EXHIBIT 10.5
YANKEE ENERGY SYSTEM, INC. NON-EMPLOYEE DIRECTOR
DEFERRED COMPENSATION PLAN
PREAMBLE
WHEREAS, Yankee Energy System, Inc. (the "Company") desires to
establish an unfunded plan for the deferral of Fees and
Restricted Stock for non-employee directors; and
WHEREAS, the Company recognizes the unique qualifications of its
key directors and the valuable services that they have provided
to or for the Company;
NOW, THEREFORE, the Company hereby establishes the Yankee Energy
System, Inc. Non-Employee Director Deferred Compensation Plan
(the "Plan") as hereinafter provided:
ARTICLE I
GENERAL
Section 1.1 Effective Date. The provisions of the Plan shall be
effective as of the date on which the Plan is adopted by the
Board of Directors of the Company, subject to the approval of the
Plan by the holders of a majority of the shares of Common Stock
present or represented and entitled to vote at the annual meeting
of the Company's shareholders to be held on February 23, 1996 or
at any adjournment thereof. The rights, if any, of any person who
is no longer a Director of the Company shall be determined
pursuant to the Plan as in effect on the date such Director
terminated, unless a subsequently adopted provision of the Plan
is made specifically applicable to such person.
Section 1.2 Purpose. The purpose of the Plan is to aid the
Company in attracting and retaining Non-Employee Directors
capable of furthering the future success of the Company and to
further align their interests with the Company's other
shareholders by increasing their proprietary interest in the
Company.
Section 1.3 Participation. All Non-Employee Directors shall be
eligible to participate in the Plan.
Section 1.4 Plan Not Funded. The obligation of the Company to
make payments under this Plan constitutes nothing more than an
unsecured promise of the Company to make such payments. More
specifically, until benefits are distributed in accordance with
Article V herein, all amounts of Fees and Restricted Stock
deferred under the Plan, all property and rights purchased with
such amounts, and all income attributed to such amounts,
property, or rights shall remain solely the property and rights
of the Company subject only to claims of the Company's general
creditors.
ARTICLE II
DEFINITIONS AND USAGE
Section 2.1 Definitions. Wherever used in the Plan, the
following words and phrases shall have the meaning set forth
below unless the context plainly requires a different meaning:
- - "Account" means the account established on behalf of the
Participant as described in Section 4.1.
- - "Change in Control" means:
(a) A change in control of a nature that would be required
to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A as in effect on the date hereof pursuant to the
Securities Exchange Act of 1934, as amended, herein referred to
as the "Exchange Act"; provided that, without limitation, such a
change in control shall be deemed to have occurred at such time
as any Person hereafter becomes the "Beneficial Owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of 25 percent or more of the combined voting power of
the Company's Voting Securities. As used herein, "Person" means
any individual, corporation, partnership, group, association or
other "person" as such term is used in Section 14(d) of the
Exchange Act, other than the Company, Yankee Gas Services Company
or any employee benefit plan or plans sponsored by either,
"Voting Securities" means the Company's issued and outstanding
securities ordinarily having the right to vote at elections of
the Board of Directors of the Company.
(b) The occurrence of a change during any 25 consecutive
calendar months in the composition of the Board of Directors so
that the Continuing Directors (as hereafter defined) cease for
any reason to constitute a majority of the Board of Directors. As
used herein, "Continuing Directors" means the individuals who
were directors at the beginning of the 25-month period or whose
nomination for election or appointment to the Board of Directors
was approved by a vote of at least a majority of the then
Continuing Directors; or
c) There shall be consummated (i) any consolidation or
merger of the Company in which the Company is not the continuing
or surviving corporation or pursuant to which Voting Securities
(other than fractional shares) would be converted into cash,
securities, or other property, other than a merger of the Company
in which the holders of Voting Securities immediately prior to
the merger have the same proportionate ownership of common stock
of the surviving corporation immediately after the merger, (ii)
any sale, lease, exchange, or other transfer (in one transaction
or series of related transactions) of a majority (by value) of
the assets of the Company, provided that any such consolidation,
merger, sale, lease, exchange, or other transfer consummated at
the insistence of an appropriate public utility regulatory agency
shall not constitute a change in control; or
(d) Approval by the shareholders of the Company of any plan
or proposal for the liquidation or dissolution of the Company; or
(e) Determination by the Board of Directors that a change
in control has occurred for purposes of this Plan.
- - "Code" means the Internal Revenue Service Code of 1986, as
amended from time to time.
- - "Committee" means the Organization and Compensation
Committee of the Board of Directors.
- - "Common Stock" means the Common Stock, $5.00 par value per
share, of the Company.
- - "Deferral Agreement" means an agreement between the Company
and a Participant to defer Fees and Restricted Stock, which is
executed pursuant to Section 3.1.
- - "Director" means a member of the Board of Directors of the
Company.
- - "Disability" means, as determined by a licensed physician
chosen by the Committee, permanent and total disability, mental
or physical, which prevents a Participant from discharging the
duties and obligations of a Director or from otherwise providing
the services for which Fees are paid by the Company.
- - "Fees" means the total fees paid to a Director for service
on the Board of Directors of the Company including board
retainers, meeting fees, chair retainers, quarterly retainers
paid in the form of Common Stock and committee fees.
- - "Interest Factor" means the annual rate of interest
applicable for each month during the deferral period based upon
100% of the rate of Return on Rate Base for the average rolling
12 month period, as filed on a monthly basis with the Connecticut
Department of Public Utility Control. The Interest Factor for
each month shall be credited as of the last day of each such
month and shall be compounded monthly.
- - "Non-Employee Director" means a Director who is not an
employee of the Company or any subsidiary thereof.
- - "Participant" means any Non-Employee Director who has
executed a Deferral Agreement as described in Article III.
- - "Plan Year" means the twelve month period ended December 31.
- - "Restricted Stock" means restricted shares of the Company's
Common Stock awarded under the terms of the Non-Employee
Directors' Restricted Stock Plan, established by the Company in
1991.
- - "Retirement" means the date of a Participant's actual
retirement as a Director.
Section 2.2 Usage. Except where otherwise indicated by the
context, any masculine terminology used herein shall also
included the feminine and vice versa, and the definition of any
term herein in the singular shall also included the plural and
vice versa.
ARTICLE III
ELECTIONS
Section 3.1 Election to Defer Fees. Each Non-Employee Director
shall be permitted to elect to defer all or a portion of his Fees
for a Plan Year which would otherwise be payable by the Company,
by executing an irrevocable agreement to defer the receipt of
such Fees until the commencement of benefits in accordance with
Section 5.2. Such election must be made by the Director prior to
the first day of each Plan Year and shall apply only with respect
to Fees received for services performed as a Director for the
Company after the election is made. Any Fees deferred under this
Section 3.1 as well as any earnings attributable thereto shall be
paid to each Participant in accordance with Section 5.2.
Section 3.2 Election to Defer Restricted Stock. Each Non-
Employee Director shall be permitted to elect to defer all or a
portion of the Restricted Stock awarded to him in consideration
for his services as a Director, by executing an irrevocable
agreement to defer the receipt of the restricted stock until the
commencement of benefits in accordance with Section 5.2. Such
election must be made by the Director prior to the first day of
the Plan Year in which the Restricted Stock becomes vested. Any
Restricted Stock deferred under this Section 3.2 shall be paid to
the Director in accordance with Section 5.2.
Section 3.3 Election Procedure. Any election to defer Fees and
Restricted Stock under Sections 3.1 and 3.2 shall be made by
executing a Deferral Agreement.
ARTICLE IV
PARTICIPANTS' ACCOUNTS
Section 4.1 Establishment of Account. The Company will establish
and maintain Accounts for each Participant with respect to each
Deferral Agreement made pursuant to Article III by the
Participant. Each Account shall initially contain zero dollars
($0).
Section 4.2 Credits to the Accounts. Each Participant's Account
will be credited for the amount each Participant agrees to defer
pursuant to Article III and the Deferral Agreement. Deferred Fees
will be credited as a dollar amount to the Participant's Account
on the date they would otherwise be payable. All amounts credited
to each Account are credited solely for accounting and
computation purposes. The amounts credited to the Accounts are at
all times the assets of the Company subject to the claims of the
Company's general creditors. Participants shall not have any
right to receive any current or accumulated deferred Fees or
earnings until such time as determined under Article V of this
Plan. To the extent that any person, including a Participant,
acquires a right to receive payments from the Company under the
Plan such right shall be no greater than the right of any
unsecured general creditor of the Company. Furthermore, such
right may not be pledged, transferred or assigned in whole or in
part.
Section 4.3 Determination of Account Value. Each Participant may
elect one of the following options with respect to crediting of
earnings on his Account:
Option A: If this option is selected, the Participant's
Account will be credited monthly with the Interest Factor for
that month. For purposes of crediting the Interest Factor to the
Account, the balance of the Account shall include any Fees
credited in accordance with Section 4.2. Amounts withdrawn prior
to the last day of the Plan year shall be credited with the
Interest Factor calculated to the date of withdrawal.
Option B: If this option is selected, the Participant's
Account will be deemed to be invested in Common Stock of the
Company. In addition, the quarterly retainer Fees payable in the
form of Common Stock and the Restricted Stock that a Participant
elects to defer pursuant to Section 3.2 shall be deemed to be
invested in accordance with this Option B. The following
provisions will govern the crediting of the Account:
(a) For each Participant electing to participate in
Option B, the Company shall maintain a deferred money account
("Deferred Money Account") which shall periodically be converted
into a stock unit account ("Stock Unit Account") for each such
Participant.
(b) Deferred Fees of each Participant that are payable
in cash shall be credited as a dollar amount to the Participant's
Deferred Money Account on the date they otherwise would be
payable in accordance with Section 4.2 and shall be converted
into stock units quarterly at March 31, June 30, September 30 and
December 31 in each year by dividing the dollar balance of such
Deferred Money Account as of the end of each such quarter by the
last reported sales price per share of the Company's Common Stock
on the New York Stock Exchange on the last day upon which such
stock was traded during each such quarter. The number of stock
units for full shares so determined shall be credited to the
Participant's Stock Unit Account and the aggregate value thereof
at said closing price shall be charged to the Participant's
Deferred Money Account. Any cash balance remaining in the
Participant's Deferred Money Account after such charge shall be
used together with other subsequent credits thereto at the next
stock conversion period. Quarterly retainer Fees payable in the
form of Common Stock and Restricted Stock that a Participant
elects to defer pursuant to Section 3.2 shall be credited
directly to the Participant's Stock Unit Account.
(c) Additional credits will be made to each
Participant's Deferred Money Account in dollar amounts equal to
the cash dividends (or the fair market value of dividends paid in
property) the Participant would have received from time to time
had he been the owner on the record dates with respect thereto of
the number of shares of the Company's Common Stock equal to the
number of stock units in his Stock Unit Account on such dates.
Such credits shall be converted into stock units quarterly in the
same manner as deferred Fees are converted pursuant to Section
4.3(b). In the event of a merger, consolidation, reorganization,
recapitalization, stock dividend, stock split or other changes in
corporate structure or capitalization affecting the Common Stock,
such appropriate adjustment shall be made in the number of stock
units in each Participant's Stock Unit Account to prevent
dilution or enlargement of the rights of Participants.
Section 4.4 Decreases in Account. A Participant's Account shall
be reduced by the amount of any benefits distributed to or on
behalf of a Participant pursuant to Article V. Further, a
Participant's Account shall be reduced for any penalties,
withdrawal charges or similar assessments or charges actually
assessed against the value of any investment held in such Account
as a result of early withdrawal or payment under such investment.
Section 4.5 Statement of Account. A statement will be furnished
to each Participant stating the value of his Account following
the end of each calendar quarter.
ARTICLE V
DISTRIBUTION OF BENEFITS
Section 5.1 General. The value of each Account, as determined
under Article IV, shall determine and constitute the basis for
the value of the benefits payable to a Participant under this
Plan.
Section 5.2 Commencement of Benefit Payments. Except as provided
in Article VI, a Participant may elect on the Deferral Agreement
to receive payment of the amounts deferred under the Plan at (a)
a specified date in the future at least six months after the date
of such election or (b) after the date on which the Participant
ceases to be a Director for any reason including, but not limited
to, Disability, resignation, removal or Retirement. Provided,
however, that in no event may a Participant receive a
distribution of Common Stock unless at least six months have
passed since the last date on which the Director executed a
Deferral Agreement pursuant to Article III.
Section 5.3 Form of Benefit Payments. Except as provided in
Article VI, a Participant's benefit shall be paid in the form
provided under the Deferral Agreement. If the Participant's
Deferral Agreement does not provide for a form of payment, then
the Participant's benefit shall be paid in a single lump-sum cash
payment.
ARTICLE VI
DEATH BENEFITS
Section 6.1 Death Prior to Benefit Commencement. If a
Participant should die before payment of benefits has commenced
under the Plan, then the benefits otherwise payable with respect
to the Participant shall be paid to the Participant's estate in a
single sum payment as soon as administratively feasible following
the death of the Participant.
Section 6.2 Death Following Benefit Commencement. If a
Participant dies after the date payment of benefits has commenced
under the Plan, the Participant's estate shall be entitled to
payment of the remaining benefits in the form of a single sum
payment which shall be paid as soon as administratively feasible
following the death of the Participant.
ARTICLE VII
ADMINISTRATIVE COMMITTEE
Section 7.1 General. Except where otherwise specifically
indicated, responsibility for administration of this Plan shall
be that of the Organization and Compensation Committee of the
Board of Directors (the "Committee").
Section 7.2 Duties. The Committee shall have the following
rights and duties:
(a) No member of the Committee shall have any right to vote
or decide upon any matter relating to himself or to any of his
rights or benefits under any part of the Plan.
(b) The decision of the Committee in matters concerning the
Plan shall be final, binding and conclusive upon the Company and
upon any other person affected by such decision, subject to the
claims procedure hereinafter set forth.
(c) The Committee shall have the discretionary fiduciary
authority to interpret and construe the provisions of the Plan,
to decide any dispute which may arise regarding the rights of
Directors, whether or not they are Participants under the terms
of the Plan (see the claims procedure hereinafter set forth) and
whether or not such Participants are eligible for benefits, which
determinations and rules shall apply uniformly to all Directors
similarly situated.
(d) The Committee shall have the sole authority to
determine those individuals eligible to become Participants in
accordance with the provisions of the Plan.
(e) The Committee shall maintain full and complete records
of its deliberations and decisions. Its records shall contain all
relevant data pertaining to individual Participants and their
rights under the Plan. It has the duty to carry into effect all
such rights and benefits.
(f) The Committee shall cause the principal provisions of
the Plan to be communicated to each Participant, and a copy of
the Plan and other documents shall be available at the principal
office of the Company for inspection by each Participant at
reasonable times determined by the Committee.
ARTICLE VIII
CLAIMS PROCEDURE
Section 8.1 General. Any claim for benefits under the Plan shall
be filed by a Participant or his estate (claimant) of this Plan
by written communication which is made by the claimant, or by the
claimant's authorized representative which is reasonably
calculated to bring the claim to the attention of the Committee.
Section 8.2 Denials. If a claim for a Plan benefit is wholly or
partially denied, notice of the decision shall be furnished to
the claimant by the Committee within a reasonable period of time
after receipt of the claim by the Committee.
Section 8.3 Notice. Any claimant who is denied a claim for
benefits shall be furnished written notice setting forth:
(a) The specific reason or reasons for the denial;
(b) Specific reference to the pertinent Plan or Deferral
Agreement provision upon which the denial is based;
(c) A description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of the Plan's claim review procedure;
(d) An explanation of the Plan's claim review procedure.
Section 8.4 Appeals Procedure. In order that a claimant may
appeal the denial of a claim, a claimant or his duly authorized
representative:
(a) Must request a review by written application to the
Company's Board of Directors, or its designate, not later than
sixty (60) days after receipt by the claimant of written
notification of denial of a claim;
(b) May review pertinent documents; and
(c) May submit issues and comments in writing.
Section 8.5 Review. A decision on review of a denied claim
shall be made not later than sixty (60) days after receipt of a
request for review, unless special circumstances require an
extension of time for processing, in which case a decision shall
be rendered within a reasonable period of time, but not later
than 120 days after receipt of a request for review. The decision
on review shall be in writing and shall include the specific
reason(s) for the decision and the specific reference(s) to the
pertinent Plan or Trust Agreement provisions on which the
decision is based.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1 Amendment of Plan. The Company reserves the right to
amend the Plan in any manner that it deems advisable, by a
written instrument signed by any authorized representative of the
Company. Provided, however, that any amendment which affects a
Participant's existing Account must be agreed to, in writing, by
the Participant to be effective, and provided further that if
shareholder approval of any amendment is necessary in order to
ensure compliance with Rule 16b-3 the Exchange Act, such
amendment shall be subject to approval by the shareholders by the
vote and in the manner required by Rule 16b-3 of the Exchange
Act.
Section 9.2 Termination of Plan. The Company reserves the right
to terminate this Plan at any time, provided that such
termination is prospective in effect or is otherwise agreed to in
writing by the Participant.
Section 9.3 No Assignment. The Participant shall not have the
power to transfer, assign, anticipate, mortgage or otherwise
encumber or dispose of in advance any interest in amounts payable
hereunder or any of the payments provided for herein, nor shall
any interest in amounts payable hereunder or in any payments be
subject to seizure for payment of any debts, judgments, alimony
or separate maintenance, or be reached or transferred by
operation of law in the event of bankruptcy, insolvency or
otherwise.
Section 9.4 Successors and Assigns. The provisions of this Plan
are binding upon and inure to the benefit of the Company, its
successors and assigns, and the Participant, his beneficiaries,
heirs, legal representatives and assigns.
Section 9.5 Governing Law. This Plan shall be subject to and
construed in accordance with the laws of the State of Connecticut
to the extent not preempted by the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
ARTICLE X
TRUST
Section 10.1 Trust. The Trust under the Yankee Energy System,
Inc. Non-Employee Director Deferred Compensation Plan (the
"Trust") has been established by the execution of a Trust
Agreement with the Trustee thereunder and is intended to be
maintained as a "grantor trust" under Section 677 of the Code.
The assets of the Trust will be held, invested and disposed of by
the Trustee, in accordance with the terms of the Trust Agreement,
for the exclusive purpose of providing benefits for the
Participants and their beneficiaries. Notwithstanding any
provision of the Plan or the Trust Agreement to the contrary, the
assets of the Trust shall at all times be subject to the claims
of the Company's general creditors in the event of insolvency as
defined in the Trust Agreement or bankruptcy.
Section 10.2 Contributions and Expenses. The Company, from time
to time, shall make contributions to the Trust. All benefits
under the Plan shall be paid by the Trust. All expenses
chargeable to the Plan shall be paid by the Company. In the event
of a Change in Control, the Company shall make an irrevocable
contribution to the Trust in an amount sufficient to pay each
Participant or beneficiary the benefits to which Participants or
their beneficiaries would be entitled pursuant to the terms of
the Plan as of the date on which the Change in Control occurred.
Section 10.3 Trustee Duties. The powers, duties and
responsibilities of the Trustee shall be as set forth in the
Trust Agreement and nothing contained in the Plan, either
expressly or by implication, shall impose any additional powers,
duties or responsibilities upon the Trustee.
Section 10.4 Reversion to the Company. The Company shall have no
beneficial interest in the Trust and no part of the Trust shall
ever revert or be repaid to the Company, directly or indirectly,
except as otherwise provided in Section 10.1 above or in the
Trust Agreement.
IN WITNESS WHEREOF, the Company, by its duly authorized officers,
hereby adopts this Plan on this 7th day of December, 1995.
ATTEST/WITNESS YANKEE ENERGY SYSTEM, INC. (Company
Seal)
____________________ By:___________________________
___________________ ______________________________
Print Name Print Name and Title
Date:____________________