PSE&G's Logo
Public Service Electric and Gas Company
80 Park Plaza
Newark, New Jersey 07107
201-430-7620
Mailing Address:
PO Box 570
Newark, New Jersey, 07101
May 27, 1995
Mr. Elbert C. Simpson
13618 S. 34th Street
Phoenix, Arizona 85044
Dear Mr. Simpson:
In Conjunction with your employment as Senior Vice President -
Nuclear Engineering of Public Service Electric and Gas Company (PSE&G), the
agreed terms of employment are as follows:
1. The effective date of your employment with PSE&G shall
be June 30, 1995 or such earlier date as may be agreed to in
writing (the Date of Employment (DOE)).
2. You shall be paid a salary at the annual rate of
$225,000, which salary may be increased, but shall not be reduced,
thereafter during the five - year period commencing on the DOE.
This initial annual rate of salary shall remain in effect until
December 31, 1996.
3. PSE&G will make a cash payment to you on the DOE in the
amount of $126,000 to compensate you for the loss of benefits under
plans of your present employer. You agree to repay this amount
($126,000) to PSE&G if you voluntarily terminate your employment
with PSE&G prior to five years from the DOE.
4. PSE&G will make a further cash payment to you on the
DOE in the amount of $60,000 as inducement for you to commence
employment with PSE&G.
5. You shall be entitled to those benefits from time to
time available to officers and employees of PSE&G generally, except
as otherwise provided in this letter. You shall be initially
eligible for a minimum of four weeks of vacation per year. In
addition, financial counseling will be available to you on the same
terms and conditions that it is provided to officers of PSE&G.
6. PSE&G will compensate you for reasonably incurred
moving and relocation expenses in accordance with PSE&G's
Relocation Program. Such compensation shall specifically include
reimbursement of any sales commissions on your existing principal
residence and will also include, if you so elect, the purchase of
your principal residence at an appraised value. In addition, PSE&G
will provide your, spouse and children temporary living expenses
in New Jersey for a period of up to six months and will provide for
the taxes associated with providing you housing in New Jersey
during such 6 - month period.
7. You may be discharged with or without cause at any
time. If you should be discharged without cause during the five -
year period commencing on DOE, PSE&G will pay to you the salary in
effect pursuant to Paragraph 1 above at the time of your discharge
for a period of twelve months following such discharge, or for the
remainder of such five - year period, whichever is less. "Cause"
shall mean (i) the willful or negligent dereliction of, and
continued failure by you to perform your duties with PSE&G (other
than any such failure resulting from your incapacity due to
physical or mental illness), after a written demand for performance
is delivered to you by the Chief Executive Officer or Chief Nuclear
Officer of PSE&G which identifies the manner in which the CEO or
CNO believes that you have not so performed your duties, or (ii)
any conduct constituting a felony or moral turpitude.
8. Your participation in PSE&G's Management Incentive
Compensation Plan (MICP) for 1995 will reflect a full year's award.
Your target incentive award as Senior Vice President - Nuclear
Engineering will initially be 20% of salary. This may be adjusted
from time to time in accordance with established plan procedures.
In addition, to provide an appropriate transition adjustment,
because any MICP awards are paid out one third annually over a
three-year period, PSE&G will pay to you the following lump sum
cash payments in January of the following years: 1996 - $45,000;
1997 - $30,000; 1998 - $15,000; in addition to any payouts which
may result from your participation in the MICP itself. Copies of
the MICP and the calculation determining the 1994 corporate factor
have previously been forwarded to you.
9. As Senior Vice President - Nuclear Engineering, you
will participate in the Long - Term Incentive Plan (LTIP) of Public
Service Enterprise Group Incorporated (Enterprise), the parent of
PSE&G. The LTIP provides senior officers selected by the
Organization and Compensation Committee with options to purchase
shares of Enterprise Common Stock. The options generally are
granted in January and become exercisable three years after the
date of grant, and the LTIP provides for payments to be made,
dependant upon dividends paid by Enterprise and future financial
performance by Enterprise in comparison to other corporations, to
assist the officers in exercising the options granted. I will
recommend to the Organization and Compensation Committee that you
be granted 1,200 options in January 1996 (which would be
exercisable in 1999). In addition, I will recommend to the
Organization and Compensation Committee that you also be granted
600 stock options under the LTIP which are exercisable in 1996, 800
stock options exercisable in 1997, and 1,000 stock options
exercisable in 1998. Such options would be subject to all of the
provisions of the LIPT and would permit the purchase by you of
numbers of shares granted by the Organization and Compensation
Committee that appropriately reflect your responsibilities and
ability to contribute to the long term success of Enterprise.
10. In light of your allied work experience, you shall be
granted credited service, in addition to that earned as a result
of your employment by PSE&G, for the purpose of determining any
pension benefits from PSE&G in accordance with the following
schedule:
Additional Years
Date of Termination of Employment of Credited Service
--------------------------------- ------------------
On or after DOE plus 5 years and
prior to DOE plus 6 years 13
On or after DOE plus 6 years and
prior to DOE plus 7 years 15
On or after DOE plus 7 years and
prior to DOE plus 8 years 17
On or after DOE plus 8 years and
prior to DOE plus 9 years 19
On or after DOE plus 9 years and
prior to DOE plus 10 years 21
On or after DOE plus 10 years 23
The additional credited service shown in the table above is
not cumulative, but is applied from the table depending upon when
you retire. For example, assuming you are currently age 47, the
additional credited service set forth above, together with the
Board's current policy of granting 5 years of additional credited
service to officers who retire between age 60 and age 65 - 1/2, and
your actual credited service, will afford you a total of 41 years
of credited service at age 60, and 46 years of credited service at
age 65, dependent upon your actual date of birth and DOE. You will
be a participant in PSE&G's Pension Plan and in its Limited
Supplemental Death Benefits and Retirement Plan. The Limited Plan
provides a retirement benefit of a percentage of final average
compensation as defined in the Plan that is equal to credited
service plus 30 years. This would result in a target retirement
benefit of 71% (41 years plus 30) at age 60 and 75% at age 64 (the
maximum replacement value under the program) times final average
compensation, adjusted for any survivorship benefit you may choose,
and reduced by Social Security benefits and pensions from other
employers as provided in the Plan. Under these pension programs
as presently in effect, you would be eligible to retire at age 56
with a reduced pension, or at age 57 with an unreduced pension,
dependent upon your actual date of birth and DOE. Specifically,
the amount of your pension or survivorship benefits paid by your
present employer (or any other employer) shall be deducted from the
pension benefits payable to you or your beneficiary by PSE&G on
account of such service with your present employer (or other
employer).
11. In recognition of your need for an automobile for
business purposes, PSE&G will provide you with a full size American
made automobile (Oldsmobile, Buick or other comparable model) and
shall provide the related maintenance, repairs, insurance and costs
of operation thereof.
12. As part of PSE&G's requirement for a work force that
is free from the influence of foreign chemical substances, you will
be equired to complete a medical examination which will include
definitive analysis of freshly voided urine specimen for the
presence of commonly abused drugs, including marijuana.
If the foregoing is in accordance with your understanding,
please sign the enclosed copy of this letter and return it to me.
Sincerely,
By: M. PETER MELLETT
---------------------------
M. Peter Mellett
Vice President - Human Resources
Agreed to this 31st day
of May, 1995
By: ELBERT C. SIMPSON
-------------------------
Elbert C. Simpson