File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
APPLICATION /DECLARATION
under the
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
***
Northeast Utilities
Western Massachusetts Electric Company
Holyoke Water Power Company
174 Brush Hill Avenue
West Springfield, Massachusetts 01090-0010
Northeast Utilities Service Company
The Connecticut Light and Power Company
Northeast Nuclear Energy Company
107 Selden Street
Berlin, Connecticut 06037
Public Service Company of New Hampshire
North Atlantic Energy Service Corporation
1000 Elm Street
Manchester, New Hampshire 03105
(Name of companies filing this statement and
address of principal executive offices)
***
Northeast Utilities
(Name of top registered holding company parent
of each applicant or declarant)
***
Robert P. Wax, Esq.
Senior Vice President, Secretary and General Counsel
Northeast Utilities
P.O. Box 270
Hartford, CT 06141-0270
(Name and address of agent for service)
The Commission is requested to mail signed copies of all orders, notices, and
communications to:
Richard M. Early
Senior Counsel
Northeast Utilities Service Company
P.O. Box 270
Hartford, CT 06141-0270
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION.
1. Northeast Utilities (NU), a registered holding company, Northeast
Utilities Service Company (NUSCO), a wholly-owned subsidiary service company
of NU, and certain of NU's subsidiaries, namely The Connecticut Light and
Power Company, Holyoke Water Power Company, North Atlantic Energy Service
Corporation, Northeast Nuclear Energy Company, Public Service Company of New
Hampshire, and Western Massachusetts Electric Company, hereby submit to the
Commission an application/declaration (the Application) pursuant to Sections
6(a), 7, 9(a), 10 and 12(e) of the Public Utility Holding Company Act of 1935
(the Act) and Rules 42, 62 and 65 thereunder seeking Commission approval for
(a) the solicitation of proxies from NU's common shareholders seeking the
approval of the adoption of the Northeast Utilities Incentive Plan (the
Incentive Plan) and the Northeast Utilities Employee Share Purchase Plan (the
Employee Share Purchase Plan, and with the Incentive Plan, collectively, the
Plans), which contemplate the issuance of NU's Common Shares, $5.00 par
value (NU Common Shares) and derivative securities thereof for use as awards
and grants thereunder, subject to the limitations set forth therein, and (b)
the use of newly-issued NU Common Shares and derivative securities thereof,
and the use of reacquired NU Common Shares, under the Plans and as employee
incentive compensation from time to time, all as described herein.
2. The Incentive Plan and the Employee Share Purchase Plan were adopted
by action of NU's Board of Trustees (the Board) on January 13, 1998, subject
to shareholder approval at the Annual Meeting of Shareholders to be held May
12, 1998. If approved by the shareholders, the Plans will be effective as of
January 1, 1998. A draft of the proposed proxy statement disclosure
regarding the Plans is filed herewith as Exhibit A.2. Copies of the
Incentive Plan and the Employee Share Purchase Plan are filed herewith as
Exhibits A.3 and A.4, respectively.
3. The Incentive Plan will replace the Northeast Utilities Executive
Incentive Plan (the EIP) (See Holding Co. Act Rel. No 25297, dated April 12,
1990, in File 70-7992). It will be administered by the Compensation Committee
of the Board, or its delegate (collectively, the Committee). The Incentive
Plan provides greater flexibility than the EIP in that it not only provides
for the kinds of incentive awards now permitted but also allows the use of
stock options and other derivatives as incentive compensation. It also
benefits the Company, its shareholders, customers and employees by allowing
the use of incentive compensation that qualifies as "qualified
performance-based compensation" for purposes of the $1 million cap on
deductibility of certain executive compensation under section 162(m) of the
Internal Revenue Code of 1986, as amended (the Code). Thus certain
qualifying awards will be wholly tax-deductible if the Incentive Plan can be
implemented.
4. The Incentive Plan provides for (a) annual cash or stock-based bonus
awards for eligible officers of NU and participating subsidiaries based on
fulfillment of various company and individual performance goals and (b)
stock-based incentive compensation grants for eligible officers, employees
and contractors of NU and participating subsidiaries of NU. Such grants may
take the form of stock options (either incentive stock options under Section
422 of the Code or non-qualified stock options), restricted stock, stock
appreciation rights (SARs), or performance units whose value depends on the
value of NU Common Shares from time to time.
5. The Incentive Plan also provides for the grant to non-employee
Trustees of NU, upon election to the Board of Trustees and annually
thereafter, of non-qualified options to purchase 2,500 NU Common Shares at a
price equal to fair market value as of the date of the grant. Such options
will have a term of ten years from the date of grant. Half of each such
grant will be exercisable immediately following grant, while the other half
will become exercisable on the first anniversary of the grant, if the
non-employee Trustee still holds office on that date.
6. The Incentive Plan authorizes NU, if NU Common Shares are to be
included in any award or grant, to obtain shares for such purpose through
open market purchases, through issuance of treasury shares or authorized but
unissued shares, or through some combination thereof. The maximum number of
NU Common Shares that may be utilized for share-based awards or grants under
the Incentive Plan in any calendar year is one percent of the outstanding NU
Common Shares as of the end of the preceding calendar year. Based on the
issued and outstanding NU Common Shares on December 31, 1997, this
restriction would permit 1,368,421 NU Common Shares to be used for awards and
grants to participants in 1998 under all programs under the Incentive Plan.
This share limit is subject to adjustment in the event of a recapitalization,
stock split, merger, combination, exchange or similar corporate transaction.
Shares that are eligible to be used for awards and grants under the Incentive
Plan but are not so used, or shares that are so used but are forfeited by the
recipient or that underlie options or SARs that terminate, expire, or are
canceled, forfeited, exchanged or surrendered without having been exercised
cumulate and may be used for awards or grants in subsequent years in addition
to those shares made available under the limit described above. No more than
thirty percent of the shares available for use under the Incentive Plan in
any calendar year may be used with respect to grants of restricted stock or
performance units under the Incentive Plan in such year. Based on the issued
and outstanding NU Common Shares on December 31, 1997, this restriction would
permit 410,526 NU Common Shares to be used for restricted stock or
performance unit grants in 1998.
7. The Incentive Plan terminates ten years from its effective date,
unless earlier terminated by the Board or extended by vote of the Board
subject to shareholder approval. In the event of a change of control, as
defined in the Incentive Plan, unless the Committee determines otherwise, all
options, restricted stock and SARs granted under the Incentive Plan will
become fully vested, and grantees holding performance units will receive
payment in settlement of the units based on the target payment for the
performance period and the portion of the performance period that precedes
the change of control.
8. Under the Employee Share Purchase Plan, eligible employees of
participating subsidiaries of NU will be given the opportunity to purchase
newly-issued NU Common Shares periodically through payroll deduction.
Purchases will be made on the last day of each purchase period as established
by the Committee, at a discounted price. The price will be 85 percent of the
lower of the closing market price on the first day or the last day of the
purchase period, unless a higher price (not to exceed the lower of the
closing market price on the first day or the last day of the purchase period)
is set by the Committee prior to the commencement of the purchase period.
Officers who receive stock option grants under the Incentive Plan described
above will not be eligible for the discounted price but may purchase shares
under the Employee Share Purchase Plan at a price equal to the lower of the
fair market value of an NU Common Share on the first or last day of the
purchase period. The Employee Share Purchase Plan is intended to be an
"employee stock purchase plan" as described in Section 423 of the Code.
9. Shares purchased pursuant to the Employee Share Purchase Plan will be
held in participant accounts to be established by Northeast Utilities Service
Company until withdrawn by the participant. Such shares may not be sold or
otherwise transferred by the participant for six months following the date of
purchase. Dividends on such shares will be reinvested into additional shares
under NU's Dividend Reinvestment Plan (see Holding Co. Act Rel. No. 26279,
dated April 26, 1995, in File No. 70-7701).
10. The Employee Share Purchase Plan will terminate ten years from its
effective date, unless terminated earlier by the Board. The maximum number
of shares that may be issued for purchases under the Employee Share Purchase
Plan in any calendar year is one-half of one percent of the number of shares
outstanding as of the last day of the previous calendar year. This
limitation is subject to adjustment in the event of a recapitalization, stock
split, merger, combination, exchange or similar corporate transaction. Shares
that are eligible to be used for purchases under the Employee Share Purchase
Plan but are not so used cumulate and may be used for purchases in subsequent
years in addition to those shares made available under the limit described
above. Based on the issued and outstanding NU Common Shares on December 31,
1997, this restriction would permit 684,210 NU Common Shares to be issued to
fund purchases by Employee Share Purchase Plan Participants in 1998.
11. Applicants also request authorization to issue an additional 1.3
million NU Common Shares (less than one percent of the shares outstanding as
of December 31, 1997) during the years 1998 through 2007 to be used to
provide incentive compensation to employees and non-employee Trustees other
than through grants and awards under the Incentive Plan. Applicants have
from time to time provided certain new and other key employees with incentive
grants of NU Common Shares from time to time, subject to certain restrictions
on ownership and transfer (See Holding Co. Act Rel. No. 26204, dated December
28, 1994, in File No. 70-8515). Non-employee Trustees of NU have received
compensation in the form of NU Common Shares (See Holding Co. Act Rel. Nos.
25842, dated June 30, 1993 and 26368, dated September 5, 1995, in File No.
70-8080). When such shares are issued for such purposes, they have been
acquired by NUSCO on the open market for the respective accounts of the
recipient employees and Trustees. Applicants intend to continue this
practice of providing compensation in the form of NU Common Shares to
eligible employees and non-employee Trustees. One intended use of such shares
is to provide employer matching contributions pursuant to Section 4.3 of the
Northeast Utilities Deferred Compensation Plan for Executives (the Deferred
Compensation Plan), adopted by the Board on January 13, 1998. A copy of the
Deferred Compensation Plan is filed herewith as Exhibit A.5. Other intended
uses of such shares are to fund bonuses upon commencement of employment and
awards under periodic incentive plans. Such shares may be issued subject to
such limitations or restrictions as may be deemed appropriate by the
Applicants.
12. Approval of the Incentive Plan and the Employee Share Purchase Plan
by NU's common shareholders will require the affirmative vote of the holders
of a majority of the NU Common Shares present or represented at the 1998
Annual Meeting of Shareholders. Shareholder approval is required pursuant to
Article (19) of NU's Declaration of Trust, a copy of which is filed herewith
as Exhibit A.1, in order to issue NU Common Shares not subject to pre-emptive
rights. No shareholder approval is required for the use of NU Common Shares
as contemplated by Paragraph 11 above.
13. Except in accordance with the Act, neither NU nor any subsidiary
thereof (a) has acquired an ownership interest in an exempt wholesale
generator ("EWG") or a foreign utility company ("FUCO") as defined in
Sections 32 and 33 of the Act, or (b) now is or as a consequence of the
transactions proposed herein will become a party to, or has or will as a
consequence of the transactions proposed herein have a right under, a
service, sales, or construction contract with an exempt wholesale generator
or a foreign utility company. None of the proceeds from the transactions
proposed herein will be used by the Company to acquire any securities of, or
any interest in, an exempt wholesale generator or a foreign utility company.
The NU system is in compliance with Rule 53(a), (b) and (c), as demonstrated
by the following determinations:
(i) NU's aggregate investment in EWGs and FUCOs (i.e. amounts
invested in or committed to be invested in EWGs and FUCOs, for which there is
recourse to NU) does not exceed 50 percent of the NU system's consolidated
retained earnings as reported for the four most recent quarterly periods on
NU's Form 10-K and 10-Qs. At September 30, 1997, the ratio of such
investment ($78 million) to such consolidated retained earnings ($702
million) was 11.1 percent.
(ii) Ave Fenix Energia S.A. and Plantas Eolicas S.A. (NU's only EWGs
or FUCOs at this time) (collectively, EWGs/FUCOs) maintain books and records
and prepare financial statements in accordance with Rule 53(a)(2).
Furthermore, NU has undertaken to provide the Commission access to such books
and records and financial statements, as it may request.
(iii) No employees of the NU system's public utility companies have
rendered services to the EWGs/FUCOs.
(iv) NU has submitted (a) a copy of each Form U-1 and Rule 24
certificates that have been filed with the Commission under Rule 53 and (b) a
copy of Item 9 of Form U5S and Exhibits G and H thereof to each state
regulator having jurisdiction over the retail rates of the NU system public
utility companies.
(v) Neither NU nor any NU subsidiary has been subject of a
bankruptcy or similar proceeding unless a plan of reorganization has been
confirmed in such proceeding. In addition, although NU's average
consolidated retained earnings ("CREs") for the four most recent quarterly
periods has decreased by 10 percent or more from the average for the previous
four quarterly periods (at 9/30/96, NU's CREs were $941 million; at 9/30/97,
NU's CREs were $702 million), NU's aggregate investment in EWGs/FUCOs at
September 30, 1997 ($78 million) did not exceed two percent of NU's
consolidated capital invested in utility operations ($133.7 million).
(vi) In the previous fiscal year, NU did not report operating
losses attributable to its investment in EWGs/FUCOs, unless such losses did
not exceed 5 percent of NU's consolidated retained earnings.
ITEM 2. FEES, COMMISSIONS AND EXPENSES.
14. The estimated fees, commissions, and expenses paid or incurred, or
to be paid or incurred, directly or indirectly, in connection with the
proposed transactions will be specified in Exhibit H (to be filed by
amendment).
15. None of such fees, commissions, or expenses are to be paid to any
associate company or affiliate of the Companies or any affiliate of any such
associate company except for financial, legal, and other services to be
performed at cost by NUSCO, an affiliated service company.
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
Sections 6(a) and 7 of the Act and Rule 50 thereunder apply to the
issuance by NU from time to time of authorized but unissued shares and
treasury shares in connection with the Plans as described above and may apply
to the use by NUSCO and other Applicants of NU Common Shares in compensation
programs described in paragraph 12. Sections 9(a) and 10 of the Act and Rule
42 thereunder apply to NU's acquisition of NU Common Shares from Plan
participants upon the forfeiture thereof if applicable vesting requirements
or forfeiture restrictions are not satisfied. Section 12(e) of the Act and
Rules 62 and 65 thereunder apply to the proxy solicitation as described above
ITEM 4. REGULATORY APPROVAL.
No commission, other than this Commission, has jurisdiction over the
Applicants with respect to any of the proposed transactions described in this
Application.
ITEM 5. PROCEDURE.
In order for NU to complete the printing of proxy cards and proxy
statements for the 1998 Annual Meeting and to permit at least 60 days for the
solicitation of proxies, NU requests that the Commission issue an order on or
before March 13, 1998 declaring this Application effective with respect to
the solicitation of proxies from the holders of NU Common Shares in
connection with shareholder approval of the Plans, as provided by Rule 62
under the Act. The Commission is requested to issue its further order on or
before May 12, 1998 permitting the Application to become effective as to all
other matters described herein.
Applicants hereby waive a recommended decision by a hearing officer or
other responsible officer of the Commission. It consents that the Office of
Public Utility Regulation within the Division of Investment Management may
assist in the preparation of the Commission's finding and/or order and hereby
requests that the Commission's orders become effective forthwith upon
issuance.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.
The following exhibits and financial statements are filed as part of
this application:
(a) Exhibits:
Exhibit A.1 -- Declaration of Trust of Northeast Utilities, as amended,
incorporated by reference to Exhibit 3.1.1 of the 1988 Annual Report on Form
10-K of Northeast Utilities (File No. 1-5324)
Exhibit A.2 -- Draft of Proposed Proxy Solicitation
Exhibit A.3 -- Proposed Incentive Plan
Exhibit A.4 -- Proposed Employee Share Purchase Plan
Exhibit A.5 -- Form of Deferred Compensation Plan for Executives
Exhibit B -- None
Exhibit C -- None
Exhibit D -- None
Exhibit E -- None
Exhibit F -- Opinion of Counsel (to be filed by Amendment).
Exhibit G -- Form of Notice.
Exhibit H -- Fee Statement (to be filed by Amendment)
(b) Financial Statements: Financial statements are omitted since they are not
deemed relevant for a proper disposition of the
proposed transactions by the Commission.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.
This Application relates to the implementation by NU of a new incentive
plan and employee share purchase plan and the solicitation of proxies from
the holders of NU Common Shares with respect thereto, and to the issuance of
additional NU Common Shares. As such, it is believed that the granting and
permitting to become effective of this Application will not constitute a
major federal action significantly affecting the quality of the human
environment. No other federal agency has prepared or is preparing an
environmental impact statement with respect to the proposed transaction.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, the undersigned companies have duly caused this statement to be signed
on their behalf by the undersigned hereunto duly authorized.
NORTHEAST UTILITIES
NORTHEAST UTILITIES SERVICE COMPANY
THE CONNECTICUT LIGHT AND POWER COMPANY
HOLYOKE WATER POWER COMPANY
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
WESTERN MASSACHUSETTS ELECTRIC COMPANY
NORTHEAST NUCLEAR ENERGY COMPANY
NORTH ATLANTIC ENERGY SERVICE CORPORATION
By /s/John B. Keane
Vice President and Treasurer
Dated: March 4, 1998
Exhibit A.2
Proposed Proxy Solicitation Language
3. APPROVAL OF EMPLOYEE SHARE PURCHASE PLAN
To encourage employee ownership of the Company, the Board adopted an
employee share purchase plan (the Employee Share Purchase Plan) on January
13, 1998, effective January 1, 1998, subject to shareholder approval. The
Employee Share Purchase Plan generally provides eligible employees of the
Company with a means to purchase, through payroll deductions, common shares
at a discount, consistent with the provisions of the Internal Revenue Code of
1986, as amended. The Board reserved a number of common shares equal to one-
half of one percent of the total number of outstanding common shares for
issuance pursuant to the terms of the Employee Share Purchase Plan each
fiscal year, subject to adjustment in the event of stock splits, stock
dividends, recapitalization, or other changes in the outstanding common
shares. If and to the extent that the reserved shares are not purchased by
participants in any fiscal year, such shares again will be available for
purchase in subsequent years. Under current accounting rules, the issuance
of shares at a discount under the Employee Share Purchase Plan does not
adversely affect earnings. The text of the Employee Share Purchase Plan is
included in Appendix 1 of this proxy statement.
Eligibility. Regular full or part-time employees of the Company are
eligible to participate in the Employee Share Purchase Plan, on a purely
voluntary basis, if they meet certain conditions. To be eligible, an
employee's customary employment must be greater than both twenty hours per
week and five months per calendar year. The employee must also have
completed one year of service with the Company (as determined under the NUSCO
Retirement Plan). An employee who owns 5 percent or more of the total
combined voting power or value of all classes of shares of the Company will
not be eligible to participate in the Employee Share Purchase Plan.
Temporary employees will not be eligible to participate in the Employee Share
Purchase Plan. Employees whose terms and conditions of employment are
subject to negotiation with a collective bargaining agent may not participate
until the agreement between the Company and such agent provides for such
participation. Approximately 6,500 employees would have been eligible to
participate as of January 1, 1998.
Share Purchases. Eligible employees participate in the Employee Share
Purchase Plan through exercising options to purchase common shares. Options
may be granted for each purchase period to eligible employees. In general,
each semi-annual calendar period will be a purchase period. Common shares
will be purchased through a participant's payroll deductions at a stated
dollar amount not less than $20 nor more than 25 percent of compensation per
pay period, as determined by the participant, at a price that will be an
amount equal to the lower of 85 percent of the fair market value of the
common shares as of the first or the last trading day of each purchase period
(100 percent of the fair market value for officers who have received stock
option Grants under the Incentive Plan described at pages - of this
proxy statement), unless the Committee determines to use a different discount
between 85 percent and 100 percent. The fair market value of the common
shares will be determined as the closing price of a Northeast Utilities
common share reported as composite transactions in the Wall Street Journal
for each relevant date. No employee will be permitted to purchase common
shares under the Employee Share Purchase Plan in any calendar year whose fair
market value (determined at the beginning of each purchase period) exceeds
$25,000. Each eligible employee who elects to participate in the Employee
Share Purchase Plan will, without any action on his or her part, be
automatically deemed to have exercised his or her option on the last day of
each purchase period if he or she is then employed, to the extent that the
amount withheld through payroll deduction throughout the purchase period is
sufficient to purchase, at the option price, one or more whole common shares.
Transferability. An option granted under the Employee Share Purchase
Plan may not be transferred by an employee other than by will or by the laws
of descent and distribution. Only the employee may exercise the option
during his or her lifetime.
Withdrawals, Discontinuance or Suspension of Participation. A
participant may voluntarily suspend his or her payroll deductions at any
time, but will not be permitted to resume the payroll deductions effective
again until the January 1 or July 1 following the date of suspension of
payroll deductions. A participant may change the rate of his or her payroll
deductions effective on any January 1 or July 1. A participant may withdraw
shares from his or her account at any time; provided that all shares must be
held (and thus may not be distributed or sold) for at least six months
subsequent to purchase. If a participant terminates his or her employment
with the Company, his or her participation in the Employee Share Purchase
Plan will automatically terminate as of the date of termination of
employment, all amounts withheld through payroll deduction that have not been
applied to purchase common shares under the Employee Share Purchase Plan will
be paid to the participant, and the shares held in his or her account will
either be sold for the account of the terminated participant or distributed
to the terminated participant, at his or her election.
Administration. The Employee Share Purchase Plan is administered by the
Compensation Committee of the Board, or its delegate (the Committee). All
funds received or held by the Company under the Employee Share Purchase Plan
are general assets of the Company, free of any trust or other restriction,
and may be used for any corporate purpose. No interest on such funds will be
credited to or paid to any participant under the Employee Share Purchase
Plan.
Amendment and Termination. The Board may terminate, suspend or amend
the Employee Share Purchase Plan in any respect at any time, except that
shareholder approval is required to broaden the eligibility criteria or
increase the number of shares available for purchase. Unless earlier
terminated, the Employee Share Purchase Plan will continue in effect for 10
years.
Federal Income Tax Treatment
The Employee Share Purchase Plan is intended to qualify as an employee
stock purchase plan within the meaning of section 423 of the Code. Under the
Code, an employee who elects to participate in the Employee Share Purchase
Plan will not realize income at the time the offering commences or when the
shares are actually purchased under the Employee Share Purchase Plan. If an
employee disposes of such shares after two years from the date the offering
of such shares commences under the Employee Share Purchase Plan and after one
year from the actual date of purchase of such shares under the Employee Share
Purchase Plan (collectively, the Holding Period), the employee will be
required to include in income, as capital gain for the year in which such
disposition occurs, an amount equal to the lesser of (1) the excess of the
fair market value of such shares at the time of disposition over the purchase
price and (2) the excess of the fair market value of such shares at the time
the offering commenced over the purchase price. If any employee disposes of
the shares purchased under the Employee Share Purchase Plan during the
Holding Period, the employee will be required to include in income, as
compensation for the year in which such disposition occurs, an amount equal
to the excess, if any, of the fair market value of such shares on the date of
purchase over the purchase price. The employee's basis in such shares
disposed of will be increased by an amount equal to the amount includable in
his or her income as compensation, and any gain or loss computed with
reference to such adjusted basis that is recognized at the time of
disposition will be capital gain or loss, either short-term or long-term,
depending on the length of the holding period for such shares. In the event
of a disposition during the Holding Period, the Company will be entitled to a
deduction from income equal to the amount the employee is required to include
in income as a result of such disposition.
Regulatory Approvals
The SEC has issued an order under the Public Utility Holding Company Act
of 1935 authorizing the solicitation of proxies in favor of the Employee
Share Purchase Plan. The Company has applied for SEC authorization to issue
new common shares, subject to the limits set forth above, for purchases under
the Employee Share Purchase Plan. SEC action on the application is expected
later in the Spring of 1998.
Share Purchases Under Employee Share Purchase Plan
No purchases will be made under the Employee Share Purchase Plan until
after shareholder approval of the Employee Share Purchase Plan is obtained.
Because share purchases under the Employee Share Purchase Plan are made
solely at the election of the eligible employee, it is not possible to
ascertain the employees who will purchase shares under the Employee Share
Purchase Plan in the current fiscal year.
An affirmative vote of a majority of the common shares present or
represented at the Annual Meeting of Shareholders will be required for the
adoption of this proposal.
The Board of Trustees recommends that shareholders vote FOR this
proposal.
4. APPROVAL OF INCENTIVE PLAN
The Board of Trustees adopted an incentive plan (the Incentive Plan) on
January 13, 1998, effective on January 1, 1998, subject to shareholder
approval, that provides for annual incentive awards (Awards) to officers of
the Company at or above the Vice President level and grants of incentive
stock options, nonqualified stock options, restricted stock, stock
appreciation rights and performance units to selected employees of the
Company, including employees who are also Trustees of Northeast Utilities.
In addition, the Incentive Plan provides for grants of nonqualified stock
options to non-employee Trustees of Northeast Utilities and Company
contractors. Grants of stock options, restricted stock, stock appreciation
rights and performance units are referred to collectively as "Grants."
Subject to adjustment in certain circumstances as discussed below, the
Incentive Plan authorizes Awards and Grants with respect to up to 1 percent
of the total number of outstanding common shares each fiscal year. If and to
the extent Awards or Grants under the Incentive Plan expire or are terminated
for any reason without being exercised, or the shares subject to an Award or
Grant are forfeited, or the full number of available common shares is not
made subject to Awards and Grants in any fiscal year, such shares will be
available for grant under the Incentive Plan the following year. No more
than 30 percent of the shares authorized for use in any year may be used for
restricted stock or performance unit Grants in such year. The text of the
Incentive Plan is included in Appendix 2 of this proxy statement.
Administration. The Incentive Plan is administered and interpreted by
the Committee. The Committee has the authority to determine (i) the persons
to whom Awards and Grants may be made under the Incentive Plan, (ii) the
type, size and other terms and conditions of each Award or Grant, (iii) the
time when the Awards and Grants will be made and the duration of any
applicable exercise or restriction period, including the criteria for vesting
and the acceleration of vesting, and (iv) any other matters arising under the
Incentive Plan. The Committee has full power and authority to administer and
interpret the Incentive Plan, to make factual determinations and to adopt or
amend such rules, regulations, agreements and instruments for implementing
the Incentive Plan and for conduct of its business as it deems necessary or
advisable, in its sole discretion. Notwithstanding the foregoing, the Board
may ratify or approve Grants, in which case references to the "Committee"
will be deemed to include the Board. The Committee has delegated day-to-day
administration of the Incentive Plan and its Awards and Grants to the Vice
President for Human Resources of NUSCO. The Committee has delegated
authority to the Chief Executive Officer for setting and certifying the
fulfillment of individual goals for, and the allocation of Awards based on
such fulfillment among, Incentive Plan participants, except for those whose
goals, performance and Awards must be certified by a committee consisting of
not less than two members of the Compensation Committee of the Board (each
member of such committee must be an "outside director" as defined by section
162(m) of the Internal Revenue Code of 1986, as amended (the Code), and a
"non-employee" director as defined in Rule 16b-3 under the Exchange Act) in
order to satisfy those provisions with respect to the deductibility of
executive compensation and the exemption of Awards and Grants from Section
16(b) under the Exchange Act.
Annual Incentive Awards. Annual incentive awards are based on a
comparison of the Company's performance for the year against the financial
target set for such year. Financial targets may be based on the growth of
Northeast Utilities common share price, earnings per share, net earnings,
operating earnings, return on assets, shareholder return, return on equity,
growth in assets, unit volume, sales, market share, or strategic business
criteria consisting of one or more objectives based on meeting specified
revenue goals, market penetration goals, geographic business expansion goals,
cost targets or goals relating to acquisitions or divestitures. The actual
amount of the Award for any individual may be reduced by the Committee if (or
to the extent) the employee does not satisfy the objectives (financial or
otherwise) set by the Committee for that individual at the beginning of the
fiscal year. Objectives for the fiscal year are set no later than ninety
days after the beginning of that year. Generally, Awards will be certified
as due by the Committee and paid within ninety days following the end of the
fiscal year to employees employed on the date of payment. Awards will be pro
rated for years in which a participant retires, dies or becomes disabled as
defined in the Company's long term disability plan. The maximum Award for
any individual is $3,500,000.
Grants. Grants may be made to any employees (including officers and
Trustees), non-employee Trustees of Northeast Utilities, and Company
contractors; provided, that employees whose terms and conditions of
employment are subject to negotiation with a collective bargaining agent are
not eligible for Grants until the agreement between the Company and such
agent provides for participation in the Incentive Plan. As of January 1,
1998 approximately 6,500 employees and ten Trustees (including non-employee
Trustees) were eligible for Grants under the Incentive Plan. During any
calendar year, no participant may receive Grants under the Incentive Plan of
more than 2.5 percent of the total number of common shares outstanding as of
December 31, 1997. Grants under the Incentive Plan may consist of (1)
options intended to qualify as incentive stock options (ISOs) within the
meaning of section 422 of the Code, (2) nonqualified stock options that are
not intended so to qualify (NQSOs), (3) restricted stock, (4) stock
appreciation rights (SARs) or (5) performance units. However, non-employee
Trustees and Company contractors are only eligible for grants of nonqualified
stock options. Non-employee Trustees will receive an NQSO Grant for 2,500
shares upon election to the Board and an annual NQSO Grant for 2,500 shares
thereafter while serving on the Board.
Options. The exercise price to purchase common shares subject to an
option under the Incentive Plan will be determined by the Committee and may
be equal to or greater than the fair market value of a common share on the
date the option is granted. Notwithstanding the foregoing, however the
exercise price of an ISO granted to an employee who owns more than 10 percent
of the total combined voting power of all classes of the shares of Northeast
Utilities may not be less than 110 percent of the fair market value of the
underlying common shares on the date of grant. Further, the exercise price
of an NQSO granted to a non-employee Trustee of Northeast Utilities will be
equal to the fair market value of the underlying common shares on the date
the option is granted. Generally, the Committee will determine the term of
each Option; provided, however, that the exercise period may not exceed ten
years from the date of grant, and the exercise period of an ISO granted to an
employee who owns more than 10 percent of the total voting power of all
outstanding stock of the Company may not exceed five years from the date of
grant. The option term of an NQSO granted to a non-employee Trustee,
however, is ten years and such options vest one-half on the date of the grant
and one-half on the first anniversary of the date of the grant if the
non-employee Trustee is still a member of the Board on such date. A
participant may pay the exercise price (i) in cash, (ii) with the approval of
the Committee, by delivering common shares owned by the participant and
having a fair market value on the date of exercise equal to the exercise
price, or (iii) by any other method approved by the Committee. The Committee
may permit a participant to instruct the Company to deliver the shares due
upon the exercise to a designated broker instead of to the participant.
Restricted Stock. The Committee may issue common shares to participants
pursuant to the Incentive Plan. Shares may be issued for cash consideration
or for no cash consideration, as the Committee determines. The number of
shares granted to each participant will be determined by the Committee,
subject to the maximum limit described above. Grants of restricted stock
will be made subject to such performance requirements, vesting provisions,
transfer restrictions or other restrictions and conditions as the Committee
may determine.
Stock Appreciation Rights. The Committee may grant SARs alone or in
tandem with any stock option pursuant to the Incentive Plan. Unless the
Committee determines otherwise, the base price of an SAR will be the exercise
price of the related stock option or, if there is no related option, the fair
market value of a common share on the date of grant of the SAR. When the
participant exercises an SAR, the participant will receive the amount by
which the fair market value of the common share on the date of exercise
exceeds the base price of the SAR. The Committee will determine whether the
appreciation will be paid in cash or in shares, or in a combination of the
two. To the extent a participant exercises a tandem SAR, the related option
will terminate. Similarly, upon exercise of a stock option, the related SAR,
if any, will terminate.
Performance Units. The Committee may grant performance units to
participants. Performance units may be payable in cash or, subject to the
maximum limit described above, common shares at the end of a specified
performance period. Payment will be contingent upon achieving performance
goals by the end of the performance period. The measure of a performance
unit may be based on the fair market value of a common share or such other
measurement base as the Committee specifies from the following: the growth
of Northeast Utilities' share price, earnings per share, net earnings,
operating earnings, return on assets, shareholder return, return on equity,
growth in assets, unit volume, sales, market share, or strategic business
criteria consisting of one or more objectives based on meeting specified
revenue goals, market penetration goals, geographic business expansion goals,
cost targets or goals relating to acquisitions or divestitures. The
Committee will determine the performance criteria, the length of the
performance period, the maximum payment value of an award, and the minimum
performance goals required before payment will be made.
Section 162(m). Under section 162(m) of the Code, the Company may be
precluded from claiming a federal income tax deduction for total remuneration
in excess of $1,000,000 paid to the chief executive officer or to any of the
other four most highly compensated executive officers in any one year. Total
remuneration includes amounts received upon the exercise of stock options
granted under the Incentive Plan and the value of shares received when the
shares of restricted stock became transferable (or such other time when
income is recognized). An exception exists, however, for "qualified
performance-based compensation." The Incentive Plan is intended to allow
Awards and Grants to meet the requirements of "qualified performance-based
compensation."
Stock options and SARs should generally meet the requirements of
"qualified performance-based compensation," if the exercise price is at least
equal to the fair market value of the common shares on the date of grant.
The Committee may grant annual incentive awards, performance units and
restricted stock that are intended to be "qualified performance-based
compensation" under section 162(m) of the Code. In that event, the Committee
will establish in writing the objective performance goals that must be met
(based on the financial criteria summarized above) and other conditions of
the award before the beginning of the annual incentive period (or within 90
days after its commencement), performance period or during a period permitted
by section 162(m) of the Code. The performance goals may relate to the
employee's business unit or the performance of the Company and its
subsidiaries as a whole, or any combination of the two. The Committee will
not have discretion to increase the amount of compensation that is payable
upon achievement of performance goals. Common shares associated with
performance units or restricted stock granted as "qualified performance-based
compensation" to any participant for any year of a performance period may not
exceed 2.5 percent of the number of common shares outstanding as of December
31, 1997. If performance units are measured with respect to other criteria,
the maximum amount that may be paid to an employee with respect to each year
of a performance period is $3,500,000. At the end of each performance
period, the Committee will certify the results of the performance goals and
the extent to which the performance goals have been met.
Transferability. Grants are generally not transferable by the
participant, except in the event of death. However, the Committee may grant
NQSOs that allow the participant to transfer the NQSOs on such terms as the
Committee deems appropriate.
Amendment and Termination. The Board may amend or terminate the
Incentive Plan at any time; provided, however, that the Board may not,
without shareholder approval, make any amendment that requires shareholder
approval pursuant to section 162(m) of the Code. The Incentive Plan will
terminate on the date immediately preceding the tenth anniversary of its
effective date, unless terminated earlier by the Board or extended by the
Board with approval of the shareholders.
Adjustment Provisions. In the event of certain transactions identified
in the Incentive Plan, the Committee shall appropriately adjust: (i) the
maximum number of common shares available for Awards and Grants and the
individual share limits, (ii) the number of shares covered by outstanding
Awards and Grants, (iii) the kind of shares issued under the Incentive Plan,
and (iv) the price per share or market value of Grants, and such adjustments
will be effective and binding for all purposes of the Incentive Plan.
Change of Control of the Company. In the event of a change of control,
unless the Committee determines otherwise, all options, restricted stock and
SARs will become fully vested, and grantees holding performance units will
receive payment in settlement of the units based on the target payment for
the performance period and the portion of the performance period that
precedes the change of control. A "change of control" will be deemed to have
occurred if (i) any person becomes a beneficial owner of securities of
Northeast Utilities representing 20 percent or more of the voting power of
either the outstanding common shares of Northeast Utilities, or the common
securities of Northeast Utilities that carry the right to vote generally in
the election of the Board; (ii) individuals who, as of the beginning of any
24-month period, constitute the incumbent Trustees cease for any reason to
constitute at least a majority of the Trustees or cease to be able to
exercise the powers of the majority of the Trustees; (iii) consummation by
Northeast Utilities of a reorganization, merger or consolidation, where all
or substantially all of the beneficial owners of the outstanding common
shares of Northeast Utilities and the common securities of Northeast
Utilities that carry the right to vote generally in the election of the
Board, immediately before the transaction, will not own, immediately after
consummation of all transactions intended to constitute part of the
transaction, more than 75 percent of the then outstanding shares of common
stock and the combined voting power of the then outstanding common securities
that carry the right to vote generally in the election of the directors of
the corporation, business trust or other entity resulting from, or being the
survivor entity in, such transaction in substantially the same proportion as
their ownership immediately before such transaction in the outstanding common
shares of Northeast Utilities and the common securities of Northeast
Utilities that carry the right to vote generally in the election of the
Board; or (iv) consummation of a complete liquidation or dissolution of
Northeast Utilities or sale or other disposition of all or substantially all
of the assets of Northeast Utilities other than to a corporation, business
trust or other entity with respect to which following consummation of all
transactions intended to constitute part of such sale or disposition, more
than 75 percent of, respectively, the then outstanding common securities that
carry the right to vote generally in the election of the directors is then
owned beneficially, directly or indirectly, by all or substantially all of
the beneficial owners of the outstanding common shares of Northeast Utilities
and the common securities of Northeast Utilities that carry the right to vote
generally in the election of the Board immediately before such sale or
disposition in substantially the same proportion as their ownership of the
outstanding common shares of Northeast Utilities and the common securities of
Northeast Utilities that carry the right to vote generally in the election of
the Board immediately before the sale or disposition.
FEDERAL INCOME TAX TREATMENT
The following generally describes the current federal income tax
treatment of Awards and Grants under the Incentive Plan. Local and state tax
authorities may also tax incentive compensation awarded under the Incentive
Plan, and tax laws are subject to change.
There are no federal income tax consequences to a participant or to the
Company upon the grant of an NQSO under the Incentive Plan. Upon the
exercise of an NQSO, a participant will recognize ordinary compensation
income in an amount equal to the excess of the fair market value of the
shares at the time of exercise over the exercise price of the NQSO, and the
Company generally will be entitled to a corresponding federal income tax
deduction. Upon the sale of shares acquired by the exercise of an NQSO, a
participant will have a capital gain or loss (long-term or short-term
depending upon the length of time the shares were held) in an amount equal to
the difference between the amount realized upon the sale and the
participant's adjusted tax basis in the shares (the exercise price plus the
amount of ordinary income recognized by the participant at the time of
exercise of the NQSO).
A participant who is granted an ISO will not recognize taxable income
for purposes of the regular income tax, upon either the grant or exercise of
the ISO. However, for purposes of the alternative minimum tax imposed under
the Code, in the year in which an ISO is exercised, the amount by which the
fair market value of the shares acquired upon exercise exceeds the exercise
price will be treated as an item of adjustment and included in the
computation of the recipient's alternative minimum taxable income in the year
of exercise. A participant who disposes of the shares acquired upon exercise
of an ISO after two years from the date the ISO was granted and after one
year from the date such shares were transferred to him or her upon exercise
of the ISO will recognize long-term capital gain or loss in the amount of the
difference between the amount realized on the sale and the exercise price (or
the participant's other tax basis in the shares), and the Company will not be
entitled to any tax deduction by reason of the grant or exercise of the ISO.
Generally, if a participant disposes of the shares acquired upon exercise of
an ISO before satisfying both holding period requirements (a disqualifying
disposition), his or her gain recognized on such a disposition will be taxed
as ordinary income to the extent of the difference between the fair market
value of such shares on the date of exercise and the exercise price, and the
Company will be entitled to a deduction in that amount. The gain, if any, in
excess of the amount recognized as ordinary income on such a disqualifying
disposition will be long-term or short-term capital gain, depending upon the
length of time the participant held his or her shares before the disposition.
A participant normally will not recognize taxable income upon receiving
restricted stock, and the Company will not be entitled to a deduction, until
such stock is transferable by the participant or no longer subject to a
substantial risk of forfeiture for federal tax purposes, whichever occurs
earlier. When the stock is either transferable or no longer subject to a
substantial risk of forfeiture, the participant will recognize ordinary
compensation income in an amount equal to the fair market value of the shares
(less any amounts paid for such shares) at that time, and the Company will be
entitled to a deduction in the same amount. A participant may, however,
elect to recognize ordinary compensation income in the year the restricted
stock is awarded in an amount equal to the fair market value of the shares
subject to the restricted stock Award or Grant (less any amounts paid for
such shares) at that time, determined without regard to the restrictions. In
such event, the Company generally will be entitled to a corresponding
deduction in the same year. Any gain or loss recognized by the participant
upon subsequent disposition of the shares will be long-term or short-term
capital gain or loss, depending upon the length of time the participant held
his or her shares before the disposition.
There are no federal income tax consequences to a participant or to the
Company upon the grant of an SAR under the Incentive Plan. Upon the exercise
of an SAR, if the participant receives the appreciation inherent in the SAR
in cash, the participant will recognize ordinary compensation income in an
amount equal to the cash received. If the participant receives the
appreciation in shares, the participant will recognize ordinary compensation
income in an amount equal to the fair market value of the shares received.
The Company generally will be entitled to a corresponding federal income tax
deduction at the time of the exercise of the SAR. Upon the sale of any
shares acquired by the exercise of an SAR, a participant will have a capital
gain or loss (long-term or short-term depending upon the length of time the
shares were held) in an amount equal to the difference between the amount
realized upon the sale and the participant's adjusted tax basis in the shares
(the amount of ordinary income recognized by the participant at the time of
exercise of the SAR).
There are no federal income tax consequences to a participant or to the
Company upon the grant of performance units under the Incentive Plan. If the
participant receives payment of the performance units in cash, the
participant will recognize ordinary compensation income in an amount equal to
the cash received. If the participant receives payment of the performance
units in shares, the participant will recognize ordinary compensation income
in an amount equal to the fair market value of the shares received. The
Company generally will be entitled to a corresponding federal income tax
deduction at the time of the payment of the performance units. Upon the sale
of any shares acquired upon payment of the performance units, a participant
will have a capital gain or loss (long-term or short-term depending upon the
length of time the shares were held) in an amount equal to the difference
between the amount realized upon the sale and the participant's adjusted tax
basis in the shares (the amount of ordinary income recognized by the
participant at the time of the payment of the performance units).
The Company's income tax deduction in any of the foregoing cases may be
limited by the $1,000,000 limit of section 162(m) of the Code if the Award or
Grant does not qualify as "qualified performance-based compensation" under
section 162(m) of the Code (see Section 162(m) above).
Tax Withholding. The Company has the right to deduct from all Awards
and Grants paid in cash or from other wages paid to an employee of the
Company, any federal, state or local taxes required by law to be withheld
with respect thereto, and the participant or other person receiving shares
under the Incentive Plan will be required to pay to the Company the amount of
any such taxes that the Company is required to withhold with respect to such
shares. A participant may elect to satisfy the Company's income tax
withholding obligation by withholding shares received. The shares withheld
may not exceed the participant's maximum marginal tax rate for federal, state
and local tax liabilities.
REGULATORY APPROVALS
The SEC has issued an order under the Public Utility Holding Company Act
of 1935 authorizing the solicitation of proxies in favor of the Incentive
Plan. The Company has applied for SEC authorization to issue new common
shares, subject to the limits set forth above, for Awards and Grants under
the Incentive Plan. SEC action on the application is expected later in the
Spring of 1998.
GRANTS UNDER INCENTIVE PLAN
No Grants will be made under the Incentive Plan until after the
shareholder approval of the Incentive Plan is obtained. The following table
sets forth the number of stock options that will be granted, assuming
shareholder approval, to the group comprised of all current Trustees who are
not executive officers.
NEW PLAN BENEFITS
NORTHEAST UTILITIES INCENTIVE PLAN
Recipient Dollar Value ($) Option Shares
CEO - (Note 1) - (Note 1)
A - (Note 1) - (Note 1)
B - (Note 1) - (Note 1)
C - (Note 1) - (Note 1)
D - (Note 1) - (Note 1)
Executive Group (8 persons) - (Note 1) - (Note 1)
Non-Executive Trustee Group (9 persons) - - 22,500 shares
Non-Executive Officer Employee Group
(approximately 6,500 persons) - (Note 1) - (Note 1)
Note 1 Benefits and amounts are not determinable, because (a) Grants
have not yet been made and (b) Awards, to be made in cash during 1999, depend
on future performance. Based on Company performance in the previous fiscal
year, there would have been no annual incentive awards made had the new plan
been available.
An affirmative vote of a majority of the common shares present or
represented at the Annual Meeting of Shareholders will be required for the
adoption of this proposal.
THE BOARD OF TRUSTEES RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THIS PROPOSAL.
Exhibit A.3
NORTHEAST UTILITIES
INCENTIVE PLAN
Adopted by Northeast Utilities
Board of Trustees on January 13, 1998
Approved by Northeast Utilities
Shareholders on ,1998
ARTICLE I
PURPOSE
The purpose of the Northeast Utilities Incentive Plan (the "Plan") is to
provide (i) designated employees of the Company (as hereinafter defined) and
(ii) non-employee members of the Board of Trustees (the "Board") of Northeast
Utilities, a Massachusetts business trust, ("NU") with the opportunity to
receive annual incentive compensation and grants of incentive stock options,
nonqualified stock options, stock appreciation rights, restricted stock and
performance units. The Company believes that the Plan will assist it in
recruiting talented employees who will contribute materially to the growth of
the Company, thereby benefitting NU's shareholders, and will align the
economic interests of the participants with those of the shareholders.
ARTICLE II
ADMINISTRATION
1. Committee. The Plan shall be administered and interpreted by the
Board's Compensation Committee, or the person or persons to which such
committee delegates any of its functions under the Plan (the "Committee").
The Committee may consist of two or more persons appointed by the Board, all
of whom shall be "outside directors" as defined under section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code") and related Treasury
regulations and "non-employee directors" as defined under Rule 16b-3 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
However, the Board may ratify or approve any grants as it deems appropriate
or as are submitted by the Committee.
2. Committee Authority. The Committee shall have the sole authority
to (i) establish, and review the Company's and the Grantee's, as defined
below, performance against, annual goals for purpose of the annual incentives
to be distributed and determine the individuals to whom grants shall be made
under the Plan, (ii) determine the type, size and terms of the grants to be
made to each such individual, (iii) determine the time when the grants will
be made and the duration of any applicable exercise or restriction period,
including the criteria for exercisability and the acceleration of
exercisability and (iv) deal with any other matters arising under the Plan.
3. Committee Determinations. The Committee shall have full power and
authority to administer and interpret the Plan, to make factual
determinations and to adopt or amend such rules, regulations, agreements and
instruments for implementing the Plan and for the conduct of its business as
it deems necessary or advisable, in its sole discretion. The Committee's
interpretations of the Plan and all determinations made by the Committee
pursuant to the powers vested in it hereunder shall be conclusive and binding
on all persons having any interest in the Plan or in any awards granted
hereunder. All powers of the Committee shall be executed in its sole
discretion, in the best interest of the Company, not as a fiduciary, and in
keeping with the objectives of the Plan and need not be uniform as to
similarly situated individuals.
ARTICLE III
ANNUAL INCENTIVE AWARDS
1. Eligibility for Participation. Each employee of the Company
classified as a Vice President or higher (an "Executive Employee") shall be
eligible to receive an annual incentive award (an "Award") under the Plan.
2. Annual Awards.
(a) As soon as practicable after the start of each fiscal year of NU,
but in any event within 90 days, the Committee shall set the financial target
for the Company which shall be the basis for determining the Awards to be
paid to each Executive Employee for such fiscal year. The financial target
shall be based on the growth of NU's stock price, earnings per share, net
earnings, operating earnings, return on assets, shareholder return, return on
equity, growth in assets, unit volume, sales, market share, or strategic
business criteria consisting of one or more objectives based on meeting
specified revenue goals, market penetration goals, geographic business
expansion goals, cost targets or goals relating to acquisitions or
divestitures and the Committee shall communicate the target and the
percentages (including minimums and maximums) for each Executive Employee
applicable to each level of achievement against the target set. In no event
may an individual Award for an Executive Employee exceed $3,500,000.
(b) The maximum amount of an Award for an Executive Employee shall be
based upon the Company's performance compared against the financial target
set for that fiscal year. The actual amount of the Award for any Executive
Employee may be reduced by the Committee if the Executive Employee does not
satisfy one or more of the individual financial or nonfinancial objectives
set by the Committee for that Executive Employee as of the beginning of the
relevant fiscal year. Any such objectives for an Executive Employee shall be
set by the Committee and announced to the affected Executive Employee no
later than 90 days after the commencement of the relevant fiscal year of NU.
(c) The Committee shall certify and announce the Awards that will be
paid by the Company to each Executive Employee as soon as practicable
following the final determination of the Company's financial results for the
relevant fiscal year. Payment shall normally be made, in cash, or in shares
of Company Stock (as hereinafter defined) or Options (as hereinafter defined)
the value of which shall equal the amount to be distributed, all as
determined by the Committee, within 90 days following the end of such fiscal
year, provided that the Executive Employee has not separated from employment
by the Company prior to the date that payment is due except as otherwise
specifically provided in a contract between the Company and the Executive
Employee. If an Executive Employee's employment terminated for Retirement
(as hereinafter defined), death or Disability (as hereinafter defined) a full
Award shall be paid (unless such event occurred during the fiscal year for
which the Award is earned, in which case the Award will be pro-rated as of
the date of termination) when all other payments are made in accordance with
the first sentence of this Section.
ARTICLE IV
STOCK-BASED GRANTS
1. Grants.
Grants under the Plan may consist of grants of incentive stock options
("Incentive Stock Options") or nonqualified stock options ("Nonqualified
Stock Options")(Incentive Stock Options and Nonqualified Stock Options are
collectively referred to as "Options"), restricted stock (Restricted Stock"),
stock appreciation rights ("SARs"), and/or performance units ("Performance
Units") (hereinafter collectively referred to as "Grants"). All Grants shall
be subject to the terms and conditions set forth herein and to such other
terms and conditions consistent with this Plan as the Committee deems
appropriate and as are specified in writing by the Committee to the
individual in a grant instrument or an amendment to the grant instrument (the
"Grant Instrument"). The Committee shall approve the form and provisions of
each Grant Instrument. Grants under a particular Section of the Plan need
not be uniform as among the Grantees, as defined below.
2. Eligibility for Participation.
(a) Eligible Persons. All employees of the Company ("Employees"),
including Employees who are officers or members of the Board, contractors of
the Company ("Contractors"), and members of the Board who are not Employees
("Non-Employee Trustees") shall be eligible to receive Grants under the Plan.
Contractors shall be eligible to receive Grants only of Nonqualified Stock
Options. Non-Employee Trustees shall be eligible to receive Grants only
under Article V of the Plan.
(b) Selection of Grantees. The Committee shall select the Employees
and Contractors to receive Grants and shall determine the number of shares of
Company Stock subject to a particular Grant in such manner as the Committee
determines. Employees, Contractors and Non-Employee Trustees who receive
Grants under this Plan shall hereinafter be referred to as "Grantees".
(c) Collective Bargaining Employees. Anything to the contrary in this
Plan notwithstanding, no Employee whose terms and conditions of employment
are subject to negotiation with a collective bargaining agent shall be
eligible to receive Grants under this Plan until the agreement between the
Company and such collective bargaining agent with respect to the Employee
provides for participation in the Plan.
3. Granting of Options.
(a) Number of Shares. The Committee shall determine the number of
shares of Company Stock that will be subject to each Grant of Options to
Employees and Contractors subject to the overall limits of Article IX.
(b) Type of Option and Price.
(i) The Committee may grant Incentive Stock Options that are
intended to qualify as "incentive stock options" within the meaning of
section 422 of the Code or Nonqualified Stock Options that are not intended
so to qualify or any combination of Incentive Stock Options and Nonqualified
Stock Options, all in accordance with the terms and conditions set forth
herein. Incentive Stock Options may be granted only to Employees.
Nonqualified Stock Options may be granted to Employees, Contractors and
Non-Employee Trustees.
(ii) The purchase price (the "Exercise Price") of Company Stock
subject to an Option shall be determined by the Committee and shall be equal
to or greater than the Fair Market Value (as defined below) of a share of
Company Stock on the date the Option is granted; provided, however, that an
Incentive Stock Option may not be granted to an Employee who, at the time of
grant, owns stock possessing more than 10 percent of the total combined
voting power of all classes of stock of the Company or any parent or
subsidiary of the Company, unless the Exercise Price per share is not less
than 110% of the Fair Market Value of Company Stock on the date of grant.
(iii) If the Company Stock is publicly traded, then the Fair
Market Value per share shall be the closing price of the Company Stock as
reported in the Wall Street Journal as composite transactions for the
relevant date (or the latest date for which such price was reported if such
date is not a business day), or if not available, determined as follows: (x)
if the principal trading market for the Company Stock is the New York Stock
Exchange, the last reported sale price thereof on the relevant date or (if
there were no trades on that date) the latest preceding date upon which a
sale was reported, (y) if the principal trading market for the Company Stock
is a national securities exchange other than the New York Stock Exchange or
is the Nasdaq National Market, the last reported sale price thereof on the
relevant date or (if there were no trades on that date) the latest preceding
date upon which a sale was reported, or (z) if the Company Stock is not
principally traded on such exchange or market, the mean between the last
reported "bid" and "asked" prices of Company Stock on the relevant date, as
reported on Nasdaq or, if not so reported, as reported by the National Daily
Quotation Bureau, Inc. or as reported in a customary financial reporting
service, as applicable and as the Committee determines. If the Company Stock
is not publicly traded or, if publicly traded, is not subject to reported
transactions or "bid" or "asked" quotations as set forth above, the Fair
Market Value per share shall be as determined by the Committee.
(c) Option Term. The Committee shall determine the term of each
Option. The term of any Option shall not exceed ten years from the date of
grant. However, an Incentive Stock Option that is granted to an Employee
who, at the time of grant, owns stock possessing more than 10 percent of the
total combined voting power of all classes of stock of the Company, or any
parent or subsidiary of the Company, may not have a term that exceeds five
years from the date of grant.
(d) Exercisability of Options. Options shall become exercisable in
accordance with such terms and conditions, consistent with the Plan, as may
be determined by the Committee and specified in the Grant Instrument. The
Committee may accelerate the exercisability of any or all outstanding Options
at any time for any reason.
(e) Termination of Employment, Retirement, Disability or Death.
(i) Except as provided below, an Option may only be exercised
while the Grantee is employed by, or providing service to, the Company as an
Employee, a Contractor, or a member of the Board. In the event that a
Grantee ceases to be employed by, or provide service to, the Company for any
reason other than a "Retirement," "Disability," death, or termination for
"Cause" (as hereinafter defined), any Option which is otherwise exercisable
by the Grantee shall terminate unless exercised within 90 days after the date
on which the Grantee ceases to be employed by, or provide service to, the
Company (or within such other period of time as may be specified by the
Committee), but in any event no later than the date of expiration of the
Option term. Any of the Grantee's Options that are not otherwise exercisable
as of the date on which the Grantee ceases to be employed by, or provide
service to, the Company shall terminate as of such date.
(ii) In the event the Grantee ceases to be employed by, or provide
service to, the Company on account of a termination for Cause by the Company,
any Option held by the Grantee shall terminate as of the date the Grantee
ceases to be employed by, or provide service to, the Company.
(iii) In the event the Grantee ceases to be employed by, or
provide service to, the Company because the Grantee Retires or is Disabled,
any Option which is otherwise exercisable by the Grantee shall terminate
unless exercised within one year after the date on which the Grantee ceases
to be employed by, or provide service to, the Company (or within such other
period of time as may be specified by the Committee), but in any event no
later than the date of expiration of the Option term. Any of the Grantee's
Options which are not otherwise exercisable as of the date on which the
Grantee ceases to be employed by, or provide service to, the Company shall
terminate as of such date.
(iv) If the Grantee dies while employed by, or providing service
to, the Company or within 90 days after the date on which the Grantee ceases
to be employed or provide service on account of a termination specified in
Section 5(e)(i) above (or within such other period of time as may be
specified by the Committee), any Option that is otherwise exercisable by the
Grantee shall terminate unless exercised within one year after the date on
which the Grantee ceases to be employed by, or provide service to, the
Company (or within such other period of time as may be specified by the
Committee), but in any event no later than the date of expiration of the
Option term. Any of the Grantee's Options that are not otherwise exercisable
as of the date on which the Grantee ceases to be employed by, or provide
service to, the Company shall terminate as of such date.
(v) For purposes of this Plan:
(A) "Cause" shall mean, except to the extent specified
otherwise by the Committee acting on behalf of the Company, (i) the Grantee's
conviction of a felony, (ii) in the reasonable determination of the
Committee, the Grantee's (x) commission of an act of fraud,
embezzlement, or theft in connection with the Grantee's duties in the course
of the Grantee's employment with the Company, (y) acts or omissions causing
intentional, wrongful damage to the property of the Company or intentional
and wrongful disclosure of confidential information of the Company, or (z)
engaging in gross misconduct or gross negligence in the course of the
Grantee's employment with the Company, or (iii) the Grantee's material breach
of his or her obligations under any written agreement with the Company if
such breach shall not have been remedied within 30 days after receiving
written notice from the Committee specifying the details thereof. For
purposes of this Program, an act or omission on the part of a Grantee shall
be deemed "intentional" only if it was not due primarily to an error in
judgment or negligence and was done by Grantee not in good faith and without
reasonable belief that the act or omission was in the best interest of the
Company. In the event a Grantee's employment or service is terminated for
cause, in addition to the immediate termination of all Grants, the Grantee
shall automatically forfeit all shares underlying any exercised portion of an
Option for which the Company has not yet delivered the share certificates,
upon refund by the Company of the Exercise Price paid by the Grantee for such
shares.
(B) "Disability" shall mean a Grantee's becoming disabled
within the meaning of the Company's long-term disability plan.
(C) "Employed by, or provide service to, the Company" shall
mean employment or service as an Employee, Contractor or member of the Board
(so that, for purposes of exercising Options and SARs and satisfying
conditions with respect to Restricted Stock and Performance Units, a Grantee
shall not be considered to have terminated employment or service until the
Grantee ceases to be an Employee, Contractor and member of the Board), unless
the Committee determines otherwise.
(D) "Retired" shall mean a termination of employment from the
Company on or after attaining age 65 or eligibility for normal or early
retirement under any retirement plan maintained by the Company.
(f) Exercise of Options. A Grantee may exercise an Option that has
become exercisable, in whole or in part, by delivering a notice of exercise
to the Company with payment of the Exercise Price. The Grantee shall pay the
Exercise Price for an Option as specified by the Committee (x) in cash, (y)
with the approval of the Committee, by delivering shares of Company Stock
owned by the Grantee (including Company Stock acquired in connection with the
exercise of an Option or Restricted Stock, as defined below, granted under
this Plan, subject to such restrictions as the Committee deems appropriate
including placing the same restrictions on the shares of Company Stock
obtained through the exchange of the Restricted Stock) and having a Fair
Market Value on the date of exercise equal to the Exercise Price or (z) by
such other method as the Committee may approve, including payment through a
broker in accordance with procedures permitted by Regulation T of the Federal
Reserve Board. Shares of Company Stock used to exercise an Option shall have
been held by the Grantee for the requisite period of time to avoid adverse
accounting consequences to the Company with respect to the Option. The
Grantee shall pay the Exercise Price and the amount of any withholding tax
due at the time of exercise.
(g) Limits on Incentive Stock Options. Each Incentive Stock Option
shall provide that, if the aggregate Fair Market Value of the stock on the
date of the grant with respect to which Incentive Stock Options are
exercisable for the first time by a Grantee during any calendar year, under
the Plan or any other stock option plan of the Company exceeds $100,000, then
the option, as to the excess, shall be treated as a Nonqualified Stock
Option. An Incentive Stock Option shall not be granted to any person who is
not an Employee of the Company.
ARTICLE V
STOCK OPTION GRANTS TO NON-EMPLOYEE TRUSTEES
1. Formula Option Grants to Non-Employee Trustees. A Non-Employee
Trustee shall be entitled to receive Nonqualified Stock Options in accordance
with this Article V.
(a) Initial Grant. Each Non-Employee Trustee who first becomes a
member of the Board after the effective date of this Plan shall receive, on
the date as of which he or she first becomes a member of the Board, a grant
of a Nonqualified Stock Option to purchase 2,500 shares of Company Stock.
(b) Annual Grants. On each date that NU holds its annual meeting of
shareholders, commencing with the 1998 annual meeting, each Non-Employee
Trustee who is in office immediately after the annual election of directors
(other than a director who is first elected to the Board at such meeting)
shall receive a grant of a Nonqualified Stock Option to purchase 2,500 shares
of Company Stock. The date of grant of each such annual Grant shall be the
date of the annual meeting of the Company's shareholders.
(c) Exercise Price. The Exercise Price per share of Company Stock
subject to an Option granted under this Article shall be equal to the Fair
Market Value of a share of Company Stock on the date of grant.
(d) Option Term and Exercisability. The term of each Option granted
pursuant to this Article shall be 10 years. Options granted under this
Article shall vest one-half on the date of grant and the other one-half on
the first anniversary of the date of grant if the Non-Employee Trustee is
still a member of the Board on each such date. Options shall be exercisable
in accordance with the provisions of Article IV, Section 3(e) except that
only the provisions of subsections (e)(i), (iii) where the Non-Employee
Trustee ceases to serve on the Board on or after age 70 and (iv) shall be
applicable.
(e) Payment of Exercise Price.
(i) The Non-Employee Trustee shall pay the Exercise Price for an
Option (x) in cash, (y) by delivering shares of Company Stock owned by the
Non-Employee Trustee and having a Fair Market Value on the date of exercise
equal to the Exercise Price or (z) by payment through a broker in accordance
with procedures permitted by Regulation T of the Federal Reserve Board.
Shares of Company Stock used to exercise an Option shall have been held by
the Grantee for the requisite period of time to avoid adverse accounting
consequences to the Company with respect to the Option. The Non-Employee
Trustee shall pay the Exercise Price at the time of exercise. Shares of
Company Stock shall not be issued upon exercise of an Option until the
Exercise Price is fully paid.
(ii) A Grantee may exercise an Option granted under this Article by
delivering to the Committee a notice of exercise as described below, with
accompanying payment of the Exercise Price in accordance with Subsection (i)
above. The notice of exercise may instruct the Company to deliver shares of
Company Stock due upon the exercise of the Option to any registered broker or
dealer designated by the Committee in lieu of delivery to the Grantee, and
shall designate the account into which the shares are to be deposited.
(f) Applicability of Plan Provisions. Except as otherwise provided in
this Article, Nonqualified Stock Options granted to Non-Employee Trustees
shall be subject to the provisions of this Plan applicable to Nonqualified
Stock Options granted to other persons, provided however that (i) if an event
described in Article IV, Section 3(b) occurs, appropriate adjustments, as
described in that Section, shall be made automatically, (ii) with respect to
the provisions of Article IV, Section 3(e), the Committee shall not have
discretion to modify the terms of such provisions in the Grant Instrument,
and (iii) in the event of a Change of Control (as defined in Article XI), the
provisions of Article XI, Section 2 shall apply to Options granted pursuant
to this Article, except that the Committee shall not have discretion under
subsection (c) thereof to modify the automatic provisions of that Section.
(g) Administration. The provisions of this Article are intended to
operate automatically and not require administration. To the extent that any
administrative determinations are required, any determinations with respect
to the provisions of this Article shall be made by the members of the Board
who are not eligible to receive Grants under this Article, but in no event
shall such determinations affect the eligibility of Grantees, the
determination of the Exercise Price, the timing of the Grants or the number
of shares subject to Options granted hereunder. If at any time there are not
sufficient shares available under the Plan to permit an automatic Grant as
described in this Article, the Grant shall be reduced pro rata (to zero, if
necessary) so as not to exceed the number of shares then available under the
Plan.
ARTICLE VI
RESTRICTED STOCK GRANTS
1. Restricted Stock Grants. The Committee may issue or transfer
shares of Company Stock to an Employee with such restrictions as the
Committee deems appropriate ("Restricted Stock"). The following provisions
are applicable to Restricted Stock:
(a) General Requirements. Shares of Company Stock issued or
transferred pursuant to Restricted Stock Grants may be issued or transferred
in exchange for services performed or to
be performed. The Committee may establish conditions under which
restrictions on shares of Restricted Stock shall lapse over a period of time
or according to such other criteria as the Committee deems appropriate. The
period of time during which the Restricted Stock will remain subject to
restrictions will be designated in the Grant Instrument as the "Restriction
Period."
(b) Number of Shares. The Committee shall determine the number of
shares of Company Stock to be issued or transferred pursuant to a Restricted
Stock Grant and the restrictions applicable to such shares, subject to the
limitations contained in Article IX.
(c) Requirement of Employment or Service. If the Grantee ceases to be
employed by, or provide service to, the Company during a period designated in
the Grant Instrument as the Restriction Period, or if other specified
conditions are not met, the Restricted Stock Grant shall terminate as to all
shares covered by the Grant as to which the restrictions have not lapsed, and
those shares of Company Stock must be immediately returned to the Company.
The Committee may, however, provide for complete or partial exceptions to
this requirement as it deems appropriate.
(d) Restrictions on Transfer and Legend on Stock Certificate. During
the Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the shares of Restricted Stock except to a Successor
Grantee, as defined below. Each certificate for a share of Restricted Stock
shall contain a legend giving appropriate notice of the restrictions in the
Grant. The Grantee shall be entitled to have the legend removed from the
stock certificate covering the shares subject to restrictions when all
restrictions on such shares have lapsed. The Committee may determine that
the Company will not issue certificates for shares of Restricted Stock until
all restrictions on such shares have lapsed, or that the Company will retain
possession of certificates for shares of Restricted Stock until all
restrictions on such shares have lapsed.
(e) Right to Vote and to Receive Dividends. Unless the Committee
determines otherwise, during the Restriction Period, the Grantee shall have
the right to vote shares of Restricted Stock and to receive any dividends or
other distributions paid on such shares, subject to any restrictions deemed
appropriate by the Committee.
(f) Lapse of Restrictions. All restrictions imposed on Restricted
Stock shall lapse upon the expiration of the applicable Restriction Period
and the satisfaction of all conditions imposed by the Committee. The
Committee may determine, as to any or all Restricted Stock Grants, that the
restrictions shall lapse without regard to any Restriction Period.
ARTICLE VII
STOCK APPRECIATION RIGHTS
1. Stock Appreciation Rights.
(a) General Requirements. The Committee may grant stock appreciation
rights ("SARs") to an Employee separately or in tandem with any Option (for
all or a portion of the applicable Option). Tandem SARs may be granted
either at the time the Option is granted or at any time thereafter while the
Option remains outstanding; provided, however, that, in the case of an
Incentive Stock Option, SARs may be granted only at the time of the Grant of
the Incentive Stock Option. The Committee shall establish the base amount of
the SAR at the time the SAR is granted. Unless the Committee determines
otherwise, the base amount of each SAR shall be equal to the per share
Exercise Price of the related Option or, if there is no related Option, the
Fair Market Value of a share of Company Stock as of the date of Grant of the
SAR.
(b) Tandem SARs. In the case of tandem SARs, the number of SARs
granted to a Grantee that shall be exercisable during a specified period
shall not exceed the number of shares of Company Stock that the Grantee may
purchase upon the exercise of the related Option during such period. Upon
the exercise of an Option, the SARs relating to the Company Stock covered by
such Option shall terminate. Upon the exercise of SARs, the related Option
shall terminate to the extent of an equal number of shares of Company Stock.
(c) Exercisability. An SAR shall be exercisable during the period
specified by the Committee in the Grant Instrument and shall be subject to
such vesting and other restrictions as may be specified in the Grant
Instrument. The Committee may accelerate the exercisability of any or all
outstanding SARs at any time for any reason. SARs may only be exercised
while the Grantee is employed by the Company or during the applicable period
after termination of employment as described in Article IV, Section 3(e). A
tandem SAR shall be exercisable only during the period when the Option to
which it is related is also exercisable.
(d) Value of SARs. When a Grantee exercises SARs, the Grantee shall
receive in settlement of such SARs an amount equal to the value of the stock
appreciation for the number of SARs exercised, payable in cash, Company Stock
or a combination thereof. The stock appreciation for an SAR is the amount by
which the Fair Market Value of the underlying Company Stock on the date of
exercise of the SAR exceeds the base amount of the SAR as described in
Subsection (a).
(e) Form of Payment. The Committee shall determine whether the
appreciation in an SAR shall be paid in the form of cash, shares of Company
Stock, or a combination of the two, in such proportion as the Committee deems
appropriate. For purposes of calculating the number of shares of Company
Stock to be received, shares of Company Stock shall be valued at their Fair
Market Value on the date of exercise of the SAR. If shares of Company Stock
are to be received upon exercise of an SAR, cash shall be delivered in lieu
of any fractional share.
ARTICLE VIII
PERFORMANCE UNITS
1. Performance Units.
(a) General Requirements. The Committee may grant performance units
("Performance Units") to an Employee. Each Performance Unit shall represent
the right of the Grantee to receive an amount based on the value of the
Performance Unit, if performance goals established by the Committee are met.
A Performance Unit shall be based on the Fair Market Value of a share of
Company Stock or on such other measurement base as the Committee deems
appropriate. The Committee shall determine the number of Performance Units
to be granted and the requirements applicable to such Units, subject to the
limitations contained in Article IX.
(b) Performance Period and Performance Goals. When Performance Units
are granted, the Committee shall establish the performance period during
which performance shall be measured (the "Performance Period"), performance
goals applicable to the Units ("Performance Goals") and such other conditions
of the Grant as the Committee deems appropriate. Performance Goals may
relate to the financial performance of the Company or its operating units,
the performance of Company Stock, individual performance, or such other
criteria as the Committee deems appropriate.
(c) Payment with respect to Performance Units. At the end of each
Performance Period, the Committee shall determine to what extent the
Performance Goals and other conditions of the Performance Units are met and
the amount, if any, to be paid with respect to the Performance Units.
Payments with respect to Performance Units shall be made in cash, in Company
Stock, or in a combination of the two, as determined by the Committee.
(d) Requirement of Employment or Service. If the Grantee ceases to be
employed by, or provide service to, the Company (as defined in Article IV,
Section 3(e)) during a Performance Period, or if other conditions established
by the Committee are not met, the Grantee's Performance Units shall be
forfeited. The Committee may, however, provide for complete or partial
exceptions to this requirement as it deems appropriate.
(e) Designation as Qualified Performance-Based Compensation. The
Committee may determine that Performance Units granted to an Employee shall
be considered "qualified performance-based compensation" under Section 162(m)
of the Code. The provisions of this subsection (e) shall apply to Grants of
Performance Units that are to be considered "qualified performance-based
compensation" under Section 162(m) of the Code.
(i) Performance Goals. When Performance Units that are to be
considered "qualified performance-based compensation" are Granted, the
Committee shall establish in writing (i) the objective performance goals that
must be met in order for amounts to be paid under the Performance Units, (ii)
the Performance Period during which the performance goals must be met, (iii)
the threshold, target and maximum amounts that may be paid if the performance
goals are met, and (iv) any other conditions, including without limitation
provisions relating to death, disability, other termination of employment or
Change of Control, that the Committee deems appropriate and consistent with
the Plan and Section 162(m) of the Code. The performance goals may relate to
the Employee's business unit or the performance of the Company and its
subsidiaries as a whole, or any combination of the foregoing. The Committee
shall use objectively determinable performance goals based on one or more of
the following criteria: stock price, earnings per share, net earnings,
operating earnings, return on assets, shareholder return, return on equity,
growth in assets, unit volume, sales, market share, or strategic business
criteria consisting of one or more objectives based on meeting specified
revenue goals, market penetration goals, geographic business expansion goals,
cost targets or goals relating to acquisitions or divestitures.
(ii) Establishment of Goals. The Committee shall establish the
performance goals in writing either before the beginning of the Performance
Period or during a period ending no later than the earlier of (i) 90 days
after the beginning of the Performance Period or (ii) the date on which 25%
of the Performance Period has been completed, or such other date as may be
required or permitted under applicable regulations under Section 162(m) of
the Code. The performance goals shall satisfy the requirements for
"qualified performance-based compensation," including the requirement that
the achievement of the goals be substantially uncertain at the time they are
established and that the goals be established in such a way that a third
party with knowledge of the relevant facts could determine whether and to
what extent the performance goals have been met. The Committee shall not
have discretion to increase the amount of compensation that is payable upon
achievement of the designated performance goals.
(iii) Maximum Payment. If Performance Units measured with
respect to the fair market value of Company Stock, are granted, not more than
25% of the total number of shares of Company Stock subject to the Plan in the
aggregate may be granted to an Employee under the Performance Units for any
Performance Period. If Performance Units are measured with respect to other
criteria, the maximum amount that may be paid to an Employee with respect to
a Performance Period is $3,500,000.
(iv) Announcement of Grants. The Committee shall certify and
announce the results for each Performance Period to all Grantees immediately
following the announcement of the Company's financial results for the
Performance Period. If and to the extent that the Committee does not so
certify that the performance goals have been met, the grants of Performance
Units for the Performance Period shall be forfeited.
ARTICLE IX
AUTHORIZED SHARES
1. Shares Subject to the Plan.
(a) Shares Authorized. Subject to the adjustment specified below, the
aggregate number of common shares of NU, par value $5.00, ("Company Stock")
that may be subject to Grants of Options, or transferred on account of other
Grants or Awards, under the Plan in any fiscal year of NU is one percent of
the total number of shares of Company Stock outstanding as of the first day
of such fiscal year; provided, however, that sum of the total number of
shares of Company Stock that may be granted as Restricted Stock plus the
number of Performance Units that may be granted, in any fiscal year, shall
not exceed 30% of the total number of shares of Company Stock available under
the Plan for such year; and provided, further, that the aggregate number of
shares of Company Stock that may be issued or transferred under the Plan
subject to Incentive Stock Options is 10% of the number of shares of Company
Stock outstanding as of December 31, 1997. The shares may be authorized but
unissued shares of Company Stock or reacquired shares of Company Stock,
including shares purchased by the Company on the open market for purposes of
the Plan. If and to the extent (i) less than the full number of shares
available for use under the Plan, as set forth above, are made the subject of
Grants or Awards in any year, or (ii) Options or SARs granted under the Plan
terminate, expire, or are canceled, forfeited, exchanged or surrendered
without having been exercised, or (iii) any shares of Restricted Stock or
Performance Units are forfeited, then the shares not made the subject of
Grants and Awards, and the shares subject to such terminated, expired,
canceled, forfeited, exchanged or surrendered Grants and Awards shall again
be available for purposes of the Plan in addition to the number of shares of
Company Stock otherwise available for Grants and Awards. No Grantee under
the Plan may receive aggregate Grants in excess of 2.5% of the total number
of shares of Company Stock outstanding as of December 31, 1997.
(b) Adjustments. If there is any change in the number or kind of
shares of Company Stock outstanding (i) by reason of a stock dividend,
spinoff, recapitalization, stock split, or combination or exchange of shares,
(ii) by reason of a merger, reorganization or consolidation in which NU is
the surviving entity, (iii) by reason of a reclassification or change in par
value, or (iv) by reason of any other extraordinary or unusual event
affecting the outstanding Company Stock as a class without NU's receipt of
consideration, or if the value of outstanding shares of Company Stock is
substantially reduced as a result of a spinoff or NU's payment of an
extraordinary dividend or distribution, the maximum number of shares of
Company Stock available for Grants, the maximum number of shares of Company
Stock that any individual participating in the Plan may be granted in any
year, the number of shares covered by outstanding Grants, the kind of shares
issued under the Plan, and the price per share or the applicable market value
of such Grants shall be appropriately adjusted by the Committee to reflect
any increase or decrease in the number of, or change in the kind or value of,
issued shares of Company Stock to preclude, to the extent practicable, the
enlargement or dilution of rights and benefits under such Grants; provided,
however, that any fractional shares resulting from such adjustment shall be
eliminated. Any adjustments determined by the Committee shall be final,
binding and conclusive.
ARTICLE X
OPERATING RULES
1. Withholding of Taxes. All Grants under the Plan shall be subject
to applicable federal (including FICA), state and local tax withholding
requirements. The Company shall have the right to deduct from all Grants
paid in cash, or from other wages paid to the Grantee, any federal, state or
local taxes required by law to be withheld with respect to such Grants. In
the case of Options and other Grants paid in Company Stock, the Company may
require the Grantee or other person receiving such shares to pay to the
Company the amount of any such taxes that the Company is required to withhold
with respect to such Grants, or the Company may deduct from other wages paid
by the Company the amount of any withholding taxes due with respect to such
Grants. If the Committee so permits, a Grantee may elect to satisfy the
Company's income tax withholding obligation with respect to an Option, SAR,
Restricted Stock or Performance Units paid in Company Stock by having shares
withheld up to an amount that does not exceed the Grantee's minimum
applicable withholding tax rate for federal (including FICA), state and local
tax liabilities. The election must be in a form and manner prescribed by the
Committee.
2. Transferability of Grants.
(a) Nontransferability of Grants. Except as provided below, only the
Grantee may exercise rights under a Grant during the Grantee's lifetime. A
Grantee may not transfer those rights except by will or by the laws of
descent and distribution or, with respect to Grants other than Incentive
Stock Options, if permitted in any specific case by the Committee, pursuant
to a domestic relations order (as defined under the Code or Title I of the
Employee Retirement Income Security Act of 1974, as amended, or the
regulations thereunder). When a Grantee dies, the personal representative or
other person entitled to succeed to the rights of the Grantee ("Successor
Grantee") may exercise such rights. A Successor Grantee must furnish proof
satisfactory to the Company of his or her right to receive the Grant under
the Grantee's will or under the applicable laws of descent and distribution.
(b) Transfer of Nonqualified Stock Options. Notwithstanding the
foregoing, the Committee may provide, in a Grant Instrument, that a Grantee
may transfer Nonqualified Stock Options to family members, one or more trusts
for the benefit of family members, or one or more partnerships of which
family members are the only partners, according to such terms as the
Committee may determine; provided that the Grantee receives no consideration
for the transfer of an Option and the transferred Option shall continue to be
subject to the same terms and conditions as were applicable to the Option
immediately before the transfer.
3. Requirements for Issuance or Transfer of Shares. No Company Stock
shall be issued or transferred in connection with any Grant hereunder unless
and until all legal requirements applicable to the issuance or transfer of
such Company Stock have been complied with to the satisfaction of the
Committee. The Committee shall have the right to condition any Grant made to
any Grantee hereunder on such Grantee's undertaking in writing to comply with
such restrictions on his or her subsequent disposition of such shares of
Company Stock as the Committee shall deem necessary or advisable as a result
of any applicable law, regulation or official interpretation thereof, and
certificates representing such shares may be legended to reflect any such
restrictions. Certificates representing shares of Company Stock issued or
transferred under the Plan will be subject to such stop-transfer orders and
other restrictions as may be required by applicable laws, regulations and
interpretations, including any requirement that a legend be placed thereon.
4. Funding of the Plan. This Plan shall be unfunded. The Company
shall not be required to establish any special or separate fund or to make
any other segregation of assets to assure the payment of any Grants under
this Plan. In no event shall interest be paid or accrued on any Grant,
including unpaid installments of Grants.
5. Rights of Participants. Nothing in this Plan shall entitle any
Employee or Non-Employee Director or other person to any claim or right to
be granted a Grant under this Plan except as provided in Article V. Neither
this Plan nor any action taken hereunder shall be construed as giving any
individual any rights to be retained by or in the employ of the Company or
any other employment rights.
6. No Fractional Shares. No fractional shares of Company Stock shall
be issued or delivered pursuant to the Plan or any Grant. The Committee
shall determine whether cash, other awards or other property shall be issued
or paid in lieu of such fractional shares or whether such fractional shares
or any rights thereto shall be forfeited or otherwise eliminated.
7. Headings. Section headings are for reference only. In the event
of a conflict between a title and the content of a Section, the content of
the Section shall control.
8. Effective Date of the Plan. Subject to approval by NU's
shareholders, the Plan shall be effective on January 1, 1998.
9. Definition of Company. "Company" means NU and any Affiliate which
is authorized by the Board to adopt the Plan and cover its eligible employees
and whose designation as such has become effective upon acceptance of such
status by the board of directors of the Affiliate. An Affiliate may revoke
its acceptance of such designation at any time, but until such acceptance has
been revoked, all the provisions of the Plan, including the authority of the
Board and the Committee, and amendments thereto shall apply to the eligible
employees of the Affiliate. In the event the designation is revoked by the
board of directors of an Affiliate, the Plan shall be deemed terminated only
with respect to such Affiliate. For the purposes hereof, "Affiliate" means
each direct and indirect affiliated company that directly or through one or
more intermediaries, controls, is controlled by, or is under common control
with NU.
ARTICLE XI
CHANGE OF CONTROL OF NU
1. Change of Control of NU.
As used herein, a "Change of Control" shall be deemed to have occurred:
(i) When any "person," as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), other
than the Company, its affiliates, or any Company or NU employee benefit plan
(including any trustee of such plan acting as trustee), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of NU representing more than 20% of the
combined voting power of either (i) the then outstanding common shares of NU
(the "Outstanding Common Shares") or (ii) the then outstanding voting
securities of NU entitled to vote generally in the election of directors (the
"Voting Securities"); or
(ii) Individuals who, as of the beginning of any twenty-four
month period, constitute the Trustees (the "Incumbent Trustees") cease for
any reason to constitute at least a majority of the Trustees or cease to be
able to exercise the powers of the majority of the Trustees, provided that
any individual becoming a trustee subsequent to the beginning of such period
whose election or nomination for election by the Company's stockholders was
approved by a vote of at least a majority of the trustees then comprising the
Incumbent Trustees shall be considered as though such individual were a
member of the Incumbent Trustees, but excluding, for this purpose, any such
individual whose initial assumption of office is in connection with an actual
or threatened election contest relating to the election of the Trustees of NU
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated under
the Exchange Act); or
(iii) Consummation by NU of a reorganization, merger or
consolidation (a "Business Combination"), in each case, with respect to which
all or substantially all of the individuals and entities who were the
respective beneficial owners of the Outstanding Common Shares and Voting
Securities immediately prior to such Business Combination do not, following
consummation of all transactions intended to constitute part of such Business
Combination, beneficially own, directly or indirectly, more than 75% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation, business trust or other entity resulting from or being the
surviving entity in such Business Combination in substantially the same
proportion as their ownership immediately prior to such Business Combination
of the Outstanding Common Shares and Voting Securities, as the case may be;
or
(iv) Consummation of a complete liquidation or dissolution of
NU or sale or other disposition of all or substantially all of the assets of
NU other than to a corporation, business trust or other entity with respect
to which, following consummation of all transactions intended to constitute
part of such sale or disposition, more than 75% of, respectively, the then
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, is then owned beneficially, directly or
indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Common Shares
and Voting Securities immediately prior to such sale or disposition in
substantially the same proportion as their ownership of the Outstanding
Common Shares and Voting Securities, as the case may be, immediately prior to
such sale or disposition.
2. Consequences of a Change of Control.
(a) Notice and Acceleration. Upon a Change of Control, unless the
Committee determines otherwise, (i) the Company shall provide each Grantee
with outstanding Grants written notice of such Change of Control, (ii) all
outstanding Options and SARs shall automatically accelerate and become fully
exercisable, (iii) the restrictions and conditions on all outstanding
Restricted Stock shall immediately lapse, and (iv) Grantees holding
Performance Units shall receive a payment in settlement of such Performance
Units, in an amount determined by the Committee, based on the Grantee's
target payment for the Performance Period and the portion of the Performance
Period that precedes the Change of Control.
(b) Assumption of Grants. Upon a Change of Control where the Company
is not the surviving corporation (or survives only as a subsidiary of another
corporation), unless the Committee determines otherwise, all outstanding
Options and SARs that are not exercised shall be assumed by, or replaced with
comparable options or rights by, the surviving corporation.
(c) Other Alternatives. Notwithstanding the foregoing, subject to
subsection (d) below, in the event of a Change of Control, the Committee may
take one or both of the following actions: the Committee may (i) require that
Grantees surrender their outstanding Options and SARs in exchange for a
payment by the Company, in cash or Company Stock as determined by the
Committee, in an amount equal to the amount by which the then Fair Market
Value of the shares of Company Stock subject to the Grantee's unexercised
Options and SARs exceeds the Exercise Price of the Options or the base
amount of the SARs, as applicable, or (ii) after giving Grantees an
opportunity to exercise their outstanding Options and SARs, terminate any or
all unexercised Options and SARs at such time as the Committee deems
appropriate. Such surrender or termination shall take place as of the date
of the Change of Control or such other date as the Committee may specify.
(d) Committee. The Committee making the determinations under this
Article XI, Section 2(d) following a Change of Control must comprise the same
members as those on the Committee immediately before the Change of Control.
If the Committee members do not meet this requirement, the automatic
provisions of Subsections (a) and (b) shall apply, and the Committee shall
not have discretion to vary them.
(e) Limitations. Notwithstanding anything in the Plan to the contrary,
in the event of a Change of Control, the Committee shall not have the right
to take any actions described in the Plan (including without limitation
actions described in Subsection (c) above) that would make the Change of
Control ineligible for pooling of interests accounting treatment or that
would make the Change of Control ineligible for desired tax treatment if, in
the absence of such right, the Change of Control would qualify for such
treatment and the Company intends to use such treatment with respect to the
Change of Control.
ARTICLE XII
AMENDMENT AND TERMINATION
1. Amendment and Termination of the Plan.
(a) Amendment. The Board may amend or terminate the Plan at any time;
provided, however, that the Board shall not amend the Plan without
shareholder approval if such approval is required by section 422 of the Code
or section 162(m) of the Code.
(b) Termination of Plan. The Plan shall terminate on the day
immediately preceding the tenth anniversary of its effective date, unless the
Plan is terminated earlier by the Board or is extended by the Board with the
approval of the shareholders.
(c) Termination and Amendment of Outstanding Grants. A termination or
amendment of the Plan that occurs after a Grant is made shall not materially
impair the rights of a Grantee unless the Grantee consents or unless the
Committee acts under Article XI, Section 2(c). The termination of the Plan
shall not impair the power and authority of the Committee with respect to an
outstanding Grant.
(d) Governing Document. The Plan shall be the controlling document.
No other statements, representations, explanatory materials or examples, oral
or written, may amend the Plan in any manner. The Plan shall be binding upon
and enforceable against the Company and its successors and assigns.
ARTICLE XIII
MISCELLANEOUS
1. Grants in Connection with Corporate Transactions and Otherwise.
Nothing contained in this Plan shall be construed to (i) limit the right of
the Committee to make Grants under this Plan in connection with the
acquisition, by purchase, lease, merger, consolidation or otherwise, of the
business or assets of any corporation, firm or association, including Grants
to employees thereof who become Employees of the Company, or for other proper
corporate purposes, or (ii) limit the right of the Company to grant stock
options or make other awards outside of this Plan. Without limiting the
foregoing, the Committee may make a Grant to an employee of another
corporation who becomes an Employee by reason of a corporate merger,
consolidation, acquisition of stock or property, reorganization or
liquidation involving the Company or any of its subsidiaries in substitution
for a stock option or restricted stock grant made by such corporation. The
terms and conditions of the substitute grants may vary from the terms and
conditions required by the Plan and from those of the substituted stock
incentives. The Committee shall prescribe the provisions of the substitute
grants.
2. Compliance with Law. The Plan, the exercise of Options and SARs
and the obligations of the Company to issue or transfer shares of Company
Stock under Grants shall be subject to all applicable laws and to approvals
by any governmental or regulatory agency as may be required. With respect to
persons subject to section 16 of the Exchange Act, it is the intent of the
Company that the Plan and all transactions under the Plan comply with all
applicable provisions of Rule 16b-3 or its successors under the Exchange Act.
In addition, it is the intent of the Company that the Plan and applicable
Grants under the Plan comply with the applicable provisions of sections
162(m) and 422 of the Code. To the extent that any legal requirement of
section 16 of the Exchange Act or section 162(m) or 422 of the Code as set
forth in the Plan ceases to be required under section 16 of the Exchange Act
or section 162(m) or 422 of the Code, that Plan provision shall cease to
apply. The Committee may revoke any Grant if it is contrary to law or modify
a Grant to bring it into compliance with any valid and mandatory government
regulation. The Committee may also adopt rules regarding the withholding of
taxes on payments to Grantees. The Committee may, in its sole discretion,
agree to limit its authority under this Section.
3. Governing Law. The validity, construction, interpretation and
effect of the Plan and Grant Instruments issued under the Plan shall
exclusively be governed by and determined in accordance with the law of the
State of Connecticut.
4. Disclaimer of Liability. The Declaration of Trust of NU provides
that no shareholder of NU shall be held to any liability whatever for the
payment of any sum of money, or for damages or otherwise under any contract,
obligation or undertaking made, entered into or issued by the Board or by any
officer, agent or representative elected or appointed by the Board, and no
such contract, obligation or undertaking shall be enforceable against the
Board or any of them in their or his or her individual capacities or capacity
and all such contracts, obligations and undertakings shall be enforceable
only against the Board as such, and every person or entity, having any claim
or demand arising out of any such contract, obligation or undertaking shall
look only to the trust estate for the payment or satisfaction thereof.
Exhibit A.4
NORTHEAST UTILITIES
EMPLOYEE SHARE PURCHASE PLAN
Adopted by Northeast Utilities
Board of Trustees on January 13, 1998
Approved by Northeast Utilities
Shareholders on , 1998
ARTICLE I
PURPOSE
The purpose of the Northeast Utilities Employee Share Purchase Plan (the
"Plan") is to provide a means whereby the Company (as hereinafter defined)
may provide eligible employees an opportunity to purchase shares of Company
Stock (as hereinafter defined). The Board of Trustees of Northeast Utilities
believes that employee participation in share ownership will be to the mutual
benefit of both the employees and the Company. The Plan is intended to
constitute an "employee stock purchase plan" within the meaning of section
423 of the Internal Revenue Code of 1986, as amended (the "Code") and is not
intended and shall not be construed as constituting an "employee benefit
plan," within the meaning of section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended.
ARTICLE II
DEFINITIONS
Affiliate. "Affiliate" means each direct and indirect affiliated
company that through one or more intermediaries, controls, is controlled by,
or is under common control with NU.
Board. "Board" means the board of trustees of NU.
Code. "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
Committee. "Committee" means the Board's Compensation Committee, or the
person or persons to which such committee delegates any of its functions
under the Plan.
Company. "Company" means NU and any Affiliate which is authorized by
the Board to adopt the Plan and cover its Eligible Employees and whose
designation as such has become effective upon acceptance of such status by
the board of directors of the Affiliate. An Affiliate may revoke its
acceptance of such designation at any time, but until such acceptance has
been revoked, all the provisions of the Plan, including the authority of the
Board and the Committee, and amendments thereto shall apply to the Eligible
Employees of the Affiliate. In the event the designation is revoked by the
board of directors of an Affiliate, the Plan shall be deemed terminated only
with respect to such Affiliate.
Company Stock. "Company Stock" means common shares in NU, par value
$5.00.
Effective Date. "Effective Date" shall mean the first Election Date
beginning after (a) the later of the approval of the Plan (i) by the
shareholders of NU and (ii) the Securities and Exchange Commission pursuant
to the Public Utility Holding Company Act of 1935, and (b) the authorization
of elections by the Board.
Election Date. "Election Date" means each January 1 and July 1 or such
other dates as the Committee shall specify.
Eligible Employee. "Eligible Employee" means each employee of the
Company (i) who is classified by the Company as an employee (and not as an
independent contractor no matter how characterized by a court or
administrative agency), (ii) whose customary employment is for more than 20
hours per week and for more than five months per year, (iii) who is not
deemed for purposes of section 423(b)(3) of the Code to own shares possessing
five percent or more of the total combined voting power or value of all
classes of shares of NU or any subsidiary, and (iv) who has completed at
least one Year of Service with the Company after being classified as an
employee (without regard to any retroactive recharacterization); provided,
however, that an "Eligible Employee" whose terms and conditions of employment
are subject to negotiation with a collective bargaining agent shall be deemed
not to have elected to file a Purchase Agreement until the agreement between
the Company and such collective bargaining agent with respect to the employee
provides for participation in the Plan.
Exchange Act. "Exchange Act" means the Securities Exchange Act of 1934,
as amended, and as the same may hereafter be amended.
Market Value. "Market Value" means the closing price of the Company
Stock as reported in the Wall Street Journal as composite transactions for
the relevant date (or the latest date for which such price was reported if
such date is not a business day), or if not available, (x) if the principal
trading market for the Company Stock is the New York Stock Exchange, the last
reported sale price thereof on the relevant date or (if there were no trades
on that date) the latest preceding date upon which a sale was reported, (y)
if the principal trading market for the Company Stock is a national
securities exchange other than the New York Stock Exchange or is the Nasdaq
National Market, the last reported sale price thereof on the relevant date or
(if there were no trades on that date) the latest preceding date upon which a
sale was reported, or (z) if the Company Stock is not principally traded on
such exchange or market, the mean between the last reported "bid" and "asked"
prices of Company Stock on the relevant date, as reported on Nasdaq or, if
not so reported, as reported by the National Daily Quotation Bureau, Inc. or
as reported in a customary financial reporting service, as applicable and as
the Committee determines. If the Company Stock is not publicly traded or, if
publicly traded, is not subject to reported transactions or "bid" or "asked"
quotations as set forth above, the Fair Market Value per share shall be as
determined by the Committee.
NU. "NU" means Northeast Utilities, a Massachusetts business trust,
and its successors and assigns.
Option Participant. "Option Participant" means a Participant who is an
officer of the Company and who has received a grant of stock options under
the Northeast Utilities Incentive Plan.
Participant. "Participant" means an Eligible Employee who elects to
participate in the Plan.
Plan. "Plan" means the Northeast Utilities Employee Share Purchase
Plan, as amended from time to time.
Plan Year. "Plan Year" means each calendar year during which the Plan
is in effect.
Purchase Agreement. "Purchase Agreement" means the instrument
prescribed by the Committee pursuant to which an Eligible Employee may enroll
as a Participant and subscribe for the purchase of shares of Company Stock on
the terms and conditions offered by the Company. The Purchase Agreement is
intended to evidence the Company's offer of an option to the Eligible
Employee to purchase Company Stock on the terms and conditions set forth
therein and herein.
Purchase Date. "Purchase Date" means the last day of each Purchase
Period.
Purchase Period. "Purchase Period" means the period that begins on each
Election Date on and following the Effective Date and ending on the day
before the next Election Date or other period specified by the Committee
during which the Participant's Company Stock purchase is funded through
payroll deduction accumulations.
Purchase Price. "Purchase Price" means the purchase price for shares of
Company Stock purchased under the Plan, determined as set forth in Section
4.03.
Year of Service. "Year of Service" means a "Year of Service" credited
to a the Participant under the Northeast Utilities Service Company Retirement
Plan prior to the Election Date.
ARTICLE III
ADMISSION TO PARTICIPATION
3.1 Initial Participation. An Eligible Employee may elect to
participate in the Plan and may become a Participant effective as of any
Election Date, by executing and filing with the Committee a Purchase
Agreement at such time in advance of such Election Date as the Committee
shall prescribe. The Purchase Agreement shall remain in effect until
modified or canceled in accordance with the terms of this Plan.
3.2 Discontinuance of Participation. A Participant may voluntarily
cease his or her participation in the Plan and stop payroll deductions at any
time by filing a notice of cessation of participation on such form and at
such time in advance of the effective date as the Committee shall prescribe.
Notwithstanding anything in the Plan to the contrary, if a Participant ceases
to be an Eligible Employee, his or her participation automatically shall
cease and no further purchase of Company Stock shall be made for the
Participant.
3.3 Readmission to Participation. Any Eligible Employee who has
previously been a Participant, who has discontinued participation (whether by
cessation of eligibility or otherwise), and who wishes to be reinstated as a
Participant may again become a Participant by executing and filing with the
Committee a new Purchase Agreement. Reinstatement to Participant status
shall be effective as of any Election Date, provided the Participant files a
new Purchase Agreement with the Committee at such time in advance of the
Election Date as the Committee shall prescribe.
ARTICLE IV
COMPANY STOCK PURCHASE AND RESALE
4.1 Reservation of Shares. There shall be a number of shares of
Company Stock equal to one-half of one percent (0.5%) of the total number of
shares of Company Stock outstanding in each Plan Year reserved for issuance
or transfer under the Plan during or for that Plan Year, subject to
adjustment in accordance with the antidilution provisions hereinafter set
forth. If and to the extent that less than the full number of shares of
company Stock reserved for issuance or transfer under the Plan, as set forth
above, are actually so issued or transferred, then the remaining shares
shall again be available for issuance or transfer under the Plan. Except as
provided in Section 5.2, the aggregate number of shares of Company Stock that
may be purchased under the Plan shall not exceed five percent (5%) of the
total number of shares of Company Stock outstanding as of December 31, 1997.
4.2 Limitation on Shares Available. The maximum number of shares of
Company Stock that may be purchased for each Participant on a Purchase Date
is the lesser of (a) the number of whole and fractional shares of Company
Stock that can be purchased by applying the full balance of the Participant's
withheld funds to the purchase of shares of Company Stock at the Purchase
Price, or (b) the Participant's proportionate part of the maximum number of
shares of Company Stock available under the Plan, as stated in Section 4.1.
Moreover, (a) the maximum number of shares of Company Stock that may be
purchased by a Participant during the first Purchase Period in a Plan Year
is an amount determined by dividing the $25,000 limit under Section 4.4(c) by
the per share Market Value of Company Stock as determined on the first day of
such Purchase Period; and (b) the maximum number of shares of Company Stock
that may be purchased by a Participant during the second Purchase Period in a
Plan Year is an amount determined by dividing (i) the difference determined
by subtracting the total Purchase Price paid for all shares of Company Stock
purchased during the first Purchase Period in that Plan Year from the $25,000
limit under Section 4.4(c), by (ii) the per share Market Value of Company
Stock as determined on the first day of the second Purchase Period.
Notwithstanding the foregoing, if any person entitled to purchase shares
pursuant to any offering under the Plan would be deemed for purposes of
section 423(b)(3) of the Code to own stock (including any number of shares of
Company Stock that such person would be entitled to purchase hereunder)
possessing five percent or more of the total combined voting power or value
of all classes of shares of the Company, the maximum number of shares of
Company Stock that such person shall be entitled to purchase pursuant to the
Plan shall be reduced to that number which, when added to the number of
shares that such person is deemed to own (excluding any number of shares of
Company Stock that such person would be entitled to purchase hereunder), is
one less than such five percent. Any amounts withheld from a Participant's
compensation that cannot be applied to the purchase of Company Stock by
reason of the foregoing limitation shall be returned to the Participant as
soon as practicable.
4.3 Purchase Price of Shares. The Purchase Price per share of the
Company Stock sold to Participants pursuant to any offering under the Plan
shall be the lower of (i) 85% (100%, for Option Participants) of the Market
Value of such share on the first day of the Purchase Period or (ii) 85%
(100%, for Option Participants) of the Market Value of such share on the
Purchase Date. Notwithstanding the foregoing, the Committee, acting on
behalf of the Company, may determine that the Purchase Price shall be the
Market Value, or a percentage of the Market Value, on either of such dates or
the lower of such dates, so long as the percentage shall not be lower than
85% of such Market Value.
4.4 Exercise of Purchase Privilege.
(a) Each Participant shall be granted an option to purchase shares of
Company Stock as of the first day of each Purchase Period at the Purchase
Price specified in Section 4.3. The option shall continue in effect through
the Purchase Date for the Purchase Period. Subject to the provisions of
Section 4.2 above and of paragraph (c) of this Section 4.4, on each Purchase
Date, the Participant shall automatically be deemed to have exercised his or
her option to purchase shares of Company Stock, unless he or she notifies the
Committee, in such manner and at such time in advance of the Purchase Date as
the Committee shall prescribe, of his or her desire not to make such
purchase.
(b) There shall be purchased for the Participant on each Purchase Date,
at the Purchase Price for the Purchase Period, the largest number of whole
and fractional shares of Company Stock as can be purchased with the amounts
withheld from the Participant's compensation during the Purchase Period.
Each such purchase shall be deemed to have occurred on the Purchase Date
occurring at the close of the Purchase Period for which the purchase was
made.
(c) A Participant may not purchase shares of Company Stock having an
aggregate Market Value of more than $25,000, determined at the beginning of
each Purchase Period, for any calendar year in which one or more offerings
under this Plan are outstanding at any time, and a Participant may not
purchase a share of Company Stock under any offering after the expiration of
the Purchase Period for the offering.
4.5 Payroll Deductions. Each Participant shall authorize payroll
deductions from his or her compensation for the purpose of funding the
purchase of Company Stock pursuant to his or her Purchase Agreement. In the
Purchase Agreement, each Participant shall authorize an after-tax payroll
deduction from each payment of compensation during a Purchase Period of an
amount not less than $20 per paycheck and not more than 25% of such
Participant's compensation. A Participant may change the deduction to any
permissible level effective as of any Election Date. A change shall be made
by the Participant's filing with the Committee a notice in such form and at
such time in advance of the date on which the change is to be effective as
the Committee shall prescribe.
4.6 Payment for Company Stock. The Purchase Price for all shares of
Company Stock purchased by a Participant under the Plan shall be paid out of
the Participant's authorized payroll deductions. All funds received or held
by the Company under the Plan are general assets of the Company, shall be
held free of any trust or other restriction, and may be used for any
corporate purpose.
4.7 Share Ownership; Issuance of Certificates.
(a) The shares of Company Stock purchased by a Participant on a
Purchase Date shall, for all purposes, be deemed to have been issued or sold
at the close of business on the Purchase Date. Prior to that time, none of
the rights or privileges of a shareholder of the Company shall inure to the
Participant with respect to such shares of Company Stock. All the shares of
Company Stock purchased under the Plan shall be delivered by the Company in a
manner as determined by the Committee.
(b) The Committee, in its sole discretion, may determine that shares of
Company Stock shall be delivered by the Company by (i) issuing and delivering
to the Participant a certificate for the number of shares of Company Stock
purchased by the Participant on a Purchase Date or during a calendar year or
other period determined by the Committee, (ii) issuing and delivering
certificates for the number of shares of Company Stock purchased by all
Participants on a Purchase Date or during a calendar year or other period
determined by the Committee to a firm which is a member of the National
Association of Securities Dealers, as selected by the Committee from time to
time, which shares shall be maintained by such firm in a separate brokerage
account for each Participant, or (iii) issuing and delivering certificates
for the number of shares of Company Stock purchased by all Participants on a
Purchase Date or during the calendar year or other period determined by the
Committee to a bank or trust company or affiliate thereof, as selected by the
Committee from time to time, which shares may be held by such bank or trust
company or affiliate in street name, but with a separate account maintained
by such entity for each Participant reflecting such Participant's share
interests in the Company Stock. Each certificate or account, as the case may
be, may be in the name of the Participant or, if he or she so designates on
the Participant's Purchase Agreement, in the Participant's name jointly with
the Participant's spouse, with right of survivorship. A Participant who is a
resident of a jurisdiction that does not recognize such joint tenancy may
have a certificate or account held in the Participant's name as tenant in
common with the Participant's spouse, with or without right of survivorship.
No fractional shares may be purchased under the Plan and the balance of any
amounts withheld from a Participant's compensation which are not applied to
the purchase of Company Stock shall be returned to the Participant.
(c) The Committee, in its sole discretion, may impose such restrictions
or limitations as it shall determine on the resale of Company Stock, the
issuance of individual share certificates or the withdrawal from any
shareholder accounts established for a Participant.
(d) Any dividends payable with respect to shares of Company Stock
credited to a shareholder account of a Participant established pursuant to
Section 4.7(b) hereof will be reinvested in shares of Company Stock and
credited to the Participant's account.
4.8 Withdrawal of Shares or Resale of Company Stock.
(a) A Participant may request a withdrawal of shares of Company Stock
purchased for the Participant under the Plan or order the sale of such shares
at any time by making a request in such form and at such time as the
Committee shall prescribe. Notwithstanding the foregoing and section 4.7(c),
no such shares may be withdrawn, sold, or otherwise distributed for at least
six months following their purchase for the Participant.
(b) If a Participant terminates his or her employment with the Employer
or otherwise ceases to be an Eligible Employee, the Participant shall receive
a distribution of his or her shares of Company Stock held in any shareholder
account established pursuant to Section 4.7(b), unless the Participant elects
to have the shares of Company Stock sold in accordance with such procedures
as the Committee shall prescribe.
(c) If a Participant is to receive a withdrawal or distribution of
shares of Company Stock, or if shares are to be sold, the withdrawal,
distribution or sale shall be made in whole shares of Company Stock, with
fractional shares paid in cash.
ARTICLE V
SPECIAL ADJUSTMENTS
5.1 Shares Unavailable. If, on any Purchase Date, the aggregate funds
available for the purchase of Company Stock would purchase a number of shares
in excess of the number of shares of Company Stock then available for
purchase under the Plan, the number of shares of Company Stock that would
otherwise be purchased by each Participant for that Plan Year shall be
proportionately reduced on the Purchase Date in order to eliminate such
excess. The balance of any amounts withheld from a Participant's
compensation which had not by such time been applied to the purchase of
Company Stock shall be returned to the Participant.
5.2 Anti-Dilution Provisions. The aggregate number of shares of
Company Stock reserved for purchase under the Plan, as provided in Section
4.1, and the calculation of the Purchase Price per share shall be
appropriately adjusted to reflect any increase or decrease in the number of
issued shares of Company Stock resulting from a subdivision or consolidation
of shares or other capital adjustment, or the payment of a share dividend, or
other increase or decrease in such shares, if effected without receipt of
consideration by the Company. Any such adjustment shall be made by the
Committee acting with the consent of, and subject to the approval of, the
Board.
5.3 Effect of Certain Transactions. Subject to any required action by
the shareholders, if the Company shall be the surviving corporation in any
merger or consolidation, any offering hereunder shall pertain to and apply to
the shares of the Company. However, in the event of a dissolution or
liquidation of the Company, or of a merger or consolidation in which the
Company is not the surviving corporation, the Plan and any offering hereunder
shall terminate upon the effective date of such dissolution, liquidation,
merger or consolidation, and the balance of any amounts withheld from a
Participant's compensation which had not by such time been applied to the
purchase of Company Stock shall be returned to the Participant.
ARTICLE VI
MISCELLANEOUS
6.1 Non-Alienation. The right to purchase shares of Company Stock
under the Plan is personal to the Participant, is exercisable only by the
Participant during the Participant's lifetime, except as hereinafter set
forth, and may not be assigned or otherwise transferred by the Participant.
If a Participant dies, there shall be delivered to the executor,
administrator or other personal representative of the deceased Participant
such shares of Company Stock and such residual amounts as may remain to the
Participant's credit from amounts withheld from the Participant's
compensation as of the Purchase Date occurring at the close of the period in
which the Participant's death occurs, including shares of Company Stock
purchased as of that date or prior thereto with moneys withheld from the
Participant's compensation.
6.2 Administrative Costs. The Company shall pay all administrative
expenses associated with the operation of the Plan including expenses of
issuance and sale of shares but excluding brokerage commissions on the sale
of shares of Company Stock pursuant to Section 4.8.
6.3 The Committee. The Committee shall have the authority and power to
administer the Plan and to make, adopt, construe, and enforce rules and
regulations not inconsistent with the provisions of the Plan and to make all
required determinations including factual determinations. The Committee shall
adopt and prescribe the contents of all forms required in connection with the
administration of the Plan, including, but not limited to, the Purchase
Agreement, payroll withholding authorizations, withdrawal documents, and all
other notices required hereunder. The Committee shall have the fullest
discretion permissible under law in the discharge of its duties. The
Committee's interpretations and decisions with respect to the Plan shall be
final and conclusive.
6.4 Amendment of the Plan. The Board may, at any time and from time to
time, amend the Plan in any respect, except that no amendment may increase
the number of shares reserved for purposes of the Plan, or allow any person
who is not an Eligible Employee to become a Participant, without the approval
of the shareholders of NU.
6.5 Expiration and Termination of the Plan. The Plan shall continue in
effect for 10 years from the Effective Date, unless terminated prior to that
date pursuant to the provisions of the Plan or pursuant to action by the
Board. The Board shall have the right to terminate the Plan at any time
without prior notice to any Participant and without liability to any
Participant. Upon the expiration or termination of the Plan, the balance, if
any, then standing to the credit of each Participant from amounts withheld
from the Participant's compensation which has not, by such time, been applied
to the purchase of shares of Company Stock shall be refunded to the
Participant.
6.6 Repurchase of Company Stock. The Company shall not be required to
purchase or repurchase from any Participant any of the shares of Company
Stock that the Participant acquires under the Plan.
6.7 Notice. A Purchase Agreement and any notice that a Participant
files pursuant to the Plan shall be on the form prescribed by the Committee
and shall be effective only when received by the Committee. Delivery of such
forms may he made by hand or by certified mail, sent postage prepaid, to
Northeast Utilities Service Company, 107 Selden Street, Berlin, CT 06037,
Attention: Employee Stock Purchase Plan Administrator. Delivery by any other
mechanism shall be deemed effective at the option and discretion of the
Committee.
6.8 Government Regulation. The Company's obligation to sell and to
deliver the Company Stock under the Plan is at all times subject to all
approvals of any governmental authority required in connection with the
authorization, issuance, sale or delivery of such Company Stock.
6.9 Headings, Captions, Gender. The headings and captions herein are
for convenience of reference only and shall not be considered as part of the
text. The masculine shall include the feminine, and vice versa.
6.10 Severability of Provisions, Prevailing Law. The provisions of the
Plan shall be deemed severable. In the event any such provision is
determined to be unlawful or unenforceable by a court of competent
jurisdiction or by reason of a change in an applicable statute, the Plan
shall continue to exist as though such provision had never been included
therein (or, in the case of a change in an applicable statute, had been
deleted as of the date of such change). The Plan shall be governed by the
laws of the state of Connecticut to the extent such laws are not in conflict
with, or superseded by, federal law.
6.11 Disclaimer of Liability. The Declaration of Trust of NU provides
that no shareholder of NU shall be held to any liability whatever for the
payment of any sum of money, or for damages or otherwise under any contract,
obligation or undertaking made, entered into or issued by the Board or by any
officer, agent or representative elected or appointed by the Board, and no
such contract, obligation or undertaking shall be enforceable against the
Board or any of them in their or his or her individual capacities or capacity
and all such contracts, obligations and undertakings shall be enforceable
only against the Board as such, and every person or entity, having any claim
or demand arising out of any such contract, obligation or undertaking shall
look only to the trust estate for the payment or satisfaction thereof.
Exhibit A.5
NORTHEAST UTILITIES
DEFERRED COMPENSATION PLAN
FOR
EXECUTIVES
Adopted by Northeast Utilities
Board of Trustees on January 13, 1998
ARTICLE 1
PURPOSE
The purpose of the Northeast Utilities Deferred Compensation Plan for
Executives (the "Plan") is to provide a means whereby the Company (as
hereinafter defined) may afford increased financial security, on a
tax-favored basis, to a select group of "key management or other highly
compensated employees" of the Company, within the meaning of Sections 201,
301 and 401 of the Employee Retirement Income Security Act of 1974, as
amended. These individuals have rendered and continue to render valuable
services to the Company which constitute an important contribution towards
the Company's continued growth and success. This Plan will provide for
additional future compensation so that such employees may be recruited and
retained and their productive efforts encouraged.
ARTICLE 2
DEFINITIONS
Account. "Account " means, with respect to a Participant, the account,
including any subaccounts, established on the books of account of the
Company, pursuant to Section 5.1, to record the Participant's interest in the
Plan.
Administrator. "Administrator" means the Administrator as defined in
the Retirement Plan, or the person or persons to whom such entity delegates
any of its functions under the Plan.
Affiliate. "Affiliate" means each direct and indirect affiliated
company that directly or through one or more intermediaries, controls, is
controlled by, or is under common control with NU.
Base Salary. "Base Salary" means with respect to a Participant for any
Plan Year such Participant's annual base salary, before deferral pursuant to
this Plan or any agreement or any other plan of the Company whereby
compensation is deferred, including, without limitation, a plan whereby
compensation is deferred in accordance with Code Section 401(k) or reduced in
accordance with Code Section 125 .
Base Salary Deferral. "Base Salary Deferral" means that portion of Base
Salary as to which an Eligible Employee has made an annual irrevocable
election to defer receipt.
Beneficiary. "Beneficiary" means the person or persons designated as
such in accordance with Section 12.3.
Board. "Board" means the Board of Trustees of NU.
Bonus Compensation. "Bonus Compensation" means with respect to a
Participant for any Plan Year such Participant's bonus compensation under the
Incentive Plan or any other incentive plan of the Company before deferral
pursuant to this Plan or pursuant to any agreement or any other plan of the
Company whereby compensation is deferred, including, without limitation, a
plan whereby compensation is deferred in accordance with Code Section 401(k)
or reduced in accordance with Code Section 125.
Bonus Compensation Deferral. "Bonus Compensation Deferral" means that
portion of Bonus Compensation as to which an Eligible Employee has made an
annual irrevocable election to defer receipt.
Change of Control. "Change of Control" shall mean the happening of any
of the following:
(i) When any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), other than
the Company, its Affiliates, or any Company or NU employee benefit plan
(including any trustee of such plan acting as trustee), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of NU representing more than 20% of the
combined voting power of either (i) the then outstanding common shares of NU
(the "Outstanding Common Shares") or (ii) the Voting Securities; or
(ii) Individuals who, as of the beginning of any twenty-four month
period, constitute the Trustees (the "Incumbent Trustees") cease for any
reason to constitute at least a majority of the Trustees or cease to be able
to exercise the powers of the majority of the Trustees, provided that any
individual becoming a trustee subsequent to the beginning of such period
whose election or nomination for election by the Company's shareholders was
approved by a vote of at least a majority of the trustees then comprising the
Incumbent Trustees shall be considered as though such individual were a
member of the Incumbent Trustees, but excluding, for this purpose, any such
individual whose initial assumption of office is in connection with an actual
or threatened election contest relating to the election of the Trustees of NU
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated under
the Exchange Act); or
(iii) Consummation by NU of a reorganization, merger or
consolidation (a "Business Combination"), in each case, with respect to which
all or substantially all of the individuals and entities who were the
respective beneficial owners of the Outstanding Common Shares and Voting
Securities immediately prior to such Business Combination do not, following
consummation of all transactions intended to constitute part of such Business
Combination, beneficially own, directly or indirectly, more than 75% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation, business trust or other entity resulting from or being the
surviving entity in such Business Combination in substantially the same
proportion as their ownership immediately prior to such Business Combination
of the Outstanding Common Shares and Voting Securities, as the case may be;
or
(iv) Consummation of a complete liquidation or dissolution of NU or
sale or other disposition of all or substantially all of the assets of NU
other than to a corporation, business trust or other entity with respect to
which, following consummation of all transactions intended to constitute part
of such sale or disposition, more than 75% of, respectively, the then
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, is then owned beneficially, directly or
indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Common Shares
and Voting Securities immediately prior to such sale or disposition in
substantially the same proportion as their ownership of the Outstanding
Common Shares and Voting Securities, as the case may be, immediately prior to
such sale or disposition.
Code. "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
Committee. "Committee" means the Board's Compensation Committee, or the
person or persons to which such committee delegates any of its functions
under the Plan.
Company. "Company" means NU and any Affiliate which is authorized by
the Board to adopt the Plan and cover its Eligible Employees and whose
designation as such has become effective upon acceptance of such status by
the board of directors of the Affiliate. An Affiliate may revoke its
acceptance of such designation at any time, but until such acceptance has
been revoked, all the provisions of the Plan, including the authority of the
Board and the Committee, and amendments thereto shall apply to the Eligible
Employees of the Affiliate. In the event the designation is revoked by the
board of directors of an Affiliate, the Plan shall be deemed terminated only
with respect to such Affiliate.
Disabled. "Disabled" means a mental or physical condition which
qualifies a Participant for benefits under the Company's long term disability
plan.
Earnings Crediting Options. "Earnings Crediting Options" means the
options selected by the Participant from time to time pursuant to which
earnings are credited to the Participant's Account. The option for Matching
Contributions and Option Share Deferrals shall be deemed investments in
Voting Securities and any deemed dividends shall be deemed reinvested in
additional Voting Securities.
Effective Date. "Effective Date" means the effective date of the Plan
which is January 1, 1998.
Eligible Employee. "Eligible Employee" means an Employee who is a
member of the group of selected management and/or highly compensated
Employees of the Company designated by the Committee, acting on behalf of the
Company, as eligible to participate in the Plan.
Employee. "Employee" means any person employed by the Company on a
regular full-time salaried basis or who is an officer of the Company, or a
member of the Board.
End Termination Date. "End Termination Date" means the date of
termination of a Participant's Service with the Company and its Affiliates.
Enrollment Agreement. "Enrollment Agreement" means the authorization
form which an Eligible Employee executes and files with the Administrator to
participate in the Plan, as described in Section 4.1.
Incentive Plan. "Incentive Plan" means the Northeast Utilities
Incentive Plan, effective January 1, 1998, and as amended from time to time.
Matching Contributions. "Matching Contributions" are those
contributions credited to the Participant's Account by the Company pursuant
to Section 4.3.
NU. "NU" means Northeast Utilities, a Massachusetts business trust and
its successors and assigns.
Option Share Deferral. "Option Share Deferral" means Voting Securities
to be acquired by the exercise of a nonqualified stock option granted under
the Incentive Plan or otherwise as to which an Eligible Employee has made an
irrevocable election to defer receipt.
Participant. "Participant" means an Eligible Employee who has filed a
completed and executed Enrollment Agreement with the Administrator and is
participating in the Plan in accordance with the provisions of Article 4.
Pension Committee. "Pension Committee" means the Pension Committee as
defined in the Retirement Plan.
Plan. "Plan" means this plan, called the Northeast Utilities Deferred
Compensation Plan for Executives, as amended from time to time. The Plan
shall supersede the Deferred Compensation Plan for Officers of Northeast
System Companies as of the Effective Date and the benefits payable to
participants thereunder shall instead be payable under the Plan.
Plan Year. "Plan Year" means the 12 month period beginning on each
January 1 and ending on the following December 31.
Retires or Retirement. "Retires" or "Retirement" means the termination
of the Participant's Service with the Employer (for reasons other than death)
on any retirement date of the Participant permitted under the Retirement Plan
or as otherwise agreed upon by the Board.
Retirement Plan. "Retirement Plan" means the Northeast Utilities
Service Company Retirement Plan.
Savings Plan. "Savings Plan" means the Northeast Utilities Service
Company 401k Plan.
Service. "Service" means the period of time during which an employment
relationship exists between an Employee and the Company as credited under the
Retirement Plan or, in the case of a member of the Board who is not a
participant in the Retirement Plan, his or her tenure as such.
Vesting or Vested. "Vesting" or "Vested" refers to the permanent
ownership rights to the Matching Contributions and related earnings that a
Participant earns through Years of Service. A Participant does not vest
until the Participant has been credited with three Years of Service after the
end of the Plan Year for which the Matching Contributions were made.
Matching Contributions and related earnings are forfeited when Service
terminates, to the extent not then Vested. A Participant is 100% Vested
automatically if a Change of Control occurs or if the Participant becomes
Disabled, Retires, or dies. A Participant is always 100% Vested in Base
Salary Deferrals, Bonus Compensation Deferrals, Option Share Deferrals and
related earnings.
Voting Securities. "Voting Securities" means the common shares of NU,
par value $5.00 or any successor security of NU which carries the right to
vote generally in the election of the Board.
Year of Service. "Year of Service" for Vesting purposes is each year of
service credited to a the Participant under the Retirement Plan.
ARTICLE 3
ADMINISTRATION OF THE PLAN
The Administrator is hereby authorized to administer the Plan and
establish, adopt, or revise such rules and regulations as it may deem
necessary or advisable for the administration of the Plan. The Administrator
shall have discretionary authority to construe and interpret the Plan, to
make determinations, including factual determinations, and to determine the
rights, if any, of Participants and Beneficiaries under the Plan which,
subject to the claims procedure set forth in Section 12.2, shall be final and
binding upon any Participant and Beneficiary affected thereby. The
Administrator and members of the Committee and the Pension Committee shall be
eligible to participate in the Plan while serving as such, but no such person
shall vote or act upon any matter which relates solely to such person's
interest in the Plan as a Participant.
ARTICLE 4
PARTICIPATION
4.1 Annual Election to Participate. Annually, all Eligible Employees
will be offered the opportunity to make Base Salary, Bonus Compensation and
Option Share Deferrals. Any Eligible Employee may enroll in the Plan
effective as of the first day of a Plan Year by filing a completed and fully
executed Enrollment Agreement with the Administrator prior to the end of
December of the Plan Year preceding the Plan Year for which the deferral is
to occur (or June 30 of the Plan Year preceding the Plan Year in which Bonus
Compensation subject to a Bonus Compensation Deferral is to be paid).
Pursuant to said Enrollment Agreement, the Eligible Employee shall
irrevocably elect (a) the percentages (up to 100%) by which Base Salary or
Bonus Compensation (in each case after non-deferrable payroll tax deductions)
of such Eligible Employee for the Plan Year will be deferred and (b) the
number of shares to include in an Option Share Deferral and shall provide
such other information as the Administrator shall require. The Enrollment
Agreement filed by an Eligible Employee for any Plan Year must also set forth
the Participant's election as to the time and manner of distribution from the
Participant's Account which may be (i) the second day of any Plan Year that
begins at least three Plan Years after the Plan Year of the deferral (as to
all amounts then credited to the Participant's Account that are Vested) or
the Participant's attainment of age 65, if earlier, (ii) the Participant's
End Termination Date, (iii) the earlier of (i) or (ii), or (iv) the later of
(i) or (ii).
4.2 New Eligible Employees. The Administrator, acting on behalf of the
Company, may permit Employees who first become Eligible Employees after the
beginning of a Plan Year to enroll in the Plan for that Plan Year by filing a
completed and fully executed Enrollment Agreement, in accordance with Section
4.1, as soon as practicable following the date the Employee becomes an
Eligible Employee but, in any event, within 30 days after such date.
Notwithstanding the foregoing, however, any election by an Eligible Employee,
pursuant to this section, to defer Base Salary or Bonus Compensation or to
make an Option Share Deferral shall apply only to such amounts as are
otherwise to be paid or shares of Voting Securities to be received by the
Eligible Employee after the date on which such Enrollment Agreement is filed.
4.3 Matching Contributions. An Eligible Employee who elects to
participate in the Plan pursuant to Section 4.1 or Section 4.2 shall be
eligible to receive Matching Contributions by the Company if, and only when,
such Eligible Employee is eligible to receive matching contributions under
the Savings Plan. The amount of such Matching Contributions for a Plan Year
shall be 100% of the Base Salary and Bonus Compensation Deferrals for the
Plan Year, not to exceed the amount by which 3% of the Participant's Base
Salary for the Plan Year exceeds the amount of matching contributions made
for the Participant for the Plan Year under the Savings Plan. Matching
Contributions will be credited as frequently as determined by the
Administrator, acting on behalf of the Company, but in any event at least
once per year. Matching Contributions will be credited as soon as
practicable in the Participant's final year of participation in the Plan.
4.4 Option Share Deferrals. An Eligible Employee may irrevocably elect
on an Enrollment Agreement to defer receipt of all or a portion of the Voting
Securities to be received (after non-deferrable payroll tax deductions)
during a Plan Year pursuant to the exercise of nonqualified stock options
granted under the Incentive Plan, subject to such rules and procedures as the
Administrator deems appropriate. Any election hereunder shall be given
effect only to the extent that payment of the exercise price for the option
to which the election relates is satisfied by surrender (including a
constructive surrender) of unrestricted shares of Voting Securities owned by
the Participant having a fair market value on the date of exercise equal to
the exercise price. Any election hereunder shall be irrevocable with respect
to option exercises during the Plan Year to which it relates.
ARTICLE 5
ACCOUNTS
5.1 Accounts. The Administrator shall establish and maintain a
separate Account with respect to a Participant. The amount of Base Salary
and/or Bonus Compensation deferred pursuant to Section 4.1 or Section 4.2
shall be credited by the Company to the Participant's Account no later than
the first day of the month following the month in which such Base Salary
and/or Bonus Compensation would otherwise have been paid. Any amount once
taken into account as Base Salary and/or Bonus Compensation for purposes of
this Plan shall not be taken into account thereafter. Subject to such
reasonable rules as may be prescribed by the Administrator, the number of
Voting Securities deferred pursuant to Section 4.4 shall be credited by the
Company to the Participant's Account immediately upon the exercise of the
option from which such Voting Securities would have derived. The
Participant's Account shall be reduced by the amount of payments made by the
Company to the Participant or the Participant's Beneficiary pursuant to this
Plan.
5.2 Earnings on Accounts. A Participant's Account shall be credited
with earnings in accordance with the Earnings Crediting Options elected by
the Participant from time to time for deferrals credited to the Account.
Participants may allocate their Account among the Earnings Crediting Options
available under the Plan only in whole percentages of not less than five
percent. The deemed rate of return, positive or negative, credited under
each Earnings Crediting Option is based upon the actual investment
performance of the corresponding investment portfolios under the Savings Plan
(except that Matching Contributions, Option Share Deferrals and earnings on
both shall at all times be deemed invested and reinvested in Voting
Securities) and shall equal the total return of such investment fund net of
asset based charges, including, without limitation, money management fees and
fund expenses. The Company reserves the right, on a prospective basis, to
add or delete Earnings Crediting Options.
5.3 Earnings Crediting Options. Except as otherwise provided pursuant
to Section 5.2, the Earnings Crediting Options available under the Plan shall
consist of options which correspond to the investment funds maintained from
time to time under the Savings Plan. In the event of a stock split, stock
dividend, reclassification, reorganization or other capital adjustment in the
Voting Securities, the number of deemed shares of Voting Securities then
credited to the Participant's Account shall be adjusted in the same manner as
the shares of Voting Securities are adjusted. Notwithstanding that the rates
of return credited to Participants' Accounts under the Earnings Crediting
Options are based upon the actual performance of the corresponding investment
funds (or the number of Voting Securities), or such other investment funds as
the Company may designate, the Company shall not be obligated to invest any
Base Salary and/or Bonus Compensation deferred by Participants under this
Plan, Matching Contributions, Option Share Deferrals or any other amounts, in
such portfolios or in any other investment funds.
5.4 Changes in Earnings Crediting Options. A Participant may change
the Earnings Crediting Options to which the Participant's Account is deemed
to be allocated not more frequently than is permitted under the Savings Plan.
Each such change may include (a) reallocation of the Participant's existing
Account in whole percentages of not less than five percent, and/or (b) change
in investment allocation of amounts to be credited to the Participant's
Account in the future, as the Participant may elect. Notwithstanding the
foregoing, however, in the event the Company deletes an Earnings Crediting
Option, a Participant whose Account is allocated to such Earnings Crediting
Option, in whole or in part, shall be entitled to reallocate the Account
and/or any amounts to be credited in the future to such Account among the
remaining Earnings Crediting Options, at the time of such deletion, without
regard to any annual limit on such changes.
5.5 Valuation of Accounts. The value of a Participant's Account as of
any date shall equal the amounts theretofore credited to such Account,
including any earnings (positive or negative) deemed to be earned on such
Account in accordance with Section 5.2 through the day preceding such date,
less the amounts theretofore deducted from such Accounts. The value of that
portion of the Participant's Account attributable to Matching Contributions
and Option Share Deferrals shall equal the value of the number of shares of
Voting Securities credited to the Participant's Account plus the number of
such shares deemed purchased by reinvesting the earnings on Voting Securities
already deemed credited to the Participant's Account.
5.6 Statement of Accounts. The Administrator shall provide to each
Participant, not less frequently than quarterly, a statement in such form as
the Administrator deems desirable setting forth the balance standing to the
credit of each Participant in the Participant's Account.
5.7 Distributions from Accounts. Any distribution made to or on behalf
of a Participant from the Participant's Account in an amount which is less
than the entire balance of such Account shall be made pro rata from each of
the Earnings Crediting Options to which such Account is then allocated.
ARTICLE 6
DISTRIBUTION OPTIONS
6.1 Election of Distribution Option. In each Enrollment Agreement
filed with the Administrator for a Plan Year, an Eligible Employee shall
elect the time and manner of payment pursuant to which deferrals (and
earnings) credited to the Eligible Employee's Account for that Plan Year will
be distributed and shall allocate all new deferrals and Matching
Contributions, in increments of ten percent, between distribution at a date
certain in the future, which may be (i) the second day of any Plan Year that
begins at least three Plan Years after the Plan Year of the deferral (as to
all amounts then credited to the Participant's Account that are Vested) or
the Participant's attainment of age 65, if earlier, (ii) the Participant's
End Termination Date, (iii) the earlier of (i) or (ii), or (iv) the later of
(i) or (ii).
6.2 Distribution following Change of Control. In the event that a
Participant terminates Service for any reason within two years following a
Change of Control, notwithstanding anything else in this Plan to the
contrary, the Participant's Account shall be distributed, in a single lump
sum, in cash and Voting Securities, as provided in Article VII, within 30
days following the date of the termination of Service.
ARTICLE 7
BENEFITS TO PARTICIPANTS
7.1 Benefits Elected to be Paid On or After End Termination Date.
Benefits elected to be paid to a Participant on or after the End Termination
Date shall be paid as follows:
(a) Benefits Upon Retirement. In the case of a Participant whose
Service with the Company terminates on account of Retirement, the
Participant's Account shall be distributed in one of the following methods,
as elected by the Participant in writing either in the Enrollment Agreement
or in a separate election made prior to the last day of the Plan Year in
which occurs the date of the Participant's Retirement: (i) in a lump sum; or
(ii) in the event the balance to be distributed is at least $250,000, in 5,
10, 15, or 20 annual installments. Any lump-sum benefit payable in
accordance with this paragraph shall be paid in cash (except that the deemed
investment in Voting Securities of Option Share Deferrals, Matching
Contributions and earnings on both shall be distributed in the number of
whole shares of Voting Securities credited to the Participant's Account with
cash for fractional shares), but not later than January 31 of the Plan Year
following the Plan Year in which occurs the Participant's Retirement or, if
later, attainment of age 65 as elected by the Participant in accordance with
this Section or Section 6.1, in an amount equal to the value of such Account
as of the last business day of the Plan Year preceding the date of payment.
Annual installment payments in cash and Voting Securities, as applicable,
shall commence not later than January 31 of the Plan Year following the Plan
Year in which occurs the Participant's Retirement or if later, attainment of
age 65, as elected by the Participant in accordance with this Section or
Section 6.1, in an amount equal to (i) the value of such Account as of the
last business day of the Plan Year preceding the date of payment, divided by
(ii) the number of annual installment payments elected by the Participant in
the Enrollment Agreement or in the separate election. The remaining annual
installments shall be paid not later than January 31 of each succeeding Plan
Year in an amount equal to (i) the value of such Account as of the last
business day of the immediately preceding Plan Year divided by (ii) the
number of installments remaining.
(b) Benefits Upon Termination of Employment. In the case of a
Participant whose Service with the Company terminates prior to the earliest
date on which the Participant is eligible for Retirement, other than on
account of becoming Disabled or by reason of death, the Vested portion of a
Participant's Account shall be distributed in a lump sum, in cash (except
that the deemed investment in Voting Securities of Matching Contributions,
Option Share Deferrals and earnings on both shall be distributed in Voting
Securities of equal value), as soon as practicable following the
Participant's End Termination Date.
7.2 Benefits Elected to be Paid at a Date Certain.
(a) Benefits Prior to Occurrence of End Termination Date. Benefits elected
to be paid to a Participant at a date certain shall be paid as follows:
The portion of such Participant's Account for any date certain election shall
be paid to the Participant commencing no later than January 31 of the Plan
Year irrevocably elected by the Participant in the Enrollment Agreement
pursuant to which such date certain was elected, which may be no earlier than
the second day of any Plan Year that begins at least three Plan Years after
the Plan Year of the deferral, in one lump sum or in annual installments
payable over 2, 3 or 4 years. Any lump-sum benefit payable in accordance
with this paragraph shall be paid in cash (except that the deemed investment
in Voting Securities of Option Share Deferrals, Matching Contributions and
earnings on both shall be distributed in the number of whole shares of Voting
Securities credited to the Participant's Account with cash for fractional
shares) not later than January 31 of the Plan Year elected by the Participant
in accordance with Section 6.1, in an amount equal to the value of the
portion of such Account for which a date certain distribution was elected, as
of the last business day of the Plan Year preceding the date of payment.
Annual installment payments, if any, shall commence not later than January 31
of the Plan Year as elected by the Participant in accordance with this
Section, in cash and Voting Securities, as applicable, in an amount equal to
(i) the value of the portion of such Account for which a date certain
distribution was elected, as of the last business day of the Plan Year
preceding the date of payment, divided by (ii) the number of annual
installment payments elected by the Participant. The remaining annual
installments shall be paid not later than January 31 of each succeeding year
in an amount equal to (i) the value of such Account as of the last business
day of the immediately preceding Plan Year divided by (ii) the number of
installments remaining.
(b) Benefits Upon Occurrence of End Termination Date. In the case of a
Participant whose Service with the Company terminates prior to the completion
of any distribution for which a date certain election is then in effect,
other than on account of Retirement, Disability or death, the Vested portion
of the Participant's Account (or any remaining installments thereof, in the
case of a distribution in installments not completed as of the End
Termination Date) shall be distributed either in installments or in a lump
sum, according to the Participant's date certain election in the Enrollment
Agreement. If the End Termination Date occurs prior to the date certain, the
Participant's Account shall be distributed in one of the following methods,
as elected by the Participant in writing either in the Enrollment Agreement
or in a separate election made prior to the last day of the Plan Year in
which occurs the Participant's End Termination Date: (i) in a lump sum; or
(ii) in annual installments payable over 2, 3 or 4 years. Any lump-sum
benefit payable in accordance with this paragraph shall be paid in cash
(except that the deemed investment in Voting Securities of Option Share
Deferrals, Matching Contributions and earnings on both shall be distributed
in the number of whole shares of Voting Securities credited to the
Participant's Account with cash for fractional shares), not later than
January 31 of the Plan Year following the Plan Year in which occurs the
Participant's End Termination Date, in an amount equal to the value of such
Account as of the last business day of the Plan Year preceding the date of
payment.
ARTICLE 8
DISABILITY
In the event a Participant becomes Disabled, the Participant's right to
make any further deferrals under this Plan shall terminate as of the date for
which the Participant first receives benefits under the Company's long term
disability plan, as amended from time to time. The Participant's Account
shall continue to be credited with earnings in accordance with Section 5.2
until such Account is fully distributed. For purposes of this Plan, a
Disabled Participant will not be treated as having terminated Service. The
Participant's Account shall be distributed to the Participant in accordance
with Section 7.1 or 7.2 as applicable, provided, however, that distribution
of the Participant's Account, to the extent distributable under Section 7.1,
shall commence not later than January 31 of the Plan Year immediately
following the earlier of (a) the Plan Year in which the Participant first
becomes eligible for Retirement, or (b) the Plan Year in which the
Participant first received benefits under the Company's long term disability
plan, as amended from time to time. The Participant's Account to the extent
distributable under section 7.2 will be distributed to the Participant
without regard to the fact that the Participant became Disabled.
ARTICLE 9
SURVIVOR BENEFITS
9.1 Death of Participant Prior to the Commencement of Benefits. In the
event of a Participant's death prior to the commencement of benefits in
accordance with Article 7, benefits shall be paid to the Participant's
Beneficiary, as determined under Section 12.3, pursuant to Section 9.2 or
9.3, whichever is applicable, in lieu of any benefits otherwise payable under
the Plan to or on behalf of such Participant.
9.2 Survivor Benefits at Retirement. To the extent a Participant
elected distribution on or after Retirement and dies prior to the
commencement of benefits pursuant to Section 7.1, distribution of such
portion of the Participant's Account shall be made (a) in a lump sum in cash
and Voting Securities, as applicable, as soon as practicable following the
Participant's death, or (b) in the manner and at such time as such Account
would otherwise have been distributed in accordance with Section 7.1 had the
Participant lived, as elected by the Participant in the Enrollment Agreement
pursuant to which such election to distribute on or after Retirement was
made. The amount of any lump sum benefit payable in accordance with this
Section shall equal the value of such portion of the Participant's Account as
of the last business day of the calendar month immediately preceding the date
on which such benefit is paid. The amount of any annual installment benefit
payable in accordance with this Section shall equal (a) the value of such
portion of the Participant's Account as of the last business day of the
calendar month immediately preceding the date on which such installment is
paid, divided by (b) the number of annual installments remaining to be paid
pursuant to the election of the Participant.
9.3 Survivor Benefits Under the Date Certain Election. In the case of
a Participant who elected a date certain distribution of all or a portion of
the Participant's Account and who dies prior to the date certain on which all
or a portion of the Participant's Account is to be paid pursuant to Section
7.2, distribution of such portion of the Participant's Account shall be made
(a) in a lump sum in cash and Voting Securities, as applicable, as soon as
practicable following the Participant's death, or (b) at such time and in
such form as such distribution would otherwise have been distributed in
accordance with Section 7.2 had the Participant lived, as irrevocably elected
by the Participant in the Enrollment Agreement pursuant to which such date
certain election was made. The amount of any lump sum benefit payable in
accordance with this Section shall equal the value of such portion of the
Participant's Account as of the last business day of the calendar month
immediately preceding the date on which such benefit is paid.
9.4 Death of Participant After Benefits Have Commenced. In the event a
Participant dies after annual installment benefits payable under Section 7.1
or 7.2 from the Participant's Account have commenced, but before the entire
balance of such installments have been paid, any remaining installments shall
continue to be paid to the Participant's Beneficiary at such times and in
such amounts as they would have been paid to the Participant had the
Participant survived.
9.5 Changes in Earnings Crediting Options. In the event of a deferred
distribution under this Article, the Beneficiary shall be permitted to make
changes in the Earnings Crediting Options to the same extent that the
Participant would have been entitled to make such changes under Section 5.4
during such deferral period.
ARTICLE 10
EMERGENCY BENEFIT
In the event that the Pension Committee, upon written request of a
Participant, determines, in its sole discretion, that the Participant has
suffered an unforeseeable financial emergency, the Company shall pay to the
Participant from the Vested portion of the Participant's Account, as soon as
practicable following such determination, an amount necessary to meet the
emergency, after deduction of any and all taxes as may be required pursuant
to Section 12.8 (the "Emergency Benefit"). For purposes of this Plan, an
unforeseeable financial emergency is an unexpected need for cash arising from
an illness, casualty loss, sudden financial reversal, or other such
unforeseeable occurrence. Cash needs arising from foreseeable events such as
the purchase of a house or education expenses for children shall not be
considered to be the result of an unforeseeable financial emergency.
Emergency Benefits shall be paid in cash (except that the deemed investment
in Voting Securities of Option Share Deferrals, Matching Contributions and
earnings on both shall be distributed in the number of whole shares of Voting
Securities credited to the Participant's Account with cash for fractional
shares). Notwithstanding anything in this Plan to the contrary, a
Participant who receives an Emergency Benefit in any Plan Year shall not be
entitled to make any further deferrals for the remainder of such Plan Year.
It is intended that the Pension Committee's determination as to whether a
Participant has suffered an "unforeseeable financial emergency" shall be made
consistent with the requirements under Section 457(d) of the Code.
ARTICLE 11
ACCELERATED DISTRIBUTION
11.1 Availability of Withdrawal Prior to Retirement. Upon written
election to the Administrator, a Participant may elect to withdraw all or a
portion of the Participant's Account at any time prior to the time such
Distribution Account otherwise becomes payable under the Plan, provided the
conditions specified in Section 11.3, Section 11.4, and Section 11.5 are
satisfied.
11.2 Acceleration of Periodic Distributions. Upon written election to
the Administrator, a Participant or Participant's Beneficiary who is
receiving installment payments under the Plan may elect to have the remaining
installments distributed in the form of an immediately payable lump sum,
provided the condition specified in Section 11.3 is satisfied.
11.3 Forfeiture Penalty. In the event of a withdrawal pursuant to
Section 11.1, or an accelerated distribution pursuant to Section 11.2, the
Participant shall forfeit from the Participant's Account an amount equal to
10% of the amount of the withdrawal or accelerated distribution, as the case
may be. The forfeited amount shall be deducted from the Account prior to
giving effect to the requested withdrawal or acceleration. The Participant
and the Participant's Beneficiary shall not have any right or claim to the
forfeited amount, and the Company shall have no obligation whatsoever to the
Participant, the Participant's Beneficiary or any other person with regard to
the forfeited amount.
11.4 Minimum Withdrawal. In no event shall the amount withdrawn in
accordance with Section 11.1 be less than 25% of the amount credited to the
Participant's Account immediately prior to the withdrawal taking into account
any other distributions from the Participant's Account that were made at the
same time.
11.5 Suspension from Deferrals. In the event of a withdrawal pursuant
to Section 11.1, a Participant who is otherwise eligible to make deferrals
under Article 4 shall be prohibited from making any deferrals with respect to
the Plan Year immediately following the Plan Year during which the withdrawal
was made, and any election previously made by the Participant with respect to
deferrals for the Plan Year of the withdrawal shall be void and of no effect
with respect to subsequent deferrals in such Plan Year.
ARTICLE 12
MISCELLANEOUS
12.1 Amendment and Termination. The Plan may be amended, suspended,
discontinued or terminated at any time by NU; provided, however, that no such
amendment, suspension, discontinuance or termination shall reduce or in any
manner adversely affect the rights of any Participant with respect to
benefits that are payable or may become payable under the Plan based upon the
balance of the Participant's Account as of the effective date of such
amendment, suspension, discontinuance or termination.
12.2 Claims Procedure.
(a) Claim. A person who believes that he is being denied a
benefit to which he is entitled under the Plan (hereinafter referred to as a
"Claimant") may file a written request for such benefit with the
Administrator, setting forth his claim.
(b) Claim Decision. Upon receipt of a claim, the Administrator
shall advise the Claimant that a reply will be forthcoming within ninety (90)
days and shall, in fact, deliver such reply within such period. The Human
Resources Department of the Company may, however, extend the reply period for
an additional ninety (90) days for reasonable cause.
If the claim is denied in whole or in part, the Claimant shall be
provided a written opinion, using language calculated to be understood by the
Claimant, setting forth:
(i) The specific reason or reasons for such denial;
(ii) The specific reference to pertinent provisions of this Plan
on which such denial is based;
(iii) A description of any additional material or information
necessary for the Claimant to perfect his claim and an explanation why such
material or such information is necessary;
(iv) Appropriate information as to the steps to be taken if the
Claimant wishes to submit the claim for review; and
(v) The time limits for requesting a review under subsection (c)
and for review under subsection (d) hereof.
(c) Request for Review. Within sixty (60) days after the receipt
by the Claimant of the written opinion described above, the Claimant may
request in writing that the Pension Committee review the determination of the
Administrator. The Claimant or his duly authorized representative may, but
need not, review the pertinent documents and submit issues and comment in
writing for consideration by the Pension Committee. If the Claimant does not
request a review of the initial determination within such sixty (60) day
period, the Claimant shall be barred and estopped from challenging the
determination.
(d) Review of Decision. Within sixty (60) days after the Pension
Committee's receipt of a request for review, it will review the initial
determination. After considering all materials presented by the Claimant,
the Pension Committee will render a written opinion, written in a manner
calculated to be understood by the Claimant, setting forth the specific
reasons for the decision and containing specific references to the pertinent
provisions of this Plan on which the decision is based. If special
circumstances require that the sixty (60) day time period be extended, the
Pension Committee will so notify the Claimant and will render the decision as
soon as possible, but no later than one hundred twenty (120) days after
receipt of the request for review.
12.3 Designation of Beneficiary. Each Participant may designate a
Beneficiary or Beneficiaries (which Beneficiary may be an entity other than a
natural person) to receive any payments which may be made following the
Participant's death. Such designation may be changed or canceled at any time
without the consent of any such Beneficiary. Any such designation, change or
cancellation must be made in a form approved by the Administrator and shall
not be effective until received by the Administrator. If no Beneficiary has
been named, or the designated Beneficiary or Beneficiaries shall have
predeceased the Participant, the Beneficiary shall be the Participant's
Savings Plan beneficiary, or, if none, the Participant's estate. If a
Participant designates more than one Beneficiary, the interests of such
Beneficiaries shall be paid in equal shares, unless the Participant has
specifically designated otherwise.
12.4 Limitation of Participant's Right. Nothing in this Plan shall be
construed as conferring upon any Participant any right to continue in the
employment of the Company, nor shall it interfere with the rights of the
Company to terminate the employment of any Participant and/or to take any
personnel action affecting any Participant without regard to the effect which
such action may have upon such Participant as a recipient or prospective
recipient of benefits under the Plan.
12.5 No Limitation on Company Actions. Nothing contained in the Plan
shall be construed to prevent the Company from taking any action which is
deemed by it to be appropriate or in its best interest; provided, however,
that no such action may diminish the then balance or value of the
Participant's Account. No Participant, Beneficiary, or other person shall
have any claim against the Company as a result of such action. Any
decisions, actions or interpretations to be made under the Plan by the
Company or the Board, or the Committee acting on behalf of the Company, shall
be made in its respective sole discretion, not as a fiduciary, need not be
uniformly applied to similarly situated individuals and shall be final,
binding and conclusive on all persons interested in the Plan.
12.6 Obligations to Company. If a Participant becomes entitled to a
distribution of benefits under the Plan, and if at such time the Participant
has outstanding any debt, obligation, or other liability representing an
amount owing to theCompany, then the Company may offset such amount owed to
it against the amount of benefits otherwise distributable. Such
determination shall be made by the Administrator.
12.7 Nonalienation of Benefits. Except as expressly provided herein, no
Participant or Beneficiary shall have the power or right to transfer
(otherwise than by will or the laws of descent and distribution), alienate,
or otherwise encumber the Participant's interest under the Plan. The
Company's obligations under this Plan are not assignable or transferable
except to (a) any corporation or partnership which acquires all or
substantially all of the Company's assets or (b) any corporation or
partnership into which the Company may be merged or consolidated. The
provisions of the Plan shall inure to the benefit of each Participant and the
Participant's Beneficiaries, heirs, executors, administrators or successors
in interest.
12.8 Withholding Taxes. The Company may make such provisions and take
such action as it may deem necessary or appropriate for the withholding of
any taxes which the Company is required by any law or regulation of any
governmental authority, whether Federal, state or local, to withhold in
connection with any benefits under the Plan, including, but not limited to,
the withholding of appropriate sums in cash or the equivalent value in shares
of Voting Securities from any amount or distribution of shares otherwise
payable to the Participant (or Beneficiary). Each Participant, however,
shall be responsible for the payment of all individual tax liabilities
relating to any such benefits.
12.9 Unfunded Status of Plan. The Plan is intended to constitute an
"unfunded" plan of deferred compensation for Participants. Benefits payable
hereunder shall be payable out of the general assets of the Company, and no
segregation of any assets whatsoever for such benefits shall be made.
Notwithstanding any segregation of assets or transfer to a grantor trust,
with respect to any payments not yet made to a Participant, nothing contained
herein shall give any such Participant any rights to assets that are greater
than those of a general creditor of the Company.
12.10 Severability. If any provision of this Plan is held
unenforceable, the remainder of the Plan shall continue in full force and
effect without regard to such unenforceable provision and shall be applied as
though the unenforceable provision were not contained in the Plan.
12.11 Governing Law. The Plan shall be construed in accordance with
and governed by the laws of the State of Connecticut, without reference to
the principles of conflict of laws.
12.13 Headings. Headings are inserted in this Plan for convenience of
reference only and are to be ignored in the construction of the provisions of
the Plan.
12.14 Gender, Singular and Plural. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine, or neuter, as
the identity of the person or persons may require. As the context may
require, the singular may read as the plural and the plural as the singular.
12.15 Notice. Any notice or filing required or permitted to be given
to the Committee, the Pension Committee, or the Administrator under the Plan
shall be sufficient if in writing and hand delivered, or sent by registered
or certified mail, to the Human Resources Department, or to such other entity
as the Administrator may designate from time to time. Such notice shall be
deemed given as to the date of delivery, or, if delivery is made by mail, as
of the date shown on the postmark on the receipt for registration or
certification.
12.16 Disclaimer of Liability. The Declaration of Trust of NU provides
that no shareholder of NU shall be held to any liability whatever for the
payment of any sum of money, or for damages or otherwise under any contract,
obligation or undertaking made, entered into or issued by the Board or by any
officer, agent or representative elected or appointed by the Board, and no
such contract, obligation or undertaking shall be enforceable against the
Board or any of them in their or his or her individual capacities or capacity
and all such contracts, obligations and undertakings shall be enforceable
only against the Board as such, and every person or entity, having any claim
or demand arising out of any such contract, obligation or undertaking shall
look only to the trust estate for the payment or satisfaction thereof.
Appendix G - Form of Notice
APPENDIX G - FORM OF NOTICE
Northeast Utilities ("NU"), 174 Brush Hill Avenue, West Springfield,
Massachusetts 01090-0010, a registered holding company, its service company
subsidiary, Northeast Utilities Service Company ("NUSCO"), 107 Selden Street,
Berlin, Connecticut 06037, and certain of NU's subsidiaries, namely The
Connecticut Light and Power Company, Holyoke Water Power Company, North
Atlantic Energy Service Corporation, Northeast Nuclear Energy Company, Public
Service Company of New Hampshire, and Western Massachusetts Electric Company,
have filed an application-declaration under Sections 6(a), 7, 9(a), 10, and
12(e) of the Act and Rules 42, 62 and 65 thereunder.
On January 13, 1998, NU's Board of Trustees adopted an Incentive Plan
and an Employee Share Purchase Plan ("Plans"). NU proposes to submit the
Plans to its shareholders for approval at NU's Annual Meeting of Shareholders
to be held on May 12, 1998. If approved by NU's shareholders, the Plans will
be effective as of January 1, 1998. The Incentive Plan will replace NU's
Executive Incentive Plan, approved by NU's shareholders in 1991, for plan
years beginning on and after the effective date.
The Plans will be administered by the Compensation Committee of NU's
Board of Trustees or by a delegate thereof (the "Committee"). Stock-based
grants under the Incentive Plan for eligible employees may take the form of
common shares of NU, $5.00 par value, ("Common Shares"), with or without
restrictions and limitations on ownership or transfer, or incentive stock
options, non-qualified stock options, stock appreciation rights, or
performance units derived from Common Shares. Non-employee Trustees of NU
will receive annual grants of non-qualified stock options under the Incentive
Plan, and company contractors may also receive grants of non-qualified stock
options from time to time. Annual bonus awards for officers under the
Incentive Plan may be cash or based on Common Shares.
NU may obtain shares for such awards through open market purchases,
through issuance of treasury shares or authorized but unissued Common Shares,
or through some combination thereof. Awards and grants under the Incentive
Plan are intended to be "qualified performance-based compensation for
purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended,
(the "Code") and to qualify for exemption from Section 16(b) of the
Securities Exchange Act of 1934, as amended, in accordance with Rule 16b-3
thereunder.
The Incentive Plan will terminate after ten years, unless terminated
earlier by action of the NU Board of Trustees or extended by action of the
Board with the approval of NU's shareholders. The maximum number of Common
Shares that can be used for awards and grants under the Incentive Plan in any
calendar year is equal to one percent of the Common Shares outstanding at the
end of the previous calendar year, plus any Common Shares that could have
been but were not used in a previous calendar year, or were forfeited or
subject to awards or grants that expired or were otherwise cancelled. The
number of Common Shares used for restricted stock and performance unit awards
in any year may not exceed thirty percent of the total number of Common
Shares available for awards and grants that year. The number of available
shares will be adjusted to reflect recapitalizations, splits, and other
similar corporate transactions. Based on the number of Common Shares
outstanding on December 31, 1997, 1,368,421 Common Shares would be available
for awards and grants under the Incentive Plan during 1998, 410,526 of which
could be used in grants or awards of restricted stock or performance units.
The Employee Share Purchase Plan is intended to be an employee stock
purchase plan under Section 423 of the Code. Eligible employees may purchase
newly-issued Common Shares through payroll deduction in programs to be
established by the Committee from time to time. The purchase price will be
determined by the Committee and will be between 85 percent and 100 percent of
the lower of closing market value on the first and last days of the purchase
period. Officers receiving stock options under the Incentive Plan will not
be eligible to purchase Common Shares at less than 100 percent of the lower
of closing market price on the first and last days of the purchase period.
Shares purchased under the Employee Share Purchase Plan may not be
transferred for six months following the purchase date. The Employee Share
Purchase Plan will terminate after ten years, unless earlier terminated by
action of NU's Board of Trustees. The maximum number of Common Shares that
can be issued for purchases under the Employee Share Purchase Plan in any
calendar year is equal to one-half of one percent of the Common Shares
outstanding at the end of the previous calendar year. Based on the number of
Common Shares outstanding on December 31, 1997, 684,210 Common Shares would
be available for purchase under the Employee Share Purchase Plan during 1998
and 6,842,100 Common Shares over the ten year life of the plan.
NU thus proposes to issue and sell each calendar year, through December
31, 2007, its authorized but previously unissued Common Shares in an amount
each year not to exceed one and one-half percent of the number of Common
Shares outstanding as of December 31 of the previous year, under the
provisions of the Incentive Plan and the Employee Share Purchase Plan. NU
also seeks authority to reacquire forfeited Common Shares under the Plan and
to have NUSCO reacquire Common Shares in the open market to pay awards and
make grants under the Incentive Plan from time to time. The Applicants also
request authority to use up to 1.3 million additional Common Shares to be
acquired on the open market by NUSCO from time to time prior to December 31,
2007 for the purpose of providing stock-based compensation to new and other
key employees, non-employee Trustees and company contractors other than
through awards and grants under the Incentive Plan.
Additionally, NU requests authority to solicit proxies approving the
Plans from the holders of NU Common Shares, for use at the Annual Meeting of
Shareholders to be held May 12, 1998. It is anticipated that solicitation
materials will be mailed to shareholders commencing on or about March 31,
1998. NU has filed its proxy solicitation material relating to the Plans and
requests that the effectiveness of its declaration with respect to the
solicitation of proxies for voting by its shareholders be permitted to become
effective as provided in Rule 62(d) of the Act.
It appearing to the Commission that NU's declaration regarding the
proposed solicitation of proxies should be permitted to become effective
forthwith, pursuant to Rule 62:
IT IS ORDERED, that the declaration regarding the proposed solicitation
of proxies, be, and it hereby is, permitted to become effective forthwith,
under Rule 62, subject to the terms and conditions prescribed in Rule 24
under the Act.
For the Commission, by the Division of Investment Management, pursuant
to delegated authority.
