Exhibit 10.1


 


EXECUTION
COPY


 


December 18, 2005


 


Mayo A. Shattuck, III

Chairman, President and Chief Executive Officer

Constellation Energy Group, Inc.


 


Re: Employment by Constellation Energy Group, Inc.
(the “Company”)


 


Dear Mayo:


 


You and we are currently party to the Amended and
Restated Change in Control Severance Agreement dated as of December 14,
2005 (the “Change in Control Agreement”), which provides for you to receive
certain benefits in connection with a “Qualifying Termination” of your
employment following a “Change in Control” of the Company (as such terms are
defined in the Change in Control Agreement). 
As you know, the Company has been in discussions with FPL Group, Inc.
(“FPL”) to negotiate a merger of FPL with and into the Company on the terms and
conditions set forth in the Agreement and Plan of Merger dated as of December 18,
2005 (the “Merger Agreement”), after which the shareholders of FPL immediately
prior to the consummation of the transactions contemplated by the Merger
Agreement (the “Transactions”) will control the Company.


 


This Letter Agreement will become effective on the
Closing (as defined in the Merger Agreement) of the Transactions (the “Effective
Date”), provided that you remain continuously employed by the Company until the
Closing.  If for some reason the Closing
does not occur or if your employment terminates prior to the Closing, this
Letter Agreement will be of no force and effect and will be deemed to have been
null and void ab initio.


 


All references to sections shall be to sections of
this Letter Agreement unless otherwise expressly indicated.


 


1.                                       Acknowledgment
and Affirmation.  The Company hereby
affirms the terms of your Change in Control Agreement, subject to the
modifications set forth herein.  Except
and to the extent expressly set forth herein, your Change in Control Agreement
will remain in effect in accordance with its terms and will not be modified by
this Letter Agreement.


 


The
Company hereby acknowledges and agrees that the Closing of the Transactions
will constitute a Change in Control as defined in your Change in Control
Agreement and an entitlement event with respect to your supplemental retirement
benefits, and that as a result of the Transactions, you will have the right to
terminate your employment for Good Reason (as defined in the Change in Control
Agreement) on the Effective Date and receive the payments and benefits set
forth in the Change in Control Agreement. 
However, you have agreed to continue to remain employed by the Company
on the terms and conditions described more fully in this Letter Agreement.  Accordingly, and as described more fully
below, we and you agree that on any termination of your employment following
the Effective Date at any time (including a termination that occurs after the
expiration of the “Protection Period” as such term is


 





















 


defined in your Change in Control Agreement), subject
to the terms and conditions of this Letter Agreement and the Change in Control
Agreement, the Company will provide you with the payments and benefits
specified in your Change in Control Agreement as payable in respect of a “Qualifying
Termination.”   Notwithstanding your
entitlement to these benefits as of the Effective Date, and in recognition of
our mutual desire for you to continue to provide services to the Company, you
hereby waive the right to receive the cash severance payment contemplated by Section 2(a) or
3(a), as the case may be, of the Change in Control Agreement, determined as
though you resigned for Good Reason on the Effective Date (the “Severance
Amount”), and to instead receive the award of restricted stock units described
in Section 3.


 


Except
as set forth herein, you shall not be entitled to any additional benefit under
the Change in Control Agreement upon a Qualifying Termination in connection
with a subsequent change in control of the Company.


 


2.                                       Employment
Term.  The term of this Letter Agreement
(the “Employment Term”) and your employment with the Company hereunder will
commence on the Effective Date and continue through the third anniversary of
the Effective Date (the “Scheduled Expiration Date”).  Notwithstanding the foregoing, the Employment
Term and your employment with the Company may be terminated prior to the
Scheduled Expiration Date by the Company with or without Cause (as such term is
defined in the Change in Control Agreement), by you with or without Good Reason
(as defined herein), as a result of your retirement, or as a result of your
death or Disability (as defined herein), subject to the Company’s obligations
to provide you with certain payments and benefits described in this Letter
Agreement if your employment and the Employment Term terminates before the
Scheduled Expiration Date.


 


3.                                       Waiver
of Cash Severance/Grant of RSUs.  On the
Effective Date, the Company will grant you that number of restricted stock
units (the “RSUs”) pertaining to the common stock of the Company with a fair
market value determined on the Effective Date equal to the Severance
Amount.  The RSUs will be issued under
the Company’s 2002 Long Term Incentive Plan or a successor plan (the “Plan”)
and will vest on the earlier to occur of (a) the first anniversary of the
Effective Date, subject to your continued employment with the Company through
such date or (b) a termination of your employment prior to such first
anniversary due to your death or Disability or by the Company without Cause or
by you for Good Reason, and after the RSUs have vested, the shares of common
stock to which the RSUs relate will be delivered to you on the termination of
your employment.


 


If,
prior to the first anniversary of the Effective Date, you resign without Good
Reason or your employment is terminated by the Company for Cause, you will
forfeit the RSUs and you will not be entitled to receive delivery of the shares
of common stock to which they relate at any time.  Prior to settlement, the RSUs will be
adjusted by the Company in the case of any stock split, dividend or other
corporate transaction on the same basis as restricted stock or restricted stock
unit awards issued under the Plan are adjusted.   In addition, the RSUs will be credited on
each cash dividend payment date in respect of shares of Company common stock
with additional RSUs, the number of which shall be equal to the quotient
determined by dividing (a) the product of (i) the per share cash
dividend amount multiplied by (ii) the number of RSUs recorded in your
account on the record date for the payment of any such dividend by (b) the
fair market value of a share of Company common stock on the dividend payment
date for such


 


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dividend, in each case, with fractions computed to
three decimal places.  You will not have
voting rights with respect to the shares to which the RSUs relate until such
shares are issued to you.


 


4.                                       Position.  On the Effective Date, you will be elected or
appointed Chairman of the Board of Directors of the Company (the “Board.”)  During the Employment Term, the Company will
employ you in a senior management position. 
Commencing on the Effective Date, you will have management responsibilities for the Company’s competitive energy
businesses and assist the CEO in developing the strategy for the Company until
the earlier of (a) the first anniversary of the Effective Date and (b) the
date on which such management responsibilities are transitioned to new
management. After the occurrence of the earlier of the two events described in
the preceding sentence, you will have such duties and responsibilities in your
senior executive capacity as are mutually agreed upon by you and the Company.
With respect to your executive responsibilities during the Employment Term, you
shall report directly to the Chief Executive Officer (the “CEO”) of the
Company.  In addition, during the
Employment Term the Company will cause you to be nominated for election to the
Board.


 


5.                                       Compensation.  During the Employment Term, your base salary
and bonus will be as follows:


 


(a)                                  2006:  Your base salary will remain as in effect
prior to the Effective Date, and the bonus payable to you in respect of your
employment in 2006 will be determined by a committee comprised of individuals
who were on the board of directors of the Company immediately prior to the
Effective Date;


 


(b)                                 2007:  Your aggregate base salary and bonus payable
in respect of your employment in 2007 will be five million dollars
($5,000,000), prorated for the period of time during that year that you are
employed; and


 


(c)                                  2008
and 2009:  Your aggregate base salary and
bonus payable in respect of your employment in each of 2008 and 2009 will be
two million five hundred thousand dollars ($2,500,000), prorated for the period
of time during that year that you are employed;


 


provided,
that, during the Employment Term, in no case will your aggregate base
salary and bonus in respect of any year be less than the aggregate base salary
and bonus payable or awarded to the CEO. 
If the amounts set forth above for any year are less than the aggregate
base salary and bonus payable or awarded to the CEO in respect of that year,
your aggregate base salary and bonus in respect of such year will be increased
to equal the aggregate base salary and bonus paid, payable or awarded to the
CEO in respect of such year.


 


6.                                       LTIP,
Benefits and Perquisites.  During the
Employment Term, your opportunity under the Company’s long term incentive plan
or plans  (the “LTIPs”), and the benefits
and perquisites provided to you by the Company, shall in each case be at least
as favorable as those provided to the CEO of the Company.  During the Employment Term and following the
termination of the Employment Term for so long as you remain a Director of the
Company, the Company shall make available to you office space in Baltimore,
Maryland equivalent to the


 


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office space currently provided to you, provide you
with a personal assistant or secretary of your own choosing, and shall continue
to provide you with personal and home security and use of the Company’s
executive drivers.


 


7.                                       Benefits
under the Change in Control Agreement. 
The Change in Control will constitute an entitlement event for you under
the terms of the supplemental retirement arrangement in which you participated
immediately prior to the Change in Control. 
In addition, any termination of the Employment Term and your employment
with the Company at any time and for any reason (including a termination of
your employment for Cause or by reason of your death) will be treated as a “Qualifying
Termination” under your Change in Control Agreement and, accordingly, upon any
such termination the Company will provide you with the payments and benefits
(other than the Severance Amount) set forth in the Change in Control Agreement,
with the date of termination of the Employment Term and your employment being
considered the date of such Qualifying Termination under the Change in Control
Agreement.  Notwithstanding anything to
the contrary set forth in the Change in Control Agreement or the Company’s
Senior Executive Supplemental Plan or any successor plan thereto (the “SERP”),
the calculation of the amount of your supplemental retirement benefits as
described in Section 2(b) or 3(b) of the Change in Control
Agreement, as the case may be, (the “SERP” benefit”) will be modified as
follows: your SERP benefit will be calculated based on your status as Chairman
of the Board and President and Chief Executive Officer of the Company and will
be otherwise calculated as though the Effective Date were the date of
computation, except the SERP benefit shall not be actuarially reduced to account
for your age on the date of the Effective Date, plus three years; instead your
SERP benefit shall be actuarially reduced to account for your age at the date
of termination of employment with the Company, plus three years.  The actuarial assumptions (including interest
rate and mortality) used to calculate your SERP benefit shall be at least as
favorable as those in effect immediately prior to the Effective Date.  Nothing herein is intended to give you the
right to receive more than one supplemental pension retirement benefit under
the SERP.


 


8.                                       Equity
Awards.  If your employment terminates
for any reason (other than a termination for Cause) at any time, any options to
purchase shares of common stock of the Company (including the Replacement
Options, as defined in the Change in Control Agreement) that were vested as of,
or that vest as a result of, such termination will remain outstanding for the
remainder of their term.  If your
employment terminates (a) as a result of your death or Disability at any time,
(b) is terminated by the Company without Cause or by you for Good Reason
at any time or (c) terminates for any reason after the first anniversary
of the Effective Date, other than a termination by the Company for Cause, you
will vest in all options granted on or after the Effective Date (including the
Replacement Options) and all such options will remain outstanding for the
remainder of their term.  For all
purposes under this Letter Agreement, the term “Cause” will have the meaning
set forth in the Change in Control Agreement and any termination of your
employment for Cause will be made in accordance with the procedures set forth
in the Change in Control Agreement.  For
all purposes under this Letter Agreement (including with respect to accelerated
vesting of the Replacement Options) “Good Reason” will have the meaning set
forth as an exhibit to this Letter Agreement. 
In addition to the foregoing, all of your outstanding equity awards
(including the Replacement Options) will vest in full on a subsequent change in
control of the Company to the extent the CEO’s equity awards vest on any such
change in control.


 


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9.                                       Severance.  On any termination of your employment at any
time, the Company will pay the following amounts to you: (a) any earned
but unpaid base salary through your date of termination, all accrued vacation
pay and reimbursement of all reasonable business expenses incurred prior to the
date of termination, in each case within ten business days following such
termination;  (b) all benefits in
accordance with the terms of all tax-qualified plans and all other benefit
plans (e.g., life insurance, disability insurance, etc.) in accordance with
their terms and conditions; and (c) any other or additional compensation
or benefits to which you are entitled under and in accordance with the terms of
applicable plans or employee benefit programs of the Corporation (collectively,
the “Accrued Obligations”).  In addition,
if your employment with the Company and the Employment Term is terminated by
the Company without Cause or by you for Good Reason prior to the third
anniversary of the Effective Date, in addition to the Accrued Obligations, the
payments and benefits set forth in your Change in Control Agreement and
described herein (as modified by this Letter Agreement) and the treatment of
your equity awards described above, the Company will provide you a lump sum
cash payment within ten business days following such termination, determined as
follows:


 


(i)                                     If
such termination of employment occurs prior to the first anniversary of the
Effective Date, the cash payment will be equal to fifteen million dollars
($15,000,000) less the aggregate amount of base salary and bonus paid to you
(including base salary and bonus paid to you as an Accrued Obligation) in
respect of your provision of services to the Company from and after January 1,
2007 through the termination date;


 


(ii)                                  If
such termination of employment occurs after the first anniversary of the
Effective Date, the cash payment will be equal to five million dollars
($5,000,000) less the aggregate amount of base salary and bonus paid to you
(including base salary and bonus paid to you as an Accrued Obligation) in
respect of your provision of services to the Company from and after January 1,
2008 through the termination date.


 


For purposes of clarification, if your employment with
the Company terminates on or after the Scheduled Termination Date but prior to
the payment to you of your entire aggregate base salary and bonus payable in
respect of your employment in 2008 as described in Section 5 of this
Letter Agreement, the Company will pay you any unpaid amounts as soon as
practicable following such termination.


 


10.                                 Sections
7 and 8 of the Change in Control Agreement are incorporated by reference into
this Letter Agreement as if expressly set forth herein.


 


11.                                 Non-Solicitation.  During your employment with the Company and
for a period of one year following any termination of your employment for any
reason, you will not directly or indirectly knowingly hire, employ, or solicit
the employment or services of (whether as an employee, officer, director,
agent, consultant or independent contractor), any person who (a) is
serving as an officer of the Company or any of its material subsidiaries (or
who served in such capacity at any time during the six-month period preceding
such hiring, employment or solicitation) or (b) was one of the fifty most
highly compensated employees of Constellation Energy Commodities Group (or any successor
thereto) during 2005 and is or was employed by the Company or any of its
affiliates at any time during the six-month period preceding such


 


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hiring, employment or solicitation), in each of (a) and
(b) without the prior written consent of the Company or such affiliate, as
applicable.


 


12.                                 Non-Disclosure.  You shall hold in a fiduciary capacity for
the benefit of the Company all secret or confidential information, knowledge or
data relating to the Company or any of its affiliates and their respective
businesses, which is obtained by you during your employment by the Company or
any of its affiliates and which is not public knowledge.  While you are employed by the Company and
thereafter, you shall not, without prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it.


 


13.                                 Remedies;
Injunctive Relief.  You acknowledge that
a breach of the restrictions contained in Sections 11 and 12 will cause
irreparable damage to the Company and its affiliates, the exact amount of which
will be difficult to ascertain, and that the remedies at law for any such breach
will be inadequate.  Accordingly, you and
the Company agree that if you breach any of the restrictions contained in Section 11
or Section 12, then the Company and its affiliates shall be entitled to
injunctive relief, without posting bond or other security, in addition to any
other remedy or relief to which they may be entitled.  You further agree that if you breach any of
the restrictions contained in Section 11 or Section 12, then in
addition to being subject to injunctive relief and any other remedy or relief
to which the Company and its affiliates may be entitled, you shall forfeit your
right to receive the cash severance payments described in Section 9(i) or
(ii), as applicable, that have not been paid to you at the time of such breach.


 


14.                                 No
Mitigation.  In the event your employment
and the Employment Term terminates or is terminated for any reason, you shall
not be required to mitigate any payment or benefits provided to you by the
Company by seeking other employment, and the Company will have no right to
offset against any amount subsequently earned by you following termination.


 


15.                                 Indemnification.  During the Employment Term and for so long
thereafter as you could be subject to liability, the Company shall keep in
place a directors’ and officers’ liability insurance policy (or policies)
providing comprehensive coverage to you for claims relating to your service as
an employee, officer, or director of the Company, on terms and conditions no
less favorable to you (e.g., with respect to scope, amounts and deductibles)
provided to then-existing officers and directors of the Company.  The Company shall indemnify you  to the fullest extent permitted by the
general laws of the State of Maryland and shall provide indemnification
expenses in advance to the extent permitted thereby.  The Company will follow the procedures
required by applicable law in determining persons eligible for indemnification
and in making indemnification payments and advances.   The indemnification and advance of expenses
provided by the Company pursuant to this Agreement shall not be deemed
exclusive of any other rights to which you may be entitled under any law
(common or statutory), or any agreement, vote of stockholders or disinterested
directors or other provision that is consistent with law, both as to action in
his official capacity and as to action in another capacity while holding office
or while employed or acting as agent for the Company, shall continue in respect
of all events occurring while you were a director of or employed by the Company
after you have ceased to be a director of or employed by the Company, and shall
inure to the benefit of the estate, heirs, executors and administrators of you.


 


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16.                                 Release.  Notwithstanding anything herein to the
contrary, it shall be a condition to your receiving any cash severance payments
referred to in Section 9 and delivery of the shares of common stock
underlying the RSUs upon termination of your employment that you shall have executed
and delivered to the Company a mutual release of claims against the Company in
the form attached to your Change in Control Agreement in accordance with the
procedures specified in the Change in Control Agreement (including the
provisions requiring the Company to execute a release and waiver of claims
against you and for the deemed effectiveness of such release and waiver in the
event the Company fails to execute it within the required timeframe).  It shall be a condition to your receiving any
payments or benefits pursuant to the Change in Control Agreement that you
satisfy any requirement to execute a mutual release of claims against the
Company in the form attached to your Change in Control Agreement if and to the
extent, and in accordance with the provisions and procedures, specified in the
Change in Control Agreement.


 


17.                                 Legal
Fees and Expenses.  You acknowledge that
you have been advised to consult with counsel with respect to the matters
contemplated in this Letter Agreement and the Company has agreed to reimburse
you for legal expenses incurred in connection with the negotiation of this
Letter Agreement, up to a maximum reimbursement of $40,000.


 


18.                                 Governing
Law.  This Letter Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of Maryland, without reference to rules relating to conflicts of law.


 


19.                                 No
Guarantee of Employment.  Your employment
pursuant to this Letter Agreement is not a guarantee of employment.  As stated in this Letter Agreement, the
Company may terminate your employment on written notice; provided, however,
that in certain instances as specified herein such termination may require the
Company to provide compensation or other benefits to you.


 


20.                                 Entire
Agreement/Termination of Employment Term. 
This Letter Agreement and the Change in Control Agreement as modified
hereby together set forth the entire agreement with respect to the subject
matters hereof and supersede all prior understandings and agreements as to
employment of you by the Company.  For
purposes of clarification, the Executive’s obligations and the Company’s rights
under the provisions of Sections 11, 12 and 13 of this Letter Agreement shall
survive the termination of the Employment Term and the Company’s obligations under
this Letter Agreement shall survive the termination of the Employment Term
until the Company shall have fully performed all of its obligations hereunder
with respect to the Executive with no future performance being possible.


 


21.                                 No
Amendment without Consent.  This Letter
Agreement cannot be amended, changed or modified without the written consent of
you and the Company.


 


22.                                 Severability.  If any one or more of the provisions
contained in this Letter Agreement shall be invalid, illegal or unenforceable
in any respect under any applicable law, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any
way be affected or impaired thereby.


 


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23.                                 Dispute
Resolution.  The parties agree that any
disputes, claims, complaints or causes of action of any type or kind (including
but not limited to any disputes relating in any way to this Agreement) which
the parties may have between themselves shall be resolved by final and binding
arbitration using a single arbitrator from the American Arbitration Association
pursuant to its then existing commercial arbitration rules. The arbitration
proceedings shall be conducted in Baltimore, Maryland, unless the parties
mutually agree in writing to a different location. Prior to presiding over any
such dispute, any arbitrator shall be required to consent in writing that he or
she shall reach a final decision within four (4) months after a claim has
been filed and within sixty (60) days after final submission. Any award
rendered in the arbitration may be enforced in any court of competent
jurisdiction. Pending the resolution of any such claim or dispute, you (and
your beneficiaries) shall continue to receive all payments and benefits due
under this Agreement or otherwise, except to the extent that the arbitrators
otherwise provide.


 


24.                                 Binding
on Successors.  This Letter Agreement
shall be binding upon any and all successors to the Company.


 


25.                                 Counterparts.  This Letter Agreement may be executed in two
or more counterparts, each of which shall be deemed to be an original.


 


	
   

  	
  Sincerely,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Constellation Energy
  Group, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   /s/ Thomas F. Brady

  	
   

  
	
   

  	
  By:

  	
  Thomas F. Brady

  
	
   

  	
   

  	
  Executive Vice
  President

  
				



 


Agreed to and accepted:


 


	
  /s/ Mayo A. Shattuck III

  	
   

  	
  Date:

  	
    December 18,
  2005

  
	
  Mayo A. Shattuck, III

  	
   

  	
   

  	
   

  



 


Acknowledged by:


Constellation Energy
Group, Inc.


Board of Directors


 


	
  /s/ Robert J. Lawless

  	
   

  
	
  By:

  	
  Robert J.
  Lawless

  
	
   

  	
  Chairperson of
  the

  
	
   

  	
  Compensation
  Committee

  
			



 


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Certain Defined Terms


 


The following
defined terms used in the Letter Agreement but not defined therein will have
the meanings set forth below.


 


1.  “Disability” means that you have been
determined to be eligible for long-term disability benefits under the long-term
disability plan sponsored by the Company applicable to you.


 


2.  “Good Reason” means, without your express
consent, the occurrence after the Effective Date of any one or more of the
following:


 


(a)                                  Prior
to the first anniversary of the Effective Date, you are relieved of or
otherwise lose management responsibilities for the competitive energy
businesses or of assisting the CEO in determining the strategy of the Company,
other than in connection with the transition of such responsibilities to new
management or you are removed as (or not elected or appointed) Chairman of the
Board or are removed as (or not elected or appointed) a Director of the
Company; or


 


(b)                                 After
the first anniversary of the Effective Date, you are removed as (or not elected
or appointed) Chairman of the Board or are removed as (or not elected or
appointed) a Director of the Company; or


 


(c)                                  At
any time, the Company fails to provide you with LTIP opportunity or perquisites
and benefits that are at least as favorable as those provided to the CEO; or


 


(d)                                 At
any time, the Company fails to provide you with the base salary and bonus
described in the Letter Agreement; or


 


(e)                                  Breach
by the Company of any of the provisions of the Letter Agreement or your Change
in Control Agreement (as modified by the Letter Agreement).


 


Your right to terminate employment for Good Reason
shall not be affected by your incapacity due to physical or mental
illness.  Your continued employment shall
not constitute consent to, or a waiver of rights with respect to, any
circumstance constituting Good Reason herein; provided, however, a termination
of employment by you for Good Reason for purposes of this Letter Agreement
shall be effectuated by giving the Company written notice (“Notice of
Termination for Good Reason”) of the termination setting forth in reasonable
detail the specific conduct of the Company that constitutes Good Reason and the
specific provision(s) of this Letter Agreement on which you relied.  Unless
the parties agree otherwise, a termination of employment by you for Good Reason
shall be effective on the thirtieth (30th)  day following
the date when the Notice of Termination for Good Reason is given, unless the
notice sets forth a later date (which date shall in no event be later than
sixty (60) days after the notice is given); provided, however, that no event
described hereunder shall constitute Good Reason if such event is a result of
an isolated, insubstantial and inadvertent action that is not taken in bad faith
and that is remedied by the Company within ten (10) days after receipt of
the Notice of Termination for Good Reason by the


 





















 


Company from you.  If the Company disputes the existence of Good
Reason, the burden of proof is on the Company to establish that Good Reason
does not exist.  If you continue to
provide services to the Company after one of the events giving rise to Good
Reason has occurred, it will be in no way considered a waiver of your right to
terminate your employment at any time for Good Reason in connection with such
event.


 


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