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EXHIBIT 10.1
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the
"Agreement") is entered into by and between HOUSTON INDUSTRIES INCORPORATED
D/B/A RELIANT ENERGY, INCORPORATED, a Texas corporation (said corporation,
together with its successors and assigns permitted under this Agreement,
hereinafter referred to as the "Company"), and XXX X. XXXXXX (the
"Executive"), this _____ day of March, 1999.
W I T N E S S E T H:
WHEREAS, on November 7, 1997, the Company and the Executive
entered into an Amended and Restated Employment Agreement (the "Prior
Agreement") under which the Executive would be employed by the Company until
June 1, 1999; and
WHEREAS, the parties to said Prior Agreement desire to
completely amend and restate said Prior Agreement to provide for the extended
employment of the Executive through December 31, 2000; and
WHEREAS, Section 15(A) of the Prior Agreement contemplates
the amendment of the Prior Agreement with the mutual consent of the parties
and the parties desire to amend and restate the Prior Agreement;
NOW, THEREFORE, in consideration of the mutual covenants
and agreements herein contained, the parties hereto agree that the Prior
Agreement shall be amended and restated in its entirety, effective June 1,
1999, to read as follows:
1. CERTAIN DEFINITIONS:
"ACCRUED OBLIGATIONS" shall have the meaning set forth in
Section 5(B)(i)(a).
"AFFILIATED COMPANIES" shall mean and include any company
controlled by, controlling or under common control with the Company within
the meaning of Section 414 of the Code.
"ANNUAL BASE SALARY" shall mean the salary of the Executive
provided for in Section 3(B)(i), as adjusted and in effect from time to time.
"BENEFICIARY" shall mean the person or persons, trustee or
trustees of a trust, partnership, corporation, limited liability partnership,
limited liability company or other entity named, in a writing filed with the
Company, to receive any compensation or benefit payable
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hereunder following the Executive's death or, in the event no such person or
entity is named or survives the Executive, his estate. In the event of the
Executive's death or a judicial determination of his incompetence, reference
in this Agreement to the Executive shall be deemed, where appropriate, to
refer to his Beneficiary, estate or other legal representative.
"BOARD" shall mean the Board of Directors of the Company.
"CAUSE" shall mean (i) repeated violations by the Executive
of the Executive's obligations under Section 3(A) (other than as a result of
incapacity due to physical or mental illness) which are demonstrably willful
and deliberate on the Executive's part, which are committed in bad faith or
without reasonable belief that such violations are in the best interests of
the Company and which are not remedied in a reasonable period of time after
receipt of written notice from the Company specifying such violations or (ii)
the conviction of the Executive of a felony involving moral turpitude.
"CODE" shall mean the Internal Revenue Code of 1986, as in
effect on the Effective Date and as thereafter amended.
"DATE OF TERMINATION" shall mean (a) if the Executive's
employment is terminated by the Company for Cause, or by the Executive for
Good Reason, the date of receipt of the Notice of Termination or any later
date specified therein, as the case may be, (b) if the Executive's employment
is terminated by the Company other than for Cause or Disability, the date on
which the Company notifies the Executive of such termination, (c) if the
Executive's employment is terminated by reason of death, Retirement or
Disability, the date of death or Retirement of the Executive or the
Disability Effective Date, as the case may be, and (d) if the Executive's
employment is terminated by reason of the expiration of the Employment
Period, the last day of the Employment Period.
"DEFERRED COMPENSATION PLAN" shall mean each of the
Deferred Compensation Plan (amended and restated effective January 1, 1991),
the Deferred Compensation Plan (amended and restated effective January 1,
1989) and the Deferred Compensation Plan (amended and restated effective
September 1, 1985), each of which is sponsored by the Company, as in effect
from time to time.
"DISABILITY" shall mean the absence of the Executive from
the Executive's duties with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a physician selected
by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative, such agreement as to acceptability by the
Executive not to be withheld unreasonably.
"DISABILITY EFFECTIVE DATE" shall mean the date so described
in Section 4(A).
"DIVIDEND DEFERRAL ACCOUNT" shall mean the bookkeeping
account maintained by the Company to track the dividends (and associated
accumulated interest) payable with respect to Stock Deferrals.
"EFFECTIVE DATE" shall mean June 1, 1999.
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"EICP" shall mean the Company's Executive Incentive
Compensation Plan, as in effect from time to time, or any similar successor
plan adopted by the Company.
"EMPLOYMENT PERIOD" shall mean the period commencing on the
Effective Date and ending on December 31, 2000.
"GOOD REASON" shall mean:
(a) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including
status, offices, titles and reporting requirements), authority,
duties or responsibilities as contemplated by Section 3(A), or any
other action by the Company which results in a diminution in such
position, authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not taken
in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(b) any failure by the Company to comply with any of the
provisions of Section 3(B), other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(c) the Company's requiring the Executive to be based at
any office or location other than that described in Section 3(A)(i)
or the Company's failure to provide the residence required by
Section 3(A)(i);
(d) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this
Agreement; or
(e) any failure by the Company to comply with and satisfy
Section 11(C), provided that the successor described in Section
11(C) has received at least ten days' prior written notice from the
Company or the Executive of the requirements of Section 11(C).
"LICP" shall mean the Company's Long-Term Incentive
Compensation Plan, as in effect from time to time, or any similar successor
plan adopted by the Company.
"NOTICE OF TERMINATION" shall mean a written notice that
(a) indicates the specific termination provision in this Agreement relied
upon, (b) to the extent applicable, sets 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 and (c) if the Date
of Termination is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than 15 days after the
giving of such notice except in the case of a Disability Effective Date).
"OTHER BENEFITS" shall mean the amounts so described in
Section 5(B)(i)(e).
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"PRIOR STOCK AWARD" shall mean the award of Stock described
as the 'Stock Award' in Section 3(B)(ii) of the Prior Agreement.
"RETIREMENT" shall mean the retirement of the Executive with
the express consent of the Board.
"SERP" shall mean the Benefit Restoration Plan of the Company.
"SPOUSE" shall mean the person who is legally married to the
Executive.
"STOCK" shall mean the Common Stock, without par value, of
the Company.
"STOCK DEFERRALS" shall mean the shares of Stock
potentially payable pursuant to the Prior Stock Award, the receipt of which
is deferred by Executive pursuant to Section 6.
"SUPPLEMENTAL RETIREMENT BENEFIT" shall mean the benefit so
described in Section 5(B)(i)(c).
"TARGET BONUS" shall mean the Executive's target incentive
opportunity under the EICP in effect for the year with respect to which the
Target Bonus is being determined or, if no such plan is then in effect, for
the last year in which such a plan was in effect, expressed as a dollar
amount based upon the Executive's Annual Base Salary for the year of such
determination.
"WELFARE BENEFIT CONTINUATION" shall mean the continuation
of benefits so described in Section 5(B)(i)(d).
"WITHOUT CAUSE" shall mean without Cause and for reasons
other than death, Disability or Retirement.
"WITHOUT GOOD REASON" shall mean without Good Reason and
for reasons other than death, Disability or Retirement.
2. EMPLOYMENT PERIOD: The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the
employ of the Company, in accordance with the terms and provisions of this
Agreement, for the Employment Period.
3. TERMS OF EMPLOYMENT:
A. POSITION AND DUTIES: During the Employment Period:
(i) The Executive shall relinquish the title and office of
Chief Executive Officer of the Company, effective as of the
Effective Date, and shall be employed as the Chairman of the Board
of the Company during the remainder of the Employment Period. The
Executive, in carrying out his duties under this Agreement, shall
report only to the Board and shall perform the duties and functions
set forth on Exhibit A attached hereto and incorporated herein for
all purposes. The Executive's services
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shall be performed at the location where the Executive was employed
immediately preceding the Effective Date or any office which is the
headquarters of the Company and is less than 50 miles from such
location. It is hereby agreed and understood that the Executive may
be required by the Company to move his business office (within the
50-mile limit set forth above) but not his principle place of
residence. In the event that the Company requires the Executive to
move his main office outside of Xxxxxx County, the Company shall
provide, at no expense to the Executive, an apartment or town home
in the new location which is commensurate with the Executive's
standard of living.
(ii) Excluding any periods of vacation and sick leave to
which the Executive is entitled, the Executive agrees to devote
reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder,
to use the Executive's reasonable best efforts to perform faithfully
and efficiently such responsibilities. It shall not be a violation
of this Agreement for the Executive to (a) serve on corporate, civic
or charitable boards or committees, (b) deliver lectures, fulfill
speaking engagements or teach at educational institutions and (c)
manage personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the
extent that any such activities have been conducted by the Executive
prior to the Effective Date, the continued conduct of such
activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not thereafter be
deemed to interfere with the performance of the Executive's
responsibilities to the Company.
B. COMPENSATION:
(i) Annual Base Salary: During the Employment Period, the
Executive shall receive an Annual Base Salary, payable on a
semi-monthly basis in accordance with the Company's normal payroll
practices, at an annual rate at least equal to $1,460,000; provided,
however, that the monthly salary payable to the Executive during the
period from the Effective Date to December 31, 1999 shall be
adjusted upward such that the total Annual Base Salary paid to the
Executive between January 1, 1999 and December 31, 1999 equals
$1,460,000. Annual Base Salary shall not be reduced.
(ii) Benefit and Bonus Plans: During the Employment Period,
except as otherwise set forth in this paragraph (ii), the Executive
shall be entitled to participate in all incentive, savings and
retirement plans, practices, policies and programs applicable
generally to other peer executives of the Company and its Affiliated
Companies. The Executive and/or the Executive's family, as the case
may be, shall be eligible for participation in and shall receive all
benefits under welfare benefit plans, practices, policies and
programs provided by the Company and its Affiliated Companies
(including, without limitation, medical, prescription, dental,
disability,
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the Executive salary continuance, employee life, group life,
accidental death and travel accident insurance plans and programs)
to the extent applicable generally to other peer executives of the
Company and its Affiliated Companies.
Notwithstanding the foregoing:
(a) The Executive shall not be granted awards
under the Company's Long-Term Incentive Compensation Plan
for performance cycles commencing in 1999 and 2000;
(b) The Executive shall be entitled to receive a
separate monthly supplemental retirement benefit from the
Company equal to the excess, if any, of (1) the benefit
payable under the Retirement Plan and the SERP based on the
benefit accrual formulas and actuarial assumptions in
effect at the Effective Date over (2) the Executive's
actual benefit (paid or payable) under the Retirement Plan
and the SERP. Any such benefit shall commence at the same
time and be payable in the same form as the amounts paid
under the Retirement Plan and the SERP.
(iii) Expenses: During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the policies,
practices and procedures of the Company and its Affiliated Companies
to the extent applicable generally to other peer executives of the
Company and its Affiliated Companies.
(iv) Vacation and Fringe Benefits: During the Employment
Period, the Executive shall be entitled to paid vacation and fringe
benefits in accordance with the plans, practices, programs and
policies of the Company and its Affiliated Companies to the extent
applicable generally to other peer executives of the Company and its
Affiliated Companies.
(v) Other Perquisites: During the Employment Period, the
Executive shall continue to be provided with such perquisites as
were provided to the Executive on the Effective Date of this
Agreement. Such perquisites shall be reviewed annually by the
Compensation Committee of the Board.
(vi) Termination Bonus: The Company hereby agrees that
within 60 days after the expiration of the Employment Period, it
shall review the performance of Executive hereunder and the extent
to which his efforts have contributed to any increase in shareholder
value of the Company and determine if a cash bonus or other
compensation in addition to that otherwise provided herein is
appropriate. The payment of any such additional compensation shall
be made at the Board's sole discretion.
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4. TERMINATION OF EMPLOYMENT:
A. DEATH OR DISABILITY: The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period, it may give to the Executive written
notice in accordance with Section 15(B) of its intention to terminate the
Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), provided that,
within the 30 days after such receipt, the Executive shall not have returned
to full-time performance of the Executive's duties.
B. CAUSE: The Company may terminate the Executive's employment
during the Employment Period for Cause.
C. GOOD REASON: The Executive's employment may be terminated during
the Employment Period by the Executive for Good Reason. For purposes of this
Section 4(C), any good faith determination of Good Reason made by the
Executive shall be conclusive.
D. NOTICE OF TERMINATION: Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 15(B).
The failure by the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the Company
hereunder or preclude the Executive or the Company from asserting such fact
or circumstance in enforcing the Executive's or the Company's rights
hereunder.
E. EXPIRATION OF EMPLOYMENT PERIOD: The Executive's employment shall
terminate automatically upon the expiration of the Employment Period.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION OF EMPLOYMENT:
A. FOR CAUSE OR WITHOUT GOOD REASON: If, at any time during the
Employment Period, the Company terminates the Executive's employment for
Cause or the Executive terminates his employment Without Good Reason, this
Agreement shall terminate without further obligations to the Executive other
than (i) the obligation to pay to the Executive the Annual Base Salary
through the Date of Termination plus the amount of any compensation
previously deferred by the Executive, in each case to the extent theretofore
unpaid, (ii) the timely provision of Other Benefits, and (iii) fulfillment of
the requirements of Section 3(B)(ii)(b), Sections 5(C) and (D) (to the extent
applicable), Section 6 and Section 16. Any unpaid but due Annual Base Salary
shall be paid to the Executive in a lump sum in cash within 30 days of the
Date of Termination under this paragraph.
B. WITHOUT CAUSE, FOR GOOD REASON, DEATH, DISABILITY OR RETIREMENT:
If, during the Employment Period, the employment of the Executive terminates
(except for Cause or Without Good Reason, which are addressed in Section
5(A)), the obligations of the Company shall be as set forth below:
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(i) For Good Reason or Without Cause: If, at a time
described in this Section 5(B), the Executive terminates his
employment for Good Reason or the Company terminates the Executive's
employment Without Cause, then:
(a) the Company shall pay to the Executive in a
lump sum in cash (or common stock of the Company with
respect to certain payments under the LICP), within 30 days
after the Date of Termination, determined without any
reduction for the present value of such lump-sum payment,
the aggregate of:
(I) the Annual Base Salary payable to the
Executive for the remainder of the Employment
Period, as if there had been no termination of
employment;
(II) all bonuses payable to the Executive
for the remainder of the Employment Period, as if
there had been no termination of employment
(including, but not by way of limitation, all
bonuses awarded to the Executive under the EICP
and the LICP and all bonuses that would have been
awarded to the Executive under the EICP and LICP
during the remainder of the Employment Period),
assuming, for purposes of determining the amount
of any bonus, (x) that bonus awards continued to
be granted at the levels most recently granted to
the Executive prior to the Date of Termination
(unless a reduction in the level of any bonus
award was the basis for a termination for Good
Reason, in which case reference shall be made to
the level in effect prior to such reduction) and
(y) that any applicable performance objectives
were met at the "target" level; and
(III) any accrued vacation pay;
in each case to the extent not theretofore paid (the sum of
the amounts described in clauses (I) - (III) above shall be
referred to herein as the "Accrued Obligations");
(b) the benefits accrued up to the Date of
Termination under the Retirement Plan and the SERP or any
successor plan thereto shall commence thereunder in such
form and at such time as elected by the Executive in
accordance with the terms of said Plans, subject to the
requirements of Section 16;
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(c) the Company shall pay a separate monthly
supplemental retirement benefit equal to the excess, if
any, of (I) the benefit payable under the Retirement Plan
and the SERP or any other successor supplemental and/or
excess retirement plan of the Company and its Affiliated
Companies providing benefits for the Executive which the
Executive would receive if the Executive's employment
continued at the compensation level provided for in Section
3(B) for the remainder of the Employment Period, assuming
for this purpose that (x) all accrued benefits are fully
vested and (y) benefit accrual formulas and actuarial
assumptions are no less advantageous to the Executive than
those in effect at the Effective Date, over (II) the
Executive's actual benefit (paid or payable), if any, under
the Retirement Plan and the SERP (the amount of such
benefit calculated under this Section 5(B)(i)(c), which
shall commence at the same time and be payable in the same
form as the amounts described in Section 5(B)(i)(b), shall
be referred to herein as the "Supplemental Retirement
Benefit");
(d) for the remainder of the Employment Period, or
such longer period as any plan, program, practice or policy
may provide, the Company shall continue benefits to the
Executive and/or the Executive's family at least equal to
those which would have been provided to them in accordance
with the welfare benefit plans, programs, practices and
policies described in Section 3(B)(ii) if the Executive's
employment had not been terminated; provided, however, that
if the Executive becomes reemployed with another employer
and is eligible to receive medical or other welfare
benefits under another employer provided plan, the medical
and other welfare benefits described herein shall be
secondary to those provided under such other plan during
such applicable period of eligibility (such continuation of
such benefits for the applicable period herein set forth
shall be referred to herein as "Welfare Benefit
Continuation");
(e) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to the
Executive and/or the Executive's family any other amounts
or benefits required to be paid or provided or which the
Executive and/or the Executive's family is eligible to
receive pursuant to this Agreement and under any plan,
program, policy or practice or contract or agreement of the
Company and its Affiliated Companies as in effect and
applicable generally to other peer executives and their
families (such other amounts and benefits, payable as
described in this paragraph, shall be referred to herein as
the "Other Benefits"); and
(f) the Company shall pay to the Executive in a
lump sum in cash, within 30 days after the Date of
Termination, the amount it
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would have contributed as an employer contribution to the
tax-qualified Savings Plan of the Company for the remainder
of the Employment Period, had the Executive contributed at
the maximum rate during said period and had the terms of
said Savings Plan as in effect on the Effective Date
remained unchanged during said remainder of the Employment
Period; and
(g) the Company shall fulfill the requirements of
Section 5(C) and (D), Section 6 and Section 16.
(ii) By Reason of Death or Disability: If, at a time
described in this Section 5(B), the Executive's employment is
terminated by reason of the Executive's death or Disability, this
Agreement shall terminate without further obligations to or in
respect of the Executive under this Agreement, other than for (a)
payment of Accrued Obligations (which shall be paid to the Executive
or the Executive's Beneficiary in a lump sum in cash (or common
stock of the Company with respect to certain payments under the
LICP) within 30 days of the Date of Termination), (b) the timely
payment or provision of the Welfare Benefit Continuation and Other
Benefits in accordance with Section 5(B)(i), and (c) fulfillment of
the requirements of Section 3(B)(ii)(b), Section 5(C) and (D) (to
the extent applicable), Section 6 and Section 16.
(iii) Retirement: If, at a time described in this Section
5(B), the Executive terminates his employment with the Company by
reason of Retirement, he shall be entitled to receive under this
Agreement, in addition to all other benefits otherwise due from the
Company upon Retirement, the prompt payment of all benefits due
under Section 5(B)(i) had the Executive terminated employment for
Good Reason as described therein. The Company shall also fulfill its
obligations under Section 6. Furthermore, the Executive shall be
entitled, for the remainder of the Employment Period, to the prompt
reimbursement of all expenses incurred for civic or industry
activities undertaken on behalf of the Company which are of a
similar nature and scope to those expenses reimbursable by the
Company to the Executive on the Effective Date. In this connection,
the Executive shall also be afforded reasonable use of any Company
aircraft.
C. EXECUTIVE BENEFITS PLAN/DEFERRED COMPENSATION: Upon a termination
of employment during or at the end of the Employment Period for any reason,
the Company hereby agrees that the Executive shall be fully vested in the
benefit provided under the Executive Benefits Plan, as in effect on the
Effective Date, and that the benefit payable thereunder shall be based on his
Annual Base Salary as provided in Section 3(B)(i). The Company and the Board
hereby agree to cause the Deferred Compensation Plan to be administered or
amended so that any and all amounts of salary and/or bonus theretofore
deferred by the Executive and held under the Deferred Compensation Plan with
instructions from the Executive to pay in 15 annual installments shall be
paid in said 15 installments commencing on June 1, 2002, notwithstanding any
provision of the Deferred Compensation Plan to the contrary.
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D. OFFICE: Upon a termination of employment during or at the end of
the Employment Period for any reason other than death or for Cause, the
Company shall provide the Executive with suitable executive office space and
secretarial help at an acceptable location outside the premises of any
Company location. Such office and secretary shall be provided the Executive
until such time as mutually agreed by the parties to be no longer necessary.
6. DEFERRAL OF PRIOR STOCK AWARD:
A. DEFERRAL: By executing this Agreement, the Executive hereby
irrevocably elects to defer the receipt of any amounts which may be payable,
or shares of Stock which may be deliverable, to him on account of the Prior
Stock Award. The deferred delivery of the shares of Stock deliverable on
account of the Prior Stock Award (the "Stock Deferrals") shall be implemented
by a credit to a bookkeeping account maintained by the Company evidencing the
Executive's unfunded right to receive shares of Stock of the Company on the
Executive's Termination Date.
B. DIVIDENDS AND INTEREST: The Company shall maintain a separate
bookkeeping account (the "Dividend Deferral Account") to reflect the
dividends accumulated on shares of Stock credited to the Deferral Account.
The beginning balance of the Dividend Deferral Account shall be the amount of
any cash payment to which the Executive would be entitled pursuant to Section
3(B)(ii)(e) of the Prior Agreement on account of accumulated dividends. From
the date the Prior Stock Award would otherwise be payable until the
Executive's Termination Date, the Dividend Deferral Account shall be
credited, as of the date any dividend is payable, with the amount of the
dividend payable with respect to the shares of Stock represented in the
Deferral Account. Until paid to the Executive, amounts credited to the
Dividend Deferral Account shall be credited, on a quarterly basis, with
interest calculated at an annual rate equal to the composite yield on Moody's
Long-Term Corporate Bond Index for the applicable calendar quarter as
determined from Moody's Bond Record published by Xxxxx'x Investors' Service,
Inc. (or any successor thereto), or, if such yield is no longer published, a
substantially similar average selected by the Compensation Committee, plus
2%.
C. PAYMENT: Within 30 days after the Termination Date, shares of
Stock representing the Stock Deferrals shall be registered in the name of the
Executive and certificates representing such shares of Stock shall be
delivered to the Executive. Unless the Company determines otherwise, shares
of Stock delivered to the Executive shall consist of shares of Stock
theretofore held by the Company in its treasury or by a subsidiary of the
Company. In addition, within 30 days after the Termination Date, the Company
shall deliver to the Executive a lump sum cash payment equal to the amount of
the Dividend Deferral Account.
7. NON-EXCLUSIVITY OF RIGHTS: Except as provided in Section 5,
nothing in this Agreement shall prevent or limit the Executive's continuing
or further participation in any plan, program, policy or practice provided by
the Company or any of its Affiliated Companies and for which the Executive
may qualify, nor shall anything herein limit or otherwise affect such rights
as the Executive may have under any contract or agreement with the Company or
any of its Affiliated Companies. Amounts which are vested benefits or which
the Executive is otherwise entitled to receive under any plan, policy,
practice or program of or any contract or agreement with the Company or any
of its Affiliated Companies at or subsequent to the Date of Termination shall
be
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payable in accordance with such plan, policy, practice or program or contract
or agreement except as explicitly modified by this Agreement.
8. SET-OFF; MITIGATION; LEGAL FEES; EXPENSES; OBLIGATIONS
PENDING DISPUTE
RESOLUTION:
A. SET-OFF AND MITIGATION: The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may
have against the Executive or others. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement and, except as provided in Section 5(B)(i)(d),
such amounts shall not be reduced whether or not the Executive obtains other
employment.
B. LEGAL FEES AND EXPENSES: It is the intent of the Company that the
Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of the Executive's
rights under this Agreement by litigation or otherwise because the cost and
expense thereof would detract from the benefits intended to be extended to
the Executive hereunder. Accordingly, if it should appear to the Executive
that the Company has failed to comply with any of its obligations under this
Agreement or in the event that the Company or any other person takes or
threatens to take any action to declare this Agreement void or unenforceable,
or institutes any litigation or other action or proceeding designed to deny,
or to recover from, the Executive the benefits provided or intended to be
provided to the Executive hereunder, the Company irrevocably authorizes the
Executive from time to time to retain counsel of the Executive's choice, at
the expense of the Company as hereafter provided, to advise and represent the
Executive in connection with any such interpretation, enforcement or defense,
including without limitation the initiation or defense of any litigation or
other legal action, whether by or against the Company or any director,
officer, stockholder or other person affiliated with the Company, in any
jurisdiction. Notwithstanding any existing or prior attorney-client
relationship between the Company and such counsel, the Company irrevocably
consents to the Executive entering into an attorney-client relationship with
such counsel, and in that connection the Company and the Executive agree that
a confidential relationship will exist between the Executive and such
counsel. Without respect to whether the Executive prevails, in whole or in
part, in connection with any of the foregoing, the Company will pay and be
solely financially responsible for any and all attorneys' fees and related
expenses incurred by the Executive in connection with any of the foregoing
except to the extent that a final judgment no longer subject to appeal finds
that a claim or defense asserted by the Executive was frivolous. (In such a
case, the portion of such fees and expenses incurred by the Executive as a
result of such frivolous claim or defense shall become the Executive's sole
responsibility and any funds advanced by the Company or by a Trust created to
secure such payment shall be repaid.) The Company agrees to pay promptly as
incurred, to the full extent permitted by law, all legal fees and expenses
which the Executive incurs as described above, plus in each case interest on
any delayed payment at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Code.
In addition and to the extent not already provided by the
terms of any insurance policy owned by the Company, the Company hereby agrees
to pay promptly as incurred, to the full extent permitted by law, all legal
fees and expenses which the Executive may reasonably incur as a result
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of any litigation or other legal action filed against the Executive or his
estate arising out of, or in any way connected with or resulting from,
actions taken or omitted to be taken by the Executive during his employment
with the Company.
In the event a "Change in Control" (as defined in the Prior
Agreement and hereinafter referred to "CIC") occurs, the performance of the
Company's obligations under this Section 8 will be funded by amounts
deposited or to be deposited in trust pursuant to certain trust agreements to
which the Company will be a party providing that the fees and expenses of
counsel selected from time to time by the Executive pursuant to this Section
8 will be paid, or reimbursed to the Executive if paid by the Executive,
either in accordance with the terms of such trust agreements, or, if not so
provided, on a regular, periodic basis upon presentation by the Executive to
the trustee of a statement or statements prepared by such counsel in
accordance with its customary practices. In order to be eligible for payment
of expenses directly from the Company, Executive must first exhaust all
rights to payment under the trust agreements contemplated immediately above.
The pendency of a claim by the Company that a claim or defense of the
Executive is frivolous or otherwise lacking merit shall not excuse the
Company (or the trustee of a Trust contemplated by this Section 8) from
making periodic payments of legal fees and expenses until a final judgment is
rendered as hereinabove provided. Any failure by the Company to satisfy any
of its obligations under this Section 8 will not limit the rights of the
Executive hereunder. Subject to the foregoing, the Executive will have the
status of a general unsecured creditor of the Company and will have no right
to, or security interest in, any assets of the Company or any Affiliate.
C. OBLIGATIONS PENDING DISPUTE RESOLUTION: If there shall be any
dispute between the Company and the Executive regarding (i) in the event of
any termination of the Executive's employment by the Company, whether such
termination was for Cause, or (ii) in the event of any termination of
employment by the Executive, whether Good Reason existed, then, unless and
until there is a final, nonappealable judgment by a court of competent
jurisdiction declaring that such termination was for Cause or that the
determination by the Executive of the existence of Good Reason was not made
in good faith, the Company shall pay all amounts, and provide all benefits,
to the Executive and/or the Executive's family or other beneficiaries, as the
case may be, that the Company would be required to pay or provide pursuant to
this Agreement as though such termination were by the Company without Cause
or by the Executive with Good Reason; provided, however, that the Company
shall not be required to pay any disputed amounts pursuant to this paragraph
except upon receipt of an undertaking by or on behalf of the Executive to
repay all such amounts to which the Executive is ultimately adjudged by such
court not to be entitled.
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY: 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 (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 9 (a "Payment")) would be subject to the excise tax imposed by
Section 4999 of the Code or any interest or penalties incurred by the
Executive 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 Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment (whether
through withholding at the source or otherwise) by the Executive of all taxes
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(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto), employment 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.
Subject to the provisions of this Section 9, all
determinations required to be made under this Section 9, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such determination,
shall be made by Deloitte & Touche (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice from the Executive
that there has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the CIC, the Executive
shall appoint another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment,
as determined pursuant to this Section 9, shall be paid by the Company to the
Executive within five 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 negligence or
similar penalty. Any determination by the Accounting Firm shall be binding
upon 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 the Company exhausts its remedies pursuant to
the following provisions of this Section 9 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.
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 the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten 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 30-day period following the date on which it 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:
(a) give the Company any information reasonably
requested by the Company relating to such claim;
(b) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time
to time, including, without
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limitation, accepting legal representation with respect to such claim
by an attorney reasonably selected by the Company;
(c) cooperate with the Company in good faith in order to
effectively contest such claim; and
(d) permit the Company to participate in any proceedings
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, employment 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 of the
foregoing provisions of this Section 9, 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, employment
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.
If, after the receipt by the Executive of an amount
advanced by the Company pursuant to the foregoing provisions of this Section
9, the Executive becomes entitled to receive any refund with respect to such
claim, the Executive shall (subject to the Company complying with the
requirements of this Section 9) 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 the foregoing provisions of this Section
9, 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 30 days after such determination, then such advance shall
be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
If the Company is obligated to provide the Executive with
Welfare Benefit Continuation and the amount of such benefits or the value of
such benefit coverage (including
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without limitation any insurance premiums paid by the Company to provide such
benefits) is subject to any income, employment or similar tax imposed by
federal, state or local law, or any interest or penalties with respect to such
tax (such tax or taxes, together with any such interest and penalties, being
hereafter collectively referred to as the "Income Tax") because such benefits
cannot be provided under a nondiscriminatory health plan described in Section
105 of the Code or for any other reason, the Company will pay to the Executive
an additional payment or payments (collectively, an "Income Tax Payment"). The
Income Tax Payment will be in an amount such that, after payment by the
Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), the Executive retains an amount of the Income Tax
Payment equal to the Income Tax imposed with respect to such Welfare Benefits
Continuation.
10. CONFIDENTIAL INFORMATION: The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its
Affiliated Companies, and their respective businesses, which shall have been
obtained by the Executive during the Executive's employment by the Company or
any of its Affiliated Companies and which shall not be or become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law
or legal process, communicate or divulge any such information, knowledge or
data to anyone other than the Company and those designated by it. In no event
shall an asserted violation of the provisions of this Section 10 constitute a
basis for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement.
11. SUCCESSORS:
A. This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
B. This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
C. 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 the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
12. SOURCE OF PAYMENTS: All payments provided in this Agreement shall, unless
the plan or program pursuant to which they are made provide otherwise, be paid
in cash from the general funds of the Company, and no special or separate funds
shall be established and no other segregation of assets shall be made to assure
payment. The Executive shall have no right, title or interest
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whatever in or to any investments which the Company may make to aid the Company
in meeting its obligations hereunder. Nothing contained in this Agreement, and
no action taken pursuant to this provision, shall create or be construed to
create a trust of any kind, or a fiduciary relationship, between the Company
and the Executive or any other person. To the extent that any person acquires a
right to receive payments from the Company hereunder, such right shall be no
greater than the right of an unsecured creditor of the Company.
13. EFFECT OF PRIOR AGREEMENTS: This Agreement contains the entire
understanding between the parties hereto and supersedes any prior employment
agreement between the Company or any predecessor of the Company and the
Executive, except that this Agreement shall not affect or operate to reduce
(a) any benefit or compensation inuring to the Executive of a kind elsewhere
provided and not expressly provided or modified in this Agreement or (b) the
agreements of the Company set forth in those three separate letters to the
Executive from Xxxx X. Xxxxx, Xxxxxx X. Xxxxxxxxxx and R. Xxxxx Xxxxxxxxx,
dated November 28, 1995, September 2, 1998 and March 9, 1999, respectively,
regarding various matters directly or indirectly related to or arising out of
Executive's employment with the Company. Specifically, but not by way of
limitation, this Agreement supersedes and replaces that certain amended and
restated Employment Agreement between the parties, dated November 7, 1997,
except to the extent necessary to determine the amounts deferred and payable
pursuant to Section 6.
14. CONSOLIDATION, MERGER OR SALE OF ASSETS: Nothing in this
Agreement shall preclude the Company from consolidating or merging into or
with, or transferring all or substantially all of its assets to, another
corporation which assumes this Agreement and all obligations and undertakings
of the Company hereunder; provided that no such action shall diminish the
Executive's rights hereunder, including, without limitation, rights under
Section 4(C). Upon such a consolidation, merger or transfer of assets and
assumption, the term "Company" as used herein shall mean such other
corporation.
15. MISCELLANEOUS:
A. This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
B. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by
registered or certified-mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive: Xxx X. Xxxxxx
0 Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
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If to the Company: Houston Industries Incorporated
d/b/a Reliant Energy, Incorporated
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000
ATTENTION: Xx. Xxxx Xxxx Xxxxx
Vice President, General
Counsel and Secretary
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
C. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
D. The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
E. The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement
or the failure to assert any right the Executive or the Company may have
hereunder, including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section 4(C), shall not be
deemed to be a waiver of such provision or right or any other provision or
right of this Agreement.
F. The headings of paragraphs herein are included solely for
convenience and reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement.
16. DEFERRED COMPENSATION PLAN AND SERP PAYMENTS: Notwithstanding
any provision herein or any provision of the Deferred Compensation Plan of
the Company to the contrary, the Company and the Board hereby agree to cause
the Deferred Compensation Plan to be administered so that any and all amounts
of salary and/or bonus theretofore deferred by the Executive and held under
the Deferred Compensation Plan with instructions from the Executive to pay in
15 annual installments (a) shall be paid in said 15 installments, (b) shall
remain in said Plan earning interest at the rate prescribed therein until
installment distributions commence, (c) shall commence at the time provided
herein (or, if not provided for herein, at the time provided in said Plan)
and (d) shall not be commuted and paid in a lump sum. Notwithstanding any
provision of this Agreement or any provision of the SERP to the contrary, the
Company and the Board hereby agree to cause the SERP to be administered so
that no benefit payable to or on behalf of the Executive under the SERP may
be commuted and paid in a lump sum.
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IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its Board of
Directors, the Company has caused these presents to be executed in its name
and on its behalf, all on the day and year first above written, but effective
as of the Effective Date.
HOUSTON INDUSTRIES INCORPORATED
D/B/A RELIANT ENERGY, INCORPORATED
By /s/ Xxxxxx X. Xxxxxxxxxx
---------------------------------
Xxxxxx X. Xxxxxxxxxx, Chairman of
the Compensation Committee of the
Board of Directors
EXECUTIVE
/s/ Xxx X. Xxxxxx
---------------------------------
Xxx X. Xxxxxx
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EXHIBIT A
DUTIES OF
THE CHAIRMAN OF THE BOARD
Duties with respect to Board of Directors:
Chair meetings of the Board of Directors ("Board")
Establish Board agenda (in consultation with Board and CEO); provide
materials for Board preparation
Keep the Board apprised of merger and acquisition opportunities and
the status of any deals in progress
Specific executive duties:
Represent the company on Boards of venture capital fund investments
(Utech Climate Challenge Fund, Utility Competitive Advantage Fund,
Micro-Generation Technology Fund)
Represent company in specific external settings:
o President, World Energy Council
o Executive Committee, Edison Electric Institute
o Others (T.B.D.)
Provide principal interface to Federal legislative officials
Advise and assist CEO with respect to:
Interface with Board
Major corporate development initiatives (acquisitions and divestitures)
International development (acquisitions, divestitures and alliances)
Utilize Chairman's existing network of associations and affiliations
to expand community
and business contacts of CEO and other top officers
Other projects/issues as the CEO may request
(i)
