EXHIBIT 10-22
As Amended and Restated
effective January 1, 1997
NEW YORK STATE ELECTRIC & GAS CORPORATION
ANNUAL EXECUTIVE INCENTIVE PLAN
I. Plan Objective
The objective of the Annual Executive Incentive Plan (the
"Plan") is to provide certain key employees of New York
State Electric & Gas Corporation (hereinafter referred to
as the "Company") with the opportunity to earn annual
incentive compensation through superior management
performance. Exceptional performance will promote the
future growth and success of the Company and enhance the
linkage between employee and shareholder interests.
II. Definitions
Wherever used in the Plan, unless the context clearly
indicates otherwise, the following words and phrases shall
have the meanings set forth below:
A. "Plan" shall mean the New York State Electric & Gas
Corporation Annual Executive Incentive Plan as
embodied herein and as amended from time to time.
B. "Participant" shall mean an individual who has
satisfied the eligibility requirements of Article IV
hereof.
C. "Performance Period" shall mean the period commencing
January 1 and ending December 31 of the same calendar
year for which performance is being measured.
D. "Earnings Per Common Share (Earnings)" shall mean the
Company's annual net income reduced by preferred stock
dividends and divided by the average common shares
outstanding during the year.
E. "Threshold Earnings Level" shall mean the minimum level
of Earnings Per Common Share at which an award may be
earned.
F. "Maximum Earnings Level" shall mean the level of
Earnings Per Common Share at which a maximum award may
be earned.
G. "Level of Achievement" shall mean the Participant's
achievement of a Participant's individual objective for
the Performance Period expressed as a percentage,
ranging from zero to 100%.
III. Administration
The Plan shall be administered by the Executive
Compensation and Succession Committee of the Board of
Directors of the Company (the "Committee") composed of such
members as shall be appointed from time to time by the
Board. No member of the Committee while serving as such
shall be eligible for participation in the Plan.
Except as otherwise provided in this Plan, decisions and
determinations by the Committee shall be final and binding
upon all parties. The Committee shall have the authority
to interpret the Plan, to establish and revise rules and
regulations relating to the Plan, and to make any other
determinations that it believes necessary or advisable for
the administration of the Plan.
IV. Eligibility
Eligibility for participation in the Plan is limited to
officers of the Company holding the positions set forth
below, plus any other employee of the Company who is
approved for participation by the Chairman. Participants
shall be grouped as follows:
Group I Chairman and President
Group II Executive Vice Presidents and Senior Vice
Presidents
Group III Vice Presidents
Group IV All other Participants
In the event that, during the Performance Period an
employee becomes eligible for participation in the Plan,
incentive awards payable under the Plan will be determined
based on length of participation in the Plan measured
retroactively from the first day of the month in which the
employee becomes eligible for participation in the Plan.
In the event that, during the Performance Period a
Participant changes from one eligibility group to another,
incentive awards payable under the Plan will be prorated
based on length of participation in each eligibility group
measured from the first day of the month coinciding with or
following the Participant's change in eligibility.
If during any Performance Period a Participant ceases to be
an employee of the Company for any reason, other than
disability, retirement or death, such Participant shall not
be entitled to receive an award for such Performance Period
unless otherwise determined by the Committee in its sole
discretion. In the event of disability, retirement or
death, the Participant (or his or her successor in
interest) shall be entitled to a prorated award based on
the number of full months of participation.
Participation in the Plan precludes a Participant's
eligibility in any other annual incentive compensation plan
provided by the Company (such as the Performance Plus
Plan). Individuals entering the Plan during a Performance
Period remain eligible to receive prorated awards under
other annual incentive compensation plans provided by the
Company for periods prior to their participation in the
Plan.
V. Performance Measurement and Criteria
The Plan uses the financial performance measure of Earnings
Per Common Share (Earnings) in determining whether
incentive awards may be earned by Participants. A
Threshold Earnings Level, a Maximum Earnings Level and
individual objectives for each Participant will be
established for each Performance Period. The Threshold
Earnings Level must be achieved by the Company in order for
Participants to be eligible for incentive awards. The
actual Earnings level achieved at or above Threshold Level
will then be used to determine the Participant's Incentive
Level Percentage in accordance with the provisions of
Article VII. A Participant's actual award will also depend
on the Participant's Level of Achievement of the
Participant's individual objectives for the Performance
Period, as further set forth in Article VII.
VI. Objective Setting
A. Corporate
Performance objectives will be established annually upon a
recommendation of the Chairman which recommendation shall
be reviewed by the Committee and approved by the Board of
Directors of the Company.
B. Adjustments
The Committee may adjust the size of incentive awards in
its discretion for extraordinary events if it determines
that such adjustment is necessary for the benefit of the
Company. All determinations of the Committee pursuant to
this Article VI, Section B shall be submitted to the Board
of Directors for approval.
C. Timing
The Threshold and Maximum Earnings Levels and the
individual objectives for each Participant for the yearly
Performance Period are to be established not later than the
January Board of Directors meeting, retroactive to the
first of that year.
VII. Determination of Incentive Award
At the conclusion of each Performance Period a
determination will be made by the Committee as to the
Earnings level achieved by the Company. The achievement of
an Earnings level at or above the Threshold Earnings Level
is the first step in qualifying Participants for an
incentive award.
Each Participant has Threshold and Maximum Incentive Level
Percentages assigned to the Participant's Group, as
defined in Article IV, based on that Group's potential
impact on the Company's performance. The Threshold and
Maximum Incentive Level Percentages by Group are as
follows:
Threshold Incentive Maximum Incentive
Group Level Percentages Level Percentages
I 35% 40%
II 30% 35%
III 25% 30%
IV 20% 25%
A Participant's Incentive Level Percentage will depend on
the Earnings level achieved by the Company for each
Performance Period. If only the Threshold Earnings Level
is achieved, the Participant's Incentive Level Percentage
will be the Threshold Incentive Level Percentage for the
Participant's Group. If the Maximum Earnings Level is met
or exceeded, the Participant's Incentive Level Percentage
will be the Maximum Incentive Level Percentage for the
Participant's Group. When the Earnings level achieved by
the Company is greater than the Threshold Earnings Level
but less than Maximum Earnings Level, the Participant's
Incentive Level Percentage will be calculated based on a
corresponding interpolation between Threshold and Maximum
Incentive Level Percentages for the Participant's Group.
Each Participant will be assigned individual objectives for
the Performance Period which will be used to measure
individual performance. Each individual objective will
also be assigned a relative weight, which in the aggregate
will total 100%. To determine the Incentive Award
Percentage to be used in calculating a Participant's
Incentive Award, the weight of each individual objective
will be multiplied by the Participant's Level of
Achievement for that objective with the product further
multiplied by the Participant's Threshold Incentive Level
Percentage. The resultant Incentive Award Percentages for
each individual objective will then be aggregated to
determine the Participant's Incentive Award Percentage.
The following is an example of the calculation of an
Incentive Award Percentage for a Group III Participant at
the Threshold Incentive Level Percentage:
Threshold
Level of Incentive Incentive
Objective Achieve- Level Award
Weight ment Percentage Percentage
Individual
Objective 1 40% x 100% x 25% = 10%
Individual
Objective 2 40% x 50% x 25% = 5%
Individual
Objective 3 20% x 0% x 25% = 0%
100 % 15%
To calculate an Incentive Award for a Participant, the
Participant's cumulative Incentive Award Percentage will be
multiplied by the Participant's annual base salary as of
the last day of the Performance Period. The Incentive
Award will be rounded to the nearest whole dollar amount.
The Committee's determination of incentive awards will be
submitted to the Board of Directors for approval. Final
determination of incentive awards by the Board of Directors
will be made not later than the end of February following
the end of each Performance Period. Distribution of
incentive awards will be made as soon thereafter as
practical.
VIII. Incentive Award
Incentive awards will be granted in cash. Participants may
elect, during the year preceding the performance period, to
defer up to 100% of any potential incentive award pursuant
to the Company's Deferred Compensation Plan for Salaried
Employees. Incentive awards payable under the Plan will
not be considered as a component of regular earnings or
base compensation for any purpose.
IX. Effective Date
This Plan shall be effective as of January 1, 1996.
X. Miscellaneous
The Board of Directors may at any time suspend, terminate,
modify or amend this Plan.
No Participant shall have any claim or right to be granted
an award under this Plan. Participation in the Plan shall
not be deemed an employment contract.
The Company shall have the right to deduct from the cash
incentive awards made pursuant to this Plan any taxes
required by law to be withheld with respect to such cash
payments.
In the case of a Participant's death, an incentive award
shall be made to his or her designated beneficiary, or in
the absence of such designation, by will or the laws of
descent and distribution.
Except as set forth in the preceding paragraph, a
Participant's rights and benefits under the Plan shall not
be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge,
garnishment, attachment, execution or levy of any kind,
either voluntary or involuntary, including any such
liability which arises from the Participant's bankruptcy or
for the support of a spouse or former spouse or for any
other relative of the Participant prior to the incentive
award actually being received by the person eligible to
benefit under the Plan. Any attempt at such prohibited
anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, charge, garnishment, attachment,
execution or levy, shall be void and unenforceable except
as otherwise provided by law.
XI. Payments Upon a Change in Control
A. Calculation of Payments
Notwithstanding any other provisions hereof (including,
without limitation, Article VIII hereof), if a Change in
Control (as defined in Section B of this Article XI) shall
occur, the following shall be paid, in cash, no later than
the tenth (10th) day following such Change in Control:
i) all incentive awards for any completed fiscal year of
the Company which preceded the Change in Control, which
awards have been finally determined but not yet either (x)
distributed or (y) deferred pursuant to the Deferred
Compensation Plan for Salaried Employees,
ii) if, at the time of the Change in Control, the Board of
Directors has not yet finally determined the incentive
awards with respect to the fiscal year of the Company
immediately preceding the fiscal year in which the Change
in Control occurs, an incentive award with respect to such
fiscal year, determined by the Board of Directors in
accordance with the provisions of the preceding Articles
hereof, and
iii) an incentive award with respect to the fiscal year of
the Company in which the Change in Control occurs which
shall be calculated by (x) assuming that the Threshold
Earnings Level for such fiscal year has been achieved and
that a Participant's Level of Achievement for each
individual objective is one hundred percent, and (y)
multiplying the result so obtained by a fraction the
numerator of which is the number of days elapsed from the
beginning of such fiscal year until the Change in Control
and the denominator of which is three hundred and sixty-
five (365).
B. Definition of a Change in Control
A "Change in Control" shall be deemed to have occurred if
the conditions set forth in any one of the following
paragraphs shall have been satisfied:
i) any Person (as defined in this Section B) is or becomes
the Beneficial Owner (as defined in this Section B),
directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such
Person any securities acquired directly from the Company or
its affiliates) representing 25% or more of the combined
voting power of the Company's then outstanding securities;
or
ii) during any period of two consecutive years (not
including any period prior to January 7, 1994), individuals
who at the beginning of such period constitute the Board of
Directors and any new director (other than a director
designated by a Person who has entered into an agreement
with the Company to effect a transaction described in
paragraph (i), (iii) or (iv) of this Change in Control
definition) whose election by the Board of Directors or
nomination for election by the Company's stockholders was
approved by a vote of at least two thirds (2/3) of the
directors then still in office who either were directors at
the beginning of the period or whose election or nomination
for election was previously so approved, cease for any
reason to constitute a majority thereof; or
iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation,
other than (x) a merger or consolidation which would result
in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting
securities of the surviving entity), in combination with
the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the Company,
at least 75% of the combined voting power of the voting
securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation,
or (y) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no Person acquires more than 50% of the combined
voting power of the Company's then outstanding securities;
or
iv) the shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially
all the Company's assets.
For purposes of the definition of Change in Control in this
Section B:
"Beneficial Owner" shall have the meaning defined in Rule
13d-3 under the Exchange Act.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
"Person" shall have the meaning given in Section 3(a) (9)
of the Exchange Act, as modified and used in Sections 13(d)
and 14(d) thereof; however, a Person shall not include (i)
the Company or any of its subsidiaries, (ii) a trustee or
other fiduciary holding securities under an employee
benefit plan of the Company or any of its subsidiaries,
(iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company.
XII. Plan Administration After a Change in Control
Notwithstanding any other provisions of the Plan
(including, without limitation, Articles VI (B) and X
hereof), upon and after the occurrence of a Change in
Control, neither the Board of Directors nor the Committee
shall be authorized to, and no termination, suspension,
modification or amendment of the Plan shall be permitted
to, amend or modify the terms and provisions (including,
without limitation, the payment provisions) of any
incentive awards theretofore made to Participants in any
way which adversely affects the rights of such
Participants.