PSE&G's Logo
Public Service Electric and Gas Company
M. Peter Mellett
Vice President - Human Resources
PSE&G's Logo
Public Service Electric and Gas Company
M. Peter Mellett
Vice President - Human Resources
80 Park Plaza
Newark, New Jersey 07107
201-430-7620
Mailing Address:
PO Box 570
Newark, New Jersey, 07101
Fax: 201-642-1689
August 23, 1995
Mr. Alfred C. Koeppe
2 East Acres Drive
Pennington, NJ 08534
Dear Mr. Koeppe:
In Conjunction with your employment as Senior Vice President -
External Affairs of Public Service Electric and Gas Company (PSE&G), the agreed
terms of employment are as follows:
1. The effective date of your employment with PSE&G shall be
October 10, 1995 or such earlier date as may be agreed to in writing (the
Date of Employment (DOE)).
2. You shall be paid a salary at the annual rate of $240,000,
which salary may be increased, but shall not be reduced, thereafter
during the five-year period commencing on the DOE. This initial annual
rate of salary shall remain in effect until December 31, 1996. As a
PSE&G Officer, you will be entitled to participate in PSE&G's Deferred
Compensation Plan, which permits Officers to elect to defer salary.
Salary deferred under the Plan currently earns interest at the prime rate
plus 1/2%.
3. PSE&G will make a cash payment to you on the DOE in the
amount of $100,000 as inducement for you to commence employment with
PSE&G and in consideration of the loss of benefits with your current
employer.
4. You shall be entitled to those benefits from time to time
available to officers and employees of PSE&G generally, except as
otherwise provided in this letter. You shall be initially eligible for
a minimum of six weeks vacation per year. In addition, financial
counseling will be available to you on the same terms and conditions that
it is provided to officers of PSE&G.
5. You may be discharged with or without cause at any time. If
you should be discharged without cause during the five-year period
commencing on DOE, PSE&G will pay to you the salary in effect pursuant
to Paragraph 1 above at the time of your discharge for a period of twelve
months following such discharge, or for the remainder of such five-year
period, whichever is less. "Cause" shall mean (I) the willful or
negligent dereliction of, and continued failure by you to perform your
duties with PSE&G (other than any such failure resulting from your
incapacity due to physical or mental illness), after a written demand for
performance is delivered to you be the Chief Executive Officer of PSE&G
which identifies the manner in which the CEO believes that you have not
so performed your duties, or (ii) any conduct constituting a felony or
moral turpitude.
6. Your participation in PSE&G's Management Incentive
Compensation Plan (MICP) for 1995 will reflect a full year's award. Your
target incentive award as Senior Vice President - External Affairs will
initially be 25% of salary. This may be adjusted from time to time in
accordance with established plan procedures. In addition, to provide an
appropriate transition adjustment, because any MICP awards are paid out
one third annually over a three-year period, PSE&G will pay to you the
following lump sum cash payments in January of the following years: 1996-
$60,000; 1997-$40,000; 1998-$20,000; in addition to any payout which may
result from your participation in the MICP itself. Copies of the MICP
and the calculation determining the 1994 corporate factor have previously
been forwarded to you.
7. As Senior Vice President - External Affairs, you will
participate in the Long-Term Incentive Plan (LTIP) of Public Service
Enterprise Group Incorporated (Enterprise), the parent of PSE&G. The
LTIP provides senior officers selected by the Organization and
Compensation Committee with options to purchase shares of Enterprise
Common Stock. The options generally are granted in January and become
exercisable three years after the date of grant, and the LTIP provides
for payments to be made, dependent upon dividends paid by Enterprise and
future financial performance by Enterprise in comparison to other
corporations, to assist the officers in exercising the options granted.
It will be recommended to the Organization and Compensation Committee
that you be granted 1,600 options in January 1996 (which would be
exercisable in 1999). In addition, it will be recommended to the
Organization and Compensation Committee that you also be granted 600
stock options under the LTIP which are exercisable in 1996, 800 stock
options exercisable in 1997, and 1,000 stock options exercisable in 1998.
Such options would be subject to all of the provisions of the LTIP and
would permit the purchase by you of numbers of shares granted by the
Organization and Compensation Committee that appropriately reflect your
responsibilities and ability to contribute to the long term success of
Enterprise.
8. In light of your allied work experience, you shall be granted
credited service, in addition to that earned as a result of your
employment by PSE&G, for the purpose of determining any pension benefits
from PSE&g in accordance with the following schedule:
Additional Years
Date of Termination of Employment of Credited Service
On or after DOE plus 5 years and
prior to DOE plus 6 years 10
On or after DOE plus 6 years and
prior to DOE plus 7 years 20
On or after DOE plus 7 years and
prior to DOE plus 8 years 23
On or after DOE plus 8 years 25
The additional credited service shown in the table above is not
cumulative, but is applied from the table depending upon when you retire.
For example, assuming you are currently age 48, the additional credited
service set forth above, together with the Board's current policy of
granting 5 years of additional credited service to officers who retire
between age 60 and age 65-1/2, and your actual credited service, will
afford you a total of 42 years of credited service at age 60, and 45
years of credited service at age 63, dependent upon your actual date of
birth and DOE. You will be a participant in PSE&G's Pension Plan and in
its Limited Supplemental Death Benefits and Retirement Plan. The Limited
Plan provides a retirement benefit of a percentage of final average
compensation as defined in the Plan that is equal to credited service
plus 30 years. This would result in a target retirement benefit of 72%
(42 years plus 30) at age 60 and 75% at age 63 (the maximum replacement
value under the program) times final average compensation, adjusted for
any survivorship benefit you may choose, and reduced by Social Security
benefits and pensions from other employers as provided in the Plan.
Under these pension programs as presently in effect, you would be
eligible to retire at age 55 without an early retirement penalty,
dependent upon your actual date of birth and DOE. The amount of your
pension or survivorship benefits paid by your present employer (or any
other employer) shall be deducted from the pension benefits payable to
you or your beneficiary by PSE&G on account of such service with your
present employer (or other employer). The Limited Plan also provides for
a pre-retirement death benefit paid for by PSE&G in an amount based upon
150% of salary in effect at the time of death.
9. In recognition of your need for an automobile for business
purposes, PSE&G will provide you with a full size American made
automobile (Oldsmobile, Buick, Chrysler or other comparable model) and
shall provide the related maintenance, repairs, insurance and costs of
operation thereof. The automobile shall include a mobile telephone paid
for by PSE&G for your use for business purposes.
10. As part of PSE&G's requirement for a work force that is free
from the influence of foreign chemical substances, you will be required
to complete a medical examination which will include definitive analysis
of freshly voided urine specimen for the presence of commonly abused
drugs, including marijuana.
11. Any and all disputes arising out of or relating to this
Agreement or your employment, other than an unemployment or workers'
compensation claim, shall, at the demand of either you or PSE&G, whether
made before or after the institution of any legal proceeding, be resolved
through binding arbitration administered by the American Arbitration
Association (AAA) in accordance with the Employment Dispute Resolution
Rules of the AAA and with the United States Arbitration Act. The
arbitration shall be conducted in New Jersey before one arbitrator. If
the parties cannot agree on the arbitrator within 30 days after the
demand for an arbitration, then either party may request the AAA to
select an arbitrator, which selection shall be deemed acceptable to both
parties. To the maximum extent practicable, the arbitration proceeding
shall be concluded within 180 days of the filing the demand for
arbitration with the AAA. All costs and fees of the arbitration shall
be shared equally by the parties, unless otherwise awarded by the
arbitrator. Each party agrees to keep all such disputes and arbitration
proceedings strictly confidential except for disclosure of information
required by law.
If the foregoing is in accordance with your understanding, please
sign the enclosed copy of this letter and return it to me.
Very truly yours,
By: M. PETER MELLETT
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M. Peter Mellett
Vice President - Human Resources
Agreed to this 28 day
of September, 1995
By: ALFRED C. KOEPPE
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Alfred C. Koeppe