EMPLOYMENT AGREEMENT
EXHIBIT
10.1
EMPLOYMENT
AGREEMENT (this “Agreement”),
effective as of May 15, 2007, by and between El Paso Electric Company, a
Texas corporation (“Company”),
and Xxxxxx X. Xxxx, Xx. (“Executive”).
WHEREAS,
the Company desires to employ Executive as its President and Chief Executive
Officer and serve as a member of its Board of Directors on the terms and
conditions set forth herein; and
WHEREAS,
Executive is willing, on the terms and subject to the conditions provided in
this Agreement, to undertake the responsibilities contemplated herein, to
furnish services to Company as provided herein, and to be subject to certain
employment restrictions and obligations;
NOW,
THEREFORE, in consideration of the premises and the covenants herein contained
and other good, valuable, and binding consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE
1
Employment
Section
1.01.
Responsibilities And
Authority. Company
hereby employs Executive to serve as its President and Chief Executive Officer
and serve as a member of its Board of Directors starting on or about
May 15, 2007 (the date of Executive’s commencement of employment, the
“Start
Date”).
The
duties of Executive shall be those duties which can reasonably be expected
to be
performed by a person with the title of President and Chief Executive Officer.
Executive shall report directly to the Board of Directors of the Company (the
“Board”)
and
shall perform such other duties as may be assigned to him and as are not
inconsistent with his position. The Company will appoint Executive to the Board
and shall use reasonable efforts to do so on or promptly following the Start
Date.
Section
1.02.
Acceptance Of Employment. Executive
accepts employment by Company on the terms and conditions herein provided and
agrees, subject to the terms of this Agreement, to devote substantially all
of
his business time to advance the business of the Company. Nothing contained
in
this Agreement shall be construed so as to prevent Executive from investing
his
personal assets in such a manner and otherwise engaging in business transactions
that are not inconsistent with the interests of the Company and that will not
require a substantial portion of Executive’s business time or otherwise
interfere with the performance of his duties hereunder. Executive expressly
represents and warrants to the Company that the Executive is not a party to
any
contract or agreement
and
is not
otherwise obligated in any way, and is not subject to any rules or regulations,
whether governmentally imposed or otherwise, which will or may restrict in
any
way the Executive’s ability to fully perform the Executive’s duties and
responsibilities under this Agreement.
Section
1.03.
Agreement Term. The
term
of this Agreement shall be for an initial term of five years from the Start
Date
(such five-year period, the “Initial
Term”
and,
as
the term of this Agreement may be extended or shortened as set forth herein,
the
“Employment
Term”).
The
Employment Term shall be extended automatically for three one-year periods
(each, a “Renewal
Term”)
following the Initial Term unless either party has given 90 days prior written
notice of termination of the Employment Term. Following such period, the parties
may agree mutually in writing to extend the Employment Term.
Section
1.04.
At-will
Employment.
Notwithstanding anything else herein, Executive’s employment with Company shall
be at-will and may be terminated by either party at any time for any or no
reason, including by the Company either with or without Cause. The foregoing
shall not affect the Company’s obligation to pay severance benefits if required
pursuant to Section 3.01 below. “Cause”
shall
mean the willful and continued failure by the Executive to perform his duties,
or the engaging by the Executive in illegal conduct or misconduct in connection
with Executive’s employment that is injurious to the Company, in each case
following written notice and a reasonable opportunity to cure the failure or
cease any non-criminal misconduct.
ARTICLE
2
Compensation
And Incentives
Section
2.01.
Base
Compensation. During
the
Employment Term, Company shall pay Executive a base cash salary at the aggregate
initial rate of $500,000 per annum. Thereafter, the base salary amount will
be
reviewed annually by the Board, which may, in its discretion, make appropriate
annual merit increases. The compensation paid to Executive pursuant to this
Section is hereinafter referred to as “Base
Compensation.”
The
Base Compensation shall be paid to Executive in accordance with the Company’s
payroll policy as in effect from time to time.
Section
2.02.
Annual
Bonus.
During
the Employment Term, Executive shall be eligible for an annual performance
bonus
under the terms of the Company’s bonus plans in place from to time. Executive’s
target bonus opportunity will be 65% of Base Compensation, with actual bonus
based on completion of performance goals determined by the Board or a committee
of the Board. For fiscal 2007, Executive’s bonus opportunity will be based on
the 2007 performance goals established by the Company’s compensation committee
at its meeting on March 2, 2007, and any bonus will be prorated for the period
from the Start Date through December 31, 2007.
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Section
2.03.
Equity Awards. The
Company will issue the equity awards set forth below to Executive pursuant
to
separate award agreements. Executive shall be eligible to receive other equity
awards as determined by the Board or a committee of the Board in its sole
discretion.
(a) Restricted
Stock.
The
Company will issue to Executive shares of its Common Stock, no par value (the
“Common
Stock”),
on or
promptly following the Start Date, in an amount such that the intrinsic value
on
the grant date is approximately $650,000, the ownership of which shall vest
in
two equal annual installments on the first and second anniversaries of the
Start
Date, subject to Executive’s continued employment with Company on the applicable
vesting date.
(b) LTIP.
Executive’s participation in the Company’s long-term incentive plan
(“LTIP”)
will
begin with the performance period to end on December 31, 2009 with an intrinsic
value (at target) on the grant date of approximately $651,000 (but subject
to
proration to account for the period from the Start Date to December 31, 2009
being less than 3 full years). LTIP awards typically consist of restricted
stock
with a three-year cliff vesting (25%) and performance stock with a three-year
performance cycle based on total shareholder return compared to a peer group
of
companies (75%). In future years, Executive will be eligible to receive LTIP
awards as determined by the Board or a committee of the Board.
Section
2.04.
Reimbursement Of Moving Costs. Executive
will be reimbursed the full cost of moving his household goods and up to two
automobiles to the El Paso area. Executive will be reimbursed for travel
expenses for himself and his family at the time of the move and for reasonable
house-hunting activities while making his decision on the purchase of a home
in
the El Paso area. Such house hunting trips shall not exceed 3 trips. Executive
will be reimbursed for travel expenses for visits home, not to exceed 3 visits
per month, until he relocates permanently in the El Paso area. Executive will
receive appropriate temporary lodging in the El Paso area, not to exceed three
months from his start date, until his relocation is complete. Executive will
be
reimbursed all reasonable costs to sell his present home in New Jersey and
purchase a home in the El Paso area including closing costs, commissions and
attorney’s fees. Executive will receive an additional reimbursement payment for
the taxable items reimbursed pursuant to this Section.
Section
2.05.
Retirement
Plans.
Executive will be a participant in the Company’s Retirement Income Plan for
Employees (“RIP”)
and
Excess Benefit Plan (“EBP”
and,
together with the RIP, the “Plans”).
The
Company agrees that if the Company terminates Executive’s employment, other than
for Cause, following the Initial Term (including by exercising its right to
decline to continue this Agreement in any of the Renewal Terms), any benefit
election chosen under the terms of such Plans by Executive shall be computed
as
if the aggregate monthly amount (in the form of a straight life annuity payable
over the lifetime of Executive only commencing on such date) of the Plan
Retirement Benefit (as defined in the RIP) and the Excess Benefit (as defined
in
the EBP) is equal to the higher
3
of
(a) the Plan Retirement Benefit and Excess Benefit as determined under the
terms of the Plans or (b) $100,000. Except as set forth in this Section,
nothing in this Agreement shall affect Executive’s rights under the Plans. Any
supplemental payment required by the Company under this Section shall be
entirely unfunded and no provision shall at any time be made with respect to
segregating assets of the Company for any such payment. Neither Executive nor
his spouse or other beneficiary shall have any interest in any particular assets
of the Company by reason of the right to receive any such payment and the
Executive, his spouse or other beneficiary shall have only the rights of a
general unsecured creditor of the Company with respect to such
payments.
Section
2.06.
Other Benefits. Executive
shall be entitled to participate in all benefits plans available from time
to
time to senior executives of the Company including but not limited to the Plans,
monthly car allowance and five (5) weeks and three (3) days paid time
off. In addition to the Company-provided one (1) times annual base salary
life insurance, the Company will provide to Executive (at no cost to Executive)
1.5 times his annual base salary in additional life insurance benefit coverage.
In addition to participation in all Company-sponsored health and welfare benefit
plans, Executive will be required to take a Company-paid physical exam on an
annual basis. Executive will receive financial planning and tax preparation
assistance in an amount not to exceed $15,000 annually.
Section
2.07.
Indemnification. The
Company shall provide Executive with the same indemnification and insurance
protection provided by Company from time to time to all of its officers and
directors.
ARTICLE
3
Termination
Of Employment
Section
3.01.
Severance Benefits.
(a) If,
during
the Employment Term, the Company terminates Executive’s employment other than
for death, disability or Cause, Executive shall be entitled to the following,
subject to Executive signing and letting become effective a separation and
release agreement including the release in the form attached hereto as
Exhibit A:
(i) a
pro
rated payment for the Severance Period of Executive’s then current Base
Compensation plus target bonus for the year of termination;
(ii) if
Executive elects COBRA coverage, continued Company-paid health benefits for
the
Severance Period (or until such earlier date as Executive is covered by another
company’s health plan); provided
that to
the extent COBRA coverage is not available, the Company shall pay Executive
an
amount equal to the cost to the Company of such coverage that cannot be
provided; and
4
(iii) outplacement
benefits and assistance for up to 12 months following termination of employment
in an amount not to exceed $25,000 in the aggregate;
(b) The
“Severance
Period”
shall
equal (x) during the Initial Term, the lesser of two years or the then remaining
period of the Initial Term or (y) during any Renewal Term, the then remaining
period of such Renewal Term.
(c) To
the
extent the payments provided for in this Section would be deemed to constitute
non-qualified deferred compensation subject to Section 409A of the Internal
Revenue Code of 1986, as amended (“Section
409A”),
no
such payments shall be made until six months following termination of
employment.
Section
3.02.
Termination Upon Change Of Control. The
foregoing provisions notwithstanding, the provisions of the Change of Control
Severance Agreement between the Company and Executive (the “Change
of Control Agreement”)
shall
govern any termination of Executive’s employment following a Change of Control
(as defined in the Change of Control Agreement) of the Company, and the payments
and benefits under the Change of Control Agreement shall be in lieu of any
payments or benefits under this Agreement.
Section
3.03.
No
Duplication. Any
benefits or payments due under this Article shall be reduced by any notice
period or severance payments required by applicable federal, state or other
law,
including without limitation the WARN Act, and, except as expressly set forth
herein, shall supersede any termination or severance benefits to which Executive
may otherwise be entitled under any other agreement, plan or policy of the
Company.
ARTICLE
4
Arbitration
And Mediation
Section
4.01.
Mediation.
Any
dispute arising hereunder between Executive and Company (including any dispute
over whether Company has properly terminated Executive for Cause) which cannot
be resolved by them to their mutual satisfaction within a period of 14 days,
unless mutually extended, shall first be submitted to mediation in El Paso,
Texas, to a mediator selected pursuant to the rules of the American Arbitration
Association (“AAA”).
All
costs of mediation incurred by Executive will be paid by the
Company.
Section
4.02.
Arbitration. If
such
mediation shall not result in an agreed settlement between the parties, the
dispute will be promptly submitted to binding arbitration (conducted in El
Paso,
Texas, by a panel of three arbitrators) in accordance with the rules of the
AAA
then in effect. The results of such arbitration shall be binding and conclusive
upon the parties hereto, and judgment on the award may be entered at the
5
instance
of either party in any court of competent jurisdiction. The dispute resolution
procedure set forth in this Section may be initiated by either party upon five
business days prior written notice to the other and after failure to resolve
the
dispute after the expiration of the 14-day time period referred to in the
preceding Section.
Section
4.03.
Proceedings. Unless
otherwise expressly agreed in writing by the parties to the arbitration
proceedings:
(a) The
arbitration proceedings shall be conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, as amended from
time
to time;
(b) Any
procedural issues not determined under the arbitral rules selected pursuant
to
item (a) above shall be determined by the law of the place of arbitration,
other
than those laws which would refer the matter to another
jurisdiction;
(c) The
losing
party in any such dispute will pay all of the winning party’s costs, including
any arbitrator or administrative fees and reasonable attorneys’
fees.
(d) The
decision of the arbitrators shall be reduced to writing; final and binding
without the right of appeal; the sole and exclusive remedy regarding any claims,
counterclaims, issues or accounting presented to the arbitrators; made and
promptly paid in United States dollars free of any deduction or offset; and
any
costs or fees incident to enforcing the award shall, to the maximum extent
permitted by law, be charged against the party resisting such
enforcement.
Section
4.04.
Acknowledgement Of Parties. Each
party
acknowledges that he or she or it has voluntarily and knowingly entered into
an
agreement to arbitration under this Section by executing this
Agreement.
ARTICLE
5
Miscellaneous
Section
5.01.
Notices.
Any
notice, demand or request to be given hereunder to either party hereto shall
be
deemed given and effective only if in writing and either (1) delivered
personally to Executive or (in case of a notice to Company) to the Chairman
of
the Board of the Company with a copy to the General Counsel, or (2) sent by
certified or registered mail, postage prepaid, to the addresses set forth on
the
signature page hereof or to such other address as either party may hereafter
specify to the other by notice similarly served.
Section
5.02.
Governing Law. This
Agreement shall be construed and enforced in accordance with the laws of the
State of Texas.
6
Section
5.03.
Modification. No
modification or waiver of any provision hereof shall be made unless it be in
writing and signed by both of the parties hereto.
Section
5.04.
Scope Of Agreement. This
Agreement constitutes the whole of the agreement between the parties on the
subject matter, superseding all prior oral and written conversations,
negotiations, understandings, and agreements in effect as of the date of this
Agreement.
Section
5.05.
Successors and Assigns. This
Agreement shall not be assignable by the Company (other than to an affiliate
of
the Company or to any successor or assign of the Company) without the written
consent of Executive. The Company will require any successor to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform the obligations under 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. This Agreement shall inure to the benefit
of and be enforceable by Executive’s personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees, and
legatees. If Executive should die or become disabled while any amount is owed
but unpaid to Executive hereunder, all such amounts, unless otherwise provided
herein, shall be paid to Executive’s devisee, legatee, legal guardian or other
designee, or if there is no such designee, to Executive’s estate. Executive’s
rights hereunder shall not otherwise be assignable
Section
5.06.
Tax
Payments, Withholdings And Reporting. Executive
recognizes that the payments and benefits provided under this Agreement may
result in taxable income to him which Company and its affiliates will report
to
the appropriate taxing authorities. Company shall have the right to deduct
from
any payment made under this Agreement any federal, state, local or foreign
income, employment or other taxes it determines are required by law to be
withheld with respect to such payments or benefits provided thereunder or to
require payment from Executive which he agrees to pay upon demand, for the
purpose of satisfying any such withholding requirement.
Section
5.07.
Separate Counsel. Executive
acknowledges that he has been advised by Company that before he signs this
Agreement he should consult with an attorney.
Section
5.08.
Severability. In
the
event any provision of the Agreement shall be held illegal or invalid for any
reason, the illegality or invalidity shall not affect the remaining parts of
the
Agreement, and the Agreement shall be construed and enforced as if the illegal
or invalid provision had not been included.
Section
5.09.
Counterparts. This
Agreement may be signed in several counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were
on
the same instrument.
7
IN
WITNESS
WHEREOF, the parties have executed this Agreement effective as of the date
set
forth above.
EL
PASO
ELECTRIC COMPANY
By:
/s/
Xxxxxxx X. Parks______________
Name: Xxxxxxx
X.
Xxxxx
Title: Vice
Chairman
EXECUTIVE
/s/
Xxxxxx X. Xxxx, Xx.________________
Xxxxxx
X.
Xxxx, Xx.
8
Exhibit
A
Form
of Release and Waiver
Executive
agrees to and does fully and completely release, discharge and waive any and
all
claims, complaints, causes of action, demands of whatever kind or nature which
Executive has or may have against the Company, its subsidiaries, affiliates,
predecessors, and successors and all of their respective directors, officers,
and employees by reason of any event, matter, cause, or thing that has occurred
prior to the date hereof (hereinafter “Executive
Claims”).
Executive agrees that this release and waiver specifically covers, but is not
limited to, any and all Executive Claims which Executive has or may have against
the Company relating in any way to compensation, or to any other terms,
conditions, or circumstances of Executive’s employment with the Company, and to
the cessation of such employment, based on statutory or common law claims for
employment discrimination, including claims under Title VII, the Age
Discrimination in Employment Act, Americans with Disabilities Act, and any
and
all discrimination or retaliation claims under state or federal law, wrongful
discharge, breach of contract, defamation, intentional infliction of emotional
distress, breach of fiduciary duty, or any other theory whether legal or
equitable; provided, however, that this release shall not affect Executive’s
rights under or with respect to any retirement plan which is subject to ERISA
and is qualified under Section 401 (a) of the Code.
Executive
acknowledges that he has twenty-one (21) days to review and consider this
release and waiver. Executive has also been advised verbally and by this writing
of his right to consult with an attorney prior to executing this release and
waiver. Executive is further aware that if he signs this release and waiver,
he
may revoke it for a period of seven (7) days following the day he signs it,
and this release and waiver shall not be effective or enforceable until the
revocation period has expired.
