Exhibit 5
THIRD AMENDMENT TO SEVERANCE AGREEMENT
(Executive and Senior Vice Presidents)
THIS THIRD AMENDMENT TO SEVERANCE AGREEMENT ("Third Amendment"),
dated as of the ___ day of _______________, 1997, is made and entered into by
and between New York State Electric & Gas Corporation, a New York corporation
(the "Company"), and ________________ (the "Executive") amending certain
provisions of the Severance Agreement, dated as of ___________, as amended
("Employment Agreement"), and __________________ (the "Executive") ("Severance
Agreement") by and between the Company and the Executive.
WHEREAS, the Company, in consultation with outside advisors, has
determined that it is in the best interest of the Company and its shareholders
to amend the Severance Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Section 6.1 of the Severance Agreement is hereby amended and
restated to read in its entirety as follows:
6.1 The Company shall pay the Executive the payments described
in this Section 6.1 (the "Severance Payments") upon the termination of the
Executive's employment following a Change in Control and during the term of
this Agreement, in addition to the payments and benefits described in
Section 5 hereof, unless such termination is (i) by the Company 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 the Company 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 the Company
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 two and
one-half (2-1/2) 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 higher of (x) the amount
paid to the Executive pursuant to the Company's Annual Executive
Incentive Compensation Plan, Annual Executive Incentive Plan, or any
successor annual executive incentive compensation plan, as the case
may be, for the fiscal year preceding that in which the Date of
Termination occurs, or (y) the average amount so paid for the three
fiscal years preceding that in which the Change in Control occurs.
(B) Notwithstanding any provision of the Company's Annual
Executive Incentive Plan or successor annual executive incentive
compensation plan (but provided that there shall be no duplication of
the benefits under any such plans), 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, as the case
may be, but has not yet been either (x) paid (pursuant to Section 5.2
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) In determining the retirement benefits to which the
Executive is entitled under the Company's Supplemental Executive
Retirement Plan, the Executive shall be given an additional two and
one-half (2-1/2) years of service credit at the Executive's highest
annual rate of compensation during the twelve (12) months immediately
preceding the Date of Termination and shall be deemed to be two and
one-half (2-1/2) years older than he is; such benefits shall be
determined without
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regard to any amendment to the Supplemental Executive Retirement 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.
(D) For a thirty (30) 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 such reduction
constitutes Good Reason). Benefits otherwise receivable by the
Executive pursuant to this Section 6.1(D) shall be reduced to the
extent comparable benefits are actually received by or made available
to the Executive without cost during the thirty (30) month period
following the Executive's termination of employment (and any such
benefits actually received by the Executive shall be reported to the
Company by the Executive). If the benefits provided to the Executive
under this Section 6.1(D) shall result in a Gross-Up Payment pursuant
to Section 6.2, and these Section 6.1(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 6.2 hereof.
(E) For a period equal to the lesser of (i) the period from
the Date of Termination to the date on which the Executive commences
employment with another employer or (ii) the thirty (30) month period
immediately following the Date of Termination, the Company shall
arrange to provide the Executive with outplacement counseling;
provided, however, that the aggregate cost of such counseling shall
not exceed five percent (5%) 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.
2. Section 6.2 of the Severance Agreement is hereby amended to read
in its entirety as follows:
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6.2 (A) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by 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 6.2(C) hereof, all
determinations required to be made under this Section 6.2, 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 the Company'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
the Company or the Executive (each such date and the Date of Termination
shall be referred to as a "Determination Date", for purposes of this
Section 6.2(B) and Section 6.3 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 6.2(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 6.2(B) shall be binding upon the
Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the
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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 the
Company exhausts its remedies pursuant to Section 6.2(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 the Company 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 the
Company 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 the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company 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
the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceeding relating to
such claim;
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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 6.2(C), the Company
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 xxx 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 the Company shall
determine; provided, however, that if the Company directs the Executive to
pay such claim and xxx 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, the Company'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 6.2(C) hereof, the Executive becomes
entitled to receive any refund with respect to such claim, the Executive
shall (subject to the Company's complying with the requirements of Section
6.2(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 Execu-
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tive of an amount advanced by the Company pursuant to Section 6.2(C)
hereof, a determination is made that the Executive shall not be entitled to
any refund with respect to such claim and the Company 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.
3. Section 6.3 of the Severance Agreement is hereby amended to read in
its entirety as follows:
1. The payments provided for in Section 6.1 hereof (other than
Section 6.1(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).
4. The definition of Base Amount in Section 15(A) of the Severance
Agreement is hereby deleted in its entirety and replaced with the words
"Intentionally Omitted".
5. Paragraph (II) of Section 15(E) of the Severance Agreement is hereby
amended to read in its entirety as follows:
(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 the Company 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
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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
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
6. Section 15(F) of the Severance Agreement is hereby amended to read in
its entirety as follows:
(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) if such Change in Control
shall be caused by the shareholder approval of a merger or consolidation,
as described in Section 15(E)(III) hereof, the second anniversary of the
consummation of such merger or consolidation, provided, however, that in
the event that the agreement providing for such merger or consolidation,
as described in Section 15(E)(III) hereof, is terminated without
consummation of such merger or consolidation, the Change-in-Control
Protective Period shall expire 90 days following such termination, unless
there has occurred another event constituting a Change in Control, in which
case the Change-in-Control Protective Period shall expire upon the date
described herein with respect to such subsequent Change in Control.
7. Section 15(L) of the Severance Agreement is hereby amended to read in
its entirety as follows:
(L) "Excise Tax" shall have the meaning stated in Section 6.2(A)
hereof.
8. Section 15(N)(I) of the Severance Agreement is hereby amended to read
in its entirety as follows:
(I) the assignment to the Executive of any duties inconsistent with
the Executive's status as an executive officer of 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
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such alteration attributable to the fact that the Company may no longer be
a public company);
9. Section 15(N)(II) of the Severance Agreement is hereby amended to
read in its entirety as follows:
(II) a reduction by 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;
10. Section 15(N)(IV) of the Severance Agreement is hereby amended to
read in its entirety as follows:
(IV) the failure by 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 the Company, within seven (7) days of the date such
compensation is due;
11. The definition of Total Payments in Section 15(T) of the
Severance Agreement is hereby deleted in its entirety and replaced with the
words "Intentionally Omitted".
12. Except as expressly modified hereby, the terms and provisions of
the Severance Agreement remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Third Amendment to be
duly executed and delivered by their respective duly authorized representatives
as of the date first above written.
NEW YORK STATE ELECTRIC EXECUTIVE
& GAS CORPORATION
By: ________________________ _________________________
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