Report On Executive Compensation
-------------------------------------------------------
The Compensation Committee of the Board of Directors, composed entirely of
independent, non-employee directors, recommends to the Board the compensation of
executive officers and administers the Corporation's long-term incentive plan.
The objective of the Corporation's compensation program is to enhance
shareholder value by attracting and retaining the talent needed to manage and
build the Corporation's businesses. The Committee seeks, therefore, to provide
compensation opportunities that are competitive and link the interests of
shareholders and executives.
Upon the Committee's recommendation, the Board has adopted stock ownership
guidelines of five times base salary for the CEO and three times base salary for
the other executive officers. These guidelines allow the executives five years
to acquire this amount of stock and do not recognize stock options as shares
owned.
The components of the Corporation's executive compensation program, base
salary, annual incentive awards and long-term incentive awards, are described
below.
Base Salary. Base salary is designed to provide each executive with a
-----------
fixed amount of annual compensation that is competitive with the marketplace.
The Corporation's salary structure for its executive officers utilizes various
salary grade ranges and associated midpoints. Each executive officer is
assigned to a salary grade by the Board, on the recommendation of the Committee,
based on the officer's experience level and scope of responsibility and a market
assessment conducted by the Corporation's outside consultant, Towers Perrin, of
the median compensation paid to executives with similar positions by
organizations having comparable revenues in the energy services industry and in
general industry. Each year, the Committee adjusts the salary ranges based on
surveys by outside consultants of expected changes in compensation levels at
general industrial and electric utility companies and recommends adjustments to
the base salaries for the executive officers. In 2001, adjustments were made to
the base salaries for each executive officer. In making these adjustments, the
Committee took into account the midpoint of the officer's assigned salary grade
and the Committee's subjective evaluation of the officer's individual
performance. For 2001, Mr. Fagan's base salary was 95% of the midpoint of his
salary grade.
Annual Incentive Awards. The Corporation has an annual incentive program
-----------------------
intended to encourage actions that contribute to improved operating and
financial results which provides for incentive awards based on the achievement
of corporate and individual performance goals. Target award percentages range
up to 70% for the CEO, 45-55% for the other named executive officers and lower
percentages for other officers, and are multiplied by the greater of the
midpoint of the officer's salary range or the officer's salary. In setting
these percentages, the Committee used data from the market assessment referred
to above. Under the Corporation's program, additional payments of up to 50% of
the target awards may be made if the goals are exceeded; lesser amounts may be
paid if the goals are not achieved, but only if the Corporation's net income
exceeds a threshold designated for that year. The Board may decide to adjust
awards if the plan formula would unduly penalize or reward management and, in
individual cases, to vary the calculated award based on the officer's total
performance.
The 2001 objectives for all the executive officers under the incentive
program included overall operating and financial performance targets measured by
the Corporation's net income and return on equity on an absolute basis and by
the Corporation's earnings per share growth and return on equity relative to
other companies in the industry. 60% of Mr. Fagan's 2001 award was based on
these factors. Additional quantitative targets were used for some of the other
executive officers including, in the case of certain officers, targets relating
specifically to the performance of the companies for which they have chief
operating responsibility.
In addition to measuring performance against the 2001 quantitative targets,
the Committee evaluated each executive's performance against qualitative
objectives. These objectives focused on aspects of the Corporation's business
that directly related to the executive officer's individual responsibilities.
40% of Mr. Fagan's 2001 award was based on these qualitative objectives. These
objectives related to the effective execution of corporate strategy and the
initiation of actions to accelerate growth and enhance shareholder value. The
Committee's review consisted of a subjective evaluation of the officer's
achievement of these objectives. Based on this evaluation and the Corporation's
7
2001 net income, earnings per share and return on equity, Mr. Fagan received an
incentive award of 70% of the midpoint of his salary grade.
Long-Term Incentive Awards. The long-term component of the Corporation's
--------------------------
incentive compensation program consists of equity-based grants which have been
in the form of stock options and restricted stock. These grants are designed to
create a mutuality of interest with shareholders by motivating the CEO and the
other executive officers and key personnel to manage the Corporation's business
so that the shareholders' investment will grow in value over time. The
Committee's policy has been to base individual awards on an annual study by
Towers Perrin comparing the value of long-term incentive grants to salary levels
in the energy services industry and in general industry.
The Committee does not normally consider the amount of an individual's
outstanding or previously granted options or shares in determining the size of
the grant. The 137,857 options and the 45,268 shares of performance-based
restricted stock granted to Mr. Fagan in 2001 reflected the policies described
above and, as in the case of the other executive officers, the results of the
Committee's review of his performance conducted when it considered his base
salary for 2001.
For 2001, the value of the long-term incentive grants to all executive
officers except Richard E. Ludwig was weighted with approximately two-thirds of
the value in performance-based restricted stock and one-third in stock options.
Mr. Ludwig's long-term incentive grants were weighted with three-fourths of the
value in performance-based restricted stock and one-fourth in stock options.
The performance-based restricted stock granted to Mr. Ludwig has a payout
dependent upon the net income and return on equity of TECO Power Services
Corporation over a three-year period. The performance-based restricted stock
granted to the other executive officers has a payout that is dependent upon the
total return of the Common Stock over a three-year period relative to that of
the median company (in terms of total return) in the Dow Jones Electric Utility
Index. If the Common Stock's total return is equal to that of the median
company during the three-year period, the payout will be equal to 90 percent of
the target amount. If the total return is in the top 10 percentile of the
companies in the index, the payout will be at 200 percent. If the total return
is in the bottom 1/3 of these companies, there will be no payout. A minimum
payout of 50 percent of target will be made if performance is equal to the 33
and 1/3 percentile. The payout for performance between the top 10 percent and
the bottom 1/3 is prorated.
With respect to qualifying compensation paid to executive officers under
Section 162(m) of the Internal Revenue Code, the Corporation does not expect to
have any significant amount of compensation exceeding the $1-million annual
limitation. Accordingly, the Committee has recommended that the Corporation
continue to structure its executive compensation program to meet the objectives
described in this report. Compensation attributable to the Corporation's
performance-based restricted stock and stock options is not subject to the
Section 162(m) limit because of the performance-based exemption.
By the Compensation Committee,
James O. Welch, Jr. (Chairman)
Sara L. Baldwin
William P. Sovey
John A. Urquhart
8
The following tables set forth certain compensation information for the
Chief Executive Officer of the Corporation and each of the four other most
highly compensated executive officers of the Corporation and its subsidiaries in
2001.
Summary Compensation Table
--------------------------
Long-Term
Annual Compensation
Compensation Awards
------------------------------ -----------------------------
Other
Annual Restricted Shares All Other
Name and Compen- Stock Underlying Compen-
Principal Position Year Salary Bonus (1) sation (2) Awards (3) Options/SARs (#) sation (4)
------------------ ---- -------- --------- ---------- ---------- ---------------- -------------
Robert D. Fagan 2001 $625,000 $463,478 137,857 $50,260
Chairman, President 2000 540,000 522,494 129,304 22,728
and CEO 1999 253,333 301,023 $243,070 $328,477 140,000 2,111
John B. Ramil 2001 343,000 243,524 43,482 24,574
President of Tampa 2000 299,000 225,847 41,377 12,212
Electric 1999 255,000 131,544 36,807 10,317
Richard E. Ludwig 2001 315,000 200,583 29,250 20,930
President of TECO 2000 260,000 183,330 36,057 11,448
Power Services 1999 225,500 150,000 12,000 10,215
William N. Cantrell 2001 300,000 167,902 36,070 19,997
President of Peoples 2000 275,000 176,117 28,447 11,427
Gas System and 1999 255,000 106,639 33,485 10,776
TECO Solutions
Gordon L. Gillette 2001 266,500 124,326 25,200 17,639
Sr. Vice President- 2000 232,500 175,351 28,447 9,997
Finance and Chief 1999 207,500 69,724 25,318 8,963
Financial Officer
(1) Since the portion of each executive officer's annual bonus that is based on
the Corporation's 2001 earnings per share growth and return on equity
relative to that of other companies in the industry is determined using
comparative data that was not available at the time of printing of this
document, this portion of the annual bonus for 2001 will be reported in the
2003 proxy statement as part of the 2001 bonus amount.
(2) Included in the reported amount is $239,472 for Mr. Fagan's relocation
expenses and an associated tax gross-up.
(3) The reported values of the restricted stock awards were determined using
the closing market price of the Common Stock on the date of grant.
Restricted stock holdings and the values thereof based on the closing price
of the Common Stock on December 31, 2001 were as follows: Mr. Fagan,
125,309 shares ($3,288,108); Mr. Ramil, 39,549 shares ($1,037,766); Mr.
Ludwig, 40,351 shares ($1,058,810); Mr. Cantrell, 34,065 shares ($893,866);
9
and Mr. Gillette, 25,593 shares ($671,560). Holders of restricted stock
receive the same dividends as holders of other shares of Common Stock.
(4) The reported amounts for 2001 consist of $372 in premiums paid by the
Corporation to the Executive Supplemental Life Insurance Plan, with the
balance in each case being employer contributions under the TECO Energy
Group Retirement Savings Plan and Retirement Savings Excess Benefit Plan.
Option/SAR Grants in Last Fiscal Year
-------------------------------------
Individual Grants
---------------------------------------------------
Number of % of Total
Shares Options/SARs Exercise Grant
Underlying Granted to or Base Date
Options/SARs Employees in Price Expiration Present
Name Granted(1) Fiscal Year Per Share Date Value(2)
---- ---------- ---------- --------- ---- --------
Robert D. Fagan 137,857 11.22 $31.575 4/17/11 $786,557
John B. Ramil 43,482 3.54 31.575 4/17/11 248,091
Richard E. Ludwig 29,250 2.38 31.575 4/17/11 166,889
William N. Cantrell 36,070 2.94 31.575 4/17/11 205,801
Gordon L. Gillette 25,200 2.05 31.575 4/17/11 143,781
(1) The options are exercisable in three equal annual installments beginning
one year from the date of grant.
(2) The values shown are based on the Black-Scholes valuation model and are
stated in current annualized dollars on a present value basis. The key
assumptions used for purposes of this calculation include the following:
(a) a 5.09% discount rate; (b) a volatility factor based upon the average
trading price for the 36-month period ending March 20, 2001; (c) a dividend
factor based upon the 3-year average dividend paid for the period ending
March 20, 2001; (d) the 10-year option term; and (e) an exercise price
equal to the fair market value on the date of grant. The values shown have
not been reduced to reflect the non-transferability of the options or the
vesting or forfeiture provisions. The actual value an executive may realize
will depend upon the extent to which the stock price exceeds the exercise
price on the date the option is exercised. Accordingly, the value, if any,
realized by an executive will not necessarily be the value determined by
the Black-Scholes model.
10
Aggregated Option/SAR Exercises in Last Fiscal Year and
-------------------------------------------------------
Fiscal Year-End Option/SAR Value
--------------------------------
Number of Shares Value of Unexercised
Underlying Unexercised In-The-Money
Options/SARs Options/SARs
at Year-End at Year-End
----------- ------------
Shares Acquired Value Exercisable/ Exercisable/
on Exercise (#) Realized($) Unexercisable Unexercisable
Name --------------- ----------- ------------- -------------
----
Robert D. Fagan 0 0 136,437 / 270,724 $566,337 / 605,767
John B. Ramil 0 0 77,361 / 83,335 $281,727 / 196,949
Richard E. Ludwig 10,000 114,500 84,319 / 57,288 $352,246 / 139,284
William N. Cantrell 5,000 61,850 76,837 / 66,195 $289,177 / 148,579
Gordon L. Gillette 0 0 43,462 / 52,603 $161,344 / 135,422
Long-Term Incentive Plans - Awards in Last Fiscal Year
------------------------------------------------------
Number of Performance or other
shares, units period until
or other rights maturation or payout Threshold (#) Target (#) Maximum (#)
--------------- -------------------- ------------- ---------- -----------
Name
----
Robert D. Fagan 45,268 April 1, 2001 to 22,634 45,268 90,536
March 31, 2004
John B. Ramil 11,250 April 1, 2001 to 5,625 11,250 22,500
March 31, 2004
Richard E. Ludwig 14,330 April 1, 2001 to 7,165 14,330 28,660
March 31, 2004
William N. Cantrell 9,554 April 1, 2001 to 4,777 9,554 19,108
March 31, 2004
Gordon L. Gillette 6,875 April 1, 2001 to 3,438 6,875 13,750
March 31, 2004
For additional information about the 2001 awards of performance-based
restricted stock, see the section of the Compensation Committee Report on
Executive Compensation entitled "Long-Term Incentive Awards" on page 8.
11
Pension Table
-------------
The following table shows estimated annual benefits payable under the
Corporation's pension plan arrangements for the named executive officers other
than Mr. Fagan.
Years of Service
-------------------------------------------------------
Final
Average Earnings 5 10 15 20 or More
---------------- ----- ------ ------ ----------
$300,000................. $ 45,000 $ 90,000 $135,000 $180,000
350,000................. 52,500 105,000 157,500 210,000
400,000................. 60,000 120,000 180,000 240,000
450,000................. 67,500 135,000 202,500 270,000
500,000................. 75,000 150,000 225,000 300,000
550,000................. 82,500 165,000 247,500 330,000
600,000................. 90,000 180,000 270,000 360,000
650,000................. 97,500 195,000 292,500 390,000
700,000................. 105,000 210,000 315,000 420,000
750,000................. 112,500 225,000 337,500 450,000
800,000................. 120,000 240,000 360,000 480,000
The annual benefits payable to each of the named executive officers are
equal to a stated percentage of such officer's final average earnings multiplied
by his number of years of service, up to a stated maximum. Final average
earnings are based on the greater of (a) the officer's final 36 months of
earnings or (b) the officer's highest three consecutive calendar years of
earnings out of the five calendar years preceding retirement. The amounts shown
in the table are based on 3% of such earnings and a maximum of 20 years of
service. The amount payable to Mr. Fagan is based on 20% of earnings plus 4% of
earnings for each year of service, up to a maximum of 60% of earnings.
The earnings covered by the pension plan arrangements are the same as those
reported as salary and bonus in the summary compensation table above. Years of
service for the named executive officers are as follows: Mr. Fagan (3 years),
Mr. Ramil (25 years), Mr. Ludwig (19 years), Mr. Cantrell (26 years) and Mr.
Gillette (20 years). The pension benefit is computed as a straight-life annuity
commencing at the officer's normal retirement age and is reduced by the
officer's Social Security benefits. The normal retirement age is 63 for Messrs.
Fagan, Ludwig and Cantrell, 63 and 2 months for Mr. Ramil and 64 for Mr.
Gillette.
The present value of the officer's pension benefit is, at the election of
the officer, payable in the form of a lump sum. The pension plan arrangements
also provide death benefits to the surviving spouse of an officer equal to 50%
of the benefit payable to the officer. If the officer dies during employment
before reaching his normal retirement age, the benefit is based on the officer's
service as if his employment had continued until such age. The death benefit is
payable for the life of the spouse.
Employment and Change in Control Arrangements
The Corporation has severance agreements with the named executive officers
under which payments will be made under certain circumstances in connection with
a change in control of the Corporation. A change in control means in general an
acquisition by any person of 30% or more of the Common Stock, a change in a
majority of the directors, a merger or consolidation of the Corporation in which
the Corporation's shareholders do not have at least 65% of the voting power in
the surviving entity or a liquidation or sale of the assets of the Corporation.
Each of these officers is required, subject to the terms of the severance
agreements, to remain in the employ of the Corporation for one year following a
potential change in control (as defined) unless a change in control earlier
occurs. The severance agreements provide that in the event employment is
terminated by the Corporation without cause (as defined) or by one of these
officers for good reason (as defined) in contemplation of or following a change
in control, or if the officer terminates his employment for
12
any reason during the thirteenth month following a change in control, the
Corporation will make a lump sum severance payment to the officer of three times
annual salary and bonus. In such event, the severance agreements also provide
for: (a) a cash payment equal to the additional retirement benefit which would
have been earned under the Corporation's retirement plans if employment had
continued for five years following the date of termination, in the case of Mr.
Fagan, and three years following the date of termination, in the case of the
other executive officers, (b) participation in the life, disability, accident
and health insurance plans of the Corporation for a three-year period except to
the extent such benefits are provided by a subsequent employer and (c) a payment
to compensate for the additional taxes, if any, payable on the benefits received
under the severance agreements and any other benefits contingent on a change in
control as a result of the application of the excise tax associated with Section
280G of the Internal Revenue Code. In addition, the terms of the Corporation's
stock options and restricted stock provide for vesting upon a change in control.
The Corporation has an agreement with Mr. Fagan which provides that, within
the first three years of employment, if his employment is terminated by the
Corporation without cause or by Mr. Fagan for good reason, he will receive
severance benefits equal to two times annual salary and bonus. Any payments
under this agreement would be offset against the amount payable under Mr.
Fagan's change-in-control severance agreement.
AUDIT COMMITTEE REPORT
The Audit Committee is composed of four directors, each of whom is
independent as defined by applicable New York Stock Exchange listing standards.
The Committee assists the Board of Directors in overseeing (a) the integrity of
the financial statements of the Corporation, (b) the annual independent audit
process, (c) the Corporation's systems of internal accounting and financial
controls, (d) the independence and performance of the Corporation's outside
auditor and (e) the Corporation's compliance with legal and regulatory
requirements. The Committee operates under a written charter adopted by the
Board, a copy of which was included as Appendix A to the Corporation's 2001
proxy statement.
In the course of its oversight of the Corporation's financial reporting
process, the Committee has:
1. Reviewed and discussed with management the Corporation's audited
financial statements for the fiscal year ended December 31, 2001;
2. Discussed with PricewaterhouseCoopers LLP, the Corporation's outside
auditor, the matters required to be discussed by Statement on Auditing
Standards No. 61, Communication with Audit Committees; and
3. Received the written disclosures and the letter from
PricewaterhouseCoopers LLP required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees,
discussed with PricewaterhouseCoopers LLP its independence and
considered whether the provision of nonaudit services by
PricewaterhouseCoopers LLP is compatible with maintaining its
independence.
Based on the foregoing review and discussions, the Committee has
recommended to the Board of Directors that the audited financial statements be
included in the Corporation's Annual Report on Form 10-K for the year ended
December 31, 2001 for filing with the Securities and Exchange Commission.
By the Audit Committee,
J. Thomas Touchton (Chairman)
James L. Ferman, Jr.
Ira D. Hall
Tom L. Rankin
13
INFORMATION CONCERNING AUDITORS
Based on the Audit Committee's recommendation, the Board reappointed
PricewaterhouseCoopers LLP to serve as independent accountants and to audit the
Corporation's financial statements for 2001. Consistent with past procedures,
independent accountants for the current fiscal year will be appointed by the
Board at its April 2002 meeting.
The fees for services provided by PricewaterhouseCoopers LLP to the
Corporation in 2001 were as follows:
Audit Fees $ 654,400
----------
Financial Information Systems Design and Implementation Fees None
------------------------------------------------------------
All Other Fees $1,046,087
--------------
Of the amounts reported above as "All Other Fees," approximately $650,000
represented the following accounting-related services: $100,000 for audit fees
associated with benefit plans and other related entities, $225,000 for debt and
equity offerings, $130,000 for lease financing facilities, $94,500 for
regulatory and other services, and $100,000 for tax services. The remaining
balance of approximately $400,000, or 24% of the total fees, related primarily
to a requirements review for a replacement financial reporting system.
Representatives of PricewaterhouseCoopers LLP are expected to be present at
the Annual Meeting of Shareholders and to be available to respond to appropriate
questions. They will also have the opportunity to make a statement if they so
desire.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Corporation's executive officers and directors are required under
Section 16(a) of the Securities Exchange Act of 1934 to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the New York Stock Exchange. Copies of those reports must also be furnished
to the Corporation.
Based solely on a review of the copies of reports furnished to the
Corporation with respect to 2001 and written representations that no other
reports were required, the Corporation believes that the executive officers and
directors of the Corporation have complied in a timely manner with all
applicable Section 16(a) filing requirements except that James O. Welch, Jr.
filed one late report covering the acquisition of 2,500 shares owned by a trust
of which Mr. Welch's wife was a beneficiary.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented pursuant to Rule 14a-8
under the Securities Exchange Act of 1934 (the "Exchange Act") for inclusion in
the Corporation's proxy materials relating to the Annual Meeting of Shareholders
in 2003 must be received on or before November 4, 2002. In order for a
shareholder proposal made outside of Rule 14a-8 under the Exchange Act to be
considered "timely" within the meaning of Rule 14a-4(c) of the Exchange Act,
such proposal must be received by the Corporation not later than January 17,
2003. Any such proposals should be sent to: Secretary, TECO Energy, Inc., P.O.
Box 111, Tampa, Florida 33601.
ADVANCE NOTICE PROVISIONS FOR SHAREHOLDER PROPOSALS AND NOMINATIONS
The Bylaws of the Corporation provide that in order for a shareholder to
bring business before or propose director nominations at an annual meeting, the
shareholder must give written notice to the Secretary of the Corporation not
less than 90 days nor more than 120 days in advance of the anniversary date of
the immediately preceding annual meeting of shareholders. The notice must
contain specified information about the proposed business or each nominee and
the shareholder making the proposal or nomination. If the annual meeting is
scheduled for a date that is not within 30 days before or after such anniversary
date, the notice given by the shareholder must be received no later than the
tenth day following the day on which the notice of such annual meeting date was
mailed or public disclosure of the date of such annual meeting was made,
whichever first occurs.
14
SOLICITATION OF PROXIES
In addition to the solicitation of proxies by mail, proxies may be
solicited by telephone, facsimile or in person by regular employees of the
Corporation. The Corporation has also retained Morrow & Co., Inc. to assist in
the solicitation of proxies for a fee of $6,500 plus out-of-pocket expenses.
All expenses of this solicitation, including the cost of preparing and mailing
this proxy statement, and the reimbursement of brokerage houses and other
nominees for their reasonable expenses in forwarding proxy material to
beneficial owners of stock, will be paid by the Corporation.
OTHER MATTERS
The Board of Directors does not know of any business to be presented at the
meeting other than the matters described in this proxy statement. If other
business is properly presented for consideration at the meeting, the enclosed
proxy authorizes the persons named therein to vote the shares in their
discretion.
Dated: March 4, 2002
15
[LOGO] TECO
ENERGY
2002 Annual Shareholders' Meeting
Wednesday, April 17, 2002, 11:30 A.M.
TECO Plaza
702 North Franklin Street
Tampa, Florida 33602
Attached below is your proxy card for the 2002 Annual Meeting of Shareholders of
TECO Energy, Inc.
You may vote by Telephone, by Internet, or by Mail.
To vote by Telephone or Internet, see instructions on reverse side.
To vote by Mail, please return your proxy in the enclosed Business Reply
Envelope
P.O. Box 9381 Boston, MA 02205-9381.
DETACH HERE
PROXY
TECO ENERGY, INC.
Proxy for Annual Meeting of Shareholders, April 17, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
TECO ENERGY, INC.
The undersigned hereby constitutes and appoints DuBose Ausley, Robert D. Fagan
and Luis Guinot, Jr. and any one or more of them, attorneys and proxies of the
undersigned, with full power of substitution to each attorney and substitute,
for and in the name of the undersigned to appear and vote all shares of Common
Stock of TECO Energy, Inc. that the undersigned is entitled to vote at the
Annual Meeting of Shareholders of the Corporation to be held on April 17, 2002
at 11:30 A.M., and at any and all adjournments thereof, with all powers the
undersigned would have if personally present, hereby revoking all proxies
previously given.
------------ ------------
SEE REVERSE SEE REVERSE
SIDE (THIS PROXY IS CONTINUED AND IS TO BE SIGNED ON REVERSE SIDE) SIDE
------------ ------------
[LOGO]TECO
ENERGY
702 N. FRANKLIN STREET
TAMPA, FL 33602
------------------
Vote by Telephone
------------------
It's fast, convenient, and immediate!
Call Toll-Free on a Touch-Tone Phone
1-877-PRX-VOTE (1-877-779-8683).
--------------------------------------------------------------------------------
Follow these four easy steps:
1. Read the accompanying Proxy Statement and Proxy Card.
2. Call the toll-free number
1-877-PRX-VOTE (1-877-779-8683).
3. Enter your 14-digit Voter Control Number located on your Proxy Card above
your name.
4. Follow the recorded instructions.
--------------------------------------------------------------------------------
Your vote is important!
Call 1-877-PRX-VOTE anytime!
------------------
Vote by Internet
------------------
It's fast, convenient, and your vote is immediately confirmed and posted.
--------------------------------------------------------------------------------
Follow these four easy steps:
1. Read the accompanying Proxy Statement and Proxy Card.
2. Go to the Website http://www.eproxyvote.com/te
3. Enter your 14-digit Voter Control Number located on your Proxy Card above
your name.
4. Follow the instructions provided.
--------------------------------------------------------------------------------
Your vote is important!
Go to http://www.eproxyvote.com/te anytime!
Do not return your Proxy Card if you are voting by Telephone or Internet.
DETACH HERE
[X] Please mark votes as in this example.
ELECTION OF DIRECTORS
The Board Recommends a Vote FOR all Nominees.
Instructions - To vote against any individual nominee(s), mark Box (C) and write
the name(s) of such nominee(s) above the line provided below.
Nominees: (01) D. Ausley, (02) J.L. Ferman, Jr.
(03) I.D. Hall and (04) J.O. Welch, Jr.
(A) (B)
FOR AGAINST
ALL ALL
[_] NOMINEES [_] NOMINEES
[_]_________________________
(C) FOR ALL NOMINEES EXCEPT
Signature: _____________ Date: ___________
In their discretion, the proxies are also authorized to vote upon such other
matters as may properly come before the meeting.
This proxy will be voted as specified, or if no specification is made, FOR all
nominees.
PLEASE SIGN AND MAIL THIS PROXY TODAY.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT. [_]
INSTRUCTIONS - Signatures should correspond exactly with the name or names of
Shareholders as they appear on this proxy. Persons signing as Attorney,
Executor, Administrator, Trustee or Guardian should give their full titles.
Execution on behalf of corporations should be by a duly authorized officer and
on behalf of partnerships by a general partner or in the firm name by another
duly authorized person.
Signature:____________ Date:________