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
For the quarterly period ended September 30, 1996
- -------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-2987.
NIAGARA MOHAWK POWER CORPORATION
- --------------------------------
(Exact name of registrant as specified in its charter)
State of New York 15-0265555
- ----------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 Erie Boulevard West Syracuse, New York 13202
(Address of principal executive offices) (Zip Code)
(315) 474-1511
Registrant's telephone number, including area code
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 [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common stock, $1 par value, outstanding at October 31, 1996 -
144,365,214<PAGE>
<PAGE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
FORM 10-Q - For the Quarter Ended September 30, 1996
INDEX
- -----
PART I. FINANCIAL INFORMATION
------------------------------
Glossary of Terms
Item 1. Financial Statements.
a) Consolidated Statements of Income -
Three Months and Nine Months ended
September 30, 1996 and 1995
b) Consolidated Balance Sheets - September 30,
1996 and December 31, 1995
c) Consolidated Statements of Cash Flows -
Nine Months ended September 30, 1996 and 1995
d) Notes to Consolidated Financial Statements
e) Review by Independent Accountants
f) Independent Accountant's Report on the
Limited Review of the Interim Financial
Information
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.
PART II. OTHER INFORMATION
---------------------------
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
Signature
Exhibit Index
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NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
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GLOSSARY OF TERMS
- -----------------
TERM DEFINITION
- ---- ----------
ALJ New York State PSC Administrative Law Judge
COPS Competitive Opportunities Proceeding
DSM Demand-Side Management
Dth Dekatherms
FAC Fuel Adjustment Clause
FERC Federal Energy Regulatory Commission
GwHrs Gigawatt-hours
HYDRA-CO HYDRA-CO Enterprises, Inc.
ISO Independent System Operator
Kwh Kilowatt-hour
NOPR Notice of Proposed Rulemaking
NRC Nuclear Regulatory Commission
PPA Power Purchase Agreements
PRP Potentially responsible party
PSC New York State Public Service Commission
SFAS Statement of Financial Accounting Standards No. 71
No. 71 "Accounting for the Effects of Certain Types of
Regulation"
SFAS Statement of Financial Accounting Standards No. 121
No. 121 "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of"
Unit 1 Nine Mile Point Nuclear Station Unit No. 1
Unit 2 Nine Mile Point Nuclear Station Unit No. 2<PAGE>
<PAGE>
<TABLE>
PART 1. FINANCIAL INFORMATION
- -----------------------------
ITEM 1. FINANCIAL STATEMENTS.
- -----------------------------
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
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CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
- ---------------------------------------------
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1996 1995
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(In thousands of dollars)
<S> <C> <C>
OPERATING REVENUES:
Electric $ 829,370 $ 829,303
Gas 66,343 57,928
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895,713 887,231
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OPERATING EXPENSES:
Fuel for electric generation 55,129 70,603
Electricity purchased 286,085 251,436
Gas purchased 26,113 17,171
Other operation and maintenance
expenses 284,237 200,126
Depreciation and amortization 82,475 79,850
Federal and foreign income taxes (6,287) 28,606
Other taxes 114,555 125,313
---------- ----------
842,307 773,105
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OPERATING INCOME 53,406 114,126
---------- ----------<PAGE>
<PAGE>
OTHER INCOME AND (DEDUCTIONS):
Allowance for other funds used
during construction 1,138 756
Federal and foreign income taxes 289 301
Other items (net) 4,162 1,222
---------- ----------
5,589 2,279
---------- ----------
INCOME BEFORE INTEREST CHARGES 58,995 116,405
---------- ----------
INTEREST CHARGES:
Interest on long-term debt 68,301 68,330
Other interest 4,550 2,850
Allowance for borrowed funds used
during construction (940) (1,716)
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71,911 69,464
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NET INCOME/(LOSS) (12,916) 46,941
Dividends on preferred stock 9,609 9,691
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BALANCE AVAILABLE FOR COMMON STOCK $ (22,525) $ 37,250
========== ==========
Average number of shares of common
stock outstanding (in thousands) 144,364 144,330
Balance available per average
share of common stock $ (.16) $ .26
Dividends paid per share of common
stock $ .00 $ .28
The accompanying notes are an integral part of these financial statements
/TABLE
<PAGE>
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<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1996 1995
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(In thousands of dollars)
OPERATING REVENUES:
<S> <C> <C>
Electric $2,484,964 $2,522,788
Gas 534,583 428,072
---------- ----------
3,019,547 2,950,860
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OPERATING EXPENSES:
Fuel for electric generation 141,630 148,943
Electricity purchased 874,450 830,840
Gas purchased 296,665 200,828
Other operation and maintenance
expenses 693,602 592,062
Depreciation and amortization 246,681 237,314
Federal and foreign income taxes 79,728 137,290
Other taxes 362,013 389,067
---------- ----------
2,694,769 2,536,344
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OPERATING INCOME 324,778 414,516
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<PAGE>
OTHER INCOME AND (DEDUCTIONS):
Allowance for other funds used
during construction 2,340 1,068
Federal and foreign income taxes 4,950 (7,297)
Other items (net) 13,345 19,694
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20,635 13,465
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INCOME BEFORE INTEREST CHARGES 345,413 427,981
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INTEREST CHARGES:
Interest on long-term debt 205,089 197,699
Other interest 6,721 17,427
Allowance for borrowed funds used
during construction (2,595) (7,307)
---------- ----------
209,215 207,819
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NET INCOME/(LOSS) 136,198 220,162
Dividends on preferred stock 28,760 29,952
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BALANCE AVAILABLE FOR COMMON STOCK $ 107,438 $ 190,210
========== ==========
Average number of shares of common
stock outstanding (in thousands) 144,344 144,328
Balance available per average
share of common stock $ .74 $ 1.32
Dividends paid per share of common
stock $ .00 $ .84
The accompanying notes are an integral part of these financial statements
/TABLE
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<PAGE>
<TABLE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
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CONSOLIDATED BALANCE SHEETS
- ---------------------------
<CAPTION>
ASSETS
- ------ SEPTEMBER 30, 1996
(UNAUDITED) DECEMBER 31, 1995
------------------ ---- -------------
(In thousands of dollars)
<S> <C> <C>
UTILITY PLANT:
Electric plant $ 8,592,238 $ 8,543,429
Gas plant 1,066,188 1,017,062
Nuclear fuel 546,742 517,681
Common plant 287,786 281,525
Construction work in progress 261,647 289,604
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Total utility plant 10,754,601 10,649,301
Less-Accumulated depreciation
and amortization 3,801,454 3,641,448
--------- ----------
Net utility plant 6,953,147 7,007,853
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OTHER PROPERTY AND INVESTMENTS 207,910 218,417
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<PAGE>
<PAGE>
CURRENT ASSETS:
Cash, including temporary cash
investments of $294,885 and
$114,415, respectively 381,057 153,475
Accounts receivable (less allowance for
doubtful accounts of $88,500 and
$20,000, respectively) 297,908 471,442
Materials and supplies, at average cost:
Coal and oil for production of electricity 17,055 27,509
Gas storage 47,936 26,431
Other 132,874 141,820
Prepaid taxes 65,142 17,239
Other 51,346 45,834
---------- ----------
993,318 883,750
REGULATORY ASSETS (NOTE 3):
Regulatory tax asset 470,198 470,198
Deferred finance charges 239,880 239,880
Deferred environmental restoration
costs (Note 2) 225,000 225,000
Unamortized debt expense 81,779 92,548
Postretirement benefits other than
pensions 67,149 68,933
Other 161,862 204,253
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1,245,868 1,300,812
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OTHER ASSETS 76,741 67,037
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$9,476,984 $9,477,869
========== ==========
The accompanying notes are an integral part of these financial statements
/TABLE
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<TABLE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
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CONSOLIDATED BALANCE SHEETS
- ---------------------------
CAPITALIZATION AND LIABILITIES
- ------------------------------
<CAPTION>
SEPTEMBER 30, 1996
(UNAUDITED) DECEMBER 31, 1995
------------------ -----------------
(In thousands of dollars)
<S> <C> <C>
CAPITALIZATION:
COMMON STOCKHOLDERS' EQUITY:
Common stock - $1 par value; authorized
185,000,000 shares; issued 144,365,214
and 144,332,123 shares, respectively $ 144,365 $ 144,332
Capital stock premium and expense 1,784,473 1,784,247
Retained earnings 692,811 585,373
---------- ----------
2,621,649 2,513,952
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<PAGE>
<PAGE>
CUMULATIVE PREFERRED STOCK, AUTHORIZED 3,400,000
SHARES, $100 PAR VALUE:
Non-redeemable (optionally redeemable),
issued 2,100,000 shares 210,000 210,000
Redeemable (mandatorily redeemable), issued
240,000 and 258,000 shares, respectively 22,200 24,000
CUMULATIVE PREFERRED STOCK, AUTHORIZED
19,600,000 SHARES, $25 PAR VALUE:
Non-redeemable (optionally redeemable),
issued 9,200,000 shares 230,000 230,000
Redeemable (mandatorily redeemable), issued
3,008,005 and 3,208,005 shares,
respectively 64,530 72,850
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526,730 536,850
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Long-term debt 3,476,926 3,582,414
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TOTAL CAPITALIZATION 6,625,305 6,633,216
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<PAGE>
<PAGE>
CURRENT LIABILITIES:
Long-term debt due within one year 93,083 65,064
Sinking fund requirements on redeemable
preferred stock 12,470 9,150
Accounts payable 229,250 268,603
Payable on outstanding bank checks 46,649 36,371
Customers' deposits 15,403 14,376
Accrued taxes 31,270 14,770
Accrued interest 73,120 64,448
Accrued vacation pay 36,131 35,214
Other 51,316 57,748
---------- ----------
588,692 565,744
---------- ----------
REGULATORY LIABILITIES (NOTE 3):
Deferred finance charges 239,880 239,880
Other 2,881 2,712
---------- ----------
242,761 242,592
---------- ----------
OTHER LIABILITIES:
Accumulated deferred income taxes 1,390,785 1,388,799
Employee pension and other benefits 255,692 245,047
Deferred pension settlement gain 19,466 32,756
Unbilled revenues 19,081 28,410
Other 110,202 116,305
---------- ----------
1,795,226 1,811,317
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COMMITMENTS AND CONTINGENCIES (NOTES 2 AND 3):
Liability for environmental restoration 225,000 225,000
---------- ----------
$9,476,984 $9,477,869
========== ==========
The accompanying notes are an integral part of these financial statements
/TABLE
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<TABLE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------
INCREASE (DECREASE) IN CASH (UNAUDITED)
- ---------------------------------------
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1996 1995
------------- ------------
(In thousands of dollars)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 136,198 $ 220,162
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 246,681 237,314
Amortization of nuclear fuel 30,040 23,141
Provision for deferred income taxes 1,986 82,791
Gain on sale of subsidiary - (11,257)
Decrease in net accounts receivable 164,205 23,793
(Increase) decrease in materials and
supplies (5,683) 11,773
Decrease in accounts payable and accrued
expenses (14,465) (45,096)
Increase in accrued interest and taxes 25,172 20,706
Changes in other assets and liabilities (5,907) (5,301)
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 578,227 558,026
---------- ----------
<PAGE>
<PAGE>
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction additions (186,860) (231,111)
Nuclear fuel (29,061) (7,726)
---------- ----------
Acquisition of utility plant (215,921) (238,837)
Decrease in materials and supplies
related to construction 3,578 2,743
Decrease in accounts payable and accrued
expenses related to construction (3,616) (11,274)
(Increase) decrease in other investments 10,226 (85,331)
Proceeds from sale of subsidiary
(net of cash sold) - 161,087
Other (5,972) 9,236
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NET CASH USED IN INVESTING ACTIVITIES (211,705) (162,376)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in long-term debt 105,000 275,000
Net change in revolving credit agreements (170,000) (99,000)
Reductions of preferred stock (6,800) (9,300)
Reductions in long-term debt (29,341) (23,414)
Net change in short-term debt - (370,749)
Dividends paid (28,760) (151,190)
Other (9,039) (7,281)
---------- ----------
NET CASH USED IN FINANCING ACTIVITIES (138,940) (385,934)
---------- ----------
<PAGE>
<PAGE>
NET INCREASE IN CASH 227,582 9,716
Cash at beginning of period 153,475 94,330
---------- ----------
CASH AT END OF PERIOD $381,057 $104,046
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $205,702 $207,357
Income taxes paid $80,499 $35,376
The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE>
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NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
NOTE 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The Company, in the opinion of management, has included
adjustments (which include normal recurring adjustments)
necessary for a fair statement of the results of operations
for the interim periods presented. The consolidated
financial statements for 1996 are subject to adjustment at
the end of the year when they will be audited by
independent accountants. The consolidated financial
statements and notes thereto should be read in conjunction
with the financial statements and notes for the years ended
December 31, 1995, 1994 and 1993 included in the Company's
1995 Annual Report to Shareholders on Form 10-K.
The Company's electric sales tend to be substantially
higher in summer and winter months as related to weather
patterns in its service territory; gas sales tend to peak
in the winter. Notwithstanding other factors, the Company's
quarterly net income will generally fluctuate accordingly.
Therefore, the earnings for the three-month and nine-month
periods ended September 30, 1996, should not be taken as an
indication of earnings for all or any part of the balance
of the year.
The allowance for doubtful accounts receivable on the
consolidated balance sheets amounted to $88.5 million and
$20.0 million at September 30, 1996 and December 31, 1995,
respectively. The Company increased its allowance for
doubtful accounts by $68.5 million to recognize the
increased risk of collection inherent in significantly
higher levels of past-due customer bills. In addition to
this increase in the allowance for doubtful accounts, the
Company has already charged $46.3 million to bad debt
expense for the nine months ended September 1996. (See
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations - "Increase in
Allowance for Doubtful Accounts.")
Certain amounts have been reclassified on the accompanying
Consolidated Financial Statements to conform with the 1996
presentation.
NOTE 2. CONTINGENCIES
ENVIRONMENTAL CONTINGENCIES: The public utility industry
typically utilizes and/or generates in its operations a
broad range of potentially hazardous wastes and by-
products. The Company believes it is handling identified
wastes and by-products in a manner consistent with federal,
state and local requirements and has implemented an
environmental audit program to identify any potential areas
of concern and assure compliance with such requirements.
The Company is also currently conducting a program to
investigate and restore, as necessary to meet current
environmental standards, certain properties associated with
its former gas manufacturing process and other properties
which the Company has learned may be contaminated with
industrial waste, as well as investigating identified
industrial waste sites as to which it may be determined
that the Company contributed. The Company has also been
advised that various federal, state or local agencies
believe certain properties require investigation and has
prioritized the sites based on available information in
order to enhance the management of investigation and
remediation, if necessary.
The Company is currently aware of 86 sites with which it
has been or may be associated, including 43 which are
Company-owned. With respect to non-owned sites, the
Company may be required to contribute some proportionate
share of remedial costs.
Investigations at each of the Company-owned sites are
designed to (1) determine if environmental contamination
problems exist, (2) if necessary, determine the appropriate
remedial actions required for site restoration and (3)
where appropriate, identify other parties who should bear
some or all of the cost of remediation. Legal action
against such other parties will be initiated where
appropriate. After site investigations are completed, the
Company expects to determine site-specific remedial actions
and to estimate the attendant costs for restoration.
However, since technologies are still developing the
ultimate cost of remedial actions may change substantially.
Estimates of the cost of remediation and post-remedial
monitoring are based upon a variety of factors, including
identified or potential contaminants, location, size and
use of the site, proximity to sensitive resources, status
of regulatory investigation and knowledge of activities at
similarly situated sites, and the United States
Environmental Protection Agency figure for average cost to
remediate a site. Actual Company expenditures are
dependent upon the total cost of investigation and
remediation and the ultimate determination of the Company's
share of responsibility for such costs, as well as the
financial viability of other identified responsible parties
since clean-up obligations are joint and several. The
Company has denied any responsibility in certain of these
PRP sites and is contesting liability accordingly.
As a consequence of site characterizations and assessments
completed to date and negotiations with PRP's, the Company
has accrued a liability in the amount of $225 million,
which is reflected in the Company's Consolidated Balance
Sheets at September 30, 1996 and December 31, 1995. This
represents the low end of the range of its share of the
estimated cost for investigation and remediation. The
potential high end of the range is presently estimated at
approximately $900 million, including approximately $400
million in the unlikely event the Company is required to
assume 100% responsibility at non-owned sites.
Prior to 1995, the Company recovered 100% of its costs
associated with site investigation and restoration (SIR).
In the Company's 1995 rate order, costs incurred during
1995 for the investigation and restoration of Company-owned
sites and sites with which it is associated were subject to
80%/20% (ratepayer/Company) sharing. In 1995, the Company
incurred $11.5 million of such costs, resulting in a
disallowance of $2.3 million (before tax), which the
Company recognized as a loss in Other items (net) on the
Consolidated Statements of Income. The PSC stated in its
opinion, dated December 1995, its decision to require
sharing was "on a one-time, short-term basis only, pending
its further evaluation of the issue in future proceedings."
In July 1996, the ALJ issued a recommended decision in the
Company's November 1995 gas rate filing that recommended
100% recovery of its SIR costs. (See Item 2. Management's
Discussion and Analysis of Financial Condition and Results
of Operations - "Multi-Year Gas Rate Proposal.") The
Company has recorded a regulatory asset representing the
remediation obligations to be recovered from ratepayers.
Where appropriate, the Company has provided notices of
insurance claims to carriers with respect to the
investigation and remediation costs for manufactured gas
plant, industrial waste sites and sites for which the
Company has been identified as a PRP. The Company has
settled some of these claims and continues to pursue
others, but is unable to predict what the ratemaking
disposition will be.
TAX ASSESSMENTS: The Internal Revenue Service (IRS) has
conducted an examination of the Company's Federal income
tax returns for the years 1987 and 1988 and has submitted a
Revenue Agents' Report to the Company. The IRS has
proposed various adjustments to the Company's federal
income tax liability for these years which could increase
the Company's Federal income tax liability by approximately
$80 million, before assessment of penalties and interest.
Included in these proposed adjustments are several
significant issues involving Unit 2. The Company is
vigorously defending its position on each of the issues,
and submitted a protest to the IRS in 1993. Pursuant to
the Unit 2 settlement entered into with the PSC in 1990, to
the extent the IRS is able to sustain adjustments, the
Company will be required to absorb a portion of any
assessment. The Company believes any such disallowance
will not have a material impact on its financial position
or results of operations under traditional cost-of-service
based ratemaking. The Company is currently attempting to
finalize a settlement of these issues with the Appeals
Division of the IRS.
In addition, the IRS has conducted an examination of the
Company's Federal income tax returns for the years 1989 and
1990. The Company received a Revenue Agents' Report in
late January 1996. The IRS has raised the issue concerning
the deductibility of payments made to unregulated
generators in accordance with certain contracts that
include a provision for a tracking account. A tracking
account represents amounts that these mandated contracts
required the Company to pay unregulated generators in
excess of the Company's avoided costs, including a carrying
charge. The IRS proposes to disallow a current deduction
for amounts paid in excess of the avoided costs of the
Company. Although the Company believes that any such
disallowances for the years 1989 and 1990 will not have a
material impact on its financial position or results of
operations, it believes that a disallowance for these
above-market payments for the years subsequent to 1990
could have a material adverse affect on its cash flows.
The Company is vigorously defending its position on this
issue. The IRS has commenced its examination of the
Company's Federal income tax returns for the years 1991
through 1993.
LITIGATION: The Company is unable to predict the ultimate
disposition of the lawsuits referred to below. However,
the Company believes it has meritorious defenses and
intends to defend these lawsuits vigorously, but can
neither provide any judgment regarding the likely outcome
nor provide any estimate or range of possible loss.
Accordingly, no provision for liability, if any, that may
result from these lawsuits has been made in the Company's
financial statements.
(a) In March 1993, Inter-Power of New York, Inc. (Inter-
Power), filed a complaint against the Company and
certain of its officers and employees in the Supreme
Court of the State of New York, Albany County (NYS
Supreme Court). Inter-Power alleged, among other
matters, fraud, negligent misrepresentation and breach
of contract in connection with the Company's alleged
termination of a PPA in January 1993. The plaintiff
sought enforcement of the original contract or
compensatory and punitive damages in an aggregate
amount that would not exceed $1 billion, excluding
pre-judgment interest.
In early 1994, the NYS Supreme Court dismissed two of
the plaintiff's claims; this dismissal was upheld by
the Appellate Division, Third Department of the NYS
Supreme Court. Subsequently, the NYS Supreme Court
granted the Company's motion for summary judgment on
the remaining causes of action in Inter-Power's
complaint. In August 1994, Inter-Power appealed this
decision and on July 27, 1995, the Appellate Division,
Third Department affirmed the granting of summary
judgment as to all counts, except for one dealing with
an alleged breach of the PPA relating to the Company's
having declared the agreement null and void on the
grounds that Inter-Power had failed to provide it with
information regarding its fuel supply in a timely
fashion. This one breach of contract claim was
remanded to the NYS Supreme Court for further
consideration. Discovery on this one breach of
contract claim is currently in progress.
(b) In November 1993, Fourth Branch Associates
Mechanicville (Fourth Branch) filed an action against
the Company and several of its officers and employees
in the NYS Supreme Court, seeking compensatory damages
of $50 million, punitive damages of $100 million and
injunctive and other related relief. The lawsuit
grows out of the Company's termination of a contract
for Fourth Branch to operate and maintain a
hydroelectric plant the Company owns in the Town of
Halfmoon, New York. Fourth Branch's complaint also
alleges claims based on the inability of Fourth Branch
and the Company to agree on terms for the purchase of
power from a new facility that Fourth Branch hoped to
construct at the Mechanicville site. In January 1994,
the Company filed a motion to dismiss Fourth Branch's
complaint. By order dated November 7, 1995, the Court
granted the Company's motion to dismiss the complaint
in its entirety. Fourth Branch has filed an appeal
from the Court's order which was argued on October 7,
1996 and a decision is expected in mid-December 1996.
Fourth Branch has filed for protection under Chapter
11 of the Bankruptcy Code in the Bankruptcy Court for
the Northern District of New York. On January 5,
1996, Fourth Branch vacated the Mechanicville site.
The Company and Fourth Branch recently entered into
negotiations under a FERC mediation process. As a
result of these negotiations, the Company has proposed
to sell the hydroelectric plant to Fourth Branch for
an amount which would not be material. In addition,
the proposal includes a provision that would require
the discontinuance of all litigation between the
parties.
(c) The Company is involved in a number of court cases
regarding the price of overgeneration, the amount of
energy that the Company is required to purchase in
excess of contract levels from certain unregulated
generators. The Company has paid the unregulated
generators based on its short-run avoided cost (under
Service Class No. 6) for all such overgeneration
rather than the price which the unregulated generators
contend is applicable under the contracts. At
September 30, 1996, the amount of overgeneration
adjustments in dispute that the Company estimates it
has not paid or accrued is not significant as a result
of settlements reached in the third quarter of 1996.
NOTE 3. RATE AND REGULATORY ISSUES AND CONTINGENCIES
The Company's financial statements conform to generally
accepted accounting principles, as applied to regulated
public utilities and reflect the application of SFAS No.
71. Substantively, SFAS No. 71 permits a public utility
regulated on a cost-of-service basis to defer certain costs
when authorized to do so by the regulator, which would
otherwise be charged to expense. These deferred costs are
known as regulatory assets, which in the case of the
Company are approximately $1,003 million, which are net of
approximately $243 million of regulatory liabilities at
September 30, 1996. The portion of the $1,003 million
which relates to the electric business is approximately
$888 million, which are net of approximately $243 million
of regulatory liabilities. Generally, regulatory assets
and liabilities are allocated to the portion of the
business that incurred the underlying transaction that
resulted in the recognition of the regulatory asset or
liability. The allocation methods used between electric
and gas are consistent with those used in prior regulatory
proceedings.
While the allocation of regulatory assets and liabilities
at September 30, 1996 is based on management's assessment,
should the Company discontinue the application of SFAS No.
71, for all or a portion of its business, a final
allocation would be made by evaluating circumstances at
that time. Currently, substantially all of the Company's
net regulatory assets have been approved by the PSC and are
being amortized to expense as they are being recovered in
rates as last established in April 1995.
RATE FILING: The Company filed in February 1996 a
request to increase electric rates. This rate increase
request of 4.1% for 1996 and 4.2% for 1997 was based on the
Company's cost of providing service. These rate increases
are predicated on a requested rate of return on common
stock equity (ROE) of approximately 11% on an annual basis
and recover the Company's cost of providing electric
service. At a public session on May 2, 1996, the PSC
rejected the Company's request for a 1996 temporary rate
increase primarily on the basis that the request did not
meet the PSC's legal standard for approving emergency rate
increases. In their remarks, the Chairman of the PSC and
the ALJ assigned to the proceeding indicated that emergency
rate relief requires meeting a higher standard than
traditional cases and that a financial crisis did not exist
that would jeopardize the provision of safe and adequate
service. In addition, the PSC Chairman stated that an
increase in electric rates would have a negative impact on
economic conditions in the regions served by the Company,
which he stated that the Company itself recognized in its
PowerChoice proposal (see - "Competition" for a discussion
of the Company's PowerChoice proposal.) The PSC Chairman
also stated that the PowerChoice proposal better addresses
the long-term viability of the Company, whereas a temporary
rate increase does not. Accordingly, results for 1996 will
reflect regulatory lag and resulting reduced ROE; however,
the Company believes that the rejection of a temporary rate
increase does not indicate that the Company is no longer
regulated on a cost-of-service basis.
Until the Company's PowerChoice proposal or another
acceptable alternative is implemented, the Company will
continue to pursue its traditional rate request for 1997.
Originally, the Company expected an ALJ recommended
decision in early October and a PSC decision in January
1997. However, in 1996, the Company and the PSC staff
jointly requested (and the ALJ approved) a series of
extensions totaling 180 days so parties can focus on the
negotiations related to the Company's PowerChoice proposal,
including its negotiations with unregulated generators.
These extensions change the effective date of any rate
increase to July 8, 1997 and will reduce the amount of
revenues and significantly reduce the amount of earnings
the Company would realize in 1997 from any price increases
granted, absent additional cost reductions.
The Company estimates that its 1997 rate request will
require an overall electric price increase of nearly 9%.
The Company expects that the PSC will approve cost-of-
service based rates that provide for a reasonable rate of
return until such time as the implementation of the
PowerChoice proposal or a new competitive market model
becomes probable. As a result the Company believes that it
will continue to be regulated on a cost-of-service basis
which will enable it to continue to apply SFAS No. 71 and
that its regulatory assets are currently probable of
recovery. While various proposals have been made to
develop a new regulatory model, including the Company's
PowerChoice proposal, none of these proposals are currently
probable of implementation since a number of parties are
required to concur with the change in the regulatory model.
For the reasons noted above, the Company believes that it
continues to meet the requirements for the application of
SFAS No. 71 to the electric business. However, there are a
number of events that could change that conclusion during
the fourth quarter of 1996 and beyond. Those future events
include: inaction or inadequate action on the Company's
1997 rate request by the PSC; a decision by the Company in
the future not to pursue the rate request as filed;
significant unanticipated reduction in electricity usage by
customers; unsuccessful results in unregulated generator
negotiations; adverse results of litigation; and probable
changes in the regulatory model.
As discussed in Part II, Item 7. Management's Discussion
and Analysis of Financial Condition and Results of
Operations in the Company's Form 10-K for the fiscal year
ended December 31, 1995, the Company was unable to earn its
allowed ROE in 1995 and expects to earn substantially below
its allowed ROE in 1996. In addition, if the Company's
rate increase proposals with respect to 1997 and future
years under traditional ratemaking are not approved, then
the Company will, more likely than not, be unable to earn a
reasonable ROE for such years. The inability of the
Company to earn a reasonable ROE over a sustained period
would indicate that its rates are not based on its cost of
service. In such a case, application of SFAS No. 71 would
be discontinued. The resulting after-tax charges against
income would reduce retained earnings, the balance of which
is currently approximately $693 million. Various
requirements under applicable law and regulations and under
corporate instruments, including those with respect to
issuance of debt and equity securities, payment of common
dividends and certain types of transfers of assets could be
adversely impacted by any such write-downs. (See the
discussion in Part II, Item 5. Other Information - "NRC
Draft Policy Statement.")
COMPETITION: The public utility industry in general, and
the Company in particular, is facing increasing competitive
threats. As competition increases in the marketplace, it
is possible that the Company may no longer be able to
continue to apply the fundamental accounting principles of
SFAS No. 71. The Company believes that in the future some
form of market-based pricing will replace cost-based
pricing in certain aspects of its business. In that
regard, in October 1995, the Company filed its PowerChoice
proposal with the PSC. (See Form 10-K for fiscal year
ended December 31, 1995, Part II, Item 7. Management's
Discussion and Analysis of Financial Condition and Results
of Operations - "PowerChoice Proposal.") The PowerChoice
proposal, as amended by the Company's August 1, 1996
announcement discussed below, would:
- Create a competitive wholesale electricity market and
allow direct access by retail customers.
- Separate the Company's non-nuclear power generation
business from the remainder of the business.
- Provide relief from above market unregulated generator
PPAs that were mandated by federal and state public
policy.
- Stabilize average prices for Company electric customers,
with reductions to industrial customers to facilitate
economic and job growth in the service territory.
The separated non-nuclear generation business would no
longer be rate-regulated and, accordingly, existing
regulatory assets related to the non-nuclear power
generation business, amounting to approximately $98
million, which is net of approximately $2 million of
regulatory liabilities at September 30, 1996, would be
charged against income if and when PowerChoice (or a
similar proposal) becomes probable of implementation. Of
the remaining electric business, under PowerChoice, the
Company has proposed that its nuclear generation and
electric transmission and distribution business continue to
be rate-regulated on a cost-of-service basis (but with
performance objectives) and, accordingly, it would continue
to apply SFAS No. 71. The Company currently expects to
retain ownership of its nuclear assets, but will continue
to investigate various options that may be available to
mitigate the risk of ownership of these assets. (See Part
II, Item 5. Other Information - "New York Nuclear
Operating Company.") While the Company expects to pursue
performance based cost-of-service regulation, the ultimate
form and substance of rate regulation applied to nuclear
operations will determine whether SFAS No. 71 can continue
to be applied. If the Company determines it could no
longer apply SFAS No. 71, existing nuclear regulatory
assets of approximately $264 million, which is net of
nuclear regulatory liabilities of approximately $240
million at September 30, 1996 would be charged against
income.
The PowerChoice proposal also includes provisions for
recovery of "stranded costs" by the generation business
through surcharges on rates for retail transmission and
distribution customers. Stranded costs are those costs of
utilities that may become unrecoverable due to a change in
the regulatory environment and include costs related to the
Company's generating plants, regulatory assets and
overpriced unregulated generator contracts. As discussed
below, the Company has offered to buy out 44 unregulated
generator contracts for a combination of cash and
securities. While the Company believes that buy out costs
should be recoverable as part of the implementation of
PowerChoice, or a form thereof, resolution of this issue is
subject to negotiation and approval by the PSC. Until
resolved, no assurance can be given as to the total amount
recoverable or whether the criteria of SFAS No. 71 can be
met to record a regulatory asset for the amount
recoverable.
Critical to the stabilization of average prices and
restructuring of the Company's markets and business
envisioned in the PowerChoice proposal are substantial
reductions in the Company's embedded cost structure. The
Company has commenced negotiations with the unregulated
generators with the objective of reducing unregulated
generator costs. On August 1, 1996 the Company announced it
had offered to terminate 44 unregulated generator contracts
in exchange for a combination of cash and securities from a
new restructured Niagara Mohawk Power Corporation (NMPC).
Under the plan, the Company would buy out contracts which
account for more than 90% of the above-market power costs
that the Company is required to buy from unregulated
generators. The restructured NMPC would include electric
and gas transmission and distribution assets and nuclear
assets. The new securities would be subordinate to
existing first mortgage bonds and not impair the rights of
first mortgage bondholders. The plan would also create a
separate non-nuclear generating company. The offer is
subject to negotiation and is conditioned on receipt of
appropriate regulatory and other approvals including PSC
approval of an appropriate price structure consistent with
the levels envisioned by the PowerChoice proposal. The
offer, if accepted, would clear the way for implementation
of PowerChoice, or a form thereof, which the Company has
indicated depends upon reducing the cost of power the
Company is required to purchase from unregulated
generators. The Company cannot predict whether the offer
will be accepted and implemented as proposed. The
Company's desire is to conclude negotiations on the offer
in the fourth quarter of 1996 although, there can be no
assurance that such negotiations will be successful or will
be concluded within that time frame.
The Company does not presently expect that its PowerChoice
proposal or any other alternative proposal could be fully
effective before sometime in 1997, at the earliest. In
addition, the Company cannot predict whether the
PowerChoice proposal, in its current or a modified form, or
an alternative proposal will be implemented.
PSC AND FERC REGULATORY PROCEEDINGS: On May 16, 1996, the
PSC issued its decision in its COPS case to restructure New
York State's electric industry. (See Item 2. Management's
Discussion and Analysis of Financial Condition and Results
of Operations - "PSC Competitive Opportunities Proceeding -
Electric.") Although the PSC's decision outlines its
overall vision of how the electricity industry should be
deregulated and restructured for competition, it did not
provide a detailed plan for implementation and instead
ordered filings from the major utilities, except the
Company and Long Island Lighting Company (LILCO), by
October 1, 1996. The October 1 filings were required to
address the corporate structure of each utility both in the
short and long term and the schedule for and cost of
attaining that structure; a schedule for introducing retail
access to all of the utility's customers and a set of
unbundled tariffs that are consistent with the retail
access program; and a rate plan to be effective for the
transition to a competitive market, including mechanisms to
reduce rates and address stranded costs. The Company was
exempted from the October 1 filing by the PSC because the
PSC determined that the Company's PowerChoice restructuring
proposal met the requirements of the PSC's decision in its
COPS proceeding. However, the Company made a filing to
address several retail issues. The Company's filing also
urged the PSC to be as permissive as possible in allowing
the natural development of the competitive marketplace. In
addition, it argued that regulated and unregulated
companies should be permitted to coexist under the same
holding company.
In April 1996, FERC issued its final rules on open
transmission access and stranded cost issues. (See Item 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations - "FERC Rulemaking on Open Access
and Stranded Cost Recovery.")
IMPAIRMENT OF LONG-LIVED ASSETS: In March 1995, the
Financial Accounting Standards Board (FASB) issued SFAS No.
121. This Statement, which the Company adopted in 1996,
requires that long-lived assets and certain identifiable
intangibles held and used by an entity, be reviewed for
impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable. In performing the review for recoverability,
the Company is required to estimate future undiscounted
cash flows expected to result from the use of the asset and
its eventual disposition. Furthermore, this Statement
amends SFAS No. 71 to clarify that regulatory assets should
be charged against earnings if the assets are no longer
considered probable of recovery rather than probable of
loss. While the Company is unable to predict the outcome of
its PowerChoice proposal, or various FERC and PSC
initiatives, the Company has analyzed the provisions of
SFAS No. 121, as it relates to the impairment of its
investment in generating plant, under two scenarios:
traditional cost-based rate-making and its PowerChoice
proposal, as filed. As a result of these analyses, the
effects of adopting SFAS No. 121, as it relates to the
impairment of the Company's investment in generating plant,
did not have an effect on its results of operations and
financial condition. However, to the extent the
PowerChoice proposal is significantly altered or an
alternative proposal is implemented, a new asset impairment
analysis must be performed, with no assurance as to whether
an impairment might exist. In addition, the Company
expects that the PSC will approve cost-of-service based
rate increases until such time as a new competitive
regulatory model is developed.
<PAGE>
<PAGE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
- ---------------------------------------------------------
REVIEW BY INDEPENDENT ACCOUNTANTS
- ---------------------------------
The Company's independent accountants, Price Waterhouse LLP, have
made limited reviews (based on procedures adopted by the American
Institute of Certified Public Accountants) of the unaudited
Consolidated Balance Sheet of Niagara Mohawk Power Corporation
and Subsidiary Companies as of September 30, 1996 and the
unaudited Consolidated Statements of Income for the three-month
and nine-month periods ended September 30, 1996 and 1995 and the
unaudited Consolidated Statements of Cash Flows for the nine-
months ended September 30, 1996 and 1995. The accountants'
report regarding their limited reviews of the Form 10-Q of
Niagara Mohawk Power Corporation and its subsidiaries appears on
the next page. That report does not express an opinion on the
interim unaudited consolidated financial information. Price
Waterhouse LLP has not carried out any significant or additional
audit tests beyond those which would have been necessary if their
report had not been included. Accordingly, such report is not a
"report" or "part of the Registration Statement" within the
meaning of Sections 7 and 11 of the Securities Act of 1933 and
the liability provisions of Section 11 of such Act do not apply.<PAGE>
<PAGE>
PRICE WATERHOUSE LLP
ONE MONY PLAZA
SYRACUSE NY 13202
TELEPHONE 315-474-6571
REPORT OF INDEPENDENT ACCOUNTANTS
November 13, 1996
To the Stockholders and Board of Directors of
Niagara Mohawk Power Corporation
300 Erie Boulevard West
Syracuse NY 13202
We have reviewed the condensed consolidated balance sheet of
Niagara Mohawk Power Corporation and its subsidiaries as of
September 30, 1996, and the related condensed consolidated
statements of income for the three-month and nine-month periods
ended September 30, 1996 and 1995 and of cash flows for the nine
months ended September 30, 1996 and 1995. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the condensed consolidated
financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet at December
31, 1995, and the related consolidated statements of income,
retained earnings and cash flows for the year then ended (not
presented herein); and in our report dated January 25, 1996, we
expressed an unqualified opinion (containing an explanatory
paragraph with respect to the Company's application of Statement
of Financial Accounting Standards No. 71, Accounting for the
Effects of Certain Types of Regulation [SFAS No. 71]) on those
consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated
balance sheet as of December 31, 1995 is fairly stated, in all
material respects, in relation to the consolidated balance sheet
from which it has been derived.<PAGE>
<PAGE>
To the Stockholders and
Board of Directors
November 13, 1996
Page 2
As discussed in Note 3, the Company believes that it continues to
meet the requirements for application of SFAS No. 71 and that its
regulatory assets are currently probable of recovery in future
rates charged to customers. There are a number of events that
could change these conclusions in the fourth quarter of 1996 and
beyond, resulting in material adverse effects on the Company's
financial condition and results of operations. As also discussed
in Note 3, the Company's PowerChoice proposal, in its current
form, would restructure the Company to facilitate a transition to
a competitive electric generation market. If it becomes probable
that the proposal (or a similar proposal) will be implemented and
certain other conditions are met by third parties, the Company
would discontinue application of SFAS No. 71 with respect to the
non-nuclear portion of its electric generation business and
write-off the related net regulatory assets, currently
approximately $98 million. While the Company expects to pursue
performance based cost-of-service regulation, the form and
substance of rate regulation applied to nuclear operations will
determine whether SFAS No. 71 can continue to be applied. If the
Company determines it could no longer apply SFAS No. 71, existing
nuclear net regulatory assets, currently approximately $264
million, would be written-off. Such actions, in the aggregate,
could have a material adverse effect on the Company's results of
operations and financial condition.
/s/ Price Waterhouse LLP
- ------------------------
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Certain statements included in this Quarterly Report on Form 10-Q
regarding expected capital expenditures, statements of
management's plans and objectives for the Company's future
operations and statements of future economic performance,
including those contained in or implied by the discussion under
Item 2 (Management's Discussion and Analysis of Financial
Condition and Results of Operations), are forward-looking
statements as defined in Section 21E of the Securities Exchange
Act of 1934. Those forward-looking statements include
information on the financial condition of the Company, expected
PSC approval of cost-of-service based electric rate increases,
an expected decrease in future bad debt expense, expected
construction expenditures, the Company's borrowing capacity to
fund working capital deficits, and the assumptions described in
the Quarterly Report on Form 10-Q underlying such forward-looking
statements. The Company's actual results and developments may
differ materially from the results discussed in or implied by
such forward-looking statements, due to a number of important
factors. Those factors include, but are not limited to, matters
described in the context of such forward-looking statements, as
well as such other factors as set forth in the Notes to
Consolidated Financial Statements contained herein and in the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995.
FINANCIAL CHALLENGES
The Company faces significant challenges in its efforts to
maintain its financial condition in the face of expanding
competition. While utilities across the nation must address
these concerns to varying degrees, the Company believes that it
is more financially vulnerable because of its large industrial
customer base, an oversupply of high-cost mandated power
purchases from unregulated generators, an excess supply of
wholesale power at relatively low prices, a high tax burden, a
stagnant economy in the Company's service territory and
significant investments in nuclear plants. Moreover, solving the
problems the Company faces, including the implementation of
PowerChoice, requires the cooperation and agreement of third
parties outside the Company's control and, thus, limits the
options available to solve those problems and keep the Company
financially viable.
Company Proposal to Buy Out Unregulated Generator Contracts
On August 1, 1996 the Company announced it had offered to
terminate 44 unregulated generator contracts in exchange for a
combination of cash and securities from a newly restructured
NMPC. The offer, if accepted, would clear the way for the
implementation of PowerChoice, which the Company has indicated
depends upon reducing the cost of power the Company is required
to purchase from unregulated generators.
The 44 contracts represent more than 90% of the above-market cost
of mandated purchases by the Company. The securities included in
the offer would be issued by a restructured NMPC, which would
include electric and gas transmission and distribution assets and
nuclear assets. The new securities would be subordinate to the
existing first mortgage bonds of the Company. The proposed buy
out would not impair the rights of the Company's existing first
mortgage bondholders.
The buy out offer is conditioned, among other things, on receipt
of appropriate regulatory and other approvals including PSC
approval of an appropriate price structure consistent with the
levels envisioned by the PowerChoice proposal. The Company
cannot predict whether the offer will be accepted and implemented
as proposed. The Company's desire is to conclude negotiations on
the offer in the fourth quarter of 1996, with the appropriate
approvals following in 1997, although there can be no assurance
that such negotiations will be successful or will be concluded
within that time frame.
PSC PROPOSAL OF NEW UNREGULATED GENERATOR OPERATING AND PPA
MANAGEMENT PROCEDURES
(See Form 10-K for the fiscal year ended December 31, 1995, Part
II, Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - "Unregulated Generators.")
On August 21, 1996, the PSC proposed to examine the circumstances
under which a utility, including the Company, may legally curtail
purchases from unregulated generators; whether utilities should
be permitted to collect data that will assist in monitoring
unregulated generator's compliance with federal qualifying
facility (QF) requirements, which are standards that unregulated
generators must satisfy under the Public Utility Regulatory Act
of 1978; and if utilities should be allowed to demand security
from unregulated generators to ensure the repayment of advance
payments made under their purchased power contracts.
The PSC noted that some of the current unregulated generator
contracts are far above market prices and are causing utilities
to seek rate increases. In addition, the PSC stated that its
proposal was initiated to protect ratepayers, since it would
ensure just and reasonable rates in the event ongoing
negotiations between utilities and unregulated generators fail.
A FERC rule issued in the early 1980s describes the circumstances
under which a utility may refuse to purchase power from an
unregulated generator and avoid payment. More specifically, it
stated that a utility that will incur increased costs as a result
of the purchase may curtail or avoid the purchase if the utility
provides the unregulated generator with advance notice. In
addition, the claimed operating conditions for such curtailment
were subject to state regulatory commission verification, before
or after such curtailment.
Previously, the PSC required verification in advance of such
curtailment, among other conditions. The PSC is now considering
verification after such curtailment. Under this proposed
approach, the PSC and utilities would no longer have to invest
significant time and resources trying to predict what might
happen, as was the case when the PSC required verification in
advance of such curtailment.
In addition, the PSC is requesting comments on the procedures
for, and the contents of, utility programs for monitoring QF
status. The PSC stated that if unregulated generators are
violating the QF standards, then the obligation of the utility to
pay the full contract rate is generally excused or mitigated.
The Company cannot predict the outcome of this matter, but is
encouraged by the PSC's proposal to implement new unregulated
generator procedures. However, the Company remains committed to
the proposal it made to terminate 44 unregulated generator
contracts. (See - "Company Proposal to Buy Out Unregulated
Generator Contracts.").
1996 AND 1997 ELECTRIC RATE FILING
When PowerChoice was announced, the Company said that failure to
approve the plan would mean continued price escalation under
traditional regulation, or failing that, further deterioration in
the Company's financial condition. While negotiations are
continuing on PowerChoice, in view of increasing unregulated
generator payments, continued weak sales expectations, the
Company found it necessary to seek price increases. The Company
filed for price increases of 4.1% for 1996 and 4.2% for 1997.
The 1996 rate filing was for temporary rate relief for which the
Company asked for immediate action. As discussed in Note 3 to
the Company's Consolidated Financial Statements, on May 2, 1996,
the PSC rejected the Company's request for a temporary rate
increase primarily on the basis that the request did not meet the
PSC's legal standard for approving emergency rate increases. The
Company is continuing to pursue its traditional rate request for
1997 in order to preserve the Company's right to traditional
cost-based rates in the event that an acceptable solution cannot
be achieved through negotiation of the PowerChoice proposal. In
1996, the Company and the PSC staff jointly requested a series of
extensions totaling 180 days so parties can focus on negotiations
related to the Company's PowerChoice proposal, including its
negotiations with unregulated generators. The ALJ has approved
the extensions, changing the effective date of the requested rate
increase to July 8, 1997. The Company expects that the PSC will
approve cost-of-service based rate increases until such time as
implementation of a new competitive market model becomes
probable. For a discussion of certain factors that could cause
actual results to differ materially, see Part I, Item 1.
Financial Statements - Note 3 - "Rate and Regulatory Issues and
Contingencies - Rate Filing."
PSC COMPETITIVE OPPORTUNITIES PROCEEDING - ELECTRIC
(See Form 10-K for the fiscal year ended December 31, 1995, Part
II, Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - "PSC Competitive
Opportunities Proceeding - Electric.")
On May 16, 1996 the PSC issued its decision in its COPS case to
restructure New York State's electric industry. The decision
calls for a competitive wholesale power market in early 1997 and
the introduction of retail access for all electric customers in
early 1998.
The goals cited in its decision included lowering consumer rates,
increasing choice, continuing reliability of service, continuing
environmental and public policy programs, mitigating concerns
about market power and continuing customer protections and the
obligation to serve.
To implement its policies, the PSC directed major utilities,
excluding the Company and LILCO, to file restructuring proposals
and rate plans by October 1, 1996, consistent with these goals.
Although exempt from this filing as a result of the PowerChoice
restructuring proposal, the Company made a filing to address
several retail issues. The Company's filing also urged the PSC
to be as permissive as possible in allowing the natural
development of the competitive marketplace. In addition, it
argued that regulated and unregulated companies should be
permitted to coexist under the same holding company. Subsequent
to these October 1 filings, all parties in the COPS proceeding
will be able to review and comment on the documents. The PSC
will then review each filing.
In addition, the PSC decision in the COPS proceeding states that
recovery of utility stranded costs may be accomplished by a non-
bypassable "wire charge" to be imposed by distribution companies.
Stranded costs are utility costs that may become unrecoverable
due to a change in the regulatory environment. The calculation
of the amount of stranded costs, and the timing of recovery, will
be determined individually for each utility as part of the
October 1 filings. The PSC decision suggests that a careful
balancing of customer and utility interests and expectations is
necessary, and that the level of stranded cost recovery will
ultimately depend upon the particular circumstances of each
utility.
The PSC stated that collaborative efforts would continue to take
place to accomplish the following:
- distinguish and classify transmission and distribution
facilities;
- continue reviewing the role of Energy Service Companies
(ESCOs) in a competitive retail market, including the
development of licensing requirements and consumer
safeguards, policies relating to the transfer of the
obligation to serve, funding mechanisms that might be
needed to assure fairness among all ESCOs and matters
related to billing and metering functions;
- address transmission pricing; and
- set forth the structure of the ISO, and the Market
Exchange. The PSC stated that the ISO must have the
authority and the means to ensure reliability of the
bulk power system.
In September 1996, the Energy Association of New York State
(Energy Association) and its member companies filed a lawsuit in
the NYS Supreme Court that asked the court to order a review of
the PSC's COPS decision. The Energy Association includes the
Company and seven other investor owned utilities as members.
Even though the Company believes that the PSC's objectives in its
COPS decision are consistent with the Company's PowerChoice
proposal, the Company wanted to protect its legal rights until
all issues relating to competition in the New York State electric
industry are settled fairly. The Company cannot predict the
outcome of this matter or its effects on the Company's results of
operations or financial condition.
On October 9, 1996, the PSC issued an order establishing the
procedures and schedule for the recently issued COPS decision.
This order allows 150 days from the date of the filings to
resolve outstanding issues on the utility filings, and has
assigned the ALJ to the cases. It has allowed 90 days for
discovery and potential negotiations, and 60 days of litigation
if negotiation does not bring about a settlement.
FERC RULEMAKING ON OPEN ACCESS AND STRANDED COST RECOVERY
(See Form 10-K for the fiscal year ended December 31, 1995, Part
II, Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - "FERC NOPR on Stranded
Investment.")
In April 1996, the FERC issued two final rules and a NOPR. The
first rule addresses open transmission access and stranded cost
issues. The second rule requires utilities to establish
electronic systems to share information about available
transmission capacity and also establishes standards of conduct.
The NOPR proposes to establish a new system for utilities to use
in reserving capacity on their own and others' transmission
lines.
The first rule opens wholesale power sales to competition. Under
this rule, public utilities owning, controlling or operating
transmission lines are required to file non-discriminatory open
access tariffs that offer others the same service they provide
themselves, and in accordance with the pro forma tariff issued by
the FERC. In addition, the first rule provides for the full
recovery of stranded wholesale costs, leaving it up to the states
to decide the issue of recovery of stranded retail costs, unless
the state regulators lack authority to decide this issue.
However, the FERC said it will determine stranded cost recovery
in the case where retail customers become wholesale purchasers
through municipalization.
FERC's final rules did not require the divestiture of generation
from transmission, nor did it require an ISO to run the
transmission grid. However, the FERC did offer guidelines for
the creation of ISOs that are subject to its approval.
The NOPR proposes that each utility would replace the open access
pro forma tariff with a capacity reservation tariff (CRT), by
December 31, 1997. Under the proposed CRT, utilities and all
other power market participants would reserve firm rights to
transfer power between designated receipt and delivery points.
FERC stated its belief that the proposed reservation-based
service appears to be more compatible with open access systems.
In May 1996, the New York Power Pool's (NYPP) Executive Committee
approved the restructuring of the NYPP, of which the Company is a
member, into an ISO in order to comply with FERC's guidelines.
The NYPP plans to file an ISO tariff with the FERC by December
1996. The Company is actively involved in the restructuring of
the NYPP into a statewide ISO.
In late May 1996, the Company was among a number of parties which
filed petitions with the FERC seeking rehearing of certain
portions of its first rule. The Company stated that various
exceptions to the principle of full recovery of stranded costs
adopted in that rule would distort competition in the markets for
electric power which the rule was designed to promote. In
addition, the Company stated that these limitations on the
recovery of stranded costs may deprive utilities of a reasonable
opportunity to recover their prudently incurred costs,
particularly those utilities like the Company, that face high
levels of stranded costs due to past government mandates. The
Company also urged the FERC to make certain technical changes to
its rules for the recovery of stranded costs in the
municipalization context. The Company is unable to predict the
outcome of this matter. The FERC has granted rehearing for
purposes of further consideration; however, the FERC has an
indefinite period within which to consider and act on rehearing
petitions.
MULTI-YEAR GAS RATE PROPOSAL
In November 1995, the Company filed for a 5.8% gas rate increase
to be effective October 1, 1996. (See Form 10-K for the fiscal
year ended December 31, 1995, Part II, Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations - "PowerChoice Proposal - Multi-Year Gas Rate
Proposal.") In addition, the Company proposed a performance-
based regulation (PBR) mechanism, including a gas cost incentive
mechanism for gas operations to become effective October 1, 1997.
This filing also included a complete unbundling of the Company's
sales service allowing customers to choose alternative gas
suppliers plus a move to a rate structure for the transportation
of gas that would mitigate the throughput risk to the Company.
It also proposed the discontinuation of the weather normalization
clause and sought flexibility in pursuing unregulated
opportunities related to the gas business.
The ALJ assigned to the Company's gas rate case proceeding issued
a recommended decision in July 1996 which would allow the Company
to increase its base rates $8.4 million or 1.4% and included an
allowed ROE of 11.4%. In addition, the ALJ recommended that the
PBR proposal and rate restructuring be addressed in a second
phase of this gas rate proceeding. The ALJ also recommended the
continuation of the weather normalization clause. With respect
to the Company's SIR costs (see Item 1. Financial Statements -
Note 2 - "Contingencies - Environmental Contingencies"), the ALJ
recommended 100% recovery of these costs. The period in which
the PSC must render a decision in this case has been extended
through December 1, 1996 to allow additional time for settlement
negotiations. The Company is unable to predict the outcome of
this proceeding.
In March 1996, in a generic rate proceeding, the PSC ordered all
New York utilities to refile their tariffs to implement a service
unbundling by May 1996 (March 1996 Order). The Company refiled
its tariff on April 29, 1996, which became effective on a
temporary basis on June 1, 1996. Under the approved tariff, all
of the Company's gas customers, including residential and
commercial customers, have the opportunity to buy natural gas
from other sources with the company providing delivery service
for a separate fee. These changes have not had a material impact
on the Company's natural gas throughput risk since the Company
sells gas at cost and the margins derived from the delivery
service are essentially the same as the sales service. The
revised rate structure that had been proposed by the Company to
reduce the throughput risk has been transferred into the
Company's November 1995 rate proceeding.
In addition to the tariff filing to implement service unbundling,
the Company and other utilities filed a petition for rehearing of
certain of the determinations made in the PSC's March 1996 Order.
These determinations included the PSC's requirement that
converting customers are responsible for pipeline capacity held
by the utility on their behalf for only a three-year period
rather than for the remaining life of the pipeline contract. In
addition, the March 1996 Order states that the utility is
obligated to provide back-up service to a converting customer or
provide service to a new customer even if the utility does not
currently have sufficient pipeline capacity needed to service
that customer. However, the March 1996 Order is unclear as to
how the costs of such capacity would be recovered by the utility
after the three-year period. The Company also asked for
clarification regarding the "test" the PSC would use to determine
whether the utility has adequately demonstrated its efforts to
relieve itself of "excess" capacity. The PSC issued an order on
rehearing and did not substantively change or clarify the issues.
INCREASE IN ALLOWANCE FOR DOUBTFUL ACCOUNTS
As previously disclosed by the Company, there has been a
significant increase in past due accounts receivable since 1995.
A number of factors have contributed to the increase, including
rising prices (particularly to residential customers). Rising
prices have been driven by increased payments to unregulated
generators and high taxes and have been passed on in customers'
bills. The stagnant economy in the Company's service territory
since the early 1990's has adversely affected collection of past
due accounts. Also, laws, regulations and regulatory policies
impose more stringent collection limitations on the Company than
those imposed on business in general; for example, the inability
to terminate service during certain time periods. The Company's
collection efforts were also affected by employee turnover with
the relocation to the new Collection Center in Buffalo, New York
and the Voluntary Early Retirement Program in 1994. The Company
is developing and implementing a variety of strategies to improve
its collections and reduce its past due accounts receivable
levels and bad debt expense. While a number of strategies can
and will be implemented by the Company unilaterally, other
strategies will require the support of the PSC regarding
interpretation or alteration of the PSC's rules and regulations,
and still others may require legislative action. The Company has
initiated discussions with the staff of the PSC to explore
changes in practices that require the PSC's support, and is
formulating strategies to address legislative impediments.
The information gathered in developing these strategies enabled
management to update its risk assessment of the accounts
receivable portfolio. Based on this assessment, management
determined that the level of risk associated primarily with the
older accounts had increased and the historical loss experience
no longer applied. Accordingly, the Company has determined that
a significant portion of the past due accounts receivable
(principally of residential customers) may be uncollectible, and
has increased its allowance for doubtful accounts by $68.5
million (31 cents per share) to $88.5 million as of September 30,
1996. Since the Company was denied a temporary rate increase in
1996 and there has been a delay in the 1997 rate filing due to
negotiations related to the Company's PowerChoice proposal,
management is considering filing a petition with the PSC
requesting recovery of this increase through the rate-setting
process. In addition to this increase in the allowance for
doubtful accounts, the Company has already charged $46.3 million
to bad debt expense for the nine months ended September 1996.
For the nine months ended September 1995, the Company had charged
$25.3 million to bad debt expense. The allowance for doubtful
accounts is based on critical assumptions and judgments as to the
effectiveness of collection efforts. However, future results
with respect to collecting the past due receivables may prove to
be different from those anticipated. The Company is hopeful
that, future bad debt expense will be lower than that experienced
in 1996, as a result of the implementation of new collection
strategies. Such a result is necessarily dependent upon the
following factors, including, among other things, the
effectiveness of the strategies discussed above, the support of
regulators and legislators to allow utilities to move towards
commercial collection practices and improvement in the condition
of the economy in the Company's service territory. The Company
has been pursuing PowerChoice to address high prices that are the
result of traditional price regulation, but the introduction of
competition requires that policies and practices that were
central to traditional regulation, including those involving
collections, be changed so as not to jeopardize the benefits of
competition.
SALE OF 50 PERCENT INTEREST IN CANADIAN NIAGARA POWER COMPANY,
LIMITED
In October 1996, Opinac Energy Corporation, a wholly-owned
subsidiary of the Company, sold 50 percent of its interest in
Canadian Niagara Power Company, Limited (CNP) to Fortis Inc.
(Fortis), a widely held Canadian holding company, resulting in an
after-tax gain of approximately $14 million. CNP was a wholly-
owned subsidiary of Opinac Energy Corporation.
COMMON STOCK DIVIDEND
The board of directors omitted the common stock dividend for all
of 1996. This action was taken to help stabilize the Company's
financial condition and provide flexibility as the Company
addresses growing pressure from mandated power purchases and
weaker sales and is the primary reason for the increase in the
cash balance. In making future dividend decisions, the board
will evaluate, along with standard business considerations, the
level and timing of future rate relief, the progress of
negotiating with unregulated generators within the context of its
PowerChoice proposal, the degree of competitive pressure on its
prices, and other strategic considerations.
LIQUIDITY AND CAPITAL RESOURCES
(See Form 10-K for the fiscal year ended December 31, 1995, Part
II, Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - "Financial Position,
Liquidity and Capital Resources.")
On April 25, 1996, Moody's Investors Service (Moody's) lowered
its ratings on the Company's senior secured debt, to Ba3 from
Ba1; senior unsecured debt to B2 from Ba2; its preferred stock to
b3 from ba3. Moody's "Not Prime" rating for the Company's
commercial paper remains unchanged. Moody's stated that it
downgraded the long-term credit ratings of the Company, based on
the limited progress made in achieving the goals identified in
the Company's PowerChoice proposal, among other financial
concerns, which may ultimately lead to a voluntary bankruptcy
filing. In addition, Moody's stated that due to the level of
uncertainty and potential volatility of the situation, its rating
outlook on the Company remains negative.
On May 22, 1996, Standard & Poor's (S&P) lowered its ratings on
the Company's senior secured debt to BB- from BB; senior
unsecured debt to B from B+; its preferred stock to B- from B;
and commercial paper to not rated from B. S&P stated that the
downgrade results from the inability of the financially weak
Company and the unregulated generators to make substantive
progress in their renegotiation of unregulated generator
contracts. In addition, S&P stated that the lack of progress
after several months of negotiations between the Company and the
unregulated generators increases the uncertainty that a
settlement can be achieved.
Cash flows to meet the Company's requirements for the first nine
months of 1996 and 1995 are reported in the Consolidated
Statements of Cash Flows on Page 7.
During March 1996, the Company completed an $804 million senior
debt facility with a bank group for the purposes of consolidating
and refinancing certain of the Company's existing working capital
lines of credit and letter of credit facilities and providing
additional reserves of bank credit. This senior debt facility
will enhance the Company's financial flexibility during the
period 1996 through June 1999. The senior debt facility consists
of a $255 million term loan facility, a $125 million revolving
credit facility and $424 million for letters of credit. The
letter of credit facility provides credit support for the
adjustable rate pollution control revenue bonds issued through
the New York State Energy and Development Authority. As of
September 30, 1996, the amount outstanding under the senior debt
facility was $118 million, consisting of $105 million of
borrowing and a $13 million letter of credit under the term loan
facility, leaving the Company with $275 million of borrowing
capability under the facility. The facility expires on June 30,
1999 (subject to earlier termination upon the implementation of
the Company's PowerChoice restructuring proposal or any other
significant restructuring plan).
This facility is collateralized by first mortgage bonds which
were issued on the basis of additional property. As of September
30, 1996, the Company could issue an additional $1,311 million
aggregate principal amount of first mortgage bonds under the
Company's mortgage trust indenture. This amount is based upon
retired bonds without regard to an interest coverage test.
The Company believes that it will spend approximately $290
million for construction in 1996. For the nine months ended
September 30, 1996, the Company had incurred approximately $186.9
million for construction additions. The actual amount of
construction expenditures depends on, among other things, the
timing of expenditures, which may be affected by storm damage.
Ordinarily, construction-related short-term borrowings are
refunded with long-term securities on a periodic basis. This
approach generally results in the Company showing a working
capital deficit. Working capital deficits may also be a result
of the seasonal nature of the Company's operations as well as
timing differences between the collection of customer receivables
and the payment of fuel and purchased power costs. The Company
is experiencing a significant deterioration in its collections as
compared to prior years' experience and is taking steps to
improve collection. (See - "Increase in Allowance for Doubtful
Accounts.") The Company believes it has sufficient borrowing
capacity to fund such deficits as necessary in the near term.
However, the Company's borrowing capacity to fund such deficits
may be affected by the factors discussed in the following
paragraph.
External financing plans are subject to periodic revision as
underlying assumptions are changed to reflect developments,
market conditions and, most importantly, implementation of the
Company's PowerChoice proposal or in the alternative, the
Company's rate proceedings. The ultimate level of financing
during the period 1996 through 1999 will be effected by, among
other things: the outcome of the restructuring envisioned in the
PowerChoice proposal (or a similar proposal), including the
Company's recent offer to buy out 44 unregulated generator
contracts; the alternatives the Company may pursue if the
Company's offer is not accepted; the outcome of the 1997 and
future traditional rate requests; levels of common dividend
payments, if any, and preferred dividend payments; the Company's
competitive position and the extent to which competition
penetrates the Company's markets; uncertain energy demand due to
the weather and economic conditions; and the extent to which the
Company reduces non-essential programs and manages its cash flow
during this period. The Company could also be affected by the
outcome of the NRC's consideration of new rules for adequate
financial assurance of nuclear decommissioning obligations. (See
Part II, Item 5. Other Information - "NRC Draft Policy
Statement.") In the longer term, in the absence of PowerChoice
or some reasonably equivalent solution, financing will depend on
the amount of rate relief that may be granted.
RESULTS OF OPERATIONS
The following discussion presents the material changes in results
of operations for the three months and nine months ended
September 30, 1996 in comparison to the same periods in 1995.
The Company's results of operations reflect the seasonal nature
of its business, with peak electric loads in summer and winter
periods. Gas sales peak principally in the winter. The earnings
for the three months and nine months periods should not be taken
as an indication of earnings for all or any part of the balance
of the year.
THREE MONTHS ENDED SEPTEMBER 30, 1996 VERSUS THREE MONTHS ENDED
SEPTEMBER 30, 1995
The Company experienced a loss during the third quarter of 1996
in the amount of $22.5 million or 16 cents per share, as compared
with earnings of $37.3 million or 26 cents per share in 1995.
The loss in the third quarter of 1996 reflects a charge of $68.5
million or 31 cents per share, reflecting an increased allowance
for doubtful customer bills. The allowance is necessary to
properly recognize the increased risk of collecting significantly
higher levels of past-due customer bills. In addition, the
Company experienced an increase in bad debt expense in the third
quarter of 1996 of $8.6 million or 4 cents per share and lower
margins on public sales.
ELECTRIC REVENUES
Electric revenues were $829 million during the third quarters of
both 1996 and 1995. As shown in the table below, FAC revenues
increased $23.0 million, which reflects the increased payments
made to unregulated generators. These increases were offset by
lower electric sales to ultimate customers and a decrease in the
amount of unbilled revenues recorded. The Company recorded $10.9
million of unbilled, non-cash revenues in the third quarter of
1995 in accordance with the 1995 rate order. There were no
unbilled revenues recorded in the third quarter of 1996.
FAC revenues $ 23.0 million
Unbilled revenues (10.9)
Changes in volume and mix of sales
to ultimate customers (12.1)
-------
$ - million
=======
ELECTRIC SALES
Electric Kwh sales to ultimate consumers were approximately 8.3
billion in the third quarter of 1996, a 0.4% decrease from the
same period in 1995. After adjusting for the effects of weather,
sales to ultimate consumers increased 3.0%. Sales for resale
increased 157 million Kwhs or 13.6% due to an increased demand
for electricity in the northeast, resulting in a net increase in
total electric Kwh sales of 152 million or 1.6%. Sales for
resale generally result in low margin contribution to the Company
due to regulatory sharing mechanisms and relatively low prices
caused by excess supply.
Electric fuel and purchased power costs increased $19.2 million
or 6.0%. This increase is the result of a $42.5 million
increase in actual purchased power costs (including increased
payments to unregulated generators of $37.8 million or 16.7%),
partially offset by a $17.3 million decrease in costs deferred
and recovered through the operation of the FAC and a $6.0 million
decrease in actual fuel costs. The decrease in fuel costs
reflects a 5.6% decrease in Company generation due to unregulated
generator purchase requirements, which reduced the operation of
the Company's fossil plants during the third quarter of 1996.
GAS REVENUES
Gas revenues increased $8.4 million or 14.5% in the third quarter
of 1996 from the comparable period in 1995 as set forth in the
table below:
Sales to ultimate consumers $ 2.7 million
Purchased gas adjustment clause revenues 1.3
Spot market sales 4.4
-----
$ 8.4 million
=====
GAS SALES
Gas sales to ultimate consumers increased .1 million Dth or 3.0%
from 1995. After adjusting for the effects of weather, sales to
ultimate consumers decreased 4.3%. Spot market sales (sales for
resale) which are generally from the higher priced gas available
to the Company and therefore yield margins that are substantially
lower than traditional sales to ultimate consumers, also
increased. In addition, changes in purchased gas adjustment
clause revenues are generally margin-neutral.
The total cost of gas included in expense increased $8.9 million
or 52.1% in 1996. This was the result of a 0.9 million increase
in Dth purchased and withdrawn from storage for ultimate consumer
sales ($5.1 million) and a $4.1 million increase in Dth purchased
for spot market sales and a $1.8 million increase in purchased
gas costs and certain other items recognized and recovered
through the purchased gas adjustment clause (GAC), partially
offset by a 5.5% decrease in the average cost per Dth purchased
($2.1 million). The Company's net cost per Dth sold, as charged
to expense and excluding spot market purchases, increased to
$3.37 in 1996 from $2.96 in 1995.
OTHER OPERATION AND MAINTENANCE EXPENSES increased $84.1 million
primarily as a result of a charge of $68.5 million, reflecting an
increase in the Company's allowance for doubtful accounts to
recognize the increased risk of collection inherent in
significantly higher levels of past-due customer bills. (See -
"Increase in Allowance for Doubtful Accounts.") In addition, the
Company experienced an increase in bad debt write-offs of $8.6
million.
FEDERAL AND FOREIGN INCOME TAXES (NET) decreased $34.9 million as
a result of a decrease in pre-tax income.
OTHER TAXES decreased by approximately $10.8 million primarily as
a result of lower real estate taxes ($3.5 million) and year-to-
year differences in the accounting of regulatory deferrals ($4.4
million).
NINE MONTHS ENDED SEPTEMBER 30, 1996 VERSUS NINE MONTHS ENDED
SEPTEMBER 30, 1995
Earnings for the first nine months of 1996 were $107.4 million or
74 cents per share, as compared with $190.2 million or $1.32 per
share in 1995. Earnings for the first nine months of 1996 were
lower because 1995 earnings included the recording of a one-time,
non-cash adjustment of prior years' DSM incentive revenues of $17
million, $9.4 million of revenues earned under the Unit 1
operating incentive sharing mechanism and a gain on the sale of
HYDRA-CO of $11.3 million that collectively increased 1995
earnings by 17 cents per share. In addition, an increase in bad
debt expense of $21.0 million or 9 cents per share and a charge
of $68.5 million or 31 cents per share to increase the Company's
allowance for doubtful accounts to properly recognize the
increased risk of collecting significantly higher levels of past
due customer bills also contributed to lower 1996 earnings.
ELECTRIC REVENUES
As shown in the table below, electric revenues, decreased $37.8
million or 1.5% from 1995, primarily due to a decrease in
miscellaneous electric revenues. Miscellaneous electric revenues
were lower in 1996 because 1995 electric revenues included the
recording of $66.4 million of unbilled, non-cash revenues in
accordance with the 1995 rate order, $9.4 million of revenues
earned under the Unit 1 operating incentive sharing mechanism and
a one-time, non-cash adjustment of prior year's DSM incentive
revenues of $17 million. However, higher electric sales due to
the colder weather and higher electric rates (effective April 26,
1995) partly offset those factors that contributed to lower
electric revenues.
Increase in base rates $ 44.9 million
Sales to other electric utilities 24.5
Unit 1 incentive surcharge ( 9.4)
Changes in volume and mix of sales
to ultimate customers ( 9.7)
DSM revenues (21.7)
Unbilled revenues (66.4)
-------
$(37.8) million
=======
ELECTRIC SALES
Electric Kwh sales to ultimate consumers were approximately 25.3
billion in 1996, a 1.3% increase from the same period in 1995
primarily as a result of colder weather. After adjusting for the
effects of weather, sales to ultimate consumers would have
increased 1.2%. Sales for resale increased 1,192 million Kwh
(41.7%) due to increased demand for electricity in the northeast,
resulting in a net increase in total electric Kwh sales of 1,545
million (5.5%). Sales for resale generally result in low margin
contribution to the Company due to regulatory sharing mechanisms
and relatively low prices caused by excess supply.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
ELECTRIC REVENUES (Thousands) SALES (GwHrs)
---------------------------------- --------------------------
% %
1996 1995 Change 1996 1995 Change
<S> <C> <C> <C> <C> <C> <C>
Residential $ 958,368 $ 922,152 3.9 7,767 7,644 1.6
Commercial 936,885 942,443 (0.6) 8,790 8,776 0.2
Industrial 393,093 399,503 (1.6) 5,374 5,328 0.9
Industrial - Special 43,709 42,452 3.0 3,230 3,112 3.8
Other 39,821 37,332 6.7 178 160 11.3
--------- ---------- ------ ------ ------ ----
Total to Ultimate
Consumers 2,371,876 2,343,882 1.2 25,339 25,020 1.3
Other Electric Systems 85,385 60,891 40.2 4,051 2,859 41.7
Miscellaneous 13,154 103,882 (87.3) - - -
Subsidiary 14,549 14,133 2.9 303 269 12.6
---------- --------- ------ ----- ------- ----
TOTAL $2,484,964 $2,522,788 (1.5) 29,693 28,148 5.5
========== ========== ====== ====== ====== ====
/TABLE
<PAGE>
As indicated in the table below, internal generation increased in
1996, principally at Unit 1 and Unit 2. From February 8, 1995 to
April 4, 1995, Unit 1 was taken out of service for a planned
refueling and maintenance outage. From April 8, 1995 to June 2,
1995, Unit 2 was taken out for a planned refueling and
maintenance outage.
The amount of electricity delivered to the Company by unregulated
generators decreased by approximately 468 GwHrs or 4.5%, but
total unregulated generator costs increased by approximately
$80.6 million or 11.1%, as explained below.
HYDROELECTRIC UNREGULATED GENERATOR PROJECTS
Due to high precipitation and spring run-off levels so far this
year, hydroelectric unregulated generator projects produced and
therefore increased energy deliveries to the Company by 586 GwHrs
under PPAs resulting in increased payments to those unregulated
generators of $53.3 million. In addition, a major new
hydroelectric unregulated generator came on line in November
1995, contributing to the increase in hydroelectric deliveries.
"MUST RUN" UNREGULATED GENERATOR COGENERATION PROJECTS
A substantial portion of the Company's portfolio of unregulated
generator projects operate on a "must run" basis. This means
that they tend to run to the maximum production levels regardless
of the need or economic value of the electricity produced.
Despite delivering 590 GwHrs less, due to a higher weighted
average price, payments to "must run" unregulated generators
increased $3.0 million. With respect to "must run" unregulated
generator cogeneration projects, a number of elements combined to
reduce the aggregate deliveries from "must run" unregulated
generators. These elements included renegotiation of certain
contracts, maintenance outages at certain unregulated generator
facilities and lower deliveries from other facilities.
SCHEDULABLE COGENERATION PROJECTS
The Company has renegotiated PPAs with a number of unregulated
generator cogeneration projects in order to obtain the right to
schedule the electricity deliveries of the project. The terms of
these PPAs allow the Company to schedule energy deliveries from
the facilities and then pay for the energy delivered. The
Company is also required to make fixed payments, whether or not
the unregulated generator plant produces electricity so long as
it is available for service. (See Form 10-K for the fiscal year
ended December 31, 1995, Part II, Item 8. Notes to Consolidated
Financial Statements - Note 9. Commitments and Contingencies -
"Long-term Contracts for the Purchase of Electric Power.")
Quantities from schedulable cogeneration unregulated generators
decreased 464 GwHrs. Payments to schedulable unregulated
generators increased by $24.3 million, primarily due to increased
fixed payments of approximately $25.6 million. The increase in
fixed payments is caused by a new schedulable unregulated
generator whose plant came on line in May 1995 and due to
escalation factors included in the PPAs. In addition, payments
to schedulable unregulated generators reflect the increase in the
cost of natural gas.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
GwHrs Cost (Millions) Cents/Kwhr.
----------------------- -------------------------- ------------
% %
1996 1995 Change 1996 1995 Change 1996 1995
FUEL FOR ELECTRIC GENERATION:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Coal 5,314 5,150 3.2 $ 75.2 $ 74.8 0.5 1.4 1.5
Oil 392 469 (16.4) 17.0 19.0 (10.5) 4.3 4.1
Natural Gas 244 934 (73.9) 7.1 18.4 (61.4) 2.9 2.0
Nuclear 6,417 4,889 31.3 36.1 27.7 30.3 0.6 0.6
Hydro 2,883 2,021 42.7 - - - - -
------ ------ ----- -------- ------ ----- --- ---
15,250 13,463 13.3 135.4 139.9 (3.2) 0.9 1.0
------ ------ ----- -------- ------ ----- --- ---
<PAGE>
<PAGE>
ELECTRICITY PURCHASED:
Unregulated Generators:
Capacity - - - 158.4 132.8 19.3 - -
Energy and taxes 10,027 10,495 (4.5) 649.7 594.7 9.2 6.5 5.7
------ ------ ------ --------- ------ ------- --- ---
Total UG purchases 10,027 10,495 (4.5) 808.1 727.5 11.1 8.1 6.9
Other 7,159 7,209 (0.7) 98.0 98.3 (0.3) 1.4 1.4
------ ------ ------ --------- ------ ------- --- ---
17,186 17,704 (2.9) 906.1 825.8 9.7 5.3 4.7
------ ------ ------ --------- ------ ------- --- ---
32,436 31,167 4.1 1,041.5 965.7 7.9 3.2 3.1
------ ------ ------ --------- ------ ------- --- ---
Fuel adjustment
clause - - - (25.4) 14.1 (280.1) - -
Losses/Company use 2,743 3,019 (9.1) - - - - -
------ ------ ------ --------- ------ ------- --- ---
29,693 28,148 5.5 $1,016.1 $979.8 3.7 3.4 3.5
====== ====== ====== ========= ====== ======= === ===
/TABLE
<PAGE>
<PAGE>
GAS REVENUES
Gas revenues increased $106.5 million or 24.9% in 1996 from the
comparable period in 1995 as set forth in the table below:
Sales to ultimate customers $ 46.0 million
Spot market sales 32.3
Purchased gas adjustment clause revenues 28.2
------
$106.5 million
=======
GAS SALES
Due to colder weather during the first quarter of 1996, gas sales
to ultimate consumers for the first nine months of 1996 increased
8.5 million Dth or 14.5% from 1995. After adjusting for the
effects of weather, sales to ultimate consumers decreased 5.8%.
Spot market sales (sales for resale), which are generally from
the higher priced gas available to the Company and therefore
yield margins that are substantially lower than traditional sales
to ultimate consumers, also increased. In addition, changes in
purchased gas adjustment clause revenues are generally margin-
neutral.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
GAS REVENUES (Thousands) SALES (Thousands of Dth)
------------------------------- -------------------------------
% %
1996 1995 Change 1996 1995 Change
<S> <C> <C> <C> <C> <C> <C>
Residential $326,778 $275,513 18.6 44,692 39,030 14.5
Commercial 127,638 105,086 21.5 19,900 17,474 13.9
Industrial 11,205 8,224 36.2 2,301 1,925 19.5
-------- -------- --------- ------- ------- --------
Total to Ultimate
Consumers 465,621 388,823 19.8 66,893 58,429 14.5
Other Gas Systems 101 705 (85.7) 22 150 (85.3)
Transportation of
Customer-Owned Gas 35,806 34,993 2.3 95,965 107,395 (10.6)
Spot Market Sales 33,299 1,038 3,108.0 9,298 551 1,587.5
Miscellaneous (244) 2,513 (109.7) - - -
-------- -------- --------- ------- ------- --------
TOTAL TO SYSTEM
CORE CUSTOMERS $534,583 $428,072 24.9 172,178 166,525 3.4
======== ======== ========= ======= ======= ========
</TABLE>
<PAGE>
<PAGE>
The total cost of gas included in expense increased $95.8 million
or 47.7%. This was the result of a 9.1 million increase in Dth
purchased and withdrawn from storage for ultimate consumer sales
($29.2 million) and a $25.9 million increase in Dth purchased for
spot market sales, coupled with a 9.4% increase in the average
cost per Dth purchased ($19.7 million) and a $21.0 million
increase in purchased gas costs and certain other items
recognized and recovered through the purchased GAC. The
Company's net cost per Dth sold, as charged to expense and
excluding spot market purchases, increased to $4.11 in the first
nine months of 1996 from $3.53 in the same period in 1995.
OTHER OPERATION AND MAINTENANCE EXPENSES increased $101.5 million
primarily as a result of a charge of $68.5 million, reflecting an
increase in the Company's allowance for doubtful accounts to
recognize the increased risk of collection inherent in
significantly higher levels of past-due customer bills (See
"Increase in Allowance for Doubtful Accounts.") In addition, the
Company experienced an increase in bad debt expense of $21.0
million. This was partially offset by a decrease in Unit 1 and
Unit 2 operation and maintenance costs which were higher in 1995
as a result of planned refueling and maintenance outages.
On February 8, 1995, Unit 1 was taken out of service for a
planned refueling and maintenance outage and returned to service
on April 4, 1995. Its next refueling and maintenance outage is
scheduled to begin in February 1997. On April 8, 1995, Unit 2
was taken out of service for a planned refueling and maintenance
outage and returned to service on June 2, 1995. On September 27,
1996, Unit 2 was taken out for a planned refueling and
maintenance outage and returned to service on November 2, 1996.
OTHER ITEMS (NET) decreased by $6.3 million in the first nine
months of 1996 from the comparable period in 1995 principally
because 1995 included a $21.6 million pre-tax gain from the sale
of HYDRA-CO, partially offset by certain accounting requirements
of the 1995 rate order.
FEDERAL AND FOREIGN INCOME TAXES (NET) decreased by approximately
$69.8 million primarily due to a decrease in pre-tax income.
OTHER TAXES decreased by approximately $27.1 million primarily as
a result of lower real estate taxes ($6.2 million) and year-to-
year differences in the accounting for regulatory deferrals
($15.6 million).
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
- ---------------------------
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
- ---------------------------------------------------------
ITEM 5. OTHER INFORMATION.
NRC DRAFT POLICY STATEMENT
In September 1996, the NRC issued a draft policy statement
on the Restructuring and Economic Deregulation of the Electric
Utility Industry (Draft Policy Statement). The policy statement
addresses NRC's concerns about the adequacy of decommissioning
funds and about the potential impact on operational safety.
Current NRC regulations allow a utility to set aside
decommissioning funds annually over the estimated life of a plant
(See Form 10-K for the fiscal year ended December 31, 1995, Part
II, Item 8. Notes to Consolidated Financial Statements - Note 3.
Nuclear Operations - "Nuclear Plant Decommissioning.")
The policy statement declares the NRC will:
- Continue to conduct reviews of financial qualifications,
decommissioning funding and antitrust requirements of
nuclear power plants;
- Establish and maintain working relationships with state and
federal rate-regulators;
- Evaluate the relative responsibilities of power plant co-
owners and co-licensees; and
- Re-evaluate the adequacy of current regulations in light of
economic and other changes resulting from rate
deregulation.
In addition, the policy statement stresses that no license may
be transferred without prior written approvals from the NRC. In
addition, prior written approvals are required for mergers,
formation of holding companies or the sale of facilities,
including a partial sale.
The Company is currently evaluating the Draft Policy Statement
and plans to file its comments by the December 9, 1996 due date.
NEW YORK NUCLEAR OPERATING COMPANY
In October 1996, the Company and Rochester Gas and Electric
Corporation (RG&E) announced plans to form a joint nuclear
operating company to support and manage the operations of RG&E's
Ginna nuclear plant and the Company's Unit 1 and Unit 2 nuclear
plants.
The plan includes the initial formation of a nuclear services
company, called the New York Nuclear Operating Company, to
provide support services such as quality assessment, emergency
preparedness, engineering support and fuel management.
Ultimately, the plan calls for the creation of a joint operating
company to manage the three plants.
The Company's executive vice president and chief nuclear
officer, B. Ralph Sylvia, has been selected to initially head the
formation of the nuclear services and operating company.
NM RECEIVABLES CORPORATION
The Company has established a single-purpose wholly-owned
subsidiary, NM Receivables Corporation, to facilitate its sale of
an individed interest in a designated pool of customer
receivables, including accrued unbilled revenues.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit 3(ii) - By-laws of NMPC, as amended September 26,
1996.
Exhibit 10-11 - NMPC Officers' Long Term Incentive
Compensation - Plan Document.
Exhibit 10-17 - Employment Agreement between NMPC and
David J. Arrington, Sr. Vice President, Human Resources,
dated July 1, 1996.
Exhibit 10-18 - Employment Agreement between NMPC and
Albert J. Budney, Jr., President and Chief Operating
Officer, dated July 1, 1996.
Exhibit 10-19 - Employment Agreement between NMPC and
William E. Davis, Chairman of the Board and Chief Executive
Officer, dated July 1, 1996.
Exhibit 10-20 - Employment Agreement between NMPC and
Darlene D. Kerr, Sr. Vice President, Energy Distribution
dated July 1, 1996.
Exhibit 10-21 - Employment Agreement between NMPC and Gary
J. Lavine, Sr. Vice President, Legal and Corporate
Relations, dated July 1, 1996.
Exhibit 10-22 - Employment Agreement between NMPC and John
W. Powers, Sr. Vice President and Chief Financial Officer,
dated July 1, 1996.
Exhibit 10-23 - Employment Agreement between NMPC and B.
Ralph Sylvia, Executive Vice President, Electric Generation
and Chief Nuclear Officer, dated July 1, 1996.
Exhibit 11 - Computation of the Average Number of Shares of
Common Stock Outstanding for the Three Months and Nine
Months Ended September 30, 1996 and 1995.
Exhibit 12 - Statement Showing Computations of Ratio of
Earnings to Fixed Charges, Ratio of Earnings to Fixed
Charges without AFC and Ratio of Earnings to Fixed Charges
and Preferred Stock Dividends for the Twelve Months Ended
September 30, 1996.
Exhibit 15 - Accountants' Acknowledgement Letter.
Exhibit 27 - Financial Data Schedule.
In accordance with Paragraph 4(iii) of Item 601(b) of
Regulation S-K, the Company agrees to furnish to the
Securities and Exchange Commission, upon request, a copy of
the agreements comprising the $804 million senior debt
facility that the Company completed with a bank group
during March 1996. The total amount of long-term debt
authorized under such agreement does not exceed 10 percent
of the total consolidated assets of the Company and its
subsidiaries.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter for
which this report is filed.<PAGE>
<PAGE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
- ---------------------------------------------------------
SIGNATURES
- ----------
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.
NIAGARA MOHAWK POWER CORPORATION
(Registrant)
Date: November 13, 1996 By /s/ Steven W. Tasker
--------------------
Steven W. Tasker
Vice President-Controller
and Principal Accounting Officer
<PAGE>
<PAGE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
- ---------------------------------------------------------
EXHIBIT INDEX
- -------------
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
3(ii) By-laws of NMPC, as amended September 26, 1996.
10-11 NMPC Officers' Long Term Incentive Compensation - Plan
Document.
10-17 Employment Agreement between NMPC and David J.
Arrington, Sr. Vice President, Human Resources, dated
July 1, 1996.
10-18 Employment Agreement between NMPC and Albert J. Budney,
Jr., President and Chief Operating Officer, dated July
1, 1996.
10-19 Employment Agreement between NMPC and William E. Davis,
Chairman of the Board and Chief Executive Officer,
dated July 1, 1996.
10-20 Employment Agreement between NMPC and Darlene D. Kerr,
Sr. Vice President, Energy Distribution, dated July 1,
1996.
10-21 Employment Agreement between NMPC and Gary J. Lavine,
Sr. Vice President, Legal and Corporate Relations,
dated July 1, 1996.
10-22 Employment Agreement between NMPC and John W. Powers,
Sr. Vice President and Chief Financial Officer, dated
July 1, 1996.
10-23 Employment Agreement between NMPC and B. Ralph Sylvia,
Executive Vice President, Electric Generation and Chief
Nuclear Officer, dated July 1, 1996.
11 Computation of the Average Number of Shares of Common
Stock Outstanding for the Three Months and Nine Months
Ended September 30, 1996 and 1995.
12 Statement Showing Computations of Ratio of Earnings to
Fixed Charges, Ratio of Earnings to Fixed Charges
without AFC and Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends for the Twelve Months Ended
September 30, 1996.
15 Accountants' Acknowledgement Letter.
27 Financial Data Schedule.
<PAGE>
<PAGE>
EXHIBIT 3(ii)
BY-LAWS
- -------
NIAGARA MOHAWK POWER CORPORATION
- --------------------------------
ADOPTED JANUARY 5, 1950
- -----------------------
(As Amended September 26, 1996)
*Index
Additional Officers Lost Stock Certificates
Adjournments Notices of Meetings
Amendments Officers
Annual Meeting Place of Meeting
Assistant Officers President
Audit Committee Procedure
Bonds Proxies
Certificate of Stock Quorum
Chairman of the Board Record Date
Committees Registrar
Compensation Resignation
Controller Scrip
Corporate Charter Secretary
Corporate Seal Special Meetings
Directors Stock
Directors' Meetings Stockholders' Meetings
Election Term of Office
Executive Committee Transfer Agent
Finance Committee Transfers of Shares
Finances Treasurer
Fiscal Year Vacancies
General Provisions Vice Presidents
Indemnification; Insurance Voting
Inspectors of Election
*This Index does not constitute part of the By-Laws or have any
bearing upon the interpretation of their terms and provisions.
<PAGE>
<PAGE>
BY-LAWS OF NIAGARA MOHAWK POWER CORPORATION
ARTICLE I
- ---------
BY-LAWS SUPPLEMENT CORPORATE CHARTER
- ------------------------------------
SECTION 1. CORPORATE CHARTER: The provisions of these by-laws
supplement the corporate charter. The provisions of the latter
shall govern over the provisions of these by-laws in the event of
any conflict. Elections of directors and meetings of
stockholders in addition to those provided by these by-laws may
be held in accordance with the provisions of the corporate
charter. The term "corporate charter" as used in these by-laws
includes the Certificate of Consolidation of Antwerp Light and
Power Company, Baldwinsville Light and Heat Company of
Baldwinsville, N.Y., Fulton Fuel and Light Company, Fulton Light,
Heat and Power Company, Malone Light and Power Company, Northern
New York Utilities, Inc., The Norwood Electric Light and Power
Company, Peoples Gas and Electric Company of Oswego, St. Lawrence
County Utilities, Inc., St. Lawrence Valley Power Corporation,
The Syracuse Lighting Company, Inc., and Utica Gas and Electric
Company forming Niagara Hudson Public Service Corporation, filed
in the Department of State of the State of New York on July 31,
1937, all certificates supplemental thereto or amendatory thereof
or in restatement thereof filed in the Department of State of the
State of New York (including specifically but without limitation
among all such supplemental or amendatory certificates heretofore
filed or hereafter to be filed, the Certificate of Change of Name
of Niagara Hudson Public Service Corporation to Central New York
Power Corporation, filed in the Department of State of the State
of New York on September 15, 1937, the Certificate of
Consolidation of New York Power and Light Corporation and Buffalo
Niagara Electric Corporation and Central New York Power
Corporation which is to survive the consolidation and be named
Niagara Mohawk Power Corporation pursuant to Sections 26-a and 86
of the Stock Corporation Law and to Subdivision 4 of Section 11
of the Transportation Corporations Law, filed in the Department
of State of the State of New York on January 5, 1950, and the
Certificate of Amendment of Certificate of Incorporation of
Niagara Mohawk Power Corporation pursuant to Sections 26-a and 36
of the Stock Corporation Law, filed in the Department of State of
the State of New York on January 5, 1950), and includes also all
resolutions of the board of directors fixing the designations,
preferences, privileges and voting powers of any series of stock
of the corporation, and all other instruments which are binding
upon, and define or set forth the rights of, the stockholders of
the corporation.
<PAGE>
<PAGE>
ARTICLE II
- ----------
MEETINGS OF STOCKHOLDERS
- ------------------------
SECTION 1. ANNUAL MEETING: The annual meeting of the
stockholders of the corporation for the election of directors and
the transaction of such other business as may properly come
before it shall be held on the first Tuesday in May in each year.
If that day be a legal holiday in any year, the meeting shall be
held on the next day following that is not a legal holiday.
Business properly brought before any such annual meeting
shall include matters specifically set forth in the corporation's
proxy statement with respect to such meeting, matters which the
Chairman of the Board of Directors in his sole discretion causes
to be placed on the agenda of any such annual meeting and (i) any
proposal of a stockholder of this corporation and (ii) any
nomination by a stockholder of a person or persons for election
as director or directors, if such stockholder has made a written
request to this corporation to have such proposal or nomination
considered at such annual meeting, as provided herein, and
further provided that such proposal or nomination is otherwise
proper for consideration under applicable law and the certificate
of incorporation and by-laws of the corporation.
Notice of any proposal to be presented by any stockholder or
of the name of any person to be nominated by any stockholder for
election as a director of the corporation must be received by the
secretary of the corporation at its principal executive office
not less than 45 nor more than 90 days prior to the date of the
annual meeting; provided, however, that if the date of the annual
meeting is first publicly announced or disclosed (in a public
filing or otherwise) less than 55 days prior to the date of the
meeting, such notice shall be given not more than ten days after
such date is first so announced or disclosed. Public notice
shall be deemed to have been given more than 55 days in advance
of the annual meeting if the corporation shall have previously
disclosed, in these by-laws or otherwise, that the annual meeting
in each year is to be held on a determinable date, unless and
until the Board of Directors determines to hold the meeting on a
different date.
Any stockholder who gives notice of any such proposal shall
deliver therewith the text of the proposal to be presented and a
brief written statement of the reasons why such stockholder
favors the proposal and setting forth such stockholder's name and
address, the number and class of all shares of each class of
stock of the corporation beneficially owned by such stockholder
and any material interest of such stockholder in the proposal
(other than as a stockholder).
Any stockholder desiring to nominate any person for election
as a director of the corporation shall deliver with such notice a
statement in writing setting forth the name of the person to be
nominated, the number and class of all shares of each class of
stock of the corporation beneficially owned by such person, the
information regarding such person required by paragraphs (a), (e)
and (f) of Item 401 of Regulation S-K adopted by the Securities
and Exchange Commission (or the corresponding provisions of any
regulation subsequently adopted by the Securities and Exchange
Commission applicable to the corporation), such person's signed
consent to serve as a director of the corporation if elected,
such stockholder's name and address and the number and class of
all shares of each class of stock of the corporation beneficially
owned by such stockholder. As used herein, shares "beneficially
owned" shall mean all shares as to which such person, together
with such person's affiliates and associates (as defined in Rule
12b-2 under the Securities Exchange Act of 1934), may be deemed
to beneficially own pursuant to Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, as well as all shares as to
which such person, together with such person's affiliates and
associates, has the right to become the beneficial owner pursuant
to any agreement or understanding, or upon the exercise of
warrants, option or rights to convert or exchange (whether such
rights are exercisable immediately or only after the passage of
time or the occurrence of conditions).
The person presiding at the meeting in addition to making
any other determinations that may be appropriate to the conduct
of the meeting, shall determine whether such notice has been duly
given and shall direct that proposals and nominees not be
considered if such notice has not been so given.
SECTION 2. SPECIAL MEETINGS: Special meetings of the
stockholders of the corporation may be called at any time by a
majority of the entire board of directors or by the Chairman of
the Board or the President. Such request shall state the purpose
or purposes of the proposed meeting.
Special meetings of stockholders for the election of
directors in accordance with the provisions of the corporate
charter providing for a special election of directors in the
event of default in the payment of dividends on the preferred
stock or preference stock for a specified period and on the
termination of such default may be called as provided in the
corporate charter.
SECTION 3. PLACE AND NOTICE OF STOCKHOLDERS' MEETINGS: Meetings
of Stockholders shall be held at the principal office of the
corporation in the City of Syracuse, New York, or at such other
place or places in the State of New York as may be determined
from time to time by the board of directors. For meetings other
than annual meetings, the notice shall also state by and at whose
direction and for what purpose or purposes the meeting is called.
If the manner of giving notice of the meeting is not specified by
law or the corporate charter, notice shall be given by mailing,
postage prepaid, not less than ten (10) nor more than fifty (50)
days before such meeting, a copy of the notice of such meeting,
stating the purpose or purposes for which the meeting is called
and the time when and the place where it is to be held, to each
stockholder of record on the record date established pursuant to
Article VII, Section 4 entitled to vote at the meeting at his
address as it appears on the stock book of the corporation,
unless he shall have filed with the Secretary of the corporation
a written request that notices intended for him be mailed to some
other address, in which case it shall be mailed to the address
designated in such request. If, at any meeting, action is
proposed to be taken which would, if taken, entitle shareholders
fulfilling the requirements of Section 623 of the New York
Business Corporation Law to receive payment for their shares, the
notice of such meeting shall also include a statement to that
effect.
SECTION 4. BUSINESS AT STOCKHOLDERS' MEETINGS: Business
transacted at all meetings of stockholders shall be confined to
the objects stated in the notice of the meeting and matters
germane thereto. In the absence of fraud, the determination of
the holders of a majority of the stock present in person or by
proxy and entitled to vote at the meeting shall be conclusive as
to whether any proposed action or proceeding at such meeting is
within the scope of the notice of such meeting.
SECTION 5. PROCEDURE: The order of business and all other
matters of procedure at every meeting of stockholders may be
determined by the presiding officer.
SECTION 6. QUORUM: Except as otherwise provided by law or in
the corporate charter, the presence of a majority of the holders
of shares, in person or by proxy, entitled to vote thereat shall
constitute a quorum at any shareholders' meeting.
SECTION 7. ADJOURNMENTS: Except as otherwise provided by the
corporate charter, the stockholders entitled to vote who are
present in person or by proxy at any meeting of stockholders,
whether or not a quorum shall be present or represented at the
meeting, shall have power by a majority vote to adjourn the
meeting from time to time without further notice other than
announcement at the meeting, unless the board of directors shall
fix a new record date in respect of such adjourned meeting, in
which case the provisions of Section 3 of this Article shall
apply. At any adjourned meeting at which the requisite amount of
voting stock shall be present in person or by proxy any business
may be transacted which might have been transacted at the meeting
as originally called, and the stockholders entitled to vote at
the meeting as originally called, and no others, unless the board
of directors shall have fixed a new record date in respect
thereof, shall be entitled to vote at such adjourned meeting.
SECTION 8. VOTING: Whenever an action shall require the vote of
stockholders, the tabulations that identify the particular vote
of a stockholder on all proxies, consents, authorizations and
ballots shall be kept confidential, except as disclosure may be
required (i) by applicable law, (ii) in pursuit or defense of
legal proceedings, (iii) to resolve a bona fide dispute as to the
authenticity of one or more proxies, consents, authorizations or
ballots or as to the accuracy of any tabulation of such proxies,
consents, authorizations or ballots, (iv) if an individual
stockholder requests that his or her vote and identity be
forwarded to the corporation, or (v) in the event of a proxy or
consent solicitation in opposition to the solicitation of the
Board of Directors of the corporation; and the receipt and
tabulation of such votes will be by an independent third party
not affiliated with the corporation. Comments written on
proxies, consents, authorizations and ballots will be transcribed
and provided to the secretary of the corporation without
reference to the vote of the stockholder, except where such
stockholder has requested that the nature of their vote be
forwarded to the corporation.
Stockholders shall have such voting rights as may be granted
by law and the provisions of the corporate charter. All
questions presented to stockholders for decision shall be decided
by a vote of shares. Voting may be viva voce unless a
stockholder present in person or by proxy and entitled to vote at
the meeting shall demand a vote by ballot in which event a vote
by ballot shall be taken. Except where otherwise provided by
law, the corporate charter or these by-laws, elections shall be
determined by a plurality vote and all other questions that shall
be submitted to stockholders for decision shall be decided by a
majority of the votes cast.
SECTION 9. INSPECTORS OF ELECTION: Two inspectors of election
who are not employees or directors of the corporation, shall be
appointed by the directors to serve at each meeting of
stockholders, or of a class of stockholders, such inspectors to
serve at such meeting and any adjournments thereof; and such
inspectors shall have authority to count and report upon the
votes cast at such meeting upon the election of directors and
such other questions as may be voted upon by ballot. In the
event that any such inspector of election shall not have been
appointed by the directors to serve at such meeting, or, having
been appointed, shall be absent from such meeting or adjournment
or unable to serve thereat, such inspector shall be appointed by
the presiding officer at such meeting or adjournment.
The inspectors appointed to act at any meeting of
stockholders, before entering upon the discharge of their duties,
shall be sworn faithfully to execute the duties of inspectors at
such meeting with strict impartiality and according to the best
of their ability, and the oath so taken shall be subscribed by
them and shall be filed in the records of such meeting.
The inspectors shall be responsible for determining the
number of shares outstanding, the voting power of each, the
shares represented at the meeting, the existence of a quorum, and
the validity and effect of any proxies. They shall also receive
and tabulate all votes, ballots or consents and determine the
result of any election, hear and determine all challenges and
questions arising in connection with any election and do such
acts to conduct the election according to the applicable
provisions of law of the State of New York.
SECTION 10. PROXIES: Each stockholder entitled to vote at any
meeting of stockholders may be represented and vote at such
meeting by his proxy, authorized and acting in manner as provided
by the applicable laws of the State of New York. No proxy shall
be valid after the expiration of eleven (11) months from the date
of its execution unless otherwise provided in the proxy in
accordance with law.
ARTICLE III
- -----------
DIRECTORS
- ---------
SECTION 1. NUMBER AND QUALIFICATIONS: Except as otherwise
required by the provisions of the corporate charter relating to
the rights of the holders of any class or series of preferred or
preference stock having a preference over the common stock as to
dividends or to elect directors under specified circumstances,
the board of directors shall consist of not less than nine (9)
nor more than twenty-one (21) persons, the exact number initially
to be fifteen (15) persons, subject to change from time to time
to any number not less than nine (9) nor more than twenty-one
(21) persons by the board of directors pursuant to a resolution
adopted by a majority of the total number of authorized directors
(whether or not there exist any vacancies in previously
authorized directorships at the time any such resolution is
presented to the board for adoption). Directors need not be
stockholders. No person, other than those serving on November
11, 1976, who has reached age 70 shall stand for election as a
director.
SECTION 2. ELECTION AND TENURE OF OFFICE: Except as otherwise
provided by law, the corporate charter or these by-laws, the
directors of the corporation shall be elected at the annual
meeting of the stockholders or at any meeting of the stockholders
held in lieu of such annual meeting, which meeting, for the
purposes of these by-laws, shall be deemed the annual meeting.
The directors shall be classified, with respect to the time for
which they severally hold office into three classes, as nearly
equal in number as possible, one class to hold office initially
for a term expiring at the annual meeting of stockholders to be
held in 1989, another class to hold office initially for a term
expiring at the annual meeting of stockholders to be held in
1990, and another class to hold office initially for a term
expiring at the annual meeting of stockholders to be held in
1991, with the members of each class to hold office until their
successors are elected and qualified. At each annual meeting of
the stockholders of the corporation, the successors to the class
of directors whose terms expire at that meeting shall be elected,
to hold office until the annual meeting of stockholders held in
the third year following the year of their election. Except as
otherwise provided in the corporate charter, the directors shall
hold office until the annual meeting at which their respective
terms expire and until their successors are elected and have
qualified. The election of directors shall be conducted by two
inspectors of election appointed as hereinbefore provided. The
election need not be by ballot and shall be decided by a
plurality vote.
SECTION 3. RESIGNATION; REMOVAL: Any director of the
corporation may resign at any time by giving his resignation to
the chief executive officer of the corporation, or to the
Secretary. Such resignation shall take effect at the time
specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it
effective. Subject to the rights of the holders of any class or
series of preferred or preference stock having preference over
the holders of common stock as to dividends or to elect directors
under specified circumstances, any director, or the entire board
of directors, may be removed from office at any time, but only
for cause.
SECTION 4. VACANCIES: Except as otherwise provided by the
corporate charter, if the office of any director becomes vacant
for any reason, a majority of the directors then in office,
whether or not such majority shall constitute a quorum, may
choose a successor who, to the extent required by New York law,
shall hold office until the next annual meeting of stockholders
at which the election of directors is in the regular order of
business and until his successor has been elected and qualified;
provided that if New York law does not so require, such director
shall hold office for the full unexpired term of the director
whose seat he is filling, or any such vacancy in the board of
directors may be filled by the stockholders entitled to vote at
any meeting of stockholders, notice of which shall have referred
to the proposed election.
Except as otherwise provided by the corporate charter, in
the event of an increase in the number of directors pursuant to
Section 1 of this Article III, a majority of the directors then
in office, whether or not such majority shall constitute a
quorum, may elect the additional director or directors who to the
extent required by New York law, shall hold office until the next
annual meeting of stockholders at which the election of directors
is in the regular order of business and until his successor has
been elected and qualified; provided that if New York law does
not so require, such director or directors shall hold office for
the full unexpired term of the class of directors to which such
director or directors is elected, or any such director or
directors may be elected by the stockholders entitled to vote at
any meeting of stockholders, notice of which shall have referred
to the proposed election. No decrease in the number of
authorized directors constituting the entire board of directors
shall shorten the term of any incumbent director.
SECTION 5. COMPENSATION: Members of the board of directors
shall be entitled to compensation for service and the board of
directors may assign duties to any member or members of the board
and may fix the amount of compensation therefor, which shall be a
charge to be paid by the corporation. The board of directors may
elect or appoint members of the board as officers, members of
committees, or agents of the corporation, may assign duties to be
performed and may fix the amount of the respective salaries, fees
or other compensation thereto, and the amount so fixed shall be a
charge to be paid by the corporation. In addition to any other
compensation provided pursuant to these by-laws, each director
shall be entitled to receive a fee, in amount as fixed from time
to time by resolution of the board of directors, for attendance
at any meeting of the board, or of any committee of the board,
together with his expenses of attendance, if any.
SECTION 6. MEETINGS OF DIRECTORS: Regular meetings of the board
of directors shall be held at such times and at such places as
may be determined by the board of directors, or by the Chairman
of the Board or by the President. Special meetings of the board
may be called from time to time by any three directors, or by the
Chairman of the Board or by the President.
Any action required or permitted to be taken by the board or
any committee thereof may be taken without a meeting if all board
or committee members file one or more written consents to a
resolution authorizing the action with the respective minutes of
the board or committee as the case may be.
Any one or more members of the board or of any of its
committees may participate in a meeting of the board or committee
by conference telephone or similar communications equipment
allowing all participants in the meeting to hear each other at
the same time. Participation by such means shall constitute
presence at a meeting.
SECTION 7. NOTICE OF MEETINGS OF BOARD OF DIRECTORS: Notice of
each meeting of the board of directors, stating the time and
place thereof, shall be given to each member of the board by the
Secretary, or an Assistant Secretary, by mailing the same,
postage prepaid, addressed to each member of the board at his
residence or usual place of business not less than three (3) days
before the meeting, or by delivering the same to each member of
the board personally or to his residence or usual place of
business, or by sending the same by telegraph to his residence or
usual place of business, not less than two (2) days before the
meeting. Meetings of the board of directors may also be held at
any time and place without notice provided all the members are
present at such meeting without protest or, at any time before or
after the meeting, shall sign a written waiver of notice. The
notice of any meeting of the board of directors need not specify
the purpose or purposes for which the meeting is called, except
as otherwise expressly provided in these by-laws.
SECTION 8. QUORUM: At all meetings of the board of directors,
except where otherwise provided by law, the corporate charter, or
these by-laws, a quorum shall be required for the transaction of
business and shall consist of not less than one-third of the
entire board, if the number of members be more than nine (9), but
not less than a majority, if the number of directors be less than
nine (9); and the vote of a majority of the directors present
shall decide any questions that may come before the meeting. A
majority of the directors present at any meeting, although less
than a quorum, may adjourn the same from time to time, without
notice other than announcement at the meeting, until a quorum is
present.
SECTION 9. PROCEDURE: The order of business and all other
matters of procedure at every meeting of directors may be
determined by the presiding member.
ARTICLE IV
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COMMITTEES OF DIRECTORS
- -----------------------
SECTION 1. DESIGNATION: The board of directors, by resolution
or resolutions adopted by a majority of the entire board, shall
designate an Executive Committee, an Audit Committee and a
Finance Committee, and may designate one or more other
committees, each committee to consist of three (3) or more
directors of the corporation. In the interim between meetings of
the board, the Executive Committee shall have and may exercise
the powers of the board of directors granted by the corporate
charter and these by-laws and by resolution of the board, and
such other committees shall have only such powers as shall be
granted by these by-laws and by resolution of the board;
provided, however, that no committee shall have authority as to
the following matters:
(a) The submission to shareholders of any action that needs
shareholders' approval by law;
(b) The filling of vacancies in the board of directors or in any
committee;
(c) The fixing of compensation of the directors for serving on
the board or on any committee;
(d) The amendment or repeal of the by-laws, or the adoption of
new by-laws; or
(e) The amendment or repeal of any resolution of the board
which, by its terms, shall not be so amendable or
repealable.
Each committee shall serve at the pleasure of the board of
directors and shall have such name or names as may be determined
from time to time by the by-laws or by resolution or resolutions
adopted by the board of directors. Except as otherwise required
by law, the existence of any such committee may be terminated, or
its powers and authority modified, at any time by resolution of
the board of directors.
SECTION 2. EXECUTIVE COMMITTEE: When the board of directors is
not in session, the Executive Committee shall have all of the
authority of the board of directors, except it shall have no
authority as to the matters specified in Section 1 of this
Article IV. The Chairman of the Board shall be Chairman of the
Executive Committee. The members of the Executive Committee
shall serve at the pleasure of the board of directors.
SECTION 3. AUDIT COMMITTEE: The Audit Committee shall recommend
to the board of directors the accounting firm to be selected by
the board or to be recommended by it for shareholder approval, as
independent auditor of the corporation and its subsidiaries; act
on behalf of the board in meeting and reviewing with the
independent auditors, the chief internal auditor and the
appropriate corporate officers matters relating to corporate
financial reporting and accounting procedures and policies,
adequacy of internal controls and the scope of the respective
audits of the independent auditors and the internal auditor;
review the results of such audits with the respective auditing
agency and reporting thereon to the board; review and make
recommendations to the board concerning the independent auditor's
fees and services; review interim and annual financial reports
and disclosures and submit to the board any recommendations it
may have from time to time with respect to financial reporting
and accounting practices and policies; be consulted, and its
consent obtained, prior to the selection or termination of the
chief internal auditor; oversee matters involving compliance with
Corporate business ethics policies including the work of the
Business Ethics Council; review management's assessment of
financial risks; authorize special investigations and studies, as
appropriate, in fulfillment of its function as specified herein
or by resolution of the board of directors; and perform any other
duties or functions deemed appropriate by the board of directors.
The Committee will conduct a self-assessment at least every three
years of its performance in relation to its powers and
responsibilities. The membership of such committee shall consist
only of directors of the corporation who are not, and have not
been, officers of the company.
SECTION 4. FINANCE COMMITTEE: The Finance Committee shall
exercise such powers of the board of directors as shall be
provided in one or more resolutions of the board of directors
with respect to the issuance by the corporation of securities and
evidences of indebtedness and the participation by the
corporation in other financing transactions and with respect to
the authorization of the making, modification, alteration,
termination or abrogation of notes, bills, mortgages, sales,
deeds, financing leases, liens and contracts of the corporation
and shall further be empowered to take any action in connection
with the determination of the terms of any securities, evidences
or indebtedness or other financing transactions of the
corporation, the issuance of which by the corporation or the
participation in which by the corporation shall have theretofore
been approved by the board of directors, and shall further
perform any other duties or functions deemed appropriate by the
board of directors.
SECTION 5. RECORDS AND PROCEDURE: Said committees shall keep
regular minutes of their proceedings and report the same to the
board when required. Unless otherwise determined by the board of
directors each committee may appoint a chairman and a secretary
and such other officers of the committee as it may deem
advisable, may determine the time and place of holding each
meeting of the committee, the notice of meetings to be given to
members, and all other procedural questions which may arise in
connection with the work of the committee.
ARTICLE V
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OFFICERS
- --------
SECTION 1. OFFICERS: The officers of the corporation shall
consist of a Chairman of the Board, a President, one or more
Vice-Presidents, a Secretary, a Controller, a Treasurer, and such
Assistant Secretaries, Assistant Controllers and Assistant
Treasurers and other officers as shall be elected or appointed by
the board of directors. The board of directors may elect or
appoint a General Counsel upon such terms and with such powers
and duties as it may prescribe and may also designate the General
Counsel an officer of the corporation.
SECTION 2. ELECTION: The officers of the corporation shall be
elected or appointed by the board of directors at the meeting of
the board held after each annual meeting of the stockholders.
The Chairman of the Board and the President shall be elected or
appointed by the board of directors from among their number. Any
number of Vice-Presidents, the Secretary, the Controller, the
Treasurer and other officers established pursuant to resolution
of the board of directors shall also be elected or appointed by
the board of directors.
SECTION 3. TERM OF OFFICE: The officers of the corporation
shall hold office until the meeting of the board of directors
held after the next annual meeting of the stockholders and until
their successors are elected and have qualified, unless a shorter
term is fixed or unless removed, subject to the provisions of
law, by the board of directors. The Chairman of the Board, the
President, any Vice-President, the Secretary, the Controller or
the Treasurer may be removed at any time, with or without cause,
by the board of directors provided that notice of the meeting at
which such action shall have been taken shall set forth such
action as one of the purposes of such meeting. Any other officer
of the corporation may be removed at any time, with or without
cause, by the board of directors. If the office of any officer
becomes vacant for any reason, the vacancy may be filled by the
board of directors at any time to serve the remaining current
term of that office.
SECTION 4. CHAIRMAN OF THE BOARD: There shall be a chairman of
the Board of Directors, with the official title "Chairman of the
Board", who shall be the chief executive officer of the
corporation. The Chairman of the Board shall preside at meetings
of the stockholders, the board of directors and the Executive
Committee. He shall recommend to the board policies to be
followed by the corporation, and, subject to the board, shall
have general charge of the policies and business of the
corporation and general supervision of the details thereof, and
shall supervise the operation, maintenance and preservation of
the properties of the corporation. He shall keep the board of
directors informed respecting the business of the corporation. He
shall have authority to sign on behalf of the corporation all
contracts and other documents or instruments to be signed or
executed by the corporation, and, in all cases where the duties
and powers of subordinate officers and agents of the corporation
are not specifically prescribed by the by-laws or by resolutions
of the board of directors, the Chairman of the Board may
prescribe such duties and powers. He shall perform such other
duties as may from time to time be assigned to him by the board
of directors.
SECTION 5. THE PRESIDENT: The President shall have the
direction of and responsibility for the operations of the
corporation and such other powers and duties as the board of
directors or the Chairman of the Board shall designate from time
to time and, in the absence or inability to act of the Chairman
of the Board, shall have the powers and duties of the Chairman of
the Board. The President, unless some other person is thereunto
specifically authorized by vote of the board of directors, shall
have authority to sign all contracts and other documents and
instruments of the corporation.
SECTION 6. THE VICE-PRESIDENTS: The Vice-Presidents may be
designated by such title or titles and in such order of seniority
as the board of directors may determine. The Vice-Presidents
shall perform such of the duties and exercise such of the powers
of the President on behalf of the corporation as may be assigned
to them respectively from time to time by the board of directors
or by the Chairman of the Board or the President, and, subject to
the control of the board, shall have authority to sign on behalf
of the corporation all contracts and other documents or
instruments necessary for the conduct of the business of the
corporation. The Vice Presidents shall perform such other duties
as may from time to time be assigned to them respectively by the
board of directors or the Chairman of the Board or the President.
SECTION 7. THE SECRETARY AND ASSISTANT SECRETARIES: The
Secretary shall cause notices of all meetings of stockholders and
directors to be given as required by law, the corporate charter,
and these by-laws. He shall attend all meetings of stockholders
and of the board of directors and keep the minutes thereof. He
shall affix the corporate seal to and sign such instruments as
require the seal and his signature and shall perform such other
duties as usually pertain to his office or as are required of him
by the board of directors or the Chairman of the Board or the
President.
Any Assistant Secretary may, in the absence or disability of
the Secretary, or at his request, perform the duties and exercise
the powers of the Secretary, and shall perform such other duties
as the board of directors, the Chairman of the Board, the
President or the Secretary shall prescribe.
The Secretary or any Assistant Secretary may certify under
the corporate seal as to the corporate charter or these by-laws
or any provision thereof, the acts of the board of directors or
any committee thereof, the tenure, signatures, identity and acts
of officers of the corporation or other corporate facts, and any
such certificate may be relied upon by any person or corporation
to whom the same shall be given until receipt of written notice
to the contrary.
In the absence of the Secretary and of an Assistant
Secretary, the stockholders or the board of directors may appoint
a secretary pro tem to record the proceedings of their respective
meetings and to perform such other acts pertaining to said office
as they may direct.
SECTION 8. THE CONTROLLER AND ASSISTANT CONTROLLERS: The
Controller shall be the chief accounting officer of the
corporation. He shall have general supervision of the accounting
and financial reporting policies of the corporation, and shall
recommend policies and procedures and shall render current and
periodic reports of financial status to the Chairman of the
Board, the President and the board of directors. He shall
perform such other duties as usually pertain to his office or as
are required of him by the board of directors or the Chairman of
the Board or the President.
Any Assistant Controller may, in the absence or disability
of the Controller, or at his request, perform the duties and
exercise the powers of the Controller and shall perform such
other duties as the board of directors, the Chairman of the
Board, the President or the Controller shall prescribe.
SECTION 9. THE TREASURER AND ASSISTANT TREASURERS: The
Treasurer is authorized and empowered to receive and collect all
moneys due the corporation and to receipt for the same. He shall
be empowered to execute on behalf of the corporation all
instruments, agreements and certificates necessary or appropriate
to effect the issuance by the corporation of securities or
evidences of indebtedness or to permit the corporation to enter
into and perform any other financing transactions to the extent
the foregoing are within the ordinary course of business of the
corporation or have been authorized by the board of directors or
a committee thereof. He shall cause to be entered in books of
the corporation to be kept for that purpose full and accurate
accounts of all moneys received by and paid on account of the
corporation. He shall make and sign such reports, statements,
and instruments as may be required of him by the board of
directors or by laws of the United States or the State of New
York, or by commission, bureau, department or agency created
under any such laws, and shall perform such other duties as
usually pertain to his office or as are required of him by the
board of directors or the Chairman of the Board or the President.
Any Assistant Treasurer may, in the absence or disability of
the Treasurer, or at his request, perform the duties and exercise
the powers of the Treasurer and shall perform such other duties
as the board of directors, the Chairman of the Board, or the
President, or the Treasurer shall prescribe.
SECTION 10. ADDITIONAL OFFICERS: In addition to the officers
provided for by these by-laws, the board of directors may, from
time to time, designate and appoint such other officers as may be
necessary or convenient for the transaction of the business and
affairs of the corporation. Such other officers shall have such
powers and duties as may be assigned to them by resolution of the
board of directors.
SECTION 11. OFFICERS HOLDING TWO OR MORE OFFICES: Any two or
more of the above-mentioned offices may be held by the same
person, except that the President shall not also be the
Secretary, but no officer shall execute or verify any instrument
in more than one capacity if such instrument be required by law
or otherwise to be executed or verified by any two or more
officers.
SECTION 12. DUTIES OF OFFICERS MAY BE DELEGATED: In case of the
absence of any officer of the corporation, or for any other
reason that the board of directors may deem sufficient, the board
of directors may delegate, for the time and to the extent
specified, the powers or duties of any officer to any other
officer, or to any director.
SECTION 13. COMPENSATION: The compensation of all officers with
an assigned salary level above the scale of Salary Grade N as
prescribed in the Salary Administration Program, as adopted by
the board of directors, shall be fixed by the board of directors.
The compensation of all other officers and employees shall be
fixed by the Chairman of the Board or by the President in
accordance with the Salary Administration Program.
SECTION 14. BONDS: The board of directors may require any
officer, agent or employee of the corporation to give a bond to
the corporation, conditional upon the faithful performance of his
duties, with one or more sureties and in such amount as may be
satisfactory to the board of directors. The premium payable to
any surety company for such bond shall be paid by the
corporation.
ARTICLE VI
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INDEMNIFICATION OF DIRECTORS AND OFFICERS; INSURANCE
- ----------------------------------------------------
SECTION 1. INDEMNIFICATION: The corporation shall fully
indemnify, to the extent not expressly prohibited by law, each
person involved in, or made or threatened to be made a party to,
any action, claim or proceeding, whether civil or criminal,
including any investigative, administrative, legislative, or
other proceeding, and including an action by or in the right of
the corporation or any other corporation, or any partnership,
joint venture, trust, employee benefit plan, or other enterprise,
and including appeals therein (any such action or proceeding
being hereinafter referred to as a "Matter"), by reason of the
fact that such person, such person's testator or intestate (i) is
or was a director or officer of the corporation, or (ii) is or
was serving, at the request of the corporation, as a director,
officer, or in any other capacity, any other corporation, or any
partnership, joint venture, trust, employee benefit plan, or
other enterprise, against any and all judgments, fines,
penalties, amounts paid in settlement, and expenses, including
attorneys' fees, actually and reasonably incurred as a result of
or in connection with any Matter, except as provided in the next
paragraph.
No indemnification shall be made to or on behalf of any such
person if a judgment or other final adjudication adverse to such
person establishes that such person's acts were committed in bad
faith or were the result of active and deliberate dishonesty and
were material to the cause of action so adjudicated, or that such
person personally gained in fact a financial profit or other
advantage to which such person was not legally entitled. In
addition, no indemnification shall be made with respect to any
Matter initiated by any such person against the corporation, or a
director or officer of the corporation, other than to enforce the
terms of this article, unless such Matter was authorized by the
board of directors. Further, no indemnification shall be made
with respect to any settlement or compromise of any Matter unless
and until the corporation has consented to such settlement or
compromise.
In making any determination regarding any person's
entitlement to indemnification hereunder, it shall be presumed
that such person is entitled to indemnification, and the
corporation shall have the burden of proving the contrary.
Written notice of any Matter for which indemnity may be
sought by any person shall be given to the corporation as soon as
practicable and the corporation shall be permitted to participate
therein. Such person shall cooperate in good faith with any
request that common counsel be utilized by the parties to any
Matter who are similarly situated, unless to do so would be
inappropriate due to actual or potential differing interests
between or among such parties.
SECTION 2. ADVANCEMENT OF EXPENSES: Except in the case of a
Matter against a director, officer, or other person specifically
approved by the board of directors, the corporation shall,
subject to Section 1 above, pay expenses actually and reasonably
incurred by or on behalf of such a person in connection with any
Matter in advance of the final disposition of such Matter. Such
payments shall be made promptly upon receipt by the corporation,
from time to time, of a written demand of such person for such
advancement, together with an undertaking by or on behalf of such
person to repay any expenses so advanced to the extent that the
person receiving the advancement is ultimately found not to be
entitled to indemnification for part or all of such expenses.
SECTION 3. RIGHTS NOT EXCLUSIVE: The rights to indemnification
and advancement of expenses granted by or pursuant to this
article (i) shall not limit or exclude, but shall be in addition
to, any other rights which may be granted by or pursuant to any
statute, corporate charter, by-law, resolution, or agreement,
(ii) shall be deemed to constitute contractual obligations of the
corporation to any director, officer, or other person who serves
in a capacity referred to herein at any time while this article
is in effect, (iii) are intended to be retroactive and shall be
available with respect to events occurring prior to the adoption
of this article, and (iv) shall continue to exist after the
repeal or modification hereof with respect to events occurring
prior thereto. It is the intent of this article to require the
corporation to indemnify the persons referred to herein for the
aforementioned judgments, fines, penalties, amounts paid in
settlement, and expenses, including attorneys' fees, in each and
every circumstance in which such indemnification could lawfully
be permitted by express provisions of by-laws, and the
indemnification required by this article shall not be limited by
the absence of an express recital of such circumstances.
SECTION 4. AUTHORIZATION OF CONTRACTS: The corporation may,
with the approval of the board of directors, enter into an
agreement with any person who is, or is about to become, a
director or officer of the corporation, or who is serving, or is
about to serve, at the request of the corporation, as a director,
officer, or in any other capacity, any other corporation, or any
partnership, joint venture, trust, employee benefit plan, or
other enterprise, which agreement may provide for indemnification
of such person and advancement of expenses to such person upon
terms, and to the extent, not prohibited by law. The failure to
enter into any such agreement shall not affect or limit the
rights of any such person under this article.
SECTION 5. INSURANCE: The corporation may purchase and maintain
insurance to indemnify the corporation and the directors and
officers within the limits permitted by law.
SECTION 6. SEVERABILITY: If any provision of this article is
determined at any time to be unenforceable in any respect, the
other provisions shall not in any way be affected or impaired
thereby.
ARTICLE VII
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STOCK
- -----
SECTION 1. TRANSFER AGENT AND REGISTRAR: The board of directors
may appoint one or more individuals, banks, firms of bankers, or
trust companies the agent or agents of the corporation for the
transfer of shares of its stock, and may also appoint one or more
individuals, bank, firms of bankers, or trust companies registrar
or registrars for the registering of shares of its stock.
SECTION 2. CERTIFICATE OF STOCK: The certificates of stock of
the corporation shall be numbered and shall be recorded in the
books of the corporation as they are issued. They shall contain
the holder's name and number of shares and shall be signed by the
Chairman of the Board, the President or a Vice-President and the
Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer, and shall be sealed with the corporate seal,
which may be a facsimile. Where any such certificate is signed
by a registrar, the signatures of any such Chairman of the Board,
President, Vice President, Secretary, Assistant Secretary,
Treasurer or Assistant Treasurer upon such certificate may be
facsimiles. In case any such officer who has signed or whose
facsimile signature has been placed upon such certificate shall
have ceased to be such before such certificate is issued, it may
be issued by the corporation with the same effect as if such
officer had not ceased to be such at the date of its issue. No
certificate of stock shall be valid until countersigned by a
transfer agent if the corporation have a transfer agent for the
class or series of stock represented by such certificate whose
signature may be a facsimile and until registered by a registrar
if the corporation have a registrar for such class or series.
SECTION 3. TRANSFERS OF SHARES: Subject to applicable law,
shares of stock shall be transferable on the books of the
corporation by the holder thereof, in person or by duly
authorized attorney, upon the surrender to the corporation or any
transfer agent of the corporation of the certificate representing
the shares to be transferred, duly endorsed or accompanied by
proper evidence of succession, assignment or authority to
transfer. The corporation shall be entitled to treat the holder
of record of any share or shares of stock as the owner thereof
and accordingly shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of
any other person whether or not it shall have express or other
notice thereof, save as expressly provided by the laws of the
State of New York. The board of directors, to the extent
permitted by law, shall have power and authority to make all such
rules and regulations as it may deem expedient concerning the
issue, transfer, and registration of certificates of stock.
SECTION 4. FIXING OF RECORD DATE OR CLOSING TRANSFER BOOKS: The
board of directors may fix a day and hour, not more than fifty
(50) days prior to the day on which any meeting of stockholders
is to be held, as the time as of which stockholders entitled to
notice of or to vote at such meeting and at all adjournments
thereof shall be determined; and in the event such record date is
fixed by the board of directors no one other than the holders of
record on such date of stock entitled to notice of or to vote at
such meeting shall be entitled to notice of or to vote at such
meeting or, unless a new record date be fixed as provided in
Article II, Section 7 of these by-laws, any adjournment thereof.
The board of directors may at its option, in lieu of fixing a
record date as aforesaid, prescribe a period, not exceeding fifty
(50) days prior to any meeting of stockholders, during which no
transfer of shares on the books of the corporation may be made.
The board of directors may fix a day and hour, not exceeding
fifty (50) days preceding the date fixed for the payment of a
dividend or the making of any distribution, or for the delivery
of evidences or rights or evidences of interests arising out of
any change, conversion or exchange of stock, as a record time for
the determination of the stockholders, or stockholders of any
class or series, entitled to receive any such dividend,
distribution, rights, or interests, and in such case only
stockholders of record at the time so fixed shall be entitled to
receive such dividend, distribution, rights, or interests, or the
board of directors may at its option prescribe a period, not
exceeding fifty (50) days prior to the date for such payment,
distribution or delivery, during which no transfer of stock on
the books of the corporation may be made.
SECTION 5. LOST STOCK CERTIFICATES: The holder of any
certificate representing shares of stock of the corporation shall
immediately notify the corporation of any mutilation, loss, or
destruction thereof, and the board of directors or an officer or
officers duly authorized thereunto by the board of directors may
in its or his discretion authorize one or more new certificates
for the same number of shares in the aggregate to be issued to
such holder upon the surrender of the mutilated certificate, or,
in case of loss or destruction of the certificate, upon
satisfactory proof of such loss or destruction and the deposit of
indemnity by way of bond or otherwise in such form and amount and
with such surety or sureties or security as the board of
directors or such officer or officers may require to protect the
corporation against loss of liability by reason of the issuance
of such new certificates; but the board of directors may in its
discretion refuse to issue new certificates save upon the order
of the court having jurisdiction in such matters.
SECTION 6. SCRIP: The board of directors may from time to time
authorize the issuance by the corporation of scrip certificates
representing interests in fractions of a full share of any class
or series of stock of the corporation, and, subject to the
provisions of the corporate charter and applicable provisions of
law, shall have power to prescribe the rights, and the conditions
and limitations thereof, to which the holders of such scrip
certificates shall be entitled in respect of such scrip
certificates and of the interests in shares of stock of the
corporation represented thereby, which rights and the conditions
and limitations thereon shall be set forth therein to the extent
required by law. Such scrip certificates may be issued in
registered or bearer form, as the board of directors may
determine.
ARTICLE VIII
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GENERAL PROVISIONS
- ------------------
SECTION 1. FINANCES: The funds of the corporation shall be
deposited in its name with such bank or banks, firm or firms of
bankers, trust company or trust companies as the board of
directors may from time to time designate. All checks, notes,
drafts and other negotiable instruments of the corporation shall
be signed by such officer or officers, agent or agents, employee
or employees or such other person or persons as may be designated
by the board of directors from time to time by resolution, or by
the Chairman of the Board or the President or the Treasurer in
the exercise of authority conferred by resolution of the board of
directors. No officers, agents, employees of the corporation, or
other person, along or with others, shall have power to make any
checks, notes, drafts or other negotiable instruments in the name
of the corporation or to bind the corporation thereby, except as
in this article provided.
SECTION 2. FISCAL YEAR: The fiscal year of the corporation
shall be the calendar year unless otherwise provided by the board
of directors.
ARTICLE IX
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CORPORATE SEAL
- --------------
SECTION 1. FORM OF SEAL: The seal of the corporation shall bear
the name of the corporation, the year of its incorporation, and
such appropriate design as the board of directors may approve.
The seal on stock certificates or on any corporate obligation for
the payment of money may be facsimile.
ARTICLE X
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AMENDMENTS
- ----------
SECTION 1. PROCEDURE: These by-laws may be added to, amended,
altered, or repealed at any meeting of stockholders, notice of
which shall have referred to the proposed action, by the vote of
the holders of record of a majority of the outstanding shares of
the corporation entitled to vote, or, to the extent permitted by
law, at any meeting of the board of directors, notice of which
shall have referred to the proposed action, by the affirmative
vote of a majority of the board of directors.
SECTION 2. AMENDMENT OF BY-LAW REGULATING ELECTION OF DIRECTORS:
If any by-law regulating an impending election of directors is
adopted or amended or repealed by the board of directors, there
shall be set forth in the notice of the next meeting of
stockholders for the election of directors the by-law so adopted
or amended or repealed, together with a concise statement of the
changes made.<PAGE>
Exhibit 10-11
NIAGARA MOHAWK POWER CORPORATION
OFFICER LONG TERM INCENTIVE PLAN
Article 1. Establishment, Purpose and Duration
1.1 Establishment of the Plan. Niagara Mohawk Power
Corporation, a New York corporation (hereinafter referred to as
the " Company " ), hereby establishes an incentive compensation
plan to be known as the "Niagara Mohawk Power Corporation Officer
Long Term Incentive Plan" (hereinafter referred to as the
"Plan"), as set
forth in this document. The Plan permits the grant of SAR's,
Stock Units and
Dividend Equivalents, as defined herein.
The Plan shall become effective as of September 25,
1996 (the "Effective Date") and shall remain in effect as
provided in Section 1.3 herein.
1.2 Purpose of the Plan. The purpose of the Plan is to
promote the success and enhance the value of the Company through
the retention and continued motivation of Participants, focusing
their efforts toward the execution of business strategies
directed toward improving financial returns to shareholders.
1.3 Duration of the Plan. The Plan shall commence on the
Effective Date, as described in Section 1.1 herein, and shall
remain in effect, subject to the right of the Board of Directors
to terminate the Plan at any time pursuant to Article 14 herein,
until September 24, 2006. The applicable terms of the Plan and
any terms and conditions applicable to SARs or Stock Units,
including any deferral elections, granted prior to such date
shall survive the termination of the Plan .
Article 2. Definitions
Whenever used in the Plan, the following terms shall have
the meanings set forth below and, when such meaning is intended,
the initial letter of the word is capitalized:
2.1 "Award" means, individually or collectively, a grant
under the Plan of SARs or Stock Units.
2.2 "Award Agreement" means an agreement entered into by
each Participant and the Company, setting forth the terms and
provisions applicable to an Award granted to a Participant under
the Plan.
2.3 "Base Value" of an SAR shall have the meaning set forth
in Section 6.2 herein.
2.4 "Board" or "Board of Directors" means the Board of
Directors of the Company .
2.5 "Cause" means: (i) a material default or other material
breach by a Participant of his obligations under any Employment
Agreement he may have with the Company, (ii) failure by a
Participant diligently and competently to perform his duties
under any Employment Agreement he may have with the Company, or
otherwise, or (iii) misconduct, dishonesty, insubordination or
other act by a Participant detrimental to the good will of the
Company or damaging the Company's relationships with its
customers, suppliers or employees. "Cause" shall be determined
in good faith by the Committee.
2.6 "Change in Control" of the Company shall be deemed to
have occurred as of the first day that any one or more of the
following conditions shall have been satisfied:
(1) The acquisition by any Person of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of either (i) the then outstanding Shares of
the Company or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company
Voting Securities"); provided, however, that the following
acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Company (excluding an acquisition
by virtue of the exercise of a conversion privilege), (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (iv) any
acquisition by any corporation pursuant to a reorganization,
merger or consolidation, if, following such reorganization,
merger or consolidation, the conditions described in clauses
(i), (ii) and (iii) of subparagraph (3) below are satisfied; or
(2) Individuals who, as of the date hereof, constitute the
Board of Directors (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of either an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board; or
(3) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation, (i)
more than 75 % of, respectively, the then outstanding shares of
common stock of the corporation resulting from such organization,
merger or consolidation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors are then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Shares and Outstanding Company
Voting Securities immediately prior to such reorganization,
merger or consolidation, in substantially the same proportions as
their ownership immediately prior to such reorganization, merger
or consolidation, of the Outstanding Shares and Outstanding
Company Voting Securities, as the case may be, (ii) no Person
(excluding the Company, any employee benefit plan (or related
trust) of the Company or such corporation resulting from such
reorganization, merger or consolidation and any Person
beneficially owning, immediately prior to such reorganization,
merger or consolidation, directly or indirectly, 20% or more of
the Outstanding Shares or Outstanding Voting Securities, as the
case may be) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation or the combined voting power of the
then outstanding voting securities of such corporation entitled
to vote generally in the election of directors and (iii) at least
a majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or
consolidation were members of the Incumbent Board at the time of
the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
(4) Approval by the shareholders of the Company of (i) a
complete liquidation or dissolution of the Company or (ii) the
sale or other disposition of all or substantially all of the
assets of the Company, other than to a corporation, with
respect to which following such sale or other disposition, (A)
more than 75% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of
the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Shares and
Outstanding Company Voting Securities immediately prior to such
sale or other disposition in substantially the same proportion as
their ownership immediately prior to such sale or other
disposition of the Outstanding Shares and Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding
the Company and any employee benefit plan (or related trust) of
the Company or such corporation and any Person beneficially
owning, immediately prior to such sale or other disposition,
directly or indirectly, 20% or more of the Outstanding Shares or
Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of
such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors and (C) at least
a majority of the members of the board of directors of such
corporation were members of the Incumbent Board at the time of
the execution of the initial agreement or action of the Board
providing for such sale or other disposition of assets of the
Company; provided, however, that the implementation of the
corporate restructuring contemplated by the Company's PowerChoice
proposal filed with the New York Public Service Commission on
October 6, 1995, or any substantially similar corporate
restructuring (as determined by the Committee) shall not be
deemed to be a "Change in Control".
2.7 "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
2.8 "Committee" means the committee, as specified in
Article 3, appointed by the Board to administer the Plan with
respect to grants of Awards.
2.9 "Company" means Niagara Mohawk Power Corporation, a
New York corporation, or any successor thereto as provided in
Article 16 herein.
2.10 "Director" means any individual who is a member of the
Board of Directors of the Company.
2.11 "Disability" shall have the meaning ascribed to such
term under Section 22(e)(3) of the Code.
2.12 "Dividend Equivalent" means, with respect to Shares
underlying a Stock Unit, an amount equal to all cash and stock
dividends declared on an equal number of outstanding Shares on
all common stock dividend payment dates occurring during the
Vesting Period.
2.13 "Eligible Employee" means an Employee who is eligible
to participate in the Plan, as set forth in Section 5.1 herein.
2.14 "Employee" means any full-time employee of the Company,
who is not covered by any collective bargaining agreement to
which the Company is a party. Directors who are not otherwise
employed by the Company shall not be considered Employees under
the Plan. For purposes of the Plan, transfer of employment of a
Participant from the Company to any one of its Subsidiaries shall
not be deemed a termination of employment.
2.15 "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, or any successor act thereto.
2.16 "Exercise Period" means the period during which an SAR
is exercisable, as set forth in the related Award Agreement.
2.17 "Fair Market Value" means the average of the daily
opening and closing sale prices as reported in the consolidated
transaction reporting system.
2.18 "Participant" means an Employee of the Company who has
outstanding an Award granted under the Plan.
2.19 "Person" shall have the meaning ascribed to such term
in Section 3(a)(9) of the Exchange Act, as used in Sections 13(d)
and 14(d) thereof, including usage in the definition of a "group"
in Section 13(d) thereof.
2.20 "Retirement" shall have the meaning ascribed to such
term in the tax-qualified defined benefit pension plan maintained
by the Company for the benefit of some or all of its
non-represented employees.
2.21 "Shares" means the shares of common stock of the
Company, par value $1.
2.22 "Stock Appreciation Right" or "SAR" means a right,
designated as an SAR, to receive a payment on the day the right
is exercised, pursuant to the terms of Article 6 herein. Each SAR
shall be denominated in terms of one Share.
2.23 "Stock Unit" means a right, designated as a Stock Unit,
to receive a payment as soon as practicable following the last
day of a Vesting Period, pursuant to the terms of Article 7
herein. Each Stock Unit shall be denominated in terms of one
Share.
2.24 "Subsidiary" means any corporation that is a
"subsidiary corporation" of the Company as that term is defined
in Section 424(f) of the Code.
2.25 "Valuation Period" means the 12 trading day period
ending on and including the relevant date.
2.26 "Vesting Period" means the period during which Stock
Units are not yet payable, as set forth in the related Award
Agreement.
Article 3. Administration
3.1 The Committee. The Plan shall be administered by the
Compensation and Succession Committee of the Board, or by any
other Committee appointed by the Board consisting of not less
than two (2) non-employee Directors. The members of the
Committee shall be appointed from time to time by, and shall
serve at the discretion of, the Board of Directors.
3.2 Authority of the Committee. The Committee shall have
full power except as limited by law, the Articles of
Incorporation and the Bylaws of the Company, subject to such
other restricting limitations or directions as may be imposed by
the Board and subject to the provisions herein, to determine the
size and types of Awards; to determine the terms and conditions
of such Awards in a manner consistent with the Plan; to construe
and interpret the Plan and any agreement or instrument entered
into under the Plan; to establish, amend or waive rules and
regulations for the Plan's administration; and (subject to the
provisions of Article 14 herein) to amend the terms and
conditions of any outstanding Award. Further, the Committee
shall make all other determinations that may be necessary or
advisable for the administration of the Plan. As permitted by
law, the Committee may delegate its authorities as identified
hereunder.
3.3 Decisions Binding. All determinations and decisions
made by the Committee pursuant to the provisions of the Plan and
all related orders or resolutions of the Board shall be final,
conclusive and binding on all persons, including the Company, its
shareholders, Employees, Participants and their estates and
beneficiaries.
3.4 Costs. The Company shall pay all costs of
administration of the Plan.
Article 4. Adjustments in Authorized Shares
In the event of any merger, reorganization consolidation,
recapitalization, separation, liquidation, stock dividend,
split-up, share combination or other change in the corporate
structure of the Company affecting the Shares, such adjustment
shall be made in the number of SARs and Stock Units that may be
granted under the Plan, and in the number and/or price of
outstanding Awards granted under the Plan, as may be determined
to be appropriate and equitable by the Committee, in its sole
discretion, to prevent dilution or enlargement of rights;
provided, however, that the number of SARs and Stock Units
subject to an Award shall always be a whole number.
Article 5. Eligibility and Participation
5.1 Eligibility. Persons eligible to participate in the
Plan include all Employees who are officers of the Company, as
determined by the Committee, including Employees who are members
of the Board, but excluding Directors who are not Employees.
5.2 Actual Participation. Subject to the provisions of the
Plan, the Committee may, from time to time, select from all
eligible Employees those to whom Awards shall be granted and
shall determine the nature and amount of each Award.
Article 6. Stock Appreciation Rights
6.1 Grant of SARs. Subject to the terms and conditions of
the Plan, SARs may be granted to Eligible Employees at any time
and from time to time, as shall be determined by the Committee.
The Committee shall have complete discretion in determining
the number of SARs granted to each Participant (subject to
Article 4 herein) and, consistent with the provisions of the
Plan, in determining the terms and conditions pertaining to such
SARs.
6.2 Base Value. The Base Value of an SAR shall equal the
Fair Market Value of a Share determined for the 12 trading day
period immediately preceding the date of the grant, or for such
other period as the Compensation Committee, in its sole
discretion, shall determine at the time of grant.
6.3 Exercise and Payment of SARs. A Participant may
exercise an SAR at any time during the Exercise Period. SARs
shall be exercised by the delivery of a written notice of
exercise to the Company, setting forth the number of SARs being
exercised. Upon exercise of an SAR, a Participant shall be
entitled to receive payment in cash from the Company in an amount
equal to the product of:
(a) the excess of (i) the Fair Market Value of a Share on
the date of exercise over (ii) the Base Value of the SAR,
multiplied by (b) the number of Shares with respect to which the
SAR is exercised.
6.4 SAR Award Agreement. Each SAR grant shall be evidenced
by an Award Agreement that shall specify the number of SARs
granted, the Base Value, the Exercise Period, the expiration date
and such other provisions as the Committee shall determine.
6.5 Lapse of SARs. Subject to the provisions of Article 9,
an SAR will lapse upon the earlier of (i) ten (l0) years from the
date of grant and (ii) the expiration of the Exercise Period as
set forth in the grant.
Article 7. Stock Units
7. 1 Grant of Stock Units. Subject to the terms and
conditions of the Plan, Stock Units may be granted to Eligible
Employees at any time and from time to time, as shall be
determined by the Committee.
The Committee shall have complete discretion in determining
the number of Stock Units granted to each Participant (subject to
Article 4 herein) and, consistent with the provisions of the
Plan, in determining the terms and conditions pertaining to such
Stock Units.
7.2 Vesting of Stock Units. The Vesting Period of Stock
Units granted under the Plan shall be determined by the
Committee, in its sole discretion, as set forth in the related
Award Agreement.
7.3 Payment of Stock Units. After the applicable Vesting
Period has ended, the holder of Stock Units shall be entitled to
receive, for each Stock Unit held, payment in cash from the
Company in an amount equal to the Fair Market Value of one Share
determined as of the Valuation Period ending on the last day of
the Vesting Period. Payment shall be made as soon as practicable
following the last day of the Vesting Period.
7.4 Stock Unit Award Agreement. Each Stock Unit grant
shall be evidenced by an Award Agreement that shall specify the
number of Stock Units granted, the Vesting Period and such other
provisions as the Committee shall determine.
Article 8. Dividend Equivalents
Simultaneously with the grant of Stock Units, the
Participant shall be granted Dividend Equivalents, to be credited
to a bookkeeping entry account, on each common stock dividend
payment date with respect to the Shares subject to such Award.
In the case of cash dividends, the number of Dividend Equivalents
credited on each common stock dividend payment date shall equal
the number of Shares (including fractional Shares) that could be
purchased on the dividend payment date, based on the average of
the opening and closing sale price, as reported in the
consolidated transaction reporting system on that date, with cash
dividends that would have been paid on Awards of Stock Units and
on Dividend Equivalents previously credited to such bookkeeping
entry account, if such Stock Units or Dividend Equivalents were
Shares. In the case of stock dividends, the number of Dividend
Equivalents credited on each stock dividend payment date shall be
equal to the number of Shares (including fractional Shares) that
would have been issued as a stock dividend in respect of the
Participant's Stock Units and on Dividend Equivalents previously
credited to such bookkeeping entry account, if such Stock Units
or Dividend Equivalents were Shares.
Participants shall receive cash payment from the Company of
the Fair Market Value of the Dividend Equivalents, if and when
they receive payment of the related Stock Units, the Fair Market
Value of such Dividend Equivalents to be determined in the same
manner as for the related Stock Units.
The Committee may, in its discretion, establish such rules
and procedures governing the crediting of Dividend Equivalents,
including timing and payment contingencies that apply to the
Dividend Equivalents, as the Committee deems necessary or
appropriate in order to comply with applicable law.
Article 9. Termination of Employment; Transferability
9.1 Disability; Involuntary Termination. In the event the
employment of a Participant is terminated by reason of Disability
or involuntarily by the Company (other than for Cause):
(i) during a Vesting Period for Stock Units, the
Participant shall receive a full payout of the Stock Units and
related Dividend Equivalents, as and when provided in Section 7.3
herein;
(ii) before the Exercise Period commences for SARs subject
to an Award, such SARs may be exercised in full at any time
during the one year period commencing on the day the Exercise
Period begins; and
(iii) during the Exercise Period for SARs, but before
exercise, such SARs may be exercised in full at any time during
the one year period after such termination, but in no event after
the Exercise Period for such SARs has expired.
9.2 Death. In the event the employment of a Participant is
terminated by reason of death:
(i) during the Vesting Period for Stock Units, the
Participant's beneficiary or estate shall receive a full payout
of the Stock Units and related Dividend Equivalents. The payout
shall be made promptly based on the Fair Market Value of a Share
on the date of death; and
(ii) before the Exercise Period commences for SARs subject
to an Award or during the Exercise Period, but before exercise,
the Participant's beneficiary or estate shall receive a full
payout of all SARs subject to an Award, to the extent the Fair
Market Value of a Share exceeds the Base Value of the SAR on the
date of death.
9.3 Corporate Restructuring. In the event (i) the
corporate restructuring as contemplated by the Company's
PowerChoice proposal filed with the New York Public Service
Commission on October 6, 1995, or any substantially similar
corporate restructuring (determined by the Committee), is
implemented and (ii) the employment of a Participant with the
Company is terminated (other than for Cause), then with respect
to Awards granted prior to implementation of the restructuring,
(i) during a Vesting Period for Stock Units, the
Participant shall receive a full payout of Stock Units and
related Dividend Equivalents, as and when provided in Section 7.3
herein;
(ii) before the Exercise Period commences for SARs subject
to an Award, such SARs may be exercised in full at any time
during the one year period commencing on the day the Exercise
Period begins; and
(iii) during the Exercise Period for SARs, but before
exercise, such SARs may be exercised in full at any time during
the one year period after such termination, but in no event after
the Exercise Period for such SARs has expired.
9.4 Retirement. In the event the employment of a
Participant is terminated by reason of Retirement:
(i) during a Vesting Period for Stock Units, the
Participant shall receive a prorated payout of the Stock Units
and related Dividend Equivalents. The prorated payout shall be
determined by the Committee, shall be based upon the length of
time that the Participant held the Stock Units during the Vesting
Period and shall be made as and when provided in Section 7.3
herein;
(ii) before the Exercise Period commences for SARs subject
to an Award, the number of SARs subject to an Award shall be
prorated by the Committee, based upon the length of time that the
Participant held the SARs before Retirement; after the Exercise
Period commences, the prorated SARs may be exercised at any time
in full or in part from time to time during the Exercise Period,
and
(iii) during the Exercise Period for SARs, but before
exercise, such SARs may be exercised at any time in full or in
part from time to time during the Exercise Period.
Other than as set forth in Article 13, in the event that a
Participant's employment terminates for any reason other than as
set forth in Sections 9.l, 9.2, 9.3 and 9.4, above, all Stock
Units, SARs and Dividend Equivalents shall be forfeited by the
Participant to the Company.
9.5 Nontransferability of Awards. Notwithstanding the
foregoing, the Committee may in its discretion authorize a
participant to transfer all or a portion of any award to the
participant's family members on such terms prescribed by the
Committee. No Award granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, all Awards granted to a Participant under
the Plan shall be exercisable/payable during his or her lifetime
only by or to such Participant or his or her legal
representative.
9.6 Right of Committee. Subject to the provisions of
Section 14.2 herein, all provisions in this Article 9 are subject
to the Committee's right, at any time, to make such other
determinations as it may choose, in its sole discretion.
Furthermore, should more than one section of Article 9 and/or
Article 13 apply to a situation, the Committee shall have the
right, in its sole discretion, to determine which section and/or
article to apply.
Article 10. Beneficiary Designation
Each Participant under the Plan may, from time to time, name
any beneficiary or beneficiaries (who may be named contingently
or successively) to whom any benefit under the Plan is to be paid
in case of his death before he receives any or all of such
benefit. Each such designation shall revoke all prior
designations by the same Participant, shall be in a form
prescribed by the Committee, and will be effective only when
filed by the Participant in writing with the Committee during the
Participant's lifetime. In the absence of any such designation,
benefits remaining unpaid at the Participant's death shall be
paid to the Participant's estate.
The spouse of a married Participant domiciled in a community
property jurisdiction shall join in any designation of
beneficiary or beneficiaries other than the spouse.
Article 11. Deferrals
The Committee may permit a Participant to defer such
Participant's receipt of the payment of cash that would otherwise
be due to such Participant. If any such deferral election is
permitted, the Committee shall, in its sole discretion, establish
such rules and procedures as it deems necessary or desirable for
such payment deferrals.
Article 12. Rights of Employees
12.1 Employment. Nothing in the Plan shall interfere with or
limit in any way the right of the Company to terminate any
Participant's employment at any time, for any reason or no
reason, in the Company's sole discretion, nor confer upon any
Participant any right to continue in the employ of the Company.
12.2 Participation. No Employee shall have the right to be
selected to receive an Award under the Plan, or, having been so
selected, to be selected to receive a future Award.
Article 13. Change in Control
Upon the occurrence of a Change in Control, as defined
herein, unless otherwise specifically prohibited by the terms of
Article 17 herein:
(a) Any and all SARs granted hereunder shall be deemed to
have been exercised on the date such Change in Control occurs;
(b) Any Vesting Period with respect to Stock Units shall be
deemed to have expired, and there shall be paid out in cash to
Participants within thirty (30) days following the effective date
of the Change in Control the cash payment due with respect to
such Stock Units and related Dividend Equivalents, with a
Valuation Period ending on the effective date of the Change in
Control.
Article 14. Amendment, Modification and Termination
14.1 Amendment. Modification and Termination. The Board may,
at any time and from time to time, alter, amend, suspend or
terminate the Plan in whole or in part.
14.2 Awards Previously Granted. No termination, amendment
or modification of the Plan shall adversely affect in any
material way any Award previously granted under the Plan, without
the written consent of the Participant holding such Award, unless
such termination, modification or amendment is required by
applicable law.
Article 15. Tax Withholding
The Company shall have the power and the right to deduct or
withhold, or require a Participant to remit to the Company, an
amount sufficient to satisfy Federal, state and local taxes
(including the Participant's FICA obligation) required by law to
be withheld with respect to any taxable event arising out of or
as a result of an Award made under the Plan.
Article 16. Successors
All obligations of the Company under the Plan, with respect
to Awards granted hereunder shall be binding on any successor to
the Company, whether the existence of such successor is the
result of a direct or indirect purchase, merger, consolidation or
otherwise, of all or substantially all of the business and/or
assets of the Company.
Article 17. Legal Construction
17.1 Gender and Number. Except where otherwise indicated by
the context, any masculine term used herein also shall include
the feminine, the plural shall include the singular and the
singular shall include the plural.
17.2 Severability. In the event any provision of the Plan
shall be held illegal or invalid for any reason, the illegality
or invalidity shall not affect the remaining parts of the Plan,
and the Plan shall be construed and enforced as if the illegal
or invalid provision had not been included.
17.3 Requirements of Law. The granting of Awards under the
Plan shall be subject to all applicable laws, rules and
regulations, and to such approvals by any governmental agencies
or national securities exchanges as may be required.
17.4 Governing Law. To the extent not preempted by Federal
law, the Plan, and all agreements hereunder, shall be construed
in accordance with, and governed by, the laws of the State of New
York, without regard to conflicts of law provisions.
Exhibit 10-17
EMPLOYMENT AGREEMENT
Agreement made as of the 1st day of July, 1996, between
NIAGARA MOHAWK POWER CORPORATION (the "Company"), and David J.
Arrington (the "Executive").
WHEREAS, the Company desires to employ the Executive,
and the Executive desires to accept/continue employment with the
Company, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements hereinafter set forth, the Company and
the Executive hereby agree as follows:
1. Term of Agreement. The Company shall
employ the Executive, and the Executive shall serve the Company,
for the period beginning July 1, 1996 and expiring on June 30,
1999,subject to earlier termination as provided under paragraph 4
hereof. This Agreement shall be extended automatically by one
year commencing on July 1, 1997 and on July 1st of each year
thereafter, unless either party notifies the other to the
contrary not later than sixty (60) days prior to such date.
Notwithstanding any such notice by the Company, this Agreement
shall remain in effect for a period of thirty-six months from the
date of a "Change in Control" (as that term is defined in
Schedule B hereto, unless such notice was given at least 18
months prior to the date of the Change in Control).
2. Duties. The Executive shall serve the Company as
its Senior Vice President - Human Resources. During the term of
this Agreement, the Executive shall, except during vacation or
sick leave, devote the whole of the Executive's time, attention
and skill to the business of the Company during usual business
hours (and outside those hours when reasonably necessary to the
Executive's duties hereunder); faithfully and diligently perform
such duties and exercise such powers as may be from time to time
assigned to or vested in the Executive by the Company's Board of
Directors (the "Board") or by any officer of the Company superior
to the Executive; obey the directions of the Board and of any
officer of the Company superior to the Executive; and use the
Executive's best efforts to promote the interests of the Company.
The Executive may be required in pursuance of the Executive's
duties hereunder to perform services for any company controlling,
controlled by or under common control with the Company (such
companies hereinafter collectively called "Affiliates") and to
accept such offices in any Affiliates as the Board may require.
The Executive shall obey all policies of the Company and
applicable policies of its Affiliates.
3. Compensation. During the term of this Agreement:
a. The Company shall pay the Executive a base
salary at an annual rate of $190,000, which shall be payable
periodically in accordance with the Company's then prevailing
payroll practices, or such greater amount as the Company may from
time to time determine;
b. The Executive shall be entitled to
participate in the Company's Supplemental Executive Retirement
Plan ("SERP") according to its terms, as modified by Schedule A
hereto;
c. The Executive shall be entitled to
participate in the Company's Officers Incentive Compensation
Plan, Stock Option Plan and Performance Share Unit Plan, and any
successors thereto, in accordance with the terms thereof; and
d. The Executive shall be entitled to such
expense accounts, vacation time, sick leave, perquisites of
office, fringe benefits, insurance coverage, and other terms and
conditions of employment as the Company generally provides to its
employees having rank and seniority at the Company comparable to
the Executive.
4. Termination. The Company shall continue to employ
the Executive, and the Executive shall continue to work for the
Company, during the term of this Agreement, unless the Agreement
is terminated in accordance with the following provisions:
a. This Agreement shall terminate automatically
upon the death of the Executive. Any right or benefit accrued on
behalf of the Executive or to which the Executive became entitled
under the terms of this Agreement prior to death (other than
payment of base salary in respect of the period following the
Executive's death), and any obligation of the Company to the
Executive in respect of any such right or benefit, shall not be
extinguished by reason of the Executive's death. Any base salary
earned and unpaid as of the date of the Executive's death shall
be paid to the Executive's estate in accordance with paragraph
4g. below.
b. By notice to the Executive, the Company may
terminate this Agreement upon the "Disability" of the Executive.
The Executive shall be deemed to incur a Disability when (i) a
physician selected by the Company advises the Company that the
Executive's physical or mental condition has rendered the
Executive unable to perform the essential functions of the
Executive's position in a reasonable manner, with or without
reasonable accommodation and will continue to render him unable
to perform the essential functions of the Executive's position in
such manner, for a period exceeding 12 consecutive months, or
(ii) due to a physical or mental condition, the Executive has not
performed the essential functions of the Executive's position in
a reasonable manner, with or without reasonable accommodation,
for a period of 12 consecutive months. Following termination of
this Agreement pursuant to clause (i) of the preceding sentence
of this subparagraph, the Executive shall continue to receive his
base salary under paragraph 3a. hereof for a period of 12 months
from the date of his Disability, reduced by any benefits payable
during such period under the Company's short-term disability plan
and long-term disability plan. Thereafter, or in the event of
termination of this Agreement pursuant to clause (ii) of the
preceding sentence, the Executive shall receive benefits under
the Company's long-term disability plan in lieu of any further
base salary under paragraph 3a. hereof.
c. By notice to the Executive, the Company may
terminate the Executive's employment at any time for "Cause".
The Company must deliver such notice within ninety (90) days
after the Board both (i) has or should have had knowledge of
conduct or an event allegedly constituting Cause, and (ii) has
reason to believe that such conduct or event could be grounds for
Cause. For purposes of this Agreement "Cause" shall mean (i)
the Executive is convicted of, or has plead guilty or nolo
contendere to, a felony; (ii) the willful and continued failure
by the Executive to perform substantially his duties with the
Company (other than any such failure resulting from incapacity
due to physical or mental illness) after a demand for substantial
performance is delivered to the Executive by the Company which
specifically identifies the manner in which the Company believes
the Executive has not substantially performed his duties; (iii)
the Executive engages in conduct that constitutes gross neglect
or willful misconduct in carrying out his duties under this
Agreement involving material economic harm to the Company or any
of its subsidiaries; or (iv) the Executive has engaged in a
material breach of Section 6 or 7 of this Agreement. In the
event the termination notice is based on clause (ii) of the
preceding sentence, the Executive shall have ten (10) business
days following receipt of the notice of termination to cure his
conduct, to the extent such cure is possible, and if the
Executive does not cure within the ten (10) business day period,
his termination of employment in accordance with such termination
notice shall be deemed to be for Cause. The determination of
Cause shall be made by the Board upon the recommendation of the
Compensation and Succession Committee of the Board. Following a
Change in Control, such determination shall be made in a
resolution duly adopted by the affirmative vote of not less than
three-fourths (3/4) of the membership of the Board, excluding
members who are employees of the Company, at a meeting called for
the purpose of determining that Executive has engaged in conduct
which constitutes Cause (and at which Executive had a reasonable
opportunity, together with his counsel, to be heard before the
Board prior to such vote). The Executive shall not be entitled
to the payment of any additional compensation from the Company,
except to the extent provided in paragraph 4g. hereof, in the
event of the termination of his employment for Cause.
d. If any of the following events, any of which
shall constitute "Good Reason", occurs within thirty-six months
after a Change in Control, the Executive, by notice of the
Company, may voluntarily terminate the Executive's employment for
Good Reason within ninety (90) days after the Executive both (i)
has or should have had knowledge of conduct or an event allegedly
constituting Good Reason, and (ii) has reason to believe that
such conduct or event could be grounds for Good Reason. In such
event, the Executive shall be entitled to the severance benefits
set forth in subparagraph 4f. below.
(i) the Company assigns any duties to the Executive
which are materially inconsistent in any adverse respect with the
Executive's position, duties, offices, responsibilities or
reporting requirements immediately prior to a Change in Control,
including any diminution of such duties or responsibilities; or
(ii) the Company reduces the Executive's base salary,
including salary deferrals, as in effect immediately prior to a
Change in Control; or
(iii) the Company discontinues any bonus or other
compensation plan or any other benefit, retirement plan
(including the SERP), stock ownership plan, stock purchase plan,
stock option plan, life insurance plan, health plan, disability
plan or similar plan (as the same existed immediately prior to
the Change in Control) in which the Executive participated or was
eligible to participate in immediately prior to the Change in
Control and in lieu thereof does not make available plans
providing at least comparable benefits; or
(iv) the Company takes action which adversely affects
the Executive's participation in, or eligibility for, or
materially reduces the Executive's benefits under, any of the
plans described in (iii) above, or deprives the Executive of any
material fringe benefit enjoyed by the Executive immediately
prior to the Change in Control, or fails to provide the Executive
with the number of paid vacation days to which the Executive was
entitled in accordance with the Company's normal vacation policy
immediately prior to the Change in Control; or
(v) the Company requires the Executive to be based at
any office or location other than one within a 50-mile radius of
the office or location at which the Executive was based
immediately prior to the Change in Control; or
(vi) the Company purports to terminate the Executive's
employment otherwise than as expressly permitted by this
Agreement; or
(vii) the Company fails to comply with and satisfy
paragraph 5 hereof, provided that such successor has received
prior written notice from the Company or from the Executive of
the requirements of paragraph 5 hereof.
The Executive shall have the sole right to
determine, in good faith, whether any of the above events has
occurred.
e. The Company may terminate the Executive's
employment at any time without Cause.
f. In the event that the Executive's employment
is terminated by the Company without Cause or by the Executive
for Good Reason following a Change in Control, the Company shall
pay the Executive a severance benefit, payable in twenty-four
equal monthly installments, equal to two years' base salary at
the rate in effect as of the date of termination, plus the
greater of (i) two times the most recent annual bonus paid to the
Executive under the Corporation's Annual Officers Incentive
Compensation Plan (the "OICP") or any similar annual bonus plan
(excluding the pro rata bonus referred to in the next sentence)
or (ii) two times the average annual bonus paid to the Executive
for the three prior years under the OICP or such similar plan
(excluding the pro rata annual bonus referred to in the next
sentence). If one hundred eighty (180) days or more have elapsed
in the Company's fiscal year in which such termination occurs,
the Company shall also pay the Executive in a lump sum, within
ninety (90) days after the end of such fiscal year, a pro rata
portion of Executive's annual bonus in an amount equal to (A) the
bonus which would have been payable to Executive under OICP or
any similar plan for the fiscal year in which Executive's
termination occurs, multiplied by (B) a fraction, the numerator
of which is the number of days in the fiscal year in which the
termination occurs through the termination date and the
denominator of which is three hundred sixty-five (365). For
purposes of the first sentence of this subparagraph 4f., there
shall be taken into account as bonus paid to the Executive for
each of the years 1996 and 1997 under the OICP one-half of the
sum of (x) cash payments with respect to Restricted Stock Units
(and related Dividend Equivalents) granted to the Executive under
the Corporation's 1995 Stock Incentive Plan and (y) the result of
multiplying the number of Stock Appreciation Rights granted to
the Executive under the Corporation's 1995 Stock Incentive Plan
by the difference between (1) the value of one share of the
Corporation's common stock on December 31, 1997 and (2) the Base
Value ($10.75). Notwithstanding the preceding sentence, if a
Change in Control occurs prior to December 31, 1997, there shall
be taken into account for purposes of the first sentence of this
subparagraph 4f. as bonus paid to the Executive for each of the
years 1996 and 1997 under the OICP one-half of the cash payments
with respect to Stock Units (and related Dividend Equivalents)
and Stock Appreciation Rights which are payable to the Executive
pursuant to Article 13 of the Corporation's 1995 Stock Incentive
Plan. If the termination of the Executive's employment occurs
prior to December 31, 1997 and prior to a Change in Control, the
amount of any adjustments to the severance benefit required as a
result of the preceding two sentences of this subparagraph 4f.
shall be paid to the Executive in a lump sum no later than
March 15, 1998.
In addition, in the event that the Executive's employment is
terminated by the Company without Cause or by the Executive for
Good Reason following a Change in Control, the Executive shall be
entitled to continue participation in the Company's employee
benefit plans (other than its qualified and non-qualified
retirement plans) for a two-year period from the date of
termination, provided, however, that if Executive cannot continue
to participate in any of the benefit plans, the Company shall
otherwise provide equivalent benefits to the Executive and his
dependents on the same after-tax basis as of continued
participation had been permitted. Notwithstanding the foregoing,
in the event Executive becomes employed by another employer and
becomes eligible to participate in an employee benefit plan of
such employer, the benefits described herein shall be secondary
to such benefits during the period of Executive's eligibility,
but only to the extent that the Company reimburses Executive for
any increased cost and provides any additional benefits necessary
to give Executive the benefits provided hereunder.
g. Upon termination pursuant to subparagraphs
4a., b., c., d., or e. above, the Company shall pay the Executive
or the Executive's estate any base salary earned and unpaid to
the date of termination, and any outstanding funds advanced by
the Company to or on behalf of the Executive shall become
immediately due and payable.
h. The parties intend that no severance benefits
hereunder shall be paid to the extent that such benefits (either
alone or when aggregated with other benefits contingent on a
Change in Control and paid to or for benefit of the Executive)
constitute "excess parachute payment" within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"). Accordingly, under the circumstances set forth
below, severance benefits payable under this Agreement shall be
subject to the following reduction notwithstanding anything in
this Agreement to the contrary. If the aggregate present value
(as determined pursuant to Section 280G of the Code) of severance
benefits payable under this Agreement which, together with all
other payments by the Company to the Executive or for the
Executive's benefit, would be "parachute payments" within the
meaning of Section 280G of the Code, the payments pursuant to
this Agreement shall be reduced (reducing first the severance
benefit provided in the first sentence of subparagraph 4f.
hereof) to the largest amount as will result in no portion of
such payments being treated as excess parachute payments.
i. The determination of whether and to what
extent the payments shall be reduced under this Agreement,
pursuant to the foregoing subparagraph h., including
apportionment among specific payments and benefits, shall be made
by the Executive in good faith, and such determination shall be
conclusive and binding on the Company. The Company shall make
the calculations referred to in subparagraph h. above within
thirty days following the termination of the Executive's
employment and shall provide such calculations and the basis
therefor to the Executive within such period. In the event a
reduction is required, the Executive shall give notice to the
Company, within 20 days of the Executive's receipt of such
calculations and related information, of the Executive's
determination of the reduction.
j. Upon the occurrence of a Change in Control
the Company shall pay promptly as incurred, to the full extent
permitted by law, all legal fees and expenses which the Executive
may reasonably thereafter incur as a result of any contest,
litigation or arbitration (regardless of the outcome thereof) by
the Company, or by the Executive of the validity of, or liability
under, this Agreement or the SERP (including any contest by the
Executive about the amount of any payment pursuant to this
Agreement or pursuant to the SERP), plus in each case interest on
any delayed payment at the rate of 150% of the Prime Rate posted
by the Chase Manhattan Bank, N.A. or its successor, provided,
however, that the Company shall not be liable for the Executive's
legal fees and expenses if the Executive's position in such
contest, litigation or arbitration is found by the neutral
decision-maker to be frivolous.
5. Successor Liability. The Company shall require
any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and to
agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform. As
used in this Agreement, "Company" shall mean the company as
hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
6. Confidential Information. The Executive agrees to
keep secret and retain in the strictest confidence all
confidential matters which relate to the Company, its
subsidiaries and affiliates, including, without limitation,
customer lists, client lists, trade secrets, pricing policies and
other business affairs of the Company, its subsidiaries and
affiliates learned by him from the Company or any such subsidiary
or affiliate or otherwise before or after the date of this
Agreement, and not to disclose any such confidential matter to
anyone outside the Company or any of its subsidiaries or
affiliates, whether during or after his period of service with
the Company, except (i) as such disclosure may be required or
appropriate in connection with his work as an employee of the
Company or (ii) when required to do so by a court of law, by any
governmental agency having supervisory authority over the
business of the Company or by any administrative or legislative
body (including a committee thereof) with apparent jurisdiction
to order him to divulge, disclose or make accessible such
information. The Executive agrees to give the Company advance
written notice of any disclosure pursuant to clause (ii) of the
preceding sentence and to cooperate with any efforts by the
Company to limit the extent of such disclosure. Upon request by
the Company, the Executive agrees to deliver promptly to the
Company upon termination of his services for the Company, or at
any time thereafter as the Company may request, all Company
subsidiary or affiliate memoranda, notes, records, reports,
manuals, drawings, designs, computer file in any media and other
documents (and all copies thereof) relating to the Company's or
any subsidiary's or affiliate's business and all property of the
Company or any subsidiary or affiliate associated therewith,
which he may then possess or have under his direct control, other
than personal notes, diaries, Rolodexes and correspondence.
7. Non-Compete and Non-Solicitation. During the
Executive's employment by the Company and for a period of
one year following the termination thereof for any reason, the
Executive covenants and agrees that he will not for himself or on
behalf of any other person, partnership, company or corporation,
directly or indirectly, acquire any financial or beneficial
interest in (except as provided in the next sentence), provide
consulting services to, be employed by, or own, manage, operate
or control any business which is in competition with a business
engaged in by the Company or any of its subsidiaries or
affiliates in any state of the United States in which any of them
are engaged in business at the time of such termination of
employment for as long as they carry on a business therein.
Notwithstanding the preceding sentence, the Executive shall not
be prohibited from owning less than five (5%) percent of any
publicly traded corporation, whether or not such corporation is
in competition with the Company.
The Executive hereby covenants and agrees that, at all
times during the period of his employment and for a period of one
year immediately following the termination thereof for any
reason, the Executive shall not employ or seek to employ any
person employed at that time by the Company or any of its
subsidiaries, or otherwise encourage or entice such person or
entity to leave such employment.
It is the intention of the parties hereto that the
restrictions contained in this Section be enforceable to the
fullest extent permitted by applicable law. Therefore, to the
extent any court of competent jurisdiction shall determine that
any portion of the foregoing restrictions is excessive, such
provision shall not be entirely void, but rather shall be limited
or revised only to the extent necessary to make it enforceable.
Specifically, if any court of competent jurisdiction should hold
that any portion of the foregoing description is overly broad as
to one or more states of the United States, then that state or
states shall be eliminated from the territory to which the
restrictions of paragraph (a) of this Section applies and the
restrictions shall remain applicable in all other states of the
United States.
8. No Mitigation. The Executive shall not be
required to mitigate the amount of any payments or benefits
provided for in Section 4f. hereof by seeking other employment or
otherwise and no amounts earned by the Executive shall be used to
reduce or offset the amounts payable hereunder, except as
otherwise provided in Section 4f.
9. Ownership of Work Product. Any and all
improvements, inventions, discoveries, formulae, processes,
methods, know-how, confidential data, trade secrets and other
proprietary information (collectively, "Work Products") within
the scope of any business of the Company or any Affiliate which
the Executive may conceive or make or have conceived or made
during the Executive's employment with the Company shall be and
are the sole and exclusive property of the Company, and that the
Executive, whenever requested to do so by the Company, at its
expense, shall execute and sign any and all applications,
assignments or other instruments and do all other things which
the Company may deem necessary or appropriate (i) to apply for,
obtain, maintain, enforce, or defend letters patent of the United
States or any foreign country for any Work Product, or (ii) to
assign, transfer, convey or otherwise make available to the
Company the sole and exclusive right, title and interest in and
to any Work Product.
10. Arbitration. Any dispute or controversy between
the parties relating to this Agreement (except any dispute
relating to paragraphs 6 or 7 hereof) or relating to or arising
out of the Executive's employment with the Company, shall be
settled by binding arbitration in the City of Syracuse, State of
New York, pursuant to the Employment Dispute Resolution Rules of
the American Arbitration Association and shall be subject to the
provisions of Article 75 of the New York Civil Practice Law and
Rules. Judgment upon the award may be entered in any court of
competent jurisdiction. Notwithstanding anything herein to the
contrary, if any dispute arises between the parties under
paragraphs 6 or 7 hereof, or if the Company makes any claim under
paragraphs 6 or 7, the Company shall not be required to arbitrate
such dispute or claim but shall have the right to institute
judicial proceedings in any court of competent jurisdiction with
respect to such dispute or claim. If such judicial proceedings
are instituted, the parties agree that such proceedings shall not
be stayed or delayed pending the outcome of any arbitration
proceedings hereunder.
11. Notices. Any notice or other communication
required or permitted under this Agreement shall be effective
only if it is in writing and delivered personally or sent by
certified mail, postage prepaid, or overnight delivery addressed
as follows:
If to the Company:
Niagara Mohawk Power Corporation
300 Erie Boulevard West
Syracuse, New York 13202
ATTN: Corporate Secretary
If to the Executive:
4302 Hepatica Hill Road
Manlius, NY 13104
or to such other address as either party may designate by notice
to the other, and shall be deemed to have been given upon
receipt.
12. Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto, and supersedes, and
is in full substitution for any and all prior understandings or
agreements, oral or written, with respect to the Executive's
employment.
13. Amendment. This Agreement may be amended only by
an instrument in writing signed by the parties hereto, and any
provision hereof may be waived only by an instrument in writing
signed by the party or parties against whom or which enforcement
of such waiver is sought. The failure of either party hereto at
any time to require the performance by the other party hereto of
any provision hereof shall in no way affect the full right to
require such performance at any time thereafter, nor shall the
waiver by either party hereto of a breach of any provision hereof
be taken or held to be a waiver of any succeeding breach of such
provision or a waiver of the provision itself or a waiver of any
other provision of this Agreement.
14. Miscellaneous. This Agreement is binding on and
is for the benefit of the parties hereto and their respective
successors, heirs, executors, administrators and other legal
representatives. Neither this Agreement nor any right or
obligation hereunder may be assigned by the Company (except to an
Affiliate) or by the Executive without the prior written consent
of the other party.
15. Severability. If any provision of this
Agreement, or portion thereof, is so broad, in scope or duration,
so as to be unenforceable, such provision or portion thereof
shall be interpreted to be only so broad as is enforceable.
16. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York without reference to principles of conflicts of law.
17. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original,
but all of which shall constitute one and the same instrument.
18. Performance Covenant. The Executive represents
and warrants to the Company that the Executive is not party to
any agreement which would prohibit the Executive from entering
into this Agreement or performing fully the Executive's
obligations hereunder.
19. Survival of Covenants. The obligations of the
Executive set forth in paragraphs 6, 7, 9 and 10 represent
independent covenants by which the Executive is and will remain
bound notwithstanding any breach by the Company, and shall
survive the termination of this Agreement.
IN WITNESS WHEREOF, the Company and the Executive have
executed this Agreement as of the date first written above.
________________________ NIAGARA MOHAWK POWER CORPORATION
David J. Arrington
By:______________________________
WILLIAM E. DAVIS
Chairman of the Board and
Chief Executive Officer
SCHEDULE A
Modifications in Respect of David J. Arrington ("Executive")
to the
Supplemental Executive Retirement Plan ("SERP")
of the
Niagara Mohawk Power Corporation ("Company")
I. Subsection 1.8 of Section I of the SERP is hereby modified
to provide that the term "Earnings" shall mean the sum of the (i)
Executive's base annual salary, whether or not deferred and
including any elective before-tax contributions made by the
Executive to a plan qualified under Section 401(k) of the
Internal Revenue Code, averaged over the final 36 months of the
Executive's employment with the Company and (ii) the average of
the annual bonus earned by the Executive under the Corporation's
Annual Officers Incentive Compensation Plan ("OICP"), whether or
not deferred, in respect of the final 36 months of the
Executive's employment with the Company. If (A) the Executive is
an employee of the Company on December 31, 1997 or (B) prior to
December 31, 1997 the Executive's employment is terminated and
the Executive is entitled to payment under Article 9 of the
Corporation's 1995 Stock Incentive Plan ("SIP") for all or a
portion of the Stock Units and Stock Appreciation Rights granted
to the Executive under SIP, there shall be taken into account for
purposes of the preceding sentence as an annual bonus under the
OICP, the sum of (x) cash payments made with respect to Stock
Units (and related Dividend Equivalents) granted to the Executive
under the SIP and (y) the result of multiplying the number of
Stock Appreciation Rights granted to the Executive under the SIP,
prorated if applicable to Article 9 of the SIP, by the difference
between (1) the value of one share of the Corporation's common
stock on December 31, 1997 and (2) the Base Value ($10.75).
Notwithstanding the preceding sentence, if a Change in Control
occurs prior to December 31, 1997 (and, if applicable, prior to
the Executive's termination of employment), there shall be taken
into account for purposes of the first sentence hereof as an
annual bonus under the OICP the cash payments with respect to
Stock Units (and related Dividend Equivalents) and Stock
Appreciation Rights which are payable to the Executive pursuant
to Article 13 of the SIP.
II. Subsection 2.1 of Section II of the SERP is hereby modified
to provide that full SERP benefits are vested following eight (8)
years of continuous service with the Company.
III. Subsection 4.3 of Section IV of the SERP is hereby
modified to provide that in the event of (x) the Executive's
involuntary termination of employment by the Company, at any
time, other than for Cause, (y) the termination of this Agreement
on account of the Executive's Disability or (z) the Executive's
termination of employment for Good Reason within the 36 full
calendar month period following a Change in Control (as defined
in Schedule B of this Agreement), the Executive shall be 100%
vested in his full SERP benefit (i.e., 60% of Earnings (as
modified above)) regardless of the Executive's years of
continuous service with the Company. If the Executive is less
than age 55 at the date of such termination of employment, the
Executive shall be entitled to receive benefits commencing no
earlier than age 55, calculated pursuant to Section III of the
SERP.
IV. Except as provided above, the provisions of the SERP shall
apply and control participation therein and the payment of
benefits thereunder.
SCHEDULE B
For purposes of this Agreement, the term "Change in
Control" shall mean:
(1) The acquisition by any individual, entity or
group (within the meaning of Sections 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly
from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege), (ii)any acquisition by the
Company, (iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (iv) any acquisition by
any corporation pursuant to a reorganization, merger or
consolidation, if, following such reorganization, merger or
consolidation, the conditions described in clauses (i), (ii) and
(iii) of subparagraph (3) of this Schedule B are satisfied; or
(2) Individuals who, as of the date hereof, constitute the
Company's Board of Directors (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of
at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(3) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation, (i) more
than 75% of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such
reorganization, merger or consolidation, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding the Company, any
employee benefit plan (or related trust) of the Company or such
corporation resulting from such reorganization, merger or
consolidation and any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation, directly
or indirectly, 20% or more of the Outstanding Company Common
stock or Outstanding Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or
consolidation were members of the Incumbent Board at the time of
the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
(4) Approval by the shareholders of the Company of (i)
a complete liquidation or dissolution of the Company or (ii) the
sale or other disposition of all or substantially all of the
assets of the Company, other than to a corporation, with respect
to which following such sale or other disposition, (A) more than
75% of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B) no
Person (excluding the Company and any employee benefit plan (or
related trust) of the Company or such corporation and any Person
beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 20% or more of the
Outstanding Company Common Stock or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors and (C) at least a majority of the members of the board
of directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement or
action of the Board providing for such sale or other disposition
of assets of the Company.
Exhibit 10-18
EMPLOYMENT AGREEMENT
Agreement made as of the 1st day of July, 1996, between
NIAGARA MOHAWK POWER CORPORATION (the "Company"), and Albert J.
Budney, Jr. (the "Executive").
WHEREAS, the Company desires to employ the Executive,
and the Executive desires to accept/continue employment with the
Company, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements hereinafter set forth, the Company and
the Executive hereby agree as follows:
1. Term of Agreement. The Company shall
employ the Executive, and the Executive shall serve the Company,
for the period beginning July 1, 1996 and expiring on June 30,
1999, subject to earlier termination as provided under paragraph
4 hereof. This Agreement shall be extended automatically by one
year commencing on July 1, 1997 and on July 1st of each year
thereafter, unless either party notifies the other to the
contrary not later than sixty (60) days prior to such date.
Notwithstanding any such notice by the Company, this Agreement
shall remain in effect for a period of thirty-six months from the
date of a "Change in Control" (as that term is defined in
Schedule B hereto, unless such notice was given at least 18
months prior to the date of the Change in Control).
2. Duties. The Executive shall serve the Company as
its President and Chief Operating Officer. During the term of
this Agreement, the Executive shall, except during vacation or
sick leave, devote the whole of the Executive's time, attention
and skill to the business of the Company during usual business
hours (and outside those hours when reasonably necessary to the
Executive's duties hereunder); faithfully and diligently perform
such duties and exercise such powers as may be from time to time
assigned to or vested in the Executive by the Company's Board of
Directors (the "Board") or by any officer of the Company superior
to the Executive; obey the directions of the Board and of any
officer of the Company superior to the Executive; and use the
Executive's best efforts to promote the interests of the Company.
The Executive may be required in pursuance of the Executive's
duties hereunder to perform services for any company controlling,
controlled by or under common control with the Company (such
companies hereinafter collectively called "Affiliates") and to
accept such offices in any Affiliates as the Board may require.
The Executive shall obey all policies of the Company and
applicable policies of its Affiliates.
3. Compensation. During the term of this Agreement:
a. The Company shall pay the Executive a base
salary at an annual rate of $315,000, which shall be payable
periodically in accordance with the Company's then prevailing
payroll practices, or such greater amount as the Company may from
time to time determine;
b. The Executive shall be entitled to
participate in the Company's Supplemental Executive Retirement
Plan ("SERP") according to its terms, as modified by Schedule A
hereto;
c. The Executive shall be entitled to
participate in the Company's Officers Incentive Compensation
Plan, Stock Option Plan and Performance Share Unit Plan, and any
successors thereto, in accordance with the terms thereof; and
d. The Executive shall be entitled to such
expense accounts, vacation time, sick leave, perquisites of
office, fringe benefits, insurance coverage, and other terms and
conditions of employment as the Company generally provides to its
employees having rank and seniority at the Company comparable to
the Executive.
4. Termination. The Company shall continue to employ
the Executive, and the Executive shall continue to work for the
Company, during the term of this Agreement, unless the Agreement
is terminated in accordance with the following provisions:
a. This Agreement shall terminate automatically
upon the death of the Executive. Any right or benefit accrued on
behalf of the Executive or to which the Executive became entitled
under the terms of this Agreement prior to death (other than
payment of base salary in respect of the period following the
Executive's death), and any obligation of the Company to the
Executive in respect of any such right or benefit, shall not be
extinguished by reason of the Executive's death. Any base salary
earned and unpaid as of the date of the Executive's death shall
be paid to the Executive's estate in accordance with paragraph
4g. below.
b. By notice to the Executive, the Company may
terminate this Agreement upon the "Disability" of the Executive.
The Executive shall be deemed to incur a Disability when (i) a
physician selected by the Company advises the Company that the
Executive's physical or mental condition has rendered the
Executive unable to perform the essential functions of the
Executive's position in a reasonable manner, with or without
reasonable accommodation and will continue to render him unable
to perform the essential functions of the Executive's position in
such manner, for a period exceeding 12 consecutive months, or
(ii) due to a physical or mental condition, the Executive has not
performed the essential functions of the Executive's position in
a reasonable manner, with or without reasonable accommodation,
for a period of 12 consecutive months. Following termination of
this Agreement pursuant to clause (i) of the preceding sentence
of this subparagraph, the Executive shall continue to receive his
base salary under paragraph 3a. hereof for a period of 12 months
from the date of his Disability, reduced by any benefits payable
during such period under the Company's short-term disability plan
and long-term disability plan. Thereafter, or in the event of
termination of this Agreement pursuant to clause (ii) of the
preceding sentence, the Executive shall receive benefits under
the Company's long-term disability plan in lieu of any further
base salary under paragraph 3a. hereof.
c. By notice to the Executive, the Company may
terminate the Executive's employment at any time for "Cause".
The Company must deliver such notice within ninety (90) days
after the Board both (i) has or should have had knowledge of
conduct or an event allegedly constituting Cause, and (ii) has
reason to believe that such conduct or event could be grounds for
Cause. For purposes of this Agreement "Cause" shall mean (i)
the Executive is convicted of, or has plead guilty or nolo
contendere to, a felony; (ii) the willful and continued failure
by the Executive to perform substantially his duties with the
Company (other than any such failure resulting from incapacity
due to physical or mental illness) after a demand for substantial
performance is delivered to the Executive by the Company which
specifically identifies the manner in which the Company believes
the Executive has not substantially performed his duties; (iii)
the Executive engages in conduct that constitutes gross neglect
or willful misconduct in carrying out his duties under this
Agreement involving material economic harm to the Company or any
of its subsidiaries; or (iv) the Executive has engaged in a
material breach of Section 6 or 7 of this Agreement. In the
event the termination notice is based on clause (ii) of the
preceding sentence, the Executive shall have ten (10) business
days following receipt of the notice of termination to cure his
conduct, to the extent such cure is possible, and if the
Executive does not cure within the ten (10) business day period,
his termination of employment in accordance with such termination
notice shall be deemed to be for Cause. The determination of
Cause shall be made by the Board upon the recommendation of the
Compensation and Succession Committee of the Board. Following a
Change in Control, such determination shall be made in a
resolution duly adopted by the affirmative vote of not less than
three-fourths (3/4) of the membership of the Board, excluding
members who are employees of the Company, at a meeting called for
the purpose of determining that Executive has engaged in conduct
which constitutes Cause (and at which Executive had a reasonable
opportunity, together with his counsel, to be heard before the
Board prior to such vote). The Executive shall not be entitled
to the payment of any additional compensation from the Company,
except to the extent provided in paragraph 4g. hereof, in the
event of the termination of his employment for Cause.
d. If any of the following events, any of which
shall constitute "Good Reason", occurs within thirty-six months
after a Change in Control, the Executive, by notice of the
Company, may voluntarily terminate the Executive's employment for
Good Reason within ninety (90) days after the Executive both (i)
has or should have had knowledge of conduct or an event allegedly
constituting Good Reason, and (ii) has reason to believe that
such conduct or event could be grounds for Good Reason. In such
event, the Executive shall be entitled to the severance benefits
set forth in subparagraph 4f. below.
(i) the Company assigns any duties to the Executive
which are materially inconsistent in any adverse respect with the
Executive's position, duties, offices, responsibilities or
reporting requirements immediately prior to a Change in Control,
including any diminution of such duties or responsibilities; or
(ii) the Company reduces the Executive's base salary,
including salary deferrals, as in effect immediately prior to a
Change in Control; or
(iii) the Company discontinues any bonus or other
compensation plan or any other benefit, retirement plan
(including the SERP), stock ownership plan, stock purchase plan,
stock option plan, life insurance plan, health plan, disability
plan or similar plan (as the same existed immediately prior to
the Change in Control) in which the Executive participated or was
eligible to participate in immediately prior to the Change in
Control and in lieu thereof does not make available plans
providing at least comparable benefits; or
(iv) the Company takes action which adversely affects
the Executive's participation in, or eligibility for, or
materially reduces the Executive's benefits under, any of the
plans described in (iii) above, or deprives the Executive of any
material fringe benefit enjoyed by the Executive immediately
prior to the Change in Control, or fails to provide the Executive
with the number of paid vacation days to which the Executive was
entitled in accordance with the Company's normal vacation policy
immediately prior to the Change in Control; or
(v) the Company requires the Executive to be based at
any office or location other than one within a 50-mile radius of
the office or location at which the Executive was based
immediately prior to the Change in Control; or
(vi) the Company purports to terminate the Executive's
employment otherwise than as expressly permitted by this
Agreement; or
(vii) the Company fails to comply with and satisfy
paragraph 5 hereof, provided that such successor has received
prior written notice from the Company or from the Executive of
the requirements of paragraph 5 hereof.
The Executive shall have the sole right to
determine, in good faith, whether any of the above events has
occurred.
e. The Company may terminate the Executive's
employment at any time without Cause.
f. In the event that the Executive's employment
is terminated by the Company without Cause or by the Executive
for Good Reason following a Change in Control, the Company shall
pay the Executive a severance benefit, payable in twenty-four
equal monthly installments, equal to two years' base salary at
the rate in effect as of the date of termination, plus the
greater of (i) two times the most recent annual bonus paid to the
Executive under the Corporation's Annual Officers Incentive
Compensation Plan (the "OICP") or any similar annual bonus plan
(excluding the pro rata bonus referred to in the next sentence)
or (ii) two times the average annual bonus paid to the Executive
for the three prior years under the OICP or such similar plan
(excluding the pro rata annual bonus referred to in the next
sentence). If one hundred eighty (180) days or more have elapsed
in the Company's fiscal year in which such termination occurs,
the Company shall also pay the Executive in a lump sum, within
ninety (90) days after the end of such fiscal year, a pro rata
portion of Executive's annual bonus in an amount equal to (A) the
bonus which would have been payable to Executive under OICP or
any similar plan for the fiscal year in which Executive's
termination occurs, multiplied by (B) a fraction, the numerator
of which is the number of days in the fiscal year in which the
termination occurs through the termination date and the
denominator of which is three hundred sixty-five (365). For
purposes of the first sentence of this subparagraph 4f., there
shall be taken into account as bonus paid to the Executive for
each of the years 1996 and 1997 under the OICP one-half of the
sum of (x) cash payments with respect to Restricted Stock Units
(and related Dividend Equivalents) granted to the Executive under
the Corporation's 1995 Stock Incentive Plan and (y) the result of
multiplying the number of Stock Appreciation Rights granted to
the Executive under the Corporation's 1995 Stock Incentive Plan
by the difference between (1) the value of one share of the
Corporation's common stock on December 31, 1997 and (2) the Base
Value ($10.75). Notwithstanding the preceding sentence, if a
Change in Control occurs prior to December 31, 1997, there shall
be taken into account for purposes of the first sentence of this
subparagraph 4f. as bonus paid to the Executive for each of the
years 1996 and 1997 under the OICP one-half of the cash payments
with respect to Stock Units (and related Dividend Equivalents)
and Stock Appreciation Rights which are payable to the Executive
pursuant to Article 13 of the Corporation's 1995 Stock Incentive
Plan. If the termination of the Executive's employment occurs
prior to December 31, 1997 and prior to a Change in Control, the
amount of any adjustments to the severance benefit required as a
result of the preceding two sentences of this subparagraph 4f.
shall be paid to the Executive in a lump sum no later than March
15, 1998.
In addition, in the event that the Executive's employment is
terminated by the Company without Cause or by the Executive for
Good Reason following a Change in Control, the Executive shall be
entitled to continue participation in the Company's employee
benefit plans (other than its qualified and non-qualified
retirement plans) for a two-year period from the date of
termination, provided, however, that if Executive cannot continue
to participate in any of the benefit plans, the Company shall
otherwise provide equivalent benefits to the Executive and his
dependents on the same after-tax basis as of continued
participation had been permitted. Notwithstanding the foregoing,
in the event Executive becomes employed by another employer and
becomes eligible to participate in an employee benefit plan of
such employer, the benefits described herein shall be secondary
to such benefits during the period of Executive's eligibility,
but only to the extent that the Company reimburses Executive for
any increased cost and provides any additional benefits necessary
to give Executive the benefits provided hereunder.
g. Upon termination pursuant to subparagraphs
4a., b., c., d., or e. above, the Company shall pay the Executive
or the Executive's estate any base salary earned and unpaid to
the date of termination, and any outstanding funds advanced by
the Company to or on behalf of the Executive shall become
immediately due and payable.
h. The parties intend that no severance benefits
hereunder shall be paid to the extent that such benefits (either
alone or when aggregated with other benefits contingent on a
Change in Control and paid to or for benefit of the Executive)
constitute "excess parachute payment" within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"). Accordingly, under the circumstances set forth
below, severance benefits payable under this Agreement shall be
subject to the following reduction notwithstanding anything in
this Agreement to the contrary. If the aggregate present value
(as determined pursuant to Section 280G of the Code) of severance
benefits payable under this Agreement which, together with all
other payments by the Company to the Executive or for the
Executive's benefit, would be "parachute payments" within the
meaning of Section 280G of the Code, the payments pursuant to
this Agreement shall be reduced (reducing first the severance
benefit provided in the first sentence of subparagraph 4f.
hereof) to the largest amount as will result in no portion of
such payments being treated as excess parachute payments.
i. The determination of whether and to what
extent the payments shall be reduced under this Agreement,
pursuant to the foregoing subparagraph h., including
apportionment among specific payments and benefits, shall be made
by the Executive in good faith, and such determination shall be
conclusive and binding on the Company. The Company shall make
the calculations referred to in subparagraph h. above within
thirty days following the termination of the Executive's
employment and shall provide such calculations and the basis
therefor to the Executive within such period. In the event a
reduction is required, the Executive shall give notice to the
Company, within 20 days of the Executive's receipt of such
calculations and related information, of the Executive's
determination of the reduction.
j. Upon the occurrence of a Change in Control
the Company shall pay promptly as incurred, to the full extent
permitted by law, all legal fees and expenses which the Executive
may reasonably thereafter incur as a result of any contest,
litigation or arbitration (regardless of the outcome thereof) by
the Company, or by the Executive of the validity of, or liability
under, this Agreement or the SERP (including any contest by the
Executive about the amount of any payment pursuant to this
Agreement or pursuant to the SERP), plus in each case interest on
any delayed payment at the rate of 150% of the Prime Rate posted
by the Chase Manhattan Bank, N.A. or its successor, provided,
however, that the Company shall not be liable for the Executive's
legal fees and expenses if the Executive's position in such
contest, litigation or arbitration is found by the neutral
decision-maker to be frivolous.
5. Successor Liability. The Company shall require
any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and to
agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform. As
used in this Agreement, "Company" shall mean the company as
hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
6. Confidential Information. The Executive agrees to
keep secret and retain in the strictest confidence all
confidential matters which relate to the Company, its
subsidiaries and affiliates, including, without limitation,
customer lists, client lists, trade secrets, pricing policies and
other business affairs of the Company, its subsidiaries and
affiliates learned by him from the Company or any such subsidiary
or affiliate or otherwise before or after the date of this
Agreement, and not to disclose any such confidential matter to
anyone outside the Company or any of its subsidiaries or
affiliates, whether during or after his period of service with
the Company, except (i) as such disclosure may be required or
appropriate in connection with his work as an employee of the
Company or (ii) when required to do so by a court of law, by any
governmental agency having supervisory authority over the
business of the Company or by any administrative or legislative
body (including a committee thereof) with apparent jurisdiction
to order him to divulge, disclose or make accessible such
information. The Executive agrees to give the Company advance
written notice of any disclosure pursuant to clause (ii) of the
preceding sentence and to cooperate with any efforts by the
Company to limit the extent of such disclosure. Upon request by
the Company, the Executive agrees to deliver promptly to the
Company upon termination of his services for the Company, or at
any time thereafter as the Company may request, all Company
subsidiary or affiliate memoranda, notes, records, reports,
manuals, drawings, designs, computer file in any media and other
documents (and all copies thereof) relating to the Company's or
any subsidiary's or affiliate's business and all property of the
Company or any subsidiary or affiliate associated therewith,
which he may then possess or have under his direct control, other
than personal notes, diaries, Rolodexes and correspondence.
7. Non-Compete and Non-Solicitation. During the
Executive's employment by the Company and for a period of
one year following the termination thereof for any reason, the
Executive covenants and agrees that he will not for himself or on
behalf of any other person, partnership, company or corporation,
directly or indirectly, acquire any financial or beneficial
interest in (except as provided in the next sentence), provide
consulting services to, be employed by, or own, manage, operate
or control any business which is in competition with a business
engaged in by the Company or any of its subsidiaries or
affiliates in any state of the United States in which any of them
are engaged in business at the time of such termination of
employment for as long as they carry on a business therein.
Notwithstanding the preceding sentence, the Executive shall not
be prohibited from owning less than five (5%) percent of any
publicly traded corporation, whether or not such corporation is
in competition with the Company.
The Executive hereby covenants and agrees that, at all
times during the period of his employment and for a period of one
year immediately following the termination thereof for any
reason, the Executive shall not employ or seek to employ any
person employed at that time by the Company or any of its
subsidiaries, or otherwise encourage or entice such person or
entity to leave such employment.
It is the intention of the parties hereto that the
restrictions contained in this Section be enforceable to the
fullest extent permitted by applicable law. Therefore, to the
extent any court of competent jurisdiction shall determine that
any portion of the foregoing restrictions is excessive, such
provision shall not be entirely void, but rather shall be limited
or revised only to the extent necessary to make it enforceable.
Specifically, if any court of competent jurisdiction should hold
that any portion of the foregoing description is overly broad as
to one or more states of the United States, then that state or
states shall be eliminated from the territory to which the
restrictions of paragraph (a) of this Section applies and the
restrictions shall remain applicable in all other states of the
United States.
8. No Mitigation. The Executive shall not be
required to mitigate the amount of any payments or benefits
provided for in Section 4f. hereof by seeking other employment or
otherwise and no amounts earned by the Executive shall be used to
reduce or offset the amounts payable hereunder, except as
otherwise provided in Section 4f.
9. Ownership of Work Product. Any and all
improvements, inventions, discoveries, formulae, processes,
methods, know-how, confidential data, trade secrets and other
proprietary information (collectively, "Work Products") within
the scope of any business of the Company or any Affiliate which
the Executive may conceive or make or have conceived or made
during the Executive's employment with the Company shall be and
are the sole and exclusive property of the Company, and that the
Executive, whenever requested to do so by the Company, at its
expense, shall execute and sign any and all applications,
assignments or other instruments and do all other things which
the Company may deem necessary or appropriate (i) to apply for,
obtain, maintain, enforce, or defend letters patent of the United
States or any foreign country for any Work Product, or (ii) to
assign, transfer, convey or otherwise make available to the
Company the sole and exclusive right, title and interest in and
to any Work Product.
10. Arbitration. Any dispute or controversy between
the parties relating to this Agreement (except any dispute
relating to paragraphs 6 or 7 hereof) or relating to or arising
out of the Executive's employment with the Company, shall be
settled by binding arbitration in the City of Syracuse, State of
New York, pursuant to the Employment Dispute Resolution Rules of
the American Arbitration Association and shall be subject to the
provisions of Article 75 of the New York Civil Practice Law and
Rules. Judgment upon the award may be entered in any court of
competent jurisdiction. Notwithstanding anything herein to the
contrary, if any dispute arises between the parties under
paragraphs 6 or 7 hereof, or if the Company makes any claim under
paragraphs 6 or 7, the Company shall not be required to arbitrate
such dispute or claim but shall have the right to institute
judicial proceedings in any court of competent jurisdiction with
respect to such dispute or claim. If such judicial proceedings
are instituted, the parties agree that such proceedings shall not
be stayed or delayed pending the outcome of any arbitration
proceedings hereunder.
11. Notices. Any notice or other communication
required or permitted under this Agreement shall be effective
only if it is in writing and delivered personally or sent by
certified mail, postage prepaid, or overnight delivery addressed
as follows:
If to the Company:
Niagara Mohawk Power Corporation
300 Erie Boulevard West
Syracuse, New York 13202
ATTN: Corporate Secretary
If to the Executive:
8414 Hobnail Road
Manlius, NY 13104
or to such other address as either party may designate by notice
to the other, and shall be deemed to have been given upon
receipt.
12. Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto, and supersedes, and
is in full substitution for any and all prior understandings or
agreements, oral or written, with respect to the Executive's
employment.
13. Amendment. This Agreement may be amended only by
an instrument in writing signed by the parties hereto, and any
provision hereof may be waived only by an instrument in writing
signed by the party or parties against whom or which enforcement
of such waiver is sought. The failure of either party hereto at
any time to require the performance by the other party hereto of
any provision hereof shall in no way affect the full right to
require such performance at any time thereafter, nor shall the
waiver by either party hereto of a breach of any provision hereof
be taken or held to be a waiver of any succeeding breach of such
provision or a waiver of the provision itself or a waiver of any
other provision of this Agreement.
14. Miscellaneous. This Agreement is binding on and
is for the benefit of the parties hereto and their respective
successors, heirs, executors, administrators and other legal
representatives. Neither this Agreement nor any right or
obligation hereunder may be assigned by the Company (except to an
Affiliate) or by the Executive without the prior written consent
of the other party.
15. Severability. If any provision of this
Agreement, or portion thereof, is so broad, in scope or duration,
so as to be unenforceable, such provision or portion thereof
shall be interpreted to be only so broad as is enforceable.
16. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York without reference to principles of conflicts of law.
17. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original,
but all of which shall constitute one and the same instrument.
18. Performance Covenant. The Executive represents
and warrants to the Company that the Executive is not party to
any agreement which would prohibit the Executive from entering
into this Agreement or performing fully the Executive's
obligations hereunder.
19. Survival of Covenants. The obligations of the
Executive set forth in paragraphs 6, 7, 9 and 10 represent
independent covenants by which the Executive is and will remain
bound notwithstanding any breach by the Company, and shall
survive the termination of this Agreement.
IN WITNESS WHEREOF, the Company and the Executive have
executed this Agreement as of the date first written above.
_____________________________ NIAGARA MOHAWK POWER CORPORATION
Albert J. Budney, Jr.
By:______________________________
DAVID J. ARRINGTON
Senior Vice President -
Human Resources
SCHEDULE A
Modifications in Respect of Albert J. Budney, Jr.("Executive")
to the
Supplemental Executive Retirement Plan ("SERP")
of the
Niagara Mohawk Power Corporation ("Company")
I. Subsection 1.8 of Section I of the SERP is hereby modified
to provide that the term "Earnings" shall mean the sum of the (i)
Executive's base annual salary, whether or not deferred and
including any elective before-tax contribution made by the
Executive to a plan qualified under Section 401(k) of the
Internal Revenue Code, averaged over the final 36 months of the
Executive's employment with the Company and (ii) the average of
the annual bonus earned by the Executive under the Corporation's
Annual Officers Incentive Compensation Plan ("OICP"), whether or
not deferred, in respect of the final 36 months of the
Executive's employment with the Company. If (A) the Executive is
an employee of the Company on December 31, 1997 or (B) prior to
December 31, 1997 the Executive's employment is terminated and
the Executive is entitled to payment under Article 9 of the
Corporation's 1995 Stock Incentive Plan ("SIP") for all or a
portion of the Stock Units and Stock Appreciation Rights
granted to the Executive under SIP, there shall be taken into
account for purposes of the preceding sentence as an annual bonus
under the OICP, the sum of (x) cash payments made with respect to
Stock Units (and related Dividend Equivalents) granted to the
Executive under the SIP and (y) the result of multiplying the
number of Stock Appreciation Rights granted to the Executive
under the SIP, prorated if applicable to Article 9 of the SIP, by
the difference between (1) the value of one share of the
Corporation's common stock on December 31, 1997 and (2) the Base
Value ($10.75). Notwithstanding the preceding sentence, if a
Change in Control occurs prior to December 31, 1997 (and, if
applicable, prior to the Executive's termination of employment),
there shall be taken into account for purposes of the first
sentence hereof as an annual bonus under the OICP the cash
payments with respect to Stock Units (and related Dividend
Equivalents) and Stock Appreciation Rights which are payable to
the Executive pursuant to Article 13 of the SIP.
II. Subsection 2.1 of Section II of the SERP is hereby modified
to provide that full SERP benefits are vested following eight (8)
years of continuous service with the Company.
III. Subsection 4.3 of Section IV of the SERP is hereby modified
to provide that in the event of (x) the Executive's involuntary
termination of employment by the Company, at any time, other than
for Cause, (y) the termination of this Agreement on account of
the Executive's Disability or (z) the Executive's termination of
employment for Good Reason within the 36 full calendar month
period following a Change in Control (as defined in Schedule B of
this Agreement), the Executive shall be 100% vested in his full
SERP benefit (i.e., 60% of Earnings (as modified above))
regardless of the Executive's years of continuous service with
the Company. If the Executive is less than age 55 at the date
of such termination of employment, the Executive shall be
entitled to receive benefits commencing no earlier than age
55, calculated pursuant to Section III of the SERP.
IV. Except as provided above, the provisions of the SERP shall
apply and control participation therein and the payment of
benefits thereunder.
SCHEDULE B
For purposes of this Agreement, the term "Change in
Control" shall mean:
(1) The acquisition by any individual, entity or group
(within the meaning of Sections 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly
from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege), (ii) any acquisition by the
Company, (iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (iv) any acquisition by
any corporation pursuant to a reorganization, merger or
consolidation, if, following such reorganization, merger or
consolidation, the conditions described in clauses (i), (ii) and
(iii) of subparagraph (3) of this Schedule B are satisfied; or
(2) Individuals who, as of the date hereof, constitute
the Company's Board of Directors (the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of
at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(3) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation, (i) more
than 75% of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such
reorganization, merger or consolidation, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities,
case may be, (ii) no Person (excluding the Company, any
employee benefit plan (or related trust) of the Company or such
corporation resulting from such reorganization, merger or
consolidation and any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation, directly
or indirectly, 20% or more of the Outstanding Company Common
stock or Outstanding Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or
consolidation were members of the Incumbent Board at the time of
the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
(4) Approval by the shareholders of the Company of (i)
a complete liquidation or dissolution of the Company or (ii) the
sale or other disposition of all or substantially all of the
assets of the Company, other than to a corporation, with respect
to which following such sale or other disposition, (A) more than
75% of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B) no
Person (excluding the Company and any employee benefit plan (or
related trust) of the Company or such corporation and any Person
beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 20% or more of the
Outstanding Company Common Stock or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors and (C) at least a majority of the members of the board
of directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement or
action of the Board providing for such sale or other disposition
of assets of the Company.
Exhibit 10-19
EMPLOYMENT AGREEMENT
Agreement made as of the 1st day of July, 1996, between
NIAGARA MOHAWK POWER CORPORATION (the "Company"), and William E.
Davis (the "Executive").
WHEREAS, the Company desires to employ the Executive,
and the Executive desires to accept/continue employment with the
Company, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements hereinafter set forth, the Company and
the Executive hereby agree as follows:
1. Term of Agreement. The Company shall
employ the Executive, and the Executive shall serve the Company,
for the period beginning July 1, 1996 and expiring on June 30,
1999, subject to earlier termination as provided under paragraph
4 hereof. This Agreement shall be extended automatically by one
year commencing on July 1, 1997 and on July 1st of each year
thereafter, unless either party notifies the other to the
contrary not later than sixty (60) days prior to such date.
Notwithstanding any such notice by the Company, this Agreement
shall remain in effect for a period of thirty-six months from the
date of a "Change in Control" (as that term is defined in
Schedule B hereto, unless such notice was given at least 18
months prior to the date of the Change in Control).
2. Duties. The Executive shall serve the Company as
its Chairman of the Board and Chief Executive Officer. During
the term of this Agreement, the Executive shall, except during
vacation or sick leave, devote the whole of the Executive's time,
attention and skill to the business of the Company during usual
business hours (and outside those hours when reasonably necessary
to the Executive's duties hereunder); faithfully and diligently
perform such duties and exercise such powers as may be from time
to time assigned to or vested in the Executive by the Company's
Board of Directors (the "Board") or by any officer of the Company
superior to the Executive; obey the directions of the Board and
of any officer of the Company superior to the Executive; and use
the Executive's best efforts to promote the interests of the
Company. The Executive may be required in pursuance of the
Executive's duties hereunder to perform services for any company
controlling, controlled by or under common control with the
Company (such companies hereinafter collectively called
"Affiliates") and to accept such offices in any Affiliates as the
Board may require. The Executive shall obey all policies of the
Company and applicable policies of its Affiliates.
3. Compensation. During the term of this Agreement:
a. The Company shall pay the Executive a base
salary at an annual rate of $450,500, which shall be payable
periodically in accordance with the Company's then prevailing
payroll practices, or such greater amount as the Company may from
time to time determine;
b. The Executive shall be entitled to
participate in the Company's Supplemental Executive Retirement
Plan ("SERP") according to its terms, as modified by Schedule A
hereto;
c. The Executive shall be entitled to
participate in the Company's Officers Incentive Compensation
Plan, Stock Option Plan and Performance Share Unit Plan, and any
successors thereto, in accordance with the terms thereof; and
d. The Executive shall be entitled to such
expense accounts, vacation time, sick leave, perquisites of
office, fringe benefits, insurance coverage, and other terms and
conditions of employment as the Company generally provides to its
employees having rank and seniority at the Company comparable to
the Executive.
4. Termination. The Company shall continue to employ
the Executive, and the Executive shall continue to work for the
Company, during the term of this Agreement, unless the Agreement
is terminated in accordance with the following provisions:
a. This Agreement shall terminate automatically
upon the death of the Executive. Any right or benefit accrued on
behalf of the Executive or to which the Executive became entitled
under the terms of this Agreement prior to death (other than
payment of base salary in respect of the period following the
Executive's death), and any obligation of the Company to the
Executive in respect of any such right or benefit, shall not be
extinguished by reason of the Executive's death. Any base salary
earned and unpaid as of the date of the Executive's death shall
be paid to the Executive's estate in accordance with paragraph
4g. below.
b. By notice to the Executive, the Company may
terminate this Agreement upon the "Disability" of the Executive.
The Executive shall be deemed to incur a Disability when (i) a
physician selected by the Company advises the Company that the
Executive's physical or mental condition has rendered the
Executive unable to perform the essential functions of the
Executive's position in a reasonable manner, with or without
reasonable accommodation and will continue to render him unable
to perform the essential functions of the Executive's position in
such manner, for a period exceeding 12 consecutive months, or
(ii) due to a physical or mental condition, the Executive has not
performed the essential functions of the Executive's position in
a reasonable manner, with or without reasonable accommodation,
for a period of 12 consecutive months. Following termination of
this Agreement pursuant to clause (i) of the preceding sentence
of this subparagraph, the Executive shall continue to receive his
base salary under paragraph 3a. hereof for a period of 12 months
from the date of his Disability, reduced by any benefits payable
during such period under the Company's short-term disability plan
and long-term disability plan. Thereafter, or in the event of
termination of this Agreement pursuant to clause (ii) of the
preceding sentence, the Executive shall receive benefits under
the Company's long-term disability plan in lieu of any further
base salary under paragraph 3a. hereof.
c. By notice to the Executive, the Company may
terminate the Executive's employment at any time for "Cause".
The Company must deliver such notice within ninety (90) days
after the Board both (i) has or should have had knowledge of
conduct or an event allegedly constituting Cause, and (ii) has
reason to believe that such conduct or event could be grounds for
Cause. For purposes of this Agreement "Cause" shall mean (i)
the Executive is convicted of, or has plead guilty or nolo
contendere to, a felony; (ii) the willful and continued failure
by the Executive to perform substantially his duties with the
Company (other than any such failure resulting from incapacity
due to physical or mental illness) after a demand for substantial
performance is delivered to the Executive by the Company which
specifically identifies the manner in which the Company believes
the Executive has not substantially performed his duties; (iii)
the Executive engages in conduct that constitutes gross neglect
or willful misconduct in carrying out his duties under this
Agreement involving material economic harm to the Company or any
of its subsidiaries; or (iv) the Executive has engaged in a
material breach of Section 6 or 7 of this Agreement. In the
event the termination notice is based on clause (ii) of the
preceding sentence, the Executive shall have ten (10) business
days following receipt of the notice of termination to cure his
conduct, to the extent such cure is possible, and if the
Executive does not cure within the ten (10) business day period,
his termination of employment in accordance with such termination
notice shall be deemed to be for Cause. The determination of
Cause shall be made by the Board upon the recommendation of the
Compensation and Succession Committee of the Board. Following a
Change in Control, such determination shall be made in a
resolution duly adopted by the affirmative vote of not less than
three-fourths (3/4) of the membership of the Board, excluding
members who are employees of the Company, at a meeting called for
the purpose of determining that Executive has engaged in conduct
which constitutes Cause (and at which Executive had a reasonable
opportunity, together with his counsel, to be heard before the
Board prior to such vote). The Executive shall not be entitled
to the payment of any additional compensation from the Company,
except to the extent provided in paragraph 4g. hereof, in the
event of the termination of his employment for Cause.
d. If any of the following events, any of which
shall constitute "Good Reason", occurs within thirty-six months
after a Change in Control, the Executive, by notice of the
Company, may voluntarily terminate the Executive's employment for
Good Reason within ninety (90) days after the Executive both (i)
has or should have had knowledge of conduct or an event allegedly
constituting Good Reason, and (ii) has reason to believe that
such conduct or event could be grounds for Good Reason. In such
event, the Executive shall be entitled to the severance benefits
set forth in subparagraph 4f. below.
(i) the Company assigns any duties to the Executive
which are materially inconsistent in any adverse respect with the
Executive's position, duties, offices, responsibilities or
reporting requirements immediately prior to a Change in Control,
including any diminution of such duties or responsibilities; or
(ii) the Company reduces the Executive's base salary,
including salary deferrals, as in effect immediately prior to a
Change in Control; or
(iii) the Company discontinues any bonus or other
compensation plan or any other benefit, retirement plan
(including the SERP), stock ownership plan, stock purchase plan,
stock option plan, life insurance plan, health plan, disability
plan or similar plan (as the same existed immediately prior to
the Change in Control) in which the Executive participated or was
eligible to participate in immediately prior to the Change in
Control and in lieu thereof does not make available plans
providing at least comparable benefits; or
(iv) the Company takes action which adversely affects
the Executive's participation in, or eligibility for, or
materially reduces the Executive's benefits under, any of the
plans described in (iii) above, or deprives the Executive of any
material fringe benefit enjoyed by the Executive immediately
prior to the Change in Control, or fails to provide the Executive
with the number of paid vacation days to which the Executive was
entitled in accordance with the Company's normal vacation policy
immediately prior to the Change in Control; or
(v) the Company requires the Executive to be based at
any office or location other than one within a 50-mile radius of
the office or location at which the Executive was based
immediately prior to the Change in Control; or
(vi) the Company purports to terminate the Executive's
employment otherwise than as expressly permitted by this
Agreement; or
(vii) the Company fails to comply with and satisfy
paragraph 5 hereof, provided that such successor has received
prior written notice from the Company or from the Executive of
the requirements of paragraph 5 hereof.
The Executive shall have the sole right to
determine, in good faith, whether any of the above events has
occurred.
e. The Company may terminate the Executive's
employment at any time without Cause.
f. In the event that the Executive's employment
is terminated by the Company without Cause or by the Executive
for Good Reason following a Change in Control, the Company shall
pay the Executive a severance benefit, payable in twenty-four
equal monthly installments, equal to two years' base salary at
the rate in effect as of the date of termination, plus the
greater of (i) two times the most recent annual bonus paid to the
Executive under the Corporation's Annual Officers Incentive
Compensation Plan (the "OICP") or any similar annual bonus plan
(excluding the pro rata bonus referred to in the next sentence)
or (ii) two times the average annual bonus paid to the Executive
for the three prior years under the OICP or such similar plan
(excluding the pro rata annual bonus referred to in the next
sentence). If one hundred eighty (180) days or more have elapsed
in the Company's fiscal year in which such termination occurs,
the Company shall also pay the Executive in a lump sum, within
ninety (90) days after the end of such fiscal year, a pro rata
portion of Executive's annual bonus in an amount equal to (A) the
bonus which would have been payable to Executive under OICP or
any similar plan for the fiscal year in which Executive's
termination occurs, multiplied by (B) a fraction, the numerator
of which is the number of days in the fiscal year in which the
termination occurs through the termination date and the
denominator of which is three hundred sixty-five (365). For
purposes of the first sentence of this subparagraph 4f., there
shall be taken into account as bonus paid to the Executive for
each of the years 1996 and 1997 under the OICP one-half of the
sum of (x) cash payments with respect to Restricted Stock Units
(and related Dividend Equivalents) granted to the Executive under
the Corporation's 1995 Stock Incentive Plan and (y) the result of
multiplying the number of Stock Appreciation Rights granted to
the Executive under the Corporation's 1995 Stock Incentive Plan
by the difference between (1) the value of one share of the
Corporation's common stock on December 31, 1997 and (2) the Base
Value ($10.75). Notwithstanding the preceding sentence, if a
Change in Control occurs prior to December 31, 1997, there shall
be taken into account for purposes of the first sentence of this
subparagraph 4f. as bonus paid to the Executive for each of the
years 1996 and 1997 under the OICP one-half of the cash payments
with respect to Stock Units (and related Dividend Equivalents)
and Stock Appreciation Rights which are payable to the Executive
pursuant to Article 13 of the Corporation's 1995 Stock Incentive
Plan. If the termination of the Executive's employment occurs
prior to December 31, 1997 and prior to a Change in Control, the
amount of any adjustments to the severance benefit required as a
result of the preceding two sentences of this subparagraph 4f.
shall be paid to the Executive in a lump sum no later than March
15, 1998.
In addition, in the event that the Executive's employment is
terminated by the Company without Cause or by the Executive for
Good Reason following a Change in Control, the Executive shall be
entitled to continue participation in the Company's employee
benefit plans (other than its qualified and non-qualified
retirement plans) for a two-year period from the date of
termination, provided, however, that if Executive cannot continue
to participate in any of the benefit plans, the Company shall
otherwise provide equivalent benefits to the Executive and his
dependents on the same after-tax basis as of continued
participation had been permitted. Notwithstanding the foregoing,
in the event Executive becomes employed by another employer and
becomes eligible to participate in an employee benefit plan of
such employer, the benefits described herein shall be secondary
to such benefits during the period of Executive's eligibility,
but only to the extent that the Company reimburses Executive for
any increased cost and provides any additional benefits necessary
to give Executive the benefits provided hereunder.
g. Upon termination pursuant to subparagraphs
4a., b., c., d., or e. above, the Company shall pay the Executive
or the Executive's estate any base salary earned and unpaid to
the date of termination, and any outstanding funds advanced by
the Company to or on behalf of the Executive shall become
immediately due and payable.
h. The parties intend that no severance benefits
hereunder shall be paid to the extent that such benefits (either
alone or when aggregated with other benefits contingent on a
Change in Control and paid to or for benefit of the Executive)
constitute "excess parachute payment" within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"). Accordingly, under the circumstances set forth
below, severance benefits payable under this Agreement shall be
subject to the following reduction notwithstanding anything in
this Agreement to the contrary. If the aggregate present value
(as determined pursuant to Section 280G of the Code) of severance
benefits payable under this Agreement which, together with all
other payments by the Company to the Executive or for the
Executive's benefit, would be "parachute payments" within the
meaning of Section 280G of the Code, the payments pursuant to
this Agreement shall be reduced (reducing first the severance
benefit provided in the first sentence of subparagraph 4f.
hereof) to the largest amount as will result in no portion of
such payments being treated as excess parachute payments.
i. The determination of whether and to what
extent the payments shall be reduced under this Agreement,
pursuant to the foregoing subparagraph h., including
apportionment among specific payments and benefits, shall be made
by the Executive in good faith, and such determination shall be
conclusive and binding on the Company. The Company shall make
the calculations referred to in subparagraph h. above within
thirty days following the termination of the Executive's
employment and shall provide such calculations and the basis
therefor to the Executive within such period. In the event a
reduction is required, the Executive shall give notice to the
Company, within 20 days of the Executive's receipt of such
calculations and related information, of the Executive's
determination of the reduction.
j. Upon the occurrence of a Change in Control
the Company shall pay promptly as incurred, to the full extent
permitted by law, all legal fees and expenses which the Executive
may reasonably thereafter incur as a result of any contest,
litigation or arbitration (regardless of the outcome thereof) by
the Company, or by the Executive of the validity of, or liability
under, this Agreement or the SERP (including any contest by the
Executive about the amount of any payment pursuant to this
Agreement or pursuant to the SERP), plus in each case interest on
any delayed payment at the rate of 150% of the Prime Rate posted
by the Chase Manhattan Bank, N.A. or its successor, provided,
however, that the Company shall not be liable for the Executive's
legal fees and expenses if the Executive's position in such
contest, litigation or arbitration is found by the neutral
decision-maker to be frivolous.
5. Successor Liability. The Company shall require
any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and to
agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform. As
used in this Agreement, "Company" shall mean the company as
hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
6. Confidential Information. The Executive agrees to
keep secret and retain in the strictest confidence all
confidential matters which relate to the Company, its
subsidiaries and affiliates, including, without limitation,
customer lists, client lists, trade secrets, pricing policies and
other business affairs of the Company, its subsidiaries and
affiliates learned by him from the Company or any such subsidiary
or affiliate or otherwise before or after the date of this
Agreement, and not to disclose any such confidential matter to
anyone outside the Company or any of its subsidiaries or
affiliates, whether during or after his period of service with
the Company, except (i) as such disclosure may be required or
appropriate in connection with his work as an employee of the
Company or (ii) when required to do so by a court of law, by any
governmental agency having supervisory authority over the
business of the Company or by any administrative or legislative
body (including a committee thereof) with apparent jurisdiction
to order him to divulge, disclose or make accessible such
information. The Executive agrees to give the Company advance
written notice of any disclosure pursuant to clause (ii) of the
preceding sentence and to cooperate with any efforts by the
Company to limit the extent of such disclosure. Upon request by
the Company, the Executive agrees to deliver promptly to the
Company upon termination of his services for the Company, or at
any time thereafter as the Company may request, all Company
subsidiary or affiliate memoranda, notes, records, reports,
manuals, drawings, designs, computer file in any media and other
documents (and all copies thereof) relating to the Company's or
any subsidiary's or affiliate's business and all property of the
Company or any subsidiary or affiliate associated therewith,
which he may then possess or have under his direct control, other
than personal notes, diaries, Rolodexes and correspondence.
7. Non-Compete and Non-Solicitation. During the
Executive's employment by the Company and for a period of
one year following the termination thereof for any reason, the
Executive covenants and agrees that he will not for himself or on
behalf of any other person, partnership, company or corporation,
directly or indirectly, acquire any financial or beneficial
interest in (except as provided in the next sentence), provide
consulting services to, be employed by, or own, manage, operate
or control any business which is in competition with a business
engaged in by the Company or any of its subsidiaries or
affiliates in any state of the United States in which any of them
are engaged in business at the time of such termination of
employment for as long as they carry on a business therein.
Notwithstanding the preceding sentence, the Executive shall not
be prohibited from owning less than five (5%) percent of any
publicly traded corporation, whether or not such corporation is
in competition with the Company.
The Executive hereby covenants and agrees that, at all
times during the period of his employment and for a period of one
year immediately following the termination thereof for any
reason, the Executive shall not employ or seek to employ any
person employed at that time by the Company or any of its
subsidiaries, or otherwise encourage or entice such person or
entity to leave such employment.
It is the intention of the parties hereto that the
restrictions contained in this Section be enforceable to the
fullest extent permitted by applicable law. Therefore, to the
extent any court of competent jurisdiction shall determine that
any portion of the foregoing restrictions is excessive, such
provision shall not be entirely void, but rather shall be limited
or revised only to the extent necessary to make it enforceable.
Specifically, if any court of competent jurisdiction should hold
that any portion of the foregoing description is overly broad as
to one or more states of the United States, then that state or
states shall be eliminated from the territory to which the
restrictions of paragraph (a) of this Section applies and the
restrictions shall remain applicable in all other states of the
United States.
8. No Mitigation. The Executive shall not be
required to mitigate the amount of any payments or benefits
provided for in Section 4f. hereof by seeking other employment or
otherwise and no amounts earned by the Executive shall be used to
reduce or offset the amounts payable hereunder, except as
otherwise provided in Section 4f.
9. Ownership of Work Product. Any and all
improvements, inventions, discoveries, formulae, processes,
methods, know-how, confidential data, trade secrets and other
proprietary information (collectively, "Work Products") within
the scope of any business of the Company or any Affiliate which
the Executive may conceive or make or have conceived or made
during the Executive's employment with the Company shall be and
are the sole and exclusive property of the Company, and that the
Executive, whenever requested to do so by the Company, at its
expense, shall execute and sign any and all applications,
assignments or other instruments and do all other things which
the Company may deem necessary or appropriate (i) to apply for,
obtain, maintain, enforce, or defend letters patent of the United
States or any foreign country for any Work Product, or (ii) to
assign, transfer, convey or otherwise make available to the
Company the sole and exclusive right, title and interest in and
to any Work Product.
10. Arbitration. Any dispute or controversy between
the parties relating to this Agreement (except any dispute
relating to paragraphs 6 or 7 hereof) or relating to or arising
out of the Executive's employment with the Company, shall be
settled by binding arbitration in the City of Syracuse, State of
New York, pursuant to the Employment Dispute Resolution Rules of
the American Arbitration Association and shall be subject to the
provisions of Article 75 of the New York Civil Practice Law and
Rules. Judgment upon the award may be entered in any court of
competent jurisdiction. Notwithstanding anything herein to the
contrary, if any dispute arises between the parties under
paragraphs 6 or 7 hereof, or if the Company makes any claim under
paragraphs 6 or 7, the Company shall not be required to arbitrate
such dispute or claim but shall have the right to institute
judicial proceedings in any court of competent jurisdiction with
respect to such dispute or claim. If such judicial proceedings
are instituted, the parties agree that such proceedings shall not
be stayed or delayed pending the outcome of any arbitration
proceedings hereunder.
11. Notices. Any notice or other communication
required or permitted under this Agreement shall be effective
only if it is in writing and delivered personally or sent by
certified mail, postage prepaid, or overnight delivery addressed
as follows:
If to the Company:
Niagara Mohawk Power Corporation
300 Erie Boulevard West
Syracuse, New York 13202
ATTN: Corporate Secretary
If to the Executive:
88 West Lake Street
Skaneateles, NY 13152
or to such other address as either party may designate by notice
to the other, and shall be deemed to have been given upon
receipt.
12. Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto, and supersedes, and
is in full substitution for any and all prior understandings or
agreements, oral or written, with respect to the Executive's
employment.
13. Amendment. This Agreement may be amended only by
an instrument in writing signed by the parties hereto, and any
provision hereof may be waived only by an instrument in writing
signed by the party or parties against whom or which enforcement
of such waiver is sought. The failure of either party hereto at
any time to require the performance by the other party hereto of
any provision hereof shall in no way affect the full right to
require such performance at any time thereafter, nor shall the
waiver by either party hereto of a breach of any provision hereof
be taken or held to be a waiver of any succeeding breach of such
provision or a waiver of the provision itself or a waiver of any
other provision of this Agreement.
14. Miscellaneous. This Agreement is binding on and
is for the benefit of the parties hereto and their respective
successors, heirs, executors, administrators and other legal
representatives. Neither this Agreement nor any right or
obligation hereunder may be assigned by the Company (except to an
Affiliate) or by the Executive without the prior written consent
of the other party.
15. Severability. If any provision of this
Agreement, or portion thereof, is so broad, in scope or duration,
so as to be unenforceable, such provision or portion thereof
shall be interpreted to be only so broad as is enforceable.
16. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York without reference to principles of conflicts of law.
17. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original,
but all of which shall constitute one and the same instrument.
18. Performance Covenant. The Executive represents
and warrants to the Company that the Executive is not party to
any agreement which would prohibit the Executive from entering
into this Agreement or performing fully the Executive's
obligations hereunder.
19. Survival of Covenants. The obligations of the
Executive set forth in paragraphs 6, 7, 9 and 10 represent
independent covenants by which the Executive is and will remain
bound notwithstanding any breach by the Company, and shall
survive the termination of this Agreement.
IN WITNESS WHEREOF, the Company and the Executive have
executed this Agreement as of the date first written above.
________________________ NIAGARA MOHAWK POWER CORPORATION
William E. Davis
By:______________________________
DAVID J. ARRINGTON
Senior Vice President -
Human Resources
SCHEDULE A
Modifications in Respect of William E. Davis ("Executive")
to the
Supplemental Executive Retirement Plan ("SERP")
of the
Niagara Mohawk Power Corporation ("Company")
I. Subsection 1.8 of Section I of the SERP is hereby modified
to provide that the term "Earnings" shall mean the sum of the (i)
Executive's base annual salary, whether or not deferred and
including any elective before-tax contributions made by the
Executive to a plan qualified under Section 401(k) of the
Internal Revenue Code, averaged over the final 36 months of the
Executive's employment with the Company and (ii) the average of
the annual bonus earned by the Executive under the Corporation's
Annual Officers Incentive Compensation Plan ("OICP"), whether or
not deferred, in respect of the final 36 months of the
Executive's employment with the Company. If (A) the Executive is
an employee of the Company on December 31, 1997 or (B) prior to
December 31, 1997 the Executive's employment is terminated and
the Executive is entitled to payment under Article 9 of the
Corporation's 1995 Stock Incentive Plan ("SIP") for all or a
portion of the Stock Units and Stock Appreciation Rights granted
to the Executive under SIP, there shall be taken into account for
purposes of the preceding sentence as an annual bonus under the
OICP, the sum of (x) cash payments made with respect to Stock
Units (and related Dividend Equivalents) granted to the Executive
under the SIP and (y) the result of multiplying the number of
Stock Appreciation Rights granted to the Executive under the SIP,
prorated if applicable to Article 9 of the SIP, by the difference
between (1) the value of one share of the Corporation's common
stock on December 31, 1997 and (2) the Base Value ($10.75).
Notwithstanding the preceding sentence, if a Change in Control
occurs prior to December 31, 1997 (and, if applicable, prior to
the Executive's termination of employment), there shall be taken
into account for purposes of the first sentence hereof as an
annual bonus under the OICP the cash payments with respect to
Stock Units (and related Dividend Equivalents) and Stock
Appreciation Rights which are payable to the Executive pursuant
to Article 13 of the SIP.
II. Subsection 2.1 of Section II of the SERP is hereby modified
to provide that full SERP benefits are vested following eight (8)
years of continuous service with the Company.
III. Subsection 4.3 of Section IV of the SERP is hereby modified
to provide that in the event of (x) the Executive's involuntary
termination of employment by the Company, at any time, other than
for Cause, (y) the termination of this Agreement on account of
the Executive's Disability or (z) the Executive's termination of
employment for Good Reason within the 36 full calendar month
period following a Change in Control (as defined in Schedule B of
this Agreement), the Executive shall be 100% vested in his full
SERP benefit (i.e., 60% of Earnings (as modified above))
regardless of the Executive's years of continuous service with
the Company. If the Executive is less than age 55 at the date
of such termination of employment, the Executive shall be
entitled to receive benefits commencing no earlier than age 55,
calculated pursuant to Section III of the SERP.
IV. Except as provided above, the provisions of the SERP shall
apply and control participation therein and the payment of
benefits thereunder.
SCHEDULE B
For purposes of this Agreement, the term "Change in
Control" shall mean:
(1) The acquisition by any individual, entity or
group (within the meaning of Sections 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock
of the Company (the "Outstanding Company Common Stock")
or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors (the outstanding Company Voting
Securities"); provided, however, that the following acquisitions
shall not constitute a Change of Control: (i) any acquisition
directly from the Company (excluding an acquisition by virtue of
the exercise of a conversion privilege), (ii) any acquisition by
the Company, (iii) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (iv) any acquisition by
any corporation pursuant to a reorganization, merger or
consolidation, if, following such reorganization, merger or
consolidation, the conditions described in clauses (i), (ii) and
(iii) of subparagraph (3) of this Schedule B are satisfied; or
(2) Individuals who, as of the date hereof, constitute
the Company's Board of Directors (the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of
at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(3) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation, (i) more
than 75% of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such
reorganization, merger or consolidation, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding the Company, any
employee benefit plan (or related trust) of the Company or such
corporation resulting from such reorganization, merger or
consolidation and any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation, directly
or indirectly, 20% or more of the Outstanding Company Common
stock or Outstanding Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
Consolidation or the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or
consolidation were members of the Incumbent Board at the time of
the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
(4) Approval by the shareholders of the Company of (i)
a complete liquidation or dissolution of the Company or (ii) the
sale or other disposition of all or substantially all of the
assets of the Company, other than to a corporation, with respect
to which following such sale or other disposition, (A) more than
75% of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B) no
Person (excluding the Company and any employee benefit plan (or
related trust) of the Company or such corporation and any Person
beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 20% or more of the
Outstanding Company Common Stock or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors and (C) at least a majority of the members of the board
of directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement or
action of the Board providing for such sale or other disposition
of assets of the Company.
Exhibit 10-20
EMPLOYMENT AGREEMENT
Agreement made as of the 1st day of July, 1996, between
NIAGARA MOHAWK POWER CORPORATION (the "Company"), and Darlene D.
Kerr (the "Executive").
WHEREAS, the Company desires to employ the Executive,
and the Executive desires to accept/continue employment with the
Company, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements hereinafter set forth, the Company and
the Executive hereby agree as follows:
1. Term of Agreement. The Company shall
employ the Executive, and the Executive shall serve the Company,
for the period beginning July 1, 1996 and expiring on June 30,
1999, subject to earlier termination as provided under paragraph
4
hereof. This Agreement shall be extended automatically by one
year commencing on July 1, 1997 and on July 1st of each year
thereafter, unless either party notifies the other to the
contrary not later than sixty (60) days prior to such date.
Notwithstanding any such notice by the Company, this Agreement
shall remain in effect for a period of thirty-six months from the
date of a "Change in Control" (as that term is defined in
Schedule B hereto, unless such notice was given at least 18
months prior to the date of the Change in Control).
2. Duties. The Executive shall serve the Company as
its Senior Vice President - Energy Distribution. During the term
of this Agreement, the Executive shall, except during vacation or
sick leave, devote the whole of the Executive's time, attention
and skill to the business of the Company during usual business
hours (and outside those hours when reasonably necessary to the
Executive's duties hereunder); faithfully and diligently perform
such duties and exercise such powers as may be from time to time
assigned to or vested in the Executive by the Company's Board of
Directors (the "Board") or by any officer of the Company superior
to the Executive; obey the directions of the Board and of any
officer of the Company superior to the Executive; and use the
Executive's best efforts to promote the interests of the Company.
The Executive may be required in pursuance of the Executive's
duties hereunder to perform services for any company controlling,
controlled by or under common control with the Company (such
companies hereinafter collectively called "Affiliates") and to
accept such offices in any Affiliates as the Board may require.
The Executive shall obey all policies of the Company and
applicable policies of its Affiliates.
3. Compensation. During the term of this Agreement:
a. The Company shall pay the Executive a base
salary at an annual rate of $210,000, which shall be payable
periodically in accordance with the Company's then prevailing
payroll practices, or such greater amount as the Company may from
time to time determine;
b. The Executive shall be entitled to
participate in the Company's Supplemental Executive Retirement
Plan ("SERP") according to its terms, as modified by Schedule A
hereto;
c. The Executive shall be entitled to
participate in the Company's Officers Incentive Compensation
Plan, Stock Option Plan and Performance Share Unit Plan, and any
successors thereto, in accordance with the terms thereof; and
d. The Executive shall be entitled to such
expense accounts, vacation time, sick leave, perquisites of
office, fringe benefits, insurance coverage, and other terms and
conditions of employment as the Company generally provides to its
employees having rank and seniority at the Company comparable to
the Executive.
4. Termination. The Company shall continue to employ
the Executive, and the Executive shall continue to work for the
Company, during the term of this Agreement, unless the Agreement
is terminated in accordance with the following provisions:
a. This Agreement shall terminate automatically
upon the death of the Executive. Any right or benefit accrued on
behalf of the Executive or to which the Executive became entitled
under the terms of this Agreement prior to death (other than
payment of base salary in respect of the period following the
Executive's death), and any obligation of the Company to the
Executive in respect of any such right or benefit, shall not be
extinguished by reason of the Executive's death. Any base salary
earned and unpaid as of the date of the Executive's death shall
be paid to the Executive's estate in accordance with paragraph
4g. below.
b. By notice to the Executive, the Company may
terminate this Agreement upon the "Disability" of the Executive.
The Executive shall be deemed to incur a Disability when (i) a
physician selected by the Company advises the Company that the
Executive's physical or mental condition has rendered the
Executive unable to perform the essential functions of the
Executive's position in a reasonable manner, with or without
reasonable accommodation and will continue to render him unable
to perform the essential functions of the Executive's position in
such manner, for a period exceeding 12 consecutive months, or
(ii) due to a physical or mental condition, the Executive has not
performed the essential functions of the Executive's position in
a reasonable manner, with or without reasonable accommodation,
for a period of 12 consecutive months. Following termination of
this Agreement pursuant to clause (i) of the preceding sentence
of this subparagraph, the Executive shall continue to receive his
base salary under paragraph 3a. hereof for a period of 12 months
from the date of his Disability, reduced by any benefits payable
during such period under the Company's short-term disability plan
and long-term disability plan. Thereafter, or in the event of
termination of this Agreement pursuant to clause (ii) of the
preceding sentence, the Executive shall receive benefits under
the Company's long-term disability plan in lieu of any further
base salary under paragraph 3a. hereof.
c. By notice to the Executive, the Company may
terminate the Executive's employment at any time for "Cause".
The Company must deliver such notice within ninety (90) days
after the Board both (i) has or should have had knowledge of
conduct or an event allegedly constituting Cause, and (ii) has
reason to believe that such conduct or event could be grounds for
Cause. For purposes of this Agreement "Cause" shall mean (i)
the Executive is convicted of, or has plead guilty or nolo
contendere to, a felony; (ii) the willful and continued failure
by the Executive to perform substantially his duties with the
Company (other than any such failure resulting from incapacity
due to physical or mental illness) after a demand for substantial
performance is delivered to the Executive by the Company which
specifically identifies the manner in which the Company believes
the Executive has not substantially performed his duties; (iii)
the Executive engages in conduct that constitutes gross neglect
or willful misconduct in carrying out his duties under this
Agreement involving material economic harm to the Company or any
of its subsidiaries; or (iv) the Executive has engaged in a
material breach of Section 6 or 7 of this Agreement. In the
event the termination notice is based on clause (ii) of the
preceding sentence, the Executive shall have ten (10) business
days following receipt of the notice of termination to cure his
conduct, to the extent such cure is possible, and if the
Executive does not cure within the ten (10) business day period,
his termination of employment in accordance with such termination
notice shall be deemed to be for Cause. The determination of
Cause shall be made by the Board upon the recommendation of the
Compensation and Succession Committee of the Board. Following a
Change in Control, such determination shall be made in a
resolution duly adopted by the affirmative vote of not less than
three-fourths (3/4) of the membership of the Board, excluding
members who are employees of the Company, at a meeting called for
the purpose of determining that Executive has engaged in conduct
which constitutes Cause (and at which Executive had a reasonable
opportunity, together with his counsel, to be heard before the
Board prior to such vote). The Executive shall not be entitled
to the payment of any additional compensation from the Company,
except to the extent provided in paragraph 4g. hereof, in the
event of the termination of his employment for Cause.
d. If any of the following events, any of which
shall constitute "Good Reason", occurs within thirty-six months
after a Change in Control, the Executive, by notice of the
Company, may voluntarily terminate the Executive's employment for
Good Reason within ninety (90) days after the Executive both (i)
has or should have had knowledge of conduct or an event allegedly
constituting Good Reason, and (ii) has reason to believe that
such conduct or event could be grounds for Good Reason. In such
event, the Executive shall be entitled to the severance benefits
set forth in subparagraph 4f. below.
(i) the Company assigns any duties to the Executive
which are materially inconsistent in any adverse respect with the
Executive's position, duties, offices, responsibilities or
reporting requirements immediately prior to a Change in Control,
including any diminution of such duties or responsibilities; or
(ii) the Company reduces the Executive's base salary,
including salary deferrals, as in effect immediately prior to a
Change in Control; or
(iii) the Company discontinues any bonus or other
compensation plan or any other benefit, retirement plan
(including the SERP), stock ownership plan, stock purchase plan,
stock option plan, life insurance plan, health plan, disability
plan or similar plan (as the same existed immediately prior to
the Change in Control) in which the Executive participated or was
eligible to participate in immediately prior to the Change in
Control and in lieu thereof does not make available plans
providing at least comparable benefits; or
(iv) the Company takes action which adversely affects
the Executive's participation in, or eligibility for, or
materially reduces the Executive's benefits under, any of the
plans described in (iii) above, or deprives the Executive of any
material fringe benefit enjoyed by the Executive immediately
prior to the Change in Control, or fails to provide the Executive
with the number of paid vacation days to which the Executive was
entitled in accordance with the Company's normal vacation policy
immediately prior to the Change in Control; or
(v) the Company requires the Executive to be based at
any office or location other than one within a 50-mile radius of
the office or location at which the Executive was based
immediately prior to the Change in Control; or
(vi) the Company purports to terminate the Executive's
employment otherwise than as expressly permitted by this
Agreement; or
(vii) the Company fails to comply with and satisfy
paragraph 5 hereof, provided that such successor has received
prior written notice from the Company or from the Executive of
the requirements of paragraph 5 hereof.
The Executive shall have the sole right to
determine, in good faith, whether any of the above events has
occurred.
e. The Company may terminate the Executive's
employment at any time without Cause.
f. In the event that the Executive's employment
is terminated by the Company without Cause or by the Executive
for Good Reason following a Change in Control, the Company shall
pay the Executive a severance benefit, payable in twenty-four
equal monthly installments, equal to two years' base salary at
the rate in effect as of the date of termination, plus the
greater of (i) two times the most recent annual bonus paid to the
Executive under the Corporation's Annual Officers Incentive
Compensation Plan (the "OICP") or any similar annual bonus plan
(excluding the pro rata bonus referred to in the next sentence)
or (ii) two times the average annual bonus paid to the Executive
for the three prior years under the OICP or such similar plan
(excluding the pro rata annual bonus referred to in the next
sentence). If one hundred eighty (180) days or more have elapsed
in the Company's fiscal year in which such termination occurs,
the Company shall also pay the Executive in a lump sum, within
ninety (90) days after the end of such fiscal year, a pro rata
portion of Executive's annual bonus in an amount equal to (A) the
bonus which would have been payable to Executive under OICP or
any similar plan for the fiscal year in which Executive's
termination occurs, multiplied by (B) a fraction, the numerator
of which is the number of days in the fiscal year in which the
termination occurs through the termination date and the
denominator of which is three hundred sixty-five (365). For
purposes of the first sentence of this subparagraph 4f., there
shall be taken into account as bonus paid to the Executive for
each of the years 1996 and 1997 under the OICP one-half of the
sum of (x) cash payments with respect to Restricted Stock Units
(and related Dividend Equivalents) granted to the Executive under
the Corporation's 1995 Stock Incentive Plan and (y) the result of
multiplying the number of Stock Appreciation Rights granted to
the Executive under the Corporation's 1995 Stock Incentive Plan
by the difference between (1) the value of one share of the
Corporation's common stock on December 31, 1997 and (2) the Base
Value ($10.75). Notwithstanding the preceding sentence, if a
Change in Control occurs prior to December 31, 1997, there shall
be taken into account for purposes of the first sentence of this
subparagraph 4f. as bonus paid to the Executive for each of the
years 1996 and 1997 under the OICP one-half of the cash payments
with respect to Stock Units (and related Dividend Equivalents)
and Stock Appreciation Rights which are payable to the Executive
pursuant to Article 13 of the Corporation's 1995 Stock Incentive
Plan. If the termination of the Executive's employment occurs
prior to December 31, 1997 and prior to a Change in Control, the
amount of any adjustments to the severance benefit required as a
result of the preceding two sentences of this subparagraph 4f.
shall be paid to the Executive in a lump sum no later than March
15, 1998.
In addition, in the event that the Executive's employment is
terminated by the Company without Cause or by the Executive for
Good Reason following a Change in Control, the Executive shall be
entitled to continue participation in the Company's employee
benefit plans (other than its qualified and non-qualified
retirement plans) for a two-year period from the date of
termination, provided, however, that if Executive cannot continue
to participate in any of the benefit plans, the Company shall
otherwise provide equivalent benefits to the Executive and his
dependents on the same after-tax basis as of continued
participation had been permitted. Notwithstanding the foregoing,
in the event Executive becomes employed by another employer and
becomes eligible to participate in an employee benefit plan of
such employer, the benefits described herein shall be secondary
to such benefits during the period of Executive's eligibility,
but only to the extent that the Company reimburses Executive for
any increased cost and provides any additional benefits necessary
to give Executive the benefits provided hereunder.
g. Upon termination pursuant to subparagraphs
4a., b., c., d., or e. above, the Company shall pay the Executive
or the Executive's estate any base salary earned and unpaid to
the date of termination, and any outstanding funds advanced by
the Company to or on behalf of the Executive shall become
immediately due and payable.
h. The parties intend that no severance benefits
hereunder shall be paid to the extent that such benefits (either
alone or when aggregated with other benefits contingent on a
Change in Control and paid to or for benefit of the Executive)
constitute "excess parachute payment" within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"). Accordingly, under the circumstances set forth
below, severance benefits payable under this Agreement shall be
subject to the following reduction notwithstanding anything in
this Agreement to the contrary. If the aggregate present value
(as determined pursuant to Section 280G of the Code) of severance
benefits payable under this Agreement which, together with all
other payments by the Company to the Executive or for the
Executive's benefit, would be "parachute payments" within the
meaning of Section 280G of the Code, the payments pursuant to
this Agreement shall be reduced (reducing first the severance
benefit provided in the first sentence of subparagraph 4f.
hereof) to the largest amount as will result in no portion of
such payments being treated as excess parachute payments.
i. The determination of whether and to what
extent the payments shall be reduced under this Agreement,
pursuant to the foregoing subparagraph h., including
apportionment among specific payments and benefits, shall be made
by the Executive in good faith, and such determination shall be
conclusive and binding on the Company. The Company shall make
the calculations referred to in subparagraph h. above within
thirty days following the termination of the Executive's
employment and shall provide such calculations and the basis
therefor to the Executive within such period. In the event a
reduction is required, the Executive shall give notice to the
Company, within 20 days of the Executive's receipt of such
calculations and related information, of the Executive's
determination of the reduction.
j. Upon the occurrence of a Change in Control
the Company shall pay promptly as incurred, to the full extent
permitted by law, all legal fees and expenses which the Executive
may reasonably thereafter incur as a result of any contest,
litigation or arbitration (regardless of the outcome thereof) by
the Company, or by the Executive of the validity of, or liability
under, this Agreement or the SERP (including any contest by the
Executive about the amount of any payment pursuant to this
Agreement or pursuant to the SERP), plus in each case interest on
any delayed payment at the rate of 150% of the Prime Rate posted
by the Chase Manhattan Bank, N.A. or its successor, provided,
however, that the Company shall not be liable for the Executive's
legal fees and expenses if the Executive's position in such
contest, litigation or arbitration is found by the neutral
decision-maker to be frivolous.
5. Successor Liability. The Company shall require
any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and to
agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform. As
used in this Agreement, "Company" shall mean the company as
hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
6. Confidential Information. The Executive agrees to
keep secret and retain in the strictest confidence all
confidential matters which relate to the Company, its
subsidiaries and affiliates, including, without limitation,
customer lists, client lists, trade secrets, pricing policies and
other business affairs of the Company, its subsidiaries and
affiliates learned by him from the Company or any such subsidiary
or affiliate or otherwise before or after the date of this
Agreement, and not to disclose any such confidential matter to
anyone outside the Company or any of its subsidiaries or
affiliates, whether during or after his period of service with
the Company, except (i) as such disclosure may be required or
appropriate in connection with his work as an employee of the
Company or (ii) when required to do so by a court of law, by any
governmental agency having supervisory authority over the
business of the Company or by any administrative or legislative
body (including a committee thereof) with apparent jurisdiction
to order him to divulge, disclose or make accessible such
information. The Executive agrees to give the Company advance
written notice of any disclosure pursuant to clause (ii) of the
preceding sentence and to cooperate with any efforts by the
Company to limit the extent of such disclosure. Upon request by
the Company, the Executive agrees to deliver promptly to the
Company upon termination of his services for the Company, or at
any time thereafter as the Company may request, all Company
subsidiary or affiliate memoranda, notes, records, reports,
manuals, drawings, designs, computer file in any media and other
documents (and all copies thereof) relating to the Company's or
any subsidiary's or affiliate's business and all property of the
Company or any subsidiary or affiliate associated therewith,
which he may then possess or have under his direct control, other
than personal notes, diaries, Rolodexes and correspondence.
7. Non-Compete and Non-Solicitation. During the
Executive's employment by the Company and for a period of
one year following the termination thereof for any reason, the
Executive covenants and agrees that he will not for himself or on
behalf of any other person, partnership, company or corporation,
directly or indirectly, acquire any financial or beneficial
interest in (except as provided in the next sentence), provide
consulting services to, be employed by, or own, manage, operate
or control any business which is in competition with a business
engaged in by the Company or any of its subsidiaries or
affiliates in any state of the United States in which any of them
are engaged in business at the time of such termination of
employment for as long as they carry on a business therein.
Notwithstanding the preceding sentence, the Executive shall not
be prohibited from owning less than five (5%) percent of any
publicly traded corporation, whether or not such corporation is
in competition with the Company.
The Executive hereby covenants and agrees that, at all
times during the period of his employment and for a period of one
year immediately following the termination thereof for any
reason, the Executive shall not employ or seek to employ any
person employed at that time by the Company or any of its
subsidiaries, or otherwise encourage or entice such person or
entity to leave such employment.
It is the intention of the parties hereto that the
restrictions contained in this Section be enforceable to the
fullest extent permitted by applicable law. Therefore, to the
extent any court of competent jurisdiction shall determine that
any portion of the foregoing restrictions is excessive, such
provision shall not be entirely void, but rather shall be limited
or revised only to the extent necessary to make it enforceable.
Specifically, if any court of competent jurisdiction should hold
that any portion of the foregoing description is overly broad as
to one or more states of the United States, then that state or
states shall be eliminated from the territory to which the
restrictions of paragraph (a) of this Section applies and the
restrictions shall remain applicable in all other states of the
United States.
8. No Mitigation. The Executive shall not be
required to mitigate the amount of any payments or benefits
provided for in Section 4f. hereof by seeking other employment or
otherwise and no amounts earned by the Executive shall be used to
reduce or offset the amounts payable hereunder, except as
otherwise provided in Section 4f.
9. Ownership of Work Product. Any and all
improvements, inventions, discoveries, formulae, processes,
methods, know-how, confidential data, trade secrets and other
proprietary information (collectively, "Work Products") within
the scope of any business of the Company or any Affiliate which
the Executive may conceive or make or have conceived or made
during the Executive's employment with the Company shall be and
are the sole and exclusive property of the Company, and that the
Executive, whenever requested to do so by the Company, at its
expense, shall execute and sign any and all applications,
assignments or other instruments and do all other things which
the Company may deem necessary or appropriate (i) to apply for,
obtain, maintain, enforce, or defend letters patent of the United
States or any foreign country for any Work Product, or (ii) to
assign, transfer, convey or otherwise make available to the
Company the sole and exclusive right, title and interest in and
to any Work Product.
10. Arbitration. Any dispute or controversy between
the parties relating to this Agreement (except any dispute
relating to paragraphs 6 or 7 hereof) or relating to or arising
out of the Executive's employment with the Company, shall be
settled by binding arbitration in the City of Syracuse, State of
New York, pursuant to the Employment Dispute Resolution Rules of
the American Arbitration Association and shall be subject to the
provisions of Article 75 of the New York Civil Practice Law and
Rules. Judgment upon the award may be entered in any court of
competent jurisdiction. Notwithstanding anything herein to the
contrary, if any dispute arises between the parties under
paragraphs 6 or 7 hereof, or if the Company makes any claim under
paragraphs 6 or 7, the Company shall not be required to arbitrate
such dispute or claim but shall have the right to institute
judicial proceedings in any court of competent jurisdiction with
respect to such dispute or claim. If such judicial proceedings
are instituted, the parties agree that such proceedings shall not
be stayed or delayed pending the outcome of any arbitration
proceedings hereunder.
11. Notices. Any notice or other communication
required or permitted under this Agreement shall be effective
only if it is in writing and delivered personally or sent by
certified mail, postage prepaid, or overnight delivery addressed
as follows:
If to the Company:
Niagara Mohawk Power Corporation
300 Erie Boulevard West
Syracuse, New York 13202
ATTN: Corporate Secretary
If to the Executive:
245 Whitestone Circle
Syracuse, NY 13215
or to such other address as either party may designate by notice
to the other, and shall be deemed to have been given upon
receipt.
12. Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto, and supersedes, and
is in full substitution for any and all prior understandings or
agreements, oral or written, with respect to the Executive's
employment.
13. Amendment. This Agreement may be amended only by
an instrument in writing signed by the parties hereto, and any
provision hereof may be waived only by an instrument in writing
signed by the party or parties against whom or which enforcement
of such waiver is sought. The failure of either party hereto at
any time to require the performance by the other party hereto of
any provision hereof shall in no way affect the full right to
require such performance at any time thereafter, nor shall the
waiver by either party hereto of a breach of any provision hereof
be taken or held to be a waiver of any succeeding breach of such
provision or a waiver of the provision itself or a waiver of any
other provision of this Agreement.
14. Miscellaneous. This Agreement is binding on and
is for the benefit of the parties hereto and their respective
successors, heirs, executors, administrators and other legal
representatives. Neither this Agreement nor any right or
obligation hereunder may be assigned by the Company (except to an
Affiliate) or by the Executive without the prior written consent
of the other party.
15. Severability. If any provision of this
Agreement, or portion thereof, is so broad, in scope or duration,
so as to be unenforceable, such provision or portion thereof
shall be interpreted to be only so broad as is enforceable.
16. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York without reference to principles of conflicts of law.
17. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original,
but all of which shall constitute one and the same instrument.
18. Performance Covenant. The Executive represents
and warrants to the Company that the Executive is not party to
any agreement which would prohibit the Executive from entering
into this Agreement or performing fully the Executive's
obligations hereunder.
19. Survival of Covenants. The obligations of the
Executive set forth in paragraphs 6, 7, 9 and 10 represent
independent covenants by which the Executive is and will remain
bound notwithstanding any breach by the Company, and shall
survive the termination of this Agreement.
IN WITNESS WHEREOF, the Company and the Executive have
executed this Agreement as of the date first written above.
_________________________ NIAGARA MOHAWK POWER CORPORATION
Darlene D. Kerr
By:______________________________
DAVID J. ARRINGTON
Senior Vice President -
Human Resources
SCHEDULE A
Modifications in Respect of Darlene D. Kerr ("Executive")
to the
Supplemental Executive Retirement Plan ("SERP")
of the
Niagara Mohawk Power Corporation ("Company")
I. Subsection 1.8 of Section I of the SERP is hereby modified
to provide that the term "Earnings" shall mean the sum of the (i)
Executive's base annual salary, whether or not deferred and
including any elective before-tax contributions made by the
Executive to a plan qualified under Section 401(k) of the
Internal Revenue Code, averaged over the final 36 months of the
Executive's employment with the Company and (ii) the average of
the annual bonus earned by the Executive under the Corporation's
Annual Officers Incentive Compensation Plan ("OICP"), whether or
not deferred, in respect of the final 36 months of the
Executive's employment with the Company. If (A) the Executive is
an employee of the Company on December 31, 1997 or (B) prior to
December 31, 1997 the Executive's employment is terminated and
the Executive is entitled to payment under Article 9 of the
Corporation's 1995 Stock Incentive Plan ("SIP") for all or a
portion of the Stock Units and Stock Appreciation Rights granted
to the Executive under SIP, there shall be taken into account for
purposes of the preceding sentence as an annual bonus under the
OICP, the sum of (x) cash payments made with respect to Stock
Units (and related Dividend Equivalents) granted to the Executive
under the SIP and (y) the result of multiplying the number of
Stock Appreciation Rights granted to the Executive under the SIP,
prorated if applicable to Article 9 of the SIP, by the difference
between (1) the value of one share of the Corporation's common
stock on December 31, 1997 and (2) the Base Value ($10.75).
Notwithstanding the preceding sentence, if a Change in Control
occurs prior to December 31, 1997 (and, if applicable, prior to
the Executive's termination of employment), there shall be taken
into account for purposes of the first sentence hereof as an
annual bonus under the OICP the cash payments with respect to
Stock Units (and related Dividend Equivalents) and Stock
Appreciation Rights which are payable to the Executive pursuant
to Article 13 of the SIP.
II. Subsection 2.1 of Section II of the SERP is hereby modified
to provide that full SERP benefits are vested following eight (8)
years of continuous service with the Company.
III. Subsection 4.3 of Section IV of the SERP is hereby modified
to provide that in the event of (x) the Executive's involuntary
termination of employment by the Company, at any time, other than
for Cause, (y) the termination of this Agreement on account of
the Executive's Disability or (z) the Executive's termination of
employment for Good Reason within the 36 full calendar month
period following a Change in Control (as defined in Schedule B of
this Agreement), the Executive shall be 100% vested in his full
SERP benefit (i.e., 60% of Earnings (as modified above))
regardless of the Executive's years of continuous service with
the Company. If the Executive is less than age 55 at the date of
such termination of employment, the Executive shall be entitled
to receive benefits commencing no earlier than age 55, calculated
pursuant to Section III of the SERP.
IV. Except as provided above, the provisions of the SERP shall
apply and control participation therein and the payment of
benefits thereunder.
SCHEDULE B
For purposes of this Agreement, the term "Change in
Control" shall mean:
(1) The acquisition by any individual, entity or
group (within the meaning of Sections 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock
of the Company (the "Outstanding Company Common Stock")
or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled
to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided,
however, that the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly
from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege), (ii) any acquisition by the
Company, (iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (iv) any acquisition by
any corporation pursuant to a reorganization, merger or
consolidation, if, following such reorganization, merger or
consolidation, the conditions described in clauses (i), (ii) and
(iii) of subparagraph (3) of this Schedule B are satisfied; or
(2) Individuals who, as of the date hereof, constitute
the Company's Board of Directors (the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of
at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(3) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation, (i) more
75% of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such
reorganization, merger or consolidation, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding the Company, any
employee benefit plan (or related trust) of the Company or such
corporation resulting from such reorganization, merger or
consolidation and any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation, directly
or indirectly, 20% or more of the Outstanding Company Common
stock or Outstanding Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or
consolidation were members of the Incumbent Board at the time of
the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
(4) Approval by the shareholders of the Company of (i)
a complete liquidation or dissolution of the Company or (ii) the
sale or other disposition of all or substantially all of the
assets of the Company, other than to a corporation, with respect
to which following such sale or other disposition, (A) more than
75% of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B) no
Person (excluding the Company and any employee benefit plan (or
related trust) of the Company or such corporation and any Person
beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 20% or more of the
Outstanding Company Common Stock or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors and (C) at least a majority of the members of the board
of directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement or
action of the Board providing for such sale or other disposition
of assets of the Company.
EXHIBIT 10-21
EMPLOYMENT AGREEMENT
Agreement made as of the 1st day of July, 1996, between
NIAGARA MOHAWK POWER CORPORATION (the "Company"), and Gary J.
Lavine (the "Executive").
WHEREAS, the Company desires to employ the Executive,
and the Executive desires to accept/continue employment with the
Company, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants
and agreements hereinafter set forth, the Company and the
Executive hereby agree as follows:
1. Term of Agreement. The Company shall
employ the Executive, and the Executive shall serve the Company,
for the period beginning July 1, 1996 and expiring on June 30,
1999, subject to earlier termination as provided under paragraph
4 hereof. This Agreement shall be extended automatically by one
year commencing on July 1, 1997 and on July 1st of each year
thereafter, unless either party notifies the other to the
contrary not later than sixty (60) days prior to such date.
Notwithstanding any such notice by the Company, this Agreement
shall remain in effect for a period of thirty-six months from the
date of a "Change in Control" (as that term is defined in
Schedule B hereto, unless such notice was given at least 18
months prior to the date of the Change in Control).
2. Duties. The Executive shall serve the Company as
its Senior Vice President - Legal and Corporate Relations.
During the term of this Agreement, the Executive shall, except
during vacation or sick leave, devote the whole of the
Executive's time, attention and skill to the business of
the Company during usual business hours (and outside those hours
when reasonably necessary to the Executive's duties hereunder);
faithfully and diligently perform such duties and exercise such
powers as may be from time to time assigned to or vested in the
Executive by the Company's Board of Directors (the "Board") or by
any officer of the Company superior to the Executive; obey the
directions of the Board and of any officer of the Company
superior to the Executive; and use the Executive's best efforts
to promote the interests of the Company. The Executive may be
required in pursuance of the Executive's duties hereunder to
perform services for any company controlling, controlled by or
under common control with the Company (such companies hereinafter
collectively called "Affiliates") and to accept such offices in
any Affiliates as the Board may require. The Executive shall
obey all policies of the Company and applicable policies of its
Affiliates.
3. Compensation. During the term of this Agreement:
a. The Company shall pay the Executive a base
salary at an annual rate of $191,500, which shall be payable
periodically in accordance with the Company's then prevailing
payroll practices, or such greater amount as the Company may from
time to time determine;
b. The Executive shall be entitled to participate
in the Company's Supplemental Executive Retirement Plan ("SERP")
according to its terms, as modified by Schedule A hereto;
c. The Executive shall be entitled to participate
in the Company's Officers Incentive Compensation Plan, Stock
Option Plan and Performance Share Unit Plan, and any successors
thereto, in accordance with the terms thereof; and
d. The Executive shall be entitled to such
expense accounts, vacation time, sick leave, perquisites of
office, fringe benefits, insurance coverage, and other terms and
conditions of employment as the Company generally provides to its
employees having rank and seniority at the Company comparable to
the Executive.
4. Termination. The Company shall continue to employ
the Executive, and the Executive shall continue to work for the
Company, during the term of this Agreement, unless the Agreement
is terminated in accordance with the following provisions:
a. This Agreement shall terminate automatically
upon the death of the Executive. Any right or benefit accrued on
behalf of the Executive or to which the Executive became entitled
under the terms of this Agreement prior to death (other than
payment of base salary in respect of the period following the
Executive's death), and any obligation of the Company to the
Executive in respect of any such right or benefit, shall not be
extinguished by reason of the Executive's death. Any base salary
earned and unpaid as of the date of the Executive's death shall
be paid to the Executive's estate in accordance with paragraph
4g. below.
b. By notice to the Executive, the Company may
terminate this Agreement upon the "Disability" of the Executive.
The Executive shall be deemed to incur a Disability when (i) a
physician selected by the Company advises the Company that the
Executive's physical or mental condition has rendered the
Executive unable to perform the essential functions of the
Executive's position in a reasonable manner, with or without
reasonable accommodation and will continue to render him unable
to perform the essential functions of the Executive's position in
such manner, for a period exceeding 12 consecutive months, or
(ii) due to a physical or mental condition, the Executive has not
performed the essential functions of the Executive's position in
a reasonable manner, with or without reasonable accommodation,
for a period of 12 consecutive months. Following termination
of this Agreement pursuant to clause (i) of the preceding
sentence of this subparagraph, the Executive shall continue to
receive his base salary under paragraph 3a. hereof for a period
of 12 months from the date of his Disability, reduced by any
benefits payable during such period under the Company's
short-term disability plan and long-term disability plan.
Thereafter, or in the event of termination of this Agreement
pursuant to clause (ii) of the preceding sentence, the Executive
shall receive benefits under the Company's long-term disability
plan in lieu of any further base salary under paragraph 3a.
hereof.
c. By notice to the Executive, the Company may
terminate the Executive's employment at any time for "Cause".
The Company must deliver such notice within ninety (90) days
after the Board both (i) has or should have had knowledge of
conduct or an event allegedly constituting Cause, and (ii) has
reason to believe that such conduct or event could be grounds for
Cause. For purposes of this Agreement "Cause" shall mean (i)
the Executive is convicted of, or has plead guilty or nolo
contendere to, a felony; (ii) the willful and continued failure
by the Executive to perform substantially his duties with the
Company (other than any such failure resulting from incapacity
due to physical or mental illness) after a demand for substantial
performance is delivered to the Executive by the Company which
specifically identifies the manner in which the Company believes
the Executive has not substantially performed his duties; (iii)
the Executive engages in conduct that constitutes gross neglect
or willful misconduct in carrying out his duties under this
Agreement involving material economic harm to the Company or any
of its subsidiaries; or (iv) the Executive has engaged in a
material breach of Section 6 or 7 of this Agreement. In the
event the termination notice is based on clause (ii) of the
preceding sentence, the Executive shall have ten (10) business
days following receipt of the notice of termination to cure his
conduct, to the extent such cure is possible, and if the
Executive does not cure within the ten (10) business day period,
his termination of employment in accordance with such termination
notice shall be deemed to be for Cause. The determination of
Cause shall be made by the Board upon the recommendation of the
Compensation and Succession Committee of the Board. Following a
Change in Control, such determination shall be made in a
resolution duly adopted by the affirmative vote of not less than
three-fourths (3/4) of the membership of the Board, excluding
members who are employees of the Company, at a meeting called for
the purpose of determining that Executive has engaged in conduct
which constitutes Cause (and at which Executive had a reasonable
opportunity, together with his counsel, to be heard before the
Board prior to such vote). The Executive shall not be entitled
to the payment of any additional compensation from the Company,
except to the extent provided in paragraph 4g. hereof, in the
event of the termination of his employment for Cause.
d. If any of the following events, any of which
shall constitute "Good Reason", occurs within thirty-six months
after a Change in Control, the Executive, by notice of the
Company, may voluntarily terminate the Executive's employment for
Good Reason within ninety (90) days after the Executive both (i)
has or should have had knowledge of conduct or an event allegedly
constituting Good Reason, and (ii) has reason to believe that
such conduct or event could be grounds for Good Reason. In such
event, the Executive shall be entitled to the severance benefits
set forth in subparagraph 4f. below.
(i) the Company assigns any duties to the Executive
which are materially inconsistent in any adverse respect with the
Executive's position, duties, offices, responsibilities or
reporting requirements immediately prior to a Change in Control,
including any diminution of such duties or responsibilities; or
(ii) the Company reduces the Executive's base salary,
including salary deferrals, as in effect immediately prior to a
Change in Control; or
(iii) the Company discontinues any bonus or other
compensation plan or any other benefit, retirement plan
(including the SERP), stock ownership plan, stock purchase plan,
stock option plan, life insurance plan, health plan, disability
plan or similar plan (as the same existed immediately prior to
the Change in Control) in which the Executive participated or was
eligible to participate in immediately prior to the Change in
Control and in lieu thereof does not make available plans
providing at least comparable benefits; or
(iv) the Company takes action which adversely affects
the Executive's participation in, or eligibility for, or
materially reduces the Executive's benefits under, any of the
plans described in (iii) above, or deprives the Executive of any
material fringe benefit enjoyed by the Executive immediately
prior to the Change in Control, or fails to provide the Executive
with the number of paid vacation days to which the Executive was
entitled in accordance with the Company's normal vacation policy
immediately prior to the Change in Control; or
(v) the Company requires the Executive to be based at
any office or location other than one within a 50-mile radius of
the office or location at which the Executive was based
immediately prior to the Change in Control; or
(vi) the Company purports to terminate the Executive's
employment otherwise than as expressly permitted by this
Agreement; or
(vii) the Company fails to comply with and satisfy
paragraph 5 hereof, provided that such successor has received
prior written notice from the Company or from the Executive of
the requirements of paragraph 5 hereof.
The Executive shall have the sole right to
determine, in good faith, whether any of the above events has
occurred.
e. The Company may terminate the Executive's
employment at any time without Cause.
f. In the event that the Executive's employment
is terminated by the Company without Cause or by the Executive
for Good Reason following a Change in Control, the Company shall
pay the Executive a severance benefit, payable in twenty-four
equal monthly installments, equal to two years' base salary at
the rate in effect as of the date of termination, plus the
greater of (i) two times the most recent annual bonus paid to the
Executive under the Corporation's Annual Officers Incentive
Compensation Plan (the "OICP") or any similar annual bonus plan
(excluding the pro rata bonus referred to in the next sentence)
or (ii) two times the average annual bonus paid to the Executive
for the three prior years under the OICP or such similar plan
(excluding the pro rata annual bonus referred to in the next
sentence). If one hundred eighty (180) days or more have elapsed
in the Company's fiscal year in which such termination occurs,
the Company shall also pay the Executive in a lump sum, within
ninety (90) days after the end of such fiscal year, a pro rata
portion of Executive's annual bonus in an amount equal to (A) the
bonus which would have been payable to Executive under OICP or
any similar plan for the fiscal year in which Executive's
termination occurs, multiplied by (B) a fraction, the numerator
of which is the number of days in the fiscal year in which the
termination occurs through the termination date and the
denominator of which is three hundred sixty-five (365). For
purposes of the first sentence of this subparagraph 4f., there
shall be taken into account as bonus paid to the Executive for
each of the years 1996 and 1997 under the OICP one-half of the
sum of (x) cash payments with respect to Restricted Stock Units
(and related Dividend Equivalents) granted to the Executive under
the Corporation's 1995 Stock Incentive Plan and (y) the result of
multiplying the number of Stock Appreciation Rights granted to
the Executive under the Corporation's 1995 Stock Incentive Plan
by the difference between (1) the value of one share of the
Corporation's common stock on December 31, 1997 and (2) the Base
Value ($10.75). Notwithstanding the preceding sentence, if a
Change in Control occurs prior to December 31, 1997, there shall
be taken into account for purposes of the first sentence of this
subparagraph 4f. as bonus paid to the Executive for each of the
years 1996 and 1997 under the OICP one-half of the cash payments
with respect to Stock Units (and related Dividend Equivalents)
and Stock Appreciation Rights which are payable to the Executive
pursuant to Article 13 of the Corporation's 1995 Stock Incentive
Plan. If the termination of the Executive's employment occurs
prior to December 31, 1997 and prior to a Change in Control, the
amount of any adjustments to the severance benefit required as a
result of the preceding two sentences of this subparagraph 4f.
shall be paid to the Executive in a lump sum no later than March
15, 1998.
In addition, in the event that the Executive's employment is
terminated by the Company without Cause or by the Executive for
Good Reason following a Change in Control, the Executive shall be
entitled to continue participation in the Company's employee
benefit plans (other than its qualified and non-qualified
retirement plans) for a two-year period from the date of
termination, provided, however, that if Executive cannot continue
to participate in any of the benefit plans, the Company shall
otherwise provide equivalent benefits to the Executive and his
dependents on the same after-tax basis as of continued
participation had been permitted. Notwithstanding the foregoing,
in the event Executive becomes employed by another employer and
becomes eligible to participate in an employee benefit plan of
such employer, the benefits described herein shall be secondary
to such benefits during the period of Executive's eligibility,
but only to the extent that the Company reimburses Executive for
any increased cost and provides anyadditional benefits necessary
to give Executive the benefits provided hereunder.
g. Upon termination pursuant to subparagraphs
4a., b., c., d., or e. above, the Company shall pay the Executive
or the Executive's estate any base salary earned and unpaid to
the date of termination, and any outstanding funds advanced by
the Company to or on behalf of the Executive shall become
immediately due and payable.
h. The parties intend that no severance benefits
hereunder shall be paid to the extent that such benefits (either
alone or when aggregated with other benefits contingent on a
Change in Control and paid to or for benefit of the Executive)
constitute "excess parachute payment" within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"). Accordingly, under the circumstances set forth
below, severance benefits payable under this Agreement shall be
subject to the following reduction notwithstanding anything in
this Agreement to the contrary. If the aggregate present value
(as determined pursuant to Section 280G of the Code) of severance
benefits payable under this Agreement which, together with all
other payments by the Company to the Executive or for the
Executive's benefit, would be "parachute payments" within the
meaning of Section 280G of the Code, the payments pursuant to
this Agreement shall be reduced (reducing first the severance
benefit provided in the first sentence of subparagraph 4f.
hereof) to the largest amount as will result in no portion of
such payments being treated as excess parachute payments.
i. The determination of whether and to what
extent the payments shall be reduced under this Agreement,
pursuant to the foregoing subparagraph h., including
apportionment among specific payments and benefits, shall be made
by the Executive in good faith, and such determination shall be
conclusive and binding on the Company. The Company shall make
the calculations referred to in subparagraph h. above within
thirty days following the termination of the Executive's
employment and shall provide such calculations and the basis
therefor to the Executive within such period. In the event a
reduction is required, the Executive shall give notice to the
Company, within 20 days of the Executive's receipt of such
calculations and related information, of the Executive's
determination of the reduction.
j. Upon the occurrence of a Change in Control the
Company shall pay promptly as incurred, to the full extent
permitted by law, all legal fees and expenses which the Executive
may reasonably thereafter incur as a result of any contest,
litigation or arbitration (regardless of the outcome thereof) by
the Company, or by the Executive of the validity of, or liability
under, this Agreement or the SERP (including any contest by the
Executive about the amount of any payment pursuant to this
Agreement or pursuant to the SERP), plus in each case interest on
any delayed payment at the rate of 150% of the Prime Rate posted
by the Chase Manhattan Bank, N.A. or its successor, provided,
however, that the Company shall not be liable for the Executive's
legal fees and expenses if the Executive's position in such
contest, litigation or arbitration is found by the neutral
decision-maker to be frivolous.
5. Successor Liability. The Company shall require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and to
agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform. As
used in this Agreement, "Company" shall mean the company as
hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
6. Confidential Information. The Executive agrees to
keep secret and retain in the strictest confidence all
confidential matters which relate to the Company, its
subsidiaries and affiliates, including, without limitation,
customer lists, client lists, trade secrets, pricing policies and
other business affairs of the Company, its subsidiaries and
affiliates learned by him from the Company or any such subsidiary
or affiliate or otherwise before or after the date of this
Agreement, and not to disclose any such confidential matter to
anyone outside the Company or any of its subsidiaries or
affiliates, whether during or after his period of service with
the Company, except (i) as such disclosure may be required or
appropriate in connection with his work as an employee of the
Company or (ii) when required to do so by a court of law, by any
governmental agency having supervisory authority over the
business of the Company or by any administrative or legislative
body (including a committee thereof) with apparent jurisdiction
to order him to divulge, disclose or make accessible such
information. The Executive agrees to give the Company advance
written notice of any disclosure pursuant to clause (ii) of the
preceding sentence and to cooperate with any efforts by the
Company to limit the extent of such disclosure. Upon request by
the Company, the Executive agrees to deliver promptly to the
Company upon termination of his services for the Company, or at
any time thereafter as the Company may request, all Company
subsidiary or affiliate memoranda, notes, records, reports,
manuals, drawings, designs, computer file in any media and other
documents (and all copies thereof) relating to the Company's or
any subsidiary's or affiliate's business and all property of the
Company or any subsidiary or affiliate associated therewith,
which he may then possess or have under his direct control, other
than personal notes, diaries, Rolodexes and correspondence.
7. Non-Compete and Non-Solicitation. During the
Executive's employment by the Company and for a period of
one year following the termination thereof for any reason, the
Executive covenants and agrees that he will not for himself or on
behalf of any other person, partnership, company or corporation,
directly or indirectly, acquire any financial or beneficial
interest in (except as provided in the next sentence), provide
consulting services to, be employed by, or own, manage, operate
or control any business which is in competition with a business
engaged in by the Company or any of its subsidiaries or
affiliates in any state of the United States in which any of them
are engaged in business at the time of such termination of
employment for as long as they carry on a business therein.
Notwithstanding the preceding sentence, the Executive shall not
be prohibited from owning less than five (5%) percent of any
publicly traded corporation, whether or not such corporation is
in competition with the Company.
The Executive hereby covenants and agrees that, at all
times during the period of his employment and for a period of one
year immediately following the termination thereof for any
reason, the Executive shall not employ or seek to employ any
person employed at that time by the Company or any of its
subsidiaries, or otherwise encourage or entice such person or
entity to leave such employment. It is the intention of the
parties hereto that the restrictions contained in this Section be
enforceable to the fullest extent permitted by applicable law.
Therefore, to the extent any court of competent jurisdiction
shall determine that any portion of the foregoing restrictions is
excessive, such provision shall not be entirely void, but rather
shall be limited or revised only to the extent necessary to make
it enforceable. Specifically, if any court of competent
jurisdiction should hold that any portion of the foregoing
description is overly broad as to one or more states of the
United States, then that state or states shall be eliminated from
the territory to which the restrictions of paragraph (a) of this
Section applies and the restrictions shall remain applicable in
all other states of the United States.
8. No Mitigation. The Executive shall not be required
to mitigate the amount of any payments or benefits provided for
in Section 4f. hereof by seeking other employment or otherwise
and no amounts earned by the Executive shall be used to reduce or
offset the amounts payable hereunder, except as otherwise
provided in Section 4f.
9. Ownership of Work Product. Any and all
improvements, inventions, discoveries, formulae, processes,
methods, know-how, confidential data, trade secrets and other
proprietary information (collectively, "Work Products") within
the scope of any business of the Company or any Affiliate which
the Executive may conceive or make or have conceived or made
during the Executive's employment with the Company shall be and
are thesole and exclusive property of the Company, and that the
Executive, whenever requested to do so by the Company, at its
expense, shall execute and sign any and all applications,
assignments or other instruments and do all other things which
the Company may deem necessary or appropriate (i) to apply for,
obtain, maintain, enforce, or defend letters patent of the United
States or any foreign country for any Work Product, or (ii) to
assign, transfer, convey or otherwise make available to the
Company the sole and exclusive right, title and interest in and
to any Work Product.
10. Arbitration. Any dispute or controversy between
the parties relating to this Agreement (except any dispute
relating to paragraphs 6 or 7 hereof) or relating to or arising
out of the Executive's employment with the Company, shall be
settled by binding arbitration in the City of Syracuse, State of
New York, pursuant to the Employment Dispute Resolution Rules of
the American Arbitration Association and shall be subject to the
provisions of Article 75 of the New York Civil Practice Law and
Rules. Judgment upon the award may be entered in any court of
competent jurisdiction. Notwithstanding anything herein to the
contrary, if any dispute arises between the parties under
paragraphs 6 or 7 hereof, or if the Company makes any claim under
paragraphs 6 or 7, the Company shall not be required to arbitrate
such dispute or claim but shall have the right to institute
judicial proceedings in any court of competent jurisdiction with
respect to such dispute or claim. If such judicial proceedings
are instituted, the parties agree that such proceedings shall not
be stayed or delayed pending the outcome of any arbitration
proceedings hereunder.
11. Notices. Any notice or other communication
required or permitted under this Agreement shall be effective
only if it is in writing and delivered personally or sent by
certified mail, postage prepaid, or overnight delivery addressed
as follows:
If to the Company:
Niagara Mohawk Power Corporation
300 Erie Boulevard West
Syracuse, New York 13202
ATTN: Corporate Secretary
If to the Executive:
111 Holliston Circle
Fayetteville, NY 13066
or to such other address as either party may designate by notice
to the other, and shall be deemed to have been given upon
receipt.
12. Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto, and supersedes, and
is in full substitution for any and all prior understandings or
agreements, oral or written, with respect to the Executive's
employment.
13. Amendment. This Agreement may be amended only by
an instrument in writing signed by the parties hereto, and any
provision hereof may be waived only by an instrument in writing
signed by the party or parties against whom or which enforcement
of such waiver is sought. The failure of either party hereto at
any time to require the performance by the other party hereto of
any provision hereof shall in no way affect the full right to
require such performance at any time thereafter, nor shall the
waiver by either party hereto of a breach of any provision hereof
be taken or held to be a waiver of any succeeding breach of such
provision or a waiver of the provision itself or a waiver of any
other provision of this Agreement.
14. Miscellaneous. This Agreement is binding on and
is for the benefit of the parties hereto and their respective
successors, heirs, executors, administrators and other legal
representatives. Neither this Agreement nor any right or
obligation hereunder may be assigned by the Company (except to an
Affiliate) or by the Executive without the prior written consent
of the other party.
15. Severability. If any provision of this Agreement,
or portion thereof, is so broad, in scope or duration, so as to
be unenforceable, such provision or portion thereof shall be
interpreted to be only so broad as is enforceable.
16. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York without reference to principles of conflicts of law.
17. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original,
but all of which shall constitute one and the same instrument.
18. Performance Covenant. The Executive represents
and warrants to the Company that the Executive is not party to
any agreement which would prohibit the Executive from entering
into this Agreement or performing fully the Executive's
obligations hereunder.
19. Survival of Covenants. The obligations of the
Executive set forth in paragraphs 6, 7, 9 and 10 represent
independent covenants by which the Executive is and will remain
bound notwithstanding any breach by the Company, and shall
survive the termination of this Agreement.
IN WITNESS WHEREOF, the Company and the Executive have
executed this Agreement as of the date first written above.
_______________________ NIAGARA MOHAWK POWER CORPORATION
Gary J. Lavine
By:______________________________
DAVID J. ARRINGTON
Senior Vice President -
Human Resources
SCHEDULE A
Modifications in Respect of Gary J. Lavine ("Executive")
to the
Supplemental Executive Retirement Plan ("SERP")
of the
Niagara Mohawk Power Corporation ("Company")
I. Subsection 1.8 of Section I of the SERP is hereby modified
to provide that the term "Earnings" shall mean the sum of the (i)
Executive's base annual salary, whether or not deferred and
including any elective before-tax contributions made by the
Executive to a plan qualified under Section 401(k) of the
Internal Revenue Code, averaged over the final 36 months of the
Executive's employment with the Company and (ii) the average of
the annual bonus earned by the Executive under the Corporation's
Annual Officers Incentive Compensation Plan ("OICP"), whether or
not deferred, in respect of the final 36 months of the
Executive's employment with the Company. If (A) the Executive is
an employee of the Company on December 31, 1997 or (B) prior to
December 31, 1997 the Executive's employment is terminated and
the Executive is entitled to payment under Article 9 of the
Corporation's 1995 Stock Incentive Plan ("SIP") for all or a
portion of the Stock Units and Stock Appreciation Rights granted
to the Executive under SIP, there shall be taken into account for
purposes of the preceding sentence as an annual bonus under the
OICP, the sum of (x) cash payments made with respect to Stock
Units (and related Dividend Equivalents) granted to the Executive
under the SIP and (y) the result of multiplying the number of
Stock Appreciation Rights granted to the Executive under the SIP,
prorated if applicable to Article 9 of the SIP, by the difference
between (1) the value of one share of the Corporation's common
stock on December 31, 1997 and (2) the Base Value ($10.75).
Notwithstanding the preceding sentence, if a Change in Control
occurs prior to December 31, 1997 (and, if applicable, prior to
the Executive's termination of employment), there shall be taken
into account for purposes of the first sentence hereof as an
annual bonus under the OICP the cash payments with respect to
Stock Units (and related Dividend Equivalents) and Stock
Appreciation Rights which are payable to the Executive pursuant
to Article 13 of the SIP.
II. Subsection 2.1 of Section II of the SERP is hereby modified
to provide that full SERP benefits are vested following eight (8)
years of continuous service with the Company.
III. Subsection 4.3 of Section IV of the SERP is hereby
modified to provide that in the event of (x) the Executive's
involuntary termination of employment by the Company, at any
time, other than for Cause, (y) the termination of this
Agreement on account of the Executive's Disability or (z) the
Executive's termination of employment for Good Reason within the
36 full calendar month period following a Change in Control (as
defined in Schedule B of this Agreement), the Executive shall be
100% vested in his full SERP benefit (i.e., 60% of Earnings (as
modified above)) regardless of the Executive's years of
continuous service with the Company. If the Executive is less
than age 55 at the date of such termination of employment, the
Executive shall be entitled to receive benefits commencing no
earlier than age 55, calculated pursuant to Section III of the
SERP.
IV. Except as provided above, the provisions of the SERP shall
apply and control participation therein and the payment of
benefits thereunder.
SCHEDULE B
For purposes of this Agreement, the term "Change in
Control" shall mean:
(1) The acquisition by any individual, entity or group
(within the meaning of Sections 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly
from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege), (ii) any acquisition by the
Company, (iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (iv) any acquisition by
any corporation pursuant to a reorganization, merger or
consolidation, if, following such reorganization, merger or
consolidation, the conditions described in clauses (i), (ii) and
(iii) of subparagraph (3) of this Schedule B are satisfied; or
(2) Individuals who, as of the date hereof, constitute
the Company's Board of Directors (the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of
at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(3) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation, (i) more
than 75% of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such
reorganization, merger or consolidation, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding the Company, any
employee benefit plan (or related trust) of the Company or such
corporation resulting from such reorganization, merger or
consolidation and any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation, directly
or indirectly, 20% or more of the Outstanding Company Common
stock or Outstanding Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or
consolidation were members of the Incumbent Board at the time of
the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
(4) Approval by the shareholders of the Company of (i)
a complete liquidation or dissolution of the Company or (ii) the
sale or other disposition of all or substantially all of the
assets of the Company, other than to a corporation, with respect
to which following such sale or other disposition, (A) more than
75% of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled
to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities
immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately
prior to such sale or other disposition, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (B) no Person (excluding the Company and any
employee benefit plan (or related trust) of the Company or such
corporation and any Person beneficially owning, immediately prior
to such sale or other disposition, directly or indirectly, 20% or
more of the Outstanding Company Common Stock or Outstanding
Company Voting Securities, as the case may be) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the election of
directors and (C) at least a majority of the members of the board
of directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement or
action of the Board providing for such sale or other disposition
of assets of the Company.
Exhibit 10-22
EMPLOYMENT AGREEMENT
Agreement made as of the 1st day of July, 1996, between
NIAGARA MOHAWK POWER CORPORATION (the "Company"), and John W.
Powers (the "Executive").
WHEREAS, the Company desires to employ the Executive,
and the Executive desires to accept/continue employment with the
Company, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements hereinafter set forth, the Company and
the Executive hereby agree as follows:
1. Term of Agreement. The Company shall
employ the Executive, and the Executive shall serve the Company,
for the period beginning July 1, 1996 and expiring on June 30,
1999, subject to earlier termination as provided under paragraph
4
hereof. This Agreement shall be extended automatically by one
year commencing on July 1, 1997 and on July 1st of each year
thereafter, unless either party notifies the other to the
contrary not later than sixty (60) days prior to such date.
Notwithstanding any such notice by the Company, this Agreement
shall remain in effect for a period of thirty-six months from the
date of a "Change in Control" (as that term is defined in
Schedule B hereto, unless such notice was given at least 18
months prior to the date of the Change in Control).
2. Duties. The Executive shall serve the Company as
its Senior Vice President and Chief Financial Officer. During
the term of this Agreement, the Executive shall, except during
vacation or sick leave, devote the whole of the Executive's time,
attention and skill to the business of the Company during usual
business hours (and outside those hours when reasonably necessary
to the Executive's duties hereunder); faithfully and diligently
perform such duties and exercise such powers as may be from time
to time assigned to or vested in the Executive by the Company's
Board of Directors (the "Board") or by any officer of the Company
superior to the Executive; obey the directions of the Board and
of any officer of the Company superior to the Executive; and use
the Executive's best efforts to promote the interests of the
Company. The Executive may be required in pursuance of the
Executive's duties hereunder to perform services for any company
controlling, controlled by or under common control with the
Company (such companies hereinafter collectively called
"Affiliates") and to accept such offices in any Affiliates as the
Board may require. The Executive shall obey all policies of the
Company and applicable policies of its Affiliates.
3. Compensation. During the term of this Agreement:
a. The Company shall pay the Executive a base
salary at an annual rate of $211,000, which shall be payable
periodically in accordance with the Company's then prevailing
payroll practices, or such greater amount as the Company may from
time to time determine;
b. The Executive shall be entitled to
participate in the Company's Supplemental Executive Retirement
Plan ("SERP") according to its terms, as modified by Schedule A
hereto;
c. The Executive shall be entitled to
participate in the Company's Officers Incentive Compensation
Plan, Stock Option Plan and Performance Share Unit Plan, and any
successors thereto, in accordance with the terms thereof; and
d. The Executive shall be entitled to such
expense accounts, vacation time, sick leave, perquisites of
office, fringe benefits, insurance coverage, and other terms and
conditions of employment as the Company generally provides to its
employees having rank and seniority at the Company comparable to
the Executive.
4. Termination. The Company shall continue to employ
the Executive, and the Executive shall continue to work for the
Company, during the term of this Agreement, unless the Agreement
is terminated in accordance with the following provisions:
a. This Agreement shall terminate automatically
upon the death of the Executive. Any right or benefit accrued on
behalf of the Executive or to which the Executive became entitled
under the terms of this Agreement prior to death (other than
payment of base salary in respect of the period following the
Executive's death), and any obligation of the Company to the
Executive in respect of any such right or benefit, shall not be
extinguished by reason of the Executive's death. Any base salary
earned and unpaid as of the date of the Executive's death shall
be paid to the Executive's estate in accordance with paragraph
4g. below.
b. By notice to the Executive, the Company may
terminate this Agreement upon the "Disability" of the Executive.
The Executive shall be deemed to incur a Disability when (i) a
physician selected by the Company advises the Company that the
Executive's physical or mental condition has rendered the
Executive unable to perform the essential functions of the
Executive's position in a reasonable manner, with or without
reasonable accommodation and will continue to render him unable
to perform the essential functions of the Executive's position in
such manner, for a period exceeding 12 consecutive months, or
(ii) due to a physical or mental condition, the Executive has not
performed the essential functions of the Executive's position in
a reasonable manner, with or without reasonable accommodation,
for a period of 12 consecutive months. Following termination of
this Agreement pursuant to clause (i) of the preceding sentence
of this subparagraph, the Executive shall continue to receive his
base salary under paragraph 3a. hereof for a period of 12 months
from the date of his Disability, reduced by any benefits payable
during such period under the Company's short-term disability plan
and long-term disability plan. Thereafter, or in the event of
termination of this Agreement pursuant to clause (ii) of the
preceding sentence, the Executive shall receive benefits under
the Company's long-term disability plan in lieu of any further
base salary under paragraph 3a. hereof.
c. By notice to the Executive, the Company may
terminate the Executive's employment at any time for "Cause".
The Company must deliver such notice within ninety (90) days
after the Board both (i) has or should have had knowledge of
conduct or an event allegedly constituting Cause, and (ii) has
reason to believe that such conduct or event could be grounds for
Cause. For purposes of this Agreement "Cause" shall mean (i)
the Executive is convicted of, or has plead guilty or nolo
contendere to, a felony; (ii) the willful and continued failure
by the Executive to perform substantially his duties with the
Company (other than any such failure resulting from incapacity
due to physical or mental illness) after a demand for substantial
performance is delivered to the Executive by the Company which
specifically identifies the manner in which the Company believes
the Executive has not substantially performed his duties; (iii)
the Executive engages in conduct that constitutes gross neglect
or willful misconduct in carrying out his duties under this
Agreement involving material economic harm to the Company or any
of its subsidiaries; or (iv) the Executive has engaged in a
material breach of Section 6 or 7 of this Agreement. In the
event the termination notice is based on clause (ii) of the
preceding sentence, the Executive shall have ten (10) business
days following receipt of the notice of termination to cure his
conduct, to the extent such cure is possible, and if the
Executive does not cure within the ten (10) business day period,
his termination of employment in accordance with such termination
notice shall be deemed to be for Cause. The determination of
Cause shall be made by the Board upon the recommendation of the
Compensation and Succession Committee of the Board. Following a
Change in Control, such determination shall be made in a
resolution duly adopted by the affirmative vote of not less than
three-fourths (3/4) of the membership of the Board, excluding
members who are employees of the Company, at a meeting called for
the purpose of determining that Executive has engaged in conduct
which constitutes Cause (and at which Executive had a reasonable
opportunity, together with his counsel, to be heard before the
Board prior to such vote). The Executive shall not be entitled
to the payment of any additional compensation from the Company,
except to the extent provided in paragraph 4g. hereof, in the
event of the termination of his employment for Cause.
d. If any of the following events, any of which
shall constitute "Good Reason", occurs within thirty-six months
after a Change in Control, the Executive, by notice of the
Company, may voluntarily terminate the Executive's employment for
Good Reason within ninety (90) days after the Executive both (i)
has or should have had knowledge of conduct or an event allegedly
constituting Good Reason, and (ii) has reason to believe that
such conduct or event could be grounds for Good Reason. In such
event, the Executive shall be entitled to the severance benefits
set forth in subparagraph 4f. below.
(i) the Company assigns any duties to the Executive
which are materially inconsistent in any adverse respect with the
Executive's position, duties, offices, responsibilities or
reporting requirements immediately prior to a Change in Control,
including any diminution of such duties or responsibilities; or
(ii) the Company reduces the Executive's base salary,
including salary deferrals, as in effect immediately prior to a
Change in Control; or
(iii) the Company discontinues any bonus or other
compensation plan or any other benefit, retirement plan
(including the SERP), stock ownership plan, stock purchase plan,
stock option plan, life insurance plan, health plan, disability
plan or similar plan (as the same existed immediately prior to
the Change in Control) in which the Executive participated or was
eligible to participate in immediately prior to the Change in
Control and in lieu thereof does not make available plans
providing at least comparable benefits; or
(iv) the Company takes action which adversely affects
the Executive's participation in, or eligibility for, or
materially reduces the Executive's benefits under, any of the
plans described in (iii) above, or deprives the Executive of any
material fringe benefit enjoyed by the Executive immediately
prior to the Change in Control, or fails to provide the Executive
with the number of paid vacation days to which the Executive was
entitled in accordance with the Company's normal vacation policy
immediately prior to the Change in Control; or
(v) the Company requires the Executive to be based at
any office or location other than one within a 50-mile radius of
the office or location at which the Executive was based
immediately prior to the Change in Control; or
(vi) the Company purports to terminate the Executive's
employment otherwise than as expressly permitted by this
Agreement; or
(vii) the Company fails to comply with and satisfy
paragraph 5 hereof, provided that such successor has received
prior written notice from the Company or from the Executive of
the requirements of paragraph 5 hereof.
The Executive shall have the sole right to
determine, in good faith, whether any of the above events has
occurred.
e. The Company may terminate the Executive's
employment at any time without Cause.
f. In the event that the Executive's employment
is terminated by the Company without Cause or by the Executive
for Good Reason following a Change in Control, the Company shall
pay the Executive a severance benefit, payable in twenty-four
equal monthly installments, equal to two years' base salary at
the rate in effect as of the date of termination, plus the
greater of (i) two times the most recent annual bonus paid to the
Executive under the Corporation's Annual Officers Incentive
Compensation Plan (the "OICP") or any similar annual bonus plan
(excluding the pro rata bonus referred to in the next sentence)
or (ii) two times the average annual bonus paid to the Executive
for the three prior years under the OICP or such similar plan
(excluding the pro rata annual bonus referred to in the next
sentence). If one hundred eighty (180) days or more have elapsed
in the Company's fiscal year in which such termination occurs,
the Company shall also pay the Executive in a lump sum, within
ninety (90) days after the end of such fiscal year, a pro rata
portion of Executive's annual bonus in an amount equal to (A) the
bonus which would have been payable to Executive under OICP or
any similar plan for the fiscal year in which Executive's
termination occurs, multiplied by (B) a fraction, the numerator
of which is the number of days in the fiscal year in which the
termination occurs through the termination date and the
denominator of which is three hundred sixty-five (365). For
purposes of the first sentence of this subparagraph 4f., there
shall be taken into account as bonus paid to the Executive for
each of the years 1996 and 1997 under the OICP one-half of the
sum of (x) cash payments with respect to Restricted Stock Units
(and related Dividend Equivalents) granted to the Executive under
the Corporation's 1995 Stock Incentive Plan and (y) the result of
multiplying the number of Stock Appreciation Rights granted to
the Executive under the Corporation's 1995 Stock Incentive Plan
by the difference between (1) the value of one share of the
Corporation's common stock on December 31, 1997 and (2) the Base
Value ($10.75). Notwithstanding the preceding sentence, if a
Change in Control occurs prior to December 31, 1997, there shall
be taken into account for purposes of the first sentence of this
subparagraph 4f. as bonus paid to the Executive for each of the
years 1996 and 1997 under the OICP one-half of the cash payments
with respect to Stock Units (and related Dividend Equivalents)
and Stock Appreciation Rights which are payable to the Executive
pursuant to Article 13 of the Corporation's 1995 Stock Incentive
Plan. If the termination of the Executive's employment occurs
prior to December 31, 1997 and prior to a Change in Control, the
amount of any adjustments to the severance benefit required as a
result of the preceding two sentences of this subparagraph 4f.
shall be paid to the Executive in a lump sum no later than March
15, 1998.
In addition, in the event that the Executive's employment is
terminated by the Company without Cause or by the Executive for
Good Reason following a Change in Control, the Executive shall be
entitled to continue participation in the Company's employee
benefit plans (other than its qualified and non-qualified
retirement plans) for a two-year period from the date of
termination, provided, however, that if Executive cannot continue
to participate in any of the benefit plans, the Company shall
otherwise provide equivalent benefits to the Executive and his
dependents on the same after-tax basis as of continued
participation had been permitted. Notwithstanding the foregoing,
in the event Executive becomes employed by another employer and
becomes eligible to participate in an employee benefit plan of
such employer, the benefits described herein shall be secondary
to such benefits during the period of Executive's eligibility,
but only to the extent that the Company reimburses Executive for
any increased cost and provides any additional benefits necessary
to give Executive the benefits provided hereunder.
g. Upon termination pursuant to subparagraphs
4a., b., c., d., or e. above, the Company shall pay the Executive
or the Executive's estate any base salary earned and unpaid to
the date of termination, and any outstanding funds advanced by
the Company to or on behalf of the Executive shall become
immediately due and payable.
h. The parties intend that no severance benefits
hereunder shall be paid to the extent that such benefits (either
alone or when aggregated with other benefits contingent on a
Change in Control and paid to or for benefit of the Executive)
constitute "excess parachute payment" within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"). Accordingly, under the circumstances set forth
below, severance benefits payable under this Agreement shall be
subject to the following reduction notwithstanding anything in
this Agreement to the contrary. If the aggregate present value
(as determined pursuant to Section 280G of the Code) of severance
benefits payable under this Agreement which, together with all
other payments by the Company to the Executive or for the
Executive's benefit, would be "parachute payments" within the
meaning of Section 280G of the Code, the payments pursuant to
this Agreement shall be reduced (reducing first the severance
benefit provided in the first sentence of subparagraph 4f.
hereof) to the largest amount as will result in no portion of
such payments being treated as excess parachute payments.
i. The determination of whether and to what
extent the payments shall be reduced under this Agreement,
pursuant to the foregoing subparagraph h., including
apportionment among specific payments and benefits, shall be made
by the Executive in good faith, and such determination shall be
conclusive and binding on the Company. The Company shall make
the calculations referred to in subparagraph h. above within
thirty days following the termination of the Executive's
employment and shall provide such calculations and the basis
therefor to the Executive within such period. In the event a
reduction is required, the Executive shall give notice to the
Company, within 20 days of the Executive's receipt of such
calculations and related information, of the Executive's
determination of the reduction.
j. Upon the occurrence of a Change in Control
the Company shall pay promptly as incurred, to the full extent
permitted by law, all legal fees and expenses which the Executive
may reasonably thereafter incur as a result of any contest,
litigation or arbitration (regardless of the outcome thereof) by
the Company, or by the Executive of the validity of, or liability
under, this Agreement or the SERP (including any contest by the
Executive about the amount of any payment pursuant to this
Agreement or pursuant to the SERP), plus in each case interest on
any delayed payment at the rate of 150% of the Prime Rate posted
by the Chase Manhattan Bank, N.A. or its successor, provided,
however, that the Company shall not be liable for the Executive's
legal fees and expenses if the Executive's position in such
contest, litigation or arbitration is found by the neutral
decision-maker to be frivolous.
5. Successor Liability. The Company shall require
any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and to
agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform. As
used in this Agreement, "Company" shall mean the company as
hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
6. Confidential Information. The Executive agrees to
keep secret and retain in the strictest confidence all
confidential matters which relate to the Company, its
subsidiaries and affiliates, including, without limitation,
customer lists, client lists, trade secrets, pricing policies and
other business affairs of the Company, its subsidiaries and
affiliates learned by him from the Company or any such subsidiary
or affiliate or otherwise before or after the date of this
Agreement, and not to disclose any such confidential matter to
anyone outside the Company or any of its subsidiaries or
affiliates, whether during or after his period of service with
the Company, except (i) as such disclosure may be required or
appropriate in connection with his work as an employee of the
Company or (ii) when required to do so by a court of law, by any
governmental agency having supervisory authority over the
business of the Company or by any administrative or legislative
body (including a committee thereof) with apparent jurisdiction
to order him to divulge, disclose or make accessible such
information. The Executive agrees to give the Company advance
written notice of any disclosure pursuant to clause (ii) of the
preceding sentence and to cooperate with any efforts by the
Company to limit the extent of such disclosure. Upon request by
the Company, the Executive agrees to deliver promptly to the
Company upon termination of his services for the Company, or at
any time thereafter as the Company may request, all Company
subsidiary or affiliate memoranda, notes, records, reports,
manuals, drawings, designs, computer file in any media and other
documents (and all copies thereof) relating to the Company's or
any subsidiary's or affiliate's business and all property of the
Company or any subsidiary or affiliate associated therewith,
which he may then possess or have under his direct control, other
than personal notes, diaries, Rolodexes and correspondence.
7. Non-Compete and Non-Solicitation. During the
Executive's employment by the Company and for a period of
one year following the termination thereof for any reason, the
Executive covenants and agrees that he will not for himself or on
behalf of any other person, partnership, company or corporation,
directly or indirectly, acquire any financial or beneficial
interest in (except as provided in the next sentence), provide
consulting services to, be employed by, or own, manage, operate
or control any business which is in competition with a business
engaged in by the Company or any of its subsidiaries or
affiliates in any state of the United States in which any of them
are engaged in business at the time of such termination of
employment for as long as they carry on a business therein.
Notwithstanding the preceding sentence, the Executive shall not
be prohibited from owning less than five (5%) percent of any
publicly traded corporation, whether or not such corporation is
in competition with the Company.
The Executive hereby covenants and agrees that, at all
times during the period of his employment and for a period of one
year immediately following the termination thereof for any
reason, the Executive shall not employ or seek to employ any
person employed at that time by the Company or any of its
subsidiaries, or otherwise encourage or entice such person or
entity to leave such employment.
It is the intention of the parties hereto that the
restrictions contained in this Section be enforceable to the
fullest extent permitted by applicable law. Therefore, to the
extent any court of competent jurisdiction shall determine that
any portion of the foregoing restrictions is excessive, such
provision shall not be entirely void, but rather shall be limited
or revised only to the extent necessary to make it enforceable.
Specifically, if any court of competent jurisdiction should hold
that any portion of the foregoing description is overly broad as
to one or more states of the United States, then that state or
states shall be eliminated from the territory to which the
restrictions of paragraph (a) of this Section applies and the
restrictions shall remain applicable in all other states of the
United States.
8. No Mitigation. The Executive shall not be
required to mitigate the amount of any payments or benefits
provided for in Section 4f. hereof by seeking other employment or
otherwise and no amounts earned by the Executive shall be used to
reduce or offset the amounts payable hereunder, except as
otherwise provided in Section 4f.
9. Ownership of Work Product. Any and all
improvements, inventions, discoveries, formulae, processes,
methods, know-how, confidential data, trade secrets and other
proprietary information (collectively, "Work Products") within
the scope of any business of the Company or any Affiliate which
the Executive may conceive or make or have conceived or made
during the Executive's employment with the Company shall be and
are the sole and exclusive property of the Company, and that the
Executive, whenever requested to do so by the Company, at its
expense, shall execute and sign any and all applications,
assignments or other instruments and do all other things which
the Company may deem necessary or appropriate (i) to apply for,
obtain, maintain, enforce, or defend letters patent of the United
States or any foreign country for any Work Product, or (ii) to
assign, transfer, convey or otherwise make available to the
Company the sole and exclusive right, title and interest in and
to any Work Product.
10. Arbitration. Any dispute or controversy between
the parties relating to this Agreement (except any dispute
relating to paragraphs 6 or 7 hereof) or relating to or arising
out of the Executive's employment with the Company, shall be
settled by binding arbitration in the City of Syracuse, State of
New York, pursuant to the Employment Dispute Resolution Rules of
the American Arbitration Association and shall be subject to the
provisions of Article 75 of the New York Civil Practice Law and
Rules. Judgment upon the award may be entered in any court of
competent jurisdiction. Notwithstanding anything herein to the
contrary, if any dispute arises between the parties under
paragraphs 6 or 7 hereof, or if the Company makes any claim under
paragraphs 6 or 7, the Company shall not be required to arbitrate
such dispute or claim but shall have the right to institute
judicial proceedings in any court of competent jurisdiction with
respect to such dispute or claim. If such judicial proceedings
are instituted, the parties agree that such proceedings shall not
be stayed or delayed pending the outcome of any arbitration
proceedings hereunder.
11. Notices. Any notice or other communication
required or permitted under this Agreement shall be effective
only if it is in writing and delivered personally or sent by
certified mail, postage prepaid, or overnight delivery addressed
as follows:
If to the Company:
Niagara Mohawk Power Corporation
300 Erie Boulevard West
Syracuse, New York 13202
ATTN: Corporate Secretary
If to the Executive:
112 Wooded Heights Drive
Camillus, NY 13031
or to such other address as either party may designate by notice
to the other, and shall be deemed to have been given upon
receipt.
12. Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto, and supersedes, and
is in full substitution for any and all prior understandings or
agreements, oral or written, with respect to the Executive's
employment.
13. Amendment. This Agreement may be amended only by
an instrument in writing signed by the parties hereto, and any
provision hereof may be waived only by an instrument in writing
signed by the party or parties against whom or which enforcement
of such waiver is sought. The failure of either party hereto at
any time to require the performance by the other party hereto of
any provision hereof shall in no way affect the full right to
require such performance at any time thereafter, nor shall the
waiver by either party hereto of a breach of any provision hereof
be taken or held to be a waiver of any succeeding breach of such
provision or a waiver of the provision itself or a waiver of any
other provision of this Agreement.
14. Miscellaneous. This Agreement is binding on and
is for the benefit of the parties hereto and their respective
successors, heirs, executors, administrators and other legal
representatives. Neither this Agreement nor any right or
obligation hereunder may be assigned by the Company (except to an
Affiliate) or by the Executive without the prior written consent
of the other party.
15. Severability. If any provision of this
Agreement, or portion thereof, is so broad, in scope or duration,
so as to be unenforceable, such provision or portion thereof
shall be interpreted to be only so broad as is enforceable.
16. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York without reference to principles of conflicts of law.
17. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original,
but all of which shall constitute one and the same instrument.
18. Performance Covenant. The Executive represents
and warrants to the Company that the Executive is not party to
any agreement which would prohibit the Executive from entering
into this Agreement or performing fully the Executive's
obligations hereunder.
19. Survival of Covenants. The obligations of the
Executive set forth in paragraphs 6, 7, 9 and 10 represent
independent covenants by which the Executive is and will remain
bound notwithstanding any breach by the Company, and shall
survive the termination of this Agreement.
IN WITNESS WHEREOF, the Company and the Executive have
executed this Agreement as of the date first written above.
_________________________ NIAGARA MOHAWK POWER CORPORATION
John W. Powers
By:______________________________
DAVID J. ARRINGTON
Senior Vice President -
Human Resources
SCHEDULE A
Modifications in Respect of John W. Powers ("Executive")
to the
Supplemental Executive Retirement Plan ("SERP")
of the
Niagara Mohawk Power Corporation ("Company")
I. Subsection 1.8 of Section I of the SERP is hereby modified
to provide that the term "Earnings" shall mean the sum of the (i)
Executive's base annual salary, whether or not deferred and
including any elective before-tax contributions made by the
Executive to a plan qualified under Section 401(k) of the
Internal Revenue Code, averaged over the final 36 months of the
Executive's employment with the Company and (ii) the average of
the annual bonus earned by the Executive under the Corporation's
Annual Officers Incentive Compensation Plan ("OICP"), whether or
not deferred, in respect of the final 36 months of the
Executive's employment with the Company. If (A) the Executive is
an employee of the Company on December 31, 1997 or (B) prior to
December 31, 1997 the Executive's employment is terminated and
the Executive is entitled to payment under Article 9 of the
Corporation's 1995 Stock Incentive Plan ("SIP") for all or a
portion of the Stock Units and Stock Appreciation Rights granted
to the Executive under SIP, there shall be taken into account for
purposes of the preceding sentence as an annual bonus under the
OICP, the sum of (x) cash payments made with respect to Stock
Units (and related Dividend Equivalents) granted to the Executive
under the SIP and (y) the result of multiplying the number of
Stock Appreciation Rights granted to the Executive under the SIP,
prorated if applicable to Article 9 of the SIP, by the difference
between (1) the value of one share of the Corporation's common
stock on December 31, 1997 and (2) the Base Value ($10.75).
Notwithstanding the preceding sentence, if a Change in Control
occurs prior to December 31, 1997 (and, if applicable, prior to
the Executive's termination of employment), there shall be taken
into account for purposes of the first sentence hereof as an
annual bonus under the OICP the cash payments with respect to
Stock Units (and related Dividend Equivalents) and Stock
Appreciation Rights which are payable to the Executive pursuant
to Article 13 of the SIP.
II. Subsection 2.1 of Section II of the SERP is hereby modified
to provide that full SERP benefits are vested following eight (8)
years of continuous service with the Company.
III. Subsection 4.3 of Section IV of the SERP is hereby modified
to provide that in the event of (x) the Executive's involuntary
termination of employment by the Company, at any time, other than
for Cause, (y) the termination of this Agreement on account of
the Executive's Disability or (z) the Executive's termination of
employment for Good Reason within the 36 full calendar month
period following a Change in Control (as defined in Schedule B of
this Agreement), the Executive shall be 100% vested in his full
SERP benefit (i.e., 60% of Earnings (as modified above))
regardless of the Executive's years of continuous service with
the Company. If the Executive is less than age 55 at the date of
such termination of employment, the Executive shall be entitled
to receive benefits commencing no earlier than age 55, calculated
pursuant to Section III of the SERP.
IV. Except as provided above, the provisions of the SERP shall
apply and control participation therein and the payment of
benefits thereunder.
<PAGE>
SCHEDULE B
For purposes of this Agreement, the term "Change in
Control" shall mean:
(1) The acquisition by any individual, entity or
group (within the meaning of Sections 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly
from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege), (ii) any acquisition by the
Company, (iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (iv) any acquisition by
any corporation pursuant to a reorganization, merger or
consolidation, if, following such reorganization, merger or
consolidation, the conditions described in clauses (i), (ii) and
(iii) of subparagraph (3) of this Schedule B are satisfied; or
(2) Individuals who, as of the date hereof, constitute
the Company's Board of Directors (the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of
at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(3) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation, (i) more
than 75% of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such
reorganization, merger or consolidation, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding the Company, any
employee benefit plan (or related trust) of the Company or such
corporation resulting from such reorganization, merger or
consolidation and any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation, directly
or indirectly, 20% or more of the Outstanding Company Common
stock or Outstanding Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or
consolidation were members of the Incumbent Board at the time of
the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
(4) Approval by the shareholders of the Company of (i)
a complete liquidation or dissolution of the Company or (ii) the
sale or other disposition of all or substantially all of the
assets of the Company, other than to a corporation, with respect
to which following such sale or other disposition, (A) more than
75% of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B) no
Person (excluding the Company and any employee benefit plan (or
related trust) of the Company or such corporation and any Person
beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 20% or more of the
Outstanding Company Common Stock or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors and (C) at least a majority of the members of the board
of directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement or
action of the Board providing for such sale or other disposition
of assets of the Company.
Exhibit 10-23
EMPLOYMENT AGREEMENT
Agreement made as of the 1st day of July, 1996, between
NIAGARA MOHAWK POWER CORPORATION (the "Company"), and B. Ralph
Sylvia (the "Executive").
WHEREAS, the Company desires to employ the Executive,
and the Executive desires to accept/continue employment with the
Company, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements hereinafter set forth, the Company and
the Executive hereby agree as follows:
1. Term of Agreement. The Company shall
employ the Executive, and the Executive shall serve the Company,
for the period beginning July 1, 1996 and expiring on June 30,
1999, subject to earlier termination as provided under paragraph
4
hereof. This Agreement shall be extended automatically by one
year commencing on July 1, 1997 and on July 1st of each year
thereafter, unless either party notifies the other to the
contrary not later than sixty (60) days prior to such date.
Notwithstanding any such notice by the Company, this Agreement
shall remain in effect for a period of thirty-six months from the
date of a "Change in Control" (as that term is defined in
Schedule B hereto, unless such notice was given at least 18
months prior to the date of the Change in Control).
2. Duties. The Executive shall serve the Company as
its Executive Vice President - Electric Generation and Chief
Nuclear Officer. During the term of this Agreement, the
Executive shall, except during vacation or sick leave, devote the
whole of the Executive's time, attention and skill to the
business of the Company during usual business hours (and outside
those hours when reasonably necessary to the Executive's duties
hereunder); faithfully and diligently perform such duties and
exercise such powers as may be from time to time assigned to or
vested in the Executive by the Company's Board of Directors (the
"Board") or by any officer of the Company superior to the
Executive; obey the directions of the Board and of any officer of
the Company superior to the Executive; and use the Executive's
best efforts to promote the interests of the Company. The
Executive may be required in pursuance of the Executive's duties
hereunder to perform services for any company controlling,
controlled by or under common control with the Company (such
companies hereinafter collectively called "Affiliates") and to
accept such offices in any Affiliates as the Board may require.
The Executive shall obey all policies of the Company and
applicable policies of its Affiliates.
3. Compensation. During the term of this Agreement:
a. The Company shall pay the Executive a base
salary at an annual rate of $295,000, which shall be payable
periodically in accordance with the Company's then prevailing
payroll practices, or such greater amount as the Company may from
time to time determine;
b. The Executive shall be entitled to
participate in the Company's Supplemental Executive Retirement
Plan ("SERP") according to its terms, as modified by Schedule A
hereto;
c. The Executive shall be entitled to
participate in the Company's Officers Incentive Compensation
Plan, Stock Option Plan and Performance Share Unit Plan, and any
successors thereto, in accordance with the terms thereof; and
d. The Executive shall be entitled to such
expense accounts, vacation time, sick leave, perquisites of
office, fringe benefits, insurance coverage, and other terms and
conditions of employment as the Company generally provides to its
employees having rank and seniority at the Company comparable to
the Executive.
4. Termination. The Company shall continue to employ
the Executive, and the Executive shall continue to work for the
Company, during the term of this Agreement, unless the Agreement
is terminated in accordance with the following provisions:
a. This Agreement shall terminate automatically
upon the death of the Executive. Any right or benefit accrued on
behalf of the Executive or to which the Executive became entitled
under the terms of this Agreement prior to death (other than
payment of base salary in respect of the period following the
Executive's death), and any obligation of the Company to the
Executive in respect of any such right or benefit, shall not be
extinguished by reason of the Executive's death. Any base salary
earned and unpaid as of the date of the Executive's death shall
be paid to the Executive's estate in accordance with paragraph
4g. below.
b. By notice to the Executive, the Company may
terminate this Agreement upon the "Disability" of the Executive.
The Executive shall be deemed to incur a Disability when (i) a
physician selected by the Company advises the Company that the
Executive's physical or mental condition has rendered the
Executive unable to perform the essential functions of the
Executive's position in a reasonable manner, with or without
reasonable accommodation and will continue to render him unable
to perform the essential functions of the Executive's position in
such manner, for a period exceeding 12 consecutive months, or
(ii) due to a physical or mental condition, the Executive has not
performed the essential functions of the Executive's position in
a reasonable manner, with or without reasonable accommodation,
for a period of 12 consecutive months. Following termination of
this Agreement pursuant to clause (i) of the preceding sentence
of this subparagraph, the Executive shall continue to receive his
base salary under paragraph 3a. hereof for a period of 12 months
from the date of his Disability, reduced by any benefits payable
during such period under the Company's short-term disability plan
and long-term disability plan. Thereafter, or in the event of
termination of this Agreement pursuant to clause (ii) of the
preceding sentence, the Executive shall receive benefits under
the Company's long-term disability plan in lieu of any further
base salary under paragraph 3a. hereof.
c. By notice to the Executive, the Company may
terminate the Executive's employment at any time for "Cause".
The Company must deliver such notice within ninety (90) days
after the Board both (i) has or should have had knowledge of
conduct or an event allegedly constituting Cause, and (ii) has
reason to believe that such conduct or event could be grounds for
Cause. For purposes of this Agreement "Cause" shall mean (i)
the Executive is convicted of, or has plead guilty or nolo
contendere to, a felony; (ii) the willful and continued failure
by the Executive to perform substantially his duties with the
Company (other than any such failure resulting from incapacity
due to physical or mental illness) after a demand for substantial
performance is delivered to the Executive by the Company which
specifically identifies the manner in which the Company believes
the Executive has not substantially performed his duties; (iii)
the Executive engages in conduct that constitutes gross neglect
or willful misconduct in carrying out his duties under this
Agreement involving material economic harm to the Company or any
of its subsidiaries; or (iv) the Executive has engaged in a
material breach of Section 6 or 7 of this Agreement. In the
event the termination notice is based on clause (ii) of the
preceding sentence, the Executive shall have ten (10) business
days following receipt of the notice of termination to cure his
conduct, to the extent such cure is possible, and if the
Executive does not cure within the ten (10) business day period,
his termination of employment in accordance with such termination
notice shall be deemed to be for Cause. The determination of
Cause shall be made by the Board upon the recommendation of the
Compensation and Succession Committee of the Board. Following a
Change in Control, such determination shall be made in a
resolution duly adopted by the affirmative vote of not less than
three-fourths (3/4) of the membership of the Board, excluding
members who are employees of the Company, at a meeting called for
the purpose of determining that Executive has engaged in conduct
which constitutes Cause (and at which Executive had a reasonable
opportunity, together with his counsel, to be heard before the
Board prior to such vote). The Executive shall not be entitled
to the payment of any additional compensation from the Company,
except to the extent provided in paragraph 4g. hereof, in the
event of the termination of his employment for Cause.
d. If any of the following events, any of which
shall constitute "Good Reason", occurs within thirty-six months
after a Change in Control, the Executive, by notice of the
Company, may voluntarily terminate the Executive's employment for
Good Reason within ninety (90) days after the Executive both (i)
has or should have had knowledge of conduct or an event allegedly
constituting Good Reason, and (ii) has reason to believe that
such conduct or event could be grounds for Good Reason. In such
event, the Executive shall be entitled to the severance benefits
set forth in subparagraph 4f. below.
(i) the Company assigns any duties to the Executive
which are materially inconsistent in any adverse respect with the
Executive's position, duties, offices, responsibilities or
reporting requirements immediately prior to a Change in Control,
including any diminution of such duties or responsibilities; or
(ii) the Company reduces the Executive's base salary,
including salary deferrals, as in effect immediately prior to a
Change in Control; or
(iii) the Company discontinues any bonus or other
compensation plan or any other benefit, retirement plan
(including the SERP), stock ownership plan, stock purchase plan,
stock option plan, life insurance plan, health plan, disability
plan or similar plan (as the same existed immediately prior to
the Change in Control) in which the Executive participated or was
eligible to participate in immediately prior to the Change in
Control and in lieu thereof does not make available plans
providing at least comparable benefits; or
(iv) the Company takes action which adversely affects
the Executive's participation in, or eligibility for, or
materially reduces the Executive's benefits under, any of the
plans described in (iii) above, or deprives the Executive of any
material fringe benefit enjoyed by the Executive immediately
prior to the Change in Control, or fails to provide the Executive
with the number of paid vacation days to which the Executive was
entitled in accordance with the Company's normal vacation policy
immediately prior to the Change in Control; or
(v) the Company requires the Executive to be based at
any office or location other than one within a 50-mile radius of
the office or location at which the Executive was based
immediately prior to the Change in Control; or
(vi) the Company purports to terminate the Executive's
employment otherwise than as expressly permitted by this
Agreement; or
(vii) the Company fails to comply with and satisfy
paragraph 5 hereof, provided that such successor has received
prior written notice from the Company or from the Executive of
the requirements of paragraph 5 hereof.
The Executive shall have the sole right to
determine, in good faith, whether any of the above events has
occurred.
e. The Company may terminate the Executive's
employment at any time without Cause.
f. In the event that the Executive's employment
is terminated by the Company without Cause or by the Executive
for Good Reason following a Change in Control, the Company shall
pay the Executive a severance benefit, payable in twenty-four
equal monthly installments, equal to two years' base salary at
the rate in effect as of the date of termination, plus the
greater of (i) two times the most recent annual bonus paid to the
Executive under the Corporation's Annual Officers Incentive
Compensation Plan (the "OICP") or any similar annual bonus plan
(excluding the pro rata bonus referred to in the next sentence)
or (ii) two times the average annual bonus paid to the Executive
for the three prior years under the OICP or such similar plan
(excluding the pro rata annual bonus referred to in the next
sentence). If one hundred eighty (180) days or more have elapsed
in the Company's fiscal year in which such termination occurs,
the Company shall also pay the Executive in a lump sum, within
ninety (90) days after the end of such fiscal year, a pro rata
portion of Executive's annual bonus in an amount equal to (A) the
bonus which would have been payable to Executive under OICP or
any similar plan for the fiscal year in which Executive's
termination occurs, multiplied by (B) a fraction, the numerator
of which is the number of days in the fiscal year in which the
termination occurs through the termination date and the
denominator of which is three hundred sixty-five (365). For
purposes of the first sentence of this subparagraph 4f., there
shall be taken into account as bonus paid to the Executive for
each of the years 1996 and 1997 under the OICP one-half of the
sum of (x) cash payments with respect to Restricted Stock Units
(and related Dividend Equivalents) granted to the Executive under
the Corporation's 1995 Stock Incentive Plan and (y) the result of
multiplying the number of Stock Appreciation Rights granted to
the Executive under the Corporation's 1995 Stock Incentive Plan
by the difference between (1) the value of one share of the
Corporation's common stock on December 31, 1997 and (2) the Base
Value ($10.75). Notwithstanding the preceding sentence, if a
Change in Control occurs prior to December 31, 1997, there shall
be taken into account for purposes of the first sentence of this
subparagraph 4f. as bonus paid to the Executive for each of the
years 1996 and 1997 under the OICP one-half of the cash payments
with respect to Stock Units (and related Dividend Equivalents)
and Stock Appreciation Rights which are payable to the Executive
pursuant to Article 13 of the Corporation's 1995 Stock Incentive
Plan. If the termination of the Executive's employment occurs
prior to December 31, 1997 and prior to a Change in Control, the
amount of any adjustments to the severance benefit required as a
result of the preceding two sentences of this subparagraph 4f.
shall be paid to the Executive in a lump sum no later than March
15, 1998.
In addition, in the event that the Executive's employment is
terminated by the Company without Cause or by the Executive for
Good Reason following a Change in Control, the Executive shall be
entitled to continue participation in the Company's employee
benefit plans (other than its qualified and non-qualified
retirement plans) for a two-year period from the date of
termination, provided, however, that if Executive cannot continue
to participate in any of the benefit plans, the Company shall
otherwise provide equivalent benefits to the Executive and his
dependents on the same after-tax basis as of continued
participation had been permitted. Notwithstanding the foregoing,
in the event Executive becomes employed by another employer and
becomes eligible to participate in an employee benefit plan of
such employer, the benefits described herein shall be secondary
to such benefits during the period of Executive's eligibility,
but only to the extent that the Company reimburses Executive for
any increased cost and provides any additional benefits necessary
to give Executive the benefits provided hereunder.
g. Upon termination pursuant to subparagraphs
4a., b., c., d., or e. above, the Company shall pay the Executive
or the Executive's estate any base salary earned and unpaid to
the date of termination, and any outstanding funds advanced by
the Company to or on behalf of the Executive shall become
immediately due and payable.
h. The parties intend that no severance benefits
hereunder shall be paid to the extent that such benefits (either
alone or when aggregated with other benefits contingent on a
Change in Control and paid to or for benefit of the Executive)
constitute "excess parachute payment" within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"). Accordingly, under the circumstances set forth
below, severance benefits payable under this Agreement shall be
subject to the following reduction notwithstanding anything in
this Agreement to the contrary. If the aggregate present value
(as determined pursuant to Section 280G of the Code) of severance
benefits payable under this Agreement which, together with all
other payments by the Company to the Executive or for the
Executive's benefit, would be "parachute payments" within the
meaning of Section 280G of the Code, the payments pursuant to
this Agreement shall be reduced (reducing first the severance
benefit provided in the first sentence of subparagraph 4f.
hereof) to the largest amount as will result in no portion of
such payments being treated as excess parachute payments.
i. The determination of whether and to what
extent the payments shall be reduced under this Agreement,
pursuant to the foregoing subparagraph h., including
apportionment among specific payments and benefits, shall be made
by the Executive in good faith, and such determination shall be
conclusive and binding on the Company. The Company shall make
the calculations referred to in subparagraph h. above within
thirty days following the termination of the Executive's
employment and shall provide such calculations and the basis
therefor to the Executive within such period. In the event a
reduction is required, the Executive shall give notice to the
Company, within 20 days of the Executive's receipt of such
calculations and related information, of the Executive's
determination of the reduction.
j. Upon the occurrence of a Change in Control
the Company shall pay promptly as incurred, to the full extent
permitted by law, all legal fees and expenses which the Executive
may reasonably thereafter incur as a result of any contest,
litigation or arbitration (regardless of the outcome thereof) by
the Company, or by the Executive of the validity of, or liability
under, this Agreement or the SERP (including any contest by the
Executive about the amount of any payment pursuant to this
Agreement or pursuant to the SERP), plus in each case interest on
any delayed payment at the rate of 150% of the Prime Rate posted
by the Chase Manhattan Bank, N.A. or its successor, provided,
however, that the Company shall not be liable for the Executive's
legal fees and expenses if the Executive's position in such
contest, litigation or arbitration is found by the neutral
decision-maker to be frivolous.
5. Successor Liability. The Company shall require
any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and to
agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform. As
used in this Agreement, "Company" shall mean the company as
hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
6. Confidential Information. The Executive agrees to
keep secret and retain in the strictest confidence all
confidential matters which relate to the Company, its
subsidiaries and affiliates, including, without limitation,
customer lists, client lists, trade secrets, pricing policies and
other business affairs of the Company, its subsidiaries and
affiliates learned by him from the Company or any such subsidiary
or affiliate or otherwise before or after the date of this
Agreement, and not to disclose any such confidential matter to
anyone outside the Company or any of its subsidiaries or
affiliates, whether during or after his period of service with
the Company, except (i) as such disclosure may be required or
appropriate in connection with his work as an employee of the
Company or (ii) when required to do so by a court of law, by any
governmental agency having supervisory authority over the
business of the Company or by any administrative or legislative
body (including a committee thereof) with apparent jurisdiction
to order him to divulge, disclose or make accessible such
information. The Executive agrees to give the Company advance
written notice of any disclosure pursuant to clause (ii) of the
preceding sentence and to cooperate with any efforts by the
Company to limit the extent of such disclosure. Upon request by
the Company, the Executive agrees to deliver promptly to the
Company upon termination of his services for the Company, or at
any time thereafter as the Company may request, all Company
subsidiary or affiliate memoranda, notes, records, reports,
manuals, drawings, designs, computer file in any media and other
documents (and all copies thereof) relating to the Company's or
any subsidiary's or affiliate's business and all property of the
Company or any subsidiary or affiliate associated therewith,
which he may then possess or have under his direct control, other
than personal notes, diaries, Rolodexes and correspondence.
7. Non-Compete and Non-Solicitation. During the
Executive's employment by the Company and for a period of
one year following the termination thereof for any reason, the
Executive covenants and agrees that he will not for himself or on
behalf of any other person, partnership, company or corporation,
directly or indirectly, acquire any financial or beneficial
interest in (except as provided in the next sentence), provide
consulting services to, be employed by, or own, manage, operate
or control any business which is in competition with a business
engaged in by the Company or any of its subsidiaries or
affiliates in any state of the United States in which any of them
are engaged in business at the time of such termination of
employment for as long as they carry on a business therein.
Notwithstanding the preceding sentence, the Executive shall not
be prohibited from owning less than five (5%) percent of any
publicly traded corporation, whether or not such corporation is
in competition with the Company.
The Executive hereby covenants and agrees that, at all
times during the period of his employment and for a period of one
year immediately following the termination thereof for any
reason, the Executive shall not employ or seek to employ any
person employed at that time by the Company or any of its
subsidiaries, or otherwise encourage or entice such person or
entity to leave such employment.
It is the intention of the parties hereto that the
restrictions contained in this Section be enforceable to the
fullest extent permitted by applicable law. Therefore, to the
extent any court of competent jurisdiction shall determine that
any portion of the foregoing restrictions is excessive, such
provision shall not be entirely void, but rather shall be limited
or revised only to the extent necessary to make it enforceable.
Specifically, if any court of competent jurisdiction should hold
that any portion of the foregoing description is overly broad as
to one or more states of the United States, then that state or
states shall be eliminated from the territory to which the
restrictions of paragraph (a) of this Section applies and the
restrictions shall remain applicable in all other states of the
United States.
8. No Mitigation. The Executive shall not be
required to mitigate the amount of any payments or benefits
provided for in Section 4f. hereof by seeking other employment or
otherwise and no amounts earned by the Executive shall be used to
reduce or offset the amounts payable hereunder, except as
otherwise provided in Section 4f.
9. Ownership of Work Product. Any and all
improvements, inventions, discoveries, formulae, processes,
methods, know-how, confidential data, trade secrets and other
proprietary information (collectively, "Work Products") within
the scope of any business of the Company or any Affiliate which
the Executive may conceive or make or have conceived or made
during the Executive's employment with the Company shall be and
are the sole and exclusive property of the Company, and that the
Executive, whenever requested to do so by the Company, at its
expense, shall execute and sign any and all applications,
assignments or other instruments and do all other things which
the Company may deem necessary or appropriate (i) to apply for,
obtain, maintain, enforce, or defend letters patent of the United
States or any foreign country for any Work Product, or (ii) to
assign, transfer, convey or otherwise make available to the
Company the sole and exclusive right, title and interest in and
to any Work Product.
10. Arbitration. Any dispute or controversy between
the parties relating to this Agreement (except any dispute
relating to paragraphs 6 or 7 hereof) or relating to or arising
out of the Executive's employment with the Company, shall be
settled by binding arbitration in the City of Syracuse, State of
New York, pursuant to the Employment Dispute Resolution Rules of
the American Arbitration Association and shall be subject to the
provisions of Article 75 of the New York Civil Practice Law and
Rules. Judgment upon the award may be entered in any court of
competent jurisdiction. Notwithstanding anything herein to the
contrary, if any dispute arises between the parties under
paragraphs 6 or 7 hereof, or if the Company makes any claim under
paragraphs 6 or 7, the Company shall not be required to arbitrate
such dispute or claim but shall have the right to institute
judicial proceedings in any court of competent jurisdiction with
respect to such dispute or claim. If such judicial proceedings
are instituted, the parties agree that such proceedings shall not
be stayed or delayed pending the outcome of any arbitration
proceedings hereunder.
11. Notices. Any notice or other communication
required or permitted under this Agreement shall be effective
only if it is in writing and delivered personally or sent by
certified mail, postage prepaid, or overnight delivery addressed
as follows:
If to the Company:
Niagara Mohawk Power Corporation
300 Erie Boulevard West
Syracuse, New York 13202
ATTN: Corporate Secretary
If to the Executive:
124 Coachmans Whip
Baldwinsville, NY 13027
or to such other address as either party may designate by notice
to the other, and shall be deemed to have been given upon
receipt.
12. Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto, and supersedes, and
is in full substitution for any and all prior understandings or
agreements, oral or written, with respect to the Executive's
employment.
13. Amendment. This Agreement may be amended only by
an instrument in writing signed by the parties hereto, and any
provision hereof may be waived only by an instrument in writing
signed by the party or parties against whom or which enforcement
of such waiver is sought. The failure of either party hereto at
any time to require the performance by the other party hereto of
any provision hereof shall in no way affect the full right to
require such performance at any time thereafter, nor shall the
waiver by either party hereto of a breach of any provision hereof
be taken or held to be a waiver of any succeeding breach of such
provision or a waiver of the provision itself or a waiver of any
other provision of this Agreement.
14. Miscellaneous. This Agreement is binding on and
is for the benefit of the parties hereto and their respective
successors, heirs, executors, administrators and other legal
representatives. Neither this Agreement nor any right or
obligation hereunder may be assigned by the Company (except to an
Affiliate) or by the Executive without the prior written consent
of the other party.
15. Severability. If any provision of this
Agreement, or portion thereof, is so broad, in scope or duration,
so as to be unenforceable, such provision or portion thereof
shall be interpreted to be only so broad as is enforceable.
16. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York without reference to principles of conflicts of law.
17. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original,
but all of which shall constitute one and the same instrument.
18. Performance Covenant. The Executive represents
and warrants to the Company that the Executive is not party to
any agreement which would prohibit the Executive from entering
into this Agreement or performing fully the Executive's
obligations hereunder.
19. Survival of Covenants. The obligations of the
Executive set forth in paragraphs 6, 7, 9 and 10 represent
independent covenants by which the Executive is and will remain
bound notwithstanding any breach by the Company, and shall
survive the termination of this Agreement.
IN WITNESS WHEREOF, the Company and the Executive have
executed this Agreement as of the date first written above.
________________________ NIAGARA MOHAWK POWER CORPORATION
B. Ralph Sylvia
By:______________________________
DAVID J. ARRINGTON
Senior Vice President -
Human Resources
SCHEDULE A
Modifications in Respect of B. Ralph Sylvia ("Executive")
to the
Supplemental Executive Retirement Plan ("SERP")
of the
Niagara Mohawk Power Corporation ("Company")
I. Subsection 1.8 of Section I of the SERP is hereby modified
to provide that the term "Earnings" shall mean the sum of the (i)
Executive's base annual salary, whether or not deferred and
including any elective before-tax contributions made by the
Executive to a plan qualified under Section 401(k) of the
Internal Revenue Code, averaged over the final 36 months of the
Executive's employment with the Company and (ii) the average of
the annual bonus earned by the Executive under the Corporation's
Annual Officers Incentive Compensation Plan ("OICP"), whether or
not deferred, in respect of the final 36 months of the
Executive's employment with the Company. If (A) the Executive is
an employee of the Company on December 31, 1997 or (B) prior to
December 31, 1997 the Executive's employment is terminated and
the Executive is entitled to payment under Article 9 of the
Corporation's 1995 Stock Incentive Plan ("SIP") for all or a
portion of the Stock Units and Stock Appreciation Rights granted
to the Executive under SIP, there shall be taken into account for
purposes of the preceding sentence as an annual bonus under the
OICP, the sum of (x) cash payments made with respect to Stock
Units (and related Dividend Equivalents) granted to the Executive
under the SIP and (y) the result of multiplying the number of
Stock Appreciation Rights granted to the Executive under the SIP,
prorated if applicable to Article 9 of the SIP, by the difference
between (1) the value of one share of the Corporation's common
stock on December 31, 1997 and (2) the Base Value ($10.75).
Notwithstanding the preceding sentence, if a Change in Control
occurs prior to December 31, 1997 (and, if applicable, prior to
the Executive's termination of employment), there shall be taken
into account for purposes of the first sentence hereof as an
annual bonus under the OICP the cash payments with respect to
Stock Units (and related Dividend Equivalents) and Stock
Appreciation Rights which are payable to the Executive pursuant
to Article 13 of the SIP.
II. Subsection 2.1 of Section II of the SERP is hereby modified
to provide that full SERP benefits are vested following eight (8)
years of continuous service with the Company.
III. Subsection 4.3 of Section IV of the SERP is hereby modified
to provide that in the event of (x) the Executive's involuntary
termination of employment by the Company, at any time, other than
for Cause, (y) the termination of this Agreement on account of
the Executive's Disability or (z) the Executive's termination of
employment for Good Reason within the 36 full calendar month
period following a Change in Control (as defined in Schedule B of
this Agreement), the Executive shall be 100% vested in his full
SERP benefit (i.e., 60% of Earnings (as modified above))
regardless of the Executive's years of continuous service with
the Company. If the Executive is less than age 55 at the date
of such termination of employment, the Executive shall be
entitled to receive benefits commencing no earlier than age
55, calculated pursuant to Section III of the SERP.
IV. Except as provided above, the provisions of the SERP shall
apply and control participation therein and the payment of
benefits thereunder.
SCHEDULE B
For purposes of this Agreement, the term "Change in
Control" shall mean:
(1) The acquisition by any individual, entity or
group (within the meaning of Sections 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly
from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege), (ii) any acquisition by the
Company, (iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (iv) any acquisition by
any corporation pursuant to a reorganization, merger or
consolidation, if, following such reorganization, merger or
consolidation, the conditions described in clauses (i), (ii) and
(iii) of subparagraph (3) of this Schedule B are satisfied; or
(2) Individuals who, as of the date hereof, constitute
the Company's Board of Directors (the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of
at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office
occurs as aresult of either an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(3) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation, (i) more
than 75% of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such
reorganization, merger or consolidation, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding the Company, any
employee benefit plan (or related trust) of the Company or such
corporation resulting from such reorganization, merger or
consolidation and any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation, directly
or indirectly, 20% or more of the Outstanding Company Common
stock or Outstanding Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or
consolidation were members of the Incumbent Board at the time of
the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
(4) Approval by the shareholders of the Company of (I)
a complete liquidation or dissolution of the Company or (ii) the
sale or other disposition of all or substantially all of the
assets of the Company, other than to a corporation, with respect
to which following such sale or other disposition, (A) more than
75% of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B) no
Person (excluding the Company and any employee benefit plan (or
related trust) of the Company or such corporation and any Person
beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 20% or more of the
Outstanding Company Common Stock or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors and (C) at least a majority of the members of the board
of directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement or
action of the Board providing for such sale or other disposition
of assets of the Company.
<TABLE>
<CAPTION>
EXHIBIT 11
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
- ---------------------------------------------------------
Computation of the Average Number of Shares of Common Stock Outstanding
For the Three Months and Nine Months Ended September 30, 1996 and 1995
(4)
Average Number
of Shares
Outstanding as
Shown on
Consolidated
Statement
(1) (2) (3) of Income
Shares of Number Share (3 divided by
Common of Days Days Number of Days
Stock Outstanding (2 X 1) in Period)
--------- ----------- ------- --------------
FOR THE THREE MONTHS ENDED SEPTEMBER 30:
<S> <C> <C> <C> <C>
JULY 1 - SEPTEMBER 30, 1996 144,349,839 92 13,280,185,188
SHARES ISSUED -
ACQUISITION - SYRACUSE
SUBURBAN GAS COMPANY, INC. - 15,375 83 1,276,125
----------- --------------
144,365,214 13,281,461,313 144,363,710
=========== ============== ===========
July 1 - September 30, 1995 144,330,482 92 13,278,404,344 144,330,482
=========== ============== ===========
<PAGE>
<PAGE>
FOR THE NINE MONTHS ENDED SEPTEMBER 30:
JANUARY 1 - SEPTEMBER 30, 1996 144,332,123 274 39,547,001,702
SHARES ISSUED AT VARIOUS
TIMES DURING THE PERIOD -
ACQUISITION - SYRACUSE
SUBURBAN GAS COMPANY, INC. - 33,091 *<F1> 3,353,281
----------- --------------
144,365,214 39,550,354,983 144,344,361
=========== ============== ===========
January 1 - September 30, 1995 144,311,466 273 39,397,030,218
Shares issued at various
times during the period -
Dividend Reinvestment Plan 19,016 *<F1> 4,620,888
----------- --------------
144,330,482 39,401,651,106 144,328,392
=========== ============== ===========
NOTE: Earnings per share calculated on both a primary and fully diluted basis are the
same due to the effects of rounding.
<FN>
<F1>* Number of days outstanding not shown as shares represent an accumulation of weekly,
monthly or quarterly issues throughout the period. Share days for shares issued
are based on the total number of days each share was outstanding during the period.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
- ---------------------------------------------------------
Statement Showing Computation of Ratio of Earnings to Fixed
Charges, Ratio of Earnings to Fixed Charges without AFC and
Ratio of Earnings to Fixed Charges and Preferred Stock Dividends
for the Twelve Months Ended September 30, 1996
(In thousands of dollars)
<S> <C>
A. Net Income $ 164,072
B. Taxes Based on Income or Profits 89,584
---------
C. Earnings, Before Income Taxes 253,656
D. Fixed Charges (a) 311,217
---------
E. Earnings Before Income Taxes and
Fixed Charges 564,873
F. Allowance for Funds Used During
Construction (AFC) 5,610
---------
G. Earnings Before Income Taxes and
Fixed Charges without AFC $ 559,263
=========
<PAGE>
<PAGE>
PREFERRED DIVIDEND FACTOR:
H. Preferred Dividend Requirements $ 38,404
---------
I. Ratio of Pre-tax Income to Net
Income (C/A) 1.546
---------
J. Preferred Dividend Factor (HxI) $ 59,373
K. Fixed Charges as Above (D) 311,217
---------
L. Fixed Charges and Preferred Dividends
Combined $ 370,590
=========
M. Ratio of Earnings to Fixed
Charges (E/D) 1.82
=========
N. Ratio of Earnings to Fixed Charges
without AFC (G/D) 1.80
=========
O. Ratio of Earnings to Fixed Charges
and Preferred Dividends Combined (E/L) 1.52
=========
(a) Includes a portion of rentals deemed representative of the
interest factor ($26,872).
</TABLE>
<PAGE>
<PAGE>
EXHIBIT 15
- ----------
November 13, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We are aware that Niagara Mohawk Power Corporation has included our
report dated November 13, 1996 (issued pursuant to the provisions
of Statement on Auditing Standards No. 71) in the Registration
Statements on Form S-8 (Nos. 33-36189, 33-42771 and 333-13781) and
in the Prospectus constituting part of the Registration Statements
on Form S-3 (Nos. 33-45898, 33-50703, 33-51073, 33-54827 and 33-
55546). We are also aware of our responsibilities under the
Securities Act of 1933.
Yours very truly,
/s/ Price Waterhouse LLP
- ------------------------
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENT OF INCOME AND CONSOLIDATED
STATEMENT OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<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> 6953147
<OTHER-PROPERTY-AND-INVEST> 207910
<TOTAL-CURRENT-ASSETS> 993318
<TOTAL-DEFERRED-CHARGES> 1245868
<OTHER-ASSETS> 76741
<TOTAL-ASSETS> 9476984
<COMMON> 144365
<CAPITAL-SURPLUS-PAID-IN> 1784473
<RETAINED-EARNINGS> 692811
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2621649
86730
440000
<LONG-TERM-DEBT-NET> 3476926
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 93083
12470
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2746126
<TOT-CAPITALIZATION-AND-LIAB> 9476984
<GROSS-OPERATING-REVENUE> 3019547
<INCOME-TAX-EXPENSE> 79728
<OTHER-OPERATING-EXPENSES> 2615041
<TOTAL-OPERATING-EXPENSES> 2694769
<OPERATING-INCOME-LOSS> 324778
<OTHER-INCOME-NET> 20635
<INCOME-BEFORE-INTEREST-EXPEN> 345413
<TOTAL-INTEREST-EXPENSE> 209215
<NET-INCOME> 136198
28760
<EARNINGS-AVAILABLE-FOR-COMM> 107438
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 578227
<EPS-PRIMARY> .74
<EPS-DILUTED> 0
</TABLE>
