EXHIBIT (10)(r)
NEW ENGLAND ELECTRIC COMPANIES'
INCENTIVE COMPENSATION PLAN II
Adopted - July 12, 1982
Amended - December 18, 1984
Amended - November 20, 1985
Amended - December 1, 1986
Amended - May 23, 1990
Amended - December 1, 1991
Amended - September 1, 1992
Amended - January 1, 1994
Amended - March 1, 1994
Amended - January 1, 1995
TABLE OF CONTENTS
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Page
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I. PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . 1
II. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 1
2.01 Base Compensation. . . . . . . . . . . . . . . 1
2.02 Beneficial Owner . . . . . . . . . . . . . . . 1
2.03 Board. . . . . . . . . . . . . . . . . . . . . 1
2.04 Change in Control. . . . . . . . . . . . . . . 1
2.05 Continuing Directors . . . . . . . . . . . . . 4
2.06 Corporate Targets. . . . . . . . . . . . . . . 5
2.07 Fund . . . . . . . . . . . . . . . . . . . . . 5
2.08 Incentive Compensation . . . . . . . . . . . . 5
2.09 Low Return Target. . . . . . . . . . . . . . . 5
2.10 A Major Transaction. . . . . . . . . . . . . . 5
2.11 Management Committee . . . . . . . . . . . . . 7
2.12 New England Electric System. . . . . . . . . . 7
2.13 Participant. . . . . . . . . . . . . . . . . . 7
2.14 Person . . . . . . . . . . . . . . . . . . . . 7
2.15 Plan Year. . . . . . . . . . . . . . . . . . . 8
2.16 Senior Incentive Compensation Plan . . . . . . 8
III. ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . 8
3.01 Administration and Interpretation. . . . . . . 8
3.02 Amendment and Termination. . . . . . . . . . . 8
3.03 No Segregation of Assets; No Assignment. . . . 9
3.04 Participant List.. . . . . . . . . . . . . . . 9
3.05 Accounting.. . . . . . . . . . . . . . . . . . 9
IV. PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . 9
4.01 Selection. . . . . . . . . . . . . . . . . . . 9
4.02 Notification.. . . . . . . . . . . . . . . . . 9
4.03 Goals. . . . . . . . . . . . . . . . . . . . .10
V. PARTICIPANTS' COMPENSATION. . . . . . . . . . . . . . . .10
5.01 Base Compensation and Incentive Compensation..10
VI. BASE COMPENSATION . . . . . . . . . . . . . . . . . . . .10
6.01 Determination. . . . . . . . . . . . . . . . .10
VII. INCENTIVE COMPENSATION. . . . . . . . . . . . . . . . . .11
7.01 Incentive Compensation Amounts.. . . . . . . .11
7.02 Criteria for Determining Incentive
Compensation.. . . . . . . . . . . . . . . . .11
7.03 Notification of Award. . . . . . . . . . . . .11
7.04 Cooperation of Others. . . . . . . . . . . . .11
VIII. INCENTIVE COMPENSATION FUND . . . . . . . . . . . . . .12
8.01 Calculation. . . . . . . . . . . . . . . . . .12
8.02 Scaling. . . . . . . . . . . . . . . . . . . .12
8.03 Minimum Performance Requirement. . . . . . . .13
IX. PAYMENT UPON CHANGE OF CONTROL. . . . . . . . . . . . . .13
9.01 Change of Control. . . . . . . . . . . . . . .13
X. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . .14
10.01 Other Benefit Plans. . . . . . . . . . . . . .14
10.02 Termination of Participation;
Interplan Transfer.. . . . . . . . . . . . . .14
10.03 Future Employment. . . . . . . . . . . . . . .14
10.04 Headings.. . . . . . . . . . . . . . . . . . .15
10.05 Gender and Number. . . . . . . . . . . . . . .15
10.06 Governing Law. . . . . . . . . . . . . . . . .15
10.07 Effective Date.. . . . . . . . . . . . . . . .15
SIGNATURE
ii
NEW ENGLAND ELECTRIC COMPANIES'
INCENTIVE COMPENSATION PLAN II
I. PURPOSE
The purpose of this Incentive Compensation Plan II (the
Plan) is to achieve and maintain a high level of corporate
performance by making it possible for those selected executives
whose efforts and responsibilities have direct and major
influence on corporate earnings to earn significant compensation
rewards in proportion, first, to measured corporate performance
and, second, to the individual executive's contribution.
II. DEFINITIONS
2.01 Base Compensation means the compensation referred to
in Section 6.01.
2.02 Beneficial Owner shall have the meaning defined in
Rule 13d-3 under the Exchange Act.
2.03 Board means the Board of Directors of New England
Electric System.
2.04 Change in Control occurs when:
(a) Through March 15, 1995:
(i) any person, firm, corporation, organization,
or association of persons or organizations
acting in concert (excluding any qualified
employee benefit plan of the System) acquires
more than 20% of the outstanding Shares,
whether in whole or in part, by means of an
offer made publicly to the holders of all or
substantially all of the outstanding Shares
to acquire Shares for cash, other property,
or a combination thereof or by any other
means, unless the transaction is consented to
by vote of a majority of the Continuing
Directors;
(ii) New England Electric System transfers all or
a substantial part of its assets to another
person, firm, corporation, organization, or
association of persons or organizations
acting in concert (excluding a subsidiary
controlled by New England Electric System
itself), unless the transaction is consented
to by vote of a majority of the Continuing
Directors;
(iii) New England Electric System consolidates or
merges with or into any person, firm,
corporation, organization, or association of
persons or organizations, unless the
transaction is consented to by vote of a
majority of the Continuing Directors; or
(iv) during any period of 24 consecutive months,
individuals who at the beginning of such
24-month period were directors of New England
Electric System shall cease to constitute a
majority of the Board, unless (a) the
remaining directors who were directors at the
beginning of such period, and (b) any other
directors whose election was approved in
advance by directors representing a majority
of the directors then in office who were
directors at the beginning of such period
constitute a majority of the Board; and
(b) After January 1, 1995, the conditions set forth in
either of the following paragraphs shall have been satisfied:
(i) any Person is or becomes the Beneficial
Owner, directly or indirectly, of securities
of New England Electric System (not including
in the securities beneficially owned by such
Person any securities acquired directly from
New England Electric System or its
affiliates) representing 20% or more of the
combined voting power of New England Electric
System's then outstanding securities; or
(ii) during any period of not more than two
consecutive years after January 1, 1995,
individuals who at the beginning of such
period constitute the Board and any new
director (other than a director designated by
a Person who has entered into an agreement
with New England Electric System to effect a
transaction described in clause (i) of this
paragraph) whose election by the Board or
nomination for election by New England
Electric System's shareholders was approved
or recommended by a vote of at least two-
thirds of the directors then still in office
who either were directors at the beginning of
the period or whose election or nomination
for election was previously so approved or
recommended, cease for any reason to
constitute a majority of the Board.
2.05 Continuing Directors means, as of the date of
determination, any director who was a member of the Board on
January 1, 1990, or who was recommended for his initial term of
office by a majority of the Continuing Directors in office at
the time of such recommendation, but excludes any director who,
together with his affiliates, is the beneficial owner of 20% or
more of the outstanding Shares (excluding securities
beneficially owned by reason of being a trustee of any employee
benefit plan of the System).
2.06 Corporate Targets means the same return on common
equity targets and cents per kilowatthour targets found in
Article IV of the Senior Incentive Compensation Plan for the
Plan Year.
2.07 Fund means the fund established each year as
provided in Section 8.01.
2.08 Incentive Compensation means the award made from the
Fund to each Participant in accordance with Section 7.01.
2.09 Low Return Target means the same low equity return
target provided in the Senior Incentive Compenstion Plan for the
Plan Year.
2.10 A Major Transaction shall be deemed to have occurred
if the conditions set forth in any one of the following
paragraphs shall have been satisfied:
(a) the shareholders of New England Electric System
approve a merger or consolidation with any
corporation or business trust, other than (i) a
merger or consolidation which would result in the
individuals who prior to such merger or
consolidation constitute the Board constituting at
least two-thirds of the board of directors of New
England Electric System or the surviving or
succeeding entity immediately after such merger or
consolidation, or (ii) a merger or consolidation
effected to implement a recapitalization (or similar
trasaction) in which no Person acquires more than
20% of the combined voting power of New England
Electric System's then outstanding securities;
(b) the shareholders of New England Electric System
approve a plan of complete liquidation thereof; or
(c) the shareholder of New England Electric System
approve an agreement for the sale or disposition of
all or substantially all of New England Electric
System's assets, other than a sale or disposition
which would result in the individuals who prior to
such sale or disposition constitute the Board
constituting at least two-thirds of the board of
directors of the Person purchasing such assets
immediately after such sale or disposition.
2.11 Management Committee means the Management Committee
established in accordance with the New England Electric System
Companies' Incentive Compensation Plan I.
2.12 New England Electric System means the trustee or
trustees for the time being (as trustee or trustees but not
personally) under an agreement and declaration of trust dated
January 2, 1926, as amended, which is hereby referred to, and a
copy of which as amended has been filed with the Secretary of
The Commonwealth of Massachusetts. Any agreement, obligation,
or liability made, entered into or incurred by or on behalf of
New England Electric System binds only its trust estate, and no
shareholder, director, trustee, officer, or agent thereof
assumes or shall be held to any liability therefor.
2.13 Participant means an individual who has been
selected, in accordance with Section 4.01, or an equivalent
prior provision, to be a participant in the Plan.
2.14 Person shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof; however, a Person shall not include (i)
New England Electric System or any subsidiary thereof, (ii) a
trustee or other fiduciary holding securities under an employee
benefit plan of New England Electric System or any subsidiary
thereof, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the shareholders
of New England Electric System in substantially the same
proportions as their ownership of shares of New England Electric
System.
2.15 Plan Year means a calendar year.
2.16 Senior Incentive Compensation Plan means New England
Electric Companies' Senior Incentive Compensation Plan, as
amended from time to time.
III. ADMINISTRATION
3.01 Administration and Interpretation. The Plan shall
be administered by the Management Committee, and interpretations
of the Plan by the Management Committee shall be final and
binding by all parties.
3.02 Amendment and Termination. The Management Committee
may amend or terminate the Plan at any time; provided, however,
that no such action shall affect any right or obligation with
respect to any award of incentive compensation previously
granted; and provided, further, the provisions of Article IX and
Sections 2.03 and 2.04 may not be amended without the written
consent of any Participant affected.
3.03 No Segregation of Assets; No Assignment. New
England Electric System is not required to set aside or
segregate any assets of any kind to meet obligations under this
Plan. A Participant has no rights under this Plan to any
specific assets of New England Electric System. A Participant
may not commute, sell, assign, transfer, or otherwise convey the
right to receive any payments under this Plan, which payments
and the right thereto shall be, to the fullest extent permitted
by law, nonassignable and nontransferable, whether voluntarily
or involuntarily.
3.04 Participant List. The Management Committee shall be
responsible for maintaining an up-to-date list of the
Participants in the Plan.
3.05 Accounting. The Manager of Internal Audits and the
Controller will be responsible to the Management Committee for
accounting matters directly affecting the Plan.
IV. PARTICIPATION
4.01 Selection. The participants in the Plan will be
selected by the Management Committee.
4.02 Notification. It is anticipated (but not binding)
that the Management Committee shall notify by December 1 of each
year those executives who for the following year have been
included in the Plan and those that may be subsequently dropped
from the Plan.
4.03 Goals. The Management Committee, or its designees,
shall establish individual goals for each Participant for each
Plan Year and shall advise each Participant what goals have been
so established.
V. PARTICIPANTS' COMPENSATION
5.01 Base Compensation and Incentive Compensation. The
compensation for each Participant will consist of two parts:
Base Compensation and Incentive Compensation.
VI. BASE COMPENSATION
6.01 Determination. A Participant's performance will be
evaluated and his/her compensation, including any merit or
promotional increase, will be set in accordance with the New
England Electric Salary Management Program. A Participant's
Base Compensation may be set anywhere within the salary range.
VII. INCENTIVE COMPENSATION
7.01 Incentive Compensation Amounts. When the books are
closed at the end of a Plan Year and the amount of the Fund for
that year is determined in accordance with Article VIII, the
Management Committee will determine the appropriate amount to be
awarded each Participant, and this money will be distributed to
the Participants by the end of March following the Plan Year.
7.02 Criteria for Determining Incentive Compensation. In
arriving at each Participant's Incentive Compensation, the
Management Committee, shall be governed by the degree of success
achieved by the Participant in reaching his/her individual goals
which were established prior to the Plan Year. Its decision
will be binding. The money remaining in the Fund will be
allocated among all the Participants based upon their total
individual performances during the Plan Year.
7.03 Notification of Award. The Management Committee
shall be responsible for seeing that each Participant is told
the basis for the size of his/her Incentive Compensation.
7.04 Cooperation of Others. To achieve any of the
established goals will require the close cooperation of all the
Participants. If the Management Committee feels in any instance
that lack of such cooperation by others is making it difficult
for a Participant to achieve his/her individual goals, the
dollars not paid to this Participant will not be distributed to
the other members of the Plan. Otherwise, all money in the Fund
will be distributed.
VIII. INCENTIVE COMPENSATION FUND
8.01 Calculation. The Fund for the Plan will be based on
the sum of the percentages for the Corporate Targets reached
multiplied by the sum of all Participants' Base Compensation,
namely:
Return on
Common Equity - Target A 11.5%
Return on
Common Equity - Target B 5.5%
Return on
Common Equity - Target C 11.5%
Return on
Common Equity - Target D 5.5%
Cents Per
Kilowatthour - Target A 10%
Cents Per
Kilowatthour - Target B 5%
8.02 Scaling. Results will be scaled using straight line
interpolation between the Return on Common Equity Targets A and
B and between Return on Common Equity Targets C and D. In
determining whether the Return on Common Equity Targets are met,
the Management Committee may enhance or curtail the actual
return on equity in response to extraordinary events or other
factors relevant to performance of New England Electric System
companies.
8.03 Minimum Performance Requirement. If the Low Return
Target is not achieved, there will be no Incentive Compensation
for the Plan Year.
IX. PAYMENT UPON CHANGE OF CONTROL
9.01 Change of Control. In the event of a Change in
Control or Major Transaction, each Participant will receive,
within 30 days, a cash payment equal to the average of the bonus
percentages for this Plan for the last three years prior to the
Change in Control or Major Transaction times the Participant's
annualized Base Compensation. If the Change in Control or Major
Transaction occurs prior to the determination and payment of the
Incentive Compensation for the prior Plan Year, the Participant
will also receive within 30 days a cash payment equal to said
percentage times the Participant's Base Compensation received in
the prior Plan Year; provided, however, if it is determined that
the Fund percentage calculated in accordance with Sections 8.01
and 8.02 for said prior Plan Year would have been greater, such
higher percentage will be used. No further benefits will be
payable from this Plan.
X. GENERAL PROVISIONS
10.01 Other Benefit Plans. A Participant's Incentive
Compensation will not be used in determining benefits under any
group insurance plan or any other incentive program other than
New England Electric Companies' Incentive Share Plan.
10.02 Termination of Participation; Interplan Transfer.
If, for any reason, a Participant should cease to be actively
employed by a subsidiary of New England Electric System prior to
July 1 of a Plan Year, that person will not be deemed a
Participant for that year unless the Management Committee
determines there are extraordinary circumstances which justify
inclusion. A Participant who ceases to be so actively employed
during the last six months of a Plan Year will be deemed a
Participant for that year on a proportional basis. The
Management Committee will also determine the extent, if any, of
participation by the person replacing a Participant. If a
Participant becomes a participant in another incentive
compensation plan during the Plan Year, the Participant will be
deemed to be a Participant for that year on a proportional basis
in each of the Plans, respectively.
10.03 Future Employment. Neither the Plan nor the making
of awards hereunder shall be construed to create any obligation
to continue the Plan or to give any present or future employee
any right to continued employment.
10.04 Headings. The headings of articles and sections of
the Plan are for convenience of reference only.
10.05 Gender and Number. Unless the context requires
otherwise, the singular shall include the plural; the masculine
gender shall include the feminine; and such words as "herein,"
"hereinafter," "hereof," and "hereunder" shall refer to this
instrument as a whole and not merely to the subdivisions in
which such words appear.
10.06 Governing Law. Except as otherwise required by law,
the Plan and all matters arising thereunder shall be governed by
the laws of The Commonwealth of Massachusetts.
10.07 Effective Date. This Amendment shall be effective
January 1, 1995.
Date: April 20, 1995 /s/ John W. Rowe
______________________________________
J.W. Rowe
Date: April 20, 1995 /s/ Joan T. Bok
______________________________________
J.T. Bok
The Management Committee