Exhibit
10.8
EMPLOYMENT
AGREEMENT
As Amended and
Restated Effective January 1, 2009
THIS
EMPLOYMENT AGREEMENT (the "Agreement") was entered into as of
March 31, 2005, by and between Northeast Utilities Service
Company, a Connecticut corporation ("NUSCO"), with its principal
office in Berlin, Connecticut, and David R. McHale, a resident of
West Simsbury, Connecticut ("Executive"). This amendment and
restatement of the Agreement is effective as of January 1,
2009.
WHEREAS, Executive
is employed as Senior Vice President and Chief Financial Officer of
Northeast Utilities ("NU") and holds senior executive positions
with certain of the subsidiaries of NU (NU and the Affiliates, as
such term is defined in Section 6.1(a), of NU being referred to
collectively herein as the "Company") and both parties desire to
enter into an agreement to reflect Executive's contribution to the
Company's business in Executive's executive capacities and to
provide for Executive's continued employment by the Company, upon
the terms and conditions set forth herein, and
WHEREAS,
Executive and
NUSCO desire to amend and restate the Agreement to comply with
Section 409A of the Internal Revenue Code of 1986, as amended (the
“Code”), effective as of January 1, 2009.
NOW,
THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1.
Employment
.
The Company hereby agrees to continue the employment of
Executive, and Executive hereby accepts such employment and agrees
to perform Executive's duties and responsibilities, in accordance
with the terms, conditions and provisions hereinafter set
forth.
1.1.
Employment
Term . The term
of Executive's employment under this Agreement shall commence as of
March 31, 2005 (the "Effective Date") and shall continue until
December 31, 2006, unless sooner terminated in accordance with
Section 5 or Section 6 hereof, and shall automatically renew for
periods of one year unless one party gives written notice to the
other, at least sixty days prior to December 31, 2006 or at least
sixty days prior to the end of any one-year renewal period, that
the Agreement shall not be further extended. The period
commencing as of the Effective Date and ending on the date on which
the term of Executive's employment under the Agreement shall
terminate is hereinafter referred to as the "Employment
Term".
1.2.
Duties and
Responsibilities . Executive
shall serve in such senior positions as directed by NUSCO's Board
of Directors (the "Board") or the Board of Trustees (the
"Trustees") of NU that provide Executive with duties and
compensation that are substantially equivalent to Executive's
current position in terms of duties and
responsibilities.
During the Employment Term, Executive shall perform all
duties and accept all responsibilities incident to such positions
as may be assigned to Executive by the Board.
1.3.
Extent of
Service . During the
Employment Term, Executive agrees to use Executive's best efforts
to carry out Executive's duties and responsibilities under Section
1.2 hereof and, consistent with the other provisions of this
Agreement, to devote substantially all Executive's business time,
attention and energy thereto. Except as provided in Section 3
hereof, the foregoing shall not be construed as preventing
Executive from making minority investments in other businesses or
enterprises provided that Executive agrees not to become engaged in
any other business activity which, in the reasonable judgment of
the Board, is likely to interfere with Executive's ability to
discharge Executive's duties and responsibilities to the
Company.
1.4.
Base
Salary . For all
the services rendered by Executive hereunder, NUSCO shall pay
Executive a base salary ("Base Salary"), commencing on the
Effective Date, at the annual rate then being paid to Executive by
NUSCO, payable in installments at such times as NUSCO customarily
pays its other senior level executives (but in any event no less
often than monthly). Executive's Base Salary shall be
reviewed annually for appropriate adjustment (but shall not be
reduced below that in effect on the Effective Date without
Executive's written consent) by the Trustees pursuant to its normal
performance review policies for senior level executives.
Executive's annual Base Salary shall not be reduced below
$275,000 without Executive's written consent.
1.5.
Retirement and
Benefit Coverages . During the
Employment Term, Executive shall be entitled to participate in all
(a) employee pension and retirement plans and programs ("Retirement
Plans") and (b) welfare benefit plans and programs ("Benefit
Coverages"), in each case made available to the Company's senior
level executives as a group or to its employees generally, as such
Retirement Plans or Benefit Coverages may be in effect from time to
time, including, without limitation, the Company's Supplemental
Executive Retirement Plan for Officers (the "Supplemental Plan"),
both as to the Make-Whole Benefit and the Target
Benefit.
1.6.
Reimbursement of
Expenses; Vacation . Executive
shall be provided with reimbursement of expenses related to
Executive's employment by NUSCO on a basis no less favorable than
that which may be authorized from time to time for senior level
executives as a group, and shall be entitled to vacation and
holidays in accordance with the Company's normal personnel policies
for senior level executives. All such
reimbursements shall be made in accordance with the provisions of
Section 7.2 of this Agreement.
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1.7.
Short-Term
Incentive Compensation . Executive
shall be entitled to participate in any short-term incentive
compensation programs established by the Company for its senior
level executives generally, depending upon achievement of certain
annual individual or business performance objectives specified and
approved by the Trustees (or a Committee thereof) in its sole
discretion; provided, however, that Executive's "target
opportunity" and "maximum opportunity" under any such program shall
be at least 65% and 130%, respectively, of Executive's Base Salary,
except that the Trustees may change these "target opportunity" and
"maximum opportunity" percentages as part of a general revision of
executive compensation which also applies to other senior level
executives of the Company. Executive's short-term incentive
compensation, either in shares of NU or cash, as applicable from
time to time, shall be paid to Executive not later than such
payments are made to the Company's senior level executives
generally and in accordance with the terms of the applicable plan
or program .
1.8.
Long-Term
Incentive Compensation . Executive
shall also be entitled to participate in any long-term incentive
compensation programs established by the Company for its senior
level executives generally, depending upon achievement of certain
business performance objectives specified and approved by the
Trustees (or a Committee thereof) in its sole discretion; provided,
however, that Executive's "target opportunity" and "maximum
opportunity" under any such program shall be at least 150% and
300%, respectively of Executive's Base Salary, except that the
Trustees may change these "target opportunity" and "maximum
opportunity" percentages as part of a general revision of executive
compensation which also applies to other senior level executives of
the Company. Executive's long-term incentive compensation,
either in shares of NU, restricted stock units, options or cash, as
applicable from time to time, shall be paid to Executive not
later than such payments are made to the Company's senior level
executives generally and in accordance with the terms of the
applicable plan or program .
2.
Confidential
Information . Executive
recognizes and acknowledges that by reason of Executive's
employment by and service to the Company before, during and, if
applicable, after the Employment Term Executive has had and will
continue to have access to certain confidential and proprietary
information relating to the business of the Company, which may
include, but is not limited to, trade secrets, trade "know-how",
customer information, supplier information, cost and pricing
information, marketing and sales techniques, strategies and
programs, computer programs and software and financial information
(collectively referred to as "Confidential Information").
Executive acknowledges that such Confidential Information is
a valuable and unique asset of the Company and Executive covenants
that Executive will not, unless expressly authorized in writing by
the Board, at any time during the course of Executive's employment
use any Confidential Information or divulge or disclose any
Confidential Information to any person, firm or corporation except
in connection with the performance of
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Executive's duties
for the Company and in a manner consistent with the Company's
policies regarding Confidential Information. Executive also
covenants that at any time after the termination of such
employment, directly or indirectly, Executive will not use any
Confidential Information or divulge or disclose any Confidential
Information to any person, firm or corporation, unless such
information is in the public domain through no fault of Executive
or except when required to do so by a court of law, by any
governmental agency having supervisory authority over the business
of the Company or by any administrative or legislative body
(including a committee thereof) with apparent jurisdiction to order
Executive to divulge, disclose or make accessible such information,
in which case Executive will inform NUSCO in writing promptly of
such required disclosure, but in any event at least two business
days prior to disclosure. All written Confidential
Information (including, without limitation, in any computer or
other electronic format) which comes into Executive's possession
during the course of Executive's employment shall remain the
property of the Company. Except as required in the
performance of Executive's duties for the Company, or unless
expressly authorized in writing by the Board, Executive shall not
remove any written Confidential Information from the Company's
premises, except in connection with the performance of Executive's
duties for the Company and in a manner consistent with the
Company's policies regarding Confidential Information. Upon
termination of Executive's employment, Executive agrees immediately
to return to the Company all written Confidential Information in
Executive's possession.
3.
Non-Competition;
Non-Solicitation.
(a)
During
Executive's employment by the Company and for a period of two years
after Executive's termination of employment for any reason, within
the Company's "service area," as defined below, Executive will not,
except with the prior written consent of the Board, directly or
indirectly, own, manage, operate, join, control, finance or
participate in the ownership, management, operation, control or
financing of, or be connected as an officer, director, employee,
partner, principal, agent, representative, consultant or otherwise
with, or use or permit Executive's name to be used in connection
with, any business or enterprise which is engaged in any business
that is competitive with any regulated business or enterprise in
which the Company is engaged ("Competitive Company"). For the
purposes of this Section, "Service Area" shall mean the geographic
area within the states of Connecticut, Maine, Massachusetts, New
Hampshire, Rhode Island, and Vermont, or any other state in which
the Company, in the aggregate, generates 25% or more of its
revenues in the fiscal year of NU in which Executive's termination
of employment occurs. Further, for the purposes of this
Section, "Competitive Company" shall mean Consolidated Edison,
Inc., Energy East Corporation, Hydro-Quebec, KeySpan Energy,
National Grid USA, NSTAR, or The United Illuminating Company, their
assigns or successors, or any other company which in the future
engages in competition with the regulated business of the Company
in the
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Service Area.
Executive acknowledges that the listed service area is the
area in which the Company presently does business.
(b)
The
foregoing restrictions shall not be construed to prohibit the
ownership by Executive of less than five percent (5%) of any class
of securities of any corporation which is engaged in any of the
foregoing businesses having a class of securities registered
pursuant to the Securities Exchange Act of 1934 (the "Exchange
Act"), provided that such ownership represents a passive investment
and that neither Executive nor any group of persons including
Executive in any way, either directly or indirectly, manages or
exercises control of any such corporation, guarantees any of its
financial obligations, otherwise takes any part in its business,
other than exercising Executive's rights as a shareholder, or seeks
to do any of the foregoing.
(c)
Executive further
covenants and agrees that during Executive's employment by the
Company and for the period of two years thereafter, Executive will
not, directly or indirectly, (i) solicit, divert, take away, or
attempt to solicit, divert or take away, any of the Company's
"Principal Customers," defined for the purposes hereof to include
any customer of the Company, from which $100,000 or more of annual
gross revenues are derived at such time, or (ii) encourage any
Principal Customer to reduce its patronage of the
Company.
(d)
Executive further
covenants and agrees that during Executive's employment by the
Company and for the period of two years thereafter, Executive will
not, except with the prior written consent of the Trustees,
directly or indirectly, solicit or hire, or encourage the
solicitation or hiring of, any person who was a managerial or
higher level employee of the Company at any time during the term of
Executive's employment by the Company by any employer other than
the Company for any position as an employee, independent
contractor, consultant or otherwise. The foregoing covenant
of Executive shall not apply to any person after 12 months have
elapsed subsequent to the date on which such person's employment by
the Company has terminated.
4.
Equitable
Relief.
(a)
Executive
acknowledges and agrees that the restrictions contained in Sections
2 and 3 are reasonable and necessary to protect and preserve the
legitimate interests, properties, goodwill and business of the
Company, that NUSCO would not have entered into this Agreement in
the absence of such restrictions and that irreparable injury will
be suffered by the Company should Executive breach any of the
provisions of those Sections. Executive represents and
acknowledges that (i) Executive has been advised by NUSCO to
consult Executive's own legal counsel in respect of this Agreement,
and (ii) that Executive has had full opportunity, prior to
execution of this Agreement, to review thoroughly this Agreement
with Executive's counsel.
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(b)
Executive further
acknowledges and agrees that a breach of any of the restrictions in
Sections 2 and 3 cannot be adequately compensated by monetary
damages. Executive agrees that the Company shall be entitled
to preliminary and permanent injunctive relief, without the
necessity of proving actual damages, as well as an equitable
accounting of all earnings, profits and other benefits arising from
any violation of Sections 2 or 3 hereof, which rights shall be
cumulative and in addition to any other rights or remedies to which
the Company may be entitled. In the event that any of the
provisions of Sections 2 or 3 hereof should ever be adjudicated to
exceed the time, geographic, service, or other limitations
permitted by applicable law in any jurisdiction, it is the
intention of the parties that the provision shall be amended to the
extent of the maximum time, geographic, service, or other
limitations permitted by applicable law, that such amendment shall
apply only within the jurisdiction of the court that made such
adjudication and that the provision otherwise be enforced to the
maximum extent permitted by law.
(c)
If
Executive breaches any of Executive's obligations under Sections 2
or 3 hereof, and such breach constitutes "cause," as defined in
Section 5.3 hereof, or would constitute Cause if it had occurred
during the Employment Term, the Company shall thereafter have no
Target Benefit obligation pursuant to the Supplemental Plan, but
shall remain obligated for the Make-Whole Benefit under the
Supplemental Plan, but only to the extent not modified by the terms
of this Agreement, and compensation and other benefits provided in
any plans, policies or practices then applicable to Executive in
accordance with the terms thereof.
(d)
Executive
irrevocably and unconditionally (i) agrees that any suit, action or
other legal proceeding arising out of Sections 2 or 3 hereof,
including without limitation, any action commenced by the Company
for preliminary and permanent injunctive relief and other equitable
relief, may be brought in the United States District Court for the
District of Connecticut, or if such court does not have
jurisdiction or will not accept jurisdiction, in any court of
general jurisdiction in Hartford, Connecticut, (ii) consents to the
non-exclusive jurisdiction of any such court in any such suit,
action or proceeding, and (iii) waives any objection which
Executive may have to the laying of venue of any such suit, action
or proceeding in any such court. Executive also irrevocably
and unconditionally consents to the service of any process,
pleadings, notices or other papers in a manner permitted by the
notice provisions of Section 10 hereof.
(e)
Executive agrees
that for a period of five years following the termination of
Executive's employment by the Company Executive will provide, and
that at all times after the date hereof the Company may similarly
provide, a copy of Sections 2 and 3 hereof to any business or
enterprise (i) which Executive may directly or indirectly own,
manage, operate, finance, join, control or participate in the
ownership,
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management,
operation, financing, or control of, or (ii) with which Executive
may be connected as an officer, director, employee, partner,
principal, agent, representative, consultant or otherwise, or in
connection with which Executive may use or permit Executive's name
to be used; provided, however, that this provision shall not apply
in respect of Section 3 hereof after expiration of the time periods
set forth therein.
5.
Termination
.
The Employment Term shall terminate upon the occurrence of
any one of the following events and payment to Executive under this
Section 5 shall be made at the time specified in Section 5.6
:
5.1.
Disability.
NUSCO may
terminate the Employment Term if Executive is unable substantially
to perform Executive's duties and responsibilities hereunder to the
full extent required by the Board by reason of illness, injury or
incapacity for six consecutive months, or for more than six months
in the aggregate during any period of twelve calendar months;
provided, however, that NUSCO shall continue to pay Executive's
Base Salary until NUSCO acts to terminate the Employment Term.
In addition, Executive shall be entitled to receive (a) any
amounts earned, accrued or owing but not yet paid under Section 1
above, and (b) any other benefits in accordance with the terms of
any applicable plans and programs of the Company. Otherwise,
the Company shall have no further liability or obligation to
Executive for compensation under this Agreement. Executive
agrees, in the event of a dispute under this Section 5.1, to submit
to a physical examination by a licensed physician selected by the
Board.
5.2.
Death
.
The Employment Term shall terminate in the event of
Executive's death. In such event, NUSCO shall pay to
Executive's executors, legal representatives or administrators, as
applicable, an amount equal to the installment of Executive's Base
Salary set forth in Section 1.4 hereof for the month in which
Executive dies. In addition, Executive's estate shall be
entitled to receive (a) any other amounts earned, accrued or owing
but not yet paid under Section 1 above and (b) any other benefits
in accordance with the terms of any applicable plans and programs
of the Company. Otherwise, the Company shall have no further
liability or obligation under this Agreement to Executive's
executors, legal representatives, administrators, heirs or assigns
or any other person claiming under or through Executive.
5.3.
Cause
.
NUSCO may terminate the Employment Term, at any time, for
"cause" upon written notice, in which event all payments under this
Agreement shall cease, except for Base Salary to the extent already
accrued, and no Target Benefit shall be due under the Supplemental
Plan, but Executive shall remain entitled to the Make-Whole Benefit
under the Supplemental Plan, but only to the extent not modified by
the terms of this Agreement, and any other benefits in accordance
with the terms of any applicable plans and programs of the Company.
For purposes of this Agreement, Executive's employment may be
terminated for "cause" if (a) Executive is convicted of a felony,
(b) in the reasonable determination of the Board, Executive has (i)
committed an
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act of
fraud, embezzlement, or theft in connection with Executive's duties
in the course of Executive's employment with the Company, (ii)
caused intentional, wrongful damage to the property of the Company
or intentionally and wrongfully disclosed Confidential Information,
or (iii) engaged in gross misconduct or gross negligence in the
course of Executive's employment with the Company or (c) Executive
materially breached Executive's obligations under this Agreement
and shall not have remedied such breach within 30 days after
receiving written notice from the Board specifying the details
thereof. For purposes of this Agreement, an act or omission
on the part of Executive shall be deemed "intentional" only if it
was not due primarily to an error in judgment or negligence and was
done by Executive not in good faith and without reasonable belief
that the act or omission was in the best interest of the
Company.
5.4.
Termination
Without Cause and Non-Renewal.
(a)
NUSCO
may remove Executive, at any time, without cause from the position
in which Executive is employed hereunder (in which case the
Employment Term shall be deemed to have ended) upon written notice
to Executive; provided, however, that, in the event that such
notice is given, Executive shall be under no obligation to render
any additional services to the Company and, subject to the
provisions of Section 3 hereof, shall be allowed to seek other
employment. Upon any such removal or if NUSCO informs
Executive that the Agreement will not be renewed after December 31,
2006 or at the end of any subsequent renewal period, Executive
shall be entitled to receive, as liquidated damages for the failure
of the Company to continue to employ Executive, only the amount due
to Executive under the Company's then current severance pay plan
for employees. No other payments or benefits shall be due
under this Agreement to Executive, but Executive shall be entitled
to any other benefits in accordance with the terms of any
applicable plans and programs of the Company. Notwithstanding
anything in this Agreement to the contrary, on or after Executive
attains age 65, no action by the Company shall be treated as a
removal from employment or non-renewal if on the effective date of
such action Executive satisfies all of the requirements for the
executive or high policy-making exception to applicable provisions
of state and federal age discrimination legislation.
(b)
Notwithstanding
the provisions of Section 5.4(a) (other than the last sentence), in
the event that Executive executes a written release upon such
removal or non-renewal and returns such executed Release to the
Company not fewer than eight days before the date provided in
Section 5.6 for payment of the amounts provided under this Section
5.4(b) , substantially in the form attached
hereto as Annex 1, (the "Release"), of any and all claims against
the Company and all related parties with respect to all matters
arising out of Executive's employment by the Company (other than
any entitlements under the terms of this Agreement or under any
other plans or programs of the Company in which Executive
participated and under which Executive has accrued a benefit), or
the termination thereof, Executive shall be entitled to
receive,
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in
lieu of the payment described in subsection (a) hereof, which
Executive agrees to waive,
(i)
as
liquidated damages for the failure of the Company to continue to
employ Executive, a single cash payment, equal to Executive's Base
Compensation, as defined in Section 6.1(b) below;
(ii)
a
single cash payment equal to the present value of (A) the total
cost that would be incurred in providing $50,000 life insurance
coverage on Executive’s life for two years after
Executive’s termination of employment under the individual
conversion policy for which Executive will be eligible following
the termination of his Company-sponsored group term life insurance
coverage; and (B) the cost that would be incurred by the Company in
providing two years of long-term disability insurance coverage to
Executive under the Company-sponsored group long-term disability
insurance program at the coverage level in place for the Executive
under such group long-term disability insurance program at
Executive's Termination Date, calculated on the basis of a discount
rate equal to the rate set forth in Section 7.1(a) of this
Agreement, such payment to be provided with a tax gross-up to
reimburse Executive for all Federal and state income taxes and for
the Hospital Insurance portion of FICA tax withholding at the
highest marginal rate resulting from the inclusion in
Executive’s income of such payment. Continued
reimbursement for tax preparation services and financial planning
also will continue for a two-year period. In addition,
immediately following Executive’s Termination Date, Executive
and Executive’s spouse and eligible dependents also will be
eligible to participate in the Company’s executive retiree
health plan for two years, after which time, Executive and
Executive’s spouse and eligible dependents may elect
participation in the Company’s retiree health plan, paying
standard retiree rates, if the terms of such plan allow such
participation . Coverage for the two-year period under the
Company’s executive retiree health plan shall be provided on
a subsidized basis so that Executive’s cost for such
executive retiree health plan coverage will generally not be
greater than the cost charged to an active employee of the Company
for comparable coverage. Executive’s cost for such
executive retiree health plan coverage shall be paid on an
after-tax basis and the Company subsidy for such coverage shall be
includible in Executive’s income for tax purposes, but the
Company will provide tax gross-up payments with respect to such
taxable subsidized coverage concurrently (or by reimbursement in
accordance with Section 7.2 of the Agreement of any benefit amount
that is taxable to Executive under Section 105(h) of the Code) with
the inclusion of such taxable coverage in Executive’s income
such that the tax gross-up payments will reimburse Executive for
all Federal and state income taxes and for the Hospital Insurance
portion of FICA tax withholding at the highest marginal rate
resulting from the inclusion in Executive’s income of
such Company subsidy to the executive retiree health plan coverage
and from the reimbursement of such taxes, but only to the extent
that such taxable subsidized
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coverage is not
also taxable to retirees of the Company who receive health coverage
through the Company’s health plan;
(iii)
any
other amounts earned, accrued or owing but not yet paid under
Section 1 above;
(iv)
any
other benefits in accordance with the terms of any applicable plans
and programs of the Company and a payment equal to any unused
vacation;
(v)
as
additional consideration for the non-competition and non-
solicitation covenant contained in Section 3, a single cash
payment, equal to Executive's Base Compensation, as defined in
Section 6.1(b) below; and
(vi)
under
the Supplemental Plan, Executive shall be entitled to receive a
Target Benefit and a Make-Whole Benefit, whether or not Executive
has then satisfied the requirements for early, normal or deferred
retirement under, or is then entitled to receive a vested benefit
under, the Company's Retirement Plan, payable at the time and in
the form provided under the Supplemental Plan; Executive's years of
service with the Company through the 24th month following the
Termination Date shall be taken into account in determining the
amount of the Target Benefit and the Make-Whole Benefit and 24
months shall be added to Executive's age for purposes of
determining the reduction in such Benefits, if any, to reflect
early commencement, utilizing the early commencement factor for
Executive's age and years of service, each as so modified, set
forth in the Company's Retirement Plan as in effect on the
Termination Date or, if there is no such factor for Executive's age
as so modified as of the Termination Date, a full actuarial
reduction for Executive's age as so modified, as determined by the
enrolled actuary for the Retirement Plan; and
(vii)
all
stock option grants, to the extent not already vested prior to the
removal or non-renewal, shall be fully vested and exercisable as if
Executive had remained actively employed by the Company, and had
satisfied all time requirements as to exercise, including the right
of exercise, where appropriate, within 36 months after the removal
or non-renewal; provided, however, that the exercise period shall
not be extended to a date later than the earlier of the latest day
by which the stock right could have expired by its original terms
or the tenth anniversary of the original date of grant.
5.5.
Voluntary
Termination . Executive
may voluntarily terminate the Employment Term upon 30 days' prior
written notice for any reason. In such event, after the
effective date of such termination, no further payments shall be
due under this Agreement except that Executive shall be entitled to
any benefits due in accordance with the terms of any applicable
plan and programs of the Company.
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5.6
Time of
Payment. Amounts
payable under this Section 5 following Executive’s
termination of employment, other than those expressly payable on a
deferred basis, will be paid on or before the 30th day following
Executive’s termination of employment, with the date of such
payment being determined in the sole discretion of the Company,
except as otherwise provided in Section 7.1. Notwithstanding
the foregoing, if calculation of the amounts payable by any payment
date specified in this Section 5.6 is not administratively
practicable due to events beyond the control of Executive (or
Ex
