AMENDMENT TO EMPLOYMENT AGREEMENT
Exhibit
10(k)
AMENDMENT
TO
This
Amendment to Employment Agreement is entered into effective as of the __ day of
February, 2003, by and between TXU Business Services Company, a Texas
corporation (the “Company”), and Xxxx Xxxxxx, an individual
(“Employee”).
WHEREAS,
the Company, as successor in interest to Texas Utilities Services Inc., and
Employee entered into that certain Employment Agreement dated as of September 1,
1998, (“Employment Agreement”); and
WHEREAS,
the parties now desire to amend the Employment Agreement to provide certain
severance and change in control benefits to Employee.
NOW,
THEREFORE, in consideration of the mutual agreements set forth herein and in the
Employment Agreement and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
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1. |
Definition
of Cause.
The definition of the term “Cause” contained in Section 4(c) of the
Employment Agreement is hereby deleted in its entirety, and as amended,
the definition of the term “Cause” contained in Section 4(c) shall be and
read as follows: |
“For
purposes of this Agreement, the term Cause shall mean any one or more of the
following: (a) the material breach by the Employee of this Agreement; (b)
Employee’s breach of his fiduciary duty to the Company and/or its shareholders
in his capacity as an officer of the Company; (c) any action or failure to act
on the part of Employee which results in material injury to the assets, business
prospects or reputation of the Company or any affiliate of the Company; (d) the
appropriation of a material business opportunity of the Company or any affiliate
of the Company, including attempting to secure or securing any personal profit
in connection with any transaction entered into on behalf of the Company; or (e)
Employee’s failure to substantially perform his duties and responsibilities
hereunder, including without limitation Employee’s breach of the Company’s Code
of Conduct or an express employment policy of the Company.”
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2. |
Severance
and Change in Control Benefits.
Section 10 of the Employment Agreement shall be replaced in full to
reflect the provision of certain severance and change in control benefits,
and, as amended, said Section 10 shall be and read in full as
follows: |
“10.1. Severance
Benefits. If
Employee is terminated by the Company without Cause (as defined below) during
the period between execution of the Amendment to Employment Agreement dated in
February 2003 and the third anniversary of the effective date of such amendment
(the “Term”), Employee shall be entitled to receive the compensation and
benefits described in (a), (b), and (c) hereinbelow:
“(a) A
one-time cash severance payment, which shall be payable as soon as reasonably
practical following such termination, but in any event within ten (10) business
days thereafter, in an aggregate amount equal to the sum of the following:
“(i) The
greater of: (a) the amount of base salary (as in effect on the date of the
termination) plus annual incentive awards (at the highest previous target level
and assuming performance satisfying a target payout) that Employee would have
received had he continued in the employment of the Company hereunder through the
expiration of the Term; or (b) twelve months’ base salary (as in effect on the
date of the termination) plus Employee’s target annual incentive award for the
year of the termination;
“(ii) An amount
equal to the sum of: (a) the value (as of the date of termination) of all
unvested and otherwise unpayable restricted stock (or alternative) awards
previously granted to Employee under the Long Term Incentive Compensation Plan
(“LTICP”) (as if performance criteria had been met to permit payment of 100% of
the award), and (b) the forfeited portion of Employee’s accounts under the TXU
Deferred and Incentive Compensation Plan (“DICP”) and the TXU Salary Deferral
Program (“SDP”) (valued in accordance with the relevant provisions of the DICP
and SDP, respectively); and
“(iii) An amount
equal to the difference between (a) the aggregate required monthly premium for
continuation coverage under the Consolidated Omnibus Budget Reconciliation Act
of 1985 (“COBRA”) under the TXU Medical (including prescription drugs), Dental
and Group Life Insurance Plans, and (b) the aggregate monthly employee
contribution rate in effect for Employee under such plans immediately prior to
such termination, multiplied by eighteen (18).
“(b) In
addition to such severance payment, Employee shall be entitled to outplacement
services, at the Company’s expense through a third-party outplacement consultant
selected by the Company, for up to one hundred eighty (180) days after such
termination.
“(c) In the
event that the foregoing payments, or any portion thereof, constitute an “excess
parachute payment” under Section 4999 of the Code, or any successor provision,
the Company shall, in addition to providing the foregoing payments and benefits,
pay Employee a tax gross-up cash payment(s) in an amount agreed upon by Employee
to be sufficient to fully offset the excise tax which Employee is, or may be,
required to pay as a result thereof. Such tax gross-up payment shall be paid to
Employee concurrently with the cash payments provided for hereinabove; provided
that if the amount of such tax gross-up payment cannot be finally determined by
such date, the Company shall pay Employee concurrently with such other payments
an estimate, determined in good faith by the Company, of the minimum amount of
the required tax gross-up payment. Thereafter, the Company shall promptly (but
in any event within forty-five (45) days of Employee’s termination) determine in
good faith the total amount of the tax gross-up payment and seek to obtain
Employee’s approval thereof. The remaining portion of the tax gross-up payment
shall be paid to Employee promptly after Employee approves the total
amount.
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“Notwithstanding
any other provision of this Agreement seemingly to the contrary, Employee shall
not be entitled to any of the payments or benefits provided for under this
Section 10.1 if Employee’s termination is for Cause, or if the circumstances of
Employee’s termination entitle him to the payments and benefits provided for in
Section 10.2 below.
“10.2 Change
In Control.
If,
during the Term: (i) Employee voluntarily terminates his employment with the
Company (or its successor) within six (6) months following a Change in Control
(as defined below), or (ii) Employee’s employment is terminated by the Company
(or its successor) without Cause, or Employee terminates his employment for Good
Reason (as defined below), in either case within twenty-four (24) months
following a Change in Control, Employee shall be entitled to receive the
compensation and benefits described in (a), (b), (c) and (d)
hereinbelow:
“(a) A
one-time cash payment, which shall be payable as soon as reasonably practical
following such termination, but in any event within ten (10) business days
thereafter, in an aggregate amount equal to the sum of the
following:
“(i) An amount
equal to three (3) times the aggregate of Employee’s annualized base salary as
in effect immediately prior to the Change in Control plus Employee’s target
annual incentive award for the year in which the Change in Control occurs;
“(ii) An amount
equal to the sum of: (a) the value (as of the date of termination) of all
unvested and otherwise unpayable restricted stock (or alternative) awards
previously granted to Employee under the LTICP (as if performance criteria had
been met to permit payment of 100% of the award), and (b) the forfeited portion
of Employee’s accounts under the DICP and SDP (valued in accordance with the
relevant provisions of the DICP and SDP, respectively);
“(iii) An amount
equal to the sum of: (a) the matching contributions which would have been made
under the DICP had Employee continued to defer salary thereunder at the rate in
effect as of the effective date of the Change in Control, for an additional
three years following the termination of employment; and (b) the matching
contributions which would have been made under the SDP had Employee continued to
defer salary thereunder at the rate in effect as of the effective date of the
Change in Control, for an additional three years following the termination of
employment; and
“(iv) An amount
equal to the difference between (a) the monthly COBRA premium for coverage under
the Company’s medical (including prescription drugs), dental and group life
insurance plans, and (b) the monthly employee contribution under such plans in
effect for Employee immediately prior to the termination, multiplied by eighteen
(18).
“(b) In
addition to such payment, Employee shall be entitled to the following
benefits:
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“(i) The
Company shall fully secure the benefit provided for under the Split-Dollar Life
Insurance Program by making irrevocable contributions to the trust established
thereunder (“Trust”) as contemplated in Section 11 of the Split-Dollar Life
Insurance Program. Additionally, Employee’s participation in the Split-Dollar
Life Insurance Program shall continue notwithstanding the termination of
employment as if the Participation Agreement between the Company and Employee
entered into under the Split-Dollar Life Insurance Program continued in
accordance with its terms as in effect prior to Employee’s termination and as if
Employee’s termination had not occurred. In the event the Company terminates the
Split-Dollar Life Insurance Program, the Company shall nonetheless provide
Employee with the benefits contemplated under the Split-Dollar Life Insurance
Program, as in effect on the effective date of this Agreement, and shall fully
secure such benefits through irrevocable contributions to the Trust;
“(ii) Employee
shall, at the Company’s cost, be entitled to financial planning services
equivalent to services available under the Company’s executive financial
planning program for three years from the date of the termination;
and
“(iii) The
Company shall pay on behalf of Employee, or shall reimburse Employee for, the
physician fees for one physical examination of Employee per year for three years
from the date of the termination.
“(c) In
addition to such severance payments and benefits, Employee shall be entitled to
additional retirement compensation (“Additional Severance Retirement
Compensation”) in an amount equal to the difference between: (i) the benefit
Employee is entitled to receive under the TXU Retirement Plan (“Retirement
Plan”) and the TXU Second Supplemental Retirement Plan (“Supplemental Retirement
Plan”), and (ii) the amount of the retirement benefit Employee would have been
entitled to receive under the Retirement Plan and the Supplemental Retirement
Plan had Employee continued in the employment of the Company, and continued
participating in the Retirement Plan, through the Term. The calculation of the
Additional Severance Retirement Compensation shall assume: (x) an annual
increase in base salary (effective as of the normal effective date for executive
salary adjustments under the Company’s standard practice in effect as of the
termination) equal to Employee’s greatest base salary increase during the Term,
and (y) an annual bonus payment (payable at the normal time under the AIP, or
successor plan) equal to the highest annual bonus payment previously paid to
Employee. The Additional Severance Retirement Compensation shall be payable in
the form elected by Employee with respect to benefits under the Retirement Plan.
The amount of the Additional Severance Retirement Compensation shall be
determined by the actuary for the Retirement Plan using the assumptions set
forth above and other reasonable and consistent actuarial assumptions
substantially similar to those used in connection with the determination of
benefits payable under the Retirement Plan. The Additional Severance Retirement
Compensation is not intended to meet the qualification requirements of Section
401 of the Internal Revenue Code of 1986, as amended (“Code”); however the
Additional Severance Retirement Compensation shall be funded and payable under
the rabbi trust established under the Supplemental Retirement Plan.
“(d) In the
event that the foregoing payments, or any portion thereof, constitute an “excess
parachute payment” under Section 4999 of the Code, or any successor provision,
the Company shall, in addition to providing the foregoing payments and benefits,
pay Employee a tax gross-up cash payment(s) in an amount agreed upon by Employee
to be sufficient to fully offset the excise tax which Employee is, or may be,
required to pay as a result thereof. Such tax gross-up payment shall be paid to
Employee concurrently with the cash payments provided for hereinabove; provided
that if the amount of such tax gross-up payment cannot be finally determined by
such date, the Company shall pay Employee concurrently with such other payments
an estimate, determined in good faith by the Company, of the minimum amount of
the required tax gross-up payment. Thereafter, the Company shall promptly (but
in any event within forty-five (45) days of Employee’s termination) determine in
good faith the total amount of the tax gross-up payment and seek to obtain
Employee’s approval thereof. The remaining portion of the tax gross-up payment
shall be paid to Employee promptly after Employee approves the total
amount.
“(e) For
purposes of this Agreement, “Change in Control” shall mean a change in control
of TXU Corp. of a nature that would be required to be reported in response to
Item 1(a) of the Securities and Exchange Commission Form 8-K, as in effect on
the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended (“Exchange Act), or would have been required to be so
reported but for the fact that such event had been “previously reported” as that
term is defined in Rule 12b-2 of Regulation 12B under the Exchange Act; provided
that, without in any way limiting the foregoing, a Change in Control shall be
deemed to have occurred if any one or more of the following events occurs: (i)
any Person is or becomes the beneficial owner (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of TXU Corp.
representing 20% or more of the combined voting power of TXU Corp.’s then
outstanding securities having the right to vote at elections of directors of TXU
Corp. (“Voting Securities”); (ii) individuals who constitute the board of
directors of TXU Corp. on the effective date of this Agreement (the “Incumbent
Board”) cease for any reason to constitute at least a majority thereof, provided
that any person becoming a director subsequent to the effective date of this
Agreement whose election, or nomination for election by TXU Corp.’s
shareholders, was approved by at least three-quarters of TXU Corp.’s directors
comprising the Incumbent Board (either by a specific vote or by approval of the
proxy statement of TXU Corp. in which such person is named as a nominee for
director, without objection to such nomination) shall, for purposes of this
clause (ii), be considered as though such person were a member of the Incumbent
Board; (iii) a recapitalization or reclassification of the Voting Securities of
TXU Corp. , which results in either (a) a decrease by 33% or more in the
aggregate percentage ownership of Voting Securities held by Independent
Shareholders (on a primary basis or on a fully diluted basis after giving effect
to the exercise of stock options and warrants), or (b) an increase in the
aggregate percentage ownership of Voting Securities held by non-Independent
Shareholders (on a primary basis or on a fully diluted basis after giving effect
to the exercise of stock options and warrants) to greater than 50%; (iv) all or
substantially all of the assets of TXU Corp. are liquidated or transferred to an
unrelated party; or (v) TXU Corp. is a party to a merger, consolidation,
reorganization or similar transaction pursuant to which TXU Corp. is not the
surviving ultimate parent entity. For purposes of this definition, the term
“Person” shall mean and include any individual, corporation, partnership, group,
association or other “person”, as such term is used in Section 14(d) of the
Exchange Act, other than TXU Corp., a subsidiary of TXU Corp. or any employee
benefit plan(s) sponsored or maintained by TXU Corp. or any subsidiary thereof,
and the term “Independent Shareholder” shall mean any shareholder of TXU Corp.
except any employee(s) or director(s) of TXU Corp. or any employee benefit
plan(s) sponsored or maintained by TXU Corp. or any subsidiary
thereof.
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“(f) For
purposes of this Agreement, “Good Reason” shall mean any one or more of the
following occurrences: (i) Employee’s base salary as in effect immediately prior
to the Change in Control, or as it may be increased subsequent to the Change in
Control, is reduced; (ii) Employee’s status or responsibilities with the Company
immediately prior to the Change in Control are materially reduced, or Employee
is assigned duties which are inconsistent with such status or responsibilities,
or Employee’s business location is materially changed; (iii) the Company (or its
successor) fails to continue in effect any pension, health care or executive
compensation plan or arrangement in which Employee was participating immediately
prior to the Change in Control, or Employer or the Company (or their successors)
takes some action which materially reduces Employee’s benefits under any such
plan or program, without (in either such case) providing Employee with
substantially similar benefits; or (iv) any successor to the Company in
connection with the Change in Control does not, prior to the Change in Control,
expressly assume this Agreement.
“10.3. Severance/Change
in Control Benefits Contingent Upon Full Release.
Employee acknowledges and agrees that the benefits and payments provided for in
Section 10.1 or 10.2, as applicable, constitute the exclusive remedy of Employee
upon termination of employment under the circumstances described in Section 10.1
or 10.2, as the case may be. Notwithstanding any other provision of this
Agreement, as a condition to receiving such benefits and payments, Employee
shall be required to execute a release of claims in favor of the Company in a
form reasonably acceptable to the Company.
“10.4 Confidentiality
and Nondisclosure.
“(a) Employee
understands and agrees that he will be given Confidential Information (as
defined below) and Training (as defined below) during his employment with the
Company relating to the business of the Company and/or its Affiliates (as
defined below , in exchange for his agreement herein. Employee hereby expressly
agrees to maintain in strictest confidence and not to use in any way (including
without limitation in any future business relationship of Employee), publish,
disclose or authorize anyone else to use, publish or disclose in any way, any
Confidential Information relating in any manner to the business or affairs of
the Company and/or its Affiliates. Employee agrees further not to remove or
retain any figures, calculations, letters, documents, lists, papers, or copies
thereof, which embody Confidential Information of the Company and/or its
Affiliates, and to return, prior to Employee’s termination of employment, any
such information in Employee’s possession. If Employee discovers, or comes into
possession of, any such information after his termination he shall promptly
return it to the Company. Employee acknowledges that the provisions of this
paragraph are consistent with the Company’s Code of Conduct with which Employee,
as an employee of the Company, is bound.
“(b) For
purposes of this Agreement, “Confidential Information” includes, but is not
limited to, information in the possession of, prepared by, obtained by, compiled
by, or that is used by the Company or any of its Affiliates or customers and (1)
is proprietary to, about, or created by the Company or its Affiliates or
customers; (2) gives the Company or its Affiliates or customers some competitive
business advantage, the opportunity of obtaining such advantage, or disclosure
of which might be detrimental to the interest of the Company or its Affiliates
or customers; and (3) is not typically disclosed by the Company or its
Affiliates or customers, or known by persons who are not employed by the Company
or its Affiliates or customers. Without in any way limiting the foregoing and by
way of example, Confidential Information shall include: information not
generally available to the general public pertaining to the Company’s business
operations such as financial and operational information and data, operational
plans and strategies, business and marketing strategies and plans for various
products and services, global operational planning, and acquisition and
divestiture planning.
“(c) For
purposes of this Agreement, “Training” includes, but is not limited to,
specialized and valuable training regarding Confidential
Information.
“(d) For
purposes of this Agreement, “Affiliate” shall mean any person, or entity (or
sub-unit of an entity) that, directly or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with
the Company.
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“10.5. Non-Compete
and Non-Solicitation.
Employee acknowledges and agrees that: (1) in order to perform his obligations
and job duties for the Company, Employee will gain Training and access to
Confidential Information regarding the Company and/or its Affiliates or
customers; (2) use of such Confidential Information in competition with the
Company and/or its Affiliates or customers would be detrimental to the business
interests of the Company and/or its Affiliates or customers; and (3) Employee
would not have been allowed to gain access to Confidential Information, or to
provide the obligations and job duties contemplated under this Agreement without
his promises and agreements contained in the following paragraph. Employee
acknowledges and agrees further that the Company is a diverse energy company and
that, based on the nature and size of the Company and the scope of its
operations, the areas in which the Company competes are not limited. Employee
also acknowledges and agrees that the services he will be performing for the
Company, and the Confidential Information and Training he will be provided,
relate to the world-wide operations of the Company and its Affiliates, and will
not be limited to any specific geographic location within which the Company, or
any of its Affiliates, conducts business.
“Employee
agrees that, during his employment with the Company, and for a period of one (1)
year thereafter, Employee shall not, directly or indirectly, either as an
employee, employer, independent contractor, consultant, agent, principal,
partner, stockholder, officer, director, or in any other individual or
representative capacity, either for his own benefit or the benefit of any other
person or entity: (i) engage or participate in a business which competes in a
material manner with the Company or any of its Affiliates in any geographic
location in which the Company conducts business; (ii) contact, solicit or
attempt to solicit the business or patronage of any of the Company’s (or
Affiliate’s) customers, or prospective customers, or any person, firm,
corporation, company, partnership, association or entity which was contacted or
whose business was solicited, serviced or maintained by the Company (or its
Affiliates) during the term of Employee’s employment with the Company; or (iii)
solicit, recruit, induce, encourage or in any way cause any employee of the
Company (or an Affiliate) to terminate his/her employment with the Company (or
such Affiliate). Notwithstanding the foregoing, the restriction provided in (i)
above shall apply following the termination of this Agreement only if Employee
receives the payments and benefits provided for in Section 10.1 or 10.2
above.
“10.6. Injunctive
Relief. Because
of the unique nature of the business to be conducted by the Company and its
Affiliates and the Confidential Information relating thereto, Employee
acknowledges, understands and agrees that the Company and/or its Affiliates will
suffer immediate and irreparable harm if Employee fails to comply with any of
his obligations under Sections 10.4 and 10.5 of this Agreement, and that
monetary damages alone will be inadequate to compensate the Company or its
Affiliates for such breach. Accordingly, Employee agrees that the Company and/or
its Affiliates shall, in addition to any other remedies available to it at law
or in equity, be entitled to temporary, preliminary, and permanent injunctive
relief and specific performance to enforce the terms of Sections 10.4 and 10.5
without the necessity of proving inadequacy of legal remedies or irreparable
harm or posting bond.”
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3. |
Continued
Effectiveness of Employment Agreement.
Except as expressly amended hereby, the Employment Agreement shall remain
in full force and effect. |
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4. |
Governing
Law.
This Amendment shall be governed by and construed in accordance with the
laws of the State of Texas. |
Executed
effective as of the __ day of February, 2003.
TXU
BUSINESS SERVICES COMPANY EMPLOYEE:
By:________________________ __________________________
Xxxx Xxx,
Chairman of the Board Xxxx
Xxxxxx
and Chief
Executive
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