EXHIBIT 10.5

 

 

 

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (the "Agreement") is entered into by and among Energy
East Corporation, a New York corporation (together with its subsidiaries and
affiliates, the "Company"), Rochester Gas & Electric Corporation ("RG&E"), and
Mark S. Lynch (the "Executive") as of November 24, 2009.

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. RG&E hereby agrees to employ the Executive, and the Executive
hereby agrees to serve the Company and RG&E, on the terms and conditions set
forth herein, until Executive's employment is terminated in accordance with the
terms of this Agreement (the "Term").

3.Term of Agreement. The Term will commence on the date hereof and continue
until the Date of Termination (as defined below).

4.Position and Duties. The Executive shall serve as President of the Iberdrola
USA New York operating companies (currently RG&E and NYSEG) and such other
positions as may be assigned from time to time by 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 Company.
The Executive shall devote substantially all his working time and efforts to the
business and affairs of the Company and its subsidiaries and affiliates.
Executive initially shall be based in the Company's offices in Albany, New York.
The Executive recognizes that his duties will require, at the Company's expense,
travel to domestic and international locations. If Executive's primary office is
moved during the Term to a location other than Albany, New York, he shall be
eligible to participate in the Company's relocation program.

5.Compensation and Related Matters.

5.1.Base Salary. RG&E 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 Three Hundred Fifteen Thousand Dollars ($315,000) per annum. The
Base Salary shall be paid in accordance with the Company's standard payroll
practices. The Base Salary shall be reviewed for possible increase on an annual
basis and shall not be decreased during the Term.

5.2.Annual Bonus. During the Term, Executive shall be eligible to participate in
the Company's Annual Executive Incentive Plan (the "AEIP"). Executive's AEIP
opportunity at target for each year during the Term (beginning with 2010) shall
be equal to 40% of his Base Salary at the beginning for such year, and the
maximum opportunity shall be equal to 80% of the Base Salary. Any amounts due
under the AEIP shall be payable to Executive by RG&E.

5.3.Strategic Bonus Program. Executive shall be eligible to participate in the
Iberdrola, S.A. Strategic Bonus Program and any successor thereto (the
"Program") beginning with new grants that occur after the. date hereof, the
first of which is expected to occur in 2011. The Executive's maximum opportunity
for the first award under the Program shall be equal to the sum of Executive's
Base Salary and the AEIP, if any, paid to Executive in respect of the most
recently-completed year during the Term.

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5.4.Special Incentive. Until such time as the Executive receives a grant
pursuant to Section 5.3, the Executive shall be eligible to receive a special
bonus (the "Special Incentive") in an amount equal to the sum of the Base Salary
and Executive's 2010 AEIP award (or, if the 2010 AEIP award has not yet
determined, Executive's target AEIP award for 2010). Amounts accrued pursuant to
this Section 5.4 shall be payable to the Executive on or before March 15 of the
year following the year in which such accrual occurred, provided that, except as
provided in Sections 7.1, 7.2 or 7.3, the Executive is employed at the time such
payment is made. Accrual of the Special Incentive shall cease upon termination
of the Executive's employment for any reason. The Special Incentive shall be
settled in shares of stock of Iberdrola, S.A.

5.5. Non-qualified Individual Account Balance Deferred Compensation Arrangement.

 

(A)

  As of the date first mentioned above, Executive will be a participant in an
employer-funded non-qualified individual account deferred compensation
arrangement (the "Arrangement") to be provided by the Company. Benefits will be
payable to the Executive or his designated beneficiary under the terms of the
Arrangement. The Arrangement may be subject to an agreement whereby a financial
vehicle within the Company's best practice principles ("the Vehicle") is
constituted, and under which contributions will be set aside to fund the
Executive's benefits under the Arrangement. Funds within the Vehicle may be
invested as directed by Company, including investments held by insurance
companies.

 

 

(B)

The Company shall make contributions under the Arrangement for the Executive's
benefit in an annual amount equal to 10% of the Base Salary. Contributions under
the Arrangement shall be made not less than annually.

 

(C)

The Company shall use its best efforts to structure the Vehicle in a manner that
will defer inclusion of Arrangement benefits, in the Executive's taxable income
until such amounts are actually received by the Executive.

 

(D)

Upon Executive's termination of employment with RG&E or upon Executive's
retirement, the Company will make one final contribution corresponding to the
year of termination. The final contribution will be calculated on a prorated
basis, based on the portion of the contribution period during which Executive
was employed by the Company. Other than as stated in this Section 5.5(D), all of
the Company's obligations to make contributions under the Arrangement will
immediately cease upon termination of the Executive's employment for any reason.

 

 

 

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(E)

   The form of payment to Executive or his designated beneficiary, shall be as
specified in the Arrangement and may be made as a single lump sum, instalment
payments, a life annuity, a joint and survivor annuity, or any combination
thereof. 

 

 

(F)

Executive shall not be eligible to participate in the Energy East Supplemental
Executive Retirement Plan (the "SERP") or the Energy East Excess Plan (the
"Excess Plan"), and Executive agrees to, and hereby does, waive, relinquish and
forfeit all rights to participation in the SERP and the Excess Plan.

5.6.Benefits. Executive shall be eligible to participate in the Company's
existing tax-qualified 401(k) and welfare plans, including but not limited to
the Company's medical insurance program, subject to and on a basis consistent
with the terms, conditions and overall administration of such plans and
arrangements.

5.7.Vacation. The Executive shall be entitled to four (4) weeks of vacation
during each year of the Term. The Executive shall be entitled to two days of
vacation during 2009.

5.8. Expenses. Upon presentation of reasonably adequate documentation to RG&E,
the Executive shall receive prompt reimbursement from RG&E for all reasonable
and customary business expenses incurred by the Executive in accordance with
RG&E policy in performing services hereunder.

6.Compensation Related to Disability. During the Term of this Agreement, during
any period that the Executive fails to perform the Executive's full-time duties
with the Company and RG&E as a result of incapacity due to physical or mental
illness, RG&E shall pay the Executive's Base Salary to the Executive, together
with all compensation and benefits payable to the Executive under the terms of
any compensation or benefit plan, program or arrangement in which the Executive
participated at the beginning of such period, until the Executive returns to
work or his employment is terminated; provided, however, that such Base Salary
payments shall be reduced by the sum of the amounts, if any, payable to the
Executive under disability benefit plans of the Company or under the Social
Security disability insurance program, which amounts were not previously applied
to reduce any such Base Salary payment.

7.Compensation Related to Termination.

7.1. Termination by the Company Without Cause or by Executive for  Good Reason.
If the Executive's employment shall be terminated during the Term by the Company
without Cause or by Executive for Good Reason, Executive shall be entitled to
receive (a) a lump sum payment payable six months and one day after the Date of
Termination equal to the sum of (i) the Base Salary; (ii) an amount equal to
Executive's AEIP award for the prior year or, if such termination occurs prior
to January 1, 2011, Executive's target AEIP opportunity for 2010; and (iii) if
the Date of Termination occurs prior to payment of the Special Incentive, a pro
rata portion of the Special Incentive Executive would have received had his
employment not terminated; and (b) all compensation and benefits payable to the
Executive through the Date of  Termination under the terms of this Agreement or
any compensation or benefit plan, program or arrangement maintained by the
Company or RG&E and in which Executive participated as of the Date of
Termination. The Company also shall make a final contribution to the Arrangement
in accordance with Section 5.5(D).

 

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7.2. Termination by the Company Without Cause or by Executive for  Good Reason
Following a Change in Control. If the Executive's employment shall be

terminated during the Term by the Company without Cause or by Executive for Good
Reason within one year following a Change in Control, in lieu of any amounts
payable under Section 71, Executive shall be entitled to receive (a) a lump sum
payment payable six months and one day after the Date of Termination equal to
the sum of the Base Salary and Executive's AEIP award for the prior year or, if
such termination occurs prior to January 1, 2011, Executive's target AEIP
opportunity for 2010; (b) if the Date of Termination occurs prior to payment of
the Special Incentive, a pro rata portion of the Special Incentive Executive
would have received had his employment not terminated; and (c) all compensation
and benefits payable to the Executive through the Date of Termination under the
terms of this Agreement or any compensation or benefit plan, program or
arrangement maintained by the Company or RG&E and in which Executive
participated as of the Date of Termination. The Company also shall make a final
contribution to the Arrangement in accordance with Section 5.5(D).

Notwithstanding the foregoing, if any payment or benefit received or to be
received by the Executive (including any payment or benefit received pursuant to
this Agreement or otherwise) would be (in whole or part) subject to the excise
tax imposed by Section 4999 of the Internal Revenue Code (the "Code"), or any
successor provision thereto, or any similar tax imposed by state or local law,
or any interest or penalties with respect to such excise tax (such tax or taxes,
together with any such interest and penalties, are hereafter collectively
referred to as the "Excise Tax"), then, the amounts payable under this Section
7.2 shall be reduced to the extent necessary to make such payments and benefits
not subject to such Excise Tax, but only if such reduction results in a higher
after-tax payment to the Executive after taking into account the Excise Tax and
any additional taxes the Executive would pay if such payments and benefits were
not reduced. Unless the Executive and the Company otherwise agree in writing,
any determination required under this Section shall be made in writing by a
certified public accountant selected by the Company (the "Accountants"), whose
determination shall be conclusive and binding upon the Executive and the Company
for all purposes. For purposes of making the calculations required by this
Section, the Accountants may make reasonable assumptions and approximations
concerning applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of Sections 280G and 4999 of the
Code. The Company and the Executive shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make a determination under this Section. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section. The reduction of payments, if applicable, shall be
effected in the following order (unless the Executive, to the extent permitted
by Section 409A of the Code, elects another method of reduction by written
notice to the Company prior to the Section 280G event): (i) any cash severance
payments, (ii) any other cash amounts payable to the Executive, (iii) any
benefits valued as parachute payments, and (iv) acceleration of vesting of
equity awards.

 

 

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7.3.Termination by Reason of Executive's Death or Disability. If the Executive's
employment shall be terminated during the Term by reason of the Executive's
death or disability, Executive shall be entitled to receive (a) the Executive's
Base Salary through the Date of Termination at the rate in effect at the time
the Notice of Termination is given; (b) pro rata payment of Executive's target
AEIP award through the date of termination; (c) if the Date of. Termination
occurs prior to payment of the Special Incentive, a pro rata portion of the
Special Incentive Executive would have received had his employment not
terminated; and (d) all compensation and benefits payable to the Executive
through the Date of Termination under the terms of this Agreement or any
compensation or benefit plan, program or arrangement maintained by the Company
or RG&E during such period and in which Executive participated as of the Date of
Termination. The Company also shall make a final contribution to the Arrangement
in accordance with Section 5.5(D). 

7.4. Termination by Executive Without Good Reason, by the Company  for Cause, or
by Reason of Executive's Retirement. If the Executive's employment shall be
terminated during the Term by Executive without Good Reason, by the Company for
Cause, or by reason of the Executive's retirement, Executive shall be entitled
to receive (a) the Executive's Base Salary through the Date of Termination at
the rate in effect at the time the Notice of Termination is given; and (b) all
compensation and benefits payable to the Executive through the Date of
Termination under the terms of this Agreement or any compensation or benefit
plan, program or arrangement maintained by the Company or RG&E during such
period and in which Executive participated as of the Date of Termination. The
Company also shall make a final contribution to the Arrangement in accordance
with Section 5.5(D).

7.5.No Further Liability; Release. Other than providing the compensation and
benefits provided for in accordance with this Section 7, the Company and its
directors, officers, employees, subsidiaries, affiliates, stockholders,
successors, assigns, agents and representatives shall have no further obligation
or liability to Executive or any other person under this Agreement. The payment
of any amounts pursuant to this Section 7 (other than payments required by law)
is expressly conditioned upon the delivery by Executive to the Company of a
release in a form to be provided by the Company of any and all claims Executive
may have against the Company and its directors, officers, employees,
subsidiaries, affiliates, stockholders, successors, assigns, agents and
representatives arising out of or related to Executive's employment by the
Company and the termination of such employment. The Company shall provide such
release to Executive not more than fifteen days after the Date of Termination.

8.Termination Procedures.

8.1. Notice of Termination. During the Term of this Agreement, 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 parties hereto in accordance with Section 11 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, if the
termination is purported to be by the Company for Cause or by Executive for Good
Reason, shall set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment.

 

 

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8.2. Date of Termination. "Date of Termination," with respect to any purported
termination of the Executive's employment during the Term of this Agreement,
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 shall not (except in the case of a termination
for Cause) be less than thirty or more than sixty days from the date such Notice
of Termination is given. 

9.Exclusive Employment; Noncompetition; Nonsolicitation; Nondisclosure of
Proprietary Information; Surrender of Records; Inventions and Patents.

9.1. No Conflict; No Other Employment. During the period of Executive's
employment with the Company, Executive shall not: (i) engage in any activity
which conflicts or interferes with or derogates from the performance of
Executive's duties hereunder nor shall Executive engage in any other business
activity, whether or not such business activity is pursued for gain or profit,
except as approved in advance in writing by the Company, such approval not to be
unreasonably withheld; provided, however, that Executive shall be entitled to
manage his personal investments and otherwise attend to personal affairs,
including charitable, social and political activities, in a manner that does not
unreasonably interfere with his responsibilities hereunder, or (ii) accept or
engage in any other employment, whether as an employee or consultant or in any
other capacity, and whether or not compensated therefor.

9.2.Noncompetition; Nonsolicitation.

(a)Executive acknowledges and recognizes the highly competitive nature of the
Company's business and that access to the Company's confidential records and
proprietary information renders him special and unique within the Company's
industry. In consideration of the payment by the Company to Executive of amounts
that may hereafter be paid to Executive pursuant to this Agreement (including,
without limitation, pursuant to Sections 5 and 7 hereof) and other obligations
undertaken by the Company hereunder, Executive agrees that during (i) his
employment with the Company, and (ii) the period beginning on the date of
termination of employment and ending one year after the date of termination of
employment (the "Covered Time"), Executive shall not, directly or indirectly,
engage (as owner, investor, partner, stockholder, employer, employee,
consultant, advisor, director or otherwise) in any Competing Business in any
Restricted Area (each as defined below), provided that the provisions of this
Section 9.2(a) will not be deemed breached merely because Executive owns less
than 2% of the outstanding common stock of a publicly-traded company.

(b)In further consideration of the payment by the Company to Executive of
amounts that may hereafter be paid to Executive pursuant to this Agreement
(including, without limitation, pursuant to Sections 5 and 7 hereof) and other
obligations undertaken by the Company hereunder, Executive agrees that during
his employment and the Covered Time, he shall not, directly or indirectly, (i)
solicit, encourage or attempt to solicit or encourage any of the employees,
agents, consultants or representatives of the Company or any of its affiliates
to terminate his, her, or its relationship with the Company or such affiliate;
(ii) solicit, encourage or attempt to solicit or encourage any of the employees,
agents, consultants or representatives of the Company or any of its affiliates
to become employees, agents, representatives or consultants of any other person
or entity; (iii) solicit or attempt to solicit any vendor or distributor of the
Company or any of its affiliates in connection with a Competing Business with
respect to any product or service being furnished, made, sold, rented or leased
by the Company or such affiliate; or (iv) persuade or seek to persuade any
vendor or distributor of the Company or any

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affiliate to cease to do business or to reduce the amount of business which such
customer, vendor or distributor has customarily done or contemplates doing with
the Company or such affiliate. 

(c)Executive understands that the provisions of this Section 9.2 may limit his
ability to earn a livelihood in a business similar to the business of the
Company or its affiliates but nevertheless agrees and hereby acknowledges that
the consideration provided under this Agreement, including any amounts or
benefits provided under Sections 5 and 7 hereof and other obligations undertaken
by the Company hereunder, is sufficient to justify the restrictions contained in
such provisions. In consideration thereof and in light of Executive's education,
skills and abilities, Executive agrees that he will not assert in any forum that
such provisions prevent him from earning a living or otherwise are void or
unenforceable or should be held void or unenforceable.

9.3.Proprietary Information. Executive acknowledges that during the course of
his employment with the Company he will necessarily have access to and make use
of proprietary information and confidential records of the Company and its
affiliates. Executive covenants that he shall not during his employment or at
any time thereafter, directly or indirectly, use for his own purpose or for the
benefit of any person or entity other than the Company, nor otherwise disclose
to any individual or entity, any Proprietary Information, unless such disclosure
is made in the good faith performance of Executive's duties hereunder, has been
authorized in writing by the Company, or is otherwise required by law.

9.4.Confidentiality and Surrender of Records. Executive shall not during his
employment or at any time thereafter (irrespective of the circumstances under
which Executive's employment by the Company terminates), except as required by
law, directly or indirectly publish, make known or in any fashion disclose any
confidential records to, or permit any inspection or copying of confidential
records by, any individual or entity other than in the course of such
individual's or entity's employment or retention by the Company. Upon
termination of employment for any reason or request by the Company, Executive
shall deliver promptly to the Company all property and records of the Company or
any of its affiliates, including, without limitation, all confidential records.
For purposes hereof, "confidential records" means all correspondence, reports,
memoranda, files, manuals, books, lists, financial, operating or marketing
records, magnetic tape, or electronic or other media or equipment of any kind
which may be in Executive's possession or under his control or accessible to him
which contain any Proprietary Information. All property and records of the
Company and any of its affiliates (including, without limitation, all
confidential records) shall be and remain the sole property of the Company or
such affiliate during Executive's employment with the Company and thereafter.

 

 

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9.5. Inventions and Patents.  All inventions, innovations or improvements
(including policies, procedures, products, improvements, software, ideas and
discoveries, whether patent, copyright, trademark, service mark, or otherwise)
conceived or made by Executive, either alone or jointly with others, in the
course of his employment by the Company, belong to the Company. Executive will
promptly disclose in writing such inventions, innovations or improvements to the
Company and perform all actions reasonably requested by the Company to establish
and confirm such ownership by the Company, including, but not limited to,
cooperating with and assisting the Company in obtaining patents, copyrights,
trademarks, or service marks for the Company in the United States and in foreign
countries, 

9.6. Enforcement. Executive acknowledges and agrees that, by virtue of his
position, his services and access to and use of confidential records and
Proprietary Information, any violation by him of any of the undertakings
contained in this Section 9 would cause the Company and/or its affiliates
immediate, substantial and irreparable injury for which it or they have no
adequate remedy at law. Accordingly, Executive agrees and consents to the entry
of an injunction or other equitable relief by a court of competent jurisdiction
restraining any violation or threatened violation of any undertaking contained
in this Section 9. Executive waives posting by the Company or its affiliates of
any bond otherwise necessary to secure such injunction or other equitable
relief. Rights and remedies provided for in this Section 9 are cumulative and
shall be in addition to rights and remedies otherwise available to the parties
hereunder or under any other agreement or applicable law.

10.Indemnification. During the Term and for so long thereafter as liability
exists with regard to the Executive's activities during the Term on behalf of
the Company or its affiliates, the Company shall indemnify the Executive (other
than in connection with the Executive's gross negligence or willful misconduct)
in accordance with the Company's customary indemnification policies and
procedures which are applicable to the Company's officers and directors. In
addition, Executive shall be entitled to receive coverage under any applicable
directors and officers liability policy as and to the same extent as other
senior executives of the Company.

11.Successors; Binding Agreement.

11.1. This Agreement shall inure to the benefit of and be enforceable by the
successors and assigns of the Company and RG&E. Each of the Company and RG&E may
assign this Agreement, without Executive's prior consent, to any person or
entity that acquires all or a substantial part of the business and/or assets of
the Company, RG&E, or any subsidiary thereof to which Executive regularly
provides services, provided in each case that such entity expressly assumes and
agrees to perform this Agreement in the same manner and to the same extent that
the Company or RG&E would be required to perform it if no succession had taken
place.

11.2. 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.

 

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12.  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 the Company and RG&E:

Energy East Corporation

Energy East Management Corporation

1387 Ithaca-Dryden Road Ithaca, New York 14850-8810

Attention: Chief Operating Officer

With a copy to:

Robert N. Holtzman, Esq.

Kramer Levin Naftalis & Frankel LLP

1177 Avenue of the Americas New York, New York 10036

To the Executive:

Mark S. Lynch

346 Loudon Road

Loudonville, New York 12211

13.Miscellaneous.

13.1. 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. 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. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of New York. 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 the Company, RG&E or the
Executive which by their nature and terms require satisfaction after the end of
the Term shall survive such event and shall remain binding upon such party.

 

 

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13.2. This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which taken together shall constitute
one and the same instrument. Facsimile or electronically transmitted signatures
shall be treated as original signatures for all purposes. 

13.3. This Agreement contains the entire agreement and understanding between the
parties hereto in respect of Executive's employment and supersedes, cancels and
annuls any prior or contemporaneous written or oral agreements, understandings,
commitments and practices between them respecting Executive's employment except
as specifically referenced herein.

14.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.

15.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.

16.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. Any dispute or
controversy arising under or in connection with this Agreement or Executive's
employment shall be settled exclusively by arbitration in New York, New York in
accordance with the Employment Dispute Resolution rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. Notwithstanding the
foregoing, the Company, RG&E, and any affiliate thereof shall have the right to
seek injunctive or other equitable relief from a court of competent jurisdiction
to enforce the provisions of Section 9 of this Agreement. For purposes of
seeking enforcement of Section 9, the Company and Executive hereby consent to
the jurisdiction of any state or federal court sitting in the State of New York.

17.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)"Board" shall mean the Board of Directors of the Company.

(C)"Cause" for termination by the Company 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 the Company
and RG&E (other than any such failure resulting from the Executive's incapacity
due to physical or mental illness or Executive's resignation for Good Reason)
after a written demand for substantial performance is delivered to the Executive
by the Company or RG&E, which demand specifically identifies the manner in which
the Company or RG&E believes that the Executive has not substantially performed
the Executive's duties, and Executive's failure to cure such failure within
fifteen (15) days of the delivery of such written demand, or (ii) the willful
engaging by the Executive in conduct which is demonstrably and materially
injurious to the Company 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

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act, was in the best interest of the Company or RG&E, as applicable. An error in
judgment or negligence by Executive shall not be considered to be "willful."
Failure to meet performance standards or objectives of the Company or RG&E shall
not constitute Cause for purposes hereof. 

(D)"Change in Control" shall mean the closing of an event qualifying as a change
in ownership of the Company or Iberdrola S.A. or a change in ownership of assets
of the Company, Iberdrola S.A., RG&E, or NYSEG that have a total gross fair
market value equal to or more than eighty percent of the total gross fair market
value of all of the assets of such entity immediately before such event, in each
case within the meaning of Treasury Regulation Section 1.409A-3(i)(5); provided,
however, that no such transfer of ownership or assets to a direct or indirect
subsidiary or affiliate of Iberdrola S.A. shall constitute a Change in Control.

(E)"Company" 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, together with such entity's subsidiaries and
affiliates.

(F)"Competing Business" shall mean any business in which the Company is
currently engaged, engages during the Term, or makes substantial plans during
the Term to engage in during the Covered Time.

(G)"Date of Termination" shall have the meaning stated in Section 8.2 hereof

(H)"Disability" shall be deemed the reason for the termination by the Company 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 the Company and. RG&E for a
period of at least six months within any twelve month period, the Company 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.

(I)"Executive" shall mean the individual named in the first paragraph of this
Agreement.

(J)"Good Reason" for termination by the Executive of the Executive's employment
shall mean the occurrence (without the Executive's express written consent), of
any of the following acts by the Company, unless such act is corrected prior to
the Date of Termination specified in the Notice of Termination given in respect
thereof, the assignment to Executive of duties, responsibilities, or authorities
inconsistent with, or failure to assign to Executive duties, responsibilities,
or authorities consistent with, his status as a member of the Company's senior
management team.

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(K)"Notice of Termination" shall have the meaning stated in Section 9.1 hereof. 

(L)"Proprietary Information" includes, but is not limited to: (a) the software
products, programs, applications, and processes utilized by the Company or any
of its affiliates; (b) information concerning the transactions or relations of
any vendor or distributor of the Company or any of its affiliates with the
Company or such affiliate or any of its or their partners, principals,
directors, officers or agents; (c) any information concerning any product,
technology, or procedure employed by the Company or any of its affiliates but
not generally known to its or their customers, vendors or competitors, or under
development by or being tested by the Company or any of its affiliates but not
at the time offered generally to customers or vendors; (d) any information
relating to the computer software, computer systems, pricing or marketing
methods, sales margins, cost of goods, cost of material, capital structure,
operating results, borrowing arrangements or business plans of the Company or
any of its affiliates; (e) any information which is generally regarded as
confidential or proprietary in any line of business engaged in by the Company or
any of its affiliates; (f) any business plans, budgets, advertising or marketing
plans; (g) any information contained in any of the written or oral policies and
procedures or manuals of the Company or any of its affiliates; (h) any
information belonging to customers or vendors of the Company or any of its
affiliates or any other person or entity which the Company or any of its
affiliates has agreed to hold in confidence; (i) any inventions, innovations or
improvements covered by this Agreement; and (j) all written, graphic and other
material relating to any of the foregoing. Executive acknowledges and
understands that information that is not novel or copyrighted or patented may
nonetheless be Proprietary Information. The term "Proprietary Information" shall
not include information that is or becomes generally available to and known by
the public or information that was known to Executive prior to the commencement
of his employment with the Company or information that is or becomes available
to Executive on a non-confidential basis from a source other than the Company,
any of its affiliates, or the directors, officers, employees, partners,
principals or agents of the Company or any of its affiliates (other than as a
result of a breach of any obligation of confidentiality).

(M)"Restricted Area" shall mean (i) the states and/or commonwealths of
Connecticut, New York, Vermont, Massachusetts, New Hampshire, Maine and Rhode
Island; and (ii) any other state or commonwealth in the United States and any
province in Canada in which the Company or any of its subsidiaries conducts
business on the date of the determination of whether Executive is engaged in a
Competing Business or at any time within 12 months preceding such date.

 

(N)

"Term" shall have the meaning stated in Section 3 hereof.

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17.2. Section 409A of the Code. It is the intention of the parties that this
Agreement comply with the requirements of Section 409A of the Internal Revenue
Code of 1986, as amended, and applicable guidance issued thereunder ("Section
409A"), and this Agreement will be interpreted in a manner intended to comply
with Section 409A. All payments under this Agreement are intended to be excluded
from the requirements of Section 409A or be payable on a fixed date or schedule
in accordance with Section 409A(a)(2)(iv). Executive shall be solely responsible
and liable for the satisfaction of all taxes and penalties that may be imposed
on Executive in connection with this Agreement (including any taxes and
penalties under Section 409A), and shall indemnify and hold the Company (or any
beneficiary) harmless from any or all of such taxes or penalties.
Notwithstanding anything in this Agreement to the contrary, in the event that
Executive is deemed to be a "specified employee" within the meaning of Section
409A(a)(2)(B)(i) and is not "disabled" within the meaning of Section
409A(a)(2)(C), no payments hereunder that are "deferred compensation" subject to
Section 409A shall be made to Executive prior to the date that is six (6) months
after the date of Executive's "separation from service" (as defined in Section
409A and any Treasury Regulations promulgated thereunder) or, if earlier,
Executive's date of death. Following any applicable six (6) month delay, all
such delayed payments will be paid in a single lump sum on the earliest
permissible payment date. For purposes of this Agreement, with respect to
payments of any amounts that are considered to be "deferred compensation"
subject to Section 409A, references to "termination of employment" (and
substantially similar phrases) shall be interpreted and applied in a manner that
is consistent with the requirements of Section 409A.

 

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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement.

 

 

 

 

 

ENERGY EAST CORPORATION

 

 

By:

/s/ Robert D. Kump

Name:  

Robert D. Kump

Title:  

Acting Chief Executive Officer

 

 

ROCHESTER GAS AND ELECTRIC CORPORATION

 

 

By:

/s/ Robert D. Kump

Name:  

Robert D. Kump

 

 

EXECUTIVE

 

 

By:

/s/ Mark S. Lynch

Name:  

Mark S. Lynch

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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