SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
June 30, 1999
For the quarterly period ended. . . . . . . .. . . . . . . . . .
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from. . . . . . . .to. . . . . . . . .
1-14766
Commission file number. . . . . . . . . . . .. . . . . . . . . .
Energy East Corporation
. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .
(Exact name of registrant as specified in its charter)
New York 14-1798693
. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 12904, Albany, NY 12212-2904
. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .
(Address of principal executive offices) (Zip Code)
(518) 434-3049
Registrant's telephone number, including area code . . . . . . .
N/A
. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .
Former name, former address and former fiscal year, if changed
since last report.
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [x] No [ ]
The number of shares of common stock (par value $.01 per
share) outstanding as of July 31, 1999 was 114,407,028.
TABLE OF CONTENTS
PART I
Page
Item 1. Financial Statements . . . . . . . . . . . . . . 1
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
(a) Liquidity and Capital Resources . . . . . 8
(b) Results of Operations . . . . . . . . . . 16
PART II
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . 18
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. . . . . . . . . . . . . . . . . 18
(b) Reports on Form 8-K . . . . . . . . . . . 18
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . 20
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Energy East Corporation
Consolidated Statements of Income - (Unaudited)
Three Months Six Months
Periods Ended June 30 1999 1998 1999 1998
(Thousands, except per share amounts)
Operating Revenues
Sales and Services . . . . . . . . . $507,927 $548,308 $1,162,365 $1,185,938
-------- -------- ---------- ----------
Operating Expenses
Fuel used in electricity generation. 18,272 55,080 74,756 114,172
Electricity purchased. . . . . . . . 184,871 164,355 333,665 310,566
Natural gas purchased. . . . . . . . 35,317 31,251 101,529 88,388
Other operating expenses . . . . . . 64,401 83,096 153,019 167,377
Maintenance. . . . . . . . . . . . . 19,811 27,748 45,524 59,697
Depreciation and amortization. . . . 538,473 48,405 593,805 96,782
Other taxes. . . . . . . . . . . . . 56,579 50,556 110,640 105,495
Gain on sale of generation assets. . (674,572) - (674,572) -
Writeoff of Nine Mile Point 2. . . . 69,930 - 69,930 -
------- ------- -------- --------
Total Operating Expenses. . . . . 313,082 460,491 808,296 942,477
------- ------- -------- --------
Operating Income. . . . . . . . . . . 194,845 87,817 354,069 243,461
Other (Income) and Deductions . . . . (13,678) 163 (14,360) 1,388
Interest Charges, Net . . . . . . . . 32,718 30,289 64,901 60,924
Preferred Stock Dividends of
Subsidiary.. . . . . . . . . . . . . 691 2,260 1,721 4,529
------- ------- -------- --------
Income Before Federal Income Taxes. . 175,114 55,105 301,807 176,620
Federal Income Taxes. . . . . . . . . 119,618 25,752 159,276 71,096
------- ------- -------- --------
Net Income. . . . . . . . . . . . . . $55,496 $29,353 $142,531 $105,524
======= ======= ======== ========
Earnings Per Share, basic and diluted $.48 $.23 $1.19 $.81
Dividends Paid Per Share. . . . . . . $.21 $.20 $.42 $.38
Average Shares Outstanding. . . . . . 116,623 128,699 119,763 130,746
Per share amounts and number of shares outstanding have been restated to
reflect the two-for-one common stock split effective April 1, 1999.
The notes on pages 6 and 7 are an integral part of the financial statements.
Item 1. Financial Statements (Cont'd)
Energy East Corporation
Consolidated Balance Sheets - (Unaudited)
June 30, Dec. 31,
1999 1998
(Thousands)
Assets
Current Assets
Cash and cash equivalents. . . . . . . . . . . . . . . $1,291,845 $48,068
Special deposits . . . . . . . . . . . . . . . . . . . 911 4,729
Accounts receivable, net . . . . . . . . . . . . . . . 133,094 148,712
Fuel, at average cost. . . . . . . . . . . . . . . . . 9,504 44,643
Materials and supplies, at average cost. . . . . . . . 7,702 38,040
Prepayments. . . . . . . . . . . . . . . . . . . . . . 156,610 111,082
---------- ----------
Total Current Assets. . . . . . . . . . . . . . . . 1,599,666 395,274
Utility Plant, at Original Cost
Electric . . . . . . . . . . . . . . . . . . . . . . . 3,377,253 5,299,604
Natural gas. . . . . . . . . . . . . . . . . . . . . . 613,951 602,904
Common . . . . . . . . . . . . . . . . . . . . . . . . 138,771 144,043
---------- ----------
4,129,975 6,046,551
Less accumulated depreciation. . . . . . . . . . . . . 1,983,423 2,211,608
---------- ----------
Net Utility Plant in Service. . . . . . . . . . . . 2,146,552 3,834,943
Construction work in progress. . . . . . . . . . . . . 9,252 27,741
---------- ----------
Total Utility Plant . . . . . . . . . . . . . . . . 2,155,804 3,862,684
Other Property and Investments, Net . . . . . . . . . . 99,328 129,088
Regulatory and Other Assets
Regulatory assets
Unfunded future federal income taxes. . . . . . . . . 29,164 136,404
Unamortized debt expense. . . . . . . . . . . . . . . 69,320 71,530
Demand-side management program costs. . . . . . . . . 58,558 64,466
Environmental remediation costs . . . . . . . . . . . 58,800 60,600
Other . . . . . . . . . . . . . . . . . . . . . . . . 33,191 125,604
---------- ----------
Total regulatory assets . . . . . . . . . . . . . . 249,033 458,604
Other assets . . . . . . . . . . . . . . . . . . . . . 25,329 37,687
---------- ----------
Total Regulatory and Other Assets . . . . . . . . . 274,362 496,291
---------- ----------
Total Assets. . . . . . . . . . . . . . . . . . . . $4,129,160 $4,883,337
========== ==========
The notes on pages 6 and 7 are an integral part of the financial statements.
Item 1. Financial Statements (Cont'd)
Energy East Corporation
Consolidated Balance Sheets - (Unaudited)
June 30, Dec. 31,
Liabilities 1999 1998
(Thousands)
Current Liabilities
Current portion of long-term debt. . . . . . . . . . . $2,018 $31,077
Current portion of preferred stock of subsidiary . . . - 75,000
Commercial paper . . . . . . . . . . . . . . . . . . . - 78,300
Accounts payable and accrued liabilities . . . . . . . 117,311 116,582
Interest accrued . . . . . . . . . . . . . . . . . . . 19,017 19,556
Taxes accrued. . . . . . . . . . . . . . . . . . . . . 298,215 587
Accumulated deferred federal income tax, net . . . . . 29,391 10,029
Other. . . . . . . . . . . . . . . . . . . . . . . . . 61,835 82,143
---------- ----------
Total Current Liabilities . . . . . . . . . . . . . 527,787 413,274
Regulatory and Other Liabilities
Regulatory liabilities
Deferred income taxes . . . . . . . . . . . . . . . . 68,921 98,038
Deferred income taxes, unfunded future federal
income taxes . . . . . . . . . . . . . . . . . . . . 14,238 60,896
Other . . . . . . . . . . . . . . . . . . . . . . . . 22,968 42,182
---------- ----------
Total regulatory liabilities. . . . . . . . . . . . 106,127 201,116
Other liabilities
Deferred income taxes . . . . . . . . . . . . . . . . 215,920 765,592
Other postretirement benefits . . . . . . . . . . . . 151,862 137,681
Environmental remediation costs . . . . . . . . . . . 78,800 80,600
Other . . . . . . . . . . . . . . . . . . . . . . . . 90,687 82,028
---------- ----------
Total other liabilities . . . . . . . . . . . . . . 537,269 1,065,901
Long-term debt. . . . . . . . . . . . . . . . . . . . . 1,386,621 1,435,120
---------- ----------
Total Liabilities . . . . . . . . . . . . . . . . . 2,557,804 3,115,411
Commitments . . . . . . . . . . . . . . . . . . . . . . - -
Preferred Stock of Subsidiary
Preferred stock redeemable solely at the
option of subsidiary. . . . . . . . . . . . . . . . . 10,131 29,440
Preferred stock subject to mandatory
redemption requirements . . . . . . . . . . . . . . . 25,000 25,000
Common Stock Equity
Common stock . . . . . . . . . . . . . . . . . . . . . 1,174 631
Capital in excess of par value . . . . . . . . . . . . 819,960 1,057,904
Retained earnings. . . . . . . . . . . . . . . . . . . 754,088 662,562
Treasury stock, at cost. . . . . . . . . . . . . . . . (38,997) (7,611)
---------- ----------
Total Common Stock Equity . . . . . . . . . . . . . 1,536,225 1,713,486
---------- ----------
Total Liabilities and Stockholders' Equity . . . . $4,129,160 $4,883,337
========== ==========
The notes on pages 6 and 7 are an integral part of the financial statements.
<PAGE>
Item 1. Financial Statements (Cont'd)
Energy East Corporation
Consolidated Statements of Cash Flows - (Unaudited)
Six Months
Periods Ended June 30 1999 1998
(Thousands)
Operating Activities
Net income . . . . . . . . . . . . . . . . . . . . $142,531 $105,524
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization. . . . . . . . . . 593,805 96,782
Federal income taxes and investment tax credits
deferred, net. . . . . . . . . . . . . . . . . (444,342) (4,445)
Gain on sale of generation assets. . . . . . . . (674,572) -
Writeoff of Nine Mile Point 2. . . . . . . . . . 69,930 -
Changes in current operating assets and liabilities
Accounts receivable . . . . . . . . . . . . . . 15,618 38,121
Inventory. . . . . . . . . . . . . . . . . . . . 65,477 4,749
Prepayments. . . . . . . . . . . . . . . . . . . (45,528) (9,042)
Accounts payable and accrued liabilities . . . . 729 17,050
Taxes accrued. . . . . . . . . . . . . . . . . . 297,628 32,696
Other, net . . . . . . . . . . . . . . . . . . . . (16,629) 14,353
---------- --------
Net Cash Provided by Operating Activities . . . 4,647 295,788
---------- --------
Investing Activities
Sale of generation assets. . . . . . . . . . . . . 1,850,000 -
Utility plant additions. . . . . . . . . . . . . . (29,904) (76,303)
Other property and investments . . . . . . . . . . (10,829) 25,200
---------- --------
Net Cash Provided by (Used in)
Investing Activities. . . . . . . . . . . . . 1,809,267 (51,103)
---------- --------
Financing Activities
Repurchase of common stock . . . . . . . . . . . . (237,559) (135,359)
Treasury stock acquired, net . . . . . . . . . . . (31,386) -
Repayments of preferred stock and
first mortgage bonds . . . . . . . . . . . . . . (144,557) (30,000)
Long-term notes, net . . . . . . . . . . . . . . . (27,330) 9,580
Commercial paper, net. . . . . . . . . . . . . . . (78,300) 12,000
Dividends on common stock. . . . . . . . . . . . . (51,005) (49,432)
---------- --------
Net Cash Used in Financing Activities . . . . . (570,137) (193,211)
---------- --------
Net Increase in Cash and Cash Equivalents . . . . . 1,243,777 51,474
Cash and Cash Equivalents, Beginning of Period. . . 48,068 8,168
---------- --------
Cash and Cash Equivalents, End of Period. . . . . . $1,291,845 $59,642
========== ========
Supplemental Disclosure of Cash Flows Information
Cash paid during the period
Interest, net of amounts capitalized. . . . . . . $55,929 $52,553
Income taxes (includes $262,500 related to
gain on sale of generation assets). . . . . . . $320,422 $37,346
The notes on pages 6 and 7 are an integral part of the financial statements.
Item 1. Financial Statements (Cont'd)
Energy East Corporation
Consolidated Statements of Retained Earnings - (Unaudited)
Six Months
Periods ended June 30 1999 1998
(Thousands)
Balance, beginning of period. . . . . . . . . . $662,562 $568,844
Add net income. . . . . . . . . . . . . . . . . 142,531 105,524
Deduct dividends on common stock. . . . . . . . 51,005 49,432
-------- --------
Balance, end of period. . . . . . . . . . . . . $754,088 $624,936
======== ========
The notes on pages 6 and 7 are an integral part of the financial statements.
<PAGE>
Item 1. Financial Statements (Cont'd)
Note 1. Unaudited Consolidated Financial Statements
The accompanying unaudited consolidated financial statements
reflect all adjustments which are necessary, in the opinion of
management, for a fair presentation of our consolidated results for
the interim periods. All such adjustments, other than those
related to the sale of our coal-fired generation stations and the
writeoff of Nine Mile Point 2, are of a normal recurring nature.
The unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes
contained in our annual report for the year ended December 31,
1998. Due to the seasonal nature of our operations, financial
results for interim periods are not necessarily indicative of
trends for a 12-month period.
Note 2. Investment in Nine Mile Point nuclear generating
unit No. 2
We wrote off our entire 18% investment in Nine Mile Point 2
during the second quarter of 1999. We completed the sale of our
Homer City generation assets to Edison Mission Energy in March
1999, and the sale of our remaining coal-fired generation assets
to The AES Corporation in May 1999. The proceeds from the sale of
those assets, net of taxes and transaction costs, in excess of the
net book value, less funded deferred taxes, were used to write down
our investment in Nine Mile Point 2 by $384 million. This
treatment was in accordance with our restructuring plan approved by
the Public Service Commission of the State of New York in January
1998. We wrote down our investment an additional $104 million due
to the required writeoff of funded deferred taxes related to Nine
Mile Point 2. These writedowns are reflected in depreciation and
amortization for the second quarter of 1999.
We announced in June 1999 that we agreed to sell our 18%
interest in Nine Mile Point 2 to AmerGen Energy Company, a joint
venture of PECO Energy Company and British Energy. (See Item 2(a)
- - Energy Distribution, Nine Mile Point nuclear generating unit No.
2.) Based on the sale agreement, we wrote off $70 million, our
remaining investment in Nine Mile Point 2, in accordance with
Statement of Financial Accounting Standards No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of.
Note 3. Common Stock Split
In January 1999 we declared a two-for-one stock split on
common stock outstanding. Shareholders of record at the close of
business on March 12, 1999, were entitled to the shares effective
April 1, 1999. All references to shares outstanding and per share
information reflect the stock split.
<PAGE>
Note 4. Segment Information
Selected financial information for each of our business
segments is presented in the following table. "Energy
Distribution" consists of our electricity distribution,
transmission and generation operations in New York and our natural
gas distribution, transportation and storage operations in New
York. "Other" includes our energy services businesses, natural gas
and propane air distribution operations outside of New York,
corporate assets and intersegment eliminations.
Energy
Three Months Ended Distribution Other Total
June 30, 1999
Operating Revenues $497,209 $10,718 $507,927
Net Income (Loss) $58,474 $(2,978) $55,496
June 30, 1998
Operating Revenues $540,412 $7,896 $548,308
Net Income $28,905 $448 $29,353
Six Months Ended
June 30, 1999
Operating Revenues $1,134,244 $28,121 $1,162,365
Net Income (Loss) $148,649 $(6,118) $142,531
June 30, 1998
Operating Revenues $1,167,644 $18,294 $1,185,938
Net Income (Loss) $106,650 $(1,126) $105,524
Identifiable Assets
June 30, 1999 $3,189,406 $939,754 $4,129,160
December 31, 1998 $4,807,657 $75,680 $4,883,337
Note 5. Reclassifications
Certain amounts have been reclassified on the consolidated
financial statements to conform with the 1999 presentation.
<PAGE>
Item 2. Management's discussion and analysis of financial
condition and results of operations
(a) Liquidity and Capital Resources
Merger Agreements
Connecticut Energy Merger: On April 23, 1999, we signed a
definitive merger agreement with Connecticut Energy Corporation
(CNE) under which CNE will become one of our wholly-owned
subsidiaries. The transaction is valued at $617 million, including
the assumption of approximately $181 million of debt.
Under the agreement 50% of the common stock of CNE will be
converted into our common stock with a value of $42.00 per CNE
share, and 50% will be converted into $42.00 in cash per CNE share,
subject to restrictions on the minimum and maximum number of shares
to be issued. Shareholders will be able to specify the percentage
of the consideration they wish to receive in stock and in cash,
subject to proration. The transaction will be accounted for using
the purchase method of accounting.
The merger is subject to, among other things, the approvals of
CNE shareholders and various regulatory agencies, including the
Connecticut Department of Public Utility Control and the Securities
and Exchange Commission. We expect the transaction to close by
early 2000.
CMP Group Merger: On June 14, 1999, we signed a definitive merger
agreement with CMP Group, Inc. under which CMP Group will become
one of our wholly-owned subsidiaries. We will acquire all of the
common stock of CMP Group for $29.50 per share in cash. The
transaction has an equity market value of approximately $957
million based on approximately 32.4 million CMP Group common shares
outstanding. We will also assume approximately $271 million of CMP
Group preferred stock and long-term debt. The transaction will be
accounted for using the purchase method of accounting.
The merger is subject to, among other things, the approvals of
CMP Group shareholders and various regulatory agencies, including
the Maine Public Utilities Commission, the Securities and Exchange
Commission, the Federal Energy Regulatory Commission and the
Nuclear Regulatory Commission. We intend to register as a holding
company with the SEC under the Public Utility Holding Company Act
of 1935. We expect the transaction to close in the middle of the
year 2000.
CTG Resources Merger: On June 29, 1999, we signed a definitive
merger agreement with CTG Resources, Inc. under which CTG Resources
will become one of our wholly-owned subsidiaries. The transaction
values CTG Resources' common equity at approximately $355 million,
and we will assume approximately $220 million of CTG Resources'
long-term debt. The transaction will be accounted for using the
purchase method of accounting.
Under the agreement, 45% of the common stock of CTG Resources
will be converted into our common stock with a value of $41.00 per
CTG Resources share, and 55% will be converted into $41.00 in cash
per CTG Resources share, subject to restrictions on the minimum and
maximum number of shares to be issued. Shareholders will be able
to specify the percentage of the consideration they wish to receive
in stock and in cash, subject to proration.
The merger is subject to, among other things, the approvals of
CTG Resources shareholders and various regulatory agencies,
including the Connecticut Department of Public Utility Control and
the Securities and Exchange Commission. We expect the transaction
to close in the middle of the year 2000.
Notes Payable: We expect to issue long-term debt prior to the
closings of the merger transactions. The proceeds from the debt
issuance, along with the proceeds from the sale of our generation
assets and internally generated funds, will be used to help fund
the cash portion of the consideration and to help fund our ongoing
share repurchase program.
Energy Distribution
Sale of our Coal-fired Generation Assets: We accepted offers
totaling $1.85 billion from The AES Corporation and Edison Mission
Energy in August 1998 for our seven coal-fired stations and
associated assets and liabilities, which were placed up for auction
earlier in 1998. We completed the sale of our Homer City
generation assets to Edison Mission Energy in March 1999, and the
sale of our remaining coal-fired generation assets to AES in May
1999. (See Item 1 - Note 2 to the Consolidated Financial
Statements.)
Now that the sale of our coal-fired generation assets is
complete, approximately 60% of our power requirements will be
satisfied through generation from our nuclear and hydroelectric
stations and by purchases under long-term contracts from nonutility
generators and the New York Power Authority. For the remaining
power requirements we have assumed the risk of market prices that
are sometimes volatile, since we have capped the prices we can
charge customers.
We use electricity contracts to manage our exposure to
fluctuations in the cost of electricity. These contracts allow us
to fix margins on the majority of our retail electricity sales.
The cost or benefit of electricity contracts is included in the
cost of electricity purchased when the electricity is sold.
Nine Mile Point nuclear generating unit No. 2: We announced in
June 1999 that we agreed to sell our 18% interest in Nine Mile
Point 2 to AmerGen Energy Company, a joint venture of PECO Energy
Company and British Energy. In the same announcement, Niagara
Mohawk Power Corporation, the operator and 41% owner of Nine Mile
Point 2, announced the sale of its interest in Nine Mile Point 2 to
AmerGen. At closing, we will receive $27.9 million in proceeds
based on our 18% ownership share. (See Item 1 - Note 2 to the
Consolidated Financial Statements.) We may be entitled to
additional payments through 2012 under a financial sharing
agreement. A power purchase agreement with AmerGen requires us to
purchase 17.1% of all electricity from Nine Mile Point 2 at
negotiated prices for three years.
AmerGen will assume full responsibility for the
decommissioning of its ownership share of Nine Mile Point 2. The
decommissioning fund will be pre-funded to a fixed amount by the
sellers, with all potential costs above the fixed amount paid by
AmerGen. We expect the sale of Nine Mile Point 2 to be completed
early next year.
New York Power Pool Restructuring: The Federal Energy Regulatory
Commission issued Orders 888 and 889 in 1996 to foster the
development of competitive wholesale electricity markets by opening
up transmission services and to address the resulting stranded
costs. In subsequent orders, the FERC generally affirmed Orders
888 and 889. Various parties, including us, have appealed these
orders in the United States Court of Appeals for the D.C. Circuit.
In response to Order 888, the New York Power Pool members
submitted filings to the FERC proposing, among other things, to
restructure the power pool by establishing a New York Independent
System Operator and a New York State Reliability Council. In a
series of orders in June 1998, January 1999 and July 1999 the FERC
conditionally authorized the formation of the system operator and
reliability council and conditionally accepted the tariff and rates
applicable to transmission service, and energy, capacity and
ancillary services filed by the members. In February 1999 power
pool members also filed the necessary applications to transfer
control of transmission facilities to the system operator, which
the FERC accepted in April 1999. On July 29, 1999, the FERC
conditionally granted certain authorizations that would allow the
system operator to become operational on September 1, 1999, and
required an additional filing by the power pool members within 30
days to implement the restructuring proposal. We are currently
awaiting the FERC's acceptance of the remaining power pool member
filings. We do not expect the restructuring to have a material
adverse effect on our financial position or results of operations.
Electric Retail Access Program: Customers in certain sections of
our service territory were eligible to choose their electricity
supplier in mid-1998. All of our electricity customers were able
to choose their electricity supplier by August 1, 1999.
We are responsible for delivery of our customers' electricity
on our transmission and distribution system. Rates charged for use
of our transmission system are subject to FERC approval, while
rates for the use of our distribution system are subject to PSC
approval. The PSC approved our distribution rates in January 1998.
Our transmission rate case, which was filed with the FERC in March
1997, has not yet been approved.
On July 15, 1999, the PSC issued an Opinion and Order
Concerning Retail Access Credit and Customer Identification Issues.
This order addressed phase one unbundling issues related to our
retail access credit (the amount backed out of a customer's
transmission and distribution bill when that customer participates
in retail access), suppliers' obligations and customer
identification. As a result of the order, our retail access credit
was maintained at its current value, retail access suppliers are
responsible for energy and capacity for their own customers and we
may require a deposit from customers who are not able to provide
adequate identification. The PSC also concluded that costs for
line losses, installed reserves and most ancillary services are
being recovered through our delivery charge and are not part of the
retail access credit. We are currently developing our response to
this order and are unable to predict the effect of the order on our
financial position or results of operations.
Competitive Electric Metering: In May 1999 the PSC approved a plan
to open up to competition electric metering services for certain
customers in New York State. The services include installation and
maintenance of electric meters, meter reading and meter data
retrieval and storage. Competitive metering would initially be
available to customers with peak electricity requirements at any
given time of 50 kilowatts or more. Utilities will be required to
file unbundled metering tariffs by October 1, 1999, that identify
their metering costs as a component of existing electricity prices.
Utilities will continue their provider of last resort
responsibilities for metering. Stranded cost issues will be
handled in individual utility proceedings. We are currently unable
to predict the effect of this plan on our financial position or
results of operations.
Environmental Matters: Since we have completed the sale of our
coal-fired generation assets, we will no longer be subject to
certain regulation by the federal government and by state and local
governments with respect to certain environmental matters and
certain water quality, air quality and waste disposal requirements
applicable to the coal-fired generation assets. (See Form 10-K for
the fiscal year ended December 31, 1998, Item 1 - Business,
Environmental matters.)
Role of Natural Gas Local Distribution Companies: On November 3,
1998, the PSC issued a "Policy Statement Concerning the Future of
the Natural Gas Industry in New York State and Order Terminating
Capacity Assignment." The policy statement includes the PSC's
vision for furthering competition in the natural gas industry in
New York State. The PSC believes the most effective way to
establish a competitive gas market is for natural gas utilities to
exit the merchant function over a three to seven year period. The
PSC also established guidelines and began several proceedings
related to implementing its policy statement. We are participating
in each of the proceedings and continue to believe the competitive
marketplace should decide who will be the suppliers of natural gas.
In compliance with the PSC's Order, effective April 1, 1999,
we ceased assigning certain capacity costs to customers who switch
from fully bundled sales service to transportation service. Any
capacity costs that may be stranded as a result of terminating
capacity assignment will be recovered from all applicable
customers.
<PAGE>
Other Matters
Year 2000 Readiness Disclosure
Many of our computer systems, which include mainframe systems
and special-purpose systems, refer to years in terms of their final
two digits only. Such systems may interpret the year 2000 as the
year 1900. If not corrected, those systems could cause us to,
among other things, experience energy delivery problems, report
inaccurate data or issue inaccurate bills.
We have been working diligently to address this problem by
reviewing all of our mainframe and special-purpose systems;
identifying potentially affected software, hardware, and date-
sensitive components, often referred to as embedded chips, of
various equipment; determining and taking appropriate corrective
action; and, when appropriate, testing our systems.
Our mainframe systems consist of the hardware and software
components of New York State Electric & Gas Corporation's
information technology systems. We believe we have identified,
taken appropriate corrective action and tested all of our mainframe
systems. We believe those systems are now able to process year
2000 and beyond transactions.
Our special-purpose systems consist of our non-information
technology systems and the information technology systems of our
subsidiaries other than NYSEG. We have identified approximately
6,000 items in our special-purpose systems that may be affected by
the Year 2000 problem. Items identified include software, hardware
and embedded chips in systems such as those that control the
acquisition and the delivery of electricity and natural gas to
customers and those in our communication systems. We believe we
have fixed, eliminated, replaced or found no problem with all of
the special-purpose items we have identified that affect our
electricity and natural gas delivery systems and our communication
systems.
Even though we believe we have taken corrective action with
respect to our own Year 2000 issues, the Year 2000 issue could
adversely affect us if there are items in our mainframe or special-
purpose systems that may be affected by the Year 2000 problem and
that we have not identified in our review of those systems. The
Year 2000 issue could also adversely affect us if third parties
such as suppliers, customers, neighboring or interconnected
utilities and other entities fail to correct any of their Year 2000
problems. We have contacted key third parties to determine the
status of their Year 2000 readiness programs. Many have responded
satisfactorily, some have not responded satisfactorily and some
have not responded at all. We are following up with key third
parties who have not responded satisfactorily or who have not
responded at all. We have developed contingency plans, some of
which are discussed below, for reasonably likely worst case
scenarios based upon an assumption that we and those third parties
will not be Year 2000 compliant.
<PAGE>
We believe we have taken all necessary steps to address the
Year 2000 issue successfully. Through June 30, 1999, we have spent
approximately $11.6 million and expect to spend an additional $1.1
million on Year 2000 readiness including contingency plan
preparations. We believe this amount is adequate to address our
Year 2000 issues. These amounts are being expensed as incurred and
are being financed entirely with internally generated funds.
Addressing the Year 2000 issue has not caused us to delay any
significant information system projects.
As part of our normal business practice we have plans in place
for use during emergencies, some of which could arise from Year
2000 problems. We are also implementing an emergency preparedness
plan which will help us to address customer emergencies and
coordinate with other emergency service providers. Each of our 13
division offices will be open from 10:00 p.m. on December 31, 1999,
to 2:00 a.m. on January 1, 2000. NYSEG personnel will be available
to staff county emergency preparedness offices during this same
time period. Other customer contact sites will also be
established. Temporary local numbers will be established so
customers can contact us should long distance telephone service
fail. We have completed over 75 contingency plans to specifically
address reasonably likely worst case scenarios that could arise as
a result of the Year 2000 problem.
The contingency plans address, among other scenarios, the
interruption or failure of normal business activities or operations
such as a partial electrical and/or natural gas system shutdown.
If the interruption or failure is due to embedded chips in
equipment such as automatic control devices, our contingency plan
is to implement the normal system restoration procedures that we
utilize during emergencies. If the interruption or failure is due
to telecommunications not being available, we plan to use
alternative communication devices such as radio systems and
satellite phones. Another scenario addressed by our contingency
plans is the failure of our customer information system. Should
that occur, we plan to rely on customer information previously
stored and make the appropriate adjustment to each customer's next
bill after the system is restored.
We are dependent on others for our supply of natural gas. In
the event a supplier is not able to meet our needs, we plan to
purchase the needed amount of natural gas from one of our many
other suppliers on the same transmission line. Since the sale of
our coal-fired generation assets has been completed, we will be
buying from third parties, including nonutility generators and the
New York Power Authority, instead of producing the majority of the
electricity our customers need. If the electricity available in
our region is not adequate for all of the customers on our system,
we plan to operate at lower levels of power as outlined in our
established emergency procedures. Should our mainframe hardware be
disabled, we have a backup mainframe system that is capable of
operating all of our business systems. All of our contingency
plans are ready and have been tested.
The PSC issued an Order on October 30, 1998, adopting a July
1, 1999, deadline for New York utilities to complete their Year
2000 readiness programs for "mission critical" systems and for
contingency plans. Mission critical systems include those systems
that control the acquisition and the delivery of electricity and
natural gas to customers, emergency management systems and certain
electricity generation plants. We completed our Year 2000
readiness program for mission critical systems and for contingency
plans before the PSC's July 1, 1999, deadline.
Investing and Financing Activities
Investing Activities
Capital spending for the first six months of 1999 was $41
million, primarily for extension of energy distribution service and
necessary improvements to existing facilities. We estimate our
capital spending for 1999 will be about $140 million, and it is
expected to be paid for entirely with internally generated funds.
Financing Activities
On February 1, 1999, we redeemed, at par, $25 million of
NYSEG's 7.40% preferred stock and $50 million of NYSEG's adjustable
rate preferred stock.
On April 1, 1999, we purchased, at a discount, shares of the
following series of NYSEG's preferred stock: $7.2 million of
3.75%, $2.8 million of 4 1/2% (Series 1949), $1.4 million of 4.15%,
$4.8 million of 4.40%, and $3.1 million of 4.15% (Series 1954).
On April 1, 1999, the holders of a majority of the votes of
shares of NYSEG's serial preferred stock consented to increase the
amount of unsecured debt NYSEG may issue by up to an additional
$1.2 billion.
In June 1999 we redeemed, at a premium, $50 million of NYSEG's
7 5/8% Series first mortgage bonds.
We repurchased 10 million shares of our common stock during
the first six months of 1999.
Forward-looking Statements
This Form 10-Q contains certain forward-looking statements
that are based upon management s current expectations and
information that is currently available. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward-
looking statements in certain circumstances. Whenever used in this
report, the words "estimate," "expect," "believe," or similar
expressions are intended to identify such forward-looking
statements.
In addition to the assumptions and other factors referred to
specifically in connection with such statements, factors that could
cause actual results to differ materially from those contemplated
in any forward-looking statements include, among others, the risk
that more Year 2000 problems may be found; the fact that despite
all of our efforts, there can be no assurances that all of our Year
2000 issues have been remedied; the fact that there can be no
assurances that all Year 2000 issues that could affect us can or
will be totally eliminated by our suppliers, customers, neighboring
or interconnected utilities and other entities; and the fact that
our assessment of the effects of Year 2000 issues are based, in
part, upon information received from our suppliers, customers,
neighboring or interconnected utilities and other entities, our
reasonable reliance upon this information and the risk that
inaccurate or incomplete information may have been supplied to us.
Some additional factors that could cause actual results to
differ materially from those contemplated in any forward-looking
statements include, among others, the deregulation and unbundling
of energy services; our ability to compete in the rapidly changing
and increasingly competitive electricity and natural gas utility
markets; our ability to control nonutility generator and other
costs; changes in fuel supply or cost and the success of our
strategies to satisfy our power requirements now that all of our
coal-fired generation assets have been sold; our ability to expand
our products and services, including our energy distribution
network in the Northeast; our ability to integrate the operations
of Connecticut Energy, CMP Group and CTG Resources with our
operations; the ability to obtain adequate and timely rate relief;
nuclear or environmental incidents; legal or administrative
proceedings; changes in the cost or availability of capital; growth
in the areas in which we are doing business; weather variations
affecting customer energy usage; and other considerations that may
be disclosed from time to time in our publicly disseminated
documents and filings. We undertake no obligation to publicly
update any forward-looking statements, whether as a result of new
information, future events or otherwise.
<PAGE>
(b) Results of Operations
Three Months Ended June 30,
1999 1998 Change
(Thousands, except per share amounts)
Total Operating Revenues $507,927 $548,308 (7%)
Operating Income $194,845 $87,817 122%
Net Income $55,496 $29,353 89%
Average Shares Outstanding 116,623 128,699 (9%)
Earnings Per Share,
basic and diluted $.48 $.23 109%
Dividends Paid Per Share $.21 $.20 5%
Earnings per share increased 16 cents for the second quarter
of 1999, exclusive of the nonrecurring benefit from the sale of
our coal-fired generation assets and the writeoff of Nine Mile
Point 2. That increase was primarily driven by investment
income, fewer shares of common stock outstanding due to our share
repurchase program, higher retail electricity deliveries, which
were caused by warmer weather, and cost control efforts. Those
increases were partially offset by higher purchased power costs
and lower wholesale electricity deliveries due to the sale of our
coal-fired generation assets.
Six Months Ended June 30,
1999 1998 Change
(Thousands, except per share amounts)
Total Operating Revenues $1,162,365 $1,185,938 (2%)
Operating Income $354,069 $243,461 45%
Net Income $142,531 $105,524 35%
Average Shares Outstanding 119,763 130,746 (8%)
Earnings Per Share,
basic and diluted $1.19 $.81 47%
Dividends Paid Per Share $.42 $.38 11%
Earnings per share increased 26 cents for the first half of
1999, exclusive of the nonrecurring benefit from the sale of our
coal-fired generation assets and the writeoff of Nine Mile Point
2. That increase was primarily due to investment income, fewer
shares of common stock outstanding due to our share repurchase
program, higher retail electricity and natural gas deliveries,
which were caused by weather, and cost control efforts. Those
increases were partially offset by higher purchased power costs
and lower wholesale electricity deliveries due to the sale of our
generation assets and electricity price reductions provided to
customers.
<PAGE>
Operating Results by Business Segment
Energy Distribution Three Months Ended June 30,
1999 1998 Change
(Thousands)
Retail Deliveries
Megawatt-hours 3,255 3,130 4%
Dekatherms 9,953 9,305 7%
Operating Revenues $497,209 $540,412 (8%)
Operating Expenses $295,944 $450,210 (34%)
Operating Income $201,265 $90,202 124%
Operating revenues decreased $43 million for the quarter
primarily due to lower wholesale electricity deliveries due to
the sale of our generation assets. That decrease was partially
offset by higher retail electricity deliveries caused by warmer
weather this quarter.
Operating expenses decreased $50 million after excluding the
nonrecurring benefit from the sale of our coal-fired generation
assets and the writeoff of Nine Mile Point 2. Operating expenses
were reduced primarily by lower fuel costs and cost control
efforts, partially offset by higher purchased power costs.
Six Months Ended June 30,
1999 1998 Change
(Thousands)
Retail Deliveries
Megawatt-hours 6,879 6,520 6%
Dekatherms 34,840 30,584 14%
Operating Revenues $1,134,244 $1,167,644 (3%)
Operating Expenses $770,322 $920,301 (16%)
Operating Income $363,922 $247,343 47%
Operating revenues decreased $33 million for the six months
primarily due to lower wholesale electricity deliveries due to
the sale of our generation assets, and lower retail electricity
and natural gas prices, partially offset by higher retail
electricity and natural gas deliveries caused by weather.
Operating expenses decreased $46 million for the six months
after excluding the nonrecurring benefit from the sale of our
coal-fired generation assets and the writeoff of Nine Mile Point
2. Operating expenses were reduced primarily by lower fuel costs
and cost control efforts, partially offset by higher purchased
power costs.
<PAGE>
PART II - OTHER INFORM ATION
Item 1. Legal Proceedings
(a) By letter dated January 21, 1992, the New York State
Department of Environmental Conservation notified us that we had
been identified as a potentially responsible party at the Peter
Cooper Corporation's Landfill Site (Peter Cooper Site) in the
village of Gowanda, New York. The Peter Cooper Site is listed on
the National Priorities List and the New York State Registry.
Three other PRPs were identified in the NYSDEC letter. We
believe that remediation costs at the Peter Cooper Site might
rise to $16 million. By letter dated May 12, 1992, we notified
the NYSDEC that we believed we had no responsibility for the
alleged contamination at the Peter Cooper Site, and we declined
to conduct remediation or finance remediation costs.
On July 2, 1996, the U.S. Environmental Protection Agency
notified us of its concern regarding the stream bank erosion
along a portion of the Peter Cooper Site that is located on our
property. Without admitting to any liability or responsibility,
on October 24, 1996, we entered into an Order on Consent with the
EPA to stabilize the stream bank. This project was completed in
January 1997 at a cost of $120,000. By letter dated June 30,
1999, the EPA notified us and 18 other companies that we are PRPs
with respect to the Peter Cooper Site, and offered us the
opportunity to perform a remedial investigation and feasibility
study at the site. Although we are still evaluating the June 30
letter, we believe that the ultimate disposition of this matter
will not have a material adverse effect on our financial position
or results of operations.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - See Exhibit Index.
(b) Reports on Form 8-K
Three reports on Form 8-K, dated April 23, 1999, June 14,
1999, and June 29, 1999, were filed to report certain information
under Item 5, "Other Events."
Signature
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
ENERGY EAST CORPORATION
(Registrant)
By /s/ Wesley W. von Schack
Wesley W. von Schack
Chairman and Chief Financial Officer
Date: August 10, 1999
EXHIBIT INDEX
(a)(1) The following exhibits are delivered with this report:
Exhibit No.
(A)10-37 - Employment Agreement dated April 23, 1999, for W. W.
von Schack.
(A)10-38 - Employment Agreement dated April 23, 1999, for K. M.
Jasinski.
(A)10-39 - Amended and Restated Employment Agreement dated April
23, 1999, for M. I. German.
27 - Financial Data Schedule.
(a)(2) The following exhibits are incorporated herein by
reference:
Exhibit No. Filed in As Exhibit No.
2-2 - Agreement and Plan of Merger, dated as
of April 23, 1999, by and among Connecticut
Energy Corporation, the Company and Merger
Co., as amended by the First Amendment to
Agreement and Plan of Merger, dated as of
July 15, 1999 - Registration No. 333-83437 2.1
2-3 - Agreement and Plan of Merger, dated as
of June 14, 1999, by and among CMP Group,
Inc., the Company and EE Merger Corp. -
Company's Current Report on Form 8-K
dated June 14, 1999 - File No. 1-14766 2
2-4 - Agreement and Plan of Merger, dated as of
June 29, 1999, by and among CTG Resources,
Inc., the Company and Oak Merger Co. -
Company's Current Report on Form 8-K dated
June 29, 1999 - File No. 1-14766 2
____________________________
(A) Management contract or compensatory plan or arrangement.
EXHIBIT 10-37
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of April 23, 1999 (the
"Agreement"), by and between Energy East Corporation, a New York
corporation (the "Company"), and Wesley W. von Schack (the
"Executive").
The Board of Directors of the Company (the "Board") desires
to provide for the employment of the Executive as a member of the
management of the Company, in the best interest of the Company
and its shareholders. The Executive is willing to commit himself
to serve the Company, on the terms and conditions herein
provided.
In order to effect the foregoing, 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. The Company hereby agrees to employ the
Executive, and the Executive hereby agrees to serve 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 April
23, 1999 and end on April 22, 2002, unless further extended as
hereinafter provided. Commencing on April 23, 2000 and each
April 23 thereafter, the Term of this Agreement shall
automatically be extended for one (1) additional year unless, not
later than the January 22 immediately preceding each such April
23, the Company (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, 5.6, 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 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. In addition, the
Executive shall serve as Chairman of the NYSEG Board until
removed or not re-elected. The Executive shall devote
substantially all his working time and efforts to the business
and affairs of 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 Seven Hundred Thousand Dollars ($700,000.00) 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
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 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 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.
Notwithstanding any provision of NYSEG's Supplemental
Executive Retirement Plan (or any successor plan) that may be to
the contrary, if the Executive's service with the Company or
NYSEG from September 9, 1996 exceeds five full years, there shall
be paid to the Executive under NYSEG's Supplemental Executive
Retirement Plan (or any successor plan) an amount that shall be
determined by giving the Executive, for purposes of that plan,
service credit for three years of service for each of the
Executive's actual years of service. Notwithstanding the
foregoing sentence of this Section 5.2, and any provision of
NYSEG's Supplemental Executive Retirement Plan (or any successor
plan) that may be to the contrary, if the Executive Retires from
the Company subsequent to April 15, 2004, there shall instead be
paid to the Executive under NYSEG's Supplemental Executive
Retirement Plan (or any successor plan) an amount that shall be
determined by (i) giving the Executive, for purposes of that
plan, service credit for 40 years of service and (ii) deeming the
Executive's "highest three years of earnings within the last ten
years of employment" for purposes of that plan to be equal to the
Executive's Base Salary at the rate in effect at the time he
Retires.
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, 2000, 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(E) 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. The Company agrees to reimburse the Executive for any
expenses he incurs in moving himself and his family from
Pittsburgh, PA to any state in the Northeast.
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. The Company agrees to
make a payment to NYSEG in an amount not to exceed $327,780.00 in
connection with the transfer of the Life Insurance Policy from
NYSEG to the Company.
5.6 Bonuses. In recognition of the Executive's
performance and for services rendered or to be rendered to the
Company, the Company shall pay to the Executive a bonus of
$2,400,000.00 payable in the following amounts and at the
following times: $1,000,000.00 on April 30, 1999; $700,000.00 on
April 30, 2000, provided that the Executive is employed by the
Company on April 23, 2000; and $700,000.00 on April 30, 2001,
provided that the Executive is employed by the Company on April
23, 2001. If at any time prior to April 23, 2001, the
Executive's employment is terminated due to the Executive's death
or Disability, or by the Company without Cause or by the
Executive for Good Reason, the Company shall pay to the
Executive, within five (5) days of the Date of Termination, any
unpaid amounts due pursuant to this Section 5.6.
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 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 the Company during such period, until the
Executive's employment is terminated by the Company 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 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 the Company 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 and any unpaid amounts the Company agreed to
pay pursuant to Section 5.6 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, 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 the Company during such period. If the Executive's employment
is terminated in connection with the Executive's death, the
Company shall pay any unpaid amounts it agreed to pay pursuant to
Section 5.6 hereof. 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, 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, 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 the Company Without
Cause. If the Company 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, or as otherwise contemplated by Section 10
hereof, severance payments equal to, and on terms analogous to,
those that are due under Section 10 hereof upon a termination of
the Executive's employment that results in payments being due
under Section 10 hereof. If the Company gives notice to the
Executive pursuant to Section 3 hereof not to extend this
Agreement, it shall be deemed to be a termination of the
Executive's employment without Cause.
9.Post-Termination Continuation of Welfare Benefit Plan
Coverage. Except as otherwise provided in Section 10.1
hereof, if the termination of the Executive's employment is
described in Section 8 hereof, 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 any amount
referred to in the third paragraph of Section 5.2 hereof or
Section 10.1(E) 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 and any unpaid amounts the
Company agreed to pay pursuant to Section 5.6 hereof, unless such
termination is (i) by the Company 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
the Company 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 the Company 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,
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 NYSEG's 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.
(B) Notwithstanding any provision of NYSEG'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 second paragraph of Section 5.2 hereof shall
be inapplicable, and notwithstanding any provision of
NYSEG's Supplemental Executive Retirement Plan (or any
successor plan) that may be to the contrary, the Company
shall pay to the Executive under NYSEG's Supplemental
Executive Retirement Plan (or any successor plan) an amount
that shall be determined by (i) deeming the Executive (a) to
have 40 years of service credit, for purposes of that plan,
(b) to be at least 60 years of age and (c) to be a "Key
Person" as defined in, and for all purposes under, that
plan and (ii) deeming the Executive's "highest three years
of earnings within the last ten years of employment" for
purposes of that plan to be equal to the higher of the
Executive's Base Salary as determined pursuant to Section
10.1(A)(i) hereof; and such benefits shall be determined
without regard to any amendment to NYSEG'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 NYSEG'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
NYSEG'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 NYSEG's Supplemental Executive Retirement
Plan (or any successor plan) and shall satisfy any
obligations that the Company would otherwise have to the
Executive under NYSEG'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 NYSEG'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 NYSEG'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 the Company
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.
(E) The Company shall pay to The Guardian Life
Insurance Company of New York such lump-sum amount as is
necessary to result in the Life Insurance Policy being a
policy upon which no future premiums are due.
10.2 (A) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment or distribution by 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 the Company'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
the Company 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
the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by
the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant to 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 the Company 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
the Company of the nature of such claim and the date on which
such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the thirty (30) day period
following the date on which he gives such notice to the Company
(or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company
notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request
in writing from time to time, including, without
limitation, accepting legal representation with
respect to such claim by an attorney reasonably
selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any
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),
the Company 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 sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that
if the Company directs the Executive to pay such claim and sue
for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis,
from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such
advance or with respect to any imputed income with respect to
such advance; and 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, the Company's control of the
contest shall be limited to issues with respect to which a Gross-
Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing
authority.
(D) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 10.2(C)
hereof, the Executive becomes entitled to receive any refund with
respect to such claim, the Executive shall (subject to 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 the Company
does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of thirty (30) days
after such determination, then such advance shall be forgiven and
shall not be required to be repaid.
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 or to The Guardian Life Insurance Company as
applicable, on such day an estimate, as determined by the
Executive, of the minimum amount of such payments to which the
Executive or The Guardian Life Insurance Company, as applicable,
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 the Company 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 the Company,
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. The Company agrees 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 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 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 the Company and to which the Executive gains
access by reason of his position as an employee or director of
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 the Company 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 the
Company 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
the Company or NYSEG with respect to products which the Company
or NYSEG are then producing or services the Company or NYSEG 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 the Company or NYSEG 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 the Company 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 the Company, 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 the Company, to expressly assume and
agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if
no such succession had taken place. Failure of 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 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 the Company:
Energy East Corporation
Post Office Box 1196
Stamford, Connecticut 06904-1196
Attention: Corporate Secretary
To the Executive:
Wesley W. von Schack
404 Beaver Road
Sewickly, PA 15143
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.
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 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 References in this Agreement to employee benefit
plans, compensation plans, incentive plans, pension plans,
disability policies or similar plans, programs or arrangements of
the Company include such plans, programs or arrangements of NYSEG
if maintained for the benefit of employees of the Company.
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 New York, 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
the Company.
(D) "Cause" for termination by the Company 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 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 the
Company 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 the Company.
(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 the
Company (not including in the securities beneficially
owned by such Person any securities acquired directly
from the Company or its affiliates) representing 25% or
more of the combined voting power of the Company'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 the Company 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 the Company'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 the Company approve a
merger or consolidation of the Company with any other
corporation, other than (i) a merger or consolidation
which would result in the voting securities of the
Company 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
the Company or any of its subsidiaries, at least 75% of
the combined voting power of the voting securities of
the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (ii)
a merger or consolidation effected to implement a
recapitalization of the Company (or similar
transaction) in which no Person acquires more than 50%
of the combined voting power of the Company's then
outstanding securities; or
(IV) the shareholders of the Company approve a
plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of
all or substantially all the Company'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) the sixtieth day after the Executive becomes sixty years of
age.
(G) "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
(H) "Company" 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 the Company has occurred
in connection with such succession).
(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 the Company 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 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), the Company 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 (VIII) below to a
"Change-in-Control" as references to a "Potential Change-in-
Control), of any one of the following acts by the Company, or
failure by the Company to act:
(I) the assignment to the Executive of any
duties inconsistent with the Executive's status as an
executive officer of 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 the Company may no longer be a public
company);
(II) a reduction by 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 the Company's Stamford,
Connecticut executive offices to a location more than
fifty (50) miles from the location of such offices
immediately prior to the Change-in-Control or the
Company's requiring the Executive to be based anywhere
other than the Company's Stamford, Connecticut
executive offices except for required travel on the
Company's business to an extent substantially
consistent with the Executive's present business travel
obligations;
(IV) the failure by the Company, without the
Executive's consent, to pay to the Executive any
portion of the Executive's current compensation
(including compensation pursuant to Section 5.6
hereof), or to pay to the Executive any portion of an
installment of deferred compensation under any deferred
compensation program of the Company, within seven (7)
days of the date such compensation is due;
(V) the failure by 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 NYSEG'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 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 the Company to continue to
provide the Executive with benefits substantially
similar to those enjoyed by the Executive under any of
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 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 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 benefit 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;
(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; or
(VIII) the failure of the Board to validly
terminate a merger or consolidation described in
Section 20(E)(III) hereof within sixty (60) days after
shareholder approval of such merger or consolidation
that provides for the election or appointment of a
successor to the Executive as Chairman or Chief
Executive Officer of the Company.
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) "NYSEG" shall mean New York State Electric & Gas
Corporation.
(S) "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) the Company or any of its subsidiaries, (ii) a trustee or
other fiduciary holding securities under an employee benefit plan
of the Company 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 the Company in substantially the same
proportions as their ownership of stock of the Company.
(T) "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) the Company enters into an agreement, the
consummation of which would result in the occurrence of
a Change-in-Control;
(II) the Company 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 the Company (or publicly) a plan or
intention to become the Beneficial Owner, directly or
indirectly, or (z) makes a filing under the Hart-Scott-
Rodino Anti-Trust Improvements Act of 1976, as amended,
with respect to securities to become the Beneficial
Owner, directly or indirectly, of securities of the
Company representing 9.9% or more of the combined
voting power of the Company'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.
(U) "Retirement" shall be deemed the reason for the
termination by the Company or the Executive of the Executive's
employment if such employment is terminated in accordance with
the Company'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.
(V) "Retires" shall, for purposes of the second
paragraph of Section 5.2 hereof, refer to the termination of the
Executive's employment in accordance with the Company's
retirement policy, not including early retirement (except that,
on April 15, 2004, and thereafter, the Executive shall be deemed
to have satisfied any normal retirement age requirement of that
retirement policy), generally applicable from time to time to its
salaried employees, or in accordance with any retirement
arrangement established with the Executive's consent with respect
to the Executive.
(W) "Severance Payments" shall mean those payments
described in Section 10.1 hereof.
(X) "Term" shall have the meaning stated in Section 3
hereof.
(Y) "NYSEG Board" shall mean the Board of Directors of
NYSEG.
IN WITNESS WHEREOF, the parties have executed and
delivered this Agreement as of the date first above written.
ENERGY EAST CORPORATION
By: /S/ Kenneth M. Jasinski
Kenneth M. Jasinski
Executive Vice President and
General Counsel
/S/ Wesley W. Von Schack
WESLEY W. VON SCHACK
F:\ATTY\BLUM\EEC\EMPLOWVS.WP
EXHIBIT 10-38
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of April 23, 1999 (the
"Agreement"), by and between Energy East Corporation, a New York
corporation (the "Company"), and Kenneth M. Jasinski (the
"Executive").
The Board of Directors of the Company (the "Board") desires
to provide for the employment of the Executive as a member of the
management of the Company, in the best interest of the Company
and its shareholders. The Executive is willing to commit himself
to serve the Company, on the terms and conditions herein
provided.
In order to effect the foregoing, 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. The Company hereby agrees to employ the
Executive, and the Executive hereby agrees to serve 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 April
23, 1999, and end on April 22, 2002, unless further extended as
hereinafter provided. Commencing on April 23, 2000 and each
April 23, thereafter, the Term of this Agreement shall
automatically be extended for one (1) additional year unless, not
later than the January 22 immediately preceding each such April
23, the Company (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 paragraph 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
Executive Vice President and General Counsel 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. The Executive shall
devote substantially all his working time and efforts to the
business and affairs of 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 Four Hundred Twenty-Five Thousand Dollars ($425,000.00)
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
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 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 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.
Notwithstanding any provision of NYSEG's Supplemental
Executive Retirement Plan (or any successor plan) that may be to
the contrary, if the Executive's service with the Company or
NYSEG from April 29, 1998 exceeds five full years, there shall be
paid to the Executive under NYSEG's Supplemental Executive
Retirement Plan (or any successor plan) an amount that shall be
determined by giving the Executive, for purposes of that plan,
service credit for three years of service for each of the
Executive's actual years of service. Additionally, if the
Executive Retires from the Company subsequent to October 15,
2008, the amount to be paid to the Executive under NYSEG's
Supplemental Executive Retirement Plan (or any successor plan)
shall be determined by deeming the Executive's "highest three
years of earnings within the last ten years of employment" for
purposes of that plan to be equal to the Executive's Base Salary
at the rate in effect at the time he Retires.
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. The Company agrees to reimburse the Executive for any
expenses he incurs in moving himself and his family from Pelham,
New York to any state in the Northeast.
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.
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 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 the Company during such period, until the
Executive's employment is terminated by the Company 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 the Company or under
the Social Security disability insurance program, which amounts
were not previously applied to reduce any such Base Salary
payment. 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, 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 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, 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, 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 the Company Without Cause. If
the Company 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, or as
otherwise contemplated by Section 10 hereof, severance payments
equal to, and on terms analogous to, those that are due under
Section 10 hereof upon a termination of the Executive's
employment that results in payments being due under Section 10
hereof. If the Company gives notice to the Executive pursuant to
Section 3 hereof not to extend this Agreement, it shall be deemed
to be a termination of the Executive's employment without Cause.
9. Post-Termination Continuation of Welfare Benefit Plan
Coverage. Except as otherwise provided in Section 10.1
hereof, if the termination of the Executive's employment is
described in Section 8 hereof, 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.
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 the Company 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 the Company 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 the Company 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,
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 NYSEG's 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.
(B) Notwithstanding any provision of NYSEG'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 second paragraph of Section 5.2 hereof shall
be inapplicable, and notwithstanding any provision of
NYSEG's Supplemental Executive Retirement Plan (or any
successor plan) that may be to the contrary, the Company
shall pay to the Executive under NYSEG's Supplemental
Executive Retirement Plan (or any successor plan) an amount
that shall be determined by (i) deeming the Executive (a) to
have 40 years of service credit, for purposes of that plan,
(b) to be at least 60 years of age and (c) to be a "Key
Person" as defined in, and for all purposes under, that
plan and (ii) deeming the Executive's "highest three years
of earnings within the last ten years of employment" for
purposes of that plan to be equal to the higher of the
Executive's Base Salary as determined pursuant to Section
10.1(A)(i) hereof; and such benefits shall be determined
without regard to any amendment to NYSEG'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 NYSEG'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
NYSEG'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 NYSEG's Supplemental Executive Retirement
Plan (or any successor plan) and shall satisfy any
obligations that the Company would otherwise have to the
Executive under NYSEG'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 NYSEG'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 NYSEG'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, 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 the Company
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 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 the Company'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
the Company 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
the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by
the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant to 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 the Company 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
the Company of the nature of such claim and the date on which
such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the thirty (30) day period
following the date on which he gives such notice to the Company
(or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company
notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request
in writing from time to time, including, without
limitation, accepting legal representation with
respect to such claim by an attorney reasonably
selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any
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),
the Company 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 sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that
if the Company directs the Executive to pay such claim and sue
for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis,
from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such
advance or with respect to any imputed income with respect to
such advance; and 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, the Company's control of the
contest shall be limited to issues with respect to which a Gross-
Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing
authority.
(D) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 10.2(C)
hereof, the Executive becomes entitled to receive any refund with
respect to such claim, the Executive shall (subject to 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 the Company
does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of thirty (30) days
after such determination, then such advance shall be forgiven and
shall not be required to be repaid.
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 the Company 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 the Company,
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. The Company agrees 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 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 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 the Company and to which the Executive gains
access by reason of his position as an employee or director of
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 the Company 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 the
Company 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
the Company or NYSEG with respect to products which the Company
or NYSEG are then producing or services the Company or NYSEG 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 the Company or NYSEG 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 the Company 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 the Company, 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 the Company, to expressly assume and
agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if
no such succession had taken place. Failure of 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 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 the Company:
Energy East Corporation
Post Office Box 1196
Stamford, Connecticut 06904-1196
Attention: Corporate Secretary
To the Executive:
Kenneth M. Jasinski
145 Corlies Avenue
Pelham, NY 10803
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.
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 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 References in this Agreement to employee benefit
plans, compensation plans, incentive plans, pension plans,
disability policies or similar plans, programs or arrangements of
the Company include such plans, programs or arrangements of NYSEG
if maintained for the benefit of employees of the Company.
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 New York, 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
the Company.
(D) "Cause" for termination by the Company 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 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 the
Company 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 the Company.
(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 the
Company (not including in the securities beneficially
owned by such Person any securities acquired directly
from the Company or its affiliates) representing 25% or
more of the combined voting power of the Company'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 the Company 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 the Company'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 the Company approve a
merger or consolidation of the Company with any other
corporation, other than (i) a merger or consolidation
which would result in the voting securities of the
Company 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
the Company or any of its subsidiaries, at least 75% of
the combined voting power of the voting securities of
the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (ii)
a merger or consolidation effected to implement a
recapitalization of the Company (or similar
transaction) in which no Person acquires more than 50%
of the combined voting power of the Company's then
outstanding securities; or
(IV) the shareholders of the Company approve a
plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of
all or substantially all the Company'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) the sixtieth day after the Executive becomes sixty years of
age.
(G) "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
(H) "Company" 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 the Company has occurred
in connection with such succession).
(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 the Company 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 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), the Company 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 (VIII) below to a
"Change-in-Control" as references to a "Potential Change-in-
Control), of any one of the following acts by the Company, or
failure by the Company to act:
(I) the assignment to the Executive of any
duties inconsistent with the Executive's status as an
executive officer of 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 the Company may no longer be a public
company);
(II) a reduction by 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 the Company's Stamford,
Connecticut executive offices to a location more than
fifty (50) miles from the location of such offices
immediately prior to the Change-in-Control or the
Company's requiring the Executive to be based anywhere
other than the Company's Stamford, Connecticut
executive offices except for required travel on the
Company's business to an extent substantially
consistent with the Executive's present business travel
obligations;
(IV) the failure by 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 the Company, within seven (7) days of the
date such compensation is due;
(V) the failure by 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 NYSEG'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 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 the Company to continue to
provide the Executive with benefits substantially
similar to those enjoyed by the Executive under any of
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 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 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 benefit it
agreed to provide pursuant to the second paragraph of
Section 5.2 hereof;
(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; or
(VIII) the failure of the Board to validly
terminate a merger or consolidation described in
Section 20(E)(III) hereof within sixty days after
shareholder approval of such merger or consolidation
that provides for the election or appointment of a
successor to Wesley W. von Schack as Chairman or Chief
Executive Officer of the Company.
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) "Notice of Termination" shall have the meaning
stated in Section 11.1 hereof.
(Q) "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) the Company or any of its subsidiaries, (ii) a trustee or
other fiduciary holding securities under an employee benefit plan
of the Company 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 the Company in substantially the same
proportions as their ownership of stock of the Company.
(R) "NYSEG" shall mean New York State Electric & Gas
Corporation.
(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) the Company enters into an agreement, the
consummation of which would result in the occurrence of
a Change-in-Control;
(II) the Company 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 the Company (or publicly) a plan or
intention to become the Beneficial Owner, directly or
indirectly, or (z) makes a filing under the Hart-Scott-
Rodino Anti-Trust Improvements Act of 1976, as amended,
with respect to securities to become the Beneficial
Owner, directly or indirectly, of securities of the
Company representing 9.9% or more of the combined
voting power of the Company'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 the Company or the Executive of the Executive's
employment if such employment is terminated in accordance with
the Company'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) "Retires" shall, for purposes of the second
paragraph of Section 5.2 hereof, refer to the termination of the
Executive's employment in accordance with the Company's
retirement policy, not including early retirement (except that,
on October 15, 2008, and thereafter, the Executive shall be
deemed to have satisfied any normal retirement age requirement of
that retirement policy), generally applicable from time to time
to its salaried employees, or in accordance with any retirement
arrangement established with the Executive's consent with respect
to the Executive.
(V) "Severance Payments" shall mean those payments
described in Section 10.1 hereof.
(W) "Term" shall have the meaning stated in Section 3
hereof.
IN WITNESS WHEREOF, the parties have executed and
delivered this Agreement as of the date first above written.
ENERGY EAST CORPORATION
By /S/ Wesley W. von Schack
Wesley W. von Schack
Chairman, President, and Chief
Executive Officer
/S/ Kenneth M. Jasinsky
KENNETH M. JASINSKI
F:\ATTY\BLUM\EEC\EMPLOKMJ.WP
EXHIBIT 10-39
EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated as
of April 23, 1999 (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 Michael I. German (the "Executive"), amends and
restates that certain Employment Agreement dated March 1, 1998,
between the Company and the Executive, as previously amended and
restated.
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
March 1, 1998 and end on February 28, 2001, unless further
extended as hereinafter provided. Commencing on March 1, 1999
and each March 1 thereafter, the Term of this Agreement shall
automatically be extended for one (1) additional year unless, not
later than the November 30 immediately preceding each such March
1, 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 paragraph 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 Senior Vice President of Energy East and as President
and Chief Operating 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 Four Hundred Twenty-Five Thousand Dollars
($425,000.00) 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.
Notwithstanding any provision of the Company's
Supplemental Executive Retirement Plan (or any successor plan)
that may be to the contrary, if the Executive's service with
Energy East or the Company from December 5, 1994 exceeds five
full years, there shall be paid to the Executive under the
Company's Supplemental Executive Retirement Plan (or any
successor plan) an amount that shall be determined by giving the
Executive, for purposes of that plan, service credit for three
years of service for each of the Executive's actual years of
service. Additionally, if the Executive Retires from the Company
or Energy East subsequent to July 13, 2010, the amount to be paid
to the Executive under the Company's Supplemental Executive
Retirement Plan (or any successor plan) shall be determined by
deeming the Executive's "highest three years of earnings within
the last ten years of employment" for purposes of that plan to be
equal to the Executive's Base Salary at the rate in effect at the
time he Retires.
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. The Company agrees to reimburse the
Executive for any expenses he incurs in moving himself and his
family from Binghamton, New York to any state in the Northeast.
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.
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. 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, or as otherwise contemplated by Section
10 hereof, severance payments equal to, and on terms analogous
to, those that are due under Section 10 hereof upon a termination
of the Executive's employment that results in payments being due
under Section 10 hereof. If Energy East gives notice to the
Executive pursuant to Section 3 hereof not to extend this
Agreement, it shall be deemed to be a termination of the
Executive's employment without Cause.
9.Post-Termination Continuation of Welfare Benefit
Plan Coverage. Except as otherwise provided in
Section 10.1 hereof, 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.
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,
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.
(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 second paragraph of Section 5.2 hereof
shall be inapplicable, and notwithstanding any provision of
the Company's Supplemental Executive Retirement Plan (or any
successor Plan) that may be to the contrary, the Company
shall pay to the Executive under the Company's Supplemental
Executive Retirement Plan (or any successor plan) an amount
that shall be determined by (i) deeming the Executive (a) to
have 40 years of service credit, for purposes of that plan,
(b) to be at least 60 years of age and (c) to be a "Key
Person" as defined in, and for all purposes under, that plan
and (ii) deeming the Executive's "highest three years of
earnings within the last ten years of employment" for
purposes of that plan to be equal to the higher of the
Executive's Base Salary as determined pursuant to Section
10.1(A)(i) hereof; and 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, 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 sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate
courts, as Energy East shall determine; provided, however, that
if Energy East directs the Executive to pay such claim and sue
for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis,
from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such
advance or with respect to any imputed income with respect to
such advance; and 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 or the Company with respect to products which Energy
East or the Company are then producing or services Energy East or
the Company 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 or the Company
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
Post Office Box 1196
Stamford, Connecticut 06904-1196
Attention: Corporate Secretary
To the Company:
New York State Electric & Gas Corporation
Post Office Box 3607
Binghamton, NY 13902-3607
Attention: Corporate Secretary
To the Executive:
Michael I. German
8 Meadowood Lane
Binghamton, NY 13901
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 New York, 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) the sixtieth day after the Executive becomes
sixty years of age.
(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
(VIII) 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:
(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
Stamford, Connecticut 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 Stamford,
Connecticut executive offices or the Company'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 benefit
it agreed to provide pursuant to the second paragraph
of Section 5.2 hereof;
(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; or
(VIII) the failure of the Board to validly
terminate a merger or consolidation described in
Section 20(E)(III) hereof within sixty days after
shareholder approval of such merger or consolidation
that provides for the election or appointment of a
successor to Wesley W. von Schack as Chairman or Chief
Executive Officer of Energy East.
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) "Notice of Termination" shall have the
meaning stated in Section 11.1 hereof.
(Q) "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.
(R) "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
Hart-Scott-Rodino 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.
(S) "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.
(T) "Retires" shall, for purposes of the
second paragraph of Section 5.2 hereof, refer to the termination
of the Executive's employment in accordance with the Company's
retirement policy, not including early retirement (except that,
on July 13, 2010, and thereafter, the Executive shall be deemed
to have satisfied any normal retirement age requirement of that
retirement policy), generally applicable from time to time to its
salaried employees, 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: /S/ Wesley W. von Schack
Wesley W. von Schack
Chairman, President and
Chief Executive Officer
NEW YORK STATE ELECTRIC &
GAS CORPORATION
By: /S/ Daniel W. Farley
Name:
Title:
/S/ Michael I. German
MICHAEL I. GERMAN
F:\ATTY\BLUM\EEC\EMPLOMIG.WP
<TABLE> <S> <C>
<ARTICLE> UT EXHIBIT 27
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S FINANCIAL STATEMENTS INCLUDED IN ITS FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,155,804
<OTHER-PROPERTY-AND-INVEST> 99,328
<TOTAL-CURRENT-ASSETS> 1,599,666
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 274,362
<TOTAL-ASSETS> 4,129,160
<COMMON> 1,174
<CAPITAL-SURPLUS-PAID-IN> 819,960
<RETAINED-EARNINGS> 754,088
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,536,225
25,000
10,131
<LONG-TERM-DEBT-NET> 1,386,621
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 2,018
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,169,165
<TOT-CAPITALIZATION-AND-LIAB> 4,129,160
<GROSS-OPERATING-REVENUE> 1,162,365
<INCOME-TAX-EXPENSE> 159,276
<OTHER-OPERATING-EXPENSES> 153,019
<TOTAL-OPERATING-EXPENSES> 808,296
<OPERATING-INCOME-LOSS> 354,069
<OTHER-INCOME-NET> 14,360
<INCOME-BEFORE-INTEREST-EXPEN> 0
<TOTAL-INTEREST-EXPENSE> 64,901
<NET-INCOME> 142,531
1,721
<EARNINGS-AVAILABLE-FOR-COMM> 0
<COMMON-STOCK-DIVIDENDS> 51,005
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 4,647
<EPS-BASIC> 1.19
<EPS-DILUTED> 1.19
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