NEW ENGLAND ELECTRIC COMPANIES'
SENIOR INCENTIVE COMPENSATION PLAN
Adopted - March 14, 1988
Amended - May 23, 1990
Amended - November 26, 1991
Amended - January 1, 1993
Amended - January 1, 1994
Amended - January 1, 1995
Amended - January 1, 1998
TABLE OF CONTENTS
Page
I. PURPOSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.01 Base Compensation. . . . . . . . . . . . . . . . . . . 1
2.02 Beneficial Owner.. . . . . . . . . . . . . . . . . . . 1
2.03 Board. . . . . . . . . . . . . . . . . . . . . . . . . 1
2.04 Bonus Award. . . . . . . . . . . . . . . . . . . . . . 1
2.05 Change in Control. . . . . . . . . . . . . . . . . . . 2
2.06 Committee. . . . . . . . . . . . . . . . . . . . . . . 2
2.07 Exchange Act.. . . . . . . . . . . . . . . . . . . . . 2
2.08 Financial Objective. . . . . . . . . . . . . . . . . . 3
2.09 A Major Transaction. . . . . . . . . . . . . . . . . . 3
2.10 New England Electric System. . . . . . . . . . . . . . 4
2.11 Participant. . . . . . . . . . . . . . . . . . . . . . 4
2.12 Performance Benchmarks.. . . . . . . . . . . . . . . . 4
2.13 Person.. . . . . . . . . . . . . . . . . . . . . . . . 4
2.14 Plan Year. . . . . . . . . . . . . . . . . . . . . . . 5
2.15 Strategic Objectives.. . . . . . . . . . . . . . . . . 5
2.16 System.. . . . . . . . . . . . . . . . . . . . . . . . 5
III. ADMINISTRATION.. . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.01 Administration and Interpretation. . . . . . . . . . . 5
3.02 Amendment or Termination.. . . . . . . . . . . . . . . 5
3.03 No Segregation of Assets; No Assignment. . . . . . . . 6
3.04 Effectuation of Interes. . . . . . . . . . . . . . . . 6
IV. CORPORATE TARGETS. . . . . . . . . . . . . . . . . . . . . . . . . 6
4.01 Financial Target.. . . . . . . . . . . . . . . . . . . 6
4.02 Strategic Objectives.. . . . . . . . . . . . . . . . . 7
4.03 Use of Benchmarks. . . . . . . . . . . . . . . . . . . 7
V. BONUS AWARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.01 Components.. . . . . . . . . . . . . . . . . . . . . . 7
5.02 Financial Objective Award. . . . . . . . . . . . . . . 7
5.03 Strategic Objective Award. . . . . . . . . . . . . . . 7
5.04 Exercise of Discretion.. . . . . . . . . . . . . . . . 8
5.05 Distribution Date. . . . . . . . . . . . . . . . . . . 8
VI. BASE COMPENSATION.. . . . . . . . . . . . . . . . . . . . . . . . 8
6.01 Performance Evaluation. . . . . . . . . . . . . . . . 8
VII. PAYMENT UPON CHANGE OF CONTROL. . . . . . . . . . . . . . . . . . 8
7.01 Change in Control.. . . . . . . . . . . . . . . . . . 8
VIII. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . 9
8.01 Other Benefit Plans.. . . . . . . . . . . . . . . . . 9
8.02 Rate Making.. . . . . . . . . . . . . . . . . . . . . 9
8.03 Future Employment. . . . . . . . . . . . . . . .. . . 9
8.04 Headings. . . . . . . . . . . . . . . . . . . . . . . 9
8.05 Gender and Number.. . . . . . . . . . . . . . . . . . 10
8.06 Governing Law.. . . . . . . . . . . . . . . . . . . . 10
8.07 Effective Date. . . . . . . . . . . . . . . . . . . . 10
SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ii
NEW ENGLAND ELECTRIC COMPANIES'
SENIOR INCENTIVE COMPENSATION PLAN
I. PURPOSE
The Senior Incentive Compensation Plan (the Plan) is intended to achieve
and maintain a high level of corporate performance by linking a significant
component of compensation to meeting financial and strategic objectives. This
amendment, effective January 1, 1998, is designed to focus efforts on the
post-divestiture growth and profitability of the New England Electric System.
II. DEFINITIONS
2.01 Base Compensation means the compensation referred to in Section
6.01 and includes all base 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 Bonus Award means the compensation referred to in Article V.
2.05 Change in Control occurs when the conditions set forth in either
of the following paragraphs shall have been satisfied:
(a) 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
(b) during any period of not more than two consecutive years
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 (a)
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.
2.06 Committee means the Compensation Committee of the Board.
2.07 Exchange Act means the Securities Exchange Act of 1934.
2.08 Financial Objective means the annual financial target set by the
Board in accordance with Section 4.01.
2.09 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 transaction) 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.
2.10 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.
2.11 Participant means the Chairman and the President of New England
Electric System, if they are employees of a System company, and such other
individuals as the Board may select.
2.12 Performance Benchmarks means those standards established by the
Committee in accordance with Sections 4.01 and 4.02 to judge progress toward
achievement of the Financial Objective and each specific Strategic Objective.
2.13 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.
2.14 Plan Year means a calendar year.
2.15 Strategic Objectives means the goals established by the Committee
in accordance with Section 4.02 to reflect the long-term goals for the
continued viability and financial health of the Company.
2.16 System means the New England Electric System holding company
system.
III. ADMINISTRATION
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 or Termination. The Board may amend or terminate the
Plan at any time, provided that:
(a) no such action shall affect any right or obligation with respect
to any Bonus Award previously granted;
(b) the provisions of Article VII and Sections 2.05 and 2.08 may not
be amended without the written consent of any Participant
affected; and
(c) no amendment or termination of the Plan may be made after a Major
Transaction unless the shareholders have rescinded their
approval.
3.03 No Segregation of Assets; No Assignment. The 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 the 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 Effectuation of Interest. In the event it should become
impossible for the System, the Board, or the Compensation Committee to perform
any act required by the Plan, the System, the Board, or the Compensation
Committee may perform such other act as it in good faith determines will most
nearly carry out the intent and purpose of the Plan.
IV. CORPORATE TARGETS
4.01 Financial Target. The Board will establish a financial target
for each Plan Year. This will serve as the Benchmark for the Financial
Objective.
4.02 Strategic Objectives. The Compensation Committee will establish
Strategic Objectives for each Plan Year and the Performance Benchmarks for
each of these objectives. For Participants in this Plan, each Strategic
Objective will be equally weighted.
4.03 Use of Benchmarks. The Board will use these Performance
Benchmarks as guides to measure the achievement in each area.
V. BONUS AWARD
5.01 Components. The Bonus Award has two components: a Financial
Objective Award and a Strategic Objective Award. The targeted Strategic
Objective Award is 25% of Base Compensation. The targeted Financial Objective
Award is 15% of Base Compensation, and the maximum Financial Objective Award
is 25%.
5.02 Financial Objective Award. If the Financial Objective Benchmark
is achieved, the target credit will be given. The Financial Objective Bonus
Award will be adjusted up or down to reflect results greater than, or less
than, the Benchmark.
5.03 Strategic Objective Award. If each Benchmark is fully met, the
maximum Strategic Objective Bonus Award will be granted. The Strategic
Objective Bonus Award will be adjusted downward to reflect shortfalls in
Performance Benchmark achievement.
5.04 Exercise of Discretion. The Board is expected to use its
judgment in evaluating performance, with the Objectives and Benchmarks as
standards, not cliffs. The Board may reduce bonuses from those calculated by
the formula if circumstances warrant. The Board may also award bonuses
outside those calculated by the formula. Further, the Committee retains the
discretion, from time to time, to add or delete Strategic Objectives and to
adjust Benchmarks as it deems appropriate.
5.05 Distribution Date. The Bonus Award shall be distributed to the
Participants by the March 15 following the Plan Year.
VI. BASE COMPENSATION
6.01 Performance Evaluation. A Participant's performance will be
evaluated and his or her compensation, including any merit or promotional
increase, will be set by the Board in accordance with the New England Electric
Salary Management Program.
VII. PAYMENT UPON CHANGE OF CONTROL
7.01 Change in Control. In the event of a Change in Control or a
Major Transaction, each Participant will receive, within 30 days of the
consummation of the Change in Control or of the transaction approved by the
Major Transaction, a cash payment equal to the average of the bonus
percentages for this Plan for the last three years for this Plan prior to the
Change in Control or Major Transaction times the Participant's annualized Base
Compensation. Further, if the consummation of the Change in Control or of
the transaction approved by the Major Transaction occurs prior to the
determination and payment of the Bonus Award 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. No further benefits will be payable from this Plan.
VIII. GENERAL PROVISIONS
8.01 Other Benefit Plans. Bonus Awards will not be used in
determining a Participant's benefit under any group insurance plan or any
other incentive program, other than New England Electric Companies' Incentive
Share Plan. Bonus Awards will be included in pension plan calculations to the
extent otherwise provided in those plans.
8.02 Rate Making. Bonus Awards shall not be included for rate-making
purposes.
8.03 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.
8.04 Headings. The headings of articles and sections of the Plan are
for convenience of reference only.
8.05 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.
8.06 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.
8.07 Effective Date. This Amendment shall be effective January 1,
1998.
/s/ George M. Sage
________________________________________
Chairman, Compensation Committee
Pursuant to Votes of November 25, 1997
AND September 22, 1998 of the Board of
Directors