Exhibit 10.64
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") entered into as
of June 1, 2002, by and between Northeast Utilities Service
Company, a Connecticut corporation (the "Company"), with its
principal office in Berlin, Connecticut, and Charles W. Shivery
("Executive"), a resident of Reisterstown, Maryland.
WHEREAS, both parties desire to enter into an agreement to
reflect Executive's executive capacities in the Company's
business and to provide for Executive's employment by the
Company, upon the terms and conditions set forth herein:
NOW, THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Employment. The Company hereby agrees to employ
Executive, and Executive hereby accepts such employment and
agrees to perform Executive's duties and responsibilities, in
accordance with the terms, conditions and provisions hereinafter
set forth.
1.1. Employment Term. The term of Executive's employment
under this Agreement shall commence as of the date hereof (the
"Effective Date") and shall continue until December 31, 2003,
unless sooner terminated in accordance with Section 5 or Section
6 hereof, and shall automatically renew for periods of one year
unless one party gives written notice to the other, at least six
months prior to December 31, 2003 or at least six months prior to
the end of any one-year renewal period, that the Agreement shall
not be further extended. The period commencing as of the
Effective Date and ending on the date on which the term of
Executive's employment under the Agreement shall terminate is
hereinafter referred to as the "Employment Term".
1.2. Duties and Responsibilities. Executive shall serve as
President and CEO, NU Enterprises, Inc., and in such other senior
positions, if any, as directed by the Company's Board of
Directors (the "Board") or the Board of Trustees (the "Trustees")
of Northeast Utilities ("NU") that provide Executive with duties
and compensation that are substantially equivalent to Executive's
current position in terms of duties and responsibilities. During
the Employment Term, Executive shall perform all duties and
accept all responsibilities incident to such positions as may be
assigned to Executive by the Board.
1.3. Extent of Service. During the Employment Term,
Executive agrees to use Executive's best efforts to carry out
Executive's duties and responsibilities under Section 1.2 hereof
and, consistent with the other provisions of this Agreement, to
devote substantially all Executive's business time, attention and
energy thereto. Except as provided in Section 3 hereof, the
foregoing shall not be construed as preventing Executive from (i)
making minority investments in other businesses or enterprises or
(ii) serving on boards of directors or board committees,
including serving on the board of directors of CareFirst, Inc.,
provided that Executive agrees to provide the Board with
reasonable advanced notice of such intended activity and agrees
not to become engaged in any such activity that the Board, in its
reasonable judgment, determines is likely to interfere with
Executive's ability to discharge Executive's duties and
responsibilities to the Company.
1.4. Base Salary. For all the services rendered by
Executive hereunder, the Company shall pay Executive a base
salary ("Base Salary"), commencing on the Effective Date, at the
annual rate of $550,000, payable in installments at such times as
the Company customarily pays its other senior level executives
(but in any event no less often than monthly). Executive's Base
Salary shall be reviewed annually for appropriate adjustment (but
shall not be reduced below that in effect on the Effective Date
without Executive's written consent) by the Trustees pursuant to
its normal performance review policies for senior level
executives.
1.5. Retirement and Benefit Coverages. During the
Employment Term, Executive shall be entitled to participate in
all (a) employee pension and retirement plans and programs
("Retirement Plans") and (b) welfare benefit plans and programs
("Benefit Coverages"), in each case made available to the
Company's senior level executives as a group or to its employees
generally, as such Retirement Plans or Benefit Coverages may be
in effect from time to time, including, without limitation, the
Company's Supplemental Executive Retirement Plan for Officers
(the "Supplemental Plan"), both as to the Make-Whole Benefit and
the Target Benefit. In addition, the Company shall provide
Executive with a special retirement benefit as hereinafter
described (the "Special Retirement Benefit"). The Special
Retirement Benefit equals the positive difference between (i) the
amount that would be payable from the Northeast Utilities Service
Company Retirement Plan (the "Retirement Plan") and the
Supplemental Plan if (a) actuarial reduction for commencement
before age 65 were equal to 2% for each year younger than age 65,
if applicable, unless actuarial reduction factors more favorable
to Executive are adopted in the Retirement Plan, in which case
those factors shall apply, (b) three years of service were added
to Executive's actual service, and (c) all benefits under the
Retirement Plan and the Supplemental Plan were fully vested, and
(ii) the amounts payable from the Retirement Plan and the
Supplemental Plan without such enhancements. Except as set forth
in Sections 5.4 and 6.4 below, the Special Retirement Benefit
shall not be available before Executive completes five years of
actual service with the Company.
1.6. Reimbursement of Expenses and Dues; Vacation.
Executive shall be provided with reimbursement of expenses
related to Executive's employment by the Company on a basis no
less favorable than that which may be authorized from time to
time for senior level executives as a group, and shall be
entitled to five weeks of vacation annually and holidays and
other leave in accordance with the Company's normal personnel
policies for senior level executives. In addition, Executive
shall be entitled to reimbursement for an initiation fee of up to
$10,000 for membership in a private business or country club, and
reimbursement of up to $5,000 per year in annual expenses related
to such membership, which reimbursements will be grossed up for
tax withholding other than Social Security tax. The Company will
review periodically the amount of such expenses it will reimburse
to Executive and may make adjustments to said amount based upon
changes in the fee structure at such club.
1.7. Short-Term Incentive Compensation. Executive shall be
entitled to participate in any short-term incentive compensation
programs established by the Company for its senior level
executives generally depending upon achievement of certain annual
individual or business performance objectives specified and
approved by the Trustees (or a Committee thereof) in its sole
discretion; provided, however, that Executive's "target
opportunity" and "maximum opportunity" under any such program
shall be at least 40% and 80% of base pay, respectively.
Executive's short-term incentive compensation, either in shares
of NU or cash, as applicable from time to time, shall be paid to
Executive, subject to the Board's or the Trustee's reasonable
discretion, not later than such payments are made to the
Company's senior level executives generally. Executive's payment
for the 2002 Annual Incentive Program shall be prorated for his
time with the Company during 2002, but the actual payment shall
not be less than $200,000.
1.8. Long-Term Incentive Compensation. Executive shall be
entitled to participate in any long-term incentive compensation
programs established by the Company for its senior level
executives generally depending upon achievement of certain
business performance objectives specified and approved by the
Trustees (or a Committee thereof) in its sole discretion;
provided, however, that Executive's target opportunity under any
such program shall be at least 80% of base pay. Executive's long-
term incentive compensation shall be paid or granted to
Executive, subject to the Board's or the Trustee's reasonable
discretion, not later than such payments or grants are made to
the Company's senior level executives generally. Executive shall
be granted NU stock options and performance units during 2002
using the same vesting, forfeiture, and payout criteria that were
used for the Company's February 2002 Long-Term Incentive grant to
officers, except that the option exercise price shall be the
market closing price on the date the Company's Board of Trustees
authorizes such grant. The value of the grant shall total 80% of
Executive's base salary and shall be split evenly between options
and performance units.
1.9. Special Net Income Incentive Program. Beginning
in 2002, Executive shall participate in a Special Net Income
Incentive Program. Under such program, if the Net Income of the
Competitive Businesses for the calendar year exceeds the
Threshold Net Income Level for such calendar year, the Executive
will receive a cash payment equal to 1% of the Net Income of the
Competitive Businesses for such calendar year. Payment to
Executive will be made by March 15 of the following calendar
year. Net Income of the Competitive Businesses equals the total
revenues minus the total costs, including overheads, for
Northeast Generation Company, Northeast Generation Services
Company, Select Energy, Inc., Select Energy Services, Inc.
Holyoke Water Power Company and each other direct or indirect
subsidiary of NU engaged in competitive business activities,
other than Mode 1 Communications, Inc. (such entities engaged in
competitive businesses, other than Mode 1 Communications, Inc.,
hereinafter referred to as the "Competitive Businesses"). Net
Income of the Competitive Businesses shall be determined in
accordance with Generally Accepted Accounting Principles,
consistently applied and reflected on the books and records of
the Competitive Businesses. The Threshold Net Income Level for
2002 is that contained in the Select Energy Staff Incentive Plan
for 2002, and Threshold Net Income Levels for future
years will be established in cooperation with the Chief Executive
Officer of the Company. This program may be modified or replaced
after 2002 through mutual agreement between Executive and the
Chief Executive Officer of the Company. No payment from this
program shall be included in determining retirement benefit
amounts, and no "target" incentive amount from this program shall
be used in determining Base Compensation, as such term is defined
in this Agreement.
1.10. Temporary Living, Moving and Transition Expenses.
The Company shall pay Executive a single lump sum of $144,000
within 30 days from the date the Agreement is executed to cover
the reasonable costs of (i) commissions associated with selling
Executive's current home and purchasing a new home, (ii) packing
and moving from Executive's current home to Connecticut, (iii)
temporary living, (iv) storage of household goods, and (v) travel
between Executive's current home and Connecticut. The Company
shall pay Executive also a single lump sum of $20,000 within 30
days from the date the Agreement is executed to cover the
reasonable professional fees incurred in negotiating and
finalizing this Agreement. These amounts will be grossed-up to
pay for tax withholding other than Social Security tax.
2. Confidential Information. Executive recognizes and
acknowledges that by reason of Executive's employment by and
service to the Company before, during and, if applicable, after
the Employment Term Executive has had and will continue to have
access to trade secrets and other confidential and proprietary
information relating to the business of the Company, which may
include, but is not limited to, the following items to the extent
they are confidential and proprietary: specific trade "know-how"
integral to the Company's business and operations, customer
information, supplier information, cost and pricing information,
marketing and sales techniques, strategies and programs, computer
programs and software and financial information (collectively
referred to as "Confidential Information"). Executive
acknowledges that such Confidential Information is a valuable and
unique asset of the Company and Executive covenants that
Executive will not, unless expressly authorized in writing by the
Board, at any time during the course of Executive's employment
use any Confidential Information or divulge or disclose any
Confidential Information to any person, firm or corporation
except in connection with the performance of Executive's duties
for the Company and in a manner consistent with the Company's
policies regarding Confidential Information. Executive also
covenants that at any time after the termination of such
employment, Executive will not, directly or indirectly, use any
Confidential Information or divulge or disclose any Confidential
Information to any person, firm or corporation, unless such
information is in the public domain through no fault of
Executive, or except when required to do so by a court of law, by
any governmental agency having supervisory authority over the
business of the Company or by any administrative or legislative
body (including a committee thereof) with apparent jurisdiction
to order Executive to divulge, disclose or make accessible such
information, in which case Executive will inform the Company in
writing promptly of such required disclosure (including if such
required disclosure occurs when Executive is still employed by
the Company), but in any event at least two business days prior
to disclosure. All written Confidential Information (including,
without limitation, in any computer or other electronic format)
that comes into Executive's possession during the course of
Executive's employment shall remain the property of the Company.
Except as required in the performance of Executive's duties for
the Company, or unless expressly authorized in writing by the
Board, Executive shall not remove any written Confidential
Information from the Company's premises, except in connection
with the performance of Executive's duties for the Company and in
a manner consistent with the Company's policies regarding
Confidential Information. Upon termination of Executive's
employment, Executive agrees immediately to return to the Company
all written Confidential Information in Executive's possession.
For the purposes of this Section 2, the term "Company" shall be
deemed to include NU and the Affiliates, as defined in Section
6.1(a), of NU and the Company.
3. Non-Competition; Non-Solicitation.
(a) During Executive's employment by the Company and
for a period of two years after Executive's termination of
employment for any reason, within the Company's "service area,"
as defined below, Executive will not, except with the prior
written consent of the Board, directly or indirectly, own,
manage, operate, join, control, finance or participate in the
ownership, management, operation, control or financing of, or be
connected as an officer, director, employee, partner, principal,
agent, representative, consultant or otherwise with, or use or
permit Executive's name to be used in connection with, any
business or enterprise which is engaged in any business that is
competitive with any business or enterprise in which the Company
is engaged. For the purposes of this Section, the Board's
consent will not be unreasonably withheld in circumstances where
following the termination of Executive's employment Executive
would be serving as a consultant to such a business or enterprise
provided that Executive's consulting services for such business
or enterprise are either (i) entirely unrelated to the activities
that are competitive with any business or enterprise in which the
Company is engaged or (ii) are related solely to activities which
are outside the Company's service area. For the purposes of this
Section, "service area" shall mean the geographic area within the
states of Connecticut, Maine, Massachusetts, New Hampshire, Rhode
Island, and Vermont, or any other state in which the Company, in
the aggregate, generates 25% or more of its revenues in the
fiscal year of NU in which Executive's termination of employment
occurs. Executive acknowledges that the listed service area is
the area in which the Company presently does business.
(b) The foregoing restrictions shall not be construed
to prohibit the ownership by Executive of less than five percent
(5%) of any class of securities of any corporation which is
engaged in any of the foregoing businesses having a class of
securities registered pursuant to the Securities Exchange Act of
1934 (the "Exchange Act"), provided that such ownership
represents a passive investment and that neither Executive nor
any group of persons including Executive in any way, either
directly or indirectly, manages or exercises control of any such
corporation, guarantees any of its financial obligations,
otherwise takes any part in its business, other than exercising
Executive's rights as a shareholder, or seeks to do any of the
foregoing.
(c) Executive further covenants and agrees that during
Executive's employment by the Company and for the period of two
years thereafter, Executive will not, directly or indirectly,
(i) solicit, divert, take away, or attempt to solicit, divert or
take away, any of the Company's "Principal Customers," defined
for the purposes hereof to include any customer of the Company,
from which $100,000 or more of annual gross revenues are derived
at such time, or (ii) encourage any Principal Customer to reduce
its patronage of the Company.
(d) Executive further covenants and agrees that during
Executive's employment by the Company and for the period of two
years thereafter, Executive will not, directly or indirectly,
solicit or hire, or encourage the solicitation or hiring of, any
person who was a managerial or higher level employee of the
Company at any time during the term of Executive's employment by
the Company by any employer other than the Company for any
position as an employee, independent contractor, consultant or
otherwise. The foregoing covenant of Executive shall not apply
to any person after 12 months have elapsed subsequent to the date
on which such person's employment by the Company has terminated,
or to a specific request for a job reference relating to a
certain person.
(e) Nothing in this Section 3 shall be construed to
prohibit Executive, if Executive is a lawyer, from being
connected as a partner, principal, shareholder, associate,
counsel or otherwise with another lawyer or a law firm which
performs services for clients engaged in any business or
enterprise that is competitive with any business or enterprise in
which the Company is engaged, provided that Executive is not
personally involved, directly or indirectly, in performing
services for any such clients during the period specified in
Section 3(a) and provided further that such lawyer or law firm
takes reasonable precautions to screen Executive from
participating for the period specified in Section 3(a) in the
representation of any such clients. The parties agree that any
such personal performance of services by Executive for any such
clients during such period would create an unreasonable risk of
violation by Executive of the provisions of Section 2 of this
Agreement, and Executive agrees (and the Company may elect) to
notify in writing any lawyer or law firm with which Executive may
be connected during the period specified in Section 3(a) of
Executive's Agreement as set forth herein. The parties further
agree that, in addition to the nondisclosure obligations of
Section 2 of this Agreement, Executive remains subject to all
ethical obligations relating to confidentiality of information to
the extent that Executive acted as a lawyer for the Company, but
Executive's knowledge of such confidential information shall not
be imputed to such other lawyer or law firm with which Executive
subsequently may become connected. Executive agrees to notify
the Company in writing in advance of the precautions to be taken
by such lawyer or law firm to screen Executive from any
representation of such competing client of such lawyer or law
firm.
(f) For the purposes of this Section 3, the term
"Company" shall be deemed to include NU and the Affiliates, as
defined in Section 6.1(a), of NU and the Company.
4. Equitable Relief.
(a) Executive acknowledges and agrees that the
restrictions contained in Sections 2 and 3 are reasonable and
necessary to protect and preserve the legitimate interests,
properties, goodwill and business of the Company, that the
Company would not have entered into this Agreement in the absence
of such restrictions and that irreparable injury will be suffered
by the Company should Executive breach any of the provisions of
those Sections. Executive represents and acknowledges that (i)
Executive has been advised by the Company to consult Executive's
own legal counsel in respect of this Agreement, and (ii) that
Executive has had full opportunity, prior to execution of this
Agreement, to review thoroughly this Agreement with Executive's
counsel.
(b) Executive further acknowledges and agrees
that a breach of any of the restrictions in Sections 2 and 3
cannot be adequately compensated by monetary damages. Executive
agrees that the Company shall be entitled to preliminary and
permanent injunctive relief, without the necessity of proving
actual damages, as well as an equitable accounting of all
earnings, profits and other benefits arising from any violation
of Sections 2 or 3 hereof, which rights shall be cumulative and
in addition to any other rights or remedies to which the Company
may be entitled. In the event that any of the provisions of
Sections 2 or 3 hereof should ever be adjudicated to exceed the
time, geographic, service, or other limitations permitted by
applicable law in any jurisdiction, it is the intention of the
parties that the provision shall be amended to the extent of the
maximum time, geographic, service, or other limitations permitted
by applicable law, that such amendment shall apply only within
the jurisdiction of the court that made such adjudication and
that the provision otherwise be enforced to the maximum extent
permitted by law.
(c) If Executive breaches any of Executive's
obligations under Sections 2 or 3 hereof, and such breach
constitutes "Cause," as defined in Section 5.3 hereof, or would
constitute Cause if it had occurred during the Employment Term,
the Company shall thereafter have no Target Benefit obligation
pursuant to the Supplemental Plan and no Special Retirement
Benefit obligation under this Agreement, but shall remain
obligated for the Make-Whole Benefit under the Supplemental Plan,
but only to the extent not modified by the terms of this
Agreement, and compensation and other benefits provided in any
plans, policies or practices then applicable to Executive in
accordance with the terms thereof.
(d) Executive irrevocably and unconditionally (i)
agrees that any suit, action or other legal proceeding arising
out of Sections 2 or 3 hereof, including without limitation, any
action commenced by the Company for preliminary and permanent
injunctive relief and other equitable relief, may be brought in
the United States District Court for the District of Connecticut,
or if such court does not have jurisdiction or will not accept
jurisdiction, in any court of general jurisdiction in Hartford,
Connecticut, (ii) consents to the non-exclusive jurisdiction of
any such court in any such suit, action or proceeding, and (iii)
waives any objection which Executive may have to the laying of
venue of any such suit, action or proceeding in any such court.
Executive also irrevocably and unconditionally consents to the
service of any process, pleadings, notices or other papers in a
manner permitted by the notice provisions of Section 10 hereof.
(e) Executive agrees that for a period of five years
following the termination of Executive's employment by the
Company Executive will provide, and that at all times after the
date hereof the Company may similarly provide, a copy of Sections
2 and 3 hereof to any business or enterprise (i) which Executive
may directly or indirectly own, manage, operate, finance, join,
control or participate in the ownership, management, operation,
financing, or control of, or (ii) with which Executive may be
connected as an officer, director, employee, partner, principal,
agent, representative, consultant or otherwise, or in connection
with which Executive may use or permit Executive's name to be
used; provided, however, that this provision shall not apply in
respect of Section 3 hereof after expiration of the time periods
set forth therein.
(f) For the purposes of this Section 4, the term
"Company" shall be deemed to include NU and the Affiliates, as
defined in Section 6.1(a), of NU and the Company.
5. Termination. The Employment Term shall terminate upon
the occurrence of any one of the following events:
5.1. Disability. The Company may terminate the Employment
Term if Executive is unable substantially to perform Executive's
duties and responsibilities hereunder to the full extent required
by the Board by reason of illness, injury or incapacity for six
consecutive months, or for more than six months in the aggregate
during any period of twelve calendar months; provided, however,
that the Company shall continue to pay Executive's Base Salary
until the Company acts to terminate the Employment Term. In
addition, Executive shall be entitled to receive (i) any amounts
earned, accrued or owing but not yet paid under Section 1 above
and (ii) any other benefits in accordance with the terms of any
applicable plans and programs of the Company. Otherwise, the
Company shall have no further liability or obligation to
Executive for compensation under this Agreement. Executive
agrees, in the event of a dispute under this Section 5.1, to
submit to a physical examination by a licensed physician selected
by the Board.
5.2. Death. The Employment Term shall terminate in the
event of Executive's death. In such event, the Company shall pay
to Executive's executors, legal representatives or
administrators, as applicable, an amount equal to the installment
of Executive's Base Salary set forth in Section 1.4 hereof for
the month in which Executive dies. In addition, Executive's
estate shall be entitled to receive (i) any other amounts earned,
accrued or owing but not yet paid under Section 1 above and (ii)
any other benefits in accordance with the terms of any applicable
plans and programs of the Company. In the event Executive's
employment terminates by reason of his death after Executive
completes five full years of actual service with the Company,
then Executive's surviving spouse shall be eligible for total
surviving spouse benefits from the Company as if Executive had
attained three additional years of service in accordance with
Section 1.5. Otherwise, the Company shall have no further
liability or obligation under this Agreement to Executive's
executors, legal representatives, administrators, heirs or
assigns or any other person claiming under or through Executive.
5.3. Cause. The Company may terminate the Employment Term,
at any time, for "cause" upon written notice, in which event all
payments under this Agreement shall cease, except for Base Salary
to the extent already accrued, and no Target Benefit and no
Special Retirement Benefit shall be due under the Supplemental
Plan, but Executive shall remain entitled to the Make-Whole
Benefit under the Supplemental Plan, but only to the extent not
modified by the terms of this Agreement, and any other benefits
in accordance with the terms of any applicable plans and programs
of the Company. For purposes of this Agreement, Executive's
employment may be terminated for "cause" if (i) Executive is
convicted of a felony, (ii) in the reasonable determination of
the Board, Executive has (x) committed an act of fraud,
embezzlement, or theft in connection with Executive's duties in
the course of Executive's employment with the Company, (y) caused
intentional, wrongful damage to the property of the Company or
intentionally and wrongfully disclosed Confidential Information,
or (z) engaged in gross misconduct or gross negligence in the
course of Executive's employment with the Company or (iii)
Executive materially breached Executive's obligations under this
Agreement and shall not have remedied such breach within 30 days
after receiving written notice from the Board specifying the
details thereof. For purposes of this Agreement, an act or
omission on the part of Executive shall be deemed "intentional"
only if it was not due primarily to an error in judgment or
negligence and was done by Executive not in good faith and
without reasonable belief that the act or omission was in the
best interest of the Company.
5.4. Termination Without Cause and Non-Renewal.
(a) The Company may remove Executive, at any time,
without cause from the position in which Executive is employed
hereunder (in which case the Employment Term shall be deemed to
have ended) upon not less than 60 days' prior written notice to
Executive; provided, however, that, in the event that such notice
is given, Executive shall be under no obligation to render any
additional services to the Company and, subject to the provisions
of Section 3 hereof, shall be allowed to seek other employment.
Upon any such removal or if the Company informs Executive that
the Agreement will not be renewed after December 31, 2003 or at
the end of any subsequent renewal period, Executive shall be
entitled to receive, as liquidated damages for the failure of the
Company to continue to employ Executive, only the amount due to
Executive under the Company's then current severance pay plan for
employees. No other payments or benefits shall be due under this
Agreement to Executive, but Executive shall be entitled to any
other benefits in accordance with the terms of any applicable
plans and programs of the Company. Notwithstanding anything in
this Agreement to the contrary, on or after Executive attains age
65, no action by the Company shall be treated as a removal from
employment or non-renewal if on the effective date of such action
Executive satisfies all of the requirements for the executive or
high policy-making exception to applicable provisions of state
and federal age discrimination legislation.
(b) Notwithstanding the foregoing, in the event that
Executive executes a written release upon such removal or non-
renewal, substantially in the form attached hereto as Annex 1,
(the "Release"), of any and all claims against the Company and
all related parties with respect to all matters arising out of
Executive's employment by the Company (other than any
entitlements under the terms of this Agreement or under any other
plans or programs of the Company in which Executive participated
and under which Executive has accrued a benefit), or the
termination thereof, Executive shall be entitled to receive, in
lieu of the payment described in subsection (a) hereof, which
Executive agrees to waive,
(i) as liquidated damages for the failure of the
Company to continue to employ Executive, a single cash payment,
within 30 days after the effective date of the removal or non-
renewal, equal to Executive's Base Compensation, as defined in
Section 6.1(b) below, which shall not constitute a "severance
benefit" to Executive for purposes of the Target Benefit under
the Supplemental Plan;
(ii) for a period of two years following the end
of the Employment Term, Executive and Executive's spouse and
dependents shall be eligible for a continuation of those Benefit
Coverages, as in effect at the time of such termination or
removal, and as the same may be changed from time to time, as if
Executive had been continued in employment during said period or
to receive cash in lieu of such benefits or premiums, as
applicable, where such Benefit Coverages may not be continued (or
where such continuation would adversely affect the tax status of
the plan pursuant to which the Benefit Coverage is provided)
under applicable law or regulations;
(iii) any other amounts earned, accrued or
owing but not yet paid under Section 1 above;
(iv) any other benefits in accordance with the
terms of any applicable plans and programs of the Company and a
payment equal to any unused vacation;
(v) as additional consideration for the non-
competition and non-solicitation covenant contained in Section 3,
a single cash payment, within 30 days after the effective date of
the removal or non-renewal, equal to Executive's Base
Compensation, as defined in Section 6.1(b) below, which shall not
constitute a "severance benefit" to Executive for purposes of the
Target Benefit under the Supplemental Plan;
(vi) Under the Supplemental Plan, Executive shall
be entitled to a Target Benefit and a Make-Whole Benefit
commencing as provided below with an actuarial reduction in the
event the Target Benefit and Make-Whole Benefit commence prior to
age 65, whether or not Executive has then satisfied the
requirements for early, normal or deferred retirement under, or
is then entitled to receive a vested benefit under the Retirement
Plan or has attained age 60, using the Termination Date as the
"date of retirement" contemplated by Section IV(b) of the
Supplemental Plan. The actuarial reduction shall be 2% for each
year younger than age 65 to age 60, if applicable, and 3% for
each year younger than age 60 to age 55 unless actuarial
reduction factors more favorable to Executive are adopted in the
Retirement Plan, in which case those factors shall apply. If the
Termination Date occurs before Executive has completed five years
of service, then Executive's years of service with the Company
shall be deemed to include an additional 24 months of service in
determining the amount of the Target Benefit and the Make-Whole
Benefit and 24 months shall be added to Executive's age for
purposes of determining the reduction in such benefits, if any,
to reflect early commencement. Executive shall receive, in lieu
of an annuity, a single sum payment equal to the then actuarial
present value (computed using the 1983 GAM (50%/Male/50%/ Female)
Mortality Table and at an interest rate equal to the discount
rate used in the Retirement Plan's previous year's FASB 87
accounting of the amount of the Target Benefit and Make-Whole
Benefit as determined in accordance with the first three
sentences of this clause. Payment shall be made within 30 days
after the Termination Date; and
(vii) All stock options, stock appreciation
rights, and performance units granted to Executive, to the extent
not already vested prior to the removal or non-renewal, shall be
fully vested and exercisable or paid as if Executive had remained
actively employed by the Company, including the right of
exercise, where appropriate, within 36 months after the removal
or non-renewal;
(viii) A gross-up payment, if needed, shall be
determined in accordance with Section 6.6 of this Agreement.
5.5. Voluntary Termination. Executive may voluntarily
terminate the Employment Term upon 30 days' prior written notice
for any reason. In such event, after the effective date of such
termination, no further payments shall be due under this
Agreement except that Executive shall be entitled to (i) any
benefits due in accordance with the terms of any applicable plan
and programs of the Company, and (ii) if Executive has completed
five years of service with the Company, the Special Retirement
Benefit.
6. Payments Upon a Change in Control.
6.1. Definitions. For all purposes of this Section 6, the
following terms shall have the meanings specified in this Section
6.1 unless the context otherwise clearly requires:
(a) "Affiliate" shall mean an "affiliate" as defined
in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act.
(b) "Base Compensation" shall mean Executive's
annualized Base Salary and all short-term incentive compensation
at the target level for Executive (but in no event less than the
target level for Executive in effect as of the Effective Date),
specified under programs established by the Company for its
senior level executives generally, for the most recent full
calendar year immediately preceding the calendar year in which
occurs Executive's Termination Date or preceding the Change of
Control, if higher.
(c) "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 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 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 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 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.
(v) Consummation of a complete liquidation or
dissolution of NU Enterprises, Inc., or sale or other disposition
of all or substantially all of the stock or assets of NU
Enterprises, Inc. or the Competitive Businesses, other than to a
corporation, business trust or other entity with respect to
which, following 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.
(d) "Termination Date" shall mean the date of receipt
of a Notice of Termination of this Agreement or any later date
specified therein.
(e) "Termination of Employment" shall mean the
termination of Executive's actual employment relationship with
the Company, including a failure to renew the Agreement after
December 31, 2003 or at the end of any subsequent renewal period,
in either case occasioned by the Company's action.
(f) "Termination upon a Change of Control" shall mean
a Termination of Employment during the period beginning on the
earlier of (a) approval by the shareholders of NU of a Change of
Control or (b) consummation of a Change of Control and, in either
case, ending on the second anniversary of the consummation of the
transaction that constitutes the Change of Control (or if such
period started on shareholder approval and after such shareholder
approval the Board abandons the transaction, on the date the
Board abandoned the transaction) either:
(i) initiated by the Company for any reason other
than Executive's (w) disability, as described in Section 5.1
hereof, (x) death, (y) retirement on or after attaining age 65,
or (z) "cause," as defined in Section 5.3 hereof, or
(ii) initiated by Executive (A) upon any
failure of the Company materially to comply with and satisfy any
of the terms of this Agreement, including any significant
reduction by the Company of the authority, duties or
responsibilities of Executive, any reduction of Executive's
compensation or benefits as in effect immediately prior to the
Change in Control, or the assignment to Executive of duties which
are materially inconsistent with the duties of Executive's
position as defined in Section 1.2 above, or (B) if Executive is
transferred, without Executive's written consent, to a location
that is more than 50 miles from Executive's principal place of
business immediately preceding such approval or consummation;
provided, that the imposition on Executive following a Change of
Control of a limitation of Executive's scope of authority such
that Executive's responsibilities relate primarily to a company
or companies whose common equity is not publicly held shall be
considered a "significant reduction by the Company of the
authority, duties or responsibilities of Executive" for purposes
hereof.
6.2. Notice of Termination. Any Termination upon a Change
of Control shall be communicated by a Notice of Termination to
the other party hereto given in accordance with Section 10
hereof. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon,
(ii) briefly summarizes the facts and circumstances deemed to
provide a basis for a Termination of Employment and the
applicable provision hereof, and (iii) if the Termination Date is
other than the date of receipt of such notice, specifies the
Termination Date (which date shall not be more than 15 days after
the giving of such notice).
6.3. Payments upon Termination. Subject to the provisions
of Sections 6.6 and 6.7 hereof, in the event of Executive's
Termination upon a Change of Control, the Company agrees (a) in
the event Executive executes the Release required by Section
5.4(b), to pay to Executive a single cash payment, within thirty
days after the Termination Date, equal to Executive's Base
Compensation and, in addition, all amounts, benefits and Benefit
Coverages described in Section 5.4(b)(ii), (iii), (iv) and (v),
provided that in (ii) Benefit Coverages shall continue for three
years instead of two unless the Change of Control is as described
in Section 6.1(c)(v), or (b) in the event Executive fails or
refuses to execute the Release required by Section 5.4(b), to pay
to Executive, in a single cash payment, within thirty days after
the Termination Date, the amount due under Section 5.4(a) above
and, in addition, all other amounts and benefits described in
Section 5.4(a).
6.4. Other Payments, Supplemental Plan, Stock Option and
Stock Grants, etc. Subject to the provisions of Sections 6.6 and
6.7 hereof, in the event of Executive's Termination upon a Change
of Control, and the execution of the Release required by Section
5.4(b):
(a) Under the Supplemental Plan, Executive shall be
entitled to a Target Benefit and a Make-Whole Benefit commencing
as provided below with an actuarial reduction in the event the
Target Benefit and Make-Whole Benefit commence prior to age 65,
whether or not Executive has then satisfied the requirements for
early, normal or deferred retirement under, or is then entitled
to receive a vested benefit under the company's Retirement Plan
or has attained age 60, using the Termination Date as the "date
of retirement" contemplated by Section IV(b) of the Supplemental
Plan. The actuarial reduction shall be 2% for each year younger
than age 65 to age 60, if applicable, and 3% for each year
younger than age 60 to age 55 unless actuarial reduction factors
more favorable to Executive are adopted in the Retirement Plan,
in which case those factors shall apply. If the Termination Date
occurs before Executive has completed five years of service, then
Executive's years of service with the Company shall be deemed to
include an additional 36 months of service in determining the
amount of the Target Benefit and Make-Whole Benefit and 36 months
shall be added to Executive's age for purposes of determining the
actuarial reduction in such benefits, if any, to reflect early
commencement, except that if the Change of Control is as
described in Section 6.1(c)(v), then 24 months of age and service
shall be added instead of 36 months in determining such benefits.
Executive shall receive, in lieu of an annuity, a single sum
payment equal to the then actuarial present value (computed using
the 1983 GAM (50%/Male/50%/ Female) Mortality Table and at an
interest rate equal to the discount rate used in the Retirement
Plan's previous year's FASB 87 accounting of the amount of the
Target Benefit and Make-Whole Benefit as determined in accordance
with the first three sentences of this subsection (a). Payment
shall be made within 30 days after the Termination Date.
(b) On Executive's Termination Date, stock options,
stock appreciation rights, and performance units previously
granted to Executive, to the extent not already vested prior to
the Termination Date, shall be fully vested and exercisable or
paid as if Executive had remained actively employed by the
Company, including the right of exercise, where appropriate,
within 36 months after the Termination Date and, if the Change of
Control results in the Voting Securities of NU ceasing to be
traded on a national securities exchange or though the national
market system of the National Association of Securities Dealers
Inc., the price at which the rights or units may be exercised
shall be the average of the closing prices for the five trading
days preceding the day such Voting Securities cease trading.
6.5. Non-Exclusivity of Rights. Nothing in this Agreement
shall prevent or limit Executive's continuing or future
participation in or rights under any benefit, bonus, incentive or
other plan or program provided by the Company and for which
Executive may qualify; provided, however, that if Executive
becomes entitled to and receives all of the payments provided for
in this Agreement, Executive hereby waives Executive's right to
receive payments under any severance plan or similar program
applicable to all employees of the Company.
6.6. Certain Increase in Payments.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event that it shall be determined that
any payment or distribution by the Company to or for the benefit
of Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise (the "Payment"), would constitute an "excess parachute
payment" within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), Executive shall be
paid an additional amount (the "Gross-Up Payment") such that the
net amount retained by Executive after deduction of any excise
tax imposed under Section 4999 of the Code, and any federal,
state and local income and employment tax and excise tax imposed
upon the Gross-Up Payment shall be equal to the Payment. For
purposes of determining the amount of the Gross-Up Payment,
Executive shall be deemed to pay federal income tax and
employment taxes at the highest marginal rate of federal income
and employment taxation in the calendar year in which the Gross-
Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of
Executive's residence on the Termination Date, net of the maximum
reduction in federal income taxes that may be obtained by the
Executive from the deduction of such state and local taxes.
(b) All determinations to be made under this Section 6
shall be made by the Company's independent public accountant
immediately prior to the Change of Control (the "Accounting
Firm"), which firm shall provide its determinations and any
supporting calculations both to the Company and Executive within
10 days of the Termination Date. Any such determination by the
Accounting Firm shall be binding upon the Company and Executive.
Within five days after the Accounting Firm's determination, the
Company shall pay (or cause to be paid) or distribute (or cause
to be distributed) to or for the benefit of Executive such
amounts as are then due to Executive under this Agreement.
(c) In the event that upon any audit by the Internal
Revenue Service, or by a state or local taxing authority, of the
Payment or Gross-Up Payment, a change is finally determined to be
required in the amount of taxes paid by Executive, appropriate
adjustments shall be made under this Agreement such that the net
amount which is payable to Executive after taking into account
the provisions of Section 4999 of the Code shall reflect the
intent of the parties as expressed in subsection (a) above, in
the manner determined by the Accounting Firm.
(d) All of the fees and expenses of the Accounting
Firm in performing the determinations referred to in subsections
(b) and (c) above shall be borne solely by the Company. The
Company agrees to indemnify and hold harmless the Accounting Firm
of and from any and all claims, damages and expenses resulting
from or relating to its determinations pursuant to subsections
(b) and (c) above, except for claims, damages or expenses
resulting from the gross negligence or willful misconduct of the
Accounting Firm.
6.7 Changes to Sections 6.3 and 6.4. The payments,
benefits and other compensation provided under Sections 6.3 and
6.4 may be revised, in the sole discretion of the Board, after
the expiration of two years following written notice to Executive
of the Board's intention to do so and the changes to be made;
provided, however, that no revision may be made that would reduce
the payments, benefits and other compensation below those
provided under Section 5.4 in the event Executive's employment is
terminated without cause or this Agreement is not renewed; and
provided, further, that no such notice may be given and no such
revision may become effective following a Change of Control.
Notice under this Section 6.7 shall not constitute a non-renewal
or removal of Executive, nor shall any such actual revision be
grounds for a determination that this Agreement is not being
renewed or that Executive has been removed, for purposes of
Section 5.4.
7. Survivorship. The respective rights and obligations of
the parties under this Agreement shall survive any termination of
Executive's employment to the extent necessary to the intended
preservation of such rights and obligations.
8. Mitigation. Executive shall not be required to
mitigate the amount of any payment or benefit provided for in
this Agreement by seeking other employment or otherwise and there
shall be no offset against amounts due Executive under this
Agreement on account of any remuneration attributable to any
subsequent employment that Executive may obtain.
9. Arbitration; Expenses. In the event of any dispute
under the provisions of this Agreement other than a dispute in
which the primary relief sought is an equitable remedy such as an
injunction, the parties shall be required to have the dispute,
controversy or claim settled by arbitration in the City of
Hartford, Connecticut in accordance with National Rules for the
Resolution of Employment Disputes then in effect of the American
Arbitration Association, before a panel of three arbitrators, two
of whom shall be selected by the Company and Executive,
respectively, and the third of whom shall be selected by the
other two arbitrators. Any award entered by the arbitrators
shall be final, binding and nonappealable (except as provided in
Section 52-418 of the Connecticut General Statutes) and judgment
may be entered thereon by either party in accordance with
applicable law in any court of competent jurisdiction. This
arbitration provision shall be specifically enforceable. The
arbitrators shall have no authority to modify any provision of
this Agreement or to award a remedy for a dispute involving this
Agreement other than a benefit specifically provided under or by
virtue of the Agreement. If Executive prevails on any material
issue that is the subject of such arbitration or lawsuit, the
Company shall be responsible for all of the fees of the American
Arbitration Association and the arbitrators and any expenses
relating to the conduct of the arbitration (including the
Company's and Executive's reasonable attorneys' fees and
expenses). Otherwise, each party shall be responsible for its
own expenses relating to the conduct of the arbitration
(including reasonable attorneys' fees and expenses) and shall
share the fees of the American Arbitration Association.
10. Notices. All notices and other communications required
or permitted under this Agreement or necessary or convenient in
connection herewith shall be in writing and shall be deemed to
have been given when hand delivered or mailed by registered or
certified mail, as follows (provided that notice of change of
address shall be deemed given only when received):
If to the Company, to:
Northeast Utilities Service Company
P.O. Box 270
Hartford, CT 06141-0270
Attention: Vice President, Secretary and General
Counsel
If to Executive, to:
Charles W. Shivery
1 Briarwood Farm Court
Reisterstown, MD 21136
With a copy to:
Mark Muedeking
Piper Rudnick, LLP
6225 Smith Avenue
Baltimore, MD 21209
or to such other names or addresses as the Company or Executive,
as the case may be, shall designate by notice to each other
person entitled to receive notices in the manner specified in
this Section.
11. Contents of Agreement; Amendment and Assignment.
(a) This Agreement sets forth the entire understanding
between the parties hereto with respect to the subject matter
hereof and cannot be changed, modified, or terminated except upon
written amendment approved by the Board and executed on its
behalf by a duly authorized officer and by Executive.
(b) All of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be
enforceable by the respective heirs, executors, administrators,
legal representatives, successors and assigns of the parties
hereto, except that the duties and responsibilities of Executive
under this Agreement are of a personal nature and shall not be
assignable or delegatable in whole or in part by Executive. The
Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation, reorganization or otherwise)
to all or substantially all of the business or assets of the
Company, by agreement in form and substance satisfactory to
Executive, expressly to assume and agree to perform this
Agreement in the same manner and to the extent the Company would
be required to perform if no such succession had taken place.
12. Severability. If any provision of this Agreement or
application thereof to anyone or under any circumstances is
adjudicated to be invalid or unenforceable in any jurisdiction,
such invalidity or unenforceability shall not affect any other
provision or application of this Agreement which can be given
effect without the invalid or unenforceable provision or
application and shall not invalidate or render unenforceable such
provision or application in any other jurisdiction. If any
provision is held void, invalid or unenforceable with respect to
particular circumstances, it shall nevertheless remain in full
force and effect in all other circumstances.
13. Remedies Cumulative; No Waiver. No remedy conferred
upon a party by this Agreement is intended to be exclusive of any
other remedy, and each and every such remedy shall be cumulative
and shall be in addition to any other remedy given under this
Agreement or now or hereafter existing at law or in equity. No
delay or omission by a party in exercising any right, remedy or
power under this Agreement or existing at law or in equity shall
be construed as a waiver thereof, and any such right, remedy or
power may be exercised by such party from time to time and as
often as may be deemed expedient or necessary by such party in
its sole discretion.
14. Beneficiaries/References. Executive shall be entitled,
to the extent permitted under any applicable law, to select and
change a beneficiary or beneficiaries to receive any compensation
or benefit payable under this Agreement following Executive's
death by giving the Company written notice thereof. In the event
of Executive's death or a judicial determination of Executive's
incompetence, reference in this Agreement to Executive shall be
deemed, where appropriate, to refer to Executive's beneficiary,
estate or other legal representative.
15. Miscellaneous. All section headings used in this
Agreement are for convenience only. This Agreement may be
executed in counterparts, each of which is an original. It shall
not be necessary in making proof of this Agreement or any
counterpart hereof to produce or account for any of the other
counterparts.
16. Withholding. The Company may withhold from any
payments under this Agreement all federal, state and local taxes,
as the Company is required to withhold pursuant to any law or
governmental rule or regulation. Executive shall bear all
expense of, and be solely responsible for, all federal, state and
local taxes due with respect to any payment received under this
Agreement.
17. Governing Law. This Agreement shall be governed by and
interpreted under the laws of the State of Connecticut without
giving effect to any conflict of laws provisions.
18. Establishment of Trust. The Company may establish an
irrevocable trust fund pursuant to a trust agreement to hold
assets to satisfy any of its obligations under this Agreement.
Funding of such trust fund shall be subject to the Board's
discretion, as set forth in the agreement pursuant to which the
fund will be established.
IN WITNESS WHEREOF, the undersigned, intending to be legally
bound, have executed this Agreement as of the date first above
written.
NORTHEAST UTILITIES
SERVICE COMPANY
/s/ Michael G. Morris By: /s/ Charles W. Shivery
Executive Name:
Title: