Progress Energy 2009 Annual Report Download - page 173

Progress Energy Proxy Statement
35
The SERP defines covered compensation as annual base salary plus the annual cash incentive award. The
qualified plans define covered compensation as base salary only. The Committee believes it is appropriate to include
annual cash incentive awards in the definition of covered compensation for purposes of determining pension plan
benefits for the named executive officers to ensure that the named executive officers can replace in retirement a
similar portion of total compensation as replaced for other employees who participate in the Company’s pension
plan. This approach takes into account the fact that base pay alone comprises a relatively smaller percentage of a
named executive officer’s total compensation than of other Company employees’ total compensation.
The Committee believes that the SERP is a valuable and effective tool for attraction and retention due to its
vesting requirements and its significant benefit. 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 officers are fully vested in the SERP.
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, the target benefit percentage is 2.25% rather than 4% per year of service. None of the
named executive officers for 2009 is subject to the new benefit percentage.) Benefits under the SERP are fully offset
by Social Security benefits and by benefits paid under our 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.
5. MANAGEMENT CHANGE-IN-CONTROL PLAN
We sponsor a Management Change-In-Control Plan (the “CIC Plan”) for selected employees. The purpose
of the CIC Plan is to retain key management employees who are critical to the negotiation and subsequent success
of any transition resulting from a change-in-control (“CIC”) of the Company. Providing such protection to executive
officers in general minimizes disruption during a pending or anticipated CIC. Under our CIC Plan, we generally
define a CIC as occurring at the earliest of the following:
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power of our then outstanding securities; or
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consummated; or
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or entity, regardless of whether we are the surviving company, unless our outstanding securities
immediately prior to the transaction continue to represent more than 60% of the combined voting
power of the outstanding voting securities of the surviving entity immediately after the transaction; or
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consolidation, sale of assets or any combination of the foregoing, the directors serving as of the effective
date of the change-in-control plan, or elected thereafter with the support of not less than 75% of those
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for the sale or disposition by us of all or substantially all of our assets; or