EXHIBIT 10-52
EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated as of
August 1, 1998 (the "Agreement"), by and among Energy East
Corporation, a New York corporation ("Energy East"), New York
State Electric & Gas Corporation, a New York corporation (the
"Company") and ▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇ (the "Executive"), amends and
restates that certain Employment Agreement dated August 7, 1996,
as amended, between the Company and the Executive.
The Board of Directors of Energy East and the Board of
Directors of the Company desire to provide for the employment of
the Executive as a member of the management of Energy East and
the Company, in the best interest of Energy East and its
shareholders. The Executive is willing to commit himself to
serve Energy East and the Company, on the terms and conditions
herein provided.
In order to effect the foregoing, Energy East, the Company
and the Executive wish to enter into an employment agreement on
the terms and conditions set forth below. Accordingly, in
consideration of the premises and the respective covenants and
agreements of the parties herein contained, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Defined Terms. The definitions of capitalized terms
used in this Agreement, unless otherwise defined herein, are
provided in the last Section hereof.
2. Employment. Energy East and the Company hereby agree
to employ the Executive, and the Executive hereby agrees to serve
Energy East and the Company, on the terms and conditions set
forth herein, during the term of this Agreement (the "Term").
3. Term of Agreement. The Term will commence on September
9, 1996 and end on September 8, 1999, unless further extended as
hereinafter provided. Commencing on September 9, 1997 and each
September 9 thereafter, the Term of this Agreement shall
automatically be extended for one (1) additional year unless, not
later than the June 8 immediately preceding each such September
9, Energy East (upon authorization by the Board) or the Executive
shall have given notice not to extend this Agreement; provided,
however, if a Change-in-Control shall have occurred during the
Term of this Agreement, Sections 5.4, 6, 7 and 10 through 20 of
this Agreement and the second and third paragraphs of Section 5.2
of this Agreement shall continue in effect until at least the end
of the Change-in-Control Protective Period (whether or not the
Term of the Agreement shall have expired for other purposes).
4. Position and Duties. The Executive shall serve as
Chairman, President and Chief Executive Officer of Energy East,
and as Chairman, President and Chief Executive Officer of the
Company and shall have such responsibilities, duties and
authority that are consistent with such positions as may from
time to time be assigned to the Executive by the Board or by the
NYSEG Board. The Executive shall devote substantially all his
working time and efforts to the business and affairs of Energy
East and the Company; provided, however, that the Executive may
also serve on the boards of directors or trustees of other
companies and organizations, as long as such service does not
substantially interfere with the performance of his duties
hereunder.
5. Compensation and Related Matters.
5.1 Base Salary. The Company shall pay the Executive
a base salary ("Base Salary") during the period of the
Executive's employment hereunder, which shall be at an initial
rate of Five Hundred Seventy-Five Thousand Dollars ($575,000.00)
per annum. The Base Salary shall be paid in substantially equal
bi-weekly installments, in arrears. The Base Salary may be
discretionarily increased by the Board from time to time as the
Board deems appropriate in its reasonable business judgment. The
Base Salary in effect from time to time shall not be decreased
during the Term. During the period of the Executive's employment
hereunder, the Board shall make an annual review of the
Executive's compensation.
Compensation of the Executive by Base Salary payments
shall not be deemed exclusive and shall not prevent the Executive
from participating in any other compensation or benefit plan of
Energy East or the Company. The Base Salary payments (including
any increased Base Salary payments) hereunder shall not in any
way limit or reduce any other obligation of Energy East or the
Company hereunder, and no other compensation, benefit or payment
hereunder shall in any way limit or reduce the obligation of the
Company to pay the Executive's Base Salary hereunder.
5.2 Benefit Plans. The Executive shall be entitled to
participate in or receive benefits under any "employee benefit
plan" (as defined in section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended from time to time
("ERISA")) or employee benefit arrangement made available by
Energy East or the Company now or during the period of the
Executive's employment hereunder to their executives and key
management employees, subject to and on a basis consistent with
the terms, conditions and overall administration of such plans
and arrangements; provided, however, that there shall be no
duplication of the benefits created by this Agreement. The
Executive's participation in such employee benefit plans and
arrangements shall be on an appropriate level, as determined by
the Board or the NYSEG Board, as appropriate.
If the Executive's service with Energy East or the
Company from September 9, 1996 exceeds five full years, the
Company shall pay to the Executive a monthly pension supplement
that results in the Executive receiving a total monthly pension
based upon two years of service for each of the Executive's first
five years of service. Specifically, the monthly pension
supplement shall be equal to the amount by which (i) the total
monthly payments that would be due to the Executive under the
Company's Retirement Benefit Plan (or any successor plan) and the
Company's Supplemental Executive Retirement Plan (or any
successor plan) if the Executive's monthly benefits under those
two plans were calculated by giving the Executive credit for two
years of service for each of the Executive's actual first five
years of service exceeds (ii) the actual total monthly amounts
that are due under those two plans.
During the Term of this Agreement (or, if later, until
the end of the Change-in-Control Protective Period), the Company
will, on each January 5, beginning January 5, 1997, pay the
premium on a Whole Life Insurance Policy issued by The Guardian
Life Insurance Company of New York, Policy No. 3810692, on the
life of the Executive (the "Life Insurance Policy"); provided
that in no event shall the Company pay on any such date more than
$96,000 toward payment of such premium and provided that the
Company shall not pay such premium if the Executive's employment
has been terminated for any reason prior to such January 5,
except as otherwise provided in Sections 6.1 and 10.1(A) hereof.
5.3 Expenses. Upon presentation of reasonably
adequate documentation to the Company, the Executive shall
receive prompt reimbursement from the Company for all reasonable
and customary business expenses incurred by the Executive in
accordance with the Company policy in performing services
hereunder.
5.4 Vacation. The Executive shall be entitled to five
(5) weeks of vacation during each year of this Agreement, or such
greater period as the Board shall approve, without reduction in
salary or other benefits.
5.5 Transition Payments. Except as otherwise provided
in the second paragraph of this Section 5.5, the Company agrees
to pay to the Executive, as an offset to any losses the Executive
may incur as a result of joining the Company, the sum of $195,000
less any amount the Executive receives, or becomes entitled to
receive, as a bonus for the calendar year 1996 from DQE, Inc. or
Duquesne Light Company ("Prior Employers"). Such amount shall be
paid to the Executive no later than December 31, 1996. The
Executive agrees to promptly notify the Company of the amount of
any bonus payments he receives, or becomes entitled to receive,
for the calendar year 1996 from the Prior Employers. In the
event the Executive receives, or becomes entitled to receive, any
bonus payment for the calendar year 1996 from the Prior Employers
after payment by the Company as provided in this Section 5.5 has
been made, the Executive will promptly remit to the Company the
amount received or that he becomes entitled to receive.
The Company agrees to make a payment in an amount not
to exceed $96,000 in connection with the transfer of the Life
Insurance Policy from DQE, Inc. to the Company; provided that, if
the Company makes a payment of more than $40,170, the amount in
excess of $40,170 shall be deducted from the amount that the
Company is required to pay to the Executive pursuant to the first
paragraph of this Section 5.5.
The Company agrees to reimburse the Executive in
accordance with the Company's Employee Relocation Policy for any
moving expenses he incurs in moving himself and his family from
Pittsburgh, PA to upstate New York.
6. Compensation Related to Disability or Termination
(Other Than Certain Post-Termination Payments).
6.1 During the Term of this Agreement (or, if later,
at any time prior to the end of the Change-in-Control Protective
Period), during any period that the Executive fails to perform
the Executive's full-time duties with Energy East or the Company
as a result of incapacity due to physical or mental illness, the
Company shall pay the Executive's Base Salary to the Executive at
the rate in effect at the commencement of any such period,
together with all compensation and benefits payable to the
Executive under the terms of any compensation or benefit plan,
program or arrangement maintained by Energy East or the Company
during such period, until the Executive's employment is
terminated by Energy East for Disability; provided, however, that
such Base Salary payments shall be reduced by the sum of the
amounts, if any, payable to the Executive at or prior to the time
of any such Base Salary payment under disability benefit plans of
Energy East or the Company or under the Social Security
disability insurance program, which amounts were not previously
applied to reduce any such Base Salary payment; and provided
further, however, that if the Executive's employment is
terminated by Energy East for Disability, the Company will pay
through the end of the Term of this Agreement (or, if later,
until the end of the Change-in-Control Protective Period), the
amount the Company agreed to pay in connection with the Life
Insurance Policy referred to in the third paragraph of Section
5.2 hereof. Subject to Sections 7, 8, 9 and 10 hereof, after
completing the expense reimbursements required by Section 5.3
hereof and making the payments and providing the benefits
required by this Section 6.1, Energy East and the Company shall
have no further obligations to the Executive under this
Agreement.
6.2 If the Executive's employment shall be terminated
for any reason during the Term of this Agreement (or, if later,
prior to the end of the Change-in-Control Protective Period), the
Company shall pay the Executive's Base Salary (to the Executive
or in accordance with Section 14.2 if the Executive's employment
is terminated by his death) through the Date of Termination at
the rate in effect at the time the Notice of Termination is
given, together with all compensation and benefits payable to the
Executive through the Date of Termination under the terms of any
compensation or benefit plan, program or arrangement maintained
by Energy East or the Company during such period. Subject to
Sections 6.1, 7, 8, 9 and 10 hereof, after completing the expense
reimbursements required by Section 5.3 hereof and making the
payments and providing the benefits required by this Section 6.2,
Energy East and the Company shall have no further obligations to
the Executive under this Agreement.
7. Normal Post-Termination Payments Upon Termination of
Employment. If the Executive's employment shall be
terminated for any reason during the Term of this Agreement (or,
if later, prior to the end of the Change-in-Control Protective
Period), the Company shall pay the Executive's normal post-
termination compensation and benefits to the Executive as such
payments become due. Subject to Section 10.1 hereof and the
second paragraph of Section 5.2 hereof, such post-termination
compensation and benefits shall be determined under, and paid in
accordance with, Energy East's or the Company's retirement,
insurance and other compensation or benefit plans, programs and
arrangements (other than this Agreement).
8. Termination of Employment (During the Term and Prior to
a Change-in-Control) by Energy East Without
Cause. If Energy East shall terminate the Executive's
employment during the Term and prior to a Change-in-Control,
without Cause (and not for Disability or in connection with the
Executive's Retirement or the Executive's death), then in lieu of
any further salary payments to the Executive for periods
subsequent to the Date of Termination, the Company shall pay to
the Executive, within the five days immediately following the
Date of Termination, a lump sum amount equal to the present value
(calculated using a discount at the appropriate corresponding
United States Treasury ▇▇▇▇ rate) of the aggregate Base Salary
otherwise payable to the Executive through the end of the Term.
9. Post-Termination Continuation of Welfare Benefit Plan
Coverage. If the termination of the Executive's
employment is described in Section 8 hereof, Energy East and the
Company shall maintain in full force and effect, for the
continued benefit of the Executive for the number of years
(including partial years) remaining in the Term, each "employee
welfare benefit plan" (as described in Section 3(1) of ERISA) in
which the Executive was entitled to participate immediately prior
to the Date of Termination, provided that the Executive's
continued participation is possible under the general terms and
provisions of such plans. In the event that the Executive's
participation in any such plan is barred, the Company shall
arrange to provide the Executive with benefits substantially
similar to those which the Executive would otherwise have been
entitled to receive under the plan from which his continued
participation is barred. For purposes of this Section 9, the
term "employee welfare benefit plan" shall be deemed not to
include the payment by the Company of the amount referred to in
the third paragraph of Section 5.2 hereof with respect to the
Life Insurance Policy.
10. Severance Payments.
10.1 The Company shall pay the Executive the payments
described in this Section 10.1 (the "Severance Payments") upon
the termination of the Executive's employment following a Change-
in-Control and prior to the end of the Change-in-Control
Protective Period, in addition to the payments and benefits
described in Sections 6 and 7 hereof, unless such termination is
(i) by Energy East for Cause, (ii) by reason of death, Disability
or Retirement, or (iii) by the Executive without Good Reason.
For purposes of the immediately preceding sentence, if a
termination of the Executive's employment occurs prior to a
Change-in-Control, but following a Potential Change-in-Control in
which a Person has entered into an agreement with Energy East the
consummation of which will constitute a Change-in-Control, such
termination shall be deemed to have followed a Change-in-Control
and to have been (i) by Energy East without Cause, if the
Executive's employment is terminated without Cause at the
direction of such Person, or (ii) by the Executive with Good
Reason, if the Executive terminates his employment with Good
Reason and the act (or failure to act) which constitutes Good
Reason occurs following such Potential Change-in-Control and at
the direction of such Person.
(A) In lieu of any further salary payments to the
Executive for periods subsequent to the Date of Termination,
in lieu of any lump sum payment with respect to aggregate
Base Salary otherwise payable pursuant to Section 8 hereof,
and in lieu of any severance benefit otherwise payable to
the Executive, the Company shall pay to the Executive a lump
sum severance payment, in cash, equal to three (3) times the
sum of:
(i) the higher of the Executive's annual Base Salary
in effect immediately prior to the occurrence of
the event or circumstance upon which the Notice of
Termination is based or the Executive's annual
Base Salary in effect immediately prior to the
Change-in-Control, and
(ii) the incentive compensation award the Executive
would have received under the Annual Executive
Incentive Plan, or any successor annual executive
incentive compensation plan, for the year in which
the Date of Termination occurs, calculated in
accordance with Article XI (A) (iii) of the Annual
Executive Incentive Plan or any comparable
provision in any successor annual executive
incentive compensation plan, without, however,
giving effect to any pro-rata adjustments
contained in said provisions, and
(iii) the amount the Company agreed to pay in connection
with the Life Insurance Policy referred to in the
third paragraph of Section 5.2 hereof.
(B) Notwithstanding any provision of the Company's
Annual Executive Incentive Plan, or any successor annual
executive incentive compensation plan, the Company shall pay
to the Executive a lump sum amount, in cash, equal to the
sum of (i) any incentive compensation which has been
allocated or awarded to the Executive for a completed fiscal
year preceding the Date of Termination under the Annual
Executive Incentive Plan, or any successor annual executive
incentive compensation plan, but has not yet been either
(x) paid (pursuant to Section 6.2 hereof or otherwise) or
(y) deferred pursuant to the Deferred Compensation Plan for
Salaried Employees, and (ii) a pro-rata portion to the Date
of Termination of the aggregate value of any contingent
incentive compensation award to the Executive for any
uncompleted fiscal year under the Annual Executive Incentive
Plan or any successor annual executive incentive
compensation plan, calculated as to each such award in
accordance with Article XI (A) (iii) of the Annual Executive
Incentive Plan or any comparable provision in any successor
annual executive incentive compensation plan.
(C) The Company shall pay to the Executive the
retirement benefits to which the Executive is entitled under
the Company's Supplemental Executive Retirement Plan (or any
successor plan), and in determining such benefits, the
Executive shall be given an additional two (2) years of
service credit at the Executive's highest annual rate of
compensation during the twelve (12) months immediately
preceding the Date of Termination and shall be deemed to be
five (5) years older than he is and a "Key Person" as
defined in, and for all purposes under, the Company's
Supplemental Executive Retirement Plan (or any successor
plan); provided that if the Executive does not have at least
ten (10) years of service credit and age eligibility under
the Company's Supplemental Executive Retirement Plan (or any
successor plan) after such additional service and age
credit, the Executive shall be deemed to have at least ten
(10) years of service credit and age eligibility under the
Company's Supplemental Executive Retirement Plan (or any
successor plan); such benefits shall be determined without
regard to any amendment to the Company's Supplemental
Executive Retirement Plan (or any successor plan) made
subsequent to a Change-in-Control and on or prior to the
Date of Termination, which amendment adversely affects in
any manner the computation of retirement benefits
thereunder.
Notwithstanding any provision in the Company's
Supplemental Executive Retirement Plan (or any successor
plan) that may be to the contrary, the benefits otherwise
payable to the Executive pursuant to this Section 10.1(C)
shall be paid to the Executive in a lump sum payment that is
equal in amount to the present value (calculated under
generally accepted actuarial methods that are consistent
with the actuarial methods used in producing the tables of
Appendix A of the Company's Retirement Benefit Plan (or any
successor plan)) of such benefits and such payment shall be
in lieu of any payments to which the Executive otherwise
would have been entitled under the Company's Supplemental
Executive Retirement Plan (or any successor plan) and shall
satisfy any obligations that the Company would otherwise
have to the Executive under the Company's Supplemental
Executive Retirement Plan (or any successor plan). Such
lump sum payment shall be paid to the Executive no later
than the due date of the first payment otherwise due to the
Executive under the Company's Supplemental Executive
Retirement Plan (or any successor plan).
Notwithstanding the immediately preceding paragraph of
this Section 10.1(C), the Executive may elect to have the
benefits otherwise payable to the Executive pursuant to this
Section 10.1(C) be paid to the Executive in the manner
provided for under the Company's Supplemental Executive
Retirement Plan (or any successor plan) and such method of
payment shall be in lieu of a lump sum payment. The
Executive shall make such election by sending a letter to
the Company in which he states that he has decided to make
such election. The election shall not be effective unless
the letter is received by the Company (i) at least 60 days
prior to the day (the "Change-in-Control Day") that the
Change-in-Control, or Potential Change-in-Control, that
gives rise to the applicability of Section 10.1(C) occurs
and (ii) prior to the first day of the calendar year in
which the Change-in-Control Day occurs. The Executive shall
have the right to revoke any such election by sending a
letter to the Company in which he states that he has decided
to revoke such election. The revocation of such election
shall not be effective unless the letter is received by the
Company (i) at least 60 days prior to the Change-in-Control
Day and (ii) prior to the first day of the calendar year in
which the Change-in-Control Day occurs. If the Executive
revokes an election, he can make a new election (in the
manner, and subject to the timing requirements, set forth in
this paragraph), and he can revoke any such new election (in
the manner, and subject to the timing requirements, set
forth in this paragraph).
(D) For a thirty-six (36) month period after the Date
of Termination, the Company shall arrange to provide the
Executive with life (other than the Life Insurance Policy),
disability, accident and health insurance benefits
substantially similar to those which the Executive is
receiving immediately prior to the Notice of Termination
(without giving effect to any reduction in such benefits
subsequent to a Change-in-Control if the Executive
terminated his employment for Good Reason or was terminated
without Cause). Benefits otherwise receivable by the
Executive pursuant to this Section 10.1(D) shall be reduced
to the extent comparable benefits are actually received by
or made available to the Executive without cost during the
thirty-six (36) month period following the Executive's
termination of employment (and any such benefits actually
received by the Executive shall be reported to Energy East
by the Executive). If the benefits provided to the
Executive under this Section 10.1(D) shall result in a
Gross-Up Payment pursuant to Section 10.2, and these Section
10.1(D) benefits are thereafter reduced pursuant to the
immediately preceding sentence because of the receipt of
comparable benefits, the Gross-Up Payment shall be
recalculated so as to reflect that reduction, and the
Executive shall refund to the Company an amount equal to any
calculated reduction in the Gross-Up Payment, but only if,
and to the extent, the Executive receives a refund of any
Excise Tax previously paid by the Executive pursuant to
Section 10.2 hereof.
10.2 (A) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment or distribution by Energy East or the Company to or for
the benefit of the Executive on account of a Change-in-Control,
whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement or otherwise (a "Payment"), would
be subject to the excise tax imposed by Section 4999 of the Code
or any interest or penalties 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 ("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 Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
(B) Subject to the provisions of Section 10.2(C)
hereof, all determinations required to be made under this Section
10.2, including whether a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be used in
arriving at such determinations, shall be made by Energy East's
principal outside accounting firm (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Board
and the Executive within fifteen (15) business days of the Date
of Termination and/or such earlier date(s) as may be requested by
Energy East or the Executive (each such date and the Date of
Termination shall be referred to as a "Determination Date", for
purposes of this Section 10.2(B) and Section 10.3 hereof). All
fees and expenses of the Accounting Firm shall be borne solely by
the Company. The initial Gross-Up Payment, if any, as determined
pursuant to this Section 10.2(B), shall be paid by the Company to
the Executive within five (5) days of the receipt of the
Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it
shall furnish the Executive with a written opinion that failure
to report the Excise Tax on the Executive's applicable federal
income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the
Accounting Firm under this Section 10.2(B) shall be binding upon
Energy East, 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 Energy East exhausts its
remedies pursuant to Section 10.2(C) 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 Energy East in
writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of an
Underpayment. 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
Energy East 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 he gives such notice to Energy East
(or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If Energy East
notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive
shall:
(i) give Energy East any information reasonably
requested by Energy East relating to such claim,
(ii) take such action in connection with contesting
such claim as Energy East 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 Energy East,
(iii) cooperate with Energy East in good faith in order
effectively to contest such claim, and
(iv) permit Energy East to participate in any
proceeding 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 Section 10.2(C),
Energy East shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo
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 ▇▇▇ 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 Energy East shall determine; provided, however, that
if Energy East directs the Executive to pay such claim and ▇▇▇
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 further provided 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, Energy East'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 Section 10.2(C)
hereof, the Executive becomes entitled to receive any refund with
respect to such claim, the Executive shall (subject to Energy
East's and the Company's complying with the requirements of
Section 10.2(C) hereof) promptly pay to the Company the amount of
such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to
Section 10.2(C) hereof, a determination is made that the
Executive shall not be entitled to any refund with respect to
such claim and Energy East 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.
10.3 The payments provided for in Section 10.1 hereof
(other than Section 10.1(C) and (D)) shall be made not later than
the fifth day following each Determination Date, provided,
however, that if the amounts of such payments cannot be finally
determined on or before such day, the Company shall pay to the
Executive on such day an estimate, as determined by the
Executive, of the minimum amount of such payments to which the
Executive is clearly entitled and shall pay the remainder of such
payments (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth (30th) day
after each Determination Date. In the event that the amount of
the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the
Company to the Executive, payable on the fifth (5th) business day
after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).
10.4 The Company also shall pay to the Executive all
legal fees and expenses incurred by the Executive as a result of
a termination which entitles the Executive to the Severance
Payments (including all such fees and expenses, if any, incurred
in disputing any such termination or in seeking in good faith to
obtain or enforce any benefit or right provided by this Agreement
or in connection with any tax audit or proceeding to the extent
attributable to the application of Section 4999 of the Code to
any payment or benefit provided hereunder). Such payments shall
be made within five (5) business days after delivery of the
Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as Energy East reasonably
may require.
11. Termination Procedures.
11.1 Notice of Termination. During the Term of this
Agreement (and, if longer, until the end of the Change-in-Control
Protective Period), any purported termination of the Executive's
employment (other than by reason of death) shall be communicated
by written Notice of Termination from one party hereto to the
other party hereto in accordance with Section 15 hereof. For
purposes of this Agreement, a "Notice of Termination" shall mean
a notice which shall indicate the specific termination provision
in this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated. Further, a Notice of Termination for Cause is
required to include a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the
entire membership of the Board at a meeting of the Board which
was called and held for the purpose of considering such
termination (after reasonable notice to the Executive and an
opportunity for the Executive, together with the Executive's
counsel, to be heard before the Board) finding that, in the good
faith opinion of the Board, the Executive was guilty of conduct
set forth in clause (i) or (ii) of the definition of Cause
herein, and specifying the particulars thereof in detail.
11.2 Date of Termination. "Date of Termination", with
respect to any purported termination of the Executive's
employment during the Term of this Agreement (or prior to the end
of the Change-in-Control Protective Period, if a Change-in-
Control shall have occurred), shall mean (i) if the Executive's
employment is terminated by his death, the date of his death,
(ii) if the Executive's employment is terminated for Disability,
thirty (30) days after Notice of Termination is given (provided
that the Executive shall not have returned to the full-time
performance of the Executive's duties during such thirty (30) day
period), and (iii) if the Executive's employment is terminated
for any other reason, the date specified in the Notice of
Termination (which, in the case of a termination by Energy East,
shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the
Executive, shall not be less than fifteen (15) days nor more than
sixty (60) days, respectively, from the date such Notice of
Termination is given).
12. No Mitigation. Energy East and the Company agree that,
if the Executive's employment hereunder is terminated during the
Term (or, if later, prior to the end of the Change-in-Control
Protective Period), the Executive is not required to seek other
employment or to attempt in any way to reduce any amounts payable
to the Executive by Energy East or the Company hereunder.
Further, the amount of any payment or benefit provided for
hereunder (other than pursuant to Section 10.1(D) hereof) shall
not be reduced by any compensation earned by the Executive as the
result of employment by another employer, by retirement benefits,
by offset against any amount claimed to be owed by the Executive
to Energy East or the Company, or otherwise.
13. Confidentiality and Noncompetition.
13.1 The Executive will not, during or after the Term,
disclose to any entity or person any information which is treated
as confidential by Energy East or the Company and to which the
Executive gains access by reason of his position as an employee
or director of Energy East or the Company.
13.2 If, at any time prior to the end of the Term (or,
if later, the end of the Change-in-Control Protective Period),
the Executive terminates his own employment without Good Reason
(and not in connection with his Disability, Retirement or death)
or Energy East terminates his employment with Cause, then for a
twelve-month period immediately following his Date of
Termination, the Executive shall not, except as permitted by
Energy East upon its prior written consent, enter, directly or
indirectly, into the employ of or render or engage in, directly
or indirectly, any services to any person, firm or corporation
within the "Restricted Territory," which is a major competitor of
Energy East, the Company or any generation subsidiary of Energy
East with respect to products which Energy East, the Company or
any generation subsidiary of Energy East are then producing or
services Energy East, the Company or any generation subsidiary of
Energy East are then providing (a "Competitor"). However, it
shall not be a violation of the immediately preceding sentence
for the Executive to be employed by, or render services to, a
Competitor, if the Executive renders those services only in lines
of business of the Competitor which are not directly competitive
with the primary lines of business of Energy East, the Company or
any generation subsidiary of Energy East or are outside of the
Restricted Territory. For purposes of this Section 13.2, the
"Restricted Territory" shall be the states of Maryland, New
Jersey, New York and Pennsylvania.
If, at any time following a Change-in-Control, or a
Potential Change-in-Control under the circumstances described in
the second sentence of Section 10.1 hereof, and prior to the end
of the Term (or, if later, the end of the Change-in-Control
Protective Period), the Executive terminates his own employment
with Good Reason (and not in connection with his Disability or
Retirement) or Energy East terminates his employment without
Cause, then for a twelve month period immediately following his
Date of Termination, the Executive shall not enter into the
employ of any person, firm or corporation or any affiliate
thereof (as such term is defined in Rule 12b-2 of the Exchange
Act) that caused the Change-in-Control, or the Potential Change-
in-Control under the circumstances described in the second
sentence of Section 10.1 hereof.
14. Successors; Binding Agreement.
14.1 In addition to any obligations imposed by law
upon any successor to Energy East or the Company, Energy East and
the Company will 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 Energy East
or the Company, as the case may be, to expressly assume and agree
to perform this Agreement in the same manner and to the same
extent that Energy East and the Company would be required to
perform it if no such succession had taken place. Failure of
Energy East or the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle the Executive to
compensation from Energy East and the Company in the same amount
and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the Executive's
employment for Good Reason after a Change-in-Control, except
that, for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the
Date of Termination.
14.2 This Agreement shall inure to the benefit of and
be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive shall die
while any amount would still be payable to the Executive
hereunder (other than amounts which, by their terms, terminate
upon the death of the Executive) if the Executive had continued
to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to
the executors, personal representatives or administrators of the
Executive's estate.
15. Notices. For the purpose of this Agreement, notices
and all other communications provided for in the Agreement shall
be in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed to the respective
addresses set forth below, or to such other address as either
party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be
effective only upon actual receipt:
To Energy East:
Energy East Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Corporate Secretary
To the Company:
New York State Electric & Gas Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Corporate Secretary
To the Executive:
▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
16. Miscellaneous.
16.1 No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or
discharge is agreed to in writing and signed by the Executive and
such officers as may be specifically designated by the Board and
the NYSEG Board, respectively. No waiver by any party hereto at
any time of any breach by any other party hereto of, or
compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by any party which are not
expressly set forth in this Agreement. This Agreement sets forth
the entire agreement of the parties hereto in respect of the
subject matter contained herein and supersedes all prior
agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any
prior agreement of the parties hereto in respect of the subject
matter contained herein is hereby terminated and cancelled. The
validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New York.
All references to sections of the Exchange Act or the Code shall
be deemed also to refer to any successor provisions to such
sections. There shall be withheld from any payments provided for
hereunder any amounts required to be withheld under federal,
state or local law and any additional withholding amounts to
which the Executive has agreed. The obligations under this
Agreement of Energy East, the Company or the Executive which by
their nature and terms require satisfaction after the end of the
Term (or after the end of the Change-in-Control Protective
Period) shall survive such event and shall remain binding upon
such party.
16.2 Notwithstanding any provision of this Agreement
to the contrary, Energy East and the Company shall be jointly and
severally liable to the Executive and his personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees or legatees for all payment obligations
under this Agreement.
17. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
18. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and the
same instrument.
19. Settlement of Disputes; Arbitration. All claims by the
Executive for benefits under this Agreement shall be directed to
and determined by the Board and shall be in writing. Any denial
by the Board of a claim for benefits under this Agreement shall
be delivered to the Executive in writing and shall set forth the
specific reasons for the denial and the specific provisions of
this Agreement relied upon. The Board shall afford a reasonable
opportunity to the Executive for a review of the decision denying
a claim and shall further allow the Executive to appeal to the
Board a decision of the Board within sixty (60) days after
notification by the Board that the Executive's claim has been
denied. To the extent permitted by applicable law, any further
dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in
Binghamton, New York in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered
on the arbitrator's award in any court having jurisdiction.
20. Definitions. For purposes of this Agreement, the
following terms shall have the meaning indicated below:
(A) "Base Salary" shall have the meaning stated in
Section 5.1 hereof.
(B) "Beneficial Owner" shall have the meaning defined
in Rule 13-d-3 under the Exchange Act.
(C) "Board" shall mean the Board of Directors of
Energy East.
(D) "Cause" for termination by Energy East of the
Executive's employment, for purposes of this Agreement, shall
mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with Energy East and
the Company (other than any such failure resulting from the
Executive's incapacity due to physical or mental illness or any
such actual or anticipated failure after the issuance of a Notice
of Termination for Good Reason by the Executive pursuant to
Section 11.1) after a written demand for substantial performance
is delivered to the Executive by the Board, which demand
specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the
Executive's duties, or (ii) the willful engaging by the Executive
in conduct which is demonstrably and materially injurious to
Energy East or its subsidiaries, monetarily or otherwise. For
purposes of clauses (i) and (ii) of this definition, no act, or
failure to act, on the Executive's part shall be deemed "willful"
unless done, or omitted to be done, by the Executive not in good
faith and without reasonable belief that the Executive's act, or
failure to act, was in the best interest of Energy East.
(E) A "Change-in-Control" shall be deemed to have
occurred if the conditions set forth in any one of the following
paragraphs shall have been satisfied during the Term:
(I) any Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of Energy
East (not including in the securities beneficially
owned by such Person any securities acquired directly
from Energy East or its affiliates) representing 25% or
more of the combined voting power of Energy East's then
outstanding securities; or
(II) during any period of two consecutive years
(not including any period prior to the date of this
Agreement), individuals who at the beginning of such
period constitute the Board and any new director (other
than a director designated by a Person who has entered
into an agreement with Energy East to effect a
transaction described in paragraph (I), (III) or (IV)
of this Change-in-Control definition or a director
whose initial assumption of office occurs as a result
of an actual or threatened election contest with
respect to the election or removal of directors or
other actual or threatened solicitations of proxies or
consents by or on behalf of a Person other than the
Board) whose election by the Board or nomination for
election by Energy East's stockholders was approved by
a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors at the
beginning of the period or whose election or nomination
for election was previously so approved, cease for any
reason to constitute a majority thereof; or
(III) the shareholders of Energy East approve a
merger or consolidation of Energy East with any other
corporation, other than (i) a merger or consolidation
which would result in the voting securities of Energy
East outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by
being converted into voting securities of the surviving
entity), in combination with the ownership of any
trustee or other fiduciary holding securities under an
employee benefit plan of Energy East or any of its
subsidiaries, at least 75% of the combined voting power
of the voting securities of Energy East or such
surviving entity outstanding immediately after such
merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization
of Energy East (or similar transaction) in which no
Person acquires more than 50% of the combined voting
power of Energy East's then outstanding securities; or
(IV) the shareholders of Energy East approve a
plan of complete liquidation of Energy East or an
agreement for the sale or disposition by Energy East of
all or substantially all Energy East's assets.
(F) "Change-in-Control Protective Period" shall mean
the period from the occurrence of a Change-in-Control until the
later of (i) the second anniversary of such Change-in-Control or,
(ii) if such Change-in-Control shall be caused by the shareholder
approval of a merger or consolidation, as described in Section
20(E)(III) hereof, the second anniversary of the consummation of
such merger or consolidation, provided, however, that in the
event that the agreement providing for such merger or
consolidation, as described in Section 20(E)(III) hereof, is
terminated without consummation of such merger or consolidation,
the Change-in-Control Protective Period shall expire 90 days
following such termination, unless there has occurred another
event constituting a Change-in-Control, in which case the Change-
in-Control Protective Period shall expire upon the date described
herein with respect to such subsequent Change-in-Control.
(G) "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
(H) "Company" shall mean New York State Electric & Gas
Corporation and any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law,
or otherwise.
(I) "Date of Termination" shall have the meaning
stated in Section 11.2 hereof.
(J) "Disability" shall be deemed the reason for the
termination by Energy East of the Executive's employment, if, as
a result of the Executive's incapacity due to physical or mental
illness, the Executive shall have been absent from the full-time
performance of the Executive's duties with Energy East and the
Company for the maximum number of months applicable to the
Executive under the Company's Disability Policy for Salaried
Employees (or any successor policy) (but in no event for less
than six (6) consecutive months), Energy East shall have given
the Executive a Notice of Termination for Disability, and, within
thirty (30) days after such Notice of Termination is given, the
Executive shall not have returned to the full-time performance of
the Executive's duties.
(K) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended from time to time.
(L) "Excise Tax" shall have the meaning stated in
Section 10.2(A) hereof.
(M) "Executive" shall mean the individual named in the
first paragraph of this Agreement.
(N) "Good Reason" for termination by the Executive of
the Executive's employment shall mean the occurrence (without the
Executive's express written consent) after any Change-in-Control,
or after any Potential Change-in-Control under the circumstances
described in the second sentence of Section 10.1 hereof (treating
all references in paragraphs (I) through (VII) below to a
"Change-in-Control" as references to a "Potential Change-in-
Control), of any one of the following acts by Energy East or the
Company, or failures by Energy East or the Company to act,
unless, in the case of any act or failure to act described in
paragraphs (I), (V), (VI) or (VII) below, such act or failure to
act is corrected prior to the Date of Termination specified in
the Notice of Termination given in respect thereof:
(I) the assignment to the Executive of any
duties inconsistent with the Executive's status as an
executive officer of Energy East or the Company or a
substantial alteration in the nature or status of the
Executive's responsibilities from those in effect
immediately prior to the Change-in-Control (including,
without limitation, any such alteration attributable to
the fact that Energy East or the Company may no longer
be a public company);
(II) a reduction by Energy East or the Company in
the Executive's annual base salary as in effect on the
date hereof or as the same may be increased from time
to time;
(III) the relocation of Energy East's principal
executive offices to a location more than fifty (50)
miles from the location of such offices immediately
prior to the Change-in-Control or Energy East's or the
Company's requiring the Executive to be based anywhere
other than Energy East's principal executive offices
except for required travel on Energy East's or the
Company's business to an extent substantially
consistent with the Executive's present business travel
obligations;
(IV) the failure by Energy East or the Company,
without the Executive's consent, to pay to the
Executive any portion of the Executive's current
compensation, or to pay to the Executive any portion of
an installment of deferred compensation under any
deferred compensation program of Energy East or the
Company, within seven (7) days of the date such
compensation is due;
(V) the failure by Energy East or the Company to
continue in effect any compensation plan in which the
Executive participates immediately prior to the Change-
in-Control which is material to the Executive's total
compensation, including but not limited to the
Company's Annual Executive Incentive Plan, Long Term
Executive Incentive Share Plan, and Supplemental
Executive Retirement Plan, or any substitute plans
adopted prior to the Change-in-Control, unless an
equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with
respect to such plan, or the failure by Energy East or
the Company to continue the Executive's participation
therein (or in such substitute or alternative plan) on
a basis not materially less favorable, both in terms of
the amount of benefits provided and the level of the
Executive's participation relative to other
participants, as existed at the time of the Change-in-
Control;
(VI) the failure by Energy East or the Company to
continue to provide the Executive with benefits
substantially similar to those enjoyed by the Executive
under any of Energy East's or the Company's pension,
life insurance, medical, health and accident, or
disability plans in which the Executive was
participating at the time of the Change-in-Control, the
taking of any action by Energy East or the Company
which would directly or indirectly materially reduce
any of such benefits or deprive the Executive of any
material fringe benefit enjoyed by the Executive at the
time of the Change-in-Control, or the failure by Energy
East or the Company to provide the Executive with the
number of paid vacation days to which the Executive is
entitled to under Section 5.4 hereof, or the failure by
the Company to provide the Executive with the pension
supplement it agreed to provide pursuant to the second
paragraph of Section 5.2 hereof, or the failure by the
Company to pay the amount it agreed to pay in
connection with the Life Insurance Policy referred to
in the third paragraph of Section 5.2 hereof; or
(VII) any purported termination of the Executive's
employment which is not effected pursuant to a Notice
of Termination satisfying the requirements of Section
11.1; for purposes of this Agreement, no such purported
termination shall be effective.
The Executive's right to terminate the Executive's
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 act or failure to act
constituting Good Reason hereunder.
(O) "Gross-Up Payment" shall have the meaning stated
in Section 10.2(A) hereof.
(P) "Life Insurance Policy" shall have the meaning
stated in the third paragraph of Section 5.2 hereof.
(Q) "Notice of Termination" shall have the meaning
stated in Section 11.1 hereof.
(R) "Person" shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof; however, a Person shall not include
(i) Energy East or any of its subsidiaries, (ii) a trustee or
other fiduciary holding securities under an employee benefit plan
of Energy East or any of its subsidiaries, (iii) an underwriter
temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly,
by the stockholders of Energy East in substantially the same
proportions as their ownership of stock of Energy East.
(S) "Potential Change-in-Control" shall be deemed to
have occurred if the conditions set forth in any one of the
following paragraphs shall have been satisfied during the Term:
(I) Energy East enters into an agreement, the
consummation of which would result in the occurrence of
a Change-in-Control;
(II) Energy East or any Person publicly announces
an intention to take or to consider taking actions
which, if consummated, would constitute a Change-in-
Control;
(III) any Person (x) is or becomes the Beneficial
Owner, directly or indirectly, (y) discloses directly
or indirectly to Energy East (or publicly) a plan or
intention to become the Beneficial Owner, directly or
indirectly, or (z) makes a filing under the ▇▇▇▇-▇▇▇▇▇-
▇▇▇▇▇▇ Anti-Trust Improvements Act of 1976, as amended,
with respect to securities to become the Beneficial
Owner, directly or indirectly, of securities of Energy
East representing 9.9% or more of the combined voting
power of Energy East's then outstanding securities; or
(IV) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a Potential
Change-in-Control has occurred.
(T) "Retirement" shall be deemed the reason for the
termination by Energy East or the Executive of the Executive's
employment if such employment is terminated in accordance with
Energy East's retirement policy, not including early retirement,
generally applicable to its salaried employees, as in effect
immediately prior to the Change-in-Control, or in accordance with
any retirement arrangement established with the Executive's
consent with respect to the Executive.
(U) "Severance Payments" shall mean those payments
described in Section 10.1 hereof.
(V) "Term" shall have the meaning stated in Section 3
hereof.
(W) "Energy East" shall mean Energy East Corporation
and any successor to its business and/or assets which assumes and
agrees to perform this Agreement by operation of law, or
otherwise (except in determining, under Section 20(E) hereof,
whether or not any Change-in-Control of Energy East has occurred
in connection with such succession).
(X) "NYSEG Board" shall mean the Board of Directors of
the Company.
IN WITNESS WHEREOF, the parties have executed and
delivered this Agreement as of the date first above written.
ENERGY EAST CORPORATION
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Senior Vice President and
General Counsel
NEW YORK STATE ELECTRIC & GAS
CORPORATION
By: ▇▇▇▇▇▇▇ ▇. German
▇▇▇▇▇▇▇ ▇. German
Executive Vice President and
Chief Operating Officer
▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇