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ENERGYNORTH, INC.
KEY EMPLOYEE PERFORMANCE AND
EQUITY INCENTIVE PLAN
This Key Employee Performance and Equity Incentive Plan was
adopted on November 18, 1992 and amended as of October 1, 1995 by
the Board of Directors of EnergyNorth, Inc. for the benefit of
its key employees.
1. DEFINITIONS.
The following terms shall have the following meanings:
1.1 "Award Agreement" shall mean the written agreement between
the Company and a Key Employee setting forth the terms and
conditions under which an Incentive Award is made.
1.2 "Change of Control" shall mean:
1.2.1 The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from
the Company (excluding an acquisition by virtue of the exercise
of a conversion privilege), (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company or (iv) any acquisition by any
corporation pursuant to a reorganization, merger or
consolidation, if, following such reorganization, merger or
consolidation, the conditions described in clauses (i), (ii) and
(iii) of subparagraph 1.2.3 of this subsection are satisfied; or
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1.2.2 Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date of adoption
of this Plan whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of either an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board; or
1.2.3 Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation, (i) more
than 60% of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such
reorganization, merger or consolidation, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding the Company, any
employee benefit plan (or related trust) of the Company or such
corporation resulting from such reorganization, merger or
consolidation and any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation, directly
or indirectly, 20% or more of the Outstanding Company Common
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stock or Outstanding Company Voting Securities, as the case may
be) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or
consolidation were members of the Incumbent Board at the time of
the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
1.2.4 Approval by the shareholders of the Company of (i) a
complete liquidation or dissolution of the Company or (ii) the
sale or other disposition of all or substantially all of the
assets of the Company, other than to a corporation, with respect
to which following such sale or other disposition, (A) more than
60% of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B) no
Person (excluding the Company and any employee benefit plan (or
related trust) of the Company or Such corporation and any Person
beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 20% or more of the
Outstanding Company Common Stock or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or
indirectly 20% or more of, respectively, the then outstanding
shares of common stock of such corporation and the combined
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voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors and (C) at least a majority of the members of the board
of directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement or
action of the Board providing for such sale or other disposition
of assets of the Company.
1.3 "Committee" shall mean the Compensation Committee of the
Board of Directors of the Company.
1.4 "Company" shall mean EnergyNorth, Inc.
1.5 "Deferred Retirement" shall have the same meaning as in the
EnergyNorth, Inc. Retirement Plan for Salaried Employees dated
January 4, 1984, as amended, restated, or replaced from time to
time.
1.6 "Early Retirement" shall have the same meaning as in the
EnergyNorth, Inc. Retirement Plan for Salaried Employees dated
January 4, 1984, as amended, restated or replaced from time to
time.
1.7 "Effective Date" shall mean November 18, 1992.
1.8 "Extraordinary Items" shall mean those items of income or
expense that are determined to be unusual or extraordinary and of
a nature that would be inappropriate to affect incentive
compensation in the Committee's sole judgment.
1.9 "Forfeiture Period" shall have the meaning set forth in
section 9.1 of the Plan.
1.10 "Incentive Award" shall mean awards of cash and shares
granted to Participants pursuant to the terms of the Plan.
1.11 "Key Employees" shall mean those officers and employees of
the Company whose performance and retention, in the judgment of
the Committee, is of distinct importance to the operation and
financial results of the Company.
1.12 "Normal Retirement" shall have the same meaning as in the
EnergyNorth, Inc.'s Retirement Plan for Salaried Employees dated
January 1, 1984, as amended, restated, or replaced from time to
time.
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1.13 "Participant" shall have the meaning set forth in Section 6
of the Plan.
1.14 "Plan" shall mean the EnergyNorth, Inc. Key Employee
Performance and Equity Incentive Plan.
1.15 "Plan Year" shall mean the Company's fiscal year during each
year of the term of the Plan, beginning with the fiscal year
ending September 30, 1993.
1.16 "Ratepayer Interests" shall have the meaning set forth
subsection 7.2.1 of the Plan.
1.17 "Salary Midpoint of the Market Interval" shall mean the
midpoint between the minimum and maximum base salary within the
salary range for a Key Employee, as such salary range may be
established from time to time by the Board of Directors.
1.18 "Shareholder Interests" shall have the meaning set forth in
subsection 7.2.2 of the Plan.
1.19 "Shares" shall mean shares of the Company's common stock,
$1.00 par value, granted pursuant to Incentive Awards.
1.20 "Share Award Date" shall have the meaning set forth in
subsection 8.3 of the Plan.
2. PURPOSE.
The Plan is intended to compensate Key Employees based upon
performance standards and objectives and to reward performance
with share ownership in the Company so that Key Employees have a
greater proprietary interest in the Company. The Plan is
intended to provide for competitive, market-based total
compensation for Key Employees comprised of base salary plus
incentive salary that is at risk. By encouraging share
ownership, the Company seeks to attract, retain and motivate
highly qualified Key Employees, and to align the interests of Key
Employees with the interests of shareholders and ratepayers.
3. TERM.
The Plan was approved by the Company's Board of Directors on
November 18, 1992 (the "Effective Date"), subject to approval by
the Company's shareholders at the Company's February 3, 1993
annual meeting. The Plan shall expire ten years from the
Effective Date on November 17, 2002.
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4. SHARES SUBJECT TO PLAN.
The number of shares of the Company's $1.00 par value common
stock that may be awarded under the Plan is 200,000.
5. PLAN ADMINISTRATION.
The Plan shall be administered by the Compensation Committee
of the Company's Board of Directors. Members of the Committee
shall not participate in the Plan. The Committee shall
determine, subject to the express provisions of the Plan, the Key
Employees to whom Incentive Awards will be granted, the
performance criteria upon which Incentive Awards will be based in
a Plan Year, and the terms and provisions (including amendments
thereto) of the respective Award Agreements (which need not be
identical), including such terms and provisions (and amendments)
as shall be required in the judgment of the Committee to conform
to any change in any applicable law or regulation. The Committee
shall have full power to construe and interpret the Plan and to
establish rules and regulations for its administration. The
Committee's determination on the foregoing matters shall be by a
majority of the Committee, and its determinations and decisions
shall be final and binding upon all persons. Notwithstanding the
foregoing or any other provision of the Plan, no Incentive Award
shall be made by the Committee without the prior approval of a
majority of the members of the Board of Directors of the Company
who at the time are ineligible to participate in the Plan.
6. ELIGIBLE EMPLOYEES.
Incentive Awards may be granted to such Key Employees of the
Company or its subsidiaries (including members of the Board of
Directors who are also employees) as may be selected by the
Committee (a "Participant").
Unless otherwise determined by the Committee, in its sole
discretion, participants whose employment with the Company
terminates, voluntarily or involuntarily, prior to the last day
of a Plan Year shall not be entitled to receive any Incentive
Award with respect to that Plan Year unless such termination
occurred as a result of death, total disability (as defined in
Section 9.1.2), or Early, Normal or Deferred Retirement from
employment (in any of which events the award shall be prorated
for the portion of the Plan Year during which the Key Employee
was employed by the Company). Unless otherwise determined by the
Committee, in its sole discretion, participants whose employment
with the Company or participation in the Plan commences after the
first day of a Plan Year shall not be entitled to receive an
Incentive Award, if any, with respect to that Plan Year.
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7. INCENTIVE AWARDS.
The Plan allows Participants to earn a portion of their
compensation based upon performance criteria established annually
by the Committee.
7.1 Percentage of Salary. Prior to or early in each Plan Year,
the Committee shall establish the maximum amount of Incentive
Awards to be awarded for the ensuing Plan Year, expressed as a
percentage of each Participant's Salary Midpoint of the Market
Interval.
7.2 Performance Criteria. Prior to the beginning of each Plan
Year, the Committee shall establish the performance criteria upon
which Incentive Awards for the ensuing Plan year will be based.
The specific performance criteria selected by the Committee shall
encompass the following general areas:
7.2.1 Criteria directed at promoting efficiency of
operations, controlling cost of service, cost measured against
inflation, and other operational criteria ("Ratepayer
Interests");
7.2.2 criteria directed at achieving income objectives, pro-
fitability, shareholder return and other financial performance
criteria ("Shareholder Interests"); and
7.3 Discretion. In addition to the performance criteria
described above, a discretionary assessment of a Participant's
individual contribution to Ratepayer Interests and Shareholder
Interests shall be made. Such discretionary assessment shall be
made by the Committee.
7.4 Annual Establishment of Standards. The Committee shall
establish performance standards in each general performance area
and the relative weight, expressed as a percentage, given to each
general performance area for each Plan Year. The specific
performance criteria and the relative weight given to Ratepayer
Interests, Shareholder Interests and the discretionary assessment
shall be set forth in writing for each Plan Year and shall be
attached as an Appendix of Annual Performance Criteria.
7.5 Earnings Threshold. The Committee shall annually set
earnings thresholds based upon a comparison of actual earnings of
the Company for a Plan Year to (i) its forecasted earnings for
that Plan Year and (ii) the amount of dividends paid during the
Plan Year. No Incentive Awards shall be made by the Committee if
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Company earnings (adjusted for Extraordinary Items) in a Plan
Year are below the threshold levels established for that year.
The earnings thresholds for each Plan Year shall be set forth in
the Appendix of Annual Performance Criteria.
8. PAYMENT OF INCENTIVE AWARDS.
Within a reasonable time after all necessary information is
available to the Committee following each Plan Year, the
Committee shall determine the amount of Incentive Award grants
for the previous Plan Year in accordance with the provisions of
the Plan and subject to the prior approval of a majority of the
members of the Board of Directors of the Company who at the time
are ineligible to participate in the Plan. Twenty-five percent
of any Incentive Award will be awarded in the form of Shares, and
the balance awarded in cash, subject to the terms and conditions
set forth below.
8.1 Payment of Cash Awards. That portion of a Participant's
Incentive Award payable in cash shall be paid as soon as
practicable following the close of the Plan Year.
8.2 Grant of Shares. Shares granted pursuant to an Incentive
Award for a Plan Year shall be issued as follows:
8.2.1 Shares shall be issued as compensation for employment,
without payment of additional consideration;
8.2.2 The number of Shares issued shall be determined by dividing
an amount equal to twenty-five percent of a Participant's
total Incentive Award by the average of the closing prices
of the Company's common stock, as reported on the New York
Stock Exchange, during the last ten trading days of the Plan
Year to which the incentive Award applies; and
8.2.3 the Shares shall be subject to certain transfer restrictions
and risk of forfeiture in accordance with the terms
of Section 9 of the Plan.
8.3 Award Agreement. At the time that Shares are granted
pursuant to an Incentive Award ("Share Award Date"), each
Participant shall be required to execute an Award Agreement which
shall provide, among other things, for escrow of Shares
consistent with Section 10 hereof, forfeiture and
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nontransferability consistent with Section 9 hereof, such
representations of the Participant as are appropriate in the
Committee's discretion, and such other terms and provisions as
are appropriate in the sole judgment of the Committee.
9. RESTRICTIONS ON TRANSFER; FORFEITURE.
Shares awarded pursuant to Incentive Awards shall be subject
to forfeiture to the Company and shall not be transferred by a
Participant for a period of three years from the Share Award
Date.
9.1 Forfeiture. Shares shall be forfeited to the Company by a
Participant if his or her employment is terminated within three
years from the Share Award Date (the "Forfeiture Period"),
provided, however, that a Participant's Shares shall not be
forfeited for a termination of employment by reason of:
9.1.1 the death of a Participant;
9.1.2 the total disability of a Participant, as that term is
defined in Section 72(m)(7) of the Internal Revenue Code of
1986, as amended; and
9.1.3 Early, Normal or Deferred Retirement from employment of
a Participant.
9.2 Nontransferability. For a period of three years from the
Share Award Date, a Participant shall not sell, assign, convey,
pledge or otherwise transfer any shares, except by will or the
laws of descent and distribution, or pursuant to a qualified
domestic relations order as defined by the Internal Revenue Code
of 1986, as amended, or by Title I of the Employee Retirement
Income Security Act ("ERISA") or the rules thereunder. No shares
shall be reached by, or be subject to, any legal, equitable or
other process, including any bankruptcy proceeding, or be subject
to the interference or control of creditors of a Participant, or
in any other way or manner including execution, attachment or
similar process except with the consent of the Company.
9.3 Termination of Restrictions. The Forfeiture Period and the
restrictions on transfer set forth in Sections 9.1 and 9.2 shall
automatically terminate in the event of the death, disability (as
defined in Section 9.1.2) or the later of Normal Retirement or
Deferred Retirement of a Participant, or in the event of a Change
of Control.
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10. ESCROW OF SHARES - RIGHTS AS SHAREHOLDER.
10.1 Escrow. During the Forfeiture Period, the Shares shall be
held in escrow by the Company or its agent pursuant to the terms
of the underlying Award Agreement with a Participant.
Certificates representing the Shares, together with executed
stock powers to be used by the Company in the event of forfeiture
or use of the Shares for payment of federal withholding tax,
shall be deposited with the Company. The Company shall release
the Shares held in escrow to a Participant (or a Participant's
estate) upon the termination of the Forfeiture Period, subject to
the terms of the Plan and the underlying Award Agreement.
10.2 Participant Rights. Participants shall have all of the
rights of a shareholder of the Company with respect to Shares
registered in his or her name, during the Forfeiture Period,
including the right to vote the Shares and receive dividends and
other distributions paid with respect to the Shares.
11. CORPORATE CHANGES.
The Company's Board of Directors shall adjust the number of
Shares subject to the Plan to give effect to any stock dividends,
stock splits, stock combinations, recapitalizations, or other
such changes in the Company's capital structure. The terms and
conditions of the Plan shall apply to any other capital Shares of
the Company and any other securities that may be acquired by a
Participant as a result of a stock dividend, stock split, stock
combination or exchange for other Company securities resulting
from any recapitalization, reorganization or other transaction
affecting Shares.
12. TAX WITHHOLDING.
Incentive Awards are subject to federal income tax
withholding. In the case of the cash component of an Incentive
Award, the Company shall withhold at the time of payment that
amount of the cash award required to be withheld under the
Internal Revenue Code of 1986, as amended, and the regulations
thereunder. In the case of the Shares component of an Incentive
Award, the Company shall withhold the applicable amount at the
time that the Forfeiture Period terminates or at such earlier
time as may be required by law, in the sole judgment of the
Committee. If the Participant elects under Section 83 of the
Internal Revenue Code of 1986, as amended, to accelerate the
recognition of income attributable to the receipt of Shares, the
Participant shall furnish the Company with a copy of such
election form concurrently with filing with the Internal Revenue
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Service. The Participant shall, in the first instance, be
required to pay the applicable amount to be withheld to the
Company before the Shares are released from escrow. In the event
that the Participant does not pay such withholding amount to the
Company, the Company shall be entitled to offset any obligation
that it may have to Participant, including salary or wage
obligations, in any amount equal to such withholdings, or, at the
option of the Company, the Company shall be entitled to pay such
withholding by using that number of the Shares it will hold in
escrow pursuant to Section 10 of this Plan sufficient to generate
cash proceeds to it necessary to pay such withholding. The
Participant's agreement to allow Company use of Shares for
withholding shall be set forth in the underlying Award Agreement.
13. TERMINATION OR AMENDMENT.
Except as provided in Section 13.3 below, the Board of
Directors may at any time suspend, reinstate, or terminate the
Plan or make such changes in or additions to the Plan as it deems
advisable without further action on the part of the shareholders
of the Company, except:
13.1 that no such termination or amendment shall adversely affect
or impair any then issued and outstanding Shares without the
consent of the Participant holding such Shares;
13.2 that no such amendment which (a) materially increase the
maximum number of Shares subject to this Plan; (b) materially
increase the benefits accruing to Participants under the Plan;
(c) remove the administration of the Plan from the Committee; or
(d) materially modify the requirements as to eligibility for
participation in the Plan may be made without first obtaining
shareholder approval; and
13.3 that in the event of a Change in Control, the Company may
neither terminate the Plan nor reduce benefits under the Plan
with respect to those individuals who are Participants as of the
date of the Change in Control.
14. EMPLOYMENT.
Nothing in the Plan shall confer upon any employee the right
to continue in the employ of the Company, and it is understood
and agreed that all Key Employees are employees at will, except
as may be provided in specific employment agreements.
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15. OTHER PLANS.
The adoption of the Plan shall not affect any other
compensation plan in effect for the Company, nor shall the Plan
preclude the Company from establishing any other forms of
incentive or other compensation for employees of the Company.
16. INDEMNIFICATION.
In addition to other rights of indemnification as directors
or otherwise, the members of the Committee shall at all times be
indemnified by the Company against the reasonable expenses,
including attorneys' fees, actually and necessarily incurred in
connection with the assertion of any claim, action, suit or
proceeding, or in connection with any appeal thereof, to which
they, or any of them, may be a party by reason of any action
taken or failure to act in connection with the Plan and against
all amounts paid by them in settlement thereof approved by
independent legal counsel selected by the Company, or paid by
them in satisfaction of a judgment in any such action, suit or
proceeding, provided that within sixty (60) days after
institution of such action, suit or proceeding, the member shall
make written offer to the Company to handle and defend the same
at its own expense.
17. SECTION 16 COMPLIANCE
With respect to persons subject to Section 16 of the
Securities Exchange Act of 1934 ("1934 Act"), transactions under
the Plan are intended to comply with all applicable conditions of
Rule 16b-3 or its successors under the 1934 Act. To the extent
any provisions of the Plan or action by the Committee fails to so
comply, it shall be deemed null and void, to the extent permitted
by law and deemed advisable by the Committee.