PPL Electric Form 8-k February 1, 2006
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of
Report (Date of earliest event reported): January 26,
2006
Commission
File
Number
|
Registrant;
State of Incorporation;
Address
and Telephone Number
|
IRS
Employer
Identification
No.
|
|
|
|
1-905
|
PPL
Electric Utilities Corporation
(Exact
name of Registrant as specified in its charter)
(Pennsylvania)
Two
North Ninth Street
Allentown,
PA 18101-1179
(610)
774-5151
|
23-0959590
|
|
|
|
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
[ ]
|
|
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
|
[ ]
|
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
[ ]
|
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
|
[ ]
|
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
|
Section
1 - Registrant's Business and Operations
Item
1.01 Entry into a Material Definitive Agreement
Named
Executive Officer Compensation Matters
Base
Salary Changes
On
January 26, 2006, the Compensation and Corporate Governance Committee
(“C&CGC”) of the Board of Directors of PPL Corporation approved the annual
base salaries, effective as of January 1, 2006, of PPL Electric Utilities
Corporation's (“PPL Electric”) President and its Senior Vice
President-Financial, after a review of performance and competitive market data.
The base salary for PPL Electric’s Treasurer is expected to be approved by PPL
Corporation's Corporate Leadership Council (“CLC”) on February 13, 2006, after a
review of performance and competitive market data. All three officers are
considered “named executive officers” (as defined in Item 402(a)(3) of
Regulation S-K). The following table sets forth the annual base salary levels
of
PPL Electric's named executive officers for 2006 and 2005:
Name
and Position
|
Year
|
Salary
($)
|
John
F. Sipics
President
|
2006
2005
|
350,000
325,000
|
Paul
A. Farr
Senior
Vice President-Financial (1)
|
2006
2005
|
390,000
350,000
|
James
E. Abel
Treasurer
(1)
|
2006
2005
|
TBD
250,773
|
(1)
|
|
Messrs. Farr
and Abel also are officers of PPL Corporation and are not paid separately
as officers of PPL Electric
|
Short-term
Incentive Cash Awards
On
January 26, 2006, the C&CGC authorized an annual incentive cash (i.e.,
bonus) award to PPL Electric’s President and its Senior Vice President-Financial
for 2005 performance. CLC is expected to authorize the annual incentive cash
award to PPL Electric’s Treasurer for 2005 performance on February 13, 2006. The
incentive cash awards were made to the President and the Senior Vice
President-Financial, and will be made to the Treasurer, for the achievement
of
specific, independent goals established and measured by the C&CGC (in the
case of the President and the Senior Vice President-Financial) and the CLC
(in
the case of the Treasurer). For 2005, the following award targets as a
percentage of base salary were established for each named executive officer:
President-50%; Senior Vice President-Financial-50%; and Treasurer-40%. The
annual incentive cash awards were made, or will be made, by applying these
target percentages to the percentage of goal attainment as determined by the
C&CGC and the CLC, as applicable. The goal categories for 2005 for Mr.
Sipics included specific financial and operational measures for PPL Corporation
and key subsidiaries, including specific operational goals for PPL Electric.
The
weightings for each of these categories are allocated 40% to PPL Corporation's
earnings per share and enhanced shareowner value, 40% to the financial and
operational performance of PPL Electric and 20% to certain operating
subsidiaries of PPL Corporation. In the case of Mr. Farr, the goal categories
for 2005 included specific financial and operational measures for PPL
Corporation and key subsidiaries, including PPL Electric. The weightings for
each of these categories are allocated 60% to PPL Corporation's earnings per
share and enhanced shareowner value, 10% to the financial and operational
performance of PPL Electric and 30% to the financial and operational performance
of certain other operating subsidiaries of PPL Corporation. In the case of
Mr.
Abel, the goal categories for 2005 included specific financial and operational
measures for PPL Corporation and key subsidiaries, and also consideration of
individual performance. The weightings for each of these categories are
allocated 40% to PPL Corporation's earnings per share and enhanced shareowner
value, 10% to the financial and operational performance of PPL Electric, 30%
to
the financial and operational performance of certain other operating
subsidiaries and 20% to individual performance. Included in the operating goals
for the operating subsidiaries were specific requirements tied to PPL
Corporation’s continued compliance with Section 404 of the Sarbanes-Oxley Act of
2002, including enhancing the efficiency of the compliance process.
The
following table sets forth the annual incentive cash awards for the named
executive officers based on 2005 performance:
Name
and Position
|
Bonus
($)
|
John
F. Sipics
President
|
206,900
(1)
|
Paul
A. Farr
Senior
Vice President-Financial
|
192,300
(2)
|
James
E. Abel
Treasurer
|
TBD
|
(1)
|
|
Mr.
Sipics exchanged his entire bonus for restricted stock units under
the
terms of PPL Corporation's Cash Incentive Premium Exchange
Program.
|
(2)
|
|
Includes
$96,150 that Mr. Farr exchanged for restricted stock units under
the terms
of PPL Corporation's Cash Incentive Premium Exchange
Program.
|
Long-term
Incentive Equity Awards
On
January 26, 2006, the C&CGC authorized grants to PPL Electric's named
executive officers of long-term incentive equity awards pursuant to PPL
Corporation's Incentive Compensation Plan. These grants consisted of (i) two
restricted stock unit awards with a three-year restriction period, based on
the
achievement of criteria established by the C&CGC in March 2005 and measured
by the Committee in January 2006, and (ii) one stock option award. One of the
grants of restricted stock units was based on the achievement of sustained
financial and operational results, which was determined by C&CGC by
averaging the most recent three years of annual performance measures used for
the annual short-term incentive cash awards. The second grant of restricted
stock units was based on the achievement of specific strategic objectives to
increase shareowner value through implementation of certain long-term corporate
initiatives, including actions to influence the evolution of government policies
toward more competitive markets, develop an internal corporate structure to
optimize PPL Corporation's wholesale hedging strategy, develop and retain
management skills and establish the financial profile necessary to optimize
growth opportunities as the wholesale electricity markets strengthen. The
exercise price of the stock option awards is the fair market value of PPL
Corporation’s common stock on the date of grant.
For
2005,
the following long-term incentive equity award targets as a percentage of base
salary were established for each named executive officer:
Long-term
Incentive Program
|
Restricted
Stock Units
|
Stock
Options
|
(Targets
as % of Salary)
|
Position
|
Sustained
Financial and Operational Results
|
Strategic
Objective Results
|
Stock
Price Performance
|
President
|
40%
|
40%
|
80%
|
Senior
Vice President-Financial
|
40%
|
40%
|
80%
|
Treasurer
|
26.25%
|
26.25%
|
52.5%
|
The
following table sets forth the long-term incentive equity awards made in January
2006 to the named executive officers:
|
Restricted
Stock Units (1)
|
Stock
Options (2)
|
(Targets
as % of Salary)
|
Name
and Position
|
Sustained
Financial and Operational Results
|
Strategic
Objective Results
|
Stock
Price Performance
|
John
F. Sipics-
President
(3)
|
4,750
|
4,310
|
57,470
|
Paul
A. Farr-
Senior
Vice President-Financial (3)
|
5,120
|
4,640
|
61,890
|
James
E. Abel-
Treasurer
|
2,410
|
2,180
|
29,100
|
(1)
|
|
The
number of restricted stock units awarded are equivalent to the dollar
value (based upon the fair market value of PPL Corporation's common
stock
on the date of grant) of the percentage applied to base pay in effect
at
the end of 2005.
|
(2)
|
|
The
exercise price of the stock option awards is $30.14. The stock options
become exercisable over a three-year period from the date of grant
in
equal installments and expire no later than January 25,
2016.
|
(3)
|
|
Messrs.
Sipics and Farr also were granted 9,600 and 4,470 restricted stock
units,
respectively, pursuant to the terms of PPL Corporation's Cash Incentive
Premium Exchange Program.
|
Attached
as Exhibits to this Current Report on Form 8-K are the forms of Stock Option
and
Restricted Stock Unit Agreements for the above-described long-term equity
incentive awards.
Also
on
January 26, 2006, PPL Corporation entered into a new retention agreement with
Mr. Farr, which agreement amended and replaced the existing retention agreement
dated August 24, 2005 between the parties. The only change from the prior
retention agreement is an increase in the grant to Mr. Farr under the new
agreement from 24,600 to 40,000 shares of restricted PPL Corporation common
stock. The restriction period lapses on April 27, 2027. In the event of Mr.
Farr’s death or disability, the restriction period on a prorated portion of
these shares will lapse immediately. In the event of a “change in control” of
PPL Corporation, the restriction period on all of these shares will lapse
immediately if there is an involuntary termination of employment that is not
“for cause” (as such terms are defined in the agreement). In the event
Mr. Farr is terminated “for cause,” or he terminates his employment with
all PPL Corporation affiliated companies prior to April 27, 2027, all
shares of this restricted stock will be forfeited.
Section
9 - Financial Statements and Exhibits
Item
9.01 Financial Statements and Exhibits
|
(d)
|
|
Exhibits
|
|
|
|
|
|
|
|
|
|
10(a)
-
|
Form
of Stock Option Agreement for stock option awards under PPL Corporation’s
Incentive Compensation Plan (“ICP”)
|
|
|
|
10(b)
-
|
Form
of Restricted Stock Unit Agreement for restricted stock unit awards
under
the ICP
|
|
|
|
10(c)
-
|
Form
of Restricted Stock Unit Agreement for restricted stock unit awards
under
the ICP pursuant to PPL Corporation’s Cash Incentive Premium Exchange
Program
|
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
|
PPL
ELECTRIC UTILITIES CORPORATION
|
|
|
|
|
By:
|
/s/
Paul A. Farr
Paul
A. Farr
Senior
Vice President-Financial
|
Dated: February
1, 2006