Progress Energy 2010 Annual Report Download - page 177

Progress Energy Proxy Statement
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• InconnectionwiththeexecutionoftheMergerAgreement,DukeEnergy,DiamondAcquisition
Corporation and Mr. Johnson executed a term sheet pursuant to which the parties agreed to enter into
an employment agreement upon consummation of the merger. Pursuant to the term sheet, Mr. Johnson
has waived his right to resign with “good reason,” and receive CIC Plan benefits or to assert a
“constructive termination” under his existing employment agreement, on account of (i) his required
relocation to Charlotte, North Carolina, (ii) any changes to his positions, duties and responsibilities
in connection with his acceptance of the new position with Duke Energy, or (iii) any changes to
his total incentive compensation opportunity following the merger with Duke Energy. In addition,
Mr. Johnson’s term sheet specifies that if he is involuntarily terminated without “cause” or resigns
for “good reason” on or prior to the second anniversary of the completion of the merger, he will not
receive a tax gross-up for the parachute payment excise tax under Sections 280G and 4999 of the
Internal Revenue Code. In addition to the waivers described above, Mr. Johnson’s term sheet also
specifies that if he is involuntarily terminated without “cause” or resigns for “good reason” following
the second anniversary of, but prior to the third anniversary of, the consummation of the merger, he
will be entitled to the severance benefits provided under his current employment agreement. If the
merger with Duke Energy is not completed, the waivers described in this paragraph will not take effect.
• AlsoinconnectionwiththeexecutionoftheMerger Agreement, each of Messrs. Yates, Lyash, McArthur
and Mulhern entered into a letter agreement with the Company waiving certain rights of such executive
officer under the CIC Plan and such executive officer’s employment agreement. Messrs. Yates, Lyash,
McArthur and Mulhern have each waived the right to resign with “good reason,” and receive the CIC Plan
benefits or to assert a “constructive termination” under their employment agreements, on account of (i)
a required relocation to Charlotte, North Carolina, (ii) a change in his position, duties or responsibilities
in connection with his acceptance of the new position with Duke Energy or (iii) a reduction in his total
incentive compensation opportunity by virtue of his participation in Duke Energy’s incentive compensation
plans (provided that his target incentive compensation opportunity is substantially similar to that of
similarly situated Duke Energy executives). Thus, Messrs. Yates, Lyash, McArthur and Mulhern cannot
claim entitlement to CIC Plan benefits or severance under their employment agreements upon a resignation
following the merger for any of these reasons. The letter agreements will be terminated in the event that the
Merger Agreement is terminated prior to the merger with Duke Energy being consummated.
Upon consummation of the merger, outstanding options to purchase shares of Company common stock
and outstanding awards of restricted stock, restricted stock units, 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 Company 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 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 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
and stipulate that the CIC Plan must be amended prior to the consummation of the merger to eliminate any funding
requirement.
On March 16, 2011, the Board amended the SERP in two respects. The SERP was amended to provide
that all service with the Company 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.