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
September 30, 1996
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. . . . . . . . .
1-3103-2
Commission file number. . . . . . . . . . . .. . . . . . . . . .
New York State Electric & Gas Corporation
. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .
(Exact name of registrant as specified in its charter)
New York 15-0398550
. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 3287, Ithaca, New York 14852-3287
. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .
(Address of principal executive offices) (Zip Code)
607 347-4131
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 $6.66 2/3
per share) outstanding as of October 31, 1996 was 70,093,827.
<PAGE>
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 . . . . . 6
(b) Results of Operations . . . . . . . . . . 13
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. . . . . . . . . . . . . . . . . 18
(b) Reports on Form 8-K . . . . . . . . . . . 18
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . 20
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
New York State Electric & Gas Corporation
Consolidated Statements of Income - (Unaudited)
(Thousands, except per share amounts)
Periods Ended September 30 Three Months Nine Months
1996 1995 1996 1995
Operating Revenues
Electric . . . . . . . . . . . . . . $421,709 $439,357 $1,291,149 $1,277,917
Natural gas. . . . . . . . . . . . . 34,859 25,337 237,116 198,603
------- ------- --------- ---------
Total Operating Revenues. . . . 456,568 464,694 1,528,265 1,476,520
------- ------- --------- ---------
Operating Expenses
Fuel used in electric generation . . 55,869 62,993 162,149 177,929
Electricity purchased. . . . . . . . 90,268 78,880 270,956 235,871
Natural gas purchased. . . . . . . . 22,982 11,330 121,090 105,103
Other operating expenses . . . . . . 91,749 78,638 252,283 235,747
Maintenance. . . . . . . . . . . . . 25,292 29,018 78,819 82,416
Depreciation and amortization. . . . 47,465 46,305 141,608 138,341
Federal income taxes . . . . . . . . 19,639 30,038 101,568 96,747
Other taxes. . . . . . . . . . . . . 48,658 50,892 155,798 156,117
------- ------- --------- ---------
Total Operating Expenses. . . . 401,922 388,094 1,284,271 1,228,271
------- ------- --------- ---------
Operating Income. . . . . . . . . . . 54,646 76,600 243,994 248,249
Other Income and Deductions . . . . . (13,893) (1,658) (21,369) (6,842)
------- ------- --------- ---------
Income Before Interest Charges. . . . 40,753 74,942 222,625 241,407
------- ------- --------- ---------
Interest Charges
Interest on long-term debt . . . . . 26,944 28,581 81,417 87,094
Other interest . . . . . . . . . . . 3,398 3,374 12,068 11,578
Allowance for borrowed funds
used during construction . . . . . (641) (516) (1,470) (982)
------- ------- --------- ---------
Interest Charges, Net . . . . . 29,701 31,439 92,015 97,690
------- ------- --------- ---------
Net Income. . . . . . . . . . . . . . 11,052 43,503 130,610 143,717
Preferred Stock Dividends . . . . . . 2,436 4,625 7,155 14,100
------- ------- --------- ---------
Earnings Available for Common Stock . $8,616 $38,878 $123,455 $129,617
======= ======= ========= =========
Earnings Per Share. . . . . . . . . . $.12 $.54 $1.73 $1.81
Dividends Per Share . . . . . . . . . $.35 $.35 $1.05 $1.05
Average Shares Outstanding. . . . . . 71,416 71,503 71,474 71,503
The notes on page 6 are an integral part of the financial statements.<PAGE>
Item 1. Financial Statements (Cont'd)
New York State Electric & Gas Corporation
Consolidated Balance Sheets - (Unaudited)
(Thousands)
Sep. 30, Dec. 31,
1996 1995
Assets
Utility Plant, at Original Cost
Electric . . . . . . . . . . . . . . . . . . . . . . .$5,149,558 $5,090,044
Natural gas. . . . . . . . . . . . . . . . . . . . . . 460,613 445,256
Common . . . . . . . . . . . . . . . . . . . . . . . . 150,477 140,686
---------- ----------
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,760,648 5,675,986
Less accumulated depreciation . . . . . . . . . . . . . 1,895,677 1,791,625
---------- ----------
Net Utility Plant in Service . . . . . . . . . . . . 3,864,971 3,884,361
Construction work in progress . . . . . . . . . . . . . 96,713 79,229
---------- ----------
Total Utility Plant. . . . . . . . . . . . . . . . . 3,961,684 3,963,590
Other Property and Investments, Net . . . . . . . . . . 107,953 99,633
Current Assets
Cash and cash equivalents. . . . . . . . . . . . . . . 11,977 11,433
Special deposits . . . . . . . . . . . . . . . . . . . 5,608 5,785
Accounts receivable, net . . . . . . . . . . . . . . . 136,938 195,834
Fuel, at average cost. . . . . . . . . . . . . . . . . 43,236 33,682
Materials and supplies, at average cost. . . . . . . . 45,032 44,809
Prepayments. . . . . . . . . . . . . . . . . . . . . . 26,754 31,371
Accumulated deferred federal income
tax benefits, net . . . . . . . . . . . . . . . . . 32,534 7,594
---------- ----------
Total Current Assets. . . . . . . . . . . . . . . . 302,079 330,508
Regulatory and Other Assets
Regulatory assets
Unfunded future federal income taxes. . . . . . . . 320,597 323,446
Unamortized debt expense. . . . . . . . . . . . . . 82,122 85,023
Demand-side management program costs. . . . . . . . 72,349 74,824
Other regulatory assets . . . . . . . . . . . . . . 185,474 206,736
---------- ----------
Total regulatory assets. . . . . . . . . . . . . . . . 660,542 690,029
Other assets . . . . . . . . . . . . . . . . . . . . . 16,234 30,571
---------- ----------
Total Regulatory and Other Assets . . . . . . . . . 676,776 720,600
---------- ----------
Total Assets. . . . . . . . . . . . . . . . . . . .$5,048,492 $5,114,331
========== ==========
The notes on page 6 are an integral part of the financial statements.
<PAGE>
Item 1. Financial Statements (Cont'd)
New York State Electric & Gas Corporation
Consolidated Balance Sheets - (Unaudited)
(Thousands)
Sep. 30, Dec. 31,
1996 1995
Capitalization and Liabilities
Capitalization
Common stock equity
Common stock . . . . . . . . . . . . . . . . . . $471,359 $476,686
Capital in excess of par value. . . . . . . . . . 831,852 842,442
Retained earnings . . . . . . . . . . . . . . . . 468,406 424,412
---------- ----------
Total common stock equity. . . . . . . . . . . . . . . 1,771,617 1,743,540
Preferred stock redeemable solely at the
option of the company . . . . . . . . . . . . . . . 134,440 140,500
Preferred stock subject to mandatory
redemption requirements . . . . . . . . . . . . . . 25,000 25,000
Long-term debt . . . . . . . . . . . . . . . . . . . . 1,508,006 1,581,448
---------- ----------
Total Capitalization. . . . . . . . . . . . . . . . 3,439,063 3,490,488
Current Liabilities
Current portion of long-term debt. . . . . . . . . . . 57,553 37,003
Current portion of preferred stock . . . . . . . . . . - 100,000
Commercial paper . . . . . . . . . . . . . . . . . . . 60,500 28,620
Accounts payable and accrued liabilities . . . . . . . 99,456 117,637
Interest accrued . . . . . . . . . . . . . . . . . . . 36,216 24,093
Taxes accrued. . . . . . . . . . . . . . . . . . . . . 36,037 22,231
Other. . . . . . . . . . . . . . . . . . . . . . . . . 68,607 68,027
---------- ----------
Total Current Liabilities . . . . . . . . . . . . . 358,369 397,611
Regulatory and Other Liabilities
Regulatory liabilities
Deferred income taxes - unfunded future federal
income taxes. . . . . . . . . . . . . . . . . . . . 127,044 128,643
Deferred income taxes . . . . . . . . . . . . . . . . 97,501 108,605
Other regulatory liabilities. . . . . . . . . . . . . 61,430 56,729
---------- ----------
Total regulatory liabilities. . . . . . . . . . . . 285,975 293,977
Other liabilities
Accumulated deferred investment tax credit. . . . . . 121,242 126,032
Deferred income taxes - other . . . . . . . . . . . . 646,334 617,452
Other postretirement benefits . . . . . . . . . . . . 89,204 75,683
Liability for environmental restoration . . . . . . . 31,800 31,800
Other . . . . . . . . . . . . . . . . . . . . . . . . 76,505 81,288
---------- ----------
Total other liabilities . . . . . . . . . . . . . . 965,085 932,255
Total Regulatory and Other Liabilities. . . . . . . 1,251,060 1,226,232
Commitments and Contingencies . . . . . . . . . . . . . - -
---------- ----------
Total Capitalization and Liabilities. . . . . . . .$5,048,492 $5,114,331
========== ==========
The notes on page 6 are an integral part of the financial statements.
Item 1. Financial Statements (Cont'd)
New York State Electric & Gas Corporation
Consolidated Statements of Cash Flows - (Unaudited)
(Thousands)
Periods Ended September 30 Nine Months
1996 1995
Operating Activities
Net income . . . . . . . . . . . . . . . . . . . . $130,610 $143,717
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization. . . . . . . . . . 141,608 138,341
Deferred fuel and purchased gas. . . . . . . . . 504 13,051
Federal income taxes and investment tax credits
deferred, net . . . . . . . . . . . . . . . . (12,601) 21,877
Changes in current operating assets and liabilities
Accounts receivable. . . . . . . . . . . . . . . 58,896 49,047
Inventory. . . . . . . . . . . . . . . . . . . . (9,777) 13,441
Accounts payable and accrued liabilities . . . . (18,181) (9,903)
Taxes accrued. . . . . . . . . . . . . . . . . . 13,806 24,731
Interest accrued . . . . . . . . . . . . . . . . 12,123 12,893
Other, net . . . . . . . . . . . . . . . . . . . . 73,698 (4,230)
-------- --------
Net Cash Provided by Operating Activities . . . 390,686 402,965
-------- --------
Investing Activities
Utility plant capital expenditures . . . . . . . . (148,085) (120,727)
Proceeds from governmental and other sources . . . 2,269 4,793
Expenditures for other property and investments. . (1,090) (3,454)
Funds restricted for capital expenditures. . . . . - 1,324
-------- --------
Net Cash Used in Investing Activities . . . . . (146,906) (118,064)
-------- --------
Financing Activities
Issuance of pollution control notes. . . . . . . . - 37,000
Repurchase of common stock . . . . . . . . . . . . (17,644) -
Repayments of preferred stock and first
mortgage bonds, including net premiums. . . . . (171,478) (92,395)
Long-term notes, net . . . . . . . . . . . . . . . (1,576) (4,006)
Commercial paper, net. . . . . . . . . . . . . . . 31,880 (151,900)
Dividends on common and preferred stock. . . . . . (84,418) (89,289)
-------- --------
Net Cash Used in Financing Activities . . . . . (243,236) (300,590)
-------- --------
Net Increase (Decrease) in Cash and
Cash Equivalents . . . . . . . . . . . . . . . . 544 (15,689)
Cash and Cash Equivalents, Beginning of Period. . . 11,433 22,322
-------- --------
Cash and Cash Equivalents, End of Period. . . . . . $11,977 $6,633
======== ========
Supplemental Disclosure of Cash Flows Information
Cash paid during the period
Interest, net of amounts capitalized. . . . . . . $70,786 $75,673
Income taxes. . . . . . . . . . . . . . . . . . . $72,680 $36,843
The notes on page 6 are an integral part of the financial statements.
<PAGE>
Item 1. Financial Statements (Cont'd)
New York State Electric & Gas Corporation
Consolidated Statements of Retained Earnings - (Unaudited)
(Thousands)
Periods ended September 30 Nine Months
1996 1995
Balance, beginning of period. . . . . . . . . . $424,412 $346,547
Add net income. . . . . . . . . . . . . . . . . 130,610 143,717
-------- --------
555,022 490,264
Deduct dividends on capital stock:
Preferred. . . . . . . . . . . . . . . . . . . 7,155 14,100
Common . . . . . . . . . . . . . . . . . . . . 75,078 75,078
-------- --------
82,233 89,178
Deduct premium paid on preferred stock
redemption, net . . . . . . . . . . . . . . . . 4,383 -
-------- --------
Balance, end of period. . . . . . . . . . . . . $468,406 $401,086
======== ========
The notes on page 6 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, in the opinion of management,
necessary for a fair presentation of New York State Electric &
Gas Corporation's (company) consolidated results for the interim
periods. All such adjustments 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 the company's annual report for the year ended
December 31, 1995. Due to the seasonal nature of the company's
operations, financial results for interim periods are not neces-
sarily indicative of trends for a twelve-month period.
Note 2. Reclassification
Certain items have been reclassified on the consolidated
financial statements to conform to the 1996 presentation.
Item 2. Management's discussion and analysis of financial
condition and results of operations
(a) Liquidity and Capital Resources
Competitive conditions (See Form 10-K for fiscal year ended
December 31, 1995, Item 1(c)(x) - Competitive conditions)
Regulatory Changes (See Form 10-Q for the quarter ended June 30,
1996, Item 2(a) - Liquidity and Capital Resources, Competitive
conditions - Regulatory Changes)
Regulatory issues being addressed by the Public Service
Commission of the State of New York (PSC), regulators in other
states and the Federal Energy Regulatory Commission (FERC) will
ultimately bring about dramatic changes in the electric industry.
Mega-NOPR: On April 24, 1996, FERC issued Orders 888 and
889 adopting final rules to facilitate the development of
competitive wholesale electric markets by opening up transmission
services and to address the resulting stranded costs.
The FERC directed all public utilities to file a compliance
open access transmission tariff on or before July 9, 1996. Order
888 allows utilities to submit further modifications to their
respective tariff, and customers to request modifications to the
tariff.
<PAGE>
The company filed its compliance open access transmission
tariff and a modified open access transmission tariff on July 9
and July 10, 1996, respectively. The company is required to
operate under the July 9 compliance tariff until the July 10
modified tariff becomes effective.
The company's modified open access tariff has been accepted
for filing and suspended for five months, to become effective on
February 9, 1997, subject to refund and subject to any further
orders.
Under the compliance open access tariff, the company must
offer transmission service to its wholesale customers on a basis
that is comparable to that which it provides itself. The company
is also required to offer and/or provide certain ancillary
services.
Competitive Opportunities Proceeding: In August 1994 the
PSC instituted an investigation of issues related to a
restructuring of the electric industry in New York (Competitive
Opportunities Proceeding). The overall objective of the
Competitive Opportunities Proceeding is to identify regulatory
and ratemaking practices that will assist in the transition to a
more competitive electric industry.
On May 20, 1996, the PSC issued its Order which sets forth
the PSC's vision and goals for the future of the electric
industry in New York. The Order calls for implementation of a
competitive wholesale power market in early 1997 and the
introduction of retail access for all electric customers in early
1998. In addition, the Order calls for lowering rates of
consumers, increasing customer choice, continuing reliability of
service, continuing programs that are in the public interest,
allaying concerns about market power and continuing customer
protections and the obligation to serve. In the Order, the PSC
strongly encourages divestiture, particularly of generation
assets, but does not require it. The Order states that
incentives for divestiture will be worked out individually for
each utility in conjunction with its rate and restructuring plan
submission in this proceeding which was due October 1, 1996. The
Order also states that utilities should have a reasonable
opportunity to seek recovery of strandable costs consistent with
the goals of lowering rates, fostering economic development,
increasing customer choices and maintaining reliable service.
Certain aspects of the restructuring envisioned by the PSC --
particularly the PSC's apparent determinations that it can deny a
reasonable opportunity to recover prudent past investments made
on behalf of the public, order retail wheeling, require
divestiture of generation assets and deregulate certain sectors
of the energy market -- could, if implemented, have a negative
effect on the operations of New York's investor-owned electric
utilities, including the company.
On September 18, 1996, the company joined with six other New
York utilities and the Energy Association of New York State in
filing a lawsuit in the New York State Supreme Court in Albany
(Court) to annul the PSC's Order. The lawsuit contends, among
other things, that the PSC (i) failed to follow proper procedures
for reaching a decision in the Competitive Opportunities
Proceeding and (ii) lacks the statutory or legal authority to (a)
disallow a reasonable opportunity for utilities to recover past
expenditures prudently incurred to fulfill their legal obligation
to provide electricity service to the public, (b) mandate retail
wheeling, (c) deregulate the rates charged by electricity
generators or the energy services sector and (d) order
divestiture of the utilities' assets. The lawsuit seeks a
declaration that the PSC's Order is unlawful, or in the
alternative, that the Court clarify that the PSC's Order can be
given no binding effect by the PSC.
On September 27, 1996, the company submitted a five-year
rate and restructuring plan (NYSEGPlan) in the Competitive
Opportunities Proceeding for the company's transition to
competition. NYSEGPlan presents a five-year transition plan to
functionally separate generation from the delivery components of
the regulated electric business and to recover past prudent
investments.
NYSEGPlan calls for wholesale competition to begin August 1,
1997 with retail competition being phased in beginning August
1998. In addition, the average retail price of electricity would
be frozen for five years, beginning August 1, 1997, and would
allow most customers to increase their electricity use at about
half the present price. NYSEGPlan would equate to a seven-year
freeze for industrial and high load factor customers if the PSC
ultimately approves the rate design recommendation for years two
and three of the three-year electric rate settlement agreement
agreed to by the PSC in August 1995. (See below - Operational
and Financial Flexibility, Rate Matters.)
NYSEGPlan is contingent upon (i) the receipt of electric
price increases of 2.8% this year and 2.7% on August 1, 1997, as
approved by the PSC in August 1995 in the current electric rate
settlement agreement, (ii) the reasonable opportunity to fully
recover prudently incurred investments, (iii) the outcome of the
Energy Association lawsuit discussed above, (iv) FERC approval
and implementation of a statewide Independent System Operator and
Power Exchange, (v) unrestricted investment and earnings
potential by unregulated affiliates and (vi) final corporate and
regulatory approvals.
<PAGE>
On October 9, 1996, the PSC issued a procedural order
(October Order) establishing a 90-day period ending January 7,
1997, for completion of discovery and settlement negotiations
regarding the utilities' submissions. If a settlement is
achieved within the 90-day period, all briefs in support or
opposition to the settlement as well as any additional matters
must be completed and the record closed no later than March 8,
1997. In the absence of a settlement at the conclusion of the
90-day period, the presiding administrative law judge will set
the remaining procedural schedule. Any hearings as well as the
submission of briefs and the closing of the record must be
completed no later than March 8, 1997.
Given the uncertainties regarding the Competitive
Opportunities Proceeding and the Energy Association's lawsuit to
annul the PSC's Order in the Competitive Opportunities
Proceeding, the company is unable to predict the outcome of this
proceeding and the ultimate effect on the company's financial
position or results of operations.
Operational and Financial Flexibility
Rate Matters (See Form 10-K for fiscal year ended December 31,
1995, Item 1(a) - Rates and regulatory matters, Electric Rate
Settlement)
On August 1, 1995, the PSC approved a new three-year
electric rate settlement agreement (electric agreement) for the
period August 1, 1995 through July 31, 1998. The electric
agreement provides for additional revenue of $45.3 million and
$45.5 million in years two and three, respectively, with the rate
design for years two and three to be determined at a later date.
In May 1996 a PSC Administrative Law Judge issued a
Recommended Decision (RD) on the rate design for years two and
three of the electric agreement. Year two calls for a price
freeze for about 1,600 industrial and high load factor commercial
and public authority customers; an average increase of 2.8% for
most other nonresidential customers; and an average increase of
3.7% for residential customers, mostly collected through an
increase in the basic monthly service charge.
On July 19, 1996, the company filed tariff leaves reflecting
rates for year two of the electric agreement with the PSC. The
rates reflected a design based on the RD and had an effective
date of September 1, 1996.
On August 26, 1996, the PSC issued an Order which deferred
the use of the year two rates contained in the tariff leaves
through December 30, 1996, unless otherwise ordered by the PSC.
On September 9, 1996, the company filed a petition for
rehearing with the PSC requesting that the PSC vacate its August
26 Order and place in effect a tariff containing a revenue
allocation and rate design that will result in an increase in
revenues of $45.3 million over year two of the electric
agreement.
The company is unable to predict the outcome of this matter
and its ultimate effect on the company's financial position or
results of operations.
Natural Gas Industry
The PSC issued an Opinion and Order in December 1994
(December Order) that set forth the policy framework to guide the
transition and movement of New York's gas distribution industry
to a more competitive marketplace in the post-FERC Order 636
environment. The PSC subsequently issued an Order on
Reconsideration in August 1995 addressing petitions for rehearing
or clarification of the December Order. In November 1995 the
company and other utilities filed restructuring tariffs in
compliance with the PSC's Order on Reconsideration. Under the
company's tariffs, approved by PSC Order on March 28, 1996 (March
Order) with certain modifications, residential and small
businesses may buy natural gas from other sources with the
company providing delivery service for a separate fee. The March
Order approving the company's tariffs is not expected to have a
material effect on the company's natural gas operations. In
addition, consistent with the March Order, the company is
implementing new services to compete more effectively for sales
to larger, more sophisticated transportation customers.
On April 29, 1996, the company and other utilities filed a
petition for rehearing of certain of the determinations made in
the March Order, including the PSC's decisions to not address the
stranded cost issue beyond three years and to provide new
customers the same access to pipeline capacity as existing
customers.
On September 13, 1996, the PSC issued its Order on Rehearing
denying the utilities' requests. The company is evaluating its
options regarding this Order on Rehearing. The company does not
expect this Order on Rehearing to have a material effect on the
its natural gas operations prior to the year 2000. Due to
uncertainties in the natural gas industry, the company is unable
to predict the effect of this Order on Rehearing on its natural
gas operations after the year 2000, however, the company does not
expect it to have a material effect.
<PAGE>
Diversification (See Form 10-Q for the quarter ended June 30,
1996, Item 2(a) - Diversification)
NGE Enterprises, Inc. (NGE), a wholly-owned subsidiary of
the company, owns four unregulated businesses - EnerSoft
Corporation (EnerSoft), XENERGY, Inc. (XENERGY), NGE Funding
Corporation (NGE Funding) and NGE Environmental, Inc. (NGE
Environmental).
EnerSoft was formed in May 1993 to develop and market
computer software and real-time information and trading systems
for natural gas utilities, marketers and pipeline operators.
EnerSoft, in an alliance with the New York Mercantile Exchange,
has developed Channel 4, a natural gas and pipeline capacity
trading and information system for the North American market.
The Channel 4 system was made available for use in 1995, but
sales have been disappointing.
NGE has reviewed its investment in EnerSoft and determined
that EnerSoft no longer fits NGE's strategic focus. As a result
of this decision, the company took a $10 million charge against
1996 third quarter earnings for the writedown of NGE's investment
in EnerSoft. NGE is assessing various exit strategies for
EnerSoft and intends to exit the business by December 31, 1996.
XENERGY, acquired in June 1994, is an energy services,
information systems and energy-consulting company providing
energy services, conservation engineering and professional
services to utilities, governmental agencies and end-use energy
consumers. XENERGY's 1995 revenues were lower than expected due
to a soft utility demand-side management consulting market.
Revenues in 1996 are expected to be slightly higher than 1995.
As of October 31, 1996 and December 31, 1995, the company
had invested approximately $57 million and $54 million,
respectively, in NGE to finance its diversified investments. For
the nine months ended September 30, 1996 and for the year ended
December 31, 1995, NGE incurred net losses of $20 million, which
includes the $10 million writedown related to EnerSoft, and $12
million, respectively. The company expects that NGE will
continue to incur operating losses at least through 1997, but at
a lower level due to its plan to exit EnerSoft. The loss in
1996, excluding the writedown related to EnerSoft, is expected to
be comparable to 1995.
<PAGE>
Investing Activities
Capital expenditures for the first nine months of 1996
totaled $147 million, primarily for the Seneca Lake gas storage
project, extension of service, purchase of facilities, necessary
improvements at existing facilities and environmental compliance
requirements. The company estimates its capital expenditures in
1996 will total $206 million and will be financed entirely with
internally generated funds.
Financing Activities
In July 1996 the company purchased the following, at a
discount, through the issuance of commercial paper: $2.6 million
of its 4.15% preferred stock, $1.5 million of its 4.15% (1954)
preferred stock and $2.0 million of its 4.40% preferred stock.
In September 1996 the company initiated a common stock
repurchase program not to exceed four million shares. The
company plans to purchase shares from time to time as market and
other conditions warrant. As of September 30, 1996, the company
had repurchased 799,000 shares.
<PAGE>
(b) Results of Operations
Three months ended September 30, 1996 compared with three months
ended September 30, 1995:
1996 1995 % Change
(Thousands, except per share amounts)
Operating revenues $456,568 $464,694 (2%)
Operating income 54,646 76,600 (29%)
Earnings available for
common stock $8,616 $38,878 (78%)
Average shares outstanding 71,416 71,503 -
Earnings per share $.12 $.54 (78%)
Dividends per share $.35 $.35 -
Earnings per share for the three months ended September 30,
1996, decreased 42 cents compared to the prior year period.
In September 1996 the company recorded a 14 cents per share
charge to write down an investment in EnerSoft Corporation by NGE
Enterprises, Inc., the company's wholly-owned subsidiary as
discussed earlier.
Lower electric retail margins, primarily due to an increase
in purchases from NUGs, reduced earnings eight cents per share.
Lower natural gas margins reduced earnings three cents per share
due to the following combination of factors. Earnings were
reduced by 11 cents per share because natural gas pipeline
capacity costs are now recorded evenly throughout the year due to
the elimination of the gas adjustment clause. In 1995 pipeline
capacity costs were based on the volume of natural gas sold,
which is lower in summer months than in winter months. This
decrease was mitigated by higher natural gas revenues resulting
from an increase in natural gas deliveries, a change in rate
structure effective December 1995 and changes in prices effective
August 1995.
Normal weather this year, compared to the unusually hot
summer in 1995, resulted in a 3% decrease in electric retail
sales, reducing earnings by seven cents per share. Higher
operating costs lowered earnings by nine cents per share for the
three months.
<PAGE>
Nine months ended September 30, 1996 compared with nine months
ended September 30, 1995:
1996 1995 % Change
(Thousands, except per share amounts)
Operating revenues $1,528,265 $1,476,520 4%
Operating income 243,994 248,249 (2%)
Earnings available for
common stock $123,455 $129,617 (5%)
Average shares outstanding 71,474 71,503 -
Earnings per share $1.73 $1.81 (4%)
Dividends per share $1.05 $1.05 -
For the nine months ended September 30, 1996, earnings
decreased eight cents per share compared to the prior year
period.
A decrease in other income and deductions reduced earnings
by 19 cents per share, primarily due to the writedown of the
investment in EnerSoft Corporation, as discussed earlier. Higher
operating costs reduced earnings by 12 cents per share and an
increase in federal income taxes due to higher taxable income
further reduced earnings by seven cents per share.
Those decreases were partially offset by higher electric and
natural gas retail sales, which contributed 15 cents per share to
earnings. The higher sales were mainly due to a combination of
colder weather in the first quarter of 1996 compared to the mild
winter a year earlier and additional customers. Lower interest
charges in 1996 added eight cents per share to earnings and a
reduction in preferred stock dividends, primarily due to the
January 1996 redemption of $100 million of 8.95% preferred stock
net of related interest expense on commercial paper, added seven
cents per share to earnings.
<PAGE>
Operating Results by Business Segment
Electric Three Months ended September 30,
1996 1995 % Change
(Thousands)
Retail sales-kilowatt-
hours(kwh) 3,162,636 3,254,094 (3%)
Operating revenues $421,709 $439,357 (4%)
Operating expenses $359,615 $357,911 -
Electric retail sales decreased 3% for the quarter ended
September 30, 1996, primarily as a result of the unusually hot
summer weather of 1995 that increased retail sales for that
period.
The $18 million, or 4%, decrease in electric operating
revenues for the quarter was primarily due to lower sales, which
reduced revenues $10 million. The elimination of the fuel
adjustment clause, in accordance with the electric rate
settlement effective August 1995, net of an increase in base
prices, further reduced revenues $7 million.
The $2 million increase in electric operating expenses for
the three months is primarily attributable to an $11 million
increase in electricity purchased, mostly due to purchases from
NUGs and an increase in other operating expenses of $12 million.
Those increases were partially offset by a $9 million decrease in
federal income taxes due to lower pretax book income, a $7
million decrease in fuel used in electric generation and a $4
million decrease in maintenance expense.
<PAGE>
Nine Months ended September 30,
1996 1995 % Change
(Thousands)
Retail sales-kilowatt-
hours(kwh) 9,897,277 9,711,287 2%
Operating revenues $1,291,149 $1,277,917 1%
Operating expenses $1,074,004 $1,046,168 3%
Electric retail sales increased 2% for the nine months ended
September 30, 1996, primarily because of colder weather in the
first quarter of 1996 compared to the mild winter a year earlier
and additional customers.
The $13 million, or 1%, increase in electric operating
revenues for the nine months ended September 30, 1996, was
primarily from higher retail sales, which added $21 million to
revenues. Changes in prices effective August 1995, net of the
effect of eliminating the fuel adjustment clause, added another
$13 million to revenues. Those increases were partially offset
by a decrease in regulatory deferrals of $20 million.
Electric operating expenses rose $28 million, or 3%, for the
nine months ended September 30, 1996. Increases in electricity
purchased, mostly due to purchases from NUGs, increased operating
expenses by $35 million and increases in other operating costs
added another $12 million to expenses. Those increases were
partially offset by a $16 million decrease in fuel used in
electric generation primarily due to reduced generation.
<PAGE>
Natural Gas Three Months ended September 30,
1996 1995 % Change
(Thousands)
Deliveries-
dekatherms(dth) 7,136 6,738 6%
Operating revenues $34,859 $25,337 38%
Operating expenses $42,307 $30,183 40%
Natural gas deliveries increased 6% for the third quarter of
1996 compared to 1995 due to additional customers and increased
usage by several large customers.
For the three months ended September 30, 1996, natural gas
operating revenues rose $10 million, or 38%, compared to the 1995
period. The increase was primarily due to a change in rate
structure effective December 1995 and changes in prices effective
August 1995 that added $8 million to revenues. Sales of natural
gas to others added another $1 million to revenues.
The $12 million, or 40%, increase in natural gas operating
expenses for the quarter resulted from a $12 million increase in
natural gas purchased because natural gas pipeline capacity costs
are now recorded evenly throughout the year due to the
elimination of the gas adjustment clause discussed earlier.
Nine Months ended September 30,
1996 1995 % Change
(Thousands)
Deliveries-
dekatherms(dth) 43,411 39,463 10%
Operating revenues $237,116 $198,603 19%
Operating expenses $210,267 $182,103 15%
Natural gas deliveries increased 10% for the nine months
ended September 30, 1996, due to a combination of colder weather
and additional customers in the first quarter of 1996 compared to
the mild winter a year earlier.
Natural gas operating revenues increased $39 million, or
19%, for the nine months ended September 30, 1996. Higher retail
sales added $17 million and a change in rate structure effective
December 1995 and changes in prices effective August 1995 added
$17 million. Also, an increase in transportation of customer-
owned gas added $3 million to revenues for the period.
Comparing the two nine month periods, natural gas operating
expenses rose $28 million, or 15%. An increase in natural gas
purchased, due to higher commodity costs and higher deliveries,
added $16 million; higher federal income taxes, because of higher
pretax book income, added $5 million and an increase in certain
operating costs added $5 million to expenses.
PART II - OTHER INFORM ATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - See Exhibit Index.
(b) Reports on Form 8-K
A report on Form 8-K dated August 26, 1996, was filed to
report certain information under Item 5, "Other Events."
A report on Form 8-K dated September 18, 1996, was filed to
report certain information under Item 5, "Other Events."
<PAGE>
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.
NEW YORK STATE ELECTRIC & GAS CORPORATION
(Registrant)
By Gary J. Turton
Gary J. Turton
Vice President and Controller
(Chief Accounting Officer)
Date: November 7, 1996<PAGE>
EXHIBIT INDEX
10-54 -- Employment Agreement for W. W. von Schack.
10-55 -- Employment Agreement for W. W. von Schack Amendment
No. 1.
27 -- Financial Data Schedule.
EXHIBIT 10-54
EMPLOYMENT AGREEMENT
AGREEMENT made this 7th day of August, 1996, between New
York State Electric & Gas 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
Company's management, 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 September
9, 1996 and end on September 8, 1999, unless further extended as
hereinafter provided. Commencing on September 9, 1997 and each
September 9, thereafter, the Term of this Agreement shall
automatically be extended for one (1) additional year unless, not
later than the June 8 immediately preceding each such September
9, 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 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. 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 Five Hundred Seventy-Five Thousand Dollars ($575,000.00)
per annum. The Base Salary shall be paid in substantially equal
bi-weekly installments, in arrears. The Base Salary may be
discretionarily increased by the Board from time to time as the
Board deems appropriate in its reasonable business judgment. The
Base Salary in effect from time to time shall not be decreased
during the Term. During the period of the Executive's employment
hereunder, the Board shall make an annual review of the
Executive's compensation.
Compensation of the Executive by Base Salary payments
shall not be deemed exclusive and shall not prevent the Executive
from participating in any other compensation or benefit plan of
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 its 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.
If the Executive's service with the Company exceeds
five full years, the Company shall pay to the Executive a monthly
pension supplement that results in the Executive receiving a
total monthly pension based upon two years of service for each of
the Executive's first five years of service. Specifically, the
monthly pension supplement shall be equal to the amount by which
(i) the total monthly payments that would be due to the Executive
under the Company's Retirement Benefit Plan and the Company's
Supplemental Executive Retirement Plan if the Executive's monthly
benefits under those two plans were calculated by giving the
Executive credit for two years of service for each of the
Executive's actual first five years of service exceeds (ii) the
actual total monthly amounts that are due under those two plans.
During the Term of this Agreement (or, if later, until
the end of the Change-in-Control Protective Period), the Company
will, on each January 5, beginning January 5, 1997, pay the
premium on a Whole Life Insurance Policy issued by The Guardian
Life Insurance Company of New York, Policy No. 3810692, on the
life of the Executive (the "Life Insurance Policy"); provided
that in no event shall the Company pay on any such date more than
$96,000 toward payment of such premium and provided that the
Company shall not pay such premium if the Executive's employment
has been terminated for any reason prior to such January 5,
except as otherwise provided in Sections 6.1 and 10.1(A) hereof.
5.3 Expenses. Upon presentation of reasonably
adequate documentation to the Company, the Executive shall
receive prompt reimbursement from the Company for all reasonable
and customary business expenses incurred by the Executive in
accordance with the Company policy in performing services
hereunder.
5.4 Vacation. The Executive shall be entitled to five
(5) weeks of vacation during each year of this Agreement, or such
greater period as the Board shall approve, without reduction in
salary or other benefits.
5.5 Transition Payments. The Company agrees to pay to
the Executive, as an offset to any losses the Executive may incur
as a result of joining the Company, the sum of $195,000 less any
amount the Executive receives, or becomes entitled to receive, as
a bonus for the calendar year 1996 from DQE, Inc. or Duquesne
Light Company ("Prior Employers"). Such amount shall be paid to
the Executive no later than December 31, 1996. The Executive
agrees to promptly notify the Company of the amount of any bonus
payments he receives, or becomes entitled to receive, for the
calendar year 1996 from the Prior Employers. In the event the
Executive receives, or becomes entitled to receive, any bonus
payment for the calendar year 1996 from the Prior Employers after
payment by the Company as provided in this Section 5.5 has been
made, the Executive will promptly remit to the Company the amount
received or that he becomes entitled to receive.
The Company agrees to make a payment to DQE, Inc. in an
amount not to exceed $40,170 in connection with the transfer of
the Life Insurance Policy from DQE, Inc. to the Company.
The Company agrees to reimburse the Executive in
accordance with the Company's Employee Relocation Policy for any
moving expenses he incurs in moving himself and his family from
Pittsburgh, PA to upstate New York.
6. Compensation Related to Disability or Termination
(Other Than Certain Post-Termination Payments).
6.1 During the Term of this Agreement (or, if later,
at any time prior to the end of the Change-in-Control Protective
Period), during any period that the Executive fails to perform
the Executive's full-time duties with 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. 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, a lump
sum amount equal to the present value (calculated using a
discount at the appropriate corresponding United States Treasury
Bill rate) of the aggregate Base Salary otherwise payable to the
Executive through the end of the Term.
9. Post-Termination Continuation of Welfare Benefit
Plan Coverage. If the termination of the Executive's
employment is described in Section 8 hereof, the Company shall
maintain in full force and effect, for the continued benefit of
the Executive for the number of years (including partial years)
remaining in the Term, each "employee welfare benefit plan" (as
described in Section 3(1) of ERISA) in which the Executive was
entitled to participate immediately prior to the Date of
Termination, provided that the Executive's continued
participation is possible under the general terms and provisions
of such plans. In the event that the Executive's participation
in any such plan is barred, the Company shall arrange to provide
the Executive with benefits substantially similar to those which
the Executive would otherwise have been entitled to receive under
the plan from which his continued participation is barred. For
purposes of this Section 9, the term "employee welfare benefit
plan" shall be deemed not to include the payment by the Company
of the amount referred to in the third paragraph of Section 5.2
hereof with respect to the Life Insurance Policy.
10. Severance Payments.
10.1 The Company shall pay the Executive the payments
described in this Section 10.1 (the "Severance Payments") upon
the termination of the Executive's employment following a Change-
in-Control and prior to the end of the Change-in-Control
Protective Period, in addition to the payments and benefits
described in Sections 6 and 7 hereof, unless such termination is
(i) by 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,
in lieu of any lump sum payment with respect to aggregate
Base Salary otherwise payable pursuant to Section 8 hereof,
and in lieu of any severance benefit otherwise payable to
the Executive, the Company shall pay to the Executive a lump
sum severance payment, in cash, equal to three (3) times the
sum of:
(i) the higher of the Executive's annual Base Salary
in effect immediately prior to the occurrence of
the event or circumstance upon which the Notice of
Termination is based or the Executive's annual
Base Salary in effect immediately prior to the
Change-in-Control, and
(ii) the incentive compensation award the Executive
would have received under the Annual Executive
Incentive Plan for the year in which the Date of
Termination occurs calculated by assuming that the
Target Performance goals of such plan for that
year have been met, and
(iii) the amount the Company agreed to pay in connection
with the Life Insurance Policy referred to in the
third paragraph of Section 5.2 hereof.
(B) Notwithstanding any provision of the Company's
Annual Executive Incentive Plan, 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, 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 calculated as to each such award by assuming the Target
Performance goals of such plan have been met.
(C) In determining the retirement benefits to which
the Executive is entitled under the Company's Supplemental
Executive Retirement Plan, the Executive shall be given an
additional two (2) years of service credit at the
Executive's highest annual rate of compensation during the
twelve (12) months immediately preceding the Date of
Termination and shall be deemed to be two (2) years older
than he is; provided that if the Executive does not have at
least ten (10) years of service credit under the Company's
Supplemental Executive Retirement Plan after such additional
two (2) years of service credit, the Executive shall be
deemed to have at least ten (10) years of service credit
under the Supplemental Executive Retirement Plan; such
benefits shall be determined without regard to any amendment
to the Supplemental Executive Retirement 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.
(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.
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. 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
<PAGE>
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 the Date of Termination, 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 the Date of Termination. 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 by the Company is terminated during the
Term (or, if later, prior to the end of the Change-in-Control
Protection 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
which is a major competitor of the Company with respect to
products which the Company is then producing or services the
Company is 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. The current
Competitors of the Company are listed on Exhibit 1 hereto. With
the consent of the Executive, which shall not be unreasonably
withheld, additional Competitors may be listed on Exhibit 1.
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:
New York State Electric & Gas Corporation
Post Office Box 3607
Binghamton, NY 13902-3607
Attention: Corporate Secretary
To the Executive:
Wesley W. von Schack
404 Beaver Road
Sewickly, PA 15143
16. Miscellaneous. 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 officer as may be specifically designated by the Board.
No waiver by either party hereto at any time of any breach by the
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 either 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 either 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.
17. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
18. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and the
same instrument.
19. Settlement of Disputes; Arbitration. All claims by the
Executive for benefits under this Agreement shall be directed to
and determined by the Board and shall be in writing. Any denial
by the Board of a claim for benefits under this Agreement shall
be delivered to the Executive in writing and shall set forth the
specific reasons for the denial and the specific provisions of
this Agreement relied upon. The Board shall afford a reasonable
opportunity to the Executive for a review of the decision denying
a claim and shall further allow the Executive to appeal to the
Board a decision of the Board within sixty (60) days after
notification by the Board that the Executive's claim has been
denied. To the extent permitted by applicable law, any further
dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in
Binghamton, New York in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered
on the arbitrator's award in any court having jurisdiction.
20. Definitions. For purposes of this Agreement, the
following terms shall have the meaning indicated below:
(A) "Base Salary" shall have the meaning stated in
Section 5.1 hereof.
(B) "Beneficial Owner" shall have the meaning defined
in Rule 13-d-3 under the Exchange Act.
(C) "Board" shall mean the Board of Directors of 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 execution 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 paragraphs (I), (III) or (IV)
of this Change-in-Control definition) 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, 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 the second anniversary of such Change-in-Control or, if
such Change-in-Control shall be caused by the shareholder
approval of a merger or consolidation described in Section
20(E)(III) hereof, the second anniversary of the consummation of
such merger or consolidation.
(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 (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 (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 (VII) 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
failures by the Company to act, unless, in the case of any act or
failure to act described in paragraphs (I), (V), (VI) or (VII)
below, such act or failure to act is corrected prior to the Date
of Termination specified in the Notice of Termination given in
respect thereof:
(I) the assignment to the Executive of any
duties inconsistent with the Executive's status as an
executive officer of the Company or a substantial
adverse alteration in the nature or status of the
Executive's responsibilities from those in effect
immediately prior to the Change-in-Control (other than
any such alteration primarily 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 (except for across-the-board salary reductions
which are made after expiration of the Term and which
similarly affect all executives of the Company and all
executives of any Person in control of the Company);
(III) the relocation of the Company's principal
executive offices to a location more than fifty (50)
miles from the location of such offices immediately
prior to the Change-in-Control or the Company's
requiring the Executive to be based anywhere other than
the Company's principal 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 (except
pursuant to an across-the-board compensation deferral
similarly affecting all executives of the Company and
all executives of any Person in control of the
Company), 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 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 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;
<PAGE>
(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 pension
supplement it agreed to provide pursuant to the second
paragraph of Section 5.2 hereof, or the failure by the
Company to pay the amount it agreed to pay in
connection with the Life Insurance Policy referred to
in the third paragraph of Section 5.2 hereof; or
(VII) any purported termination of the Executive's
employment which is not effected pursuant to a Notice
of Termination satisfying the requirements of Section
11.1; for purposes of this Agreement, no such purported
termination shall be effective.
The Executive's right to terminate the Executive's
employment for Good Reason shall not be affected by the
Executive's incapacity due to physical or mental illness. The
Executive's continued employment shall not constitute consent to,
or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
(O) "Gross-Up Payment" shall have the meaning stated
in Section 10.2(A) hereof.
(P) "Life Insurance Policy" shall have the meaning
stated in the third paragraph of Section 5.2 hereof.
(Q) "Notice of Termination" shall have the meaning
stated in Section 11.1 hereof.
(R) "Person" shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof; however, a Person shall not include (i)
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.
(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) "Severance Payments" shall mean those payments
described in Section 10.1 hereof.
<PAGE>
(V) "Term" shall have the meaning stated in Section 3
hereof.
NEW YORK STATE ELECTRIC & GAS
CORPORATION
By s/James A. Carrigg
Name: James A. Carrigg
Title: Chairman, President and CEO
s/Wesley W. von Schack
WESLEY W. VON SCHACK
<PAGE>
EXHIBIT I
Central Hudson Gas & Electric Corporation
Consolidated Edison Company of New York
Long Island Lighting Company
Niagara Mohawk Power Corporation
Orange and Rockland Utilities, Inc.
Rochester Gas and Electric Corporation
Northeast Utilities
New England Electric System
Boston Edison Company
General Public Utilities Corporation
PPL Resources, Inc.
PECO Energy Company
DQE, Inc.
Allegheny Power System, Inc.
American Electric Power Company, Inc.
Atlantic Energy, Inc.
New York Power Authority
Ontario Hydro
Hydro Quebec
The United Illuminating Company
Public Service Enterprise Group Incorporated
In addition to the above listed companies, all utility
subsidiaries of such companies.
EXHIBIT 10-55
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT ("First
Amendment"), dated as of the 11th day of October, 1996, is made
and entered into by and between New York State Electric & Gas
Corporation, a New York corporation (the "Company"), and Wesley
W. von Schack ("Executive") and amends certain provisions of the
Employment Agreement, dated as of August 7, 1996 ("Employment
Agreement"), by and between the Company and the Executive.
WHEREAS, in order to clarify the obligation of the Company
to make a payment in connection with the transfer of the Life
Insurance Policy (as defined in the Employment Agreement) from
DQE, Inc. to the Company, the parties hereto have agreed to amend
Section 5.5 of the Employment Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Section 5.5 of the Employment Agreement is hereby
amended to read in its entirety as follows:
5.5 Transition Payments. Except as otherwise
provided in the second paragraph of this Section
5.5, the Company agrees to pay to the Executive,
as an offset to any losses the Executive may incur
as a result of joining the Company, the sum of
$195,000 less any amount the Executive receives,
or becomes entitled to receive, as a bonus for the
calendar year 1996 from DQE, Inc. or Duquesne
Light Company ("Prior Employers"). Such amount
shall be paid to the Executive no later than
December 31, 1996. The Executive agrees to
promptly notify the Company of the amount of any
bonus payments he receives, or becomes entitled to
receive, for the calendar year 1996 from the Prior
Employers. In the event the Executive receives,
or becomes entitled to receive, any bonus payment
for the calendar year 1996 from the Prior
Employers after payment by the Company as provided
in this Section 5.5 has been made, the Executive
will promptly remit to the Company the amount
received or that he becomes entitled to receive.
The Company agrees to make a payment in an amount
not to exceed $96,000 in connection with the
transfer of the Life Insurance Policy from DQE,
Inc. to the Company; provided that, if the Company
makes a payment of more than $40,170, the amount
in excess of $40,170 shall be deducted from the
amount that the Company is required to pay to the
Executive pursuant to the first paragraph of this
Section 5.5.
The Company agrees to reimburse the Executive in
accordance with the Company's Employee Relocation
Policy for any moving expenses he incurs in moving
himself and his family from Pittsburgh, PA to
upstate New York.
2. Except as expressly modified hereby, the terms and
provisions of the Employment Agreement remain in full force
and effect.
IN WITNESS WHEREOF, the parties have caused this First
Amendment to be duly executed and delivered by their respective
duly authorized representatives as of the date first above
written.
NEW YORK STATE ELECTRIC
& GAS CORPORATION
By:s/Sherwood J. Rafferty s/Wesley W. von Schack
Sherwood J. Rafferty Wesley W. von Schack
Senior Vice President and
Chief Financial Officer
<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 SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,961,684
<OTHER-PROPERTY-AND-INVEST> 107,953
<TOTAL-CURRENT-ASSETS> 302,079
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 676,776
<TOTAL-ASSETS> 5,048,492
<COMMON> 471,359
<CAPITAL-SURPLUS-PAID-IN> 831,852
<RETAINED-EARNINGS> 468,406
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,771,617
25,000
134,440
<LONG-TERM-DEBT-NET> 1,508,006
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 60,500
<LONG-TERM-DEBT-CURRENT-PORT> 57,553
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,491,376
<TOT-CAPITALIZATION-AND-LIAB> 5,048,492
<GROSS-OPERATING-REVENUE> 1,528,265
<INCOME-TAX-EXPENSE> 101,568
<OTHER-OPERATING-EXPENSES> 1,182,703
<TOTAL-OPERATING-EXPENSES> 1,284,271
<OPERATING-INCOME-LOSS> 243,994
<OTHER-INCOME-NET> (21,369)
<INCOME-BEFORE-INTEREST-EXPEN> 222,625
<TOTAL-INTEREST-EXPENSE> 92,015
<NET-INCOME> 130,610
7,155
<EARNINGS-AVAILABLE-FOR-COMM> 123,455
<COMMON-STOCK-DIVIDENDS> 75,078
<TOTAL-INTEREST-ON-BONDS> 81,417
<CASH-FLOW-OPERATIONS> 390,686
<EPS-PRIMARY> 1.73
<EPS-DILUTED> 1.73
</TABLE>
