Document:

2003 Omnibus Equity Incentive Plan, as amended and restated

 Exhibit 10.2 
 CENTRAL GARDEN & PET COMPANY 
 2003 OMNIBUS EQUITY INCENTIVE
PLAN 
 (As Amended and Restated Effective February 13, 2012) 

 TABLE OF CONTENTS 

 

					
	 	  	Page	 
	 SECTION 1
	  	 	1	  
		
	 1.1 Background and Effective Date
	  	 	1	  
	 1.2 Purpose of the Plan
	  	 	1	  
	 1.3 Duration of the Plan
	  	 	1	  
		
	 SECTION 2 DEFINITIONS
	  	 	1	  
		
	 2.1 “1934 Act”
	  	 	1	  
	 2.2 “Affiliate”
	  	 	2	  
	 2.3 “Affiliated SAR”
	  	 	2	  
	 2.4 “Award”
	  	 	2	  
	 2.5 “Award Agreement”
	  	 	2	  
	 2.6 “Board” or “Board of Directors”
	  	 	2	  
	 2.7 “Code”
	  	 	2	  
	 2.8 “Committee”
	  	 	2	  
	 2.9 “Company”
	  	 	2	  
	 2.10 “Consultant”
	  	 	2	  
	 2.11 “Director”
	  	 	2	  
	 2.12 “Disability”
	  	 	2	  
	 2.13 “Employee”
	  	 	2	  
	 2.14 “ERISA”
	  	 	2	  
	 2.15 “Fair Market Value”
	  	 	3	  
	 2.16 “Freestanding SAR”
	  	 	3	  
	 2.17 “Incentive Stock Option” or “ISO”
	  	 	3	  
	 2.18 “Nonqualified Stock Option”
	  	 	3	  
	 2.19 “Option”
	  	 	3	  
	 2.20 “Option Price”
	  	 	3	  
	 2.21 “Participant”
	  	 	3	  
	 2.22 “Performance Unit”
	  	 	3	  
	 2.23 “Performance Share”
	  	 	3	  
	 2.24 “Period of Restriction”
	  	 	3	  
	 2.25 “Plan”
	  	 	3	  
	 2.26 “Restricted Stock”
	  	 	3	  

  
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 TABLE OF CONTENTS 

 

					
	 	  	Page	 
	 2.27 “Retirement”
	  	 	3	  
	 2.28 “Rule 16b-3”
	  	 	3	  
	 2.29 “Section 16 Person”
	  	 	3	  
	 2.30 “Shares”
	  	 	4	  
	 2.31 “Stock Appreciation Right” or “SAR”
	  	 	4	  
	 2.32 “Subsidiary”
	  	 	4	  
	 2.33 “Tandem SAR”
	  	 	4	  
	 2.34 “Termination of Employment”
	  	 	4	  
		
	 SECTION 3 ADMINISTRATION
	  	 	4	  
		
	 3.1 The Committee
	  	 	4	  
	 3.2 Authority of the Committee
	  	 	4	  
	 3.3 Decisions Binding
	  	 	5	  
		
	 SECTION 4 SHARES SUBJECT TO THE PLAN
	  	 	5	  
		
	 4.1 Number of Shares
	  	 	5	  
	 4.2 Lapsed Awards
	  	 	6	  
	 4.3 Adjustments in Authorized Shares
	  	 	6	  
		
	 SECTION 5 STOCK OPTIONS
	  	 	6	  
		
	 5.1 Grant of Options
	  	 	6	  
	 5.2 Award Agreement
	  	 	6	  
	 5.3 Option Price
	  	 	6	  
	 5.4 Expiration of Options
	  	 	7	  
	 5.5 Exercise of Options
	  	 	8	  
	 5.6 Payment
	  	 	8	  
	 5.7 Restrictions on Share Transferability
	  	 	9	  
	 5.8 Certain Additional Provisions for Incentive Stock Options
	  	 	9	  
	 5.9 Nontransferability of Options
	  	 	9	  
		
	 SECTION 6 STOCK APPRECIATION RIGHTS
	  	 	9	  
		
	 6.1 Grant of SARs
	  	 	9	  
	 6.2 Exercise of Tandem SARs
	  	 	10	  
	 6.3 Exercise of Affiliated SARs
	  	 	10	  
	 6.4 Exercise of Freestanding SARs
	  	 	10	  

  
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 TABLE OF CONTENTS 

 

					
	 	  	Page	 
	 6.5 SAR Agreement
	  	 	10	  
	 6.6 Expiration of SARs
	  	 	10	  
	 6.7 Payment of SAR Amount
	  	 	10	  
	 6.8 Nontransferability of SARs
	  	 	11	  
		
	 SECTION 7 RESTRICTED STOCK
	  	 	11	  
		
	 7.1 Grant of Restricted Stock
	  	 	11	  
	 7.2 Restricted Stock Agreement
	  	 	11	  
	 7.3 Transferability
	  	 	11	  
	 7.4 Other Restrictions
	  	 	11	  
	 7.5 Removal of Restrictions
	  	 	11	  
	 7.6 Voting Rights
	  	 	12	  
	 7.7 Dividends and Other Distributions
	  	 	12	  
	 7.8 Return of Restricted Stock to Company
	  	 	12	  
		
	 SECTION 8 PERFORMANCE UNITS AND PERFORMANCE SHARES
	  	 	12	  
		
	 8.1 Grant of Performance Units/Shares
	  	 	12	  
	 8.2 Value of Performance Units/Shares
	  	 	12	  
	 8.3 Earning of Performance Units/Shares
	  	 	12	  
	 8.4 Form and Timing of Payment of Performance Units/Shares
	  	 	12	  
	 8.5 Cancellation of Performance Units/Shares
	  	 	13	  
	 8.6 Nontransferability
	  	 	13	  
		
	 SECTION 9 BENEFICIARY DESIGNATION
	  	 	13	  
		
	 SECTION 10 DEFERRALS
	  	 	13	  
		
	 SECTION 11 RIGHTS OF EMPLOYEES AND CONSULTANTS
	  	 	13	  
		
	 11.1 No Effect on Employment or Service
	  	 	13	  
	 11.2 Participation
	  	 	13	  
		
	 SECTION 12 AMENDMENT, SUSPENSION, OR TERMINATION
	  	 	14	  
		
	 12.1 Amendment, Suspension, or Termination
	  	 	14	  
		
	 SECTION 13 TAX WITHHOLDING
	  	 	14	  
		
	 13.1 Withholding Requirements
	  	 	14	  
	 13.2 Shares Withholding
	  	 	14	  
		
	 SECTION 14 INDEMNIFICATION
	  	 	14	  

  
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 TABLE OF CONTENTS 

 

					
	 	  	Page	 
		
	 SECTION 15 SUCCESSORS
	  	 	15	  
		
	 SECTION 16 LEGAL CONSTRUCTION
	  	 	15	  
		
	 16.1 Gender and Number
	  	 	15	  
	 16.2 Severability
	  	 	15	  
	 16.3 Requirements of Law
	  	 	15	  
	 16.4 Securities Law Compliance
	  	 	15	  
	 16.5 Governing Law
	  	 	15	  
	 16.6 Captions
	  	 	15	  

  
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 CENTRAL GARDEN & PET COMPANY 

2003 OMNIBUS EQUITY INCENTIVE PLAN 
 (As Amended and Restated Effective February 13, 2012) 
 CENTRAL
GARDEN & PET COMPANY, hereby adopts the Central Garden & Pet Company 2003 Omnibus Equity Incentive Plan, effective as of December 4, 2002, and as amended on February 7, 2005, December 14,
2005, February 5, 2007, December 10, 2008 and December 27, 2011 as follows: 
 SECTION 1

 BACKGROUND, PURPOSE AND DURATION 
 1.1 Background and Effective Date. The Plan provides for the granting of Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock, Performance Units, and Performance Shares. The
Plan was originally approved effective as of December 4, 2002. The Plan, as amended to date, is effective as of February 13, 2012, the date on which the shareholders approved the December 27, 2011 amendment. Awards may be granted
prior to the receipt of such vote, but such grants shall be null and void if such vote is not in fact received. 
 1.2
Purpose of the Plan. The purpose of the Plan is to promote the success, and enhance the value, of the Company by aligning the interests of Participants with those of the Company’s shareholders, and by providing Participants with an
incentive for outstanding performance. 
 The Plan is further intended to provide flexibility to the Company in its ability to
motivate, attract, and retain the services of outstanding individuals, upon whose judgment, interest, and special effort the success of the Company largely is dependent. 
 1.3 Duration of the Plan. The Plan shall commence on the date specified in Section 1.1, and subject to Section 12 (concerning the Board’s right to amend or terminate the Plan), shall
remain in effect thereafter. However, without further shareholder approval, no Incentive Stock Option may be granted under the Plan on or after December 3, 2012. 
 SECTION 2 
 DEFINITIONS 

The following words and phrases shall have the following meanings unless a different meaning is plainly required by the context:

 2.1 “1934 Act” means the Securities Exchange Act of 1934, as amended. Reference to a specific section of the
Exchange Act or regulation thereunder shall include such section or regulation, any valid regulation promulgated under such section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such
section or regulation. 

 2.2 “Affiliate” means any corporation or any other entity (including, but
not limited to, partnerships and joint ventures) controlling, controlled by, or under common control with the Company. 
 2.3
“Affiliated SAR” means an SAR that is granted in connection with a related Option, and which automatically will be deemed to be exercised at the same time that the related Option is exercised. 

2.4 “Award” means, individually or collectively, a grant under the Plan of Nonqualified Stock Options, Incentive Stock
Options, SARs, Restricted Stock, Performance Units, or Performance Shares. 
 2.5 “Award Agreement” means the
written agreement setting forth the terms and provisions applicable to each Award granted under the Plan. 
 2.6
“Board” or “Board of Directors” means the Board of Directors of the Company. 
 2.7
“Code” means the Internal Revenue Code of 1986, as amended. Reference to a specific section of the Code or regulation thereunder shall include such section or regulation, any valid regulation promulgated under such section, and any
comparable provision of any future legislation or regulation amending, supplementing or superseding such section or regulation. 

2.8 “Committee” means the committee appointed by the Board (pursuant to Section 3.1) to administer the Plan.

 2.9 “Company” means Central Garden & Pet Company, a Delaware corporation, or any successor thereto.

 2.10 “Consultant” means an individual who provides significant services to the Company and/or an Affiliate,
including a Director who is not an Employee. 
 2.11 “Director” means any individual who is a member of the
Board of Directors of the Company. 
 2.12 “Disability” means a permanent and total disability within the
meaning of Code Section 22(e)(3). 
 2.13 “Employee” means an employee of the Company or of an Affiliate,
whether such employee is so employed at the time the Plan is adopted or becomes so employed subsequent to the adoption of the Plan. 
 2.14 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended. Reference to a specific section of ERISA shall include such section, any valid regulation promulgated
thereunder, and any comparable provision of any future legislation amending, supplementing or superseding such section. 

  
 2 

 2.15 “Fair Market Value” means the average of the highest and lowest quoted
selling prices or the closing share price for Shares on the relevant date, or if there were no sales on such date, the arithmetic mean of the highest and lowest quoted selling prices on the nearest day before and the nearest day after the relevant
date, as determined by the Committee. If the class of Shares is not quoted on a national exchange, “Fair Market Value” means, as of any date, the per share fair market value of the Shares, as determined by the Committee in good faith on
such basis as it deems appropriate and applied consistently with respect to Participants. 
 2.16 “Freestanding
SAR” means a SAR that is granted independently of any Option. 
 2.17 “Incentive Stock Option” or
“ISO” means an option to purchase Shares, which is designated as an Incentive Stock Option and is intended to meet the requirements of Section 422 of the Code. 

2.18 “Nonqualified Stock Option” means an option to purchase Shares which is not intended to be an Incentive Stock
Option. 
 2.19 “Option” means an Incentive Stock Option or a Nonqualified Stock Option. 

2.20 “Option Price” means the price at which a Share may be purchased pursuant to an Option. 

2.21 “Participant” means an Employee or Consultant who has an outstanding Award. 

2.22 “Performance Unit” means an Award granted to an Employee pursuant to Section 8. 

2.23 “Performance Share” means an Award granted to an Employee pursuant to Section 8. 

2.24 “Period of Restriction” means the period during which the transfer of Shares of Restricted Stock are subject to
restrictions. 
 2.25 “Plan” means the Central Garden & Pet Company 2003 Omnibus Equity Incentive
Plan, as set forth in this instrument and as hereafter amended from time to time. 
 2.26 “Restricted Stock”
means an Award granted to a Participant pursuant to Section 7. 
 2.27 “Retirement” means, in the case of
an Employee, a Termination of Employment by reason of the Employee’s retirement at or after age 62. 
 2.28 “Rule
16b-3” means Rule 16b-3 promulgated under the 1934 Act, and any future regulation amending, supplementing or superseding such regulation. 

  
 3 

 2.29 “Section 16 Person” means a person who, with respect to the
Shares, is subject to Section 16 of the 1934 Act. 
 2.30 “Shares” means (i) the shares of common
stock, $0.01 par value, of the Company (“Common Stock”), (ii) the shares of Class A common stock, $0.01 par value, of the Company (“Class A Common Stock”) or (iii) shares of preferred stock, $0.01 par value, with
such rights, privileges, restrictions and preferences as the Board of Directors may authorize from time to time (“Preferred Stock”). 
 2.31 “Stock Appreciation Right” or “SAR” means an Award, granted alone or in connection with a related Option, that pursuant to the terms of Section 7 is designated
as an SAR. 
 2.32 “Subsidiary” means any “subsidiary corporation” (other than the Company) as
defined in Code Section 424(f). 
 2.33 “Tandem SAR” means an SAR that is granted in connection with a
related Option, the exercise of which shall require forfeiture of the right to purchase an equal number of Shares under the related Option (and when a Share is purchased under the Option, the SAR shall be canceled to the same extent). 

2.34 “Termination of Employment” means a cessation of the employee-employer or director or other service arrangement
relationship between an Employee, Consultant or Director and the Company or an Affiliate for any reason, including, but not by way of limitation, a termination by resignation, discharge, death, Disability, Retirement, or the disaffiliation of an
Affiliate, but excluding any such termination where there is a simultaneous reemployment or re-engagement by the Company or an Affiliate. 
 SECTION 3 
 ADMINISTRATION 

3.1 The Committee. The Plan shall be administered by the Committee. The Committee shall consist of not less than two
(2) Directors. The members of the Committee shall be appointed from time to time by, and shall serve at the pleasure of, the Board of Directors. The Committee shall be comprised solely of Directors who are “outside directors” under
Rule 16b-3. 
 3.2 Authority of the Committee. The Committee shall have all powers and discretion necessary or
appropriate to administer the Plan and to control its operation, including, but not limited to, the power (a) to determine which Employees and Consultants shall be granted Awards, (b) to prescribe the terms and conditions of such Awards,
(c) to interpret the Plan and the Awards, (d) to adopt rules for the administration, interpretation and application of the Plan as are consistent therewith, and (e) to interpret, amend or revoke any such rules. 

The Committee, in its sole discretion and on such terms and conditions as it may provide, may delegate all or any part of its authority
and powers under the Plan to one or more directors and/or officers of the Company; provided, however, that the Committee may not delegate its authority and powers with respect to Section 16 Persons. 

  
 4 

 3.3 Decisions Binding. All determinations and decisions made by the Committee shall
be final, conclusive, and binding on all persons, and shall be given the maximum deference permitted by law. 
 SECTION 4

 SHARES SUBJECT TO THE PLAN 
 4.1 Number of Shares. Subject to adjustment as provided in Section 4.3, the total number of Shares available for grant under the Plan may not exceed 26,034,982, consisting of (i) a
maximum of 5,800,000 shares of Common Stock of the Company, (ii) a maximum of 19,734,982 shares of Class A Common Stock of the Company, and (iii) a maximum of 500,000 shares of Preferred Stock of the Company. Such Shares may be
authorized but unissued Shares or Treasury Shares. No Participant may receive Options or SARs for more than 1,500,000 shares under the Plan in a calendar year. 
 The following rules will apply for purposes of the determination of the number of Shares available for grant under the Plan: 

 

	 	(a)	While an Award is outstanding, it shall be counted against the authorized pool of Shares, regardless of its vested status. 

 

	 	(b)	The grant of an Option or Restricted Stock shall reduce the Shares available for grant under the Plan by the number of Shares subject to such Award.

  

	 	(c)	The grant of a Tandem SAR shall reduce the number of Shares available for grant by the number of Shares subject to the related Option (i.e., there is no double counting
of Options and their related Tandem SARs); provided, however, that, upon the exercise of such Tandem SAR, the authorized Share pool shall be credited with the appropriate number of Shares representing the number of shares reserved for such Tandem
SAR less the number of Shares actually delivered upon exercise thereof or the number of Shares having a Fair Market Value equal to the cash payment made upon such exercise. 

 

	 	(d)	The grant of an Affiliated SAR shall reduce the number of Shares available for grant by the number of Shares subject to the SAR, in addition to the number of Shares
subject to the related Option; provided, however, that, upon the exercise of such Affiliated SAR, the authorized Share pool shall be credited with the appropriate number of Shares representing the number of shares reserved for such Affiliated SAR
less the number of Shares actually delivered upon exercise thereof or the number of Shares having a Fair Market Value equal to the cash payment made upon such exercise. 

 

	 	(e)	 The grant of a Freestanding SAR shall reduce the number of Shares available for grant by the number of Freestanding SARs

  
 5 

	 	
granted; provided, however, that, upon the exercise of such Freestanding SAR, the authorized Share pool shall be credited with the appropriate number of Shares representing the number of shares
reserved for such Freestanding SAR less the number of Shares actually delivered upon exercise thereof or the number of Shares having a Fair Market Value equal to the cash payment made upon such exercise. 

 

	 	(f)	The Committee shall in each case determine the appropriate number of Shares to deduct from the authorized pool in connection with the grant of Performance Units and/or
Performance Shares. 

  

	 	(g)	To the extent that an Award is settled in cash rather than in Shares, the authorized Share pool shall be credited with the appropriate number of Shares having a Fair
Market Value equal to the cash settlement of the Award. 

  

	 	(h)	The grant of an Award for Preferred Stock shall reduce the number of shares of Common Stock or Class A Common Stock available for grant by the number of shares, if
any, of Common Stock or Class A Common Stock, issuable upon conversion of the Preferred Stock; provided, however, that upon conversion of such Preferred Stock, the authorized Share pool shall be credited with the appropriate number of shares of
Preferred Stock. 

 4.2 Lapsed Awards. If an Award is cancelled, terminates, expires, or lapses for any
reason (with the exception of the termination of a Tandem SAR upon exercise of the related Option, or the termination of a related Option upon exercise of the corresponding Tandem SAR), any Shares subject to such Award again shall be available to be
the subject of an Award. 
 4.3 Adjustments in Authorized Shares. In the event of any merger, reorganization,
consolidation, recapitalization, separation, liquidation, stock dividend, split-up, Share combination, or other change in the corporate structure of the Company affecting the Shares, such adjustment shall be made in the number and class of Shares
which may be delivered under the Plan, and in the number and class of and/or price of Shares subject to outstanding Options, SARs, and Restricted Stock granted under the Plan, as the Committee, in its sole discretion, shall determine to be
appropriate to prevent the dilution or diminishment of Awards. Notwithstanding the preceding sentence, the number of Shares subject to any Award always shall be a whole number. 
 SECTION 5 
 STOCK OPTIONS 

5.1 Grant of Options. Options may be granted to Employees and Consultants at any time and from time to time, as determined by the
Committee in its sole discretion. The Committee, in its sole discretion, shall determine the number and class of Shares subject to 

  
 6 

 
Options granted to each Participant. The Committee may grant ISOs, NQSOs, or a combination thereof. 
 5.2 Award Agreement. Each Option shall be evidenced by an Award Agreement that shall specify the Option Price, the expiration date of the Option, the number and class of Shares to which the Option
pertains, any conditions to exercise of the Option, and such other terms and conditions as the Committee, in its discretion, shall determine. The Award Agreement also shall specify whether the Option is intended to be an ISO or a NQSO. 

5.3 Option Price. Subject to the provisions of this Section 5.3, the Option Price for each Option shall be determined by the
Committee in its sole discretion. 
 5.3.1 Nonqualified Stock Options. In the case of a Nonqualified Stock Option, the
Option Price shall be not less than one hundred percent (100%) of the Fair Market Value of a Share on the date that the Option is granted. 
 5.3.2 Incentive Stock Options. In the case of an Incentive Stock Option, the Option Price shall be not less than one hundred percent (100%) of the Fair Market Value of a Share on the date that
the Option is granted; provided, however, that if at the time that the Option is granted, the Employee (together with persons whose stock ownership is attributed to the Employee pursuant to Section 424(d) of the Code) owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the Company or any of its Subsidiaries, the Option Price shall be not less than one hundred and ten percent (110%) of the Fair Market Value of a Share on the date that the
Option is granted. 
 5.3.3 Substitute Options. Notwithstanding the provisions of Sections 5.3.1 and 5.3.2, in the event
that the Company or an Affiliate consummates a transaction described in Section 424(a) of the Code (e.g., the acquisition of property or stock from an unrelated corporation), persons who become Employees or Consultants on account of such
transaction may be granted Options in substitution for options granted by their former employer. If such substitute Options are granted, the Committee, in its sole discretion, may determine that such substitute Options shall have an exercise price
less than 100% of the Fair Market Value of the Shares on the date the Option is granted. 
 5.4 Expiration of Options.
Unless the applicable stock option agreement provides otherwise, each Option shall terminate upon the first to occur of the events listed in Section 5.4.1, subject to Section 5.4.2. 

5.4.1 Expiration Dates. 
  

	 	(a)	The date for termination of the Option set forth in the written stock option agreement; 

 

	 	(b)	The expiration of ten years from the date the Option was granted, subject to the provisions of clause (f), below; or 

 

	 	(c)	 The expiration of one year from the date of the Optionee’s Termination of Employment for a reason other than the Optionee’s

  
 7 

	 	
death, Disability or Retirement, subject to the provisions of clause (f) below; or 

  

	 	(d)	The expiration of three years from the date of the Optionee’s Termination of Employment by reason of Disability, subject to the provisions of clause (f)
below; or 

  

	 	(e)	The expiration of three years from the date of the Optionee’s Retirement; provided that no Incentive Stock Option may be exercised after the expiration of three
months from the date of the Optionee’s Retirement, subject in each case to the provisions of clause (f) below; or 

  

	 	(f)	The expiration of one year from the date of the Optionee’s death, if such death occurs while the Optionee is in the employ or service of the Company or an
Affiliate or within the one-year or three-year periods referred to in (c), (d) or (e) above, whichever is applicable. 

 5.4.2 Committee Discretion. Subject to the provisions of this Section 5.4, the Committee shall provide, in the terms of each individual Option, when such Option expires and becomes
unexercisable. After the Option is granted, the Committee, in its sole discretion and subject to Section 5.8.4 and this Section 5.4, may extend the maximum term of such Option. 

5.5 Exercise of Options. Options granted under the Plan shall be exercisable at such times, and subject to such restrictions and
conditions, as the Committee shall determine in its sole discretion. After an Option is granted, the Committee, in its sole discretion, may accelerate the exercisability of the Option. 

5.6 Payment. Options shall be exercised by the Participant’s delivery of a written notice of exercise to the Secretary of the
Company, setting forth the number and class of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares. 
 For Options granted prior to December 14, 2005, the Option Price upon exercise of any Option shall be payable to the Company in full in cash. The Committee, in its sole discretion and pursuant to
such procedures as it may specify from time to time, also may permit (a) a Participant to elect to have the Company withhold Shares having a value equal to the amount required to be withheld or by delivering to the Company already-owned Shares
to satisfy the Option Price, or (b) by any other means which the Committee, in its sole discretion, determines to both provide legal consideration for the Shares, and to be consistent with the purposes of the Plan. The value of the Shares to be
withheld or delivered will be based on their Fair Market Value on the date of exercise. 
 For Options granted on or after
December 14, 2005, the Option Price upon exercise of any Option shall be payable by having the Company withhold Shares having a value equal to the amount required to be withheld or by delivering to the Company already-owned Shares to satisfy
the Option Price, pursuant to such procedures as the Committee may specify 

  
 8 

 
from time to time. The Committee, in its sole discretion, also may permit (a) a Participant to pay the Option Price in full in cash, or (b) by any other means which the Committee, in
its sole discretion, determines to both provide legal consideration for the Shares, and to be consistent with the purposes of the Plan. The value of the Shares to be withheld or delivered will be based on their Fair Market Value on the date of
exercise. 
 As soon as practicable after receipt of a written notification of exercise and full payment for the Shares
purchased, the Company shall deliver to the Participant Share certificates (in the Participant’s name) representing such Shares. 
 If any shares subject to a Stock Award are not delivered to a Participant because such shares are withheld for the payment of taxes or the Stock Award is exercised through a reduction of shares subject to
the Stock Award (i.e., “net exercised”), the number of shares that are not delivered to the Participant shall remain available for issuance under the Plan. If the exercise price of any Stock Award is satisfied by tendering shares of Common
Stock or Class A Common Stock held by the Participant (either by actual delivery or attestation), then the number of shares so tendered shall remain available for issuance under the Plan. 

5.7 Restrictions on Share Transferability. The Committee may impose such restrictions on any Shares acquired pursuant to the
exercise of an Option, as it may deem advisable, including, but not limited to, restrictions related to Federal securities laws, the requirements of any national securities exchange or system upon which such Shares are then listed and/or traded,
and/or any blue sky or state securities laws. 
 5.8 Certain Additional Provisions for Incentive Stock Options.

 5.8.1 Exercisability. The aggregate Fair Market Value (determined at the time the Option is granted) of the Shares
with respect to which Incentive Stock Options are exercisable for the first time by any Employee during any calendar year (under all plans of the Company and its Subsidiaries) shall not exceed $100,000. 

5.8.2 Termination of Employment. No Incentive Stock Option may be exercised more than three months after the Participant’s
termination of employment for any reason other than Disability or death, unless (a) the Participant dies during such three-month period, and (b) the Award Agreement and/or the Committee permits later exercise. No Incentive Stock Option may
be exercised more than one year after the Participant’s termination of employment on account of Disability, unless (a) the Participant dies during such one-year period, and (b) the Award Agreement and/or the Committee permit later
exercise. 
 5.8.3 Company and Subsidiaries Only. Incentive Stock Options may be granted only to persons who are
employees of the Company and/or a Subsidiary at the time of grant. 
 5.8.4 Expiration. No Incentive Stock Option may be
exercised after the expiration of 10 years from the date such Option was granted; provided, however, that if the Option is granted to an Employee who, together with persons whose stock ownership is attributed to the Employee pursuant to
Section 424(d) of the Code, owns stock possessing more than 10% of the total combined voting power of all classes of the stock of the Company or any of 

  
 9 

 
its Subsidiaries, the Option may not be exercised after the expiration of 5 years from the date that it was granted. 
 5.9 Nontransferability of Options. No Option granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will, the laws of descent and
distribution, or as provided under Section 9. All Options granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant. 
 SECTION 6 
 STOCK APPRECIATION RIGHTS 

6.1 Grant of SARs. An SAR may be granted to an Employee or Consultant at any time and from time to time as determined by the
Committee, in its sole discretion. The Committee may grant Affiliated SARs, Freestanding SARs, Tandem SARs, or any combination thereof. 
 The Committee shall have complete discretion to determine the number and class of SARs granted to any Participant, and consistent with the provisions of the Plan, the terms and conditions pertaining to
such SARs. However, the grant price of a Freestanding SAR shall be at least equal to the Fair Market Value of a Share of Common Stock or Class A Common Stock, as the case may be, on the date of grant. The grant price of Tandem or Affiliated
SARs shall equal the Option Price of the related Option. 
 6.2 Exercise of Tandem SARs. Tandem SARs may be exercised for
all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then
exercisable. 
 6.2.1 ISOs. Notwithstanding any contrary provision of the Plan, with respect to a Tandem SAR granted in
connection with an ISO: (i) the Tandem SAR shall expire no later than the expiration of the underlying ISO; (ii) the value of the payout with respect to the Tandem SAR shall be for no more than one hundred percent (100%) of the
difference between the Option Price of the underlying ISO and the Fair Market Value of the Shares subject to the underlying ISO at the time the Tandem SAR is exercised; and (iii) the Tandem SAR shall be exercisable only when the Fair Market
Value of the Shares subject to the ISO exceeds the Option Price of the ISO. 
 6.3 Exercise of Affiliated SARs. An
Affiliated SAR shall be deemed to be exercised upon the exercise of the related Option. The deemed exercise of an Affiliated SAR shall not necessitate a reduction in the number of Shares subject to the related Option. 

6.4 Exercise of Freestanding SARs. Freestanding SARs shall be exercisable on such terms and conditions as the Committee, in its
sole discretion, shall determine. 
 6.5 SAR Agreement. Each SAR shall be evidenced by an Award Agreement that shall
specify the grant price, the term of the SAR, the conditions of exercise, and such other terms and conditions as the Committee, in its sole discretion, shall determine. 

  
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 6.6 Expiration of SARs. An SAR granted under the Plan shall expire upon the date
determined by the Committee, in its sole discretion, and set forth in the Award Agreement. Notwithstanding the foregoing, the rules of Section 5.4 (pertaining to Options) also shall apply to SARs. 

6.7 Payment of SAR Amount. Upon exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an
amount determined by multiplying: 
  

	 	(a)	The difference between the Fair Market Value of a Share of Common Stock or Class A Common Stock, as the case may be, on the date of exercise over the grant price;
times 

  

	 	(b)	The number of Shares with respect to which the SAR is exercised. 

 At the discretion of the Committee, the payment upon SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof. 

6.8 Nontransferability of SARs. No SAR granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated
or hypothecated, other than by will, the laws of descent and distribution, or as permitted under Section 9. An SAR granted to a Participant shall be exercisable during the Participant’s lifetime only by such Participant. 

SECTION 7 

RESTRICTED STOCK 

7.1 Grant of Restricted Stock. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time,
may grant Shares of Restricted Stock to Employees and Consultants in such amounts and class as the Committee, in its sole discretion, shall determine. 
 7.2 Restricted Stock Agreement. Each Award of Restricted Stock shall be evidenced by an Award Agreement that shall specify the Period of Restriction, the number and class of Shares granted, and
such other terms and conditions as the Committee, in its sole discretion, shall determine. Unless the Committee determines otherwise, shares of Restricted Stock shall be held by the Company as escrow agent until the restrictions on such shares have
lapsed. 
 7.3 Transferability. Except as provided in this Section 7, Shares of Restricted Stock may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction. All rights with respect to the Restricted Stock granted to a Participant under the Plan shall be available during his or
her lifetime only to such Participant. 
 7.4 Other Restrictions. The Committee, in its sole discretion, may impose such
other restrictions on any Shares of Restricted Stock as it may deem advisable including, without limitation, restrictions based upon the achievement of specific performance goals (Company-wide, divisional, and/or individual), and/or restrictions
under applicable Federal or state securities laws; and may legend the certificates representing Restricted Stock to give 

  
 11 

 
appropriate notice of such restrictions. For example, the Committee may determine that some or all certificates representing Shares of Restricted Stock shall bear the following legend:

 “The sale or other transfer of the shares of stock represented by this certificate, whether voluntary, involuntary, or
by operation of law, is subject to certain restrictions on transfer as set forth in the Central Garden & Pet Company 2003 Omnibus Equity Incentive Plan, and in a Restricted Stock Agreement. A copy of the Plan and such Restricted Stock
Agreement may be obtained from the Secretary of Central Garden & Pet Company.” 
 7.5 Removal of
Restrictions. Except as otherwise provided in this Section 7, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan shall be released from escrow as soon as practicable after the last day of the Period of
Restriction. The Committee, in its discretion, may accelerate the time at which any restrictions shall lapse, and/or remove any restrictions. After the restrictions have lapsed, the Participant shall be entitled to have any legend or legends under
Section 7.4 removed from his or her Share certificate, and the Shares shall be freely transferable by the Participant. 

7.6 Voting Rights. During the Period of Restriction, Participants holding Shares of Restricted Stock granted hereunder may
exercise full voting rights, if any, with respect to those Shares, unless the Committee determines otherwise. 
 7.7
Dividends and Other Distributions. During the Period of Restriction, Participants holding Shares of Restricted Stock shall be entitled to receive all dividends and other distributions paid with respect to such Shares, unless otherwise
provided in the Award Agreement. If any such dividends or distributions are paid in Shares, the Shares shall be subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were
paid. 
 7.8 Return of Restricted Stock to Company. Subject to the applicable Award Agreement and Section 7.5, upon
the earlier of (a) the Participant’s termination of employment, or (b) the date set forth in the Award Agreement, the Restricted Stock for which restrictions have not lapsed shall revert to the Company and, subject to
Section 4.2, again shall become available for grant under the Plan. 
 SECTION 8 

PERFORMANCE UNITS AND PERFORMANCE SHARES 
 8.1 Grant of Performance Units/Shares. Performance Units and Performance Shares may be granted to Employees and Consultants at any time and from time to time, as shall be determined by the
Committee, in its sole discretion. The Committee shall have complete discretion in determining the number and class of Performance Units and Performance Shares granted to each Participant. 

8.2 Value of Performance Units/Shares. Each Performance Unit shall have an initial value that is established by the Committee at
the time of grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the date of grant. The 

  
 12 

 
Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the number and/or value of Performance Units/Shares that will be paid
out to the Participants. The time period during which the performance goals must be met shall be called the “Performance Period”. 
 8.3 Earning of Performance Units/Shares. After the applicable Performance Period has ended, the holder of Performance Units/Shares shall be entitled to receive a payout of the number of Performance
Units/Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals have been achieved. After the grant of a Performance Unit/Share, the Committee, in its sole
discretion, may adjust and/or waive the achievement of any performance goals for such Performance Unit/Share. 
 8.4 Form and
Timing of Payment of Performance Units/Shares. Payment of earned Performance Units/Shares shall be made as soon as practicable after the expiration of the applicable Performance Period. The Committee, in its sole discretion, may pay earned
Performance Units/Shares in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned Performance Units/Shares at the close of the applicable Performance Period) or in a combination thereof. 

8.5 Cancellation of Performance Units/Shares. Subject to the applicable Award Agreement, upon the earlier of (a) the
Participant’s termination of employment, or (b) the date set forth in the Award Agreement, all remaining Performance Units/Shares shall be forfeited by the Participant to the Company, and subject to Section 4.2, the Shares subject
thereto shall again be available for grant under the Plan. 
 8.6 Nontransferability. Performance Units/Shares may not be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will, the laws of descent and distribution, or as permitted under Section 9. A Participant’s rights under the Plan shall be exercisable during the
Participant’s lifetime only by the Participant or the Participant’s legal representative. 
 SECTION 9 

BENEFICIARY DESIGNATION 
 If permitted by the Committee, a Participant may name a beneficiary or beneficiaries to whom any unpaid vested Award shall be paid in event of the Participant’s death. Each such designation shall
revoke all prior designations by the same Participant and shall be effective only if given in a form and manner acceptable to the Committee. In the absence of any such designation, benefits remaining unpaid at the Participant’s death shall be
paid to the Participant’s estate and, subject to the terms of the Plan, any unexercised vested Award may be exercised by the administrator or executor of the Participant’s estate. 

SECTION 10 

DEFERRALS 
 The
Committee, in its sole discretion, may permit a Participant to defer receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant 

  
 13 

 
under an Award. Any such deferral elections shall be subject to such rules and procedures as shall be determined by the Committee in its sole discretion. 

SECTION 11 

RIGHTS OF EMPLOYEES AND CONSULTANTS 
 11.1 No Effect on Employment or Service. Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Participant’s employment or service at any time,
with or without cause. 
 11.2 Participation. No Employee or Consultant shall have the right to be selected to receive an
Award under this Plan, or, having been so selected, to be selected to receive a future Award. 
 SECTION 12 AMENDMENT,
SUSPENSION, OR TERMINATION 
 12.1 Amendment, Suspension, or Termination. The Board, in its sole discretion, may alter,
amend or terminate the Plan, or any part thereof, at any time and for any reason. However, as required by applicable law, no alteration or amendment shall be effective without further shareholder approval. Neither the amendment, suspension, nor
termination of the Plan shall, without the consent of the Participant, alter or impair any rights or obligations under any Award theretofore granted. No Award may be granted during any period of suspension nor after termination of the Plan.

 SECTION 13 
 TAX WITHHOLDING 
 13.1 Withholding Requirements. Prior to the delivery of
any Shares or cash pursuant to an Award, the Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy Federal, state, and local taxes required to be withheld
with respect to such Award. 
 13.2 Shares Withholding. The Committee, in its sole discretion and pursuant to such
procedures as it may specify from time to time, may permit a Participant to satisfy the minimum statutory tax withholding obligation, in whole or in part, by electing to have the Company withhold Shares having a value equal to the amount required to
be withheld or by delivering to the Company already-owned shares to satisfy the withholding requirement. The value of the Shares to be withheld or delivered will be based on their Fair Market Value on the date that the taxes are required to be
withheld. 
 SECTION 14 
 INDEMNIFICATION 
 Each person who is or shall have been a member of the Committee,
or of the Board, shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, notion, suit,
or proceeding to which he or she may 

  
 14 

 
be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan or any Award Agreement and against and from any and all amounts paid by him or her
in settlement thereof, with the Company’s approval, or paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her,
provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive
of any other rights of indemnification to which such persons may be entitled under the Company’s Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them
harmless. 
 SECTION 15 
 SUCCESSORS 
 All obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or
assets of the Company. 
 SECTION 16 
 LEGAL CONSTRUCTION 
 16.1 Gender and Number. Except where otherwise
indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural. 
 16.2 Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of the Plan, and the
Plan shall be construed and enforced as if the illegal or invalid provision had not been included. 
 16.3 Requirements of
Law. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

 16.4 Securities Law Compliance. With respect to Section 16 Persons, transactions under this Plan are intended to
comply with all applicable conditions of Rule 16b-3. To the extent any provision of the Plan, Award Agreement or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the
Committee. 
 16.5 Governing Law. The Plan and all Award Agreements shall be construed in accordance with and governed by
the laws of the State of California. 
 16.6 Captions. Captions are provided herein for convenience only, and shall not
serve as a basis for interpretation or construction of the Plan. 

  
 15Settlement Agreement

 Exhibit 10.1 
 COMMONWEALTH OF MASSACHUSETTS 
 DEPARTMENT OF PUBLIC UTILITIES

  

							
	 	  	)	  			
	Joint Petition for Approval of a Merger between	  	)	  	 	D.P.U. 10-170	  
	NSTAR and Northeast Utilities	  	)	  			
	 	  	)	  			

 SETTLEMENT AGREEMENT 

  

							
	 	  	)	  			
	Joint Petition for Approval of a Merger between	  	)	  	 	D.P.U. 10-170	  
	NSTAR and Northeast Utilities	  	)	  			
	 	  	)	  			

 SETTLEMENT AGREEMENT 

WHEREAS, this Settlement Agreement (“Settlement” or “Settlement Agreement”) is entered into by and among NSTAR
Electric Company (“NSTAR Electric”) and NSTAR Gas Company (“NSTAR Gas”), along with their holding company parent, NSTAR, and Western Massachusetts Electric Company (“WMECO”), along with its holding company parent
Northeast Utilities (“NU”) (the corporate entities together, and their successors, the “Joint Petitioners”), the Department of Energy Resources (“DOER”), and the Attorney General of the Commonwealth (“Attorney
General”) with regard to the proposed merger transactions as set forth in the Merger Agreement between the holding companies NU and NSTAR (“Proposed Merger”). 
 WHEREAS, NU and NSTAR filed the Proposed Merger before the Department of Public Utilities (“Department”) for approval pursuant to G.L. c. 164, § 96, and the Settling Parties have engaged in
discovery, hearings, briefing and negotiations concerning the Proposed Merger. 
 WHEREAS, the Settling Parties have raised
competing and disputed claims with regard to the various issues contained in the Proposed Merger but wish to resolve those matters on mutually agreeable terms, and without establishing any new precedent or principle applicable to any other
proceedings. 
 WHEREAS, the Settling Parties intend that both customers and shareholders receive the full value of the settled
issues, and not some substitute regulatory treatment of lesser value either now or in the future, and agree that no terms of this Settlement Agreement or supporting 

 
workpapers, calculations, or proposed tariffs will be used or interpreted to diminish, in any way, the intended customer or shareholder benefit related to this Settlement Agreement. 

WHEREAS, it is the objective of the Settling Parties to ensure that the impacts of the Proposed Merger to Massachusetts customers of the
merged entity will operate in a way that achieves comparability with other states with respect to merger savings, service improvements and employment impacts, and the Settling Parties have structured this Settlement Agreement to achieve such
comparability. 
 NOW THEREFORE, in consideration of the exchange of promises and covenants herein contained, the legal
sufficiency of which is hereby acknowledged, the Settling Parties agree, subject to approval by the Department as follows: 

ARTICLE I: INTRODUCTION 
  

	(1)	On November 24, 2010, the Joint Petitioners filed with the Department a petition for approval of the Proposed Merger as set forth in their Merger Agreement dated
October 16, 2010, as amended on November 1, 2010 and December 16, 2010. 

  

	(2)	A copy of the supporting testimony, discovery responses and exhibits for the Proposed Merger is filed with the Department as the evidentiary record in this proceeding.

  

	(3)	This Settlement Agreement is intended to resolve only those issues as specified in Article II and Article III. 

ARTICLE II 
  

	(1)	 APPROVAL OF THE PROPOSED MERGER: The Settling Parties
agree that the Proposed Merger between NSTAR and NU set forth in the Merger Agreement and proposed to be approved by the Department in this proceeding is consistent with the public interest as

  
 2 

	 	
required by G.L. c. 164, § 96; that approval of the Proposed Merger does not constitute approval of the merger or consolidation of the separate Operating Companies, NSTAR Electric, NSTAR Gas
or WMECO, each of which will remain legally and functionally separate companies and independently subject to the Department’s jurisdiction under G.L. c. 164, § 1 et seq. on and after the closing of the Proposed Merger, until
such time that a proposal may be made to the Department under G.L. c. 164, § 96 for consolidation of one or more of the Operating Companies and the proposal is subsequently approved by the Department; that following the Proposed Merger,
the Operating Companies will continue to be subject to the same obligations that were respectively held by each of those companies prior to the Proposed Merger; and that further action, pursuant to G.L. c. 164, § 21, is not required
to consummate the Proposed Merger. 

  

	(2)	 MERGER RATE CREDIT: The Operating Companies shall provide a one-time,
non-recoverable $21 million rate credit to customers to be applied on the first billing cycle in the next billing month following the closing of the Proposed Merger. The Operating Companies shall allocate the credit as follows: $15 million for NSTAR
Electric customers, $3 million for NSTAR Gas customers, and $3 million for WMECO customers. The credit at the Operating Company level will be allocated to retail customer classes (i.e., residential, small commercial & industrial
and large commercial and industrial) based upon their proportional share of the monthly customer charges and will appear on the bill as a uniform dollar amount credit for each separate customer class as a separate line item, along with an
explanatory bill message. For each individual Operating Company, all customers within a retail customer class shall receive the same 

  
 3 

	 	
rate credit dollar amount. The application of this credit shall not prevent customers from enjoying any other rate reductions or benefits related to the Proposed Merger. 

 

	(3)	BASE DISTRIBUTION RATE FREEZE: The base distribution rates of the Operating Companies
in effect on January 1, 2012, shall be frozen for forty-four (44) months, but in no event shall new rates go into effect earlier than January 1, 2016 (the “Base Rate Freeze Period”). Rate reconciling mechanisms and other
formula rates now pending or approved by the Department as of January 1, 2012, will not be affected by this Settlement Agreement. The Operating Companies shall not file for approval of or propose new formula rates, tariffs, or other charges,
including but not limited to: earning sharing mechanisms, capital trackers, or revenue decoupling mechanisms during the Base Rate Freeze Period under G.L. c. 164, § 94, or pursuant to the Settlement Agreement approved in D.T.E. 05-85,
as applicable (“Prohibited Filings”), unless specifically mandated by statutes enacted after the date of this Settlement Agreement; provided that if a new formula rate, tariff, or other charge is implemented pursuant to a statutory mandate
enacted after the date of this Settlement Agreement, no costs recoverable under the new formula rate, tariff, or other charge may be also recoverable as exogenous costs. The Operating Companies also hereby relinquish and waive any right to file for
approval of Prohibited Filings from January 1, 2012, to the commencement of the Base Rate Freeze Period. Prohibited Filings by the Operating Companies exclude the filings made pursuant to Article II, §§ (4) through (9), below.

  

	(4)	 RATE CASE MANAGEMENT. No more than two of the Operating Companies may have base
distribution rate proceedings for changes to distribution rates effective after December 31, 2015 filed pursuant to G.L. c. 164, § 94 pending before the Department. If

  
 4 

	 	
two of the Operating Companies have filings for a change in base distribution rates effective after December 31, 2015 pending before the Department, then the Operating Companies agree that a
petition for a base-rate change for the third company shall be lagged for a period of at least six months from the later date of the initial filings for either of the first two Operating Companies, exclusive of the initial fourteen-day period after
filing during which G.L. c. 164, § 94 prohibits schedules of rates, prices and charges from becoming effective. This provision on rate-case management shall apply only to the first base-rate cases filed for effect after the expiration of
the Base Rate Freeze Period. 

  

	(5)	 EXOGENOUS ADJUSTMENTS: During the Base Rate Freeze Period, distribution rates shall be subject to
adjustment up or down for exogenous factors. Eligibility for exogenous cost recovery or rate credit shall be allowed in accordance with the exogenous factors established by the Department in Boston Gas Company, D.P.U. 96-50 (Phase I)
(1996) and shall be applicable only for factors that occur after the approval of this Settlement Agreement. The dollar threshold for qualification as an exogenous factor in any calendar year covered by this Settlement Agreement shall be
determined by multiplying the total distribution revenues of that year by a factor of 0.003212. Regarding property tax cost changes associated solely with the change in valuation methodology affirmed by the Massachusetts Supreme Judicial Court in
Boston Gas Company v. Board of Assessors of Boston, 458 Mass. 715 (2011), and established by the Appellate Tax Board by ruling issued on April 21, 2011 in Docket F275055, F275056, the Companies are not precluded, despite the date of the
Supreme Judicial Court ruling, from filing for exogenous cost recovery for these costs. The Attorney General and DOER reserve all rights regarding disputing the substance of any such exogenous cost filings made by the Companies.

  
 5 

	(6)	CAPITAL PROJECTS SCHEDULING LIST: On the first of the month following the date of the
Department’s approval of the Proposed Merger, the Capital Projects Scheduling List (“CPSL”) rate put into effect on January 1, 2012 in D.P.U. 11-90 shall be reduced to a rate of $0.00069 per kWh, which is designed to recover $15
million in annual CPSL costs. The CPSL program approved in the D.T.E. 05-85 Rate Settlement Agreement will be extended through the end of the Base Rate Freeze Period and will be limited to the recovery of no more than $15 million in annual costs. To
demonstrate its CPSL activities, NSTAR Electric shall file a written report to the Department and submit copies to DOER and the Attorney General, annually, demonstrating that the annual cost of the CPSL program activities (including operating and
maintenance expense and the revenue requirement for CPSL capital projects completed since January 1, 2006) is $15 million or greater; and (2) that over the four-year period 2012-2015, the aggregate number of inspections completed through
CPSL for stray voltage, overhead utility poles and underground manholes shall equal the aggregate number of inspections completed over the four-year period 2007-2010, or 396,753 total inspections. If the aggregate number of inspections over the
period 2012-2015 is less than 396,753 inspections, then NSTAR Electric shall credit customers with an amount equal to the percentage shortfall times $60 million. The CPSL rate shall be deemed to fully recover NSTAR Electric’s CPSL program costs
and shall not be increased to collect any more than $15 million annually; provided that the CPSL rate may be reduced to recognize any disallowances of CPSL expenditures resulting from a finding that those expenditures were not reasonably or
prudently incurred. The CPSL charge shall terminate with the implementation of new base rates for NSTAR Electric, and recovery of CPSL-type costs shall occur through base 

  
 6 

	 	
rates thereafter; except that NSTAR Electric shall be entitled to recover its full $15 million allowance for CPSL-related activities performed in 2015 in 2016, and provided that, during the Base
Rate Freeze Period, adjustments to the fixed CPSL rate shall be allowed to accommodate applicable Department decisions on currently outstanding annual CPSL program filings for the years 2006-2011. 

 

	(7)	 LOST BASE REVENUES: During the Base Rate Freeze Period, NSTAR Electric shall recover
lost base revenues (“LBR”) associated with energy efficiency savings through the Energy Efficiency Recovery Factor (“EERF”). LBR recoveries shall be based on energy efficiency savings verified through annual reports to the
Department for installations made during the Base Rate Freeze Period. In order to comply substantially with the Department’s directives in D.P.U. 07-50-A to decouple base revenues from the effects of energy efficiency programs, LBR shall be
calculated, beginning January 1, 2012 and for the duration of the Base Rate Freeze Period, as the product of: (1) the cumulative amount of the annual energy efficiency program kilowatt-hour savings beginning January 1, 2012, as
determined, verified, and adopted by the Department in NSTAR Electric’s 2012 Energy Efficiency Annual Report (to be filed August 2013) and each Energy Efficiency Annual Report filed thereafter, multiplied by (2) the average respective rate
by residential, low income and C&I segments, as approved by the Department. There shall be no offset to such savings made by subtracting savings achieved in a year prior to 2012 as is currently done in the recovery of LBRs sought by NSTAR
Electric in D.P.U. 10-06 and D.P.U. 11-40. NSTAR Electric shall compute LBR based on monthly installations and shall exclude LBR associated with energy efficiency spending by Cape Light Compact. Nothing in this Settlement Agreement is intended to
affect the Department’s 

  
 7 

	 	
determination of LBR recovery by NSTAR Electric during the D.P.U. 05-85 Rate Settlement at issue in D.P.U. 10-06, D.P.U. 11-40 and D.P.U. 12-xx (to be filed on May 1, 2012 regarding LBR in
2011). Aside from the Department’s final determinations in D.P.U. 10-06, D.P.U. 11-40 and D.P.U. 12-xx, NSTAR Electric shall not recover LBRs associated with pre-2012 energy efficiency installations for any period after December 31,
2011, other than to recovery the normal recovery lag and true-up associated with these filings. For NSTAR Gas, LBR shall be calculated using the methodology currently in place for Massachusetts local natural gas distribution companies.

  

	(8)	STORM COST RECOVERY: Storm costs incurred by NSTAR Electric in 2011 for Tropical Storm Irene and the
snowstorm in October 2011 will be excluded from the storm fund calculation and will be deferred at Prime Rate, in recognition of the two year delay in recovery, to be recoverable in rates over a five-year period beginning January 1, 2014.
Before those storm costs may be recovered in rates, such costs shall be subject to a Department adjudicatory hearing and reviewed for prudence and reasonableness. Storm Cost Recovery amounts shall only include incremental costs. For Storm Cost
Recovery ratemaking purposes, an incremental cost is defined as those actual and required costs directly attributable to the emergency response and not otherwise represented or recoverable by the Operating Companies in any other rate, charge or
tariff. Storm cost recovery for WMECO shall occur in conformance with the Department’s directives in D.P.U. 10-70; provided that WMECO shall not seek recovery for storm costs incurred in relation to the October 2011 snow storm until after the
Department has issued a final order in D.P.U. 11-119-C. 

  
 8 

	(9)	RATE DESIGN: No later than November 1, 2012, WMECO shall file a revenue-neutral rate design plan with the
Department to realign customer rates in a manner that coincides with the decline in the transition charge resulting from the termination of the pay-down of the securitized bonds, which is expected to occur during May of 2013, and in a manner that is
consistent with the Department’s rate design principle of rate continuity and gradualism to address open rate design issues cited in the Department’s order in D.P.U. 10-70. Prior to filing with the Department, WMECO will consult with
the Attorney General to develop a proposal so that the combination of this distribution rate realignment and the reduction in the transition charge preclude a cumulative increase in rates to any rate class. Furthermore, any distribution rate
increase to a class shall be set on a uniform cents per kilowatt-hour basis, unless WMECO and the Attorney General agree prior to filing that customers would be more reasonably and equitably served by a different approach. WMECO shall consult with
the Attorney General’s office at least 30 days prior to the filing to review and discuss the proposals that will be made in the rate design filing. 

  

	(10)	 ACCOUNTING FOR GOODWILL: The transaction value recorded on the books of
NSTAR LLC (the post-closing holding company that will be the sole shareholder of NSTAR Electric and NSTAR Gas) upon the close of the Proposed Merger will include goodwill as defined under generally accepted accounting principles. The Settling
Parties agree that the goodwill resulting from the Proposed Merger will not be recorded on the books of Operating Companies unless required by rule or directive of the Securities Exchange Commission or generally accepted accounting principles. If so
required, the Operating Companies shall quantify the goodwill and its effects recorded on the financial 

  
 9 

	 	
books of account and shall exclude that amount from any ratemaking calculation used to set customer rates, tariffs or charges. 

 

	(11)	NET BOOK VALUE OF UTILITY ASSETS: In completing the
Proposed Merger transaction, the Operating Companies shall not make any accounting adjustment that has the result of increasing the net book value of utility assets for ratemaking purposes. 

 

	(12)	ACCOUNTING TREATMENT OF MERGER-RELATED COSTS: No
transaction costs incurred to negotiate, draft, or execute the merger agreement, or to obtain the regulatory and shareholder approvals required to consummate the Proposed Merger, shall be recorded on the books of the Operating Companies. Such
transaction costs will be recorded at the parent company level and not allocated or assigned to the Operating Companies. Integration costs, such as costs incurred to identify cost-reduction opportunities, to reorganize operations, or to consolidate
information systems, or that are otherwise incurred for the purpose of reducing operating costs of the Operating Companies, may be recorded on the books of the Operating Companies or charged to the Operating Companies by a service company, in an
appropriate proportion. 

  

	(13)	AMORTIZATION OF COSTS FOR RATEMAKING PURPOSES: For
ratemaking purposes, the Operating Companies shall amortize merger-related transaction and integration costs over a 10-year period following the approval of this Settlement Agreement. 

 

	(14)	 FUTURE RATEMAKING FOR MERGER COSTS: Subject to
Department review and approval, transaction and reasonable integration costs from the Proposed Merger shall be eligible for recovery in a future distribution rate proceeding through the retention of merger-related synergies to the extent that
merger-related savings are demonstrated to equal or exceed those costs. The compensation for departing employees subsequently rehired or 

  
 10 

	 	
retained as outside consultants shall be excluded from the merger-related savings calculations. Merger-related payments made to officers leaving the employ of NSTAR, NU, any of the temporary or
surviving entities engaged in the proposed merger transactions, the Operating Companies, or their successors (together, the “post-merger organization”) in the category of “change of control” payments, or to executives remaining
with the post-merger organization in the category of “retention payments,” shall be recorded at the parent company level upon the merger close and shall not be eligible for recovery as a merger-related cost or otherwise from customers.

  

	(15)	MERGER-RELATED INTEGRATION REPORTING: Actual transaction costs by account shall be
reported to the Department in a compliance filing made within ninety (90) days of the close of the Proposed Merger. In addition, the Operating Companies shall each provide to the Attorney General and to DOER, as of January 1, 2014 and 2015
(and each January 1 thereafter until each respective Operating Company files a base-rate proceeding), interim reports on the previous calendar year’s merger integration efforts organized by functional area, including but not limited to
merger-related costs incurred, supporting documentation, any savings achieved attributable to the merger integration efforts and the effects the merger integration efforts had on the Operating Companies (“Annual Interim Reports”). At least
60 days prior to the filing of the first base-rate proceeding following the Base Rate Freeze Period for NSTAR Electric, NSTAR Gas or WMECo, the respective Operating Company shall submit a final merger integration report to the Attorney General and
to DOER developed utilizing the same manner of information used to compile the Annual Interim Reports. 

  
 11 

	(16)	NOTICE OF FACILITY CLOSINGS OR LAYOFFS: In the event of
a facility closing or layoff of employees by Operating Companies or the post-merger organization during the term of this agreement, such utility will provide 30 days’ advance notice of such action to the Attorney General and to DOER. Nothing in
this Settlement Agreement shall be interpreted to abridge any collective bargaining rights regarding reductions to work force. 

 ARTICLE III: ADDITIONAL CONDITIONS 
  

	(1)	The making of this Settlement Agreement establishes no principles and shall not be deemed to foreclose any party from making any contention in any future proceeding or
investigation, except as to those issues and proceedings that are stated in this Settlement Agreement as being specifically resolved and terminated by approval of this Settlement Agreement. 

 

	(2)	This Settlement Agreement shall not be deemed in any respect to constitute an admission by any party that any allegation or contention in this proceeding, or any facts
relating to any other pending proceeding cited in this document, is true or false. Except as specified in this Settlement Agreement to accomplish the customer and shareholder benefits intended by this Settlement Agreement, the entry of an order by
the Department approving the Settlement Agreement shall not in any respect constitute a determination by the Department as to the merits of any other issue raised in this proceeding or any proceeding cited in this document. 

 

	(3)	 This Settlement Agreement is the product of settlement negotiations. The Settling Parties agree that the content of those negotiations (including any
workpapers or documents produced in connection with the negotiations) are confidential to the extent permissible under the Massachusetts Public Records Law, G.L. c. 66, § 10 and G.L. c. 4, § 7,

  
 12 

	 	
cl. twenty-sixth, that all offers of settlement are without prejudice to the position of any party or participant presenting such offer or participating in such discussion, and, except to enforce
rights related to this Settlement Agreement or defend against claims made under this Settlement Agreement, that they will not use the content of those negotiations in any manner in these or other proceedings involving one or more of the parties to
this Settlement Agreement, or otherwise. 

  

	(4)	The provisions of this Settlement Agreement are not severable. This Settlement Agreement is conditioned on its approval in full by the Department on, but not prior to,
April 4, 2012 (“Requested Approval Date”), and any supporting information or evidence provided to the Department during any proceeding to investigate this settlement shall not interpreted to vary the express terms of this
Settlement Agreement. Notwithstanding any of the foregoing provisions, the Attorney General may, in her sole discretion, or DOER may, in its sole discretion, rescind the Settlement Agreement in its entirety prior to the Department’s issuance of
an order approving the Settlement Agreement; provided that notice of such rescission must be filed, or submitted electronically, in writing with the Department. The Settling Parties agree that the Requested Approval Date of this Settlement Agreement
may be extended upon the mutual consent of the Settling Parties and notification of such extension to the Department. 

  

	(5)	 If the Department does not approve this Settlement Agreement in its entirety by the Requested Approval Date, or if, for any reason, the Proposed Merger
is not consummated, this Settlement Agreement shall be null and void, even if already approved by the Department, and this Settlement Agreement and filed supporting documents shall

  
 13 

	 	
be deemed to be withdrawn and shall not constitute a part of the record in any proceeding or used for any other purpose. 

 

	(6)	To the extent permitted by law, the Department shall have its usual jurisdiction to implement the terms of this Settlement Agreement. Nothing in this Settlement
Agreement, however, shall be construed to prevent or delay the Attorney General from pursuing any cause of action related to this Settlement Agreement in court under G.L. c. 93A or otherwise. 

 

	(7)	Under no circumstances shall: (1) any charge under this Settlement Agreement or tariffs promulgated hereunder recover costs that are collected by the Operating
Companies more than once, or through some other rate, charge or tariff; or (2) any charge recover costs more than once in any other rate, charge or tariff collected by the Operating Companies, it being acknowledged by the Settling Parties that
such collection(s), unless fully refunded with interest, as soon as reasonably possible, shall constitute a breach of this Settlement Agreement when discovered and generally known and be deemed to violate the involved tariffs.

  

	(8)	Notwithstanding any provision in this Settlement Agreement to the contrary, no part of this Settlement Agreement shall be interpreted to interfere with the Attorney
General’s rights to petition the Department under G.L. c. 164, § 93, or otherwise under law or regulation, for a review of the Operating Companies, the post-merger organization, or their successors for any reason.

  

	(9)	Any number of counterparts of this agreement may be executed, and each shall have the same force and effect as an original instrument, and as if all the parties to all
the counterparts had signed the same instrument. 

  
 14 

 The signatories listed below represent that they are authorized on behalf of their
principals to enter into this Settlement Agreement. 
  

					
	 MARTHA COAKLEY,
 COMMONWEALTH OF MASSACHUSETTS

ATTORNEY GENERAL
	 		 	 COMMONWEALTH OF MASSACHUSETTS

DEPARTMENT OF ENERGY RESOURCES

			
	/s/ Jesse S. Reyes	 		 	/s/ Anna Blumkin
	 By: Jesse S. Reyes
 Chief,
Office of Ratepayer Advocacy
 Office of the Attorney General
 One Ashburton Place
 Boston, MA 02108-1598
	 		 	 By: Anna Blumkin
 Acting
General Counsel
 Department of Energy Resources
 100 Cambridge Street, Suite 900
 Boston, MA 02114

  

					
	 NSTAR
 NSTAR
ELECTRIC COMPANY
 NSTAR GAS COMPANY
	 		 	 NORTHEAST UTILITIES
 WESTERN MASSACHUSETTS ELECTRIC COMPANY

			
	/s/ James J. Judge	 		 	/s/ David R. McHale
	 By: James J. Judge
 Senior Vice
President and
 Chief Financial Officer

NSTAR
 800 Boylston Street

Boston, MA 02199
	 		 	 By: David R. McHale

Executive Vice President and
 Chief Financial
Officer
 Northeast Utilities
 56
Prospect Street
 Hartford, CT 06103

 Dated: February 15, 2012 

  
 15

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