EMPLOYMENT AGREEMENT
THIS AGREEMENT by and between NRG Energy, Inc., a Delaware corporation
("NRG"), and Xxxxx X. Xxxxxxxx (the "Executive"), ("Agreement") is dated as of
the 28th day of June, 1995.
WITNESSETH THAT
WHEREAS, The Board of Directors of NRG (the "Board") wishes to provide
for the employment of the Executive, and the Executive wishes to serve NRG, in
the capacities and on the terms and conditions set forth in this Agreement:
NOW THEREFORE, it is hereby agreed as follows:
1. Term. NRG shall employ the Executive, and the Executive shall serve
NRG, on the terms and conditions set forth in this Agreement, for the five-year
period, (the "Employment Period") commencing on June 28, 1995 (the "Effective
Time") and ending June 27, 2000.
2. Position and Duties.
(a) During the term of this Agreement, Executive shall serve as
the highest level executive officer of NRG, with such duties and
responsibilities not inconsistent therewith as may from time to time be
assigned to him by the Board of Directors of NRG. The Executive shall be a
member of the Board on the first day
of the Employment Period, and the Board shall propose the Executive for
re-election to the Board throughout the Employment Period.
(b) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive shall
devote reasonable attention and time during normal business hours to the
business and affairs of NRG and, to the extent necessary to discharge the
responsibilities assigned to the Executive under this Agreement, use the
Executive's reasonable best efforts to carry out such responsibilities
faithfully and efficiently. It shall not be considered a violation of the
foregoing for the Executive to serve on corporate, industry, civic or
charitable boards or committees, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an employee of NRG in accordance with this Agreement.
3. Compensation.
(a) Base Salary. The Executive's compensation during the
Employment Period shall be determined by the Board upon the recommendation of
the Compensation Committee of the Board, subject to the next sentence and
Section 3 (b). During the Employment Period, the Execu-
2
tive shall receive an annual base salary ("Annual Base Salary") of not less
than his annual base salary from NRG as in effect immediately before the
Effective Time. The Annual Base Salary shall be payable in accordance with
NRG's regular payroll practice for its senior executives, as in effect from
time to time. During the Employment Period, the Annual Base salary shall be
reviewed for possible increase at least annually. Any increase in the Annual
Base Salary shall not limit or reduce any other obligation of NRG under this
Agreement. The Annual Base Salary shall not be reduced after any such increase,
and the term "Annual Base Salary" shall thereafter refer to the Annual Base
Salary as so increased.
(b) Other Compensation and Benefits.
(i) Retirement and Welfare Benefits. NRG agrees that during the
Employment Period it will provide Executive with retirement and
welfare benefits that, in the aggregate, are no less favorable to him
than those provided to any other officer of NRG. To the extent that
Executive's benefits are provided by plans sponsored by Northern
States Power Company ("NSP"), NRG agrees that Executive shall
participate in such plans on terms and conditions no less favorable
than those that apply to officers of NSP. To
3
the extent that Executive's benefits are provided by plans sponsored
by NRG, NRG agrees that Executive shall participate in such plans on
terms and conditions no less favorable than those that apply to any
other officer of NRG.
(ii) Incentive Compensation. During the Employment Period, the
Executive shall participate in short-term incentive compensation plans
and long-term incentive compensation plans providing him with the
opportunity to earn, on a year-by-year basis, greater short-term and
long-term incentive compensation (the "Incentive Compensation") than
any other NRG officer.
(c) Additional Benefits.
(i) Supplemental Retirement Benefits. During the Employment
Period, the Executive shall participate in a supplemental executive
retirement plan ("SERP") such that the aggregate value of the
retirement benefits that he and his spouse will receive at the end of
the Employment Period under all defined benefit plans of NRG, NSP and
their affiliates (whether qualified or not) will be not less than the
aggregate value of the benefits he would have received had he
continued, through the end of the
4
Employment Period to participate in the NSP Deferred Compensation
Plan, the NSP Excess Benefit Plan, and the NSP Pension Plan; provided,
that benefits under the SERP, shall also include the amount, if any,
that the NSP Pension Plan's actuaries reasonably estimate is necessary
to compensate Executive for the monthly defined benefit payments the
Executive did not receive, but would have received during the term of
this Agreement and prior to the date of his actual termination of
employment if monthly benefit payments had commenced at the end of the
month following the month in which the Executive first became eligible
for Early Retirement under the NSP Pension Plan. In addition, the SERP
shall offer the Executive the option to receive his benefits
thereunder in a single lump sum payment using actuarial assumptions
that the NSP Pension Plan's actuaries determine are reasonable in the
aggregate; provided, that such lump sum payment option shall be
subject to the consent of the Board in its sole discretion and must be
requested by the Executive not less than twelve months prior to the
Executive's termination of employment. Finally, if the Executive dies
while employed, or deemed pursuant to paragraph (a) of section 5 to be
employed
5
by NRG, his surviving spouse (or, if, he has no surviving spouse, his
estate) shall be entitled to receive a benefit equal in value to the
difference between the pension benefit that the Executive would have
received if he had retired (rather than died ) on the date of his
death and received a lump sum pension benefit and the lump sum value
of the pension payable in the absence of this provision; provided,
that in the case where the Executive has no surviving spouse, the
benefit pursuant to this sentence shall be paid in a lump sum; and
provided, further, that in the case where the Executive has a
surviving spouse, the benefit pursuant to this sentence shall be paid
in the form of a single life annuity for her life unless she elects a
single lump sum payment and the Board, in its sole discretion,
consents to the lump sum payment. Notwithstanding anything in the
preceding sentence to the contrary, if despite reasonable efforts NRG
is unable to obtain insurance on the life of the Executive with a
death benefit equal to the anticipated after-tax cost to NRG of the
benefit described in the preceding sentence at an average annual
premium cost of less than $7,000, then the value of such benefit
payable to Executive's surviv-
6
ing spouse or estate shall be reduced so that its after-tax cost to
NRG does not exceed the amount of insurance on the life of the
Executive that NRG could obtain at such cost.
(ii) During the Employment Period, the Company shall provide
the Executive with life insurance coverage (the "Life Insurance
Coverage") providing a death benefit to such beneficiary or
beneficiaries as the Executive may designate of not less than his
Annual Base Salary. Following the Employment Period, the Company shall
provide the Executive with a life insurance benefit at least equal to
the benefit that would have been provided to the executive after
termination of employment under the Northern States Power Company
Officer Survivor Benefit Plan as in effect immediately before the
Effective Time.
(d) Fringe Benefits. During the Employment Period, the Executive
shall be entitled to receive fringe benefits that are no less favorable to him
than those provided to any other officer of NRG.
4. Termination of Employment.
(a) Death or disability. The Executive's employment shall terminate
automatically upon the
7
Executive's death during the Employment Period. NRG shall be entitled to
terminate the Executive's employment because of the Executive's Disability
during the Employment period. "Disability" means that (i) the Executive has
been unable, for a period of 60 consecutive calendar days, to perform the
Executive's duties under this Agreement, as a result of physical or mental
illness or injury, and (ii) a physician selected by NRG or its insurers, and
acceptable to the Executive or the Executive's legal representative, has
determined that the Executive's incapacity is total and permanent. A
termination of the Executive's employment by NRG for Disability shall be
communicated to the Executive by written notice, and shall be effective on the
30th day after such notice is given to the Executive (the "Disability Effective
Date"), unless the Executive returns to full-time performance of the
Executive's duties before the Disability Effective Date.
(b) By the Company.
(i) NRG may terminate the Executive's employment during the
Employment Period for Cause or without Cause. "Cause" means:
A. the willful and continued failure of the Executive
substantially to perform the Executive's duties under this
8
Agreement, after the Board of NRG delivers to the Executive a
written demand for substantial performance that specifically
identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's duties;
B. the failure to achieve reasonable minimum performance
goals established by the Board and consistent with NRG's then
current long-term business plan; or
C. illegal conduct or gross misconduct by the Executive, in
either case that is willful and results in material and
demonstrable damage to the business of NRG.
No act or failure to act on the part of the Executive shall be considered
"willful" if it is done, or omitted to be done, by the Executive due to
circumstances beyond the Executive's control (which may include, but are not
limited to, the Executive's physical or mental illness or injury).
(ii) A termination of the Executive's employment for Cause
shall be effected in accordance with the following procedures. NRG
shall give the Executive written notice ("Notice of Termination for
Cause") of its intention to terminate the Executive's employment for
Cause, setting forth in reasonable detail the specific conduct of the
Executive that it considers to constitute Cause and the specific
9
provision(s) of this Agreement on which it relies, and stating the
date, time and place of the Special Board Meeting for Cause. The
"Special Board Meeting for Cause" means a meeting of the Board called
and held specifically for the purpose of considering the Executive's
termination for Cause, that takes place not less than ten and not more
than twenty business days after the Executive receives the Notice of
Termination for Cause. The Executive shall be given an opportunity,
together with counsel, to be heard at the Special Board Meeting for
Cause. The Executive's termination for Cause shall be effective when
and if a resolution is duly adopted at the Special Board Meeting for
Cause by affirmative vote of a majority of the entire membership of
the Board, excluding NRG employee directors, stating that in the good
faith opinion of the Board, the Executive is guilty of the conduct
described in the Notice of Termination for Cause, and that conduct
constitutes Cause under this Agreement.
(iii) A termination of the Executive's employment without Cause
shall be effective when and if a resolution is duly adopted by
10
the Board stating that the Executive is terminated without Cause.
(c) Good Reason.
(i) The Executive may terminate employment for Good Reason or
without Good Reason. "Good Reason" means:
A. the assignment to the Executive of any duties
inconsistent in any respect with paragraph (a) of Section 2 of
this Agreement, or any other action by NRG that results in a
diminution in the Executive's position, authority, duties or
responsibilities, unless such action is remedied by NRG promptly
after receipt of written notice thereof from the Executive;
B. any failure by NRG to comply with any provision of
Section 3 of this Agreement, unless such action is remedied by
NRG promptly after receipt of written notice thereof from the
Executive;
C. any purported termination of the Executive's employment
by NRG for a reason or in a manner not expressly permitted by
this Agreement;
D. any failure by NRG to comply with paragraph (c) of
Section 12 of this Agreement; or
E. any other substantial breach of this Agreement by NRG
that is not remedied by NRG promptly after receipt of written
notice thereof from the Executive.
(ii) A termination of employment by the Executive for Good
Reason shall be effectuated by giving NRG written notice ("Notice of
Termination for
11
Good Reason") of the termination, setting forth in reasonable detail
the specific conduct of NRG that constitutes Good Reason and the
specific provision(s) of this Agreement on which the Executive relies.
A termination of employment by the Executive for Good Reason shall be
effective on the fifth business day following the date when the Notice
of Termination for Good Reason is given, unless the notice sets forth
a later date (which date shall in no event be later than 30 days after
the notice is given).
(iii) A termination of the Executive's employment by the
Executive without Good Reason shall be effected by giving NRG written
notice of the termination.
(d) No Waiver. The failure to set forth any fact or circumstance in
a Notice of Termination for Cause, a Notice of Termination without Cause or a
Notice of Termination for Good Reason shall not constitute a waiver of the
right to assert, and shall not preclude the party giving notice from asserting,
such fact or circumstance in an attempt to enforce any right under or provision
of this Agreement.
(e) Date of Termination. The "Date of Termination" means the date
of the Executive's death, the
12
Disability Effective Date, the date on which the termination of the Executive's
employment by JRG for Cause or without Cause or by the Executive for Good
Reason is effective, or the date on which the Executive gives NRG notice of a
termination of employment without Good Reason, as the case may be.
5. Obligations of NRG upon Termination.
(a) By NRG Other Than for Cause or Disability; By the Executive
for Good Reason. If, during the Employment Period, NRG terminates the
Executive's employment, other than for Cause or Disability, or the Executive
terminates employment for Good Reason, NRG shall continue to provide the
Executive with the compensation and benefits set forth in Section 3 as if he
had remained employed by NRG pursuant to this Agreement through the end of the
Employment Period and then retired (at which time he will be treated as
eligible for all retiree welfare benefits and other benefits provided to
retired senior executives, as set forth in Section 3(b) and (c)); provided,
that the Incentive Compensation for such period shall be equal to the greater
of the target Incentive Compensation that the Executive would have been
eligible to earn for such period or the Incentive Compensation awarded for the
last complete incentive plan year ending
13
prior to Executive's Termination of Employment; provided, further, that in lieu
of stock-based or equity-based awards, the Executive shall be paid cash equal
to the fair market value at the time of grant, if any, (determined without
regard to any restrictions) of the awards that would otherwise have been
granted; and provided, finally, that during any period when the Executive is
eligible to receive welfare benefits of the type described in paragraph (b) (i)
of Section 3 under another employer-provided plan, the welfare benefits
provided by NRG under this paragraph (a) of Section 5 may be made secondary to
those provided under such other plan. The payments and benefits provided
pursuant to this paragraph (a) of Section 5 are intended as liquidated damages
for a termination of the Executive's employment by NRG other than for Cause or
Disability or for the actions of NRG leading to a termination of the
Executive's employment by the Executive for Good Reason, and shall be the sole
and exclusive remedy therefor.
(b) Death or Disability. If the Executive's employment is
terminated by reason of the Executive's death or Disability during the
Employment Period, NRG shall pay to the Executive or, in the case of the
Executive's death, to the Executive's designated
14
beneficiaries (or, if there is no such beneficiary, to the Executive's estate
or legal representative), in a lump sum in cash within 30 days after the Date
of Termination, the sum of the following amounts (the "Accrued Obligations"):
(1) any portion of the Executive's Annual Base Salary through the Date of
Termination that has not yet been paid; (2) an amount representing the
Incentive Compensation for the period that includes the Date of Termination,
computed by assuming that the amount of all such incentive Compensation would
be the same as the amount of such Incentive Compensation for the latest
corresponding period ending before the Date of Termination, and multiplying
that amount by a fraction, the numerator of which is the number of days in such
period through the Date of Termination, and the denominator of which is the
total number of days in the relevant period, (3) any compensation previously
deferred by the Executive (together with any accrued interest or earnings
thereon) that has not yet been paid; and (4) any accrued but unpaid Incentive
Compensation and vacation pay; and NRG shall have no further obligations under
this Agreement, except as specified in Section 6 below.
(c) By NRG for Cause; By the Executive Other than for Good Reason.
If the Executive's employment
15
is terminated by NRG for Cause during the Employment Period, NRG shall pay the
Executive the Annual Base Salary through the Date of Termination and the amount
of any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon), in each case to the extent not yet paid,
and NRG shall have no further obligations under this Agreement, except as
specified in Section 6 below. If the Executive voluntarily terminates
employment during the Employment Period, other than for Good Reason, NRG shall
pay the Accrued Obligations to the Executive in a lump sum in cash within 30
days of the Date of Termination, and NRG shall have no further obligations
under this Agreement, except as specified in Section 6 below.
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by NRG or any of its affiliated companies
for which the Executive may qualify, nor, subject to paragraph (f) of Section
11, shall anything in this Agreement limit or otherwise affect such rights as
the Executive may have under any contract or agreement with NRG or any of its
affiliated companies; provided, however, that Executive waives any rights he
has or may
16
hereafter acquire to participate in or to receive benefits under the NSP
Severance Plan, or any other severance plan, policy or arrangement that is
generally applicable to senior executives of NRG or NSP to the extent those
rights are based on his employment under this agreement or any prior
employment. Vested benefits and other amounts that the Executive is otherwise
entitled to receive under the Incentive Compensation, the Life Insurance
Coverage, or any other plan, policy, practice or program of, or any contract or
agreement with, NRG or any of its affiliated companies on or after the Date of
Termination shall be payable in accordance with the terms of each such plan,
policy, practice, program, contract or agreement, as the case may be, except as
explicitly modified by this Agreement.
7. Full Settlement. NRG's obligation to make the payments provided for
in, and otherwise to perform its obligations under, this Agreement shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action that NRG 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
17
and, except as specifically provided in paragraph (a) of Section 5 with respect
to benefits described in paragraph (b) (i) of Section 3, such amounts shall not
be reduced, regardless of whether the Executive obtains other employment.
8. Noncompetition Agreement. During the period of the Executive's
employment by NRG and until the later of (i) one year after the Executive's
Date of Termination or (ii) in the event Section 5(a) applies, the end of the
Employment Period, Executive agrees that he will not, directly or indirectly
own, manage, operate, join, work for, control or participate in the ownership,
management, operation or control of, or be connected in any manner with, any
business (whether in corporate, proprietorship, or partnership form or
otherwise) as a more than 10% owner in such business, or member of a group
controlling such business where such business is engaged in any activity which
competes with the business of NRG as conducted on the Date of Termination of
Executive's employment from NRG or which will compete with any proposed
business activity of NRG in the planning stage on such Date of Termination.
During the period of the Executive's employment by NRG and until the later of
(i) two years after the Executive's Date of Termination or (ii) in the event
Section 5(a)
18
applies, the end of the Employment Period, Executive agrees that he will not,
for his own benefit or for any other person, corporation or other entity (other
than NRG and its subsidiaries or affiliates) call on or solicit any customers
of NRG or any of its subsidiaries or affiliates for any business purpose that
competes with the business of NRG as conducted on the Date of Termination of
Executive's employment from NRG or which will compete with any proposed
business activity of NRG in the planning stage on such Date of Termination.
Executive acknowledges and agrees that the remedy at law for any breach of this
Section 8 will be inadequate and that NRG, in addition to any other relief
available to it, shall be entitled to temporary and permanent injunctive relief
without the necessity of proving actual damage. In the event that the
provisions of this covenant not to compete should ever be judicially determined
to exceed the limitation permitted by applicable law, then the parties hereto
agree that such provisions shall be reformed to set forth the maximum
limitations permitted.
9. Confidential Information.
(a) "Confidential Information" as used in this Section means
information that is not generally known and that is proprietary to NRG or that
NRG is obligated to
19
treat as proprietary. This information includes, without limitation:
(i) trade secret information about NRG, its strategies and its
products;
(ii) information concerning NRG's business, as NRG has
conducted it or as it may be conducted in the future; and
(iii) information concerning any of NRG's past, current, or
possible future products or services, including (without limitation)
information about NRG's research, development, accounting, marketing,
selling or leasing.
Any information that the Executive reasonably considers Confidential
Information, or that NRG treats as Confidential Information, will be presumed
to be Confidential Information (whether the Executive or others originated it
and regardless of how he obtained it).
(b) Except as required in his duties with NRG, during the period of
his employment by NRG and until the later of (i) two years after his Date of
Termination or (ii) in the event Section 5(a) applies, the end of the
Employment Period, the Executive will not use or disclose Confidential
Information to any person not authorized by NRG to receive it. When the
Executive's employment with
20
NRG ends, he will promptly turn over to NRG all records and any compositions,
articles, devices, apparatus and other items that disclose, describe or embody
Confidential Information, including all copies, reproductions and specimens of
Confidential Information in his possession, regardless of who prepared them.
(c) Notwithstanding anything in this Agreement to the contrary,
Executive's obligations under Sections 8 and 9 of this agreement shall not be
limited by the term of this Agreement and shall continue in full force
following the expiration of the term of this Agreement or its earlier
termination, as described in those sections.
10. Successors.
(a) This Agreement is personal to the Executive and, without the
prior written consent of NRG, 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 NRG and its successors and assigns.
21
(c) NRG shall 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 NRG expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that NRG would have been
required to perform it if no such succession had taken place. As used in this
Agreement, "NRG" shall mean both NRG as defined above and any such successor
that assumes and agrees to perform this Agreement, by operation of law or
otherwise.
11. Miscellaneous.
(a) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Minnesota, 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 except by a written agreement executed by the parties
hereto or their respective successors and legal representatives.
(b) All notices and other communications under this Agreement 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 pre-paid,
addressed as follows:
22
If to the Executive:
Xxxxx X. Xxxxxxxx
00000 Xxxxxxxxxxx Xxxxxxxxx XX
Xxxx Xxxxxx, XX 00000
If to NRG:
NRG Energy, Inc.
0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000
Attention: General Counsel
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph (b) of Section 11. Notices 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. If any provision of this Agreement shall be held
invalid or unenforceable in part, the remaining portion of such provision,
together with all other provisions of this Agreement, shall remain valid and
enforceable and continue in full force and effect to the fullest extent
consistent with law.
(d) Notwithstanding any other provision of this Agreement, NRG may
withhold from amounts payable
23
under this Agreement all federal, state, local and foreign taxes that are
required to be withheld by applicable laws or regulations.
(e) The Executive's or NRG's failure to insist upon strict
compliance with any provision of, or to assert any right under, this Agreement
(including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to paragraph (c) of Section 4 of this
agreement) shall not be deemed to be a waiver of such provision or right or of
any other provisions of or right under this agreement.
(f) The Executive and NRG acknowledge that this Agreement
supersedes any other agreement between them concerning the subject matter
hereof.
(g) The rights and benefits of the Executive under this Agreement
may not be anticipated, assigned, alienated or subject to attachment,
garnishment, levy, execution or other legal or equitable process except as
required by law. Any attempt by the Executive to anticipate, alienate, assign,
sell, transfer, pledge, encumber or charge the same shall be void. Payments
hereunder shall not be considered assets of the Executive in the event of
insolvency or bankruptcy.
24
(h) This Agreement may be executed in several counterparts, each of
which shall be deemed an original, and said counterparts shall constitute but
one and the same instrument.
25
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization of its Board of Directors, NRG has
caused this Agreement to be executed in its name on its behalf, all as of the
day and year first above written.
/s/XXXXX XXXXXXXX
---------------------
Xxxxx Xxxxxxxx
NRG Energy, Inc.
By /s/X.X. XXXXXX
---------------
26
