EXHIBIT 10-49
As Amended and Restated
Effective May 1, 1998
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 ("NYSEG") with the
opportunity to earn annual incentive compensation through
superior management performance. Exceptional performance
will promote the future growth and success of NYSEG and
Energy East Corporation ("Energy East") 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 NYSEG 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
Energy East's annual net income reduced by
preferred stock dividends and divided by the
average common shares outstanding during the year.
For 1998, Earnings will be determined with
reference to NYSEG and Energy East, as
appropriate.
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%.
H. "NYSEG Board" shall mean the Board of Directors of
NYSEG.
III. Administration
The Plan shall be administered by the Executive Compensation
and Succession Committee (the "Committee") of the Board of
Directors of Energy East (the "Energy East Board") composed
of such members as shall be appointed from time to time by
the Energy East 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 NYSEG holding the positions set forth below,
plus any other employee of NYSEG who is approved for
participation by the Chairman of NYSEG. 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 NYSEG 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 NYSEG Board in its sole
discretion. For the 1998 Performance Period, any
Participant that ceases to be an employee of NYSEG by reason
of a transfer of employment to a subsidiary of Energy East,
such Participant will continue to participate in the Plan at
the position level held by the individual prior to the
transfer of employment to a subsidiary of Energy East and
will be eligible to receive an award for such Performance
Period with employment by the subsidiary treated for
purposes of this Plan as employment by NYSEG. 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 NYSEG (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 NYSEG 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 Energy East 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 (or for
an individual who becomes eligible to participate in the
Plan while a Performance Period is in progress in accordance
with Item C below) upon a recommendation of the Chairman of
NYSEG which recommendation shall be approved by the NYSEG
Board.
B. Adjustments
The NYSEG Board 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 NYSEG.
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 end of
February, retroactive to the first of that year.
Performance objectives for individuals who become eligible
to participate in the Plan while the yearly Performance
Period is in progress are to be established at such time as
the NYSEG Board determines it necessary for the benefit of
NYSEG.
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 Energy East. 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
NYSEG's performance. The Threshold and Maximum Incentive
Level Percentages by Group for the 1998 Performance Period
and thereafter are as follows:
Threshold Incentive Maximum Incentive
Group Level Percentages Level Percentages
I 50% 60%
II 40% 50%
III 30% 40%
IV 20% 30%
A Participant's Incentive Level Percentage will depend on
the Earnings level achieved by Energy East 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
Energy East 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:
Objective Level of Threshold Incentive Incentive Award
Weight Achievement Level Percentage Percentage
Individual Objective 1 40% x 100% x 30% = 12%
Individual Objective 2 40% x 50% x 30% = 6%
Individual Objective 3 20% x 0% x 30% = 0%
100 % 18%
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.
Approval of incentive awards will be made by the NYSEG Board
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 NYSEG'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 NYSEG Board 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.
NYSEG 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
Energy East which preceded the Change in Control, which
awards have been finally determined but not yet either (x)
distributed or (y) deferred pursuant to the NYSEG Deferred
Compensation Plan for Salaried Employees,
ii) if, at the time of the Change in Control, the NYSEG
Board has not yet finally determined the incentive awards
with respect to the fiscal year of Energy East immediately
preceding the fiscal year in which the Change in Control
occurs, an incentive award with respect to such fiscal year,
determined by the NYSEG Board in accordance with the
provisions of the preceding Articles hereof, and
iii) an incentive award with respect to the fiscal year of
Energy East 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). Notwithstanding anything contained herein to the
contrary, following a Change in Control, the Plan shall
continue in full force and effect, and a Participant shall
be entitled to receive an additional incentive award with
respect to the fiscal year in which the Change in Control
occurs, equal to the excess (if any) of the amount of the
incentive award for such year, determined in accordance with
Article VII hereof, over the amount paid pursuant to the
preceding provision of this paragraph (iii).
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 Energy East (not
including in the securities beneficially owned by such
Person any securities acquired directly from Energy East or
its affiliates) representing 25% or more of the combined
voting power of Energy East's then outstanding securities;
or
ii) during any period of two consecutive years (not
including any period prior to May 1, 1998), individuals who
at the beginning of such period constitute the Energy East
Board and any new director (other than a director designated
by a Person who has entered into an agreement with Energy
East to effect a transaction described in paragraph (i),
(iii) or (iv) of this Change in Control definition or a
director whose initial assumption of office occurs as a
result of an actual or threatened election contest with
respect to the election or removal of directors or other
actual or threatened solicitations of proxies or consents by
or on behalf of a Person other than the Energy East Board)
whose election by the Energy East Board or nomination for
election by Energy East's stockholders was approved by a
vote of at least two thirds (2/3) of the directors then
still in office who either were directors at the beginning
of the period or whose election or nomination for election
was previously so approved, cease for any reason to
constitute a majority thereof; or
iii) the shareholders of Energy East approve a merger or
consolidation of Energy East with any other corporation,
other than (x) a merger or consolidation which would result
in the voting securities of Energy East outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity), in combination with the
ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of Energy East or
any of its subsidiaries, at least 75% of the combined voting
power of the voting securities of Energy East or such
surviving entity outstanding immediately after such merger
or consolidation, or (y) a merger or consolidation effected
to implement a recapitalization of Energy East (or similar
transaction) in which no Person acquires more than 50% of
the combined voting power of Energy East's then outstanding
securities; or
iv) the shareholders of Energy East approve a plan of
complete liquidation of Energy East or an agreement for the
sale or disposition by Energy East of all or substantially
all of Energy East'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)
Energy East or any of its subsidiaries, (ii) a trustee or
other fiduciary holding securities under an employee benefit
plan of Energy East or any of its subsidiaries, (iii) an
underwriter temporarily holding securities pursuant to an
offering of such securities, or (iv) a corporation owned,
directly or indirectly, by the stockholders of Energy East
in substantially the same proportions as their ownership of
stock of Energy East.
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
NYSEG Board, 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.