Exhibit 10.35.1
Northeast Utilities
Incentive Plan
Adopted by Northeast Utilities
Board of Trustees on January 13, 1998
Approved by Northeast Utilities
Shareholders on May 12, 1998
ARTICLE I
PURPOSE
The purpose of the Northeast Utilities Incentive Plan (the "Plan") is to
provide (i) designated employees of the Company (as hereinafter defined) and
(ii) non-employee members of the Board of Trustees (the "Board") of Northeast
Utilities, a Massachusetts business trust, ("NU") with the opportunity to
receive annual incentive compensation and grants of incentive stock options,
nonqualified stock options, stock appreciation rights, restricted stock and
performance units. The Company believes that the Plan will assist it in
recruiting talented employees who will contribute materially to the growth of
the Company, thereby benefitting NU's shareholders, and will align the
economic interests of the participants with those of the shareholders.
ARTICLE II
ADMINISTRATION
1. Committee. The Plan shall be administered and interpreted by the
Board's Compensation Committee, or the person or persons to which such
committee delegates any of its functions under the Plan (the "Committee").
The Committee may consist of two or more persons appointed by the Board, all
of whom shall be "outside directors" as defined under section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code") and related Treasury
regulations and "non-employee directors" as defined under Rule 16b-3 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
However, the Board may ratify or approve any grants as it deems appropriate
or as are submitted by the Committee.
2. Committee Authority. The Committee shall have the sole authority
to (i) establish, and review the Company's and the Grantee's, as defined
below, performance against, annual goals for purpose of the annual incentives
to be distributed and determine the individuals to whom grants shall be made
under the Plan, (ii) determine the type, size and terms of the grants to be
made to each such individual, (iii) determine the time when the grants will
be made and the duration of any applicable exercise or restriction period,
including the criteria for exercisability and the acceleration of
exercisability and (iv) deal with any other matters arising under the Plan.
3. Committee Determinations. The Committee shall have full power and
authority to administer and interpret the Plan, to make factual
determinations and to adopt or amend such rules, regulations, agreements and
instruments for implementing the Plan and for the conduct of its business as
it deems necessary or advisable, in its sole discretion. The Committee's
interpretations of the Plan and all determinations made by the Committee
pursuant to the powers vested in it hereunder shall be conclusive and binding
on all persons having any interest in the Plan or in any awards granted
hereunder. All powers of the Committee shall be executed in its sole
discretion, in the best interest of the Company, not as a fiduciary, and in
keeping with the objectives of the Plan and need not be uniform as to
similarly situated individuals.
ARTICLE III
ANNUAL INCENTIVE AWARDS
1. Eligibility for Participation. Each employee of the Company
classified as a Vice President or higher (an "Executive Employee") shall be
eligible to receive an annual incentive award (an "Award") under the Plan.
2. Annual Awards.
(a) As soon as practicable after the start of each fiscal year of NU,
but in any event within 90 days, the Committee shall set the financial target
for the Company which shall be the basis for determining the Awards to be
paid to each Executive Employee for such fiscal year. The financial target
shall be based on the growth of NU's stock price, earnings per share, net
earnings, operating earnings, return on assets, shareholder return, return on
equity, growth in assets, unit volume, sales, market share, or strategic
business criteria consisting of one or more objectives based on meeting
specified revenue goals, market penetration goals, geographic business
expansion goals, cost targets or goals relating to acquisitions or
divestitures and the Committee shall communicate the target and the
percentages (including minimums and maximums) for each Executive Employee
applicable to each level of achievement against the target set. In no event
may an individual Award for an Executive Employee exceed $3,500,000.
(b) The maximum amount of an Award for an Executive Employee shall be
based upon the Company's performance compared against the financial target
set for that fiscal year. The actual amount of the Award for any Executive
Employee may be reduced by the Committee if the Executive Employee does not
satisfy one or more of the individual financial or nonfinancial objectives
set by the Committee for that Executive Employee as of the beginning of the
relevant fiscal year. Any such objectives for an Executive Employee shall be
set by the Committee and announced to the affected Executive Employee no
later than 90 days after the commencement of the relevant fiscal year of NU.
(c) The Committee shall certify and announce the Awards that will be
paid by the Company to each Executive Employee as soon as practicable
following the final determination of the Company's financial results for the
relevant fiscal year. Payment shall normally be made, in cash, or in shares
of Company Stock (as hereinafter defined) or Options (as hereinafter defined)
the value of which shall equal the amount to be distributed, all as
determined by the Committee, within 90 days following the end of such fiscal
year, provided that the Executive Employee has not separated from employment
by the Company prior to the date that payment is due except as otherwise
specifically provided in a contract between the Company and the Executive
Employee. If an Executive Employee's employment terminated for Retirement
(as hereinafter defined), death or Disability (as hereinafter defined) a full
Award shall be paid (unless such event occurred during the fiscal year for
which the Award is earned, in which case the Award will be pro-rated as of
the date of termination) when all other payments are made in accordance with
the first sentence of this Section.
ARTICLE IV
STOCK-BASED GRANTS
1. Grants. Grants under the Plan may consist of grants of incentive stock
options ("Incentive Stock Options") or nonqualified stock options
("Nonqualified Stock Options")(Incentive Stock Options and Nonqualified Stock
Options are collectively referred to as "Options"), restricted stock
(Restricted Stock"), stock appreciation rights ("SARs"), and/or performance
units ("Performance Units") (hereinafter collectively referred to as
"Grants"). All Grants shall be subject to the terms and conditions set forth
herein and to such other terms and conditions consistent with this Plan as
the Committee deems appropriate and as are specified in writing by the
Committee to the individual in a grant instrument or an amendment to the
grant instrument (the "Grant Instrument"). The Committee shall approve the
form and provisions of each Grant Instrument. Grants under a particular
Section of the Plan need not be uniform as among the Grantees, as defined
below.
2. Eligibility for Participation.
(a) Eligible Persons. All employees of the Company ("Employees"),
including Employees who are officers or members of the Board, contractors of
the Company ("Contractors"), and members of the Board who are not Employees
("Non-Employee Trustees") shall be eligible to receive Grants under the Plan.
Contractors shall be eligible to receive Grants only of Nonqualified Stock
Options. Non-Employee Trustees shall be eligible to receive Grants only
under Article V of the Plan.
(b) Selection of Grantees. The Committee shall select the Employees
and Contractors to receive Grants and shall determine the number of shares of
Company Stock subject to a particular Grant in such manner as the Committee
determines. Employees, Contractors and Non-Employee Trustees who receive
Grants under this Plan shall hereinafter be referred to as "Grantees".
(c) Collective Bargaining Employees. Anything to the contrary in this
Plan notwithstanding, no Employee whose terms and conditions of employment
are subject to negotiation with a collective bargaining agent shall be
eligible to receive Grants under this Plan until the agreement between the
Company and such collective bargaining agent with respect to the Employee
provides for participation in the Plan.
3. Granting of Options.
(a) Number of Shares. The Committee shall determine the number of
shares of Company Stock that will be subject to each Grant of Options to
Employees and Contractors subject to the overall limits of Article IX.
(b) Type of Option and Price.
(i) The Committee may grant Incentive Stock Options that are
intended to qualify as "incentive stock options" within the meaning of
section 422 of the Code or Nonqualified Stock Options that are not intended
so to qualify or any combination of Incentive Stock Options and Nonqualified
Stock Options, all in accordance with the terms and conditions set forth
herein. Incentive Stock Options may be granted only to Employees.
Nonqualified Stock Options may be granted to Employees, Contractors and Non-
Employee Trustees.
(ii) The purchase price (the "Exercise Price") of Company Stock
subject to an Option shall be determined by the Committee and shall be equal
to or greater than the Fair Market Value (as defined below) of a share of
Company Stock on the date the Option is granted; provided, however, that an
Incentive Stock Option may not be granted to an Employee who, at the time of
grant, owns stock possessing more than 10 percent of the total combined
voting power of all classes of stock of the Company or any parent or
subsidiary of the Company, unless the Exercise Price per share is not less
than 110% of the Fair Market Value of Company Stock on the date of grant.
(iii) If the Company Stock is publicly traded, then the Fair
Market Value per share shall be the closing price of the Company Stock as
reported in the Wall Street Journal as composite transactions for the
relevant date (or the latest date for which such price was reported if such
date is not a business day), or if not available, determined as follows: (x)
if the principal trading market for the Company Stock is the New York Stock
Exchange, the last reported sale price thereof on the relevant date or (if
there were no trades on that date) the latest preceding date upon which a
sale was reported, (y) if the principal trading market for the Company Stock
is a national securities exchange other than the New York Stock Exchange or
is the Nasdaq National Market, the last reported sale price thereof on the
relevant date or (if there were no trades on that date) the latest preceding
date upon which a sale was reported, or (z) if the Company Stock is not
principally traded on such exchange or market, the mean between the last
reported "bid" and "asked" prices of Company Stock on the relevant date, as
reported on Nasdaq or, if not so reported, as reported by the National Daily
Quotation Bureau, Inc. or as reported in a customary financial reporting
service, as applicable and as the Committee determines. If the Company Stock
is not publicly traded or, if publicly traded, is not subject to reported
transactions or "bid" or "asked" quotations as set forth above, the Fair
Market Value per share shall be as determined by the Committee.
(c) Option Term. The Committee shall determine the term of each
Option. The term of any Option shall not exceed ten years from the date of
grant. However, an Incentive Stock Option that is granted to an Employee
who, at the time of grant, owns stock possessing more than 10 percent of the
total combined voting power of all classes of stock of the Company, or any
parent or subsidiary of the Company, may not have a term that exceeds five
years from the date of grant.
(d) Exercisability of Options. Options shall become exercisable in
accordance with such terms and conditions, consistent with the Plan, as may
be determined by the Committee and specified in the Grant Instrument. The
Committee may accelerate the exercisability of any or all outstanding Options
at any time for any reason.
(e) Termination of Employment, Retirement, Disability or Death.
(i) Except as provided below, an Option may only be exercised
while the Grantee is employed by, or providing service to, the Company as an
Employee, a Contractor, or a member of the Board. In the event that a
Grantee ceases to be employed by, or provide service to, the Company for any
reason other than a "Retirement," "Disability," death, or termination for
"Cause" (as hereinafter defined), any Option which is otherwise exercisable
by the Grantee shall terminate unless exercised within 90 days after the date
on which the Grantee ceases to be employed by, or provide service to, the
Company (or within such other period of time as may be specified by the
Committee), but in any event no later than the date of expiration of the
Option term. Any of the Grantee's Options that are not otherwise exercisable
as of the date on which the Grantee ceases to be employed by, or provide
service to, the Company shall terminate as of such date.
(ii) In the event the Grantee ceases to be employed by, or provide
service to, the Company on account of a termination for Cause by the Company,
any Option held by the Grantee shall terminate as of the date the Grantee
ceases to be employed by, or provide service to, the Company.
(iii) In the event the Grantee ceases to be employed by, or
provide service to, the Company because the Grantee Retires or is Disabled,
any Option which is otherwise exercisable by the Grantee shall terminate
unless exercised within one year after the date on which the Grantee ceases
to be employed by, or provide service to, the Company (or within such other
period of time as may be specified by the Committee), but in any event no
later than the date of expiration of the Option term. Any of the Grantee's
Options which are not otherwise exercisable as of the date on which the
Grantee ceases to be employed by, or provide service to, the Company shall
terminate as of such date.
(iv) If the Grantee dies while employed by, or providing service
to, the Company or within 90 days after the date on which the Grantee ceases
to be employed or provide service on account of a termination specified in
Section 5(e)(i) above (or within such other period of time as may be
specified by the Committee), any Option that is otherwise exercisable by the
Grantee shall terminate unless exercised within one year after the date on
which the Grantee ceases to be employed by, or provide service to, the
Company (or within such other period of time as may be specified by the
Committee), but in any event no later than the date of expiration of the
Option term. Any of the Grantee's Options that are not otherwise exercisable
as of the date on which the Grantee ceases to be employed by, or provide
service to, the Company shall terminate as of such date.
(v) For purposes of this Plan:
(A) "Cause" shall mean, except to the extent specified
otherwise by the Committee acting on behalf of the Company, (i) the Grantee's
conviction of a felony, (ii) in the reasonable determination of the
Committee, the Grantee's (x) commission of an act of fraud, embezzlement, or
theft in connection with the Grantee's duties in the course of the Grantee's
employment with the Company, (y) acts or omissions causing intentional,
wrongful damage to the property of the Company or intentional and wrongful
disclosure of confidential information of the Company, or (z) engaging in
gross misconduct or gross negligence in the course of the Grantee's
employment with the Company, or (iii) the Grantee's material breach of his or
her obligations under any written agreement with the Company if such breach
shall not have been remedied within 30 days after receiving written notice
from the Committee specifying the details thereof. For purposes of this
Program, an act or omission on the part of a Grantee shall be deemed
"intentional" only if it was not due primarily to an error in judgment or
negligence and was done by Grantee not in good faith and without reasonable
belief that the act or omission was in the best interest of the Company. In
the event a Grantee's employment or service is terminated for cause, in
addition to the immediate termination of all Grants, the Grantee shall
automatically forfeit all shares underlying any exercised portion of an
Option for which the Company has not yet delivered the share certificates,
upon refund by the Company of the Exercise Price paid by the Grantee for such
shares.
(B) "Disability" shall mean a Grantee's becoming disabled
within the meaning of the Company's long-term disability plan.
(C) "Employed by, or provide service to, the Company" shall
mean employment or service as an Employee, Contractor or member of the Board
(so that, for purposes of exercising Options and SARs and satisfying
conditions with respect to Restricted Stock and Performance Units, a Grantee
shall not be considered to have terminated employment or service until the
Grantee ceases to be an Employee, Contractor and member of the Board), unless
the Committee determines otherwise.
(D) "Retired" shall mean a termination of employment from the
Company on or after attaining age 65 or eligibility for normal or early
retirement under any retirement plan maintained by the Company.
(f) Exercise of Options. A Grantee may exercise an Option that has
become exercisable, in whole or in part, by delivering a notice of exercise
to the Company with payment of the Exercise Price. The Grantee shall pay the
Exercise Price for an Option as specified by the Committee (x) in cash, (y)
with the approval of the Committee, by delivering shares of Company Stock
owned by the Grantee (including Company Stock acquired in connection with the
exercise of an Option or Restricted Stock, as defined below, granted under
this Plan, subject to such restrictions as the Committee deems appropriate
including placing the same restrictions on the shares of Company Stock
obtained through the exchange of the Restricted Stock) and having a Fair
Market Value on the date of exercise equal to the Exercise Price or (z) by
such other method as the Committee may approve, including payment through a
broker in accordance with procedures permitted by Regulation T of the Federal
Reserve Board. Shares of Company Stock used to exercise an Option shall have
been held by the Grantee for the requisite period of time to avoid adverse
accounting consequences to the Company with respect to the Option. The
Grantee shall pay the Exercise Price and the amount of any withholding tax
due at the time of exercise.
(g) Limits on Incentive Stock Options. Each Incentive Stock Option
shall provide that, if the aggregate Fair Market Value of the stock on the
date of the grant with respect to which Incentive Stock Options are
exercisable for the first time by a Grantee during any calendar year, under
the Plan or any other stock option plan of the Company exceeds $100,000, then
the option, as to the excess, shall be treated as a Nonqualified Stock
Option. An Incentive Stock Option shall not be granted to any person who is
not an Employee of the Company.
ARTICLE V
STOCK OPTION GRANTS TO NON-EMPLOYEE TRUSTEES
1. Formula Option Grants to Non-Employee Trustees. A Non-Employee
Trustee shall be entitled to receive Nonqualified Stock Options in accordance
with this Article V.
(a) Initial Grant. Each Non-Employee Trustee who first becomes a
member of the Board after the effective date of this Plan shall receive, on
the date as of which he or she first becomes a member of the Board, a grant
of a Nonqualified Stock Option to purchase 2,500 shares of Company Stock.
(b) Annual Grants. On each date that NU holds its annual meeting of
shareholders, commencing with the 1998 annual meeting, each Non-Employee
Trustee who is in office immediately after the annual election of directors
(other than a director who is first elected to the Board at such meeting)
shall receive a grant of a Nonqualified Stock Option to purchase 2,500 shares
of Company Stock. The date of grant of each such annual Grant shall be the
date of the annual meeting of the Company's shareholders.
(c) Exercise Price. The Exercise Price per share of Company Stock
subject to an Option granted under this Article shall be equal to the Fair
Market Value of a share of Company Stock on the date of grant.
(d) Option Term and Exercisability. The term of each Option granted
pursuant to this Article shall be 10 years. Options granted under this
Article shall vest one-half on the date of grant and the other one-half on
the first anniversary of the date of grant if the Non-Employee Trustee is
still a member of the Board on each such date. Options shall be exercisable
in accordance with the provisions of Article IV, Section 3(e) except that
only the provisions of subsections (e)(i), (iii) where the Non-Employee
Trustee ceases to serve on the Board on or after age 70 and (iv) shall be
applicable.
(e) Payment of Exercise Price.
(i) The Non-Employee Trustee shall pay the Exercise Price for an
Option (x) in cash, (y) by delivering shares of Company Stock owned by the
Non-Employee Trustee and having a Fair Market Value on the date of exercise
equal to the Exercise Price or (z) by payment through a broker in accordance
with procedures permitted by Regulation T of the Federal Reserve Board.
Shares of Company Stock used to exercise an Option shall have been held by
the Grantee for the requisite period of time to avoid adverse accounting
consequences to the Company with respect to the Option. The Non-Employee
Trustee shall pay the Exercise Price at the time of exercise. Shares of
Company Stock shall not be issued upon exercise of an Option until the
Exercise Price is fully paid.
(ii) A Grantee may exercise an Option granted under this Article by
delivering to the Committee a notice of exercise as described below, with
accompanying payment of the Exercise Price in accordance with Subsection (i)
above. The notice of exercise may instruct the Company to deliver shares of
Company Stock due upon the exercise of the Option to any registered broker or
dealer designated by the Committee in lieu of delivery to the Grantee, and
shall designate the account into which the shares are to be deposited.
(f) Applicability of Plan Provisions. Except as otherwise provided in
this Article, Nonqualified Stock Options granted to Non-Employee Trustees
shall be subject to the provisions of this Plan applicable to Nonqualified
Stock Options granted to other persons, provided however that (i) if an event
described in Article IV, Section 3(b) occurs, appropriate adjustments, as
described in that Section, shall be made automatically, (ii) with respect to
the provisions of Article IV, Section 3(e), the Committee shall not have
discretion to modify the terms of such provisions in the Grant Instrument,
and (iii) in the event of a Change of Control (as defined in Article XI), the
provisions of Article XI, Section 2 shall apply to Options granted pursuant
to this Article, except that the Committee shall not have discretion under
subsection (c) thereof to modify the automatic provisions of that Section.
(g) Administration. The provisions of this Article are intended to
operate automatically and not require administration. To the extent that any
administrative determinations are required, any determinations with respect
to the provisions of this Article shall be made by the members of the Board
who are not eligible to receive Grants under this Article, but in no event
shall such determinations affect the eligibility of Grantees, the
determination of the Exercise Price, the timing of the Grants or the number
of shares subject to Options granted hereunder. If at any time there are not
sufficient shares available under the Plan to permit an automatic Grant as
described in this Article, the Grant shall be reduced pro rata (to zero, if
necessary) so as not to exceed the number of shares then available under the
Plan.
ARTICLE VI
RESTRICTED STOCK GRANTS
1. Restricted Stock Grants. The Committee may issue or transfer
shares of Company Stock to an Employee with such restrictions as the
Committee deems appropriate ("Restricted Stock"). The following provisions
are applicable to Restricted Stock:
(a) General Requirements. Shares of Company Stock issued or
transferred pursuant to Restricted Stock Grants may be issued or transferred
in exchange for services performed or to
be performed. The Committee may establish conditions under which
restrictions on shares of Restricted Stock shall lapse over a period of time
or according to such other criteria as the Committee deems appropriate. The
period of time during which the Restricted Stock will remain subject to
restrictions will be designated in the Grant Instrument as the "Restriction
Period."
(b) Number of Shares. The Committee shall determine the number of
shares of Company Stock to be issued or transferred pursuant to a Restricted
Stock Grant and the restrictions applicable to such shares, subject to the
limitations contained in Article IX.
(c) Requirement of Employment or Service. If the Grantee ceases to be
employed by, or provide service to, the Company during a period designated in
the Grant Instrument as the Restriction Period, or if other specified
conditions are not met, the Restricted Stock Grant shall terminate as to all
shares covered by the Grant as to which the restrictions have not lapsed, and
those shares of Company Stock must be immediately returned to the Company.
The Committee may, however, provide for complete or partial exceptions to
this requirement as it deems appropriate.
(d) Restrictions on Transfer and Legend on Stock Certificate. During
the Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the shares of Restricted Stock except to a Successor
Grantee, as defined below. Each certificate for a share of Restricted Stock
shall contain a legend giving appropriate notice of the restrictions in the
Grant. The Grantee shall be entitled to have the legend removed from the
stock certificate covering the shares subject to restrictions when all
restrictions on such shares have lapsed. The Committee may determine that
the Company will not issue certificates for shares of Restricted Stock until
all restrictions on such shares have lapsed, or that the Company will retain
possession of certificates for shares of Restricted Stock until all
restrictions on such shares have lapsed.
(e) Right to Vote and to Receive Dividends. Unless the Committee
determines otherwise, during the Restriction Period, the Grantee shall have
the right to vote shares of Restricted Stock and to receive any dividends or
other distributions paid on such shares, subject to any restrictions deemed
appropriate by the Committee.
(f) Lapse of Restrictions. All restrictions imposed on Restricted
Stock shall lapse upon the expiration of the applicable Restriction Period
and the satisfaction of all conditions imposed by the Committee. The
Committee may determine, as to any or all Restricted Stock Grants, that the
restrictions shall lapse without regard to any Restriction Period.
ARTICLE VII
STOCK APPRECIATION RIGHTS
1. Stock Appreciation Rights.
(a) General Requirements. The Committee may grant stock appreciation
rights ("SARs") to an Employee separately or in tandem with any Option (for
all or a portion of the applicable Option). Tandem SARs may be granted
either at the time the Option is granted or at any time thereafter while the
Option remains outstanding; provided, however, that, in the case of an
Incentive Stock Option, SARs may be granted only at the time of the Grant of
the Incentive Stock Option. The Committee shall establish the base amount of
the SAR at the time the SAR is granted. Unless the Committee determines
otherwise, the base amount of each SAR shall be equal to the per share
Exercise Price of the related Option or, if there is no related Option, the
Fair Market Value of a share of Company Stock as of the date of Grant of the
SAR.
(b) Tandem SARs. In the case of tandem SARs, the number of SARs
granted to a Grantee that shall be exercisable during a specified period
shall not exceed the number of shares of Company Stock that the Grantee may
purchase upon the exercise of the related Option during such period. Upon
the exercise of an Option, the SARs relating to the Company Stock covered by
such Option shall terminate. Upon the exercise of SARs, the related Option
shall terminate to the extent of an equal number of shares of Company Stock.
(c) Exercisability. An SAR shall be exercisable during the period
specified by the Committee in the Grant Instrument and shall be subject to
such vesting and other restrictions as may be specified in the Grant
Instrument. The Committee may accelerate the exercisability of any or all
outstanding SARs at any time for any reason. SARs may only be exercised
while the Grantee is employed by the Company or during the applicable period
after termination of employment as described in Article IV, Section 3(e). A
tandem SAR shall be exercisable only during the period when the Option to
which it is related is also exercisable.
(d) Value of SARs. When a Grantee exercises SARs, the Grantee shall
receive in settlement of such SARs an amount equal to the value of the stock
appreciation for the number of SARs exercised, payable in cash, Company Stock
or a combination thereof. The stock appreciation for an SAR is the amount by
which the Fair Market Value of the underlying Company Stock on the date of
exercise of the SAR exceeds the base amount of the SAR as described in
Subsection (a).
(e) Form of Payment. The Committee shall determine whether the
appreciation in an SAR shall be paid in the form of cash, shares of Company
Stock, or a combination of the two, in such proportion as the Committee deems
appropriate. For purposes of calculating the number of shares of Company
Stock to be received, shares of Company Stock shall be valued at their Fair
Market Value on the date of exercise of the SAR. If shares of Company Stock
are to be received upon exercise of an SAR, cash shall be delivered in lieu
of any fractional share.
ARTICLE VIII
PERFORMANCE UNITS
1. Performance Units.
(a) General Requirements. The Committee may grant performance units
("Performance Units") to an Employee. Each Performance Unit shall represent
the right of the Grantee to receive an amount based on the value of the
Performance Unit, if performance goals established by the Committee are met.
A Performance Unit shall be based on the Fair Market Value of a share of
Company Stock or on such other measurement base as the Committee deems
appropriate. The Committee shall determine the number of Performance Units
to be granted and the requirements applicable to such Units, subject to the
limitations contained in Article IX.
(b) Performance Period and Performance Goals. When Performance Units
are granted, the Committee shall establish the performance period during
which performance shall be measured (the "Performance Period"), performance
goals applicable to the Units ("Performance Goals") and such other conditions
of the Grant as the Committee deems appropriate. Performance Goals may
relate to the financial performance of the Company or its operating units,
the performance of Company Stock, individual performance, or such other
criteria as the Committee deems appropriate.
(c) Payment with respect to Performance Units. At the end of each
Performance Period, the Committee shall determine to what extent the
Performance Goals and other conditions of the Performance Units are met and
the amount, if any, to be paid with respect to the Performance Units.
Payments with respect to Performance Units shall be made in cash, in Company
Stock, or in a combination of the two, as determined by the Committee.
(d) Requirement of Employment or Service. If the Grantee ceases to be
employed by, or provide service to, the Company (as defined in Article IV,
Section 3(e)) during a Performance Period, or if other conditions established
by the Committee are not met, the Grantee's Performance Units shall be
forfeited. The Committee may, however, provide for complete or partial
exceptions to this requirement as it deems appropriate.
(e) Designation as Qualified Performance-Based Compensation. The
Committee may determine that Performance Units granted to an Employee shall
be considered "qualified performance-based compensation" under Section 162(m)
of the Code. The provisions of this subsection (e) shall apply to Grants of
Performance Units that are to be considered "qualified performance-based
compensation" under Section 162(m) of the Code.
(i) Performance Goals. When Performance Units that are to be
considered "qualified performance-based compensation" are Granted, the
Committee shall establish in writing (i) the objective performance goals that
must be met in order for amounts to be paid under the Performance Units, (ii)
the Performance Period during which the performance goals must be met, (iii)
the threshold, target and maximum amounts that may be paid if the performance
goals are met, and (iv) any other conditions, including without limitation
provisions relating to death, disability, other termination of employment or
Change of Control, that the Committee deems appropriate and consistent with
the Plan and Section 162(m) of the Code. The performance goals may relate to
the Employee's business unit or the performance of the Company and its
subsidiaries as a whole, or any combination of the foregoing. The Committee
shall use objectively determinable performance goals based on one or more of
the following criteria: stock price, earnings per share, net earnings,
operating earnings, return on assets, shareholder return, return on equity,
growth in assets, unit volume, sales, market share, or strategic business
criteria consisting of one or more objectives based on meeting specified
revenue goals, market penetration goals, geographic business expansion goals,
cost targets or goals relating to acquisitions or divestitures.
(ii) Establishment of Goals. The Committee shall establish the
performance goals in writing either before the beginning of the Performance
Period or during a period ending no later than the earlier of (i) 90 days
after the beginning of the Performance Period or (ii) the date on which 25%
of the Performance Period has been completed, or such other date as may be
required or permitted under applicable regulations under Section 162(m) of
the Code. The performance goals shall satisfy the requirements for
"qualified performance-based compensation," including the requirement that
the achievement of the goals be substantially uncertain at the time they are
established and that the goals be established in such a way that a third
party with knowledge of the relevant facts could determine whether and to
what extent the performance goals have been met. The Committee shall not
have discretion to increase the amount of compensation that is payable upon
achievement of the designated performance goals.
(iii) Maximum Payment. If Performance Units measured with
respect to the fair market value of Company Stock, are granted, not more than
25% of the total number of shares of Company Stock subject to the Plan in the
aggregate may be granted to an Employee under the Performance Units for any
Performance Period. If Performance Units are measured with respect to other
criteria, the maximum amount that may be paid to an Employee with respect to
a Performance Period is $3,500,000.
(iv) Announcement of Grants. The Committee shall certify and
announce the results for each Performance Period to all Grantees immediately
following the announcement of the Company's financial results for the
Performance Period. If and to the extent that the Committee does not so
certify that the performance goals have been met, the grants of Performance
Units for the Performance Period shall be forfeited.
ARTICLE IX
AUTHORIZED SHARES
1. Shares Subject to the Plan.
(a) Shares Authorized. Subject to the adjustment specified below, the
aggregate number of common shares of NU, par value $5.00, ("Company Stock")
that may be subject to Grants of Options, or transferred on account of other
Grants or Awards, under the Plan in any fiscal year of NU is one percent of
the total number of shares of Company Stock outstanding as of the first day
of such fiscal year; provided, however, that sum of the total number of
shares of Company Stock that may be granted as Restricted Stock plus the
number of Performance Units that may be granted, in any fiscal year, shall
not exceed 30% of the total number of shares of Company Stock available under
the Plan for such year; and provided, further, that the aggregate number of
shares of Common Stock that may be issued or transferred under the Plan
subject to Incentive Stock Options is 10% of the number of shares of Company
Stock outstanding as of December 31, 1997. The shares may be authorized but
unissued shares of Company Stock or reacquired shares of Company Stock,
including shares purchased by the Company on the open market for purposes of
the Plan. If and to the extent (i) less than the full number of shares
available for use under the Plan, as set forth above, are made the subject of
Grants or Awards in any year, or (ii) Options or SARs granted under the Plan
terminate, expire, or are canceled, forfeited, exchanged or surrendered
without having been exercised, or (iii) any shares of Restricted Stock or
Performance Units are forfeited, then the shares not made the subject of
Grants and Awards, and the shares subject to such terminated, expired,
canceled, forfeited, exchanged or surrendered Grants and Awards shall again
be available for purposes of the Plan in addition to the number of shares of
Company Stock otherwise available for Grants and Awards. No Grantee under
the Plan may receive aggregate Grants in excess of 2.5% of the total number
of shares of Company Stock outstanding as of December 31, 1997.
(b) Adjustments. If there is any change in the number or kind of
shares of Company Stock outstanding (i) by reason of a stock dividend,
spinoff, recapitalization, stock split, or combination or exchange of shares,
(ii) by reason of a merger, reorganization or consolidation in which NU is
the surviving entity, (iii) by reason of a reclassification or change in par
value, or (iv) by reason of any other extraordinary or unusual event
affecting the outstanding Company Stock as a class without NU's receipt of
consideration, or if the value of outstanding shares of Company Stock is
substantially reduced as a result of a spinoff or NU's payment of an
extraordinary dividend or distribution, the maximum number of shares of
Company Stock available for Grants, the maximum number of shares of Company
Stock that any individual participating in the Plan may be granted in any
year, the number of shares covered by outstanding Grants, the kind of shares
issued under the Plan, and the price per share or the applicable market value
of such Grants shall be appropriately adjusted by the Committee to reflect
any increase or decrease in the number of, or change in the kind or value of,
issued shares of Company Stock to preclude, to the extent practicable, the
enlargement or dilution of rights and benefits under such Grants; provided,
however, that any fractional shares resulting from such adjustment shall be
eliminated. Any adjustments determined by the Committee shall be final,
binding and conclusive.
ARTICLE X
OPERATING RULES
1. Withholding of Taxes. All Grants under the Plan shall be subject
to applicable federal (including FICA), state and local tax withholding
requirements. The Company shall have the right to deduct from all Grants
paid in cash, or from other wages paid to the Grantee, any federal, state or
local taxes required by law to be withheld with respect to such Grants. In
the case of Options and other Grants paid in Company Stock, the Company may
require the Grantee or other person receiving such shares to pay to the
Company the amount of any such taxes that the Company is required to withhold
with respect to such Grants, or the Company may deduct from other wages paid
by the Company the amount of any withholding taxes due with respect to such
Grants. If the Committee so permits, a Grantee may elect to satisfy the
Company's income tax withholding obligation with respect to an Option, SAR,
Restricted Stock or Performance Units paid in Company Stock by having shares
withheld up to an amount that does not exceed the Grantee's minimum
applicable withholding tax rate for federal (including FICA), state and local
tax liabilities. The election must be in a form and manner prescribed by the
Committee.
2. Transferability of Grants.
(a) Nontransferability of Grants. Except as provided below, only the
Grantee may exercise rights under a Grant during the Grantee's lifetime. A
Grantee may not transfer those rights except by will or by the laws of
descent and distribution or, with respect to Grants other than Incentive
Stock Options, if permitted in any specific case by the Committee, pursuant
to a domestic relations order (as defined under the Code or Title I of the
Employee Retirement Income Security Act of 1974, as amended, or the
regulations thereunder). When a Grantee dies, the personal representative or
other person entitled to succeed to the rights of the Grantee ("Successor
Grantee") may exercise such rights. A Successor Grantee must furnish proof
satisfactory to the Company of his or her right to receive the Grant under
the Grantee's will or under the applicable laws of descent and distribution.
(b) Transfer of Nonqualified Stock Options. Notwithstanding the
foregoing, the Committee may provide, in a Grant Instrument, that a Grantee
may transfer Nonqualified Stock Options to family members, one or more trusts
for the benefit of family members, or one or more partnerships of which
family members are the only partners, according to such terms as the
Committee may determine; provided that the Grantee receives no consideration
for the transfer of an Option and the transferred Option shall continue to be
subject to the same terms and conditions as were applicable to the Option
immediately before the transfer.
3. Requirements for Issuance or Transfer of Shares. No Company Stock
shall be issued or transferred in connection with any Grant hereunder unless
and until all legal requirements applicable to the issuance or transfer of
such Company Stock have been complied with to the satisfaction of the
Committee. The Committee shall have the right to condition any Grant made to
any Grantee hereunder on such Grantee's undertaking in writing to comply with
such restrictions on his or her subsequent disposition of such shares of
Company Stock as the Committee shall deem necessary or advisable as a result
of any applicable law, regulation or official interpretation thereof, and
certificates representing such shares may be legended to reflect any such
restrictions. Certificates representing shares of Company Stock issued or
transferred under the Plan will be subject to such stop-transfer orders and
other restrictions as may be required by applicable laws, regulations and
interpretations, including any requirement that a legend be placed thereon.
4. Funding of the Plan. This Plan shall be unfunded. The Company
shall not be required to establish any special or separate fund or to make
any other segregation of assets to assure the payment of any Grants under
this Plan. In no event shall interest be paid or accrued on any Grant,
including unpaid installments of Grants.
5. Rights of Participants. Nothing in this Plan shall entitle any
Employee or Non-Employee Director or other person to any claim or right to
be granted a Grant under this Plan except as provided in Article V. Neither
this Plan nor any action taken hereunder shall be construed as giving any
individual any rights to be retained by or in the employ of the Company or
any other employment rights.
6. No Fractional Shares. No fractional shares of Company Stock shall
be issued or delivered pursuant to the Plan or any Grant. The Committee
shall determine whether cash, other awards or other property shall be issued
or paid in lieu of such fractional shares or whether such fractional shares
or any rights thereto shall be forfeited or otherwise eliminated.
7. Headings. Section headings are for reference only. In the event
of a conflict between a title and the content of a Section, the content of
the Section shall control.
8. Effective Date of the Plan. Subject to approval by NU's
shareholders, the Plan shall be effective on January 1, 1998.
9. Definition of Company. "Company" means NU and any Affiliate which
is authorized by the Board to adopt the Plan and cover its eligible employees
and whose designation as such has become effective upon acceptance of such
status by the board of directors of the Affiliate. An Affiliate may revoke
its acceptance of such designation at any time, but until such acceptance has
been revoked, all the provisions of the Plan, including the authority of the
Board and the Committee, and amendments thereto shall apply to the eligible
employees of the Affiliate. In the event the designation is revoked by the
board of directors of an Affiliate, the Plan shall be deemed terminated only
with respect to such Affiliate. For the purposes hereof, "Affiliate" means
each direct and indirect affiliated company that directly or through one or
more intermediaries, controls, is controlled by, or is under common control
with NU.
ARTICLE XI
CHANGE OF CONTROL OF NU
1. Change of Control of NU.
As used herein, a "Change of Control" shall be deemed to have occurred:
(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 stockholders 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 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 consummation of all transactions intended to constitute
part of 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.
2. Consequences of a Change of Control.
(a) Notice and Acceleration. Upon a Change of Control, unless the
Committee determines otherwise, (i) the Company shall provide each Grantee
with outstanding Grants written notice of such Change of Control, (ii) all
outstanding Options and SARs shall automatically accelerate and become fully
exercisable, (iii) the restrictions and conditions on all outstanding
Restricted Stock shall immediately lapse, and (iv) Grantees holding
Performance Units shall receive a payment in settlement of such Performance
Units, in an amount determined by the Committee, based on the Grantee's
target payment for the Performance Period and the portion of the Performance
Period that precedes the Change of Control.
(b) Assumption of Grants. Upon a Change of Control where the Company
is not the surviving corporation (or survives only as a subsidiary of another
corporation), unless the Committee determines otherwise, all outstanding
Options and SARs that are not exercised shall be assumed by, or replaced with
comparable options or rights by, the surviving corporation.
(c) Other Alternatives. Notwithstanding the foregoing, subject to
subsection (d) below, in the event of a Change of Control, the Committee may
take one or both of the following actions: the Committee may (i) require that
Grantees surrender their outstanding Options and SARs in exchange for a
payment by the Company, in cash or Company Stock as determined by the
Committee, in an amount equal to the amount by which the then Fair Market
Value of the shares of Company Stock subject to the Grantee's unexercised
Options and SARs exceeds the Exercise Price of the Options or the base
amount of the SARs, as applicable, or (ii) after giving Grantees an
opportunity to exercise their outstanding Options and SARs, terminate any or
all unexercised Options and SARs at such time as the Committee deems
appropriate. Such surrender or termination shall take place as of the date
of the Change of Control or such other date as the Committee may specify.
(d) Committee. The Committee making the determinations under this
Article XI, Section 2(d) following a Change of Control must comprise the same
members as those on the Committee immediately before the Change of Control.
If the Committee members do not meet this requirement, the automatic
provisions of Subsections (a) and (b) shall apply, and the Committee shall
not have discretion to vary them.
(e) Limitations. Notwithstanding anything in the Plan to the contrary,
in the event of a Change of Control, the Committee shall not have the right
to take any actions described in the Plan (including without limitation
actions described in Subsection (c) above) that would make the Change of
Control ineligible for pooling of interests accounting treatment or that
would make the Change of Control ineligible for desired tax treatment if, in
the absence of such right, the Change of Control would qualify for such
treatment and the Company intends to use such treatment with respect to the
Change of Control.
ARTICLE XII
AMENDMENT AND TERMINATION
1. Amendment and Termination of the Plan.
(a) Amendment. The Board may amend or terminate the Plan at any time;
provided, however, that the Board shall not amend the Plan without
shareholder approval if such approval is required by section 422 of the Code
or section 162(m) of the Code.
(b) Termination of Plan. The Plan shall terminate on the day
immediately preceding the tenth anniversary of its effective date, unless the
Plan is terminated earlier by the Board or is extended by the Board with the
approval of the shareholders.
(c) Termination and Amendment of Outstanding Grants. A termination or
amendment of the Plan that occurs after a Grant is made shall not materially
impair the rights of a Grantee unless the Grantee consents or unless the
Committee acts under Article XI, Section 2(c). The termination of the Plan
shall not impair the power and authority of the Committee with respect to an
outstanding Grant.
(d) Governing Document. The Plan shall be the controlling document.
No other statements, representations, explanatory materials or examples, oral
or written, may amend the Plan in any manner. The Plan shall be binding upon
and enforceable against the Company and its successors and assigns.
ARTICLE XIII
MISCELLANEOUS
1. Grants in Connection with Corporate Transactions and Otherwise.
Nothing contained in this Plan shall be construed to (i) limit the right
of the Committee to make Grants under this Plan in connection with the
acquisition, by purchase, lease, merger, consolidation or otherwise, of the
business or assets of any corporation, firm or association, including Grants
to employees thereof who become Employees of the Company, or for other proper
corporate purposes, or (ii) limit the right of the Company to grant stock
options or make other awards outside of this Plan. Without limiting the
foregoing, the Committee may make a Grant to an employee of another
corporation who becomes an Employee by reason of a corporate merger,
consolidation, acquisition of stock or property, reorganization or
liquidation involving the Company or any of its subsidiaries in substitution
for a stock option or restricted stock grant made by such corporation. The
terms and conditions of the substitute grants may vary from the terms and
conditions required by the Plan and from those of the substituted stock
incentives. The Committee shall prescribe the provisions of the substitute
grants.
2. Compliance with Law. The Plan, the exercise of Options and SARs
and the obligations of the Company to issue or transfer shares of Company
Stock under Grants shall be subject to all applicable laws and to approvals
by any governmental or regulatory agency as may be required. With respect to
persons subject to section 16 of the Exchange Act, it is the intent of the
Company that the Plan and all transactions under the Plan comply with all
applicable provisions of Rule 16b-3 or its successors under the Exchange Act.
In addition, it is the intent of the Company that the Plan and applicable
Grants under the Plan comply with the applicable provisions of sections
162(m) and 422 of the Code. To the extent that any legal requirement of
section 16 of the Exchange Act or section 162(m) or 422 of the Code as set
forth in the Plan ceases to be required under section 16 of the Exchange Act
or section 162(m) or 422 of the Code, that Plan provision shall cease to
apply. The Committee may revoke any Grant if it is contrary to law or modify
a Grant to bring it into compliance with any valid and mandatory government
regulation. The Committee may also adopt rules regarding the withholding of
taxes on payments to Grantees. The Committee may, in its sole discretion,
agree to limit its authority under this Section.
3. Governing Law. The validity, construction, interpretation and
effect of the Plan and Grant Instruments issued under the Plan shall
exclusively be governed by and determined in accordance with the law of the
State of Connecticut.
4. Disclaimer of Liability. The Declaration of Trust of NU provides
that no shareholder of NU shall be held to any liability whatever for the
payment of any sum of money, or for damages or otherwise under any contract,
obligation or undertaking made, entered into or issued by the Board or by any
officer, agent or representative elected or appointed by the Board, and no
such contract, obligation or undertaking shall be enforceable against the
Board or any of them in their or his or her individual capacities or capacity
and all such contracts, obligations and undertakings shall be enforceable
only against the Board as such, and every person or entity, having any claim
or demand arising out of any such contract, obligation or undertaking shall
look only to the trust estate for the payment or satisfaction thereof.