Exhibit 10.42.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") entered into as of April 1,
2003, by and between Northeast Utilities Service Company, a Connecticut
corporation ("NUSCO"), with its principal office in Berlin, Connecticut, and
John H. Forsgren, a resident of East Hartford, Connecticut ("Executive").
WHEREAS, Executive is currently employed as Executive Vice President,
Vice Chairman and Chief Financial Officer of Northeast Utilities ("NU") and
holds senior executive positions with certain of the subsidiaries of NU (NU
and the Affiliates, as such term is defined in Section 6.1(a), of NU being
referred to collectively herein as the "Company") and both parties desire to
enter into an agreement superseding all prior employment agreements to reflect
Executive's contribution to the Company's business in Executive's executive
capacities and to provide for Executive's continued 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 continue the employment
of 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 April 1, 2003 (the "Effective Date") and shall
continue until March 31, 2004, 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 March 31, 2004 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 in such senior
positions as directed by NUSCO's Board of Directors (the "Board") or the Board
of Trustees (the "Trustees") of 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 making
minority investments in other businesses or enterprises provided that Executive
agrees not to become engaged in any other business activity which, in the
reasonable judgment of the Board, 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,
NUSCO shall pay Executive a base salary ("Base Salary"), commencing on the
Effective Date, at the annual rate then being paid to Executive by NUSCO
payable in installments at such times as NUSCO 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. Executive's annual Base Salary
shall not be reduced below $570,000 without Executive's written consent.
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 to the retirement benefits to which Executive would otherwise
be entitled upon retirement from the employ of the Company or a successor
affiliate within the NU system (the "Employer"), under the Retirement Plan and
under the existing Supplemental Plan, Executive will be entitled to two
additional benefits that will be payable by the Employer:
(1) For the first ten years of Executive's employment by the Employer,
Executive will accrue retirement benefits under the Retirement Plan and the
Supplemental Plan at the rate of two years of Credited Service (as defined by
the Retirement Plan) for each one year of actual service, and the Employer will
pay Executive after his retirement from the Employer a supplemental, non-
qualified benefit reflecting the difference between the amount determined in
accordance with this enhanced Credited Service and the amounts that Executive
will be entitled under the Retirement Plan and the Supplemental Plan. This
payment will be made monthly until Executive's death, without limit of time.
This benefit will not survive Executive's death or be available in part to a
surviving spouse, except that Executive may elect to receive it in one of the
forms of payment available from the Retirement Plan that reduces Executive's
monthly payment in order to provide for survivor benefits.
(2) In addition to Executive's benefits under the Retirement Plan and the
Supplemental Plan, and the supplemental benefit attributable to enhanced
Credited Service described in paragraph (1) above, the Employer will pay
Executive after his retirement from the Employer an additional supplemental,
non-qualified benefit, on a monthly basis for the fifteen years after
Executive's retirement begins, in an amount equal to 25 percent of FAC, as
defined below, reduced by four percentage points for each year that Executive's
age is less than 65 years at the time of Executive's retirement from the
Employer. As used in this paragraph, "FAC" means Executive's monthly Final
Average Compensation, as defined in the Supplemental Plan, but limited to
170 percent of the monthly average of Executive's high consecutive 36 months
of base salary. This benefit will not survive Executive's death or be
available in part to a surviving spouse.
In addition, if Executive remains employed with the Employer until
Executive attains age 58 (age 55 in the event that Executive executes the
Release required by Section 5.4(b) hereof following a Termination upon a Change
of Control as defined in Section 6.1(f) hereof, (a) Executive will be vested
in and eligible to receive upon Executive's voluntary termination thereafter,
notwithstanding Section 5.5 hereof, a Target Benefit in accordance with the
terms of the Supplemental Plan notwithstanding that Executive had not attained
age 60, (b) such Target Benefit will not be reduced to reflect commencement
prior to age 65 as otherwise would be required under Section V(a) of the
Supplemental Plan or Section 6.4(a) hereof, and (c) assuming that Section
6.4(a) hereof does not apply to such termination, three (3) years will be
added to Executive's service for purposes of such Target Benefit.
1.6. Reimbursement of Expenses; Vacation. Executive shall be provided
with reimbursement of expenses related to Executive's employment by NUSCO 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 vacation and
holidays in accordance with the Company's normal personnel policies for senior
level executives.
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 100% and 200%
respectively of Executive's Base Salary, except that the Trustees may change
these "target opportunity" and "maximum opportunity" percentages as part of
a general revision of executive compensation which also applies to other
senior level executives of the Company. 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 Trustees' reasonable discretion, not
later than such payments are made to the Company's senior level executives
generally.
1.8. Long-Term Incentive Compensation. Executive shall also 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" and "maximum opportunity" under
any such program shall be at least 150% and 300% respectively of Executive's
Base Salary, except that the Trustees may change these "target opportunity" and
"maximum opportunity" percentages as part of a general revision of executive
compensation which also applies to other senior level executives of the
Company. Executive's long-term incentive compensation, either in shares of NU,
restricted stock units, options or cash, as applicable from time to time, shall
be paid to Executive, subject to the Trustees' reasonable discretion, not later
than such payments are made to the Company's senior level executives generally.
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 certain confidential and proprietary information
relating to the business of the Company, which may include, but is not limited
to, trade secrets, trade "know-how", 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, directly or indirectly, Executive
will not 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 NUSCO in writing promptly of such required
disclosure, 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) which 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.
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 regulated business or enterprise in which the Company is engaged
("Competitive Company"). 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.
Further, for the purposes of this Section, "Competitive Company" shall mean
Consolidated Edison, Inc., Energy East Corporation, Hydro-Quebec, KeySpan
Energy, National Grid USA, NSTAR, or The United Illuminating Company, their
assigns or successors, or any other company which in the future engages in
competition with the regulated business of the Company in the Service Area.
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, except with the prior written consent of the Trustees, 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.
(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.
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
NUSCO 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 NUSCO 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, 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.
5. Termination. The Employment Term shall terminate upon the occurrence
of any one of the following events:
5.1. Disability. NUSCO 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
NUSCO shall continue to pay Executive's Base Salary until NUSCO 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, NUSCO 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. 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 eclaiming under or through Executive.
5.3. Cause. NUSCO 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 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) NUSCO 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 NUSCO informs
Executive that the Agreement will not be renewed after March 31, 2004 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 provisions of Section 5.4(a) (other than the last
sentence), 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; and
(vi) Under the Supplemental Plan, Executive shall be entitled to receive a
Target Benefit and a Make-Whole Benefit commencing on the first day of any
month following Executive's Termination, 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, using the Termination Date as the "date of retirement" contemplated by
Section IV(b) of the Supplemental Plan; Executive's years of service with the
Company through the 24th month following the Termination Date shall be taken
into account 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, utilizing the early commencement factor for Executive's age
and years of service, each as so modified, set forth in the Company's
Retirement Plan as in effect on the Termination Date; and
(vii) All stock option grants, 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, and had satisfied
all time requirements as to exercise, including the right of exercise, where
appropriate, within 36 months after the removal or non-renewal.
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 any
benefits due in accordance with the terms of any applicable plan and programs
of the Company.
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, for a calendar year, Executive's
annualized Base Salary as would be reported for federal income tax purposes on
Form W-2 for such calendar year, together with any and all salary reduction
authorized amounts under any of the Company's benefit plans or programs for
such calendar year, and all short-term incentive compensation at the target
level to be paid to Executive in all employee capacities with the Company
attributable to such calendar year and taxable in the following calendar year.
"Base Compensation" shall be the higher of (i) Base Compensation for the
calendar year in which occurs the Change of Control or, if no Change of Control
occurs, the calendar year in which occurs the involuntary termination; or (ii)
Base Compensation for the full calendar year immediately prior thereto.
"Base Compensation" shall not include the value of any stock options,
performance units, or other elements of Long-Term Incentive Compensation or any
exercise thereunder.
(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 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 NU's shareholders was approved by a vote of at least
a majority of the trustees then comprising the Incumbent Trustees shall be
considered as though such individual were a member of the Incumbent Trustees,
but excluding, for this purpose, any such individual whose initial assumption
of office is in connection with an actual or threatened election contest
relating to the election of the Trustees of NU (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act); or
(iii) Consummation by NU of a reorganization, merger or consolidation
(a "Business Combination"), in each case, with respect to which all or
substantially all of the individuals and entities who were the respective
beneficial owners of the Outstanding Common Shares and Voting Securities
immediately prior to such Business Combination do not, following consummation
of all transactions intended to constitute part of such Business Combination,
beneficially own, directly or indirectly, more than 50% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election
of directors, as the case may be, of the corporation, business trust or
other entity resulting from or being the surviving entity in such Business
Combination in substantially the same proportion as their ownership immediately
prior to such Business Combination of the Outstanding Common Shares and Voting
Securities, as the case may be; or
(iv) Consummation of a complete liquidation or dissolution of NU or sale
or other disposition of all or substantially all of the assets of NU other than
to a corporation, business trust or other entity with respect to which,
following consummation of all transactions intended to constitute part of such
sale or disposition, more than 50% 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 March 31, 2004 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 Trustees abandon the transaction, on the date the Trustees 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 of 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 the purposes hereof.
Notwithstanding the foregoing, for purposes of this definition: (i) a
Termination of Employment which occurs prior to consummation of a Change of
Control shall not constitute a Termination upon a Change of Control, as
determined above, unless it is specifically approved by the Trustees in their
sole discretion; and (ii) a Termination initiated by Executive prior to
consummation of a Change of Control shall not constitute a Termination upon a
Change of Control if the failure, reduction, assignment or transfer is
determined by the Trustees to be unrelated to the impending Change of Control.
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, NUSCO agrees (a) in the event Executive executes the Release required
by Section 5.4(b), to pay to Executive, in a single cash payment, within thirty
days after the Termination Date, two multiplied by 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, 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, whether or not
Executive is then age 60 and notwithstanding the Plan's requirement that a
participant retire on or after age 55 and be entitled to a vested benefit under
the Company's Retirement Plan. There shall be an actuarial reduction in the
event the Target Benefit and Make-Whole Benefit commence prior to age 65, if at
the Termination Date Executive has not yet attained age 52, or if at the
Termination Date Executive has not attained age and service for retirement
benefit calculations that total at least 85 years. The actuarial reduction
shall be 2% for each year younger than age 65 to age 60, if applicable, 3% for
each year younger than age 60 to age 55 and a full actuarial reduction, as
determined by the enrolled actuary for the Retirement Plan, for each year
younger than 55. Executive's years of service with the Company through the
36th month following the Termination Date shall be taken into account 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
Executive's eligibility for both such Benefits and the actuarial reduction
under the Plan as modified herein. Executive shall determine the form of
payment in which the Target Benefit and Make-Whole Benefit shall be paid, in
accordance with the terms of the Supplemental Plan or may elect to receive 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 commence or be made within 30 days after the
Termination Date or on any date thereafter, as specified by Executive in a
written election. Such election may be made at any time and amended at any
time but any election or amendment, other than one made within 30 days of the
Effective Date, shall be ineffective if made within six months prior to the
Termination Date. In the absence of any election or determination provided for
herein, the terms of the Supplemental Plan shall govern the form and time of
payment.
(b) Executive's years of service with the Company through the 36th month
following the Termination Date shall be taken into account in determining
Executive's eligibility for, but not amount of cost sharing under, the
Company's retiree health plan and, in addition, 36 months shall be added to
Executive's age for this purpose.
(c) Unless the Compensation Committee of the Northeast Utilities Board of
Trustees comprises the same members as those on the Committee immediately
before the Change of Control and determines otherwise, (i) all stock option
grants previously granted to Executive, to the extent not already vested prior
to such occurrence, shall be fully vested and immediately exercisable as if
Executive had satisfied all requirements as to exercise, including the right of
exercise, where appropriate, within 36 months of such occurrence 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 value of a share of
stock on the day the option is exercised shall be deemed to be the closing
price on the day such Voting Securities cease trading; and (ii) if NU is not
the surviving corporation (or survives only as a subsidiary of another
corporation), those portions of any such options that have not been exercised
shall be assumed by, or replaced with comparable options or rights by, the
surviving corporation. Notwithstanding the foregoing, such Committee (if
composed of the same members as those on the Committee immediately before the
Change of Control) may require Executive to surrender the remainder of any or
all such options, in each case in exchange for a payment by the Company, in
cash or common shares as determined by the Committee, in an amount equal to
the amount by which the then fair market value of the common shares subject
to such option exceeds the exercise price per share of such option, or, after
giving Executive an opportunity to exercise such option, terminate the option
at such time as the Committee deems appropriate.
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 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 which 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:
John H. Forsgren
235 East River Dr.
East Hartford, CT 06108
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, extended 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. Adoption by Affiliates; Obligations. The obligations under this
Agreement shall, in the first instance, be paid and satisfied by NUSCO;
provided, however, that, NUSCO will use its best efforts to cause NU and each
entity in which NU (or its successors or assigns) now or hereafter holds,
directly or indirectly, more than a 50 percent voting interest to approve and
adopt this Agreement and, by such approval and adoption, to be bound by the
terms hereof as though a signatory hereto. If NUSCO shall be dissolved or for
any other reason shall fail to pay and satisfy the obligations, each individual
such entity thereafter shall be jointly and severally liable to pay and
satisfy the obligations to Executive.
19. 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/ John H. Forsgren By /s/ Michael G. Morris
Executive
Date: April 10, 2003 Date: April 10, 2003