Exhibit 10(q)
NEW ENGLAND ELECTRIC COMPANIES'
INCENTIVE COMPENSATION PLAN I
Adopted - August 24, 1977
Amended - December 5, 1978
Amended - May 17, 1982
Amended - July 31, 1984
Amended - July 30, 1985
Amended - February 9, 1987
Amended - May 23, 1990
Amended - December 1, 1991
Amended - January 1, 1992
Amended - January 1, 1994
Amended - February 21, 1994
Amended - January 1, 1995
Amended - October 24, 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 Category A Participant . . . . . . . . . . . . .2
2.05 Category B Participant . . . . . . . . . . . . .2
2.06 Category C Participants. . . . . . . . . . . . .2
2.07 Change in Control. . . . . . . . . . . . . . . .2
2.08 Committee. . . . . . . . . . . . . . . . . . . .3
2.09 Continuing Directors . . . . . . . . . . . . . .3
2.10 Corporate Targets. . . . . . . . . . . . . . . .4
2.11 Fund . . . . . . . . . . . . . . . . . . . . . .4
2.12 Incentive Compensation . . . . . . . . . . . . .4
2.13 Low Return Target. . . . . . . . . . . . . . . .4
2.14 A Major Transaction. . . . . . . . . . . . . . .5
2.15 Management Committee . . . . . . . . . . . . . .6
2.16 New England Electric System. . . . . . . . . . .6
2.17 Participant. . . . . . . . . . . . . . . . . . .7
2.18 Person . . . . . . . . . . . . . . . . . . . . .7
2.19 Plan Year. . . . . . . . . . . . . . . . . . . .7
2.20 Senior Incentive Compensation Plan . . . . . . .7
III. ADMINISTRATION. . . . . . . . . . . . . . . . . . . . .8
3.01 Administration and Interpretation. . . . . . . .8
3.02 Amendment and Termination. . . . . . . . . . . .8
3.03 Salary Approvals.. . . . . . . . . . . . . . . .8
3.04 No Segregation of Assets; No Assignment. . . . .8
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. . . . . . . . . . . . . . . . 10
7.01 Incentive Compensation Amounts.. . . . . . . . 10
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 in Control. . . . . . . . . . . . . . . 13
X. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . 14
10.01 Other Benefit Plans. . . . . . . . . . . . . . 14
10.02 Termination of Participation; Interplan
Transfer.. . . . . . . . . . . . . . . . . . . 14
10.03 Future Employment. . . . . . . . . . . . . . . 15
10.04 Headings.. . . . . . . . . . . . . . . . . . . 15
10.05 Gender and Number. . . . . . . . . . . . . . . 15
10.06 Governing Law. . . . . . . . . . . . . . . . . 15
10.07 Effective Date.. . . . . . . . . . . . . . . . 16
SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . 16
ii
NEW ENGLAND ELECTRIC COMPANIES'
INCENTIVE COMPENSATION PLAN I
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I. PURPOSE
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The purpose of the Incentive Compensation Plan I (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 to (i) measured corporate
performance and (ii) the individual executive's contribution.
II. DEFINITIONS
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2.01 Base Compensation means the compensation referred
to in Section 6.01 and includes all salary, whether received or
deferred.
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 Category A Participant means those Participants
so designated by the Committee.
2.05 Category B Participant means those Participants
so designated by the Committee.
2.06 Category C Participants means all Participants
not designated either Category A or Category B Participants.
2.07 Change in Control occurs when 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.
2.08 Committee means the Compensation Committee of the
Board.
2.09 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).
2.10 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.
2.11 Fund means the fund established each year as
provided in Section 8.01.
2.12 Incentive Compensation means the award made from
the Fund to each Participant in accordance with Section 7.01.
2.13 Low Return Target means the same low equity
return target provided in the Senior Incentive Compensation
Plan for the Plan Year.
2.14 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.
2.15 Management Committee means the Chief Executive
Officer of New England Electric System and one or more other
New England Electric System officers as appointed by the
Committee.
2.16 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.
2.17 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.
2.18 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.
2.19 Plan Year means a calendar year.
2.20 Senior Incentive Compensation Plan means New
England Electric Companies' Senior Incentive Compensation Plan,
as amended from time to time.
III. ADMINISTRATION
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3.01 Administration and Interpretation. The Plan
shall be administered by the Committee, and interpretations of
the Plan by the Committee shall be final and binding on all
parties.
3.02 Amendment and Termination. The 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 2.06 and 2.08 may not be amended without the
written consent of any Participant affected.
3.03 Salary Approvals. The Committee will approve all
salary changes for individual Participants. Where required,
such changes must also receive the approval of the board of
directors of a subsidiary company.
3.04 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.
3.05 Accounting. The Manager of Internal Audits and
the Controller will be responsible to the Committee for
accounting matters directly affecting the Plan.
IV. PARTICIPATION
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4.01 Selection. It is anticipated (but not binding)
that the Committee shall select, by December 1 of each year,
the Participants for the following year.
4.02 Notification. The Management Committee shall
notify those Participants who have been included in the Plan
for the following year and those who have been dropped from the
Plan.
4.03 Goals. Individual goals for each Participant
will be made each Plan Year. Participants will be advised of
the goals prior to the Plan Year for which they apply.
V. PARTICIPANTS' COMPENSATION
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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
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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
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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 make recommendations to the
Committee for amounts of money from the Fund to be awarded to
each Participant. The Committee will act on the
recommendations and the money will be distributed to the
Participants based upon the Committee's determination by the
end of March following the Plan Year.
7.02 Criteria for Determining Incentive Compensation.
Each Participant's award shall be governed, first, by the
degree of success achieved by the Participant in reaching
his/her individual goals established prior to the Plan Year.
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 amount 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 Committee feel 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
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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 17.5%
Return on
Common Equity - Target B 8%
Return on
Common Equity - Target C 17.5%
Return on
Common Equity - Target D 8%
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 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
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9.01 Change in 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
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10.01 Other Benefit Plans. A Participant's Incentive
Compensation will not be used in determining the Participant's
benefits under any group insurance plan or any 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.
s/George M. Sage
SIGNATURE ____________________________
Pursuant to Vote dated
October 24, 1995, of the
Compensation Committee