Exhibit 10c(12)
PROGRESS ENERGY, INC.
MANAGEMENT CHANGE-IN-CONTROL PLAN
(Amended and Restated Effective January 1, 2005)
1.0 PURPOSE OF PLAN
1.1 Purpose. The purpose of the Progress Energy, Inc. Management
Change-in-Control Plan (the "Plan") is to attract and retain certain highly
qualified individuals as management employees of Progress Energy, Inc. and
its subsidiaries, and to provide a benefit to such management employees if
their employment is terminated in connection with a Change in Control (as
defined below). This Plan is intended to qualify as a "top-hat" plan under
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
in that it is intended to be an "employee pension benefit plan" (as such
term is defined under Section 3(2) of ERISA) which is unfunded and provides
benefits only to a select group of management or highly compensated
employees of the Company or any Subsidiary. The Plan amends and restates
the Plan as restated effective July 10, 2002, which amended and restated
the Carolina Power & Light Company Management Change-in-Control Plan which
was originally adopted effective January 1, 1998.
2.0 DEFINITIONS
The following terms shall have the following meanings unless the context
indicates otherwise:
2.1 "Beneficiary" shall mean a beneficiary designated in writing by a
Participant to receive any payments to be made under the Plan to such
Participant, and if no beneficiary is designated by the Participant, then
the Participant's estate shall be deemed to be the Participant's designated
beneficiary.
2.2 "Board" shall mean the Board of Directors of the Company.
2.3 "Cash Payment" shall mean a payment in cash by the Company or any
Subsidiary to a Participant in accordance with Section 6.1 below.
2.4 "Cause" shall mean:
(a) embezzlement or theft from the Company or any Subsidiary, or other
acts of dishonesty, disloyalty or otherwise injurious to the Company
or any Subsidiary;
(b) disclosing without authorization proprietary or confidential
information of the Company or any Subsidiary;
(c) committing any act of negligence or malfeasance causing injury to the
Company or any Subsidiary;
(d) conviction of a crime amounting to a felony under the laws of the
United States or any of the several states;
(e) any violation of the Company's Code of Ethics; or
(f) unacceptable job performance which has been substantiated in
accordance with the normal practices and procedures of the Company or
any Subsidiary.
2.5 Change-in-Control" shall mean:
2.5.1 General: Except as may be otherwise required in order to comply
with Code Section 409A, a Change-in-Control shall be deemed to
have occurred on the earliest of the following dates:
(a) the date any person or group of persons (within the meaning
of Section 13(d) or 14(d) of the Securities Exchange Act of
1934), excluding employee benefit plans of the Company,
becomes, directly or indirectly, the "beneficial owner" (as
defined in Rule 13d-3 promulgated under the Securities Act
of 1934) of securities of the Company representing
twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding securities
(excluding the acquisition of securities of the Company by
an entity at least eighty percent (80%) of the outstanding
voting securities of which are, directly or indirectly,
beneficially owned by the Company); or
(b) the date of consummation of a tender offer for the ownership
of more than fifty percent (50%) of the Company's then
outstanding voting securities; or
(c) the date of consummation of a merger, share exchange or
consolidation of the Company with any other corporation or
entity regardless of which entity is the survivor, other
than a merger, share exchange or consolidation which would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or being converted into voting
securities of the surviving or acquiring entity) more than
sixty percent (60%) of the combined voting power of the
voting securities of the Company or such surviving or
acquiring entity outstanding immediately after such merger
or consolidation; or
(d) the date, when as a result of a tender offer or exchange
offer for the purchase of securities of the Company (other
than such an offer by the Company for its own securities),
or as a result of a proxy contest, merger, share exchange,
consolidation or sale of assets, or as a result of any
combination of the foregoing, individuals who are Continuing
Directors cease for any reason to constitute at least
two-thirds (2/3) of the members of the Board; or
(e) the date the shareholders of the Company approve a plan of
complete liquidation or winding-up of the Company or an
agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets; or
2
(f) the date of any event which the Board determines should
constitute a Change-in-Control.
A Change-in-Control shall not be deemed to have occurred
until a majority of the members of the Board receive written
certification from the Committee that one of the events set
forth in this Section 2.5.1 has occurred. Any determination
that an event described in this Section 2.5.1 has occurred
shall, if made in good faith on the basis of information
available at that time, be conclusive and binding on the
Committee, the Company, the Participants and their
Beneficiaries for all purposes of the Plan.
2.5.2 Definition Applicable to Change-in-Control Benefits Subject to
Code Section 409A: Notwithstanding the preceding provisions of
Section 2.5.1, in the event that any Change-in-Control Benefits
under the Plan are deemed to be deferred compensation subject to
the provisions of Code Section 409A, then distributions related
to such benefits may be permitted, in the Committee's discretion,
upon the occurrence of one or more of the following events (as
they are defined and interpreted under Code Section 409A, related
regulations, or other guidance): (A) a change in the ownership of
the Company, (B) a change in effective control of the Company, or
(C) a change in the ownership of a substantial portion of the
assets of the Company.
2.6 "Change-in-Control Benefits" shall mean the benefits described under
Section 6 below provided to Terminated Participants. Except as otherwise
provided herein, a Terminated Participant who is terminated in anticipation
of a Change-in-Control as described in Section 5.1 shall be entitled to
receive the Change-in-Control Benefits as of the Termination Date
notwithstanding the fact that the anticipated Change-in-Control does not
occur.
2.7 "Change-in-Control Date" shall mean the date that a Change-in-Control first
occurs.
2.8 "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
2.9 "Committee" shall mean (i) the Board or (ii) a committee or subcommittee of
the Board appointed by the Board from among its members. The Committee
shall be the Board's Committee on Organization and Compensation until a
different Committee is appointed. On a Change-in-Control Date, and during
the 36-month period following such Change-in-Control Date, the Committee
shall be comprised of such persons as appointed by the Board prior to the
Change-in-Control Date, with any additions or changes to the Committee
following such Change-in-Control Date to be made and or approved by all
Committee members then in office.
2.10 "Company" shall mean Progress Energy, Inc., a North Carolina corporation,
including any successor entity or any successor to the assets of the
Company that has assumed the Plan.
2.11 "Continuing Directors" shall mean the members of the Board as of the
Effective Date; provided, however, that any person becoming a director
subsequent to such date whose election or nomination for election was
supported by seventy-five percent (75%) or more of the directors who then
comprised Continuing Directors shall be considered to be a Continuing
Director.
3
2.12 "Effective Date" of the Plan, as amended and restated herein, shall mean
January 1, 2005.
2.13 "Good Reason" shall mean the occurrence of any of the following:
(a) a reduction in the Participant's base salary without the Participant's
prior written consent (other than any reduction applicable to
management employees generally);
(b) a material adverse change in the Participant's position, duties or
responsibilities with respect to his or her employment with the
Company and/or any Subsidiary without the Participant's prior written
consent;
(c) a material reduction in the Participant's total incentive compensation
opportunity under the Company's Management Incentive Compensation
Plan, the 1997 Equity Incentive Plan, the 2002 Equity Incentive Plan,
the Performance Share Sub-Plans, or any other incentive compensation
plan (based on the total incentive compensation opportunity previously
granted to such Participant during the 12-month period preceding a
Change-in-Control Date) without the Participant's prior written
consent;
(d) an actual change in the Participant's principal work location by more
than 50 miles and more than 50 miles from the Participant's principal
place of abode as of the date of such change in job location without
the Participant's prior written consent;
(e) the failure of the Company to obtain the assumption of its obligation
under the Plan by any successor to all or substantially all of the
assets of the Company within 30 days after a merger, consolidation,
sale or similar transaction constituting a Change-in-Control; or
(f) a material breach by the Company of any term or provision of the Plan
without the Participant's prior written consent.
2.14 "Gross-Up Payment" shall mean a payment described in Section 11 below.
2.15 "Management Employee" shall mean a regular full-time employee of the
Company or any Subsidiary with managerial duties and responsibilities.
2.16 "Participant" shall mean any Management Employee who has been designated to
participate in the Plan under Section 3 below.
2.17 "Plan" shall mean the Progress Energy, Inc. Management Change-in-Control
Plan.
2.18 "Retirement" shall mean the termination of employment of a Participant
after having attained the age of 65 with five or more years of service, or
the age of 55 with 15 or more years of service, or after having completed
35 or more years of service regardless of age.
2.19 "Subsidiary" shall mean a corporation of which the Company directly or
indirectly owns more than fifty percent (50%) of the voting stock (meaning
the capital stock of any class or classes having general voting power under
ordinary circumstances, in the absence of contingencies, to elect the
directors of a corporation) or any other business entity in which the
Company directly or indirectly has an ownership interest of more than 50
percent.
4
2.20 "Terminated Participant" shall mean a Participant whose employment is
terminated as described in Section 5 below; provided, however, that a
Participant who is reemployed by the Company or any Subsidiary without an
intervening break in service shall not be a Terminated Participant for
purposes of this Plan.
2.21 "Termination Date" shall mean the date a Terminated Participant's
employment with the Company and/or a Subsidiary is terminated as described
in Section 5 below.
2.22 "Trigger Trust" shall mean a trust as described in Section 8 below.
3.0 ELIGIBILITY AND PARTICIPATION
3.1 Eligibility. An individual shall be eligible to participate in the Plan who
is a Management Employee in one of the following positions:
(a) Tier I - Chief Executive Officer, Chief Operating Officer, President
and Executive Vice Presidents who are members of the Senior Management
Committee of the Company.
(b) Tier II - Senior Vice Presidents who are members of the Senior
Management Committee of the Company.
(c) Tier III - Vice Presidents, Department Heads and other selected
Management Employees of the Company or any Subsidiary.
3.2 Participation. The Committee shall designate each eligible Management
Employee who is a Participant in the Plan. The Committee may, in its sole
discretion, terminate the participation of a Participant at any time prior
to the date that substantive negotiations occur in connection with a
potential Change-in-Control.
4.0 ADMINISTRATION
4.1 Responsibility. The Committee shall have the responsibility, in its sole
discretion, to control, operate, manage and administer the Plan in
accordance with its terms.
4.2 Authority of the Committee. The Committee shall have the maximum
discretionary authority permitted by law that may be necessary to enable it
to discharge its responsibilities with respect to the Plan, including but
not limited to the following:
(a) to determine eligibility for participation in the Plan;
(b) to designate Participants;
(c) to determine and establish the formula to be used in calculating a
Participant's Change-in-Control Benefits;
(d) to correct any defect, supply any omission, or reconcile any
inconsistency in the Plan in such manner and to such extent as it
shall deem appropriate in its sole discretion to carry the same into
effect;
5
(e) to issue administrative guidelines as an aid to administer the Plan
and make changes in such guidelines as it from time to time deems
proper;
(f) to make rules for carrying out and administering the Plan and make
changes in such rules as it from time to time deems proper;
(g) to the extent permitted under the Plan, grant waivers of Plan terms,
conditions, restrictions, and limitations;
(h) to make reasonable determinations as to a Participant's eligibility
for benefits under the Plan, including determinations as to Cause and
Good Reason; and
(i) to take any and all other actions it deems necessary or advisable for
the proper operation or administration of the Plan.
4.3 Action by the Committee. The Committee may act only by a majority of its
members. Any determination of the Committee may be made, without a meeting,
by a writing or writings signed by all of the members of the Committee. In
addition, the Committee may authorize any one or more of its members to
execute and deliver documents on behalf of the Committee.
4.4 Delegation of Authority. The Committee may delegate to one or more of its
members, or to one or more agents, such administrative duties as it may
deem advisable; provided, however, that any such delegation shall be in
writing. In addition, the Committee, or any person to whom it has delegated
duties as aforesaid, may employ one or more persons to render advice with
respect to any responsibility the Committee or such person may have under
the Plan. The Committee may employ such legal or other counsel, consultants
and agents as it may deem desirable for the administration of the Plan and
may rely upon any opinion or computation received from any such counsel,
consultant or agent. Expenses incurred by the Committee in the engagement
of such counsel, consultant or agent shall be paid by the Company, or the
Subsidiary whose employees have benefited from the Plan, as determined by
the Committee.
4.5 Determinations and Interpretations by the Committee. All determinations and
interpretations made by the Committee shall be binding and conclusive to
the maximum extent permitted by law on all Participants and their heirs,
successors, and legal representatives.
4.6 Information. The Company shall furnish to the Committee in writing all
information the Committee may deem appropriate for the exercise of its
powers and duties in the administration of the Plan. Such information may
include, but shall not be limited to, the full names of all Participants,
their earnings and their dates of birth, employment, retirement or death.
Such information shall be conclusive for all purposes of the Plan, and the
Committee shall be entitled to rely thereon without any investigation
thereof.
4.7 Self-Interest. No member of the Committee may act, vote or otherwise
influence a decision of the Committee specifically relating to his or her
benefits, if any, under the Plan.
6
5.0 TERMINATION OF EMPLOYMENT
5.1 Termination of Employment. If the Company or a Subsidiary employing a
Participant terminates such Participant's employment without Cause, or if a
Participant terminates his or her employment with the Company or a
Subsidiary for Good Reason, and in either case such termination of
employment is not due to the death or Retirement of the Participant, and
such termination of employment occurs during the 24-month period following
the Change-in-Control Date, or occurs prior to the Change-in-Control Date
but after substantive negotiations leading to the Change-in-Control and can
be demonstrated to have occurred at the request or initiation of parties to
the Change-in-Control (such date of termination of employment shall be
referred to herein as the "Termination Date"), the Terminated Participant
shall be entitled to receive the Change-in-Control Benefits in accordance
with Section 6 below.
6.0 CHANGE-IN-CONTROL BENEFITS
6.1 Cash Payment. Within ten days following the Termination Date, the Company
shall pay to the Terminated Participant, in a lump sum, an amount in cash
as determined under a formula established by the Committee (such formula to
be established by the Committee, in its sole discretion, on the date the
Committee designates such individual as a Participant in accordance with
Section 3.2 above); provided, however, that such Cash Payment shall not
exceed in the aggregate an amount equal to the sum of:
(a) The Applicable Percentage of the Terminated Participant's annual base
salary in effect on the Termination Date; plus
(b) The Applicable Percentage of the greater of (i) the average of the
Terminated Participant's annual incentive bonus paid to the Terminated
Participant under the Company's Management Incentive Compensation Plan
or otherwise with respect to the three completed calendar years
immediately preceding the year in which the Termination Date occurs;
provided, however, that if the Terminated Participant was not eligible
to receive an annual incentive bonus with respect to each of the three
calendar years immediately preceding the year in which the Termination
Date occurs, the average shall be determined for that period of
calendar years, if any, for which the Terminated Participant was
eligible to receive an annual incentive bonus, or (ii) the Terminated
Participant's target annual incentive bonus for the year in which the
Termination Date occurs.
For this purpose, the "Applicable Percentage" shall be determined as
follows:
Participant Applicable Percentage
Tier I 300%
Tier II 200%
Tier III 150%
7
6.2 Annual Cash Incentive Compensation Plans. The Terminated Participant shall
be entitled to receive an amount equal to his or her compensation under the
annual cash incentive compensation plan covering the Terminated Participant
based on 100 percent (100%) of his or her target bonus under such plan,
which shall be paid during the 10-day period following the Termination
Date.
6.3 Long Term Compensation Plan. The Terminated Participant shall be entitled
to receive any awards which have been earned prior to the Termination Date
under the Company's Amended and Restated Long Term Compensation Plan, which
shall be paid during the 10-day period following the Termination Date.
6.4 Restricted Stock Agreements. The Terminated Participant shall become vested
as of the Termination Date in any restricted share awards which have been
granted to him or her under the Company's 1997 Equity Incentive Plan, the
2002 Equity Incentive Plan or any successor plans, and such shares shall be
delivered to him or her without restriction during the 10-day period
following the Termination Date.
6.5 Performance Share Sub-Plans. The Terminated Participant shall become vested
as of the Termination Date in any awards which have been granted to such
Participant under the Company's Performance Share Sub-Plans. The Terminated
Participant shall be entitled to payment of any awards which have been
granted to him or her under such plans prior to the Termination Date within
ten days following the date that the data needed to calculate the value of
the awards is available to the Company.
6.6 Stock Option Agreements. Except to the extent that greater rights are
provided to the Terminated Participant under the terms of a Stock Option
Agreement between the Terminated Participant and the Company, the
Terminated Participant shall have the following rights under any Stock
Option Agreement following the Termination Date:
(a) Option Assumed by Successor. If the Stock Option Agreement has been
assumed by the successor to the Company on or before the
Change-in-Control Date, any options not previously forfeited shall
vest in accordance with the terms of the Stock Option Agreement and
any vested options may be exercised by the Terminated Participant
during the remaining term of such options notwithstanding the
termination of employment by the Terminated Participant.
(b) Option Not Assumed by Successor. If the Stock Option Agreement has not
been assumed by the successor on or before the Change-in-Control Date,
any outstanding options shall be fully vested as of the
Change-in-Control Date and, in lieu of exercise, the value of such
options shall be paid to the Terminated Participant in an amount equal
to the excess, if any, of the aggregate fair market value as of the
Change-in-Control Date of the shares subject to such options over the
aggregate exercise price for such shares. Such payment shall be made
during the 10-day period following the later of (i) the Termination
Date, or (ii) the Change-in-Control Date. Notwithstanding the
foregoing, if the Terminated Participant was terminated in
anticipation of a Change-in-Control as described in Section 5.1 and
the anticipated Change-in-Control does not occur, this Section 6.6(b)
shall not apply and the terms of the Stock Option Agreement shall
control.
8
For purposes of this Section 6.6, the successor shall be deemed to have
"assumed" a Stock Option Agreement if the excess of the aggregate fair
market value of the shares subject to the options over the aggregate
exercise price immediately after the assumption is no less than the excess
of the aggregate fair market value of the shares subject to the options
over the aggregate exercise price immediately prior to the assumption.
6.7 Other Company Incentive Compensation Plans. The Terminated Participant
shall become vested as of the Termination Date in any awards which have
been granted to such Participant under any Company incentive compensation
plan, program or agreements (other than those plans or agreements specified
in Sections 6.2, 6.3, 6.4, 6.5 and 6.6 above) prior to the Termination
Date. A Terminated Participant shall be entitled to (i) payment of any cash
awards and (ii) delivery of any unrestricted shares (if such award is in
the form of restricted stock), which have been granted to him or her under
such plan(s) prior to the Termination Date during the 10-day period
following the Termination Date.
6.8 Payment of Change-in-Control Benefits to Beneficiaries. In the event of the
Participant's death, all Change-in-Control Benefits that would have been
paid to the Participant under this Section 6 but for his or her death shall
be paid to the Participant's Beneficiary.
7.0 PARTICIPATION IN NONQUALIFIED PENSION AND WELFARE BENEFIT PLANS
7.1 Nonqualified Deferred Compensation Plans; Restoration Retirement Plan. The
Terminated Participant shall be entitled to payment of his or her benefit
in any nonqualified deferred compensation or restoration pension plan of
the Company (including, but not limited to, the Management Deferred
Compensation Plan, the Deferred Compensation Plan for Key Management
Employees and the Restoration Retirement Plan) in accordance with the terms
of such plan.
7.2 Supplemental Senior Executive Retirement Plan. A Terminated Participant who
is a participant in the Company's Supplemental Senior Executive Retirement
Plan shall (i) be deemed to have a minimum of three years of service on the
Senior Management Committee and (ii) receive a grant of additional service
so that such Terminated Participant has a minimum of ten years of service
with the Company for benefit purposes. The Terminated Participant shall be
entitled to payment of his or her benefit under the Supplemental Senior
Executive Retirement Plan in accordance with the terms of such plan upon
reaching the earliest age for receipt of benefits (including any additional
credited service described in the previous sentence and as if such
Terminated Participant has met the service requirements for such benefits).
7.3 Split-Dollar Life Insurance Policies. Following the Termination Date, the
Terminated Participant shall be entitled to payment by the Company of all
premiums due under any split-dollar life insurance arrangement of the
Company (including, but not limited to, the Split Dollar Life Insurance
Plan, the Executive Estate Conservation Plan and the Executive Permanent
Life Insurance Plan) for any life insurance policy under which the
Terminated Participant is the insured that come due during the Applicable
Period following the Termination Date.
9
7.4 Employee Welfare Benefits. The Company or the applicable Subsidiary shall
pay the total cost for the Terminated Participant to continue coverage
after the Termination Date in the medical, dental, vision, and life
insurance plans of the Company or the applicable Subsidiary in which he or
she was participating on the Termination Date until the earlier of:
(a) the end of the Applicable Period following the Termination Date;
(b) the date, or dates, he or she receives comparable coverage and
benefits under the plans, programs and/or arrangements of a subsequent
employer (such coverage and benefits to be determined on a
coverage-by-coverage or benefit-by-benefit basis); or
(c) the Retirement of the Terminated Participant.
Notwithstanding the foregoing, however, the termination of the Participant
shall constitute a qualifying event with respect to the right of the
Terminated Participant and any covered dependents to continue group
medical, dental and vision coverage in accordance with COBRA, and the
continuation period for purposes of COBRA shall run concurrently with the
Applicable Period.
7.5 Applicable Period. For purposes of Section 7.3 and 7.4, the Applicable
Period shall be determined as follows:
Participant Applicable Period
Tier I 36 Months
Tier II 24 Months
Tier III 18 Months
8.0 TRIGGER TRUST
8.1 Establishment of Trigger Trust. The Board may, in its sole discretion,
establish or cause to be established a Trigger Trust as described in
Section 8.2 below, the purpose of which is to provide a fund for the
payment of some or all of the Change-in-Control Benefits and other benefits
under Sections 6 and 7 above to Terminated Participants following a
Change-in-Control Date, and such other benefits as may be determined by the
Board from time to time.
8.2 Trigger Trust Requirements. The Trigger Trust shall be a trust:
(a) of which the Company is the grantor, within the meaning of subpart E,
part I, subchapter J, chapter 1, subtitle A of the Code;
(b) under which all Participants as of the Change-in-Control Date are
beneficiaries; and
(c) the assets of which shall be subject to the claims of the Company's
general creditors in accordance with Internal Revenue Service Revenue
Procedure 92-64.
10
9.0 CLAIMS
9.1 Claims Procedure. If any Participant or Beneficiary, or their legal
representative, has a claim for benefits which is not being paid, such
claimant may file a written claim with the Committee setting forth the
amount and nature of the claim, supporting facts, and the claimant's
address. Written notice of the disposition of a claim by the Committee
shall be furnished to the claimant within 90 days after the claim is filed.
In the event of special circumstances, the Committee may extend the period
for determination for up to an additional 90 days, in which case it shall
so advise the claimant. If the claim is denied, the reasons for the denial
shall be specifically set forth in writing, the pertinent provisions of the
Plan will be cited, including an explanation of the Plan's claim review
procedure, and, if the claim is perfectible, an explanation as to how the
claimant can perfect the claim shall be provided.
9.2 Claims Review Procedure. If a claimant whose claim has been denied wishes
further consideration of his or her claim, he or she may request the
Committee to review his or her claim in a written statement of the
claimant's position filed with the Committee no later than 60 days after
receipt of the written notification provided for in Section 9.1 above. The
Committee shall fully and fairly review the matter and shall promptly
advise the claimant, in writing, of its decision within the next 60 days.
Due to special circumstances, the Committee may extend the period for
determination for up to an additional 60 days.
9.3 Reimbursement of Expenses. If there is any dispute between the Company and
a Participant with respect to a claim under the Plan, the Company shall
reimburse such Participant all reasonable fees, costs and expenses incurred
by such Participant with respect to such disputed claim; provided, however,
that (i) such Participant is the prevailing party with respect to such
disputed claim or (ii) the disputed claim is settled.
10.0 TAXES
10.1 Withholding Taxes. The Company shall be entitled to withhold from any and
all payments made to a Participant under the Plan all federal, state, local
and/or other taxes or imposts which the Company determines are required to
be so withheld from such payments or by reason of any other payments made
to or on behalf of the Participant or for his or her benefit hereunder.
10.2 No Guarantee of Tax Consequences. No person connected with the Plan in any
capacity, including, but not limited to, the Company and any Subsidiary and
their directors, officers, agents and employees makes any representation,
commitment, or guarantee that any tax treatment, including, but not limited
to, federal, state. and local income, estate and gift tax treatment, will
be applicable with respect to amounts deferred under the Plan, or paid to
or for the benefit of a Participant under the Plan, or that such tax
treatment will apply to or be available to a Participant on account of
participation in the Plan.
11
11.0 ADDITIONAL PAYMENTS
11.1 Gross-Up Payment. In the event that any payment or benefit received or to
be received by any Participant pursuant to the terms of the Plan (the "Plan
Payments") or of any other plan, arrangement or agreement of the Company or
any Subsidiary ("Other Payments" and, together with the Plan Payments, the
"Payments") would be subject to the excise tax (the "Excise Tax") imposed
by Section 4999 of the Code as determined as provided below, the Company
shall pay to such Participant, at the time specified in Section 11.3 below,
an additional amount (the "Gross-Up Payment") such that the net amount
retained by such Participant, after deduction of the Excise Tax on Payments
and any federal, state and local income tax and any additional Excise Tax
upon the Gross-Up Payment, and any interest, penalties or additions to tax
payable by such Participant with respect thereto, shall be equal to the
total present value (using the applicable federal rate (as defined in
Section 1274(d) of the Code in such calculation) of the Payments at the
time such Payments are to be made. Notwithstanding the foregoing provisions
of this Section 11.1, if it shall be determined that a Participant in Tier
II or Tier III is entitled to a Gross-Up Payment, but that the Payments
would not be subject to the Excise Tax if the Payments were reduced by an
amount that does not exceed ten percent (10%) of the portion of the
Payments that would be treated as "parachute payments" under Section 280G
of the Code, then the Plan Payments shall be reduced (but not below zero)
to the maximum amount that could be paid to the Participant without giving
rise to the Excise Tax (the "Safe Harbor Cap"), and no Gross-Up Payment
shall be made to the Participant. The reduction of the Plan Payments
hereunder, if applicable, shall be made by reducing first the Cash Payment
under Section 6.1, unless an alternative method of reduction is elected by
the Participant and agreed to by the Committee. For purposes of reducing
the Payments to the Safe Harbor Cap, only Plan Payments (and no other
Payments) shall be reduced. If the reduction of the Plan Payments would not
result in a reduction of the Payments to the Safe Harbor Cap, no amounts
payable under this Plan shall be reduced pursuant to this provision.
11.2 Determination. For purposes of determining whether any of the Payments will
be subject to the Excise Tax and the amounts of such Excise Tax:
(a) the total amount of the Payments shall be treated as "parachute
payments" within the meaning of Section 280G(b)(2) of the Code, and
all "excess parachute payments" within the meaning of Section
280G(b)(1) of the Code shall be treated as subject to the Excise Tax,
except to the extent that, in the opinion of independent counsel
selected by the Company and reasonably acceptable to such Participant
("Independent Counsel"), a Payment (in whole or in part) does not
constitute a "parachute payment" within the meaning of Section
280G(b)(2) of the Code, or such "excess parachute payments" (in whole
or in part) are not subject to the Excise Tax;
(b) the amount of the Payments that shall be treated as subject to the
Excise Tax shall be equal to the lesser of (i) the total amount of the
Payments or (ii) the amount of "excess parachute payments" within the
meaning of Section 280G(b)(1) of the Code (after applying Section
11.2(a) above); and
(c) the value of any noncash benefits or any deferred payment or benefit
shall be determined by Independent Counsel in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
12
For purposes of determining the amount of the Gross-Up Payment, such
Participant shall be deemed to pay federal income taxes at the highest
marginal rates of federal income taxation applicable to the individuals in
the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rates of taxation applicable to
individuals as are in effect in the state and locality of such
Participant's residence in the calendar year in which the Gross-Up Payment
is to be made, net of the maximum reduction in federal income taxes that
can be obtained from deduction of such state and local taxes, taking into
account any limitations applicable to individuals subject to federal income
tax at the highest marginal rates.
11.3 Date of Payment of Gross-Up Payments. The Gross-Up Payments provided for in
Section 11.1 above shall be paid upon the earlier of (i) the payment to
such Participant of any Payment or (ii) the imposition upon such
Participant or payment by such Participant of any Excise Tax.
11.4 Adjustment. If it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding or the opinion of
Independent Counsel that the Excise Tax is less than the amount taken into
account under Section 11.1 above, such Participant shall repay to the
Company within 30 days of such Participant's receipt of notice of such
final determination or opinion the portion of the Gross-Up Payment
attributable to such reduction (plus the portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local income tax
imposed on the Gross-Up Payment being repaid by such Participant if such
repayment results in a reduction in Excise Tax or a federal, state and
local income tax deduction) plus any interest received by such Participant
on the amount of such repayment. If it is established pursuant to a final
determination of a court or an Internal Revenue Service proceeding or the
opinion of independent Counsel that the Excise Tax exceeds the amount taken
into account hereunder (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-Up Payment),
the Company shall make an additional Gross-Up Payment in respect of such
excess within 30 days of the Company's receipt of notice of such final
determination or opinion.
11.5 Further Interpretation of Section 280G or 4999 of the Code. In the event of
any change in, or further interpretation of, Section 280G or 4999 of the
Code and the regulations promulgated thereunder, such Participant shall be
entitled, by written notice to the Company, to request an opinion of
Independent Counsel regarding the application of such change to any of the
foregoing, and the Company shall use its best efforts to cause such opinion
to be rendered as promptly as practicable. All fees and expenses of
Independent Counsel incurred in connection with this agreement shall be
borne by the Company.
12.0 TERM OF PLAN; AMENDMENT AND TERMINATION
12.1 Term of Plan, Amendment, Termination. The Plan shall be effective as of the
Effective Date and shall remain in effect until the Board terminates the
Plan. The Plan may be terminated, suspended or amended by the Board at any
time with or without prior notice prior to a Change-in-Control; provided,
however, that the Plan shall not be terminated, suspended or amended on a
Change-in-Control Date or during the 3-year period following such
Change-in-Control Date, and if the Plan is terminated, suspended or amended
thereafter, such action shall not adversely affect the benefits of any
Terminated Participant.
13
13.0 COMPLIANCE WITH CODE SECTION 409A
13.1 General. Notwithstanding any other provision in the Plan to the contrary,
if and to the extent that Section 409A of the Code is deemed to apply to
the Plan or any Change-in-Control Benefit provided under the Plan, it is
the general intention of the Company that the Plan and all such benefits
shall comply with Code Section 409A, related regulations or other guidance,
and the Plan and any such Change-in-Control Benefit shall, to the extent
practicable, be construed in accordance therewith. Without in any way
limiting the effect of the foregoing, in the event that Code Section 409A,
related regulations or other guidance require that any special terms,
provisions or conditions be included in the Plan or any Change-in-Control
Benefit, then such terms, provisions and conditions shall, to the extent
practicable, be deemed to be made a part of the Plan or Change-in-Control
Benefit, as applicable. Further, in the event that the Plan or any
Change-in-Control Benefit shall be deemed not to comply with Code Section
409A or any related regulations or other guidance, then neither the
Company, the Committee nor its or their designees or agents shall be liable
to any Participant or other person for actions, decisions or determinations
made in good faith.
13.2 Specific Terms Applicable to Change-in-Control Benefits Subject to Code
Section 409A. Without limiting the effect of Section 13.1 above, and
notwithstanding any other provision in the Plan to the contrary, the
following provisions shall, to the extent required under Code Section 409A,
related regulations or other guidance, apply with respect to
Change-in-Control Benefits deemed to involve the deferral of compensation
under Code Section 409A:
(a) Distributions: Distributions may be made with respect to
Change-in-Control Benefits subject to Code Section 409A not earlier
than upon the occurrence of one or more of the following events: (A)
separation of service; (B) disability; (C) death; (D) a specified time
or pursuant to a fixed schedule; (E) a change in the ownership or
effective control of the Company, or in the ownership of a substantial
portion of the assets of the Company, as defined in Section 2.5.2; or
(F) the occurrence of an unforeseeable emergency. Each of the
preceding distribution events shall be defined and interpreted in
accordance with Code Section 409A and related regulations or other
guidance.
(b) Key Employees: With respect to Participants who are "key employees"
(as defined in Code Section 409A, related regulations or other
guidance), a distribution due to separation of service may not be made
before the date that is six months after the Termination Date (or, if
earlier, the date of death of the Participant), except as may be
otherwise permitted pursuant to Code Section 409A, related regulations
or other guidance. To the extent that a Participant is subject to this
section and a distribution is to be paid in installments, through an
annuity, or in some other manner where payment will be periodic, the
Participant shall be paid, during the seventh month following the
Termination Date, the aggregate amount of payments he would have
received but for the application of this section; all remaining
payments shall be made in their ordinary course.
(c) No Acceleration: Unless permissible under Code Section 409A, related
regulations or other guidance, the acceleration of the time or
schedule for the payment of any Change-in-Control Benefit under the
Plan is prohibited.
14
14.0 MISCELLANEOUS
14.1 Offset. The Change-in-Control Benefits shall be reduced by any payment or
benefit made or provided by the Company or any Subsidiary to the
Participant pursuant to (i) any severance plan, program, policy or
arrangement of the Company or any subsidiary of the Company not otherwise
referred to in the Plan, (ii) any employment agreement between the Company
or any Subsidiary and the Participant, and (iii) any federal, state or
local statute, rule, regulation or ordinance.
14.2 No Right, Title, or Interest in Company Assets. Participants shall have no
right, title, or interest whatsoever in or to any assets of the Company or
any investments which the Company may make to aid it in meeting its
obligations under the Plan. Nothing contained in the Plan, and no action
taken pursuant to its provisions, shall create or be construed to create a
trust of any kind, or a fiduciary relationship between the Company and any
Participant, Beneficiary, legal representative or any other person. To the
extent that any person acquires a right to receive payments from the
Company under the Plan, such right shall be no greater than the right of an
unsecured general creditor of the Company. Subject to Section 8 above, all
payments to be made hereunder shall be paid from the general funds of the
Company and no special or separate fund shall be established and no
segregation of assets shall be made to assure payment of such amounts
except as expressly set forth in the Plan.
14.3 No Right to Continued Employment. The Participant's rights, if any, to
continue to serve the Company or any Subsidiary as an employee shall not be
enlarged or otherwise affected by his or her designation as a Participant
under the Plan, and the Company or the applicable Subsidiary reserves the
right to terminate the employment of any employee at any time. The adoption
of the Plan shall not be deemed to give any employee, or any other
individual any right to be selected as a Participant or to continued
employment with the Company or any Subsidiary.
14.4 Other Rights. The Plan shall not affect or impair the rights or obligations
of the Company, any Subsidiary or a Participant under any other written
plan, contract, arrangement, or pension, profit sharing or other
compensation plan.
14.5 Governing Law. The Plan shall be governed by and construed in accordance
with the laws of the State of North Carolina without reference to
principles of conflict of laws, except as superseded by applicable federal
law.
14.6 Severability. If any term or condition of the Plan shall be invalid or
unenforceable to any extent or in any application, then the remainder of
the Plan, with the exception of such invalid or unenforceable provision,
shall not be affected thereby and shall continue in effect and application
to its fullest extent.
14.7 Incapacity. If the Committee determines that a Participant or a Beneficiary
is unable to care for his or her affairs because of illness or accident or
because he or she is a minor, any benefit due the Participant or
Beneficiary may be paid to the Participant's spouse or to any other person
deemed by the Committee to have incurred expense for such Participant
(including a duly appointed guardian, committee or other legal
representative), and any such payment shall be a complete discharge of the
Company's obligation hereunder.
15
14.8 Transferability of Rights. The Company shall have the unrestricted right to
transfer its obligations under the Plan with respect to one or more
Participants to any person, including, but not limited to, any purchaser of
all or any part of the Company's business. No Participant or Beneficiary
shall have any right to commute, encumber, transfer or otherwise dispose of
or alienate any present or future right or expectancy which the Participant
or Beneficiary may have at any time to receive payments of benefits
hereunder, which benefits and the right thereto are expressly declared to
be non-assignable and nontransferable, except to the extent required by
law. Any attempt to transfer or assign a benefit, or any rights granted
hereunder, by a Participant or the spouse of a Participant shall, in the
sole discretion of the Committee (after consideration of such facts as it
deems pertinent), be grounds for terminating any rights of the Participant
or Beneficiary to any portion of the Plan benefits not previously paid.
16