Exhibit 10.2


 


AMENDED AND RESTATED

CHANGE IN CONTROL SEVERANCE AGREEMENT


 


This amended and restated agreement (the “Agreement”)
is made as of the 14th day of December, 2005, by and between
CONSTELLATION ENERGY GROUP, INC. (the “Company”) and Mayo A. Shattuck III (the “Executive”).


 


WHEREAS, the Company and the Executive are parties to
a Change in Control Severance Agreement dated as of August 16, 2004 (the “Original
Agreement”);


 


WHEREAS, the Company and the Executive desire to amend
and restate the Original Agreement so that the Original Agreement will be
replaced in its entirety with this Agreement;


 


WHEREAS, the Company wishes to encourage the orderly
succession of management in the event of a Change in Control (as hereinafter
defined);


 


WHEREAS, the Company desires to maintain a severance
benefit for the Executive covering the period from the date of a Change in
Control until the end of the twenty—four month period following the date of a
Change in Control, to avoid the loss or the serious distraction of the
Executive to the detriment of the Company and its stockholders prior to and
during such period when the Executive’s undivided attention and commitment to
the needs of the Company would be particularly important;


 


WHEREAS, the Executive desires to devote the Executive’s
time and energy for the benefit of the Company and its stockholders and not to
be distracted as a result of a Change in Control.


 


NOW, THEREFORE, the parties agree as follows:


 


1.                                       Definitions.


 


1.1                                             Annual
Award Amount.  The term “Annual
Award Amount” means, as of the applicable date of determination, the average of
the two highest annual incentive awards under the Company’s annual incentive
plan (or the annual incentive plan maintained by a successor Company or a
Subsidiary) payable or actually paid under the terms of such annual incentive
plan for the performance year during which the date of determination occurs,
and in respect of the last four years to the Executive prior to the date of
determination; provided, however, that (a) if the Executive has not been
employed by the Company or a Subsidiary for a sufficient length of time to have
been eligible for payment of at least two annual incentive awards, deemed
target award payout shall be used for the one or two years for which the Executive
was not so eligible, except that the maximum payout shall be used for the
performance year in which the date of determination occurs; (b) for any
year during which an annual incentive award was paid or is payable to the
Executive that was prorated because of less than a year of plan participation,
such award shall be annualized, except that for the year in which the date of
determination occurs, the maximum payout shall be used; and (c) for any
year during which a guaranteed minimum annual incentive award amount was paid
or is payable to the Executive, such full (not prorated because


 





















 


of less than a full year of plan participation) guaranteed annual
incentive amount shall be used for such year.


 


1.2                                             Board.  The term “Board” means the
Board of Directors of the Company.


 


1.3                                             Cause.  The term “Cause” means the
occurrence of any one or more of the following:


 


(a)                                  The Executive is
convicted of a felony involving moral turpitude or that involves the
misappropriation of property of the Company or a Subsidiary; or


 


(b)                                 The Executive
engages in conduct or activities that constitutes disloyalty to the Company or
a Subsidiary and such conduct or activities are materially damaging to the
property, business or reputation of the Company or a Subsidiary; or


 


(c)                                  The Executive
persistently fails or refuses to comply with any written direction of an
authorized representative of the Company other than a directive constituting an
assignment described in Section 1.7(a); or


 


(d)                                 The Executive
embezzles or knowingly, and with intent, unlawfully appropriates any corporate
opportunity of the Company or a Subsidiary.


 


A termination of the
Executive’s employment for Cause for purposes of this Agreement shall be
effected in accordance with the following procedures.  The Company shall give the Executive written
notice (“Notice of Termination for Cause”) of its intention to terminate the
Executive’s employment for Cause, setting forth in reasonable detail the
specific conduct of the Executive that it considers to constitute Cause and the
specific provision(s) of this Agreement on which it relies, and stating the
date, time and place of the Board Meeting for Cause.  The “Board Meeting for Cause” means a meeting
of the Board at which the Executive’s termination for Cause will be considered,
that takes place not less than ten (10) and not more than twenty (20)
business days after the Executive receives the Notice of Termination for
Cause.  The Executive shall be given an
opportunity, together with counsel, to be heard at the Board Meeting for
Cause.  The Executive’s Termination for
Cause shall be effective when and if a resolution is duly adopted at the Board
Meeting for Cause by a two—thirds vote of the entire membership of the Board,
excluding employee directors, stating that in the good faith opinion of the
Board, the Executive is guilty of the conduct described in the Notice of
Termination for Cause, and that conduct constitutes Cause under this Agreement.


 


Notwithstanding the
foregoing, no event described hereunder shall constitute Cause 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 Executive within ten (10) days
after receipt of the Notice of Termination for Cause by the Executive from the
Company.


 


1.4                                             Change
in Control.  The term “Change
in Control” means the occurrence of any one of the following events:


 


(a)                                  individuals who,
on January 24, 2003, constitute the Board (the ‘‘Incumbent Directors”)
cease for any reason to constitute at least a majority of the Board,


 


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provided that any person
becoming a director subsequent to January 24, 2003, whose election or
nomination for election was approved by a vote of at least two—thirds of the
Incumbent Directors then on the Board (either by a specific vote or by approval
of the proxy statement of the Company in which such person is named as a
nominee for director, without written objection to such nomination) shall be an
Incumbent Director; provided, however, that no individual
initially elected or nominated as a director of the Company as a result of an
actual or threatened election contest with respect to directors or as a result
of any other actual or threatened solicitation of proxies by or on behalf of
any person other than the Board shall be deemed to be an Incumbent Director;


 


(b)                                 any “person” (as
such term is defined in Section 3(a)(9) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”) and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial
owner” (as defined in Rule 13d–3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 20% or more of the
combined voting power of the Company’s then outstanding securities eligible to
vote for the election of the Board (the “Company
Voting Securities”); provided, however, that the event described in this paragraph (b) shall not be deemed
to be a Change in Control by virtue of any of the following acquisitions: (A) by
the Company or any Subsidiary, (B) by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any Subsidiary, (C) by
any underwriter temporarily holding securities pursuant to an offering of such
securities, (D) pursuant to a Non—Qualifying Transaction (as defined in
paragraph (c)), or (E) pursuant to any acquisition by Executive or any
group of persons including Executive (or any entity controlled by Executive or
any group of persons including Executive);


 


(c)                                  there is consummated
a merger, consolidation, statutory share exchange or similar form of corporate
transaction involving the Company or any of its Subsidiaries (a “Business Combination”), unless immediately following
such Business Combination: (A) more than 60% of the total voting power of
(x) the corporation resulting from such Business Combination (the “Surviving Corporation”), or (y) if applicable, the
ultimate parent corporation that directly or indirectly has beneficial
ownership of at least 95% of the voting securities eligible to elect directors
of the Surviving Corporation (the “Parent
Corporation”), is represented by Company Voting Securities that were
outstanding immediately prior to such Business Combination (or, if applicable,
is represented by shares into which such Company Voting Securities were
converted pursuant to such Business Combination), and such voting power among
the holders thereof is in substantially the same proportion as the voting power
of such Company Voting Securities among the holders thereof immediately prior
to the Business Combination, (B) no person (other than any employee
benefit plan (or related trust) sponsored or maintained by the Surviving
Corporation or the Parent Corporation), is or becomes the beneficial owner,
directly or indirectly, of 20% or more of the total voting power of the
outstanding voting securities eligible to elect directors of the Parent
Corporation (or, if there is no Parent Corporation, the Surviving Corporation)
and


 


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(C) at least a majority
of the members of the board of directors of the Parent Corporation (or, if
there is no Parent Corporation, the Surviving Corporation) following the
consummation of the Business Combination were Incumbent Directors at the time of
the Board’s approval of the execution of the initial agreement providing for
such Business Combination (any Business Combination which satisfies all of the
criteria specified in (A), (B) and (C) above shall be deemed to be a “Non—Qualifying Transaction”); or


 


(d)                                 the stockholders
of the Company approve a plan of complete liquidation or dissolution of the
Company, or the consummation of a sale of all or substantially all of the
Company’s assets.


 


Notwithstanding the foregoing, a Change in Control of
the Company shall not be deemed to occur solely because any person acquires
beneficial ownership of more than 20% of the Company Voting Securities as a
result of the acquisition of Company Voting Securities by the Company which
reduces the number of Company Voting Securities outstanding; provided, that if
after such acquisition by the Company such person becomes the beneficial owner
of additional Company Voting Securities that increases the percentage of
outstanding Company Voting Securities beneficially owned by such person, a
Change in Control of the Company shall then occur.


 


1.5                                             Effective
Date.  The term “Effective Date” means
the first date during the term of this Agreement on which a Change in Control
occurs provided that the Executive is employed by the Company or a Subsidiary
on such date.  Anything in this Agreement
to the contrary notwithstanding, if the Executive’s employment with the Company
or a Subsidiary has terminated for any reason prior to the first date on which
a Change in Control occurs, this Agreement shall be null and void as of the
date of such termination of employment; provided, however, that if it is
reasonably demonstrated that such termination (i) was at the request of a
third party who has taken steps reasonably calculated to effect a Change in
Control, or (ii) otherwise arose in connection with or anticipation of a
Change in Control, then for all purposes of this Agreement the “Effective Date”
shall mean the date immediately prior to the date of such termination.


 


1.6                                             Eligible
to Retire.  The term “Eligible to Retire”
means an Executive who has met the eligibility requirements for retirement
under any Company or Subsidiary supplemental executive non—qualified defined
benefit retirement plan in which the Executive participated immediately prior
to the occurrence of a Qualifying Termination.


 


1.7                                             Good
Reason.  The term “Good
Reason” means, without the Executive’s express written consent, the occurrence
after the Effective Date of any one or more of the following:


 


(a)                                  The assignment
to the Executive of duties materially inconsistent with the Executive’s
authorities, duties, responsibilities, and status (including offices, title and
reporting relationships) as an executive and/or officer of the Company or a
Subsidiary immediately prior to the Effective Date, or a material reduction or
alteration in the nature or status of the Executive’s authorities, duties, or
responsibilities from those in effect immediately prior to the Effective Date,


 


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(including as a type of such
reduction or alteration for an Executive who is an officer of a publicly traded
company immediately prior to the Effective Date, the Executive occupying the
same position or title but with a company whose stock is not publicly traded),
unless such act is remedied by the Company or such Subsidiary within 10
business days after receipt of written notice thereof given by the Executive;
or


 


(b)                                 A reduction by
the Company or a Subsidiary of the Executive’s base salary in effect immediately
prior to the Effective Date or as the same shall be increased from time to
time, unless such reduction is less than ten percent (10%) and it is either (i) replaced
by an incentive opportunity equal in value; or is (ii) consistent and
proportional with an overall reduction in management compensation due to
extraordinary business conditions, including but not limited to reduced
profitability and other financial stress (i.e., the base salary of the
Executive will not be singled out for reduction in a manner inconsistent with a
reduction imposed on other executives of the Company or such Subsidiary); or


 


(c)                                  The relocation
of the Executive’s office more than 50 miles from the Executive’s office
immediately prior to the Effective Date; or


 


(d)                                 Failure of the
Company or a Subsidiary (whichever is the Executive’s employer) to provide (i) the
Executive the opportunity to participate in all applicable incentive, savings
and retirement plans, practices, policies and programs of the Company or such
Subsidiary to the same extent as other senior executives (or, where applicable,
retired senior executives) of the Company or such Subsidiary, and (ii) the
Executive and/or the Executive’s family, as the case may be, the opportunity to
participate in, and receive all benefits under, all applicable welfare benefit
plans, practices, policies and programs provided by the Company or such
Subsidiary, including, without limitation, medical, prescription, dental,
disability, sick benefits, accidental death and travel insurance plans and
programs, to the same extent as other senior executives (or, where applicable,
retired senior executives) of the Company or such Subsidiary; or


 


(e)                                  Failure of the
Company or a Subsidiary (whichever is the Executive’s employer) to provide the
Executive such perquisites as the Company or such Subsidiary may establish from
time to time which are commensurate with the Executive’s position and at least
comparable to those received by other senior executives at the Company or such
Subsidiary; or


 


(f)                                    The aggregate
benefits provided to the Executive by the Company following a Change in Control
are materially less than the aggregate benefits made available to the Executive
immediately prior to such Change in Control; or


 


(g)                                 The failure by
the Company to comply with paragraph (c) of Section 14 of this
Agreement; or


 


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(h)                                 Any other substantial breach of this Agreement by
the Company that either is not taken in good faith or is not remedied by the
Company promptly after receipt of notice thereof from the Executive.


 


The Executive’s right to terminate employment for Good
Reason shall not be affected by the Executive’s incapacity due to physical or
mental illness.  The Executive’s
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 the Executive for Good Reason for
purposes of this Agreement shall be effectuated by giving the Company written
notice (“Notice of Termination for Good Reason”) of the termination, at any
time during the Protection Period, setting forth in reasonable detail the
specific conduct of the Company that constitutes Good Reason and the specific
provision(s) of this Agreement on which the Executive relied.  Unless the parties agree otherwise, a
termination of employment by the Executive 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 the Executive.  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 the Executive
continues 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
the Executive’s right to terminate his employment at any time during the
Protection Period for Good Reason in connection with such event.


 


1.8                                             Ineligible
to Retire.  The term “Ineligible to
Retire” means an Executive who has not met the eligibility requirements for
retirement under any Company or Subsidiary supplemental executive non—qualified defined benefit retirement plan in which the
Executive participated immediately prior to the occurrence of a Qualifying
Termination.


 


1.9                                             Qualifying
Termination.  The term “Qualifying
Termination” means


 


(a)                                  The occurrence
of any one or more of the following employment termination events during the
period beginning with the Effective Date and ending on the second anniversary
of such date, shall constitute a “Qualifying Termination”:


 


(i)                                     The Company’s
termination of the Executive’s employment without Cause (as defined in Section 1.3);
or


 


(ii)                                  The Executive’s
resignation for Good Reason (as defined in Section 1.7).


 


(b)                                 A Qualifying
Termination shall not include a termination of employment by reason of death,
disability, the Executive’s voluntary termination of employment without Good
Reason, or the Company’s termination of the Executive’s employment for Cause.


 


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1.10                                       Protection
Period.  The Term “Protection Period”
means the two (2) year period commencing on the Change in Control and
ending on the second anniversary of the Change in Control.


 


1.11                                       Subsidiary.  The term “Subsidiary” means any corporation
with respect to which the Company owns a majority of the outstanding shares of
common stock or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors.


 


2.                                       Severance Benefits for an Executive Ineligible to Retire.  Upon the occurrence of a Qualifying
Termination with respect to an Executive who is Ineligible to Retire:


 


(a)                                  Severance
Payment.  The Company
shall pay to the Executive an amount equal to three times the sum of (i) the
greater of (A) the Executive’s annual base salary as of immediately prior
to the occurrence of the Change of Control or (B) the Executive’s annual
base salary (as in effect on the date of the Qualifying Termination, not
reduced by any reduction described in Section 1.7(b) above) and (ii) the
greater of (A) the Annual Award Amount, determined with the date of the
Change of Control as the date of determination, or (B) the Annual Award
Amount, determined with the date of the Qualifying Termination as the date of
determination.  The payment shall be made
in a lump sum after the Qualifying Termination, and within approximately 10
business days after the Company
receives the executed agreement referred to in 2(e) below but in no case
prior to the expiration of any period during which the Executive is permitted
to revoke such agreement.


 


(b)                                 Supplemental
Retirement Benefits.  For purposes of determining
the Executive’s supplemental retirement
benefits which the Executive is entitled to under the Company’s supplemental
non-qualified retirement plan in which the Executive participated immediately
prior to the Qualifying Termination (or the supplemental retirement plan
maintained by a successor company or a Subsidiary), (i) the Executive’s
service percentage shall be computed by adding three years of executive-level
service to the Executive’s actual service; (ii) any minimum age and
service eligibility requirements for such benefits shall be waived and such
benefits shall be fully vested; (iii) Annual Award Amount shall be used to
compute such benefits in lieu of any other annual incentive award amount under
such plan and (iv) for purposes of computing the present value of the
benefit to be paid to the Executive at age 62, three years will be added to the
Executive’s age.  Notwithstanding the
foregoing, on a Qualifying Termination, the Executive will be entitled to
receive under the supplemental non-qualified retirement plan in which the
Executive participated immediately prior to the Qualifying Termination, an
amount equal to the greater of (i) the amount that would have been payable
under this Section 2(b) had the Qualifying Termination occurred on
the Change in Control or (ii) the amount payable under this Section 2(b) determined
as of the date of the Qualifying Termination.


 


(c)                                  Severance
Health Benefits.  Commencing upon a Qualifying Termination and
continuing through the third anniversary of such Qualifying Termination, the


 


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Executive
and/or the Executive’s family, as the case may be, shall receive all medical
and dental benefits and any life insurance coverage provided to active
employees of the Company, and such benefits shall be provided on an insured
basis. In addition, if the Executive has attained age fifty (50) as of his
Qualifying Termination (or would have attained age fifty (50) had he remained
employed through the period ending on the third anniversary of his Qualifying
Termination), the Company shall make available to the Executive insured medical
and dental benefits at prevailing retiree coverage rates (based on the
executive’s age and deemed service on the third anniversary of his Qualifying
Termination), beginning upon the third anniversary of the Executive’s
Qualifying Termination and lasting for the Executive’s life. The Executive must
elect retiree medical and dental coverage within five (5) years after the
third anniversary of his Qualifying Termination, in order to be entitled to the
benefit described in the second sentence of this paragraph, and will commence
receiving such coverage effective as soon as practicable after the date of such
election in accordance with the terms of the applicable retiree medical and
dental programs.


 


(d)                                 Outplacement.  For a 60-day period
commencing on the date of the Qualifying Termination, the Executive is entitled
to receive outplacement services from one or more organizations that are
offered by the Company from time to time, with such services capped at a
Company cost of $50,000.


 


(e)                                  Release.  The benefits described in this Section 2
are payable by the Company to the Executive only if after the date of the
Qualifying Termination, the Executive executes (and does not subsequently
revoke) in writing and submits to the Company a mutual release and waiver of
legal claims, including those against the Company and its Subsidiaries, in the
form attached hereto. Following receipt of the Executive’s signed mutual
release pursuant to this Agreement, the Company shall have ten (10) days
from the date such release becomes irrevocable to execute the release and
deliver a copy to the Executive.  If the
Company fails to execute such release within the time frame established by the
preceding sentence, the release shall be deemed to have been signed by the
Company and shall be fully enforceable by each party against the other.


 


(f)                                    Benefits
Paid to Estate of Executive on Death. If the Executive dies after
providing the Company with Notice of Termination for Good Reason during the
Protection Period and a Good Reason event has occurred, any payments and benefits
due to him at the time of his death under this Agreement, shall be paid to his
estate in accordance with the same terms as described in the provisions of this
Agreement. Such benefits shall expressly include continuation of any severance
health benefits for which the Executive was eligible under Section 2(c) for
the Executive’s family.


 


3.                                       Severance Benefits for an Executive Eligible to Retire.  Upon the occurrence of a Qualifying
Termination with respect to an Executive who
is Eligible to Retire:


 


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(a)                                  Severance
Payment.  The Company shall pay to the
Executive an amount equal to the amount determined under Section 2(a) of
this Agreement.  The payment shall be
made in a lump sum after the Qualifying Termination, and within approximately
10 business days after the Company receives the executed agreement referred to
in Section 3(e) below, but in no case prior to the expiration of any
period during which the Executive is permitted to revoke such agreement.


 


(b)                                 Supplemental
Retirement Benefits.  For purposes of determining
the Executive’s supplemental retirement benefits which the Executive is
entitled to under the Company’s supplemental non-qualified retirement plan in
which the Executive participated immediately prior to the Qualifying
Termination (or the supplemental retirement plan maintained by a successor
company or a Subsidiary), (i) the Executive’s service percentage shall be
computed by adding three years of executive-level service to the Executive’s actual
service; (ii) Annual Award Amount shall be used to compute such benefits
in lieu of any other annual incentive award amount under such plan; and (iii) for
purposes of computing the present value of the benefit to be paid to the
Executive at age 62, three years will be added to the Executive’s age.   Notwithstanding the foregoing, on a
Qualifying Termination, the Executive will be entitled to receive under the
supplemental non-qualified retirement plan in which the Executive participated
immediately prior to the Qualifying Termination, an amount equal to the greater
of (i) the amount that would have been payable under this Section 3(b) had
the Qualifying Termination occurred on the Change in Control or (ii) the
amount payable under this Section 3(b) determined as of the date of
the Qualifying Termination.


 


(c)                                  Severance
Health Benefits.  Commencing upon a Qualifying Termination and
continuing through the third anniversary of such Qualifying Termination, the
Executive and/or the Executive’s family, as the case may be, shall receive all
medical and dental benefits and any life insurance coverage provided to active
employees of the Company, and such benefits shall be provided on an insured
basis.  In addition, if the Executive has
attained age fifty (50) as of his Qualifying Termination (or would have
attained age fifty (50) had he remained employed through the period ending on
the third anniversary of his Qualifying Termination), the Company shall make
available to the Executive insured medical and dental benefits at prevailing
retiree coverage rates (based on the executive’s age and deemed service on the
third anniversary of his Qualifying Termination), beginning upon the third
anniversary of the Executive’s Qualifying Termination and lasting for the
Executive’s life. The Executive must elect retiree medical and dental coverage
within five (5) years after the third anniversary of his Qualifying
Termination, in order to be entitled to the benefit described in the second
sentence of this paragraph, and will commence receiving such coverage effective
as soon as practicable after the date of such election in accordance with the
terms of the applicable retiree medical and dental programs.


 


(d)                                 Outplacement.  For a 60-day period commencing on the date of the Qualifying Termination, the Executive is entitled to receive outplacement
services from one


 


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or more organizations that are offered by the Company from time to time, with such services capped at
a Company cost of $50,000.


 


(e)                                  Release.  The benefits described in this Section 3
are payable by the Company to the Executive only if after the date of the
Qualifying Termination, the Executive executes (and does not subsequently
revoke) in writing and submits to the Company a mutual release and waiver of
legal claims, including those against the Company and its Subsidiaries, in the
form attached hereto. Following receipt of the Executive’s signed mutual
release pursuant to this Agreement, the Company shall have ten (10) days
from the date such release becomes irrevocable to execute the release and
deliver a copy to the Executive.  If the
Company fails to execute such release within the time frame established by the
preceding sentence, the release shall be deemed to have been signed by the
Company and shall be fully enforceable by each party against the other.


 


(f)                                    Benefits
Paid to Estate of Executive on Death. If the Executive dies after
providing the Company with Notice of Termination for Good Reason during the
Protection Period and a Good Reason event has occurred, any payments and
benefits due to him at the time of his death under this Agreement, shall be
paid to his estate in accordance with the same terms as described in the
provisions of this Agreement. Such benefits shall expressly include
continuation of any severance health benefits for which the Executive was
eligible under Section 3(c) for the Executive’s family.


 


4.                                       Grant of Replacement Options upon a Change in Control. Some or all of
the outstanding options to purchase common stock of the Company outstanding
under the Company’s equity compensation plans (the “Equity Plans”) as of the
occurrence of a Change in Control will be cashed-out in accordance with the
terms of the applicable plans in connection with any Change in Control (the “Cashed-Out
Options”).  As soon as practicable
following the occurrence of a Change in Control, the Company shall, subject to
shareholder approval, cause the applicable committee or committees
administering the Equity Plans to grant the Executive additional stock options
(the “Replacement Options”) to purchase common stock of the Company (or, if the
Company is not the surviving entity in connection with a Change in Control,
common stock of the surviving entity). 
The Replacement Options will (i) be granted on substantially the
same terms and conditions as the Cashed-Out Options (including provisions
related to the term), (ii) have an exercise price equal to the greater of (A) the
fair market value of the underlying common stock at the time of grant and (B) the
exercise price of the Cashed-Out Options to which they relate, as adjusted to
take into account the transaction or transactions that resulted in the Change
in Control, (iii) relate to the same number of shares as the Cashed-Out
Options (as adjusted to take into account the transaction or transactions that
resulted in the Change in Control), (iv) vest in accordance with the terms
of the schedule of the Cashed-Out Options to which they relate (excluding
any vesting that occurs as a result of such Change in Control and, for purposes
of determining the vesting schedule, the Replacement Options will be deemed to
have been granted at the time of grant of the Cashed-Out Options to which they
relate), and (v) will remain exercisable for the same period as the
Cashed-Out Options would have been exercisable had they not been terminated.
The Replacement Options shall vest in full as of a Qualifying Termination.  Notwithstanding anything to
the contrary set forth herein, the


 


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Replacement Options will not vest in connection with a subsequent
transaction (the “Subsequent Transaction”) following the Change in Control in
which such Replacement Options were granted (the “Initial Change in Control”)
that would constitute a Change in Control if such Subsequent Transaction merely
increases the percentage ownership of common stock of the Company held by the
person or entity whose initial acquisition of common stock of the Company
triggered the Initial Change in Control.


 


5.                                       Non-Exclusivity of Rights.  Nothing in this Agreement shall prevent or
limit the Executive’s continuing or future participation in any plan, program,
policy or practice provided by the Company or a successor company or a
Subsidiary (whichever is the Executive’s employer) for which the Executive may
qualify, nor shall anything in this Agreement limit or otherwise affect such
rights as the Executive may have under any contract or agreement with the
Company or a successor Company or such Subsidiary.  However, if the Executive receives severance
benefits under this Agreement, the Executive is not also entitled to any
benefit under any other severance plan, program, arrangement or agreement
maintained by the Company or a Subsidiary. 
Vested benefits and other amounts that the Executive is otherwise
entitled to receive under any incentive compensation (including, but not
limited to any restricted stock or stock option agreements), deferred
compensation and other benefit programs listed in Section 1.7(d), life
insurance coverage, or any other plan, policy, practice or program of, or any
contract or agreement with, the Company or a successor Company or such
Subsidiary on or after the date of the Qualifying Termination shall be payable
in accordance with the terms of each such plan, policy, practice, program,
contract or agreement, as the case may be, except as explicitly modified by
this Agreement.


 


6.                                       Full Settlement.  The Company’s obligation to
make the payments provided for in, and otherwise to perform its obligations
under, this Agreement shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action that the Company may have
against the Executive or others.  In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, such amounts shall not be reduced,
regardless of whether the Executive obtains other employment.


 


7.                                       Certain Additional Payments by the Company.


 


(a)                                  Anything in this
Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution (including an
acceleration of vesting, or a lapse of restrictions on amounts otherwise
subject to vesting) by the Company to or for the benefit of the Executive (a “Payment”)
would be subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the “Code”) or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the “Excise Tax”), then the Executive shall be entitled to
receive an additional payment (a “Gross—Up Payment”) in an amount such that
after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect thereon)
and Excise Tax imposed upon the Gross—Up Payment, the


 


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Executive retains an amount
of the Gross—Up Payment equal to the Excise Tax imposed upon the Payment.


 


(b)                                 Subject to the
provisions of paragraph (c) of this Section 7, all determinations
required to be made under this Section 7, including whether and when a
Gross—Up Payment is required and the amount of
such Gross—Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by one of the
major internationally recognized certified public accounting firms (commonly
referred to, as of the date hereof, as a Big Four firm) designated by the
Executive and approved by the Company (which approval shall not be unreasonably
withheld) (the “Accounting Firm”), which shall provide detailed supporting
calculations both to the Company and the Executive within fifteen (15) business
days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company.  In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group affecting
the change of control, the Executive shall designate another Big Four
accounting firm (subject to the approval of the Company, which approval shall
not be unreasonably withheld) to make the determinations required hereunder
(which accounting firm shall then be referred to as the Accounting Firm
hereunder).  All fees and expenses of the
Accounting Firm shall be borne solely by the Company.  Any Gross—Up Payment, as determined pursuant
to this Section 7, shall be paid by the Company to the Executive within
five (5) days of the receipt of the Accounting Firm’s determination.  Any determination by the Accounting Firm
shall be binding upon the Company and the Executive.  As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross—Up Payments
which will not have been made by the Company should have been made (“Underpayment”)
consistent with the calculations required to be made hereunder.  In the event that the Company exhausts its
remedies pursuant to paragraph (c) of this Section 7 and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for the benefit of the Executive.


 


(c)                                  The Executive
shall notify the Company in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by the Company of the
Gross—Up Payment.  Such notification
shall be given as soon as practicable but no later than ten (10) business
days after the Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on which such
claim is requested to be paid.  The
Executive shall not pay such claim prior to the expiration of the thirty (30)
day period following the date on which the Executive gives such notice to the
Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due).  If
the Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:


 


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(i)                                     give the Company
any information reasonably requested by the Company relating to such claim,


 


(ii)                                  take such action
in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably
selected by the Company,


 


(iii)                               cooperate with
the Company in good faith in order effectively to contest such claim, and


 


(iv)                              permit the
Company to participate in any proceedings relating to such claim;


 


PROVIDED, however, that the Company shall bear and
pay directly all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall indemnify and
hold the Executive harmless, on an after—tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and expenses.  Without limitation on the foregoing
provisions of this paragraph (c) of Section 7, the Company shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; PROVIDED, however, that if
the Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest—free basis and shall indemnify and hold the Executive harmless, on an
after—tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and PROVIDED,
further, that any extension of the statute of limitations relating to payment
of taxes for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount.  Furthermore, the Company’s
control of the contest shall be limited to issues with respect to which a
Gross—Up Payment would be payable hereunder and the Executive shall be entitled
to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.


 


(d)                                 If, after the
receipt by the Executive of an amount advanced by the Company pursuant to
paragraph (c) of this Section 7, the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall promptly
take all necessary action to obtain such refund and (subject to the Company’s
complying with the requirements of paragraph (c) of this Section 7)
upon receipt of such refund shall promptly pay to the Company the amount of
such refund (together with any interest paid or credited thereon after taxes
applicable thereto).


 


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If after the receipt by the
Executive of an amount advanced by the Company pursuant to paragraph (c) of
this Section 7, a determination is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of thirty (30) days
after such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.


 


8.                                       Certain Additional Agreements under Section 409A.


 


(a)                                  In the event the
payment of any amounts under this Agreement would be treated as non-qualified
deferred compensation under Section 409A of the Code, such payment will be
delayed for six (6) months after the date of the Executive’s Qualifying
Termination if required in order to avoid additional tax under Section 409A
of the Code. If the Executive dies within six (6) months following a
Qualifying Termination, any such delayed payments shall not be further delayed,
and shall be immediately payable to the Executive’s estate in accordance with
the applicable provisions of this Agreement.


 


(b)                                 The Company will
not take any action that would expose any payment or benefit to the Executive
under this Agreement or under any plan, arrangement or other agreement to the
additional tax imposed under Section 409A of the Code, unless (i) the
Company is obligated to take the action under an agreement, plan or arrangement
to which the Executive is a party, (ii) the Executive requests the action,
(iii) the Company advises the Executive in writing that the action may
result in the imposition of the additional tax and (iv) the Executive
subsequently requests the action in a writing that acknowledges that he will be
responsible for any effect of the action under Section 409A of the
Code.  The Company will hold the
Executive harmless for any action it may take in violation of this paragraph.


 


(c)                                  It is the
parties’ intention that the benefits and rights to which the Executive could
become entitled in connection with the termination of employment covered under
this Agreement comply with Section 409A of the Code.  If the Executive or the Company believes, at
any time, that any of such benefit or right does not so comply, he or it will
promptly advise the other party and will negotiate reasonably and in good faith
to amend the terms of such arrangement such that it complies (with the most
limited possible economic effect on the Executive and on the Company).


 


9.                                       Termination of Agreement.  This Agreement shall remain
in effect from the date hereof until the last day of the twenty-fourth calendar
month following the date of a Change in Control.  Further, upon a Qualifying Termination, this
Agreement shall continue until the Company or its successor shall have fully
performed all of its obligations thereunder with respect to the Executive, with
no future performance being possible. 
This Agreement may be terminated at any time by the Board with the
written consent of the Executive. 
Notwithstanding the foregoing,


 


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this Agreement shall automatically terminate upon cessation of Executive’s
employment with the Company and its Subsidiaries prior to the Effective Date.


 


10.                                 Amendment of Agreement.  This Agreement may be amended
at any time by the Board with the written consent of the Executive.


 


11.                                 Construction.  Wherever any words are used
herein in the masculine gender they shall be construed as though they were also
used in the feminine gender in all cases where they would so apply, and
wherever any words are used herein in the singular form, they shall be
construed as though they were also used in the plural form in all cases where
they would so apply.


 


12.                                 Governing Law.  This Agreement shall be
governed by the laws of Maryland.


 


13.                                 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, the Executive (and his beneficiaries)
shall continue to receive all payments and benefits due under this Agreement or
otherwise, except to the extent that the arbitrators otherwise provide.


 


14.                                 Successors and Assigns.


 


(a)          This Agreement
shall inure to the benefit of and be enforceable by the Executive’s legal representatives.


 


(b)         This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.


 


(c)          The Company
shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would have
been required to perform it if no such succession had taken place.  As used in this Agreement, “Company” shall
mean both the Company as defined above and any such successor that assumes and
agrees to perform this Agreement, by
operation of law or otherwise.


 


15.                                 Director & Officer Insurance and Indemnification.  During the
Protection Period and, upon a Qualifying Termination, for so long thereafter as
the Executive could be subject to liability, the Company shall keep in place a
directors’ and officers’ liability insurance policy (or policies) providing comprehensive
coverage to the Executive for claims relating to the Executive’s service as an
employee, officer, or director of the Company, on terms and conditions


 


15





















 


no less favorable to the Executive (e.g., with respect to scope, amounts
and deductibles) provided to then-existing officers and directors of the
Company.  The Company shall indemnify the
Executive 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 the Executive 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 the
Executive was a director of or employed by the Company after the Executive has
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 the Executive.


 


16.                                 Reimbursement of Legal Fees.  The Company will pay all reasonable fees and
expenses, if any (including without limitation, legal fees and expenses) that
are incurred by the Executive to enforce this Agreement and that result from a
breach of this Agreement by the Company.


 


17.                                 Notice.  Any notices, requests,
demands, or other communications provided for by this Agreement shall be
sufficient if in writing and if sent by registered or certified mail to the
Executive at the last address the Executive has filed in writing with the
Company, or in the case of the Company, to its principal offices.


 


18.                                 Severability.  The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.  If any provision of this Agreement shall be
held invalid or unenforceable in part, the remaining portion of such provision,
together with all other provisions of this Agreement, shall remain valid and enforceable
and continue in full force and effect to the fullest extent consistent with
law.


 


19.                                 Withholding.  Notwithstanding any other
provision of this Agreement, the Company may withhold from amounts payable under this Agreement
all federal, state, local and foreign taxes that are required to be withheld by
applicable laws or regulations.


 


20.                                 Entire Agreement.  Unless otherwise specifically
provided in this Agreement, the Executive and the Company acknowledge that this
Agreement supersedes any other agreement between them or between the Executive
and the Company or a Subsidiary, concerning the subject matter hereof.


 


21.                                 Alienability.  The rights and benefits of
the Executive under this Agreement may not be anticipated, alienated or subject
to attachment, garnishment, levy, execution or other legal or equitable process
except as required by law.  Any attempt
by the Executive to anticipate, alienate, assign, sell, transfer, pledge,
encumber or charge the same shall be void. 
Payments hereunder shall not be considered assets of the Executive in
the event of insolvency or bankruptcy.


 


16





















 


22.                                 Counterparts.  This Agreement may be
executed in several counterparts, each of which shall be deemed an original,
and said counterparts shall constitute but one and the same instrument.


 


17





















 


IN WITNESS WHEREOF, the Executive has hereunto set the
Executive’s hand and, pursuant to the authorization of the Board, the Company
has caused this Agreement to be executed in its name on its behalf, all as of
the day and year first above written.


 


	
   

  	
  CONSTELLATION ENERGY
  GROUP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ E. Follin Smith

  
	
   

  	
   

  	
  E. Follin Smith

  
	
   

  	
   

  	
  Executive Vice
  President

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/Mayo A. Shattuck III

  
	
   

  	
  Mayo A. Shattuck III

  



 


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