PEPCO HOLDINGS, INC.
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(Exact name of registrant as specified in its charter)
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Delaware
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001-31403
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52-2297449
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(State or other jurisdiction
of incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.)
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701 Ninth Street, N.W., Washington, DC
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20068
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(Address of principal executive offices)
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(Zip Code)
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Registrant's telephone number, including area code
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(202) 872-2000
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Not Applicable
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(Former name or former address, if changed since last report.)
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¨
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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¨
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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¨
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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¨
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 5.02
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Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
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Mr. Emge will continue to be employed as an executive of PHI until April 1, 2013 at his currently annual base salary of $400,000, with such duties and responsibilities as will be assigned to him by PHI’s Chief Executive Officer, and otherwise on the same terms and conditions as were in effect immediately prior to the date of the Retirement Agreement, including participation in PHI-sponsored pension, deferred compensation, health and welfare plans in accordance with the terms thereof.
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On or about April 1, 2013, Mr. Emge will receive a non-pensionable severance payment in the amount of $706,667, consisting of (i) $466,667, which is equal to the amount of salary that Mr. Emge would have earned at his current salary rate over the period from April 1, 2013 through May 31, 2014, which would have been his normal retirement date under the Pepco Holdings Retirement Plan, and (ii) $240,000, which is equal to Mr. Emge’s 2013 target bonus under the PHI Amended and Restated Annual Executive Incentive Compensation Plan (the EICP). To receive this payment, Mr. Emge must execute a general release in favor of PHI and its subsidiaries as required by the Retirement Agreement.
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Mr. Emge will receive an annuity of $547 per month to offset lower monthly retirement benefit payments due to his early retirement.
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With regard to Mr. Emge’s ongoing participation in the EICP, Mr. Emge will be entitled to receive an award for 2012 (payable in 2013) if and to the extent determined by the PHI Compensation/Human Resources Committee (the Committee) in accordance with the terms of the EICP. Mr. Emge shall not be entitled to participate in the EICP in 2013.
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With regard to Mr. Emge’s ongoing participation in the PHI Long-Term Incentive Plan (LTIP) and the PHI 2012 Long-Term Incentive Plan (the 2012 LTIP):
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o
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Payments, if any, under Mr. Emge’s time-based and performance-based awards for the 2010 to 2012 award cycle shall vest only if and to the extent determined by the Committee in accordance with the terms thereof, and, to the extent earned, shall be payable in the normal course.
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o
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Payments under Mr. Emge’s time-based restricted stock unit (RSU) award under the LTIP for the 2011 to 2013 award cycle (and additional RSUs accrued as dividend equivalents thereupon) will be prorated based on the number of full months elapsed over the period beginning on the grant date and ending on April 1, 2013.
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o
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Payments, if any, under Mr. Emge’s performance-based RSU award under the LTIP for the 2011 to 2013 award cycle (and additional RSUs accrued as dividend equivalents thereupon) will be based on actual performance over the entire three-year performance period relative to the performance goals as determined by the Committee in accordance with the terms of the award, with the number of RSUs, if any, that otherwise would have become vested to be prorated for the number of full months elapsed over the period beginning on the grant date and ending on April 1, 2013.
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o
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Mr. Emge’s time-based and performance-based awards under the LTIP for the 2012 to 2014 award cycle will be forfeited, effective April 1, 2013.
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o
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Mr. Emge will not be entitled to any awards under the 2012 LTIP with respect to the 2013 to 2015 award cycle.
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Item 8.01
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Other Events.
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The Employment Agreement has a term of three years beginning on the Election Date and expiring on September 16, 2015.
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Mr. Fitzgerald will be entitled to an annual base salary of $550,000. If during the term of the Employment Agreement Mr. Fitzgerald’s annual salary is increased, it may not thereafter be decreased.
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Mr. Fitzgerald is entitled to a target incentive opportunity under the EICP equal to 60% of his annual base salary. Any award paid with respect to 2012 will be prorated based upon the number of days he is continuously employed with PHI in 2012.
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Mr. Fitzgerald is entitled to receive 2012 LTIP awards with aggregate target award opportunities equal to 125% of his base salary. For the 2012 to 2014 performance period, Mr. Fitzgerald will receive awards (prorated based on the Election Date) consisting of:
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o
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one-third time-based RSUs (including dividend equivalents), which will vest in January 2015, provided that Mr. Fitzgerald remains continuously employed by PHI until the vesting date; and
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o
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two-thirds performance-based RSUs (including dividend equivalents), which shall vest only if Mr. Fitzgerald remains continuously employed by PHI until the end of the performance period and the Committee determines that PHI’s total shareholder return relative to that of the 2012 Utility Peer Group (as determined by the Committee) for the 2012 to 2014 performance period has exceeded certain established thresholds.
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As an inducement for Mr. Fitzgerald to enter into the Employment Agreement, Mr. Fitzgerald is eligible to receive contingent retention awards of RSUs under the 2012 LTIP. These contingent retention awards are comprised of the following:
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Time-based contingent retention award granted as of the Election Date:
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§
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The number of RSUs subject to this award will be determined by dividing $750,000 by the closing price of a share of PHI common stock on the last trading day prior to the Election Date.
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Four-fifteenths of this award will vest on each of the first and second anniversaries of the Election Date, and the balance will vest on the third anniversary of the Election Date, in each case so long as Mr. Fitzgerald remains continuously employed by PHI as of each such anniversary date.
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§
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If Mr. Fitzgerald’s employment terminates prior to September 16, 2015, the unvested portion of this time-based award will be forfeited, subject to certain exceptions.
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Performance-based contingent retention awards
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§
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Three separate awards will be made, with the first award to be made as soon as practicable after January 1, 2013, and the second and third awards to be made on or as soon as practicable after each of the first and second anniversaries thereof, so long as Mr. Fitzgerald is employed by PHI on each such date.
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§
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Each award shall consist of such number of RSUs equal to $166,666.67, divided by the closing price of a share of PHI common stock on the last trading day prior to the first day of the calendar year in which the retention performance award is executed and delivered (the Retention Award Performance Period).
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Each award shall vest only to the extent performance goals for each Retention Award Performance Period have been achieved.
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Subject to certain exceptions, an award will be forfeited if Mr. Fitzgerald’s employment with PHI ends prior to the completion of the Retention Award Performance Period.
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The Committee will adopt specific performance goal criteria from among those set forth in the 2012 LTIP, which shall serve as the basis for the performance goals for these awards.
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Subject to certain exceptions, Mr. Fitzgerald is required to hold vested RSUs attributable to these awards until his employment with PHI terminates.
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Prior to settlement, RSUs will be credited with dividend equivalents (in the form of additional fully-vested RSUs) beginning upon the vesting date.
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Item 9.01
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Financial Statements and Exhibits.
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(d)
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Exhibits
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The following exhibits are filed herewith:
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Exhibit No.
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Description of Exhibit
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10
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Retirement Agreement, dated as of September 6, 2012, by and between PHI and Kirk J. Emge
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99
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News Release of Pepco Holdings, Inc. dated September 7, 2012
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PEPCO HOLDINGS, INC.
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(Registrant)
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Date:
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September 7, 2012
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/s/ JOSEPH M. RIGBY
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Name: Joseph M. Rigby
Title: Chairman of the Board, President
and Chief Executive Officer
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Exhibit No.
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Description of Exhibit
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10
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Retirement Agreement, dated as of September 6, 2012, by and between PHI and Kirk J. Emge
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99
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News Release of Pepco Holdings, Inc. dated September 7, 2012
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