EXHIBIT 10-39
EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated as
of April 23, 1999 (the "Agreement"), by and among Energy East
Corporation, a New York corporation ("Energy East"), New York
State Electric & Gas Corporation, a New York corporation (the
"Company") and Michael I. German (the "Executive"), amends and
restates that certain Employment Agreement dated March 1, 1998,
between the Company and the Executive, as previously amended and
restated.
The Board of Directors of Energy East and the Board of
Directors of the Company desire to provide for the employment of
the Executive as a member of the management of Energy East and
the Company, in the best interest of Energy East and its
shareholders. The Executive is willing to commit himself to
serve Energy East and the Company, on the terms and conditions
herein provided.
In order to effect the foregoing, Energy East, the
Company and the Executive wish to enter into an employment
agreement on the terms and conditions set forth below.
Accordingly, in consideration of the premises and the respective
covenants and agreements of the parties herein contained, and
intending to be legally bound hereby, the parties hereto agree as
follows:
1. Defined Terms. The definitions of
capitalized terms used in this Agreement, unless otherwise
defined herein, are provided in the last Section hereof.
2. Employment. Energy East and the Company
hereby agree to employ the Executive, and the Executive hereby
agrees to serve Energy East and the Company, on the terms and
conditions set forth herein, during the term of this Agreement
(the "Term").
3. Term of Agreement. The Term will commence on
March 1, 1998 and end on February 28, 2001, unless further
extended as hereinafter provided. Commencing on March 1, 1999
and each March 1 thereafter, the Term of this Agreement shall
automatically be extended for one (1) additional year unless, not
later than the November 30 immediately preceding each such March
1, Energy East (upon authorization by the Board) or the
Executive shall have given notice not to extend this Agreement;
provided, however, if a Change-in-Control shall have occurred
during the Term of this Agreement, Sections 5.4, 6, 7 and 10
through 20 of this Agreement and the second paragraph of Section
5.2 of this Agreement shall continue in effect until at least the
end of the Change-in-Control Protective Period (whether or not
the Term of the Agreement shall have expired for other purposes).
4. Position and Duties. The Executive shall
serve as Senior Vice President of Energy East and as President
and Chief Operating Officer of the Company and shall have such
responsibilities, duties and authority that are consistent with
such positions as may from time to time be assigned to the
Executive by the Board or by the NYSEG Board. The Executive
shall devote substantially all his working time and efforts to
the business and affairs of Energy East and the Company;
provided, however, that the Executive may also serve on the
boards of directors or trustees of other companies and
organizations, as long as such service does not substantially
interfere with the performance of his duties hereunder.
5. Compensation and Related Matters.
5.1 Base Salary. The Company shall pay
the Executive a base salary ("Base Salary") during the period of
the Executive's employment hereunder, which shall be at an
initial rate of Four Hundred Twenty-Five Thousand Dollars
($425,000.00) per annum. The Base Salary shall be paid in
substantially equal bi-weekly installments, in arrears. The Base
Salary may be discretionarily increased by the Board from time to
time as the Board deems appropriate in its reasonable business
judgment. The Base Salary in effect from time to time shall not
be decreased during the Term. During the period of the
Executive's employment hereunder, the Board shall make an annual
review of the Executive's compensation.
Compensation of the Executive by Base Salary
payments shall not be deemed exclusive and shall not prevent the
Executive from participating in any other compensation or benefit
plan of Energy East or the Company. The Base Salary payments
(including any increased Base Salary payments) hereunder shall
not in any way limit or reduce any other obligation of Energy
East or the Company hereunder, and no other compensation, benefit
or payment hereunder shall in any way limit or reduce the
obligation of the Company to pay the Executive's Base Salary
hereunder.
5.2 Benefit Plans. The Executive shall
be entitled to participate in or receive benefits under any
"employee benefit plan" (as defined in section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended from
time to time ("ERISA")) or employee benefit arrangement made
available by Energy East or the Company now or during the period
of the Executive's employment hereunder to their executives and
key management employees, subject to and on a basis consistent
with the terms, conditions and overall administration of such
plans and arrangements; provided, however, that there shall be no
duplication of the benefits created by this Agreement. The
Executive's participation in such employee benefit plans and
arrangements shall be on an appropriate level, as determined by
the Board or the NYSEG Board, as appropriate.
Notwithstanding any provision of the Company's
Supplemental Executive Retirement Plan (or any successor plan)
that may be to the contrary, if the Executive's service with
Energy East or the Company from December 5, 1994 exceeds five
full years, there shall be paid to the Executive under the
Company's Supplemental Executive Retirement Plan (or any
successor plan) an amount that shall be determined by giving the
Executive, for purposes of that plan, service credit for three
years of service for each of the Executive's actual years of
service. Additionally, if the Executive Retires from the Company
or Energy East subsequent to July 13, 2010, the amount to be paid
to the Executive under the Company's Supplemental Executive
Retirement Plan (or any successor plan) shall be determined by
deeming the Executive's "highest three years of earnings within
the last ten years of employment" for purposes of that plan to be
equal to the Executive's Base Salary at the rate in effect at the
time he Retires.
5.3 Expenses. Upon presentation of
reasonably adequate documentation to the Company, the Executive
shall receive prompt reimbursement from the Company for all
reasonable and customary business expenses incurred by the
Executive in accordance with the Company policy in performing
services hereunder. The Company agrees to reimburse the
Executive for any expenses he incurs in moving himself and his
family from Binghamton, New York to any state in the Northeast.
5.4 Vacation. The Executive shall be
entitled to five (5) weeks of vacation during each year of this
Agreement, or such greater period as the Board shall approve,
without reduction in salary or other benefits.
6. Compensation Related to Disability or Termination
(Other Than Certain Post-Termination Payments).
6.1 During the Term of this Agreement (or, if
later, at any time prior to the end of the Change-in-Control
Protective Period), during any period that the Executive fails to
perform the Executive's full-time duties with Energy East or the
Company as a result of incapacity due to physical or mental
illness, the Company shall pay the Executive's Base Salary to the
Executive at the rate in effect at the commencement of any such
period, together with all compensation and benefits payable to
the Executive under the terms of any compensation or benefit
plan, program or arrangement maintained by Energy East or the
Company during such period, until the Executive's employment is
terminated by Energy East for Disability; provided, however, that
such Base Salary payments shall be reduced by the sum of the
amounts, if any, payable to the Executive at or prior to the time
of any such Base Salary payment under disability benefit plans of
Energy East or the Company or under the Social Security
disability insurance program, which amounts were not previously
applied to reduce any such Base Salary payment. Subject to
Sections 7, 8, 9 and 10 hereof, after completing the expense
reimbursements required by Section 5.3 hereof and making the
payments and providing the benefits required by this Section 6.1,
Energy East and the Company shall have no further obligations to
the Executive under this Agreement.
6.2 If the Executive's employment shall be
terminated for any reason during the Term of this Agreement (or,
if later, prior to the end of the Change-in-Control Protective
Period), the Company shall pay the Executive's Base Salary (to
the Executive or in accordance with Section 14.2 if the
Executive's employment is terminated by his death) through the
Date of Termination at the rate in effect at the time the Notice
of Termination is given, together with all compensation and
benefits payable to the Executive through the Date of Termination
under the terms of any compensation or benefit plan, program or
arrangement maintained by Energy East or the Company during such
period. Subject to Sections 6.1, 7, 8, 9 and 10 hereof, after
completing the expense reimbursements required by Section 5.3
hereof and making the payments and providing the benefits
required by this Section 6.2, Energy East and the Company shall
have no further obligations to the Executive under this
Agreement.
7.Normal Post-Termination Payments Upon Termination of
Employment. If the Executive's employment shall be
terminated for any reason during the Term of this Agreement (or,
if later, prior to the end of the Change-in-Control Protective
Period), the Company shall pay the Executive's normal post-
termination compensation and benefits to the Executive as such
payments become due. Subject to Section 10.1 hereof and the
second paragraph of Section 5.2 hereof, such post-termination
compensation and benefits shall be determined under, and paid in
accordance with, Energy East's or the Company's retirement,
insurance and other compensation or benefit plans, programs and
arrangements (other than this Agreement).
8.Termination of Employment (During the Term and Prior
to a Change-in-Control) by Energy East
Without Cause. If Energy East shall terminate the
Executive's employment during the Term and prior to a Change-in-
Control, without Cause (and not for Disability or in connection
with the Executive's Retirement or the Executive's death), then
in lieu of any further salary payments to the Executive for
periods subsequent to the Date of Termination, the Company shall
pay to the Executive, within the five days immediately following
the Date of Termination, or as otherwise contemplated by Section
10 hereof, severance payments equal to, and on terms analogous
to, those that are due under Section 10 hereof upon a termination
of the Executive's employment that results in payments being due
under Section 10 hereof. If Energy East gives notice to the
Executive pursuant to Section 3 hereof not to extend this
Agreement, it shall be deemed to be a termination of the
Executive's employment without Cause.
9.Post-Termination Continuation of Welfare Benefit
Plan Coverage. Except as otherwise provided in
Section 10.1 hereof, if the termination of the Executive's
employment is described in Section 8 hereof, Energy East and the
Company shall maintain in full force and effect, for the
continued benefit of the Executive for the number of years
(including partial years) remaining in the Term, each "employee
welfare benefit plan" (as described in Section 3(1) of ERISA) in
which the Executive was entitled to participate immediately prior
to the Date of Termination, provided that the Executive's
continued participation is possible under the general terms and
provisions of such plans. In the event that the Executive's
participation in any such plan is barred, the Company shall
arrange to provide the Executive with benefits substantially
similar to those which the Executive would otherwise have been
entitled to receive under the plan from which his continued
participation is barred.
10. Severance Payments.
10.1 The Company shall pay the Executive the
payments described in this Section 10.1 (the "Severance
Payments") upon the termination of the Executive's employment
following a Change-in-Control and prior to the end of the Change-
in-Control Protective Period, in addition to the payments and
benefits described in Sections 6 and 7 hereof, unless such
termination is (i) by Energy East for Cause, (ii) by reason of
death, Disability or Retirement, or (iii) by the Executive
without Good Reason. For purposes of the immediately preceding
sentence, if a termination of the Executive's employment occurs
prior to a Change-in-Control, but following a Potential Change-
in-Control in which a Person has entered into an agreement with
Energy East the consummation of which will constitute a Change-
in-Control, such termination shall be deemed to have followed a
Change-in-Control and to have been (i) by Energy East without
Cause, if the Executive's employment is terminated without Cause
at the direction of such Person, or (ii) by the Executive with
Good Reason, if the Executive terminates his employment with Good
Reason and the act (or failure to act) which constitutes Good
Reason occurs following such Potential Change-in-Control and at
the direction of such Person.
(A) In lieu of any further salary payments to the
Executive for periods subsequent to the Date of Termination,
and in lieu of any severance benefit otherwise payable to
the Executive, the Company shall pay to the Executive a lump
sum severance payment, in cash, equal to three (3) times the
sum of:
(i) the higher of the Executive's annual Base
Salary in effect immediately prior to the
occurrence of the event or circumstance upon
which the Notice of Termination is based or
the Executive's annual Base Salary in effect
immediately prior to the Change-in-Control,
and
(ii) the incentive compensation award the
Executive would have received under the
Annual Executive Incentive Plan, or any
successor annual executive incentive
compensation plan, for the year in which the
Date of Termination occurs, calculated in
accordance with Article XI (A) (iii) of the
Annual Executive Incentive Plan or any
comparable provision in any successor annual
executive incentive compensation plan,
without, however, giving effect to any pro-
rata adjustments contained in said
provisions.
(B) Notwithstanding any provision of the
Company's Annual Executive Incentive Plan, or any successor
annual executive incentive compensation plan, the Company
shall pay to the Executive a lump sum amount, in cash, equal
to the sum of (i) any incentive compensation which has been
allocated or awarded to the Executive for a completed fiscal
year preceding the Date of Termination under the Annual
Executive Incentive Plan, or any successor annual executive
incentive compensation plan, but has not yet been either (x)
paid (pursuant to Section 6.2 hereof or otherwise) or (y)
deferred pursuant to the Deferred Compensation Plan for
Salaried Employees, and (ii) a pro-rata portion to the Date
of Termination of the aggregate value of any contingent
incentive compensation award to the Executive for any
uncompleted fiscal year under the Annual Executive Incentive
Plan or any successor annual executive incentive
compensation plan, calculated as to each such award in
accordance with Article XI (A) (iii) of the Annual Executive
Incentive Plan or any comparable provision in any successor
annual executive incentive compensation plan.
(C) The second paragraph of Section 5.2 hereof
shall be inapplicable, and notwithstanding any provision of
the Company's Supplemental Executive Retirement Plan (or any
successor Plan) that may be to the contrary, the Company
shall pay to the Executive under the Company's Supplemental
Executive Retirement Plan (or any successor plan) an amount
that shall be determined by (i) deeming the Executive (a) to
have 40 years of service credit, for purposes of that plan,
(b) to be at least 60 years of age and (c) to be a "Key
Person" as defined in, and for all purposes under, that plan
and (ii) deeming the Executive's "highest three years of
earnings within the last ten years of employment" for
purposes of that plan to be equal to the higher of the
Executive's Base Salary as determined pursuant to Section
10.1(A)(i) hereof; and such benefits shall be determined
without regard to any amendment to the Company's
Supplemental Executive Retirement Plan (or any successor
plan) made subsequent to a Change-in-Control and on or prior
to the Date of Termination, which amendment adversely
affects in any manner the computation of retirement benefits
thereunder.
Notwithstanding any provision in the Company's
Supplemental Executive Retirement Plan (or any successor
plan) that may be to the contrary, the benefits otherwise
payable to the Executive pursuant to this Section 10.1(C)
shall be paid to the Executive in a lump sum payment that is
equal in amount to the present value (calculated under
generally accepted actuarial methods that are consistent
with the actuarial methods used in producing the tables of
Appendix A of the Company's Retirement Benefit Plan (or any
successor plan)) of such benefits and such payment shall be
in lieu of any payments to which the Executive otherwise
would have been entitled under the Company's Supplemental
Executive Retirement Plan (or any successor plan) and shall
satisfy any obligations that the Company would otherwise
have to the Executive under the Company's Supplemental
Executive Retirement Plan (or any successor plan). Such
lump sum payment shall be paid to the Executive no later
than the due date of the first payment otherwise due to the
Executive under the Company's Supplemental Executive
Retirement Plan (or any successor plan).
Notwithstanding the immediately preceding paragraph
of this Section 10.1(C), the Executive may elect to have the
benefits otherwise payable to the Executive pursuant to this
Section 10.1(C) be paid to the Executive in the manner
provided for under the Company's Supplemental Executive
Retirement Plan (or any successor plan) and such method of
payment shall be in lieu of a lump sum payment. The
Executive shall make such election by sending a letter to
the Company in which he states that he has decided to make
such election. The election shall not be effective unless
the letter is received by the Company (i) at least 60 days
prior to the day (the "Change-in-Control Day") that the
Change-in-Control, or Potential Change-in-Control, that
gives rise to the applicability of Section 10.1(C) occurs
and (ii) prior to the first day of the calendar year in
which the Change-in-Control Day occurs. The Executive shall
have the right to revoke any such election by sending a
letter to the Company in which he states that he has decided
to revoke such election. The revocation of such election
shall not be effective unless the letter is received by the
Company (i) at least 60 days prior to the Change-in-Control
Day and (ii) prior to the first day of the calendar year in
which the Change-in-Control Day occurs. If the Executive
revokes an election, he can make a new election (in the
manner, and subject to the timing requirements, set forth in
this paragraph), and he can revoke any such new election (in
the manner, and subject to the timing requirements, set
forth in this paragraph).
(D) For a thirty-six (36) month period after the
Date of Termination, the Company shall arrange to provide
the Executive with life, disability, accident and health
insurance benefits substantially similar to those which the
Executive is receiving immediately prior to the Notice of
Termination (without giving effect to any reduction in such
benefits subsequent to a Change-in-Control if the Executive
terminated his employment for Good Reason or was terminated
without Cause). Benefits otherwise receivable by the
Executive pursuant to this Section 10.1(D) shall be reduced
to the extent comparable benefits are actually received by
or made available to the Executive without cost during the
thirty-six (36) month period following the Executive's
termination of employment (and any such benefits actually
received by the Executive shall be reported to Energy East
by the Executive). If the benefits provided to the
Executive under this Section 10.1(D) shall result in a
Gross-Up Payment pursuant to Section 10.2, and these Section
10.1(D) benefits are thereafter reduced pursuant to the
immediately preceding sentence because of the receipt of
comparable benefits, the Gross-Up Payment shall be
recalculated so as to reflect that reduction, and the
Executive shall refund to the Company an amount equal to any
calculated reduction in the Gross-Up Payment, but only if,
and to the extent, the Executive receives a refund of any
Excise Tax previously paid by the Executive pursuant to
Section 10.2 hereof.
10.2 (A) Anything in this Agreement to the
contrary notwithstanding, in the event it shall be determined
that any payment or distribution by Energy East or the Company to
or for the benefit of the Executive on account of a Change-in-
Control, whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise (a
"Payment"), would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties with respect to
such excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an
additional payment ("Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes and Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed
upon the Payments.
(B) Subject to the provisions of
Section 10.2(C) hereof, all determinations required to be made
under this Section 10.2, including whether a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the
assumptions to be used in arriving at such determinations, shall
be made by Energy East's principal outside accounting firm (the
"Accounting Firm") which shall provide detailed supporting
calculations both to the Board and the Executive within fifteen
(15) business days of the Date of Termination and/or such earlier
date(s) as may be requested by Energy East or the Executive (each
such date and the Date of Termination shall be referred to as a
"Determination Date", for purposes of this Section 10.2(B) and
Section 10.3 hereof). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. The initial Gross-Up
Payment, if any, as determined pursuant to this Section 10.2(B),
shall be paid by the Company to the Executive within five (5)
days of the receipt of the Accounting Firm's determination. If
the Accounting Firm determines that no Excise Tax is payable by
the Executive, it shall furnish the Executive with a written
opinion that failure to report the Excise Tax on the Executive's
applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination
by the Accounting Firm under this Section 10.2(B) shall be
binding upon Energy East, the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments
which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required
to be made hereunder. In the event that Energy East exhausts its
remedies pursuant to Section 10.2(C) and the Executive thereafter
is required to make a payment of any Excise Tax, the Accounting
Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(C) The Executive shall notify
Energy East in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by the
Company of an Underpayment. Such notification shall be given as
soon as practicable but no later than ten (10) business days
after the Executive is informed in writing of such claim and
shall apprise Energy East of the nature of such claim and the
date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the thirty
(30) day period following the date on which he gives such notice
to Energy East (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If
Energy East notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim,
the Executive shall:
(i) give Energy East any information reasonably
requested by Energy East relating to such
claim,
(ii) take such action in connection with
contesting such claim as Energy East shall
reasonably request in writing from time to
time, including, without limitation,
accepting legal representation with respect
to such claim by an attorney reasonably
selected by Energy East,
(iii) cooperate with Energy East in good faith in
order effectively to contest such claim, and
(iv) permit Energy East to participate in any
proceeding relating to such claim;
provided, however, that the Company shall bear and pay directly
all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis,
for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 10.2(C),
Energy East shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo
any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim
and may, at its sole option, either direct the Executive to pay
the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate
courts, as Energy East shall determine; provided, however, that
if Energy East directs the Executive to pay such claim and sue
for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis,
from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such
advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for the
taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, Energy East's control of the
contest shall be limited to issues with respect to which a Gross-
Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing
authority.
(D) If, after the receipt by the
Executive of an amount advanced by the Company pursuant to
Section 10.2(C) hereof, the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall
(subject to Energy East's and the Company's complying with the
requirements of Section 10.2(C) hereof) promptly pay to the
Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 10.2(C) hereof, a determination is
made that the Executive shall not be entitled to any refund with
respect to such claim and Energy East does not notify the
Executive in writing of its intent to contest such denial of
refund prior to the expiration of thirty (30) days after such
determination, then such advance shall be forgiven and shall not
be required to be repaid.
10.3 The payments provided for in Section 10.1
hereof (other than Section 10.1(C) and (D)) shall be made not
later than the fifth day following each Determination Date,
provided, however, that if the amounts of such payments cannot be
finally determined on or before such day, the Company shall pay
to the Executive on such day an estimate, as determined by the
Executive, of the minimum amount of such payments to which the
Executive is clearly entitled and shall pay the remainder of such
payments (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth (30th) day
after each Determination Date. In the event that the amount of
the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the
Company to the Executive, payable on the fifth (5th) business day
after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).
10.4 The Company also shall pay to the
Executive all legal fees and expenses incurred by the Executive
as a result of a termination which entitles the Executive to the
Severance Payments (including all such fees and expenses, if any,
incurred in disputing any such termination or in seeking in good
faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to
the extent attributable to the application of Section 4999 of the
Code to any payment or benefit provided hereunder). Such
payments shall be made within five (5) business days after
delivery of the Executive's written requests for payment
accompanied with such evidence of fees and expenses incurred as
Energy East reasonably may require.
11. Termination Procedures.
11.1 Notice of Termination. During the Term
of this Agreement (and, if longer, until the end of the Change-
in-Control Protective Period), any purported termination of the
Executive's employment (other than by reason of death) shall be
communicated by written Notice of Termination from one party
hereto to the other party hereto in accordance with Section 15
hereof. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the
specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. Further, a Notice
of Termination for Cause is required to include a copy of a
resolution duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board which was called and held for the purpose of
considering such termination (after reasonable notice to the
Executive and an opportunity for the Executive, together with the
Executive's counsel, to be heard before the Board) finding that,
in the good faith opinion of the Board, the Executive was guilty
of conduct set forth in clause (i) or (ii) of the definition of
Cause herein, and specifying the particulars thereof in detail.
11.2 Date of Termination. "Date of
Termination", with respect to any purported termination of the
Executive's employment during the Term of this Agreement (or
prior to the end of the Change-in-Control Protective Period, if a
Change-in-Control shall have occurred), shall mean (i) if the
Executive's employment is terminated by his death, the date of
his death, (ii) if the Executive's employment is terminated for
Disability, thirty (30) days after Notice of Termination is given
(provided that the Executive shall not have returned to the full-
time performance of the Executive's duties during such thirty
(30) day period), and (iii) if the Executive's employment is
terminated for any other reason, the date specified in the Notice
of Termination (which, in the case of a termination by Energy
East, shall not be less than thirty (30) days (except in the
case of a termination for Cause) and, in the case of a
termination by the Executive, shall not be less than fifteen (15)
days nor more than sixty (60) days, respectively, from the date
such Notice of Termination is given).
12. No Mitigation. Energy East and the Company
agree that, if the Executive's employment hereunder is terminated
during the Term (or, if later, prior to the end of the Change-in-
Control Protective Period), the Executive is not required to seek
other employment or to attempt in any way to reduce any amounts
payable to the Executive by Energy East or the Company hereunder.
Further, the amount of any payment or benefit provided for
hereunder (other than pursuant to Section 10.1(D) hereof) shall
not be reduced by any compensation earned by the Executive as the
result of employment by another employer, by retirement benefits,
by offset against any amount claimed to be owed by the Executive
to Energy East or the Company, or otherwise.
13. Confidentiality and Noncompetition.
13.1 The Executive will not, during or after
the Term, disclose to any entity or person any information which
is treated as confidential by Energy East or the Company and to
which the Executive gains access by reason of his position as an
employee or director of Energy East or the Company.
13.2 If, at any time prior to the end of the
Term (or, if later, the end of the Change-in-Control Protective
Period), the Executive terminates his own employment without Good
Reason (and not in connection with his Disability, Retirement or
death) or Energy East terminates his employment with Cause, then
for a twelve-month period immediately following his Date of
Termination, the Executive shall not, except as permitted by
Energy East upon its prior written consent, enter, directly or
indirectly, into the employ of or render or engage in, directly
or indirectly, any services to any person, firm or corporation
within the "Restricted Territory," which is a major competitor of
Energy East or the Company with respect to products which Energy
East or the Company are then producing or services Energy East or
the Company are then providing (a "Competitor"). However, it
shall not be a violation of the immediately preceding sentence
for the Executive to be employed by, or render services to, a
Competitor, if the Executive renders those services only in lines
of business of the Competitor which are not directly competitive
with the primary lines of business of Energy East or the Company
or are outside of the Restricted Territory. For purposes of this
Section 13.2, the "Restricted Territory" shall be the states of
Maryland, New Jersey, New York and Pennsylvania.
If, at any time following a Change-in-Control,
or a Potential Change-in-Control under the circumstances
described in the second sentence of Section 10.1 hereof, and
prior to the end of the Term (or, if later, the end of the
Change-in-Control Protective Period), the Executive terminates
his own employment with Good Reason (and not in connection with
his Disability or Retirement) or Energy East terminates his
employment without Cause, then for a twelve month period
immediately following his Date of Termination, the Executive
shall not enter into the employ of any person, firm or
corporation or any affiliate thereof (as such term is defined in
Rule 12b-2 of the Exchange Act) that caused the Change-in-
Control, or the Potential Change-in-Control under the
circumstances described in the second sentence of Section 10.1
hereof.
14. Successors; Binding Agreement.
14.1 In addition to any obligations imposed by
law upon any successor to Energy East or the Company, Energy East
and the Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of Energy East
or the Company, as the case may be, to expressly assume and agree
to perform this Agreement in the same manner and to the same
extent that Energy East and the Company would be required to
perform it if no such succession had taken place. Failure of
Energy East or the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle the Executive to
compensation from Energy East and the Company in the same amount
and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the Executive's
employment for Good Reason after a Change-in-Control, except
that, for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the
Date of Termination.
14.2 This Agreement shall inure to the benefit
of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive shall die
while any amount would still be payable to the Executive
hereunder (other than amounts which, by their terms, terminate
upon the death of the Executive) if the Executive had continued
to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to
the executors, personal representatives or administrators of the
Executive's estate.
15. Notices. For the purpose of this Agreement,
notices and all other communications provided for in the
Agreement shall be in writing and shall be deemed to have been
duly given when delivered or mailed by United States registered
mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below, or to such other address as
either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address
shall be effective only upon actual receipt:
To Energy East:
Energy East Corporation
Post Office Box 1196
Stamford, Connecticut 06904-1196
Attention: Corporate Secretary
To the Company:
New York State Electric & Gas Corporation
Post Office Box 3607
Binghamton, NY 13902-3607
Attention: Corporate Secretary
To the Executive:
Michael I. German
8 Meadowood Lane
Binghamton, NY 13901
16. Miscellaneous.
16.1 No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing and signed by the Executive
and such officers as may be specifically designated by the Board
and the NYSEG Board, respectively. No waiver by any party hereto
at any time of any breach by any other party hereto of, or
compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by any party which are not
expressly set forth in this Agreement. This Agreement sets forth
the entire agreement of the parties hereto in respect of the
subject matter contained herein and supersedes all prior
agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any
prior agreement of the parties hereto in respect of the subject
matter contained herein is hereby terminated and cancelled. The
validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New York.
All references to sections of the Exchange Act or the Code shall
be deemed also to refer to any successor provisions to such
sections. There shall be withheld from any payments provided for
hereunder any amounts required to be withheld under federal,
state or local law and any additional withholding amounts to
which the Executive has agreed. The obligations under this
Agreement of Energy East, the Company or the Executive which by
their nature and terms require satisfaction after the end of the
Term (or after the end of the Change-in-Control Protective
Period) shall survive such event and shall remain binding upon
such party.
16.2 Notwithstanding any provision of this
Agreement to the contrary, Energy East and the Company shall be
jointly and severally liable to the Executive and his personal or
legal representatives, executors, administrators, successors,
heirs, distributees, devisees or legatees for all payment
obligations under this Agreement.
17. Validity. The invalidity or
unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of
this Agreement, which shall remain in full force and effect.
18. Counterparts. This Agreement may be
executed in several counterparts, each of which shall be deemed
to be an original but all of which together will constitute one
and the same instrument.
19. Settlement of Disputes; Arbitration. All
claims by the Executive for benefits under this Agreement shall
be directed to and determined by the Board and shall be in
writing. Any denial by the Board of a claim for benefits under
this Agreement shall be delivered to the Executive in writing and
shall set forth the specific reasons for the denial and the
specific provisions of this Agreement relied upon. The Board
shall afford a reasonable opportunity to the Executive for a
review of the decision denying a claim and shall further allow
the Executive to appeal to the Board a decision of the Board
within sixty (60) days after notification by the Board that the
Executive's claim has been denied. To the extent permitted by
applicable law, any further dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively
by arbitration in New York, New York in accordance with the rules
of the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator's award in any court having
jurisdiction.
20. Definitions. For purposes of this
Agreement, the following terms shall have the meaning indicated
below:
(A) "Base Salary" shall have the
meaning stated in Section 5.1 hereof.
(B) "Beneficial Owner" shall have the
meaning defined in Rule 13-d-3 under the Exchange Act.
(C) "Board" shall mean the Board of
Directors of Energy East.
(D) "Cause" for termination by Energy
East of the Executive's employment, for purposes of this
Agreement, shall mean (i) the willful and continued failure by
the Executive to substantially perform the Executive's duties
with Energy East and the Company (other than any such failure
resulting from the Executive's incapacity due to physical or
mental illness or any such actual or anticipated failure after
the issuance of a Notice of Termination for Good Reason by the
Executive pursuant to Section 11.1) after a written demand for
substantial performance is delivered to the Executive by the
Board, which demand specifically identifies the manner in which
the Board believes that the Executive has not substantially
performed the Executive's duties, or (ii) the willful engaging by
the Executive in conduct which is demonstrably and materially
injurious to Energy East or its subsidiaries, monetarily or
otherwise. For purposes of clauses (i) and (ii) of this
definition, no act, or failure to act, on the Executive's part
shall be deemed "willful" unless done, or omitted to be done, by
the Executive not in good faith and without reasonable belief
that the Executive's act, or failure to act, was in the best
interest of Energy East.
(E) A "Change-in-Control" shall be deemed to
have occurred if the conditions set forth in any one of the
following paragraphs shall have been satisfied during the Term:
(I) any Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of 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 the date of
this Agreement), individuals who at the beginning of
such period constitute the Board and any new director
(other than a director designated by a Person who has
entered into an agreement with 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
Board) whose election by the 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 (i) 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 (ii) 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 Energy East's assets.
(F) "Change-in-Control Protective Period"
shall mean the period from the occurrence of a Change-in-Control
until the later of (i) the second anniversary of such Change-in-
Control or, (ii) the sixtieth day after the Executive becomes
sixty years of age.
(G) "Code" shall mean the Internal Revenue
Code of 1986, as amended from time to time.
(H) "Company" shall mean New York State
Electric & Gas Corporation and any successor to its business
and/or assets which assumes and agrees to perform this Agreement
by operation of law, or otherwise.
(I) "Date of Termination" shall have the
meaning stated in Section 11.2 hereof.
(J) "Disability" shall be deemed the reason
for the termination by Energy East of the Executive's employment,
if, as a result of the Executive's incapacity due to physical or
mental illness, the Executive shall have been absent from the
full-time performance of the Executive's duties with Energy East
and the Company for the maximum number of months applicable to
the Executive under the Company's Disability Policy for Salaried
Employees (or any successor policy) (but in no event for less
than six (6) consecutive months), Energy East shall have given
the Executive a Notice of Termination for Disability, and, within
thirty (30) days after such Notice of Termination is given, the
Executive shall not have returned to the full-time performance of
the Executive's duties.
(K) "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended from time to time.
(L) "Excise Tax" shall have the meaning stated
in Section 10.2(A) hereof.
(M) "Executive" shall mean the individual
named in the first paragraph of this Agreement.
(N) "Good Reason" for termination by the
Executive of the Executive's employment shall mean the occurrence
(without the Executive's express written consent) after any
Change-in-Control, or after any Potential Change-in-Control under
the circumstances described in the second sentence of Section
10.1 hereof (treating all references in paragraphs (I) through
(VIII) below to a "Change-in-Control" as references to a
"Potential Change-in-Control), of any one of the following acts
by Energy East or the Company, or failures by Energy East or the
Company to act:
(I) the assignment to the Executive of any
duties inconsistent with the Executive's status as an
executive officer of Energy East or the Company or a
substantial alteration in the nature or status of the
Executive's responsibilities from those in effect
immediately prior to the Change-in-Control (including,
without limitation, any such alteration attributable to
the fact that Energy East or the Company may no longer
be a public company);
(II) a reduction by Energy East or the
Company in the Executive's annual base salary as in
effect on the date hereof or as the same may be
increased from time to time;
(III) the relocation of Energy East's
Stamford, Connecticut executive offices to a location
more than fifty (50) miles from the location of such
offices immediately prior to the Change-in-Control or
Energy East's or the Company's requiring the Executive
to be based anywhere other than Energy East's Stamford,
Connecticut executive offices or the Company's
principal executive offices except for required travel
on Energy East's or the Company's business to an extent
substantially consistent with the Executive's present
business travel obligations;
(IV) the failure by Energy East or the
Company, without the Executive's consent, to pay to the
Executive any portion of the Executive's current
compensation, or to pay to the Executive any portion of
an installment of deferred compensation under any
deferred compensation program of Energy East or the
Company, within seven (7) days of the date such
compensation is due;
(V) the failure by Energy East or the Company
to continue in effect any compensation plan in which
the Executive participates immediately prior to the
Change-in-Control which is material to the Executive's
total compensation, including but not limited to the
Company's Annual Executive Incentive Plan, Long Term
Executive Incentive Share Plan, and Supplemental
Executive Retirement Plan, or any substitute plans
adopted prior to the Change-in-Control, unless an
equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with
respect to such plan, or the failure by Energy East or
the Company to continue the Executive's participation
therein (or in such substitute or alternative plan) on
a basis not materially less favorable, both in terms of
the amount of benefits provided and the level of the
Executive's participation relative to other
participants, as existed at the time of the Change-in-
Control;
(VI) the failure by Energy East or the
Company to continue to provide the Executive with
benefits substantially similar to those enjoyed by the
Executive under any of Energy East's or the Company's
pension, life insurance, medical, health and accident,
or disability plans in which the Executive was
participating at the time of the Change-in-Control, the
taking of any action by Energy East or the Company
which would directly or indirectly materially reduce
any of such benefits or deprive the Executive of any
material fringe benefit enjoyed by the Executive at the
time of the Change-in-Control, or the failure by Energy
East or the Company to provide the Executive with the
number of paid vacation days to which the Executive is
entitled to under Section 5.4 hereof, or the failure by
the Company to provide the Executive with the benefit
it agreed to provide pursuant to the second paragraph
of Section 5.2 hereof;
(VII) any purported termination of the
Executive's employment which is not effected pursuant
to a Notice of Termination satisfying the requirements
of Section 11.1; for purposes of this Agreement, no
such purported termination shall be effective; or
(VIII) the failure of the Board to validly
terminate a merger or consolidation described in
Section 20(E)(III) hereof within sixty days after
shareholder approval of such merger or consolidation
that provides for the election or appointment of a
successor to Wesley W. von Schack as Chairman or Chief
Executive Officer of Energy East.
The Executive's right to terminate the
Executive's employment for Good Reason shall not be affected by
the Executive's incapacity due to physical or mental illness.
The Executive's continued employment shall not constitute consent
to, or a waiver of rights with respect to, any act or failure to
act constituting Good Reason hereunder.
(O) "Gross-Up Payment" shall have the meaning
stated in Section 10.2(A) hereof.
(P) "Notice of Termination" shall have the
meaning stated in Section 11.1 hereof.
(Q) "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.
(R) "Potential Change-in-Control" shall be
deemed to have occurred if the conditions set forth in any one of
the following paragraphs shall have been satisfied during the
Term:
(I) Energy East enters into an agreement, the
consummation of which would result in the occurrence of
a Change-in-Control;
(II) Energy East or any Person publicly
announces an intention to take or to consider taking
actions which, if consummated, would constitute a
Change-in-Control;
(III) any Person (x) is or becomes the
Beneficial Owner, directly or indirectly, (y) discloses
directly or indirectly to Energy East (or publicly) a
plan or intention to become the Beneficial Owner,
directly or indirectly, or (z) makes a filing under the
Hart-Scott-Rodino Anti-Trust Improvements Act of 1976,
as amended, with respect to securities to become the
Beneficial Owner, directly or indirectly, of securities
of Energy East representing 9.9% or more of the
combined voting power of Energy East's then outstanding
securities; or
(IV) the Board adopts a resolution to the
effect that, for purposes of this Agreement, a
Potential Change-in-Control has occurred.
(S) "Retirement" shall be deemed the reason
for the termination by Energy East or the Executive of the
Executive's employment if such employment is terminated in
accordance with Energy East's retirement policy, not including
early retirement, generally applicable to its salaried employees,
as in effect immediately prior to the Change-in-Control, or in
accordance with any retirement arrangement established with the
Executive's consent with respect to the Executive.
(T) "Retires" shall, for purposes of the
second paragraph of Section 5.2 hereof, refer to the termination
of the Executive's employment in accordance with the Company's
retirement policy, not including early retirement (except that,
on July 13, 2010, and thereafter, the Executive shall be deemed
to have satisfied any normal retirement age requirement of that
retirement policy), generally applicable from time to time to its
salaried employees, or in accordance with any retirement
arrangement established with the Executive's consent with respect
to the Executive.
(U) "Severance Payments" shall mean
those payments described in Section 10.1 hereof.
(V) "Term" shall have the meaning stated in
Section 3 hereof.
(W) "Energy East" shall mean Energy East
Corporation and any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law,
or otherwise (except in determining, under Section 20(E) hereof,
whether or not any Change-in-Control of Energy East has occurred
in connection with such succession).
(X) "NYSEG Board" shall mean the Board of
Directors of the Company.
IN WITNESS WHEREOF, the parties have executed and
delivered this Agreement as of the date first above written.
ENERGY EAST CORPORATION
By: /S/ Wesley W. von Schack
Wesley W. von Schack
Chairman, President and
Chief Executive Officer
NEW YORK STATE ELECTRIC &
GAS CORPORATION
By: /S/ Daniel W. Farley
Name:
Title:
/S/ Michael I. German
MICHAEL I. GERMAN
F:\ATTY\BLUM\EEC\EMPLOMIG.WP