EXHIBIT 10.1
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT ("Agreement") is made and effective
as of the 30th of May, 2003, by and between RELIANT RESOURCES, INC., a Delaware
corporation having its principal place of business in Houston, Xxxxxx County,
Texas, and Xxxxxx X. Xxxxxx, an individual currently residing in Xxxxxx County,
Texas ("Executive").
WHEREAS, the Company considers it essential to the best
interests of its stockholders to xxxxxx the continued employment of key
management personnel; and
WHEREAS, the Board recognizes that, as is the case with many
publicly held corporations, the possibility of a Change of Control exists and
that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management to their assigned duties
without distraction in the face of potentially disturbing circumstances arising
from the possibility of a Change of Control;
NOW, THEREFORE, the Company and Executive have entered into
this Agreement, on the terms and conditions hereinafter stated.
1. DEFINITIONS: The following terms shall have the meanings set forth
below.
"AFFILIATE" means any company controlled by, controlling or
under common control with the Company within the meaning of Section 414 of the
Internal Revenue Code of 1986, as amended (the "Code").
"BOARD" means the board of directors of the Company.
"CAUSE" means Executive's (a) gross negligence in the
performance of Executive's duties, (b) intentional and continued failure to
perform Executive's duties, (c) intentional engagement in conduct which is
materially injurious to the Company or its Affiliates (monetarily or otherwise)
or (d) conviction of a felony, which, in the case of clauses (a), (b) or (c) has
not been cured within 30 days after a written demand for substantial performance
is delivered to Executive by the Board, which demand specifically identifies the
conduct which the Board asserts to constitute Cause. For purposes of the
definition of Cause, an act or failure to act on the part of Executive will be
deemed "intentional" only if done or omitted to be done by Executive not in good
faith and without reasonable belief that his/her action or omission was in the
best interest of the Company, and no act or failure to act on the part of
Executive will be deemed "intentional" if it was due primarily to an error in
judgment or negligence.
A "CHANGE OF CONTROL" shall be deemed to have occurred upon
the occurrence of any of the following events:
(a) 30% OWNERSHIP CHANGE: Any Person, other than an
ERISA-regulated pension plan established by the Company or an
Affiliate, makes an acquisition of Outstanding Voting Stock and is,
immediately thereafter, the beneficial owner of 30% or more of the then
Outstanding Voting Stock, unless such acquisition is made directly from
the Company in a transaction approved by a majority of the Incumbent
Directors; or any group is formed that is the beneficial owner of 30%
or more of the Outstanding Voting Stock; or
(b) BOARD MAJORITY CHANGE: Individuals who are Incumbent
Directors cease for any reason to constitute a majority of the members
of the Board; or
(c) MAJOR MERGERS AND ACQUISITIONS: Consummation of a Business
Combination unless, immediately following such Business Combination,
(i) all or substantially all of the individuals and entities that were
the beneficial owners of the Outstanding Voting Stock immediately prior
to such Business Combination beneficially own, directly or indirectly,
more than 70% of the then outstanding shares of voting stock of the
parent corporation resulting from such Business Combination in
substantially the same relative proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding
Voting Stock, (ii) if the Business Combination involves the issuance or
payment by the Company of consideration to another entity or its
shareholders, the total fair market value of such consideration plus
the principal amount of the consolidated long-term debt of the entity
or business being acquired (in each case, determined as of the date of
consummation of such Business Combination by a majority of the
Incumbent Directors) does not exceed 50% of the sum of the fair market
value of the Outstanding Voting Stock plus the principal amount of the
Company's consolidated long-term debt (in each case, determined
immediately prior to such consummation by a majority of the Incumbent
Directors), (iii) no Person (other than any corporation resulting from
such Business Combination) beneficially owns, directly or indirectly,
30% or more of the then outstanding shares of voting stock of the
parent corporation resulting from such Business Combination and (iv) a
majority of the members of the board of directors of the parent
corporation resulting from such Business Combination were Incumbent
Directors of the Company immediately prior to consummation of such
Business Combination; or
(d) MAJOR ASSET DISPOSITIONS: Consummation of a Major Asset
Disposition unless, immediately following such Major Asset Disposition,
(i) individuals and entities that were beneficial owners of the
Outstanding Voting Stock immediately prior to such Major Asset
Disposition beneficially own, directly or indirectly, more than 70% of
the then outstanding shares of voting stock of the Company (if it
continues to exist) and of the entity that acquires the largest portion
of such assets (or the entity, if any, that owns a majority of the
outstanding voting stock of such acquiring entity) and (ii) a majority
of the members of the board of directors of the Company (if it
continues to exist) and of the entity that acquires the largest portion
of such assets (or the entity, if any, that
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owns a majority of the outstanding voting stock of such acquiring
entity) were Incumbent Directors of the Company immediately prior to
consummation of such Major Asset Disposition.
For purposes of the foregoing definition,
(1) the term "Person" means an individual, entity or group;
(2) the term "group" is used as it is defined for purposes of
Section 13(d)(3) of the Securities Exchange Act of 0000 (xxx "Xxxxxxxx
Xxx");
(3) the term "beneficial owner" is used as it is defined for
purposes of Rule 13d-3 under the Exchange Act;
(4) the term "Outstanding Voting Stock" means outstanding
voting securities of the Company entitled to vote generally in the
election of directors; and any specified percentage or portion of the
Outstanding Voting Stock (or of other voting stock) shall be determined
based on the combined voting power of such securities;
(5) the term "Incumbent Director" means a director of the
Company (x) who was a director of the Company on January 1, 2003 or (y)
who becomes a director subsequent to such date and whose election, or
nomination for election by the Company's shareholders, was approved by
a vote of a majority of the Incumbent Directors at the time of such
election or nomination, except that any such director shall not be
deemed an Incumbent Director if his or her initial assumption of office
occurs as a result of an actual or threatened election contest or other
actual or threatened solicitation of proxies by or on behalf of a
Person other than the Board;
(6) the term "election contest" is used as it is defined for
purposes of Rule 14a-11 under the Exchange Act;
(7) the term "Business Combination" means (x) a merger or
consolidation involving the Company or its stock or (y) an acquisition
by the Company, directly or through one or more subsidiaries, of
another entity or its stock or assets;
(8) the term "parent corporation resulting from a Business
Combination" means the Company if its stock is not acquired or
converted in the Business Combination and otherwise means the entity
which as a result of such Business Combination owns the Company or all
or substantially all the Company's assets either directly or through
one or more subsidiaries; and
(9) the term "Major Asset Disposition" means the sale or other
disposition in one transaction or a series of related transactions of
70% or more of the assets of the Company and its subsidiaries on a
consolidated basis; and any
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specified percentage or portion of the assets of the Company shall be
based on fair market value, as determined by a majority of the
Incumbent Directors.
"COMPANY" means Reliant Resources, Inc., and, except for
purposes of determining whether a Change of Control has occurred, any successor
thereto.
"COVERED TERMINATION" means any termination of Executive's
employment with the Company or any Affiliate thereof during the term of this
Agreement that does not result from any of the following:
(i) death;
(ii) disability entitling Executive to benefits under
the Company's long-term disability plan;
(iii) termination for Cause; or
(iv) termination by Executive.
Notwithstanding the foregoing, a Covered Termination shall also include a
termination by Executive for Good Reason.
"GOOD REASON" shall mean the occurrence of any of the
following events during the period commencing on the date hereof and ending on
the third anniversary of the date hereof
(i) assignment to the Executive any duties inconsistent with
the Executive's position (including offices, titles and reporting
requirements), authority, duties or responsibilities with the Company
in effect on the date hereof;
(ii) removal of the Executive from, or fail to re-elect or
appoint the Executive to, any duties or position with the Company or
any of its Affiliates that were assigned or held by the Executive on
the date hereof, except that a nominal change in the Executive's title
that is merely descriptive and does not affect rank or status shall not
constitute such an event;
(iii) taking any other action that results in a diminution in
such position, authority, duties, status or responsibilities or
otherwise take any action that interferes therewith;
(iv) reducing the Executive's annual base salary as in effect
on the date hereof or as the Executive's annual base salary may be
increased from time to time hereafter;
(v) reducing the Executive's annual bonus opportunity to an
amount less the bonus opportunity as in effect as of the date hereof at
any time on or prior to the third anniversary of the Effective Date;
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(vi) relocating the Executive's principal office outside of
the metropolitan area of the City of Houston, Texas;
(vii) failure to (x) continue in effect any bonus, incentive,
profit sharing, performance, savings, retirement or pension policy,
plan, program or arrangement (such policies, plans, programs and
arrangements collectively being referred to herein as "Basic Benefit
Plans"), including, but not limited to, any deferred compensation,
supplemental executive retirement or other retirement income, stock
option, stock purchase, stock appreciation, or similar policy, plan,
program or arrangement of the Company, in which the Executive was a
participant on the date hereof, unless an equitable and reasonably
comparable arrangement (embodied in a substitute or alternative benefit
or plan) shall have been made with respect to such Basic Benefit Plan,
or (y) continue the Executive's participation in any Basic Benefit Plan
(or any substitute or alternative plan) on substantially the same
basis, both in terms of the amount of benefits provided to the
Executive (which are in any event always subject to the terms of any
applicable Basic Benefit Plan) and the level of the Executive's
participation relative to other participants, as existed on the date
hereof unless it is part of a general reduction in those types of
programs applicable to all similarly situated executives;
(viii) failure to continue to provide the Executive with
benefits substantially similar to those enjoyed by the Executive under
any of the Company's other employee benefit plans, policies, programs
and arrangements, including, but not limited to, life insurance,
medical, dental, health, hospital, accident or disability plans, in
which the Executive was a participant on the date hereof unless it is
part of a general reduction in those types of programs applicable to
all similarly situated executives;
(ix) taking any action that would directly or indirectly
reduce any other non-contractual benefits that were provided to the
Executive by the Company on the date hereof or deprive the Executive of
any fringe benefit enjoyed by the Executive on the date hereof unless
it is part of a general reduction in those types of programs applicable
to all similarly situated executives;
(x) failure to provide the Executive with the number of paid
vacation days to which the Executive was entitled in accordance with
the Company's vacation policy in effect on the date hereof;
(xi) failure to continue to provide Executive with office
space, related facilities and support personnel (including, but not
limited to, administrative and secretarial assistance) (y) that are
both commensurate with Executive's responsibilities to and position
with the Company on the date hereof and not materially dissimilar to
the office space, related facilities and support personnel provided to
other employees of the Company having comparable responsibility to the
Executive, or (z) that are physically located at the Company's
principal executive offices;
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(xii) requiring the Executive to perform a majority of his
duties outside the Company's principal executive offices for a period
of more than 21 consecutive days or for more than 90 days in any
calendar year;
(xiii) failure to honor any provision of this Agreement;
(xiv) giving effective notice of an election to terminate at
the end of the term; or
(xv) purporting to terminate the Executive's employment by the
Company for any reason other than Cause;
and shall also mean the occurrence of any of the following events on or
following the occurrence of a Change of Control:
(a) a significant reduction in the duties or responsibilities
of Executive from those applicable to him/her immediately prior to the
date on which a Change of Control occurs;
(b) a reduction by the Company in Executive's annual base
salary as in effect on the date hereof or as the same may be increased
from time to time;
(c) the failure by the Company to continue in effect any
compensation plan in which Executive participates immediately prior to
the Change of Control which is material to Executive's total
compensation, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such
plan, or the failure by the Company to continue Executive's
participation therein (or in such substitute or alternative plan) on a
basis not materially less favorable, both in terms of the amount or
timing of payment of benefits provided and the level of Executive's
participation relative to other participants, as existed immediately
prior to the Change of Control;
(d) the failure by the Company to continue to provide
Executive with benefits substantially similar to those enjoyed by
Executive under any of the Company's pension, savings, life insurance,
medical, health and accident, or disability plans in which Executive
was participating immediately prior to the Change of Control, the
taking of any other action by the Company which would directly or
indirectly materially reduce any of such benefits or deprive Executive
of any material fringe benefit enjoyed by Executive at the time of the
Change of Control or the failure by the Company to provide Executive
with paid vacation on the same basis as was applicable to Executive
immediately prior to the Change of Control; or
(e) a change in the location of Executive's principal place of
employment with the Company by more than 50 miles from the location
where Executive was principally employed immediately prior to the date
on which a
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Change of Control occurs or the Company requiring Executive to be based
in a location other than that of the Company's principal executive
offices.
"PERFORMANCE SHARES" means an award issued to the Executive
under the Company's Long-Term Incentive Plan or any successor plan, in the form
of shares of common stock of the Company or any successor, or units denominated
in shares of Common Stock of the Company or any successor the vesting of which
is subject to the attainment of one or more performance objectives.
"RESTRICTED SHARES" means an award issued to the Executive
under the Company's Long-Term Incentive Plan, the 1994 Houston Industries
Incorporated Long-Term Incentive Compensation Plan, as amended, the Reliant
Energy, Incorporated Long-Term Incentive Plan, the Reliant Resources, Inc.
Transition Stock Plan or any successor plan in the form of shares of common
stock of the Company or of CenterPoint Energy, Incorporated or any successor or
units denominated in shares of Common Stock of the Company or of CenterPoint
Energy, Incorporated or any successor that is subject to a time-based vesting
schedule.
"SALARY" means Executive's base salary as in effect
immediately prior to the termination of his employment or, if higher, the base
salary in effect immediately prior to the first occurrence of an event or
circumstance constituting Good Reason.
"STOCK OPTION" means a right to purchase a specified number of
shares of common stock of the Company or of Reliant Energy, Incorporated at a
specified price issued to Executive under the 1994 Houston Industries
Incorporated Long-Term Incentive Compensation Plan, as amended, the Company's
2001 and 2002 Long-Term Incentive Plans, the Company's 2002 Stock Plan, the
Reliant Energy, Incorporated Long-Term Incentive Plan, or any successor plan.
"TARGET BONUS PERCENTAGE" means Executive's target incentive
award opportunity under the Reliant Resources, Inc. Annual Incentive
Compensation Plan (or any successor plan) in effect immediately prior to the
termination of his employment or, if higher, immediately prior to the first
event or circumstance constituting Good Reason.
"WAIVER AND RELEASE" means a legal document, in the form
attached hereto as Exhibit A or such other form as may be prescribed by the
Company, but which form may not be altered, amended or modified after execution
of a binding agreement to effect a Change of Control without the consent of the
Executive.
"WELFARE BENEFIT COVERAGE" shall mean each of life insurance,
medical, dental and vision benefits.
2. SEVERANCE BENEFITS: If Executive (a) experiences a Covered
Termination, (b) executes and returns to the Company a Waiver and Release within
the time period prescribed in the Waiver and Release following the date of
Executive's Covered Termination, and (c) does not revoke such Waiver and Release
within the time period prescribed in the Waiver and
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Release, then Executive shall be entitled to receive, as additional compensation
for services rendered to the Company (including its Affiliates), the following
severance benefits:
(a) CASH SEVERANCE PAYMENTS: Executive will receive an amount
equal to the product of (1) three and (2) the sum of (a) the Salary and
(b) the greater of (i) the product of the Salary multiplied by the
Target Bonus Percentage, or (ii) the highest annual bonus paid to
Executive during his employment with the Company, in one lump sum
payment, within 15 days after the expiration of the Waiver and Release
revocation period.
(b) PRO RATED BONUS: Executive will receive an amount equal to
the product of (1) the Salary and (2) Target Bonus Percentage, with the
product of (1) and (2) prorated based on the number of days Executive
was employed during the bonus year in which his employment terminated.
Such bonus shall be paid within 15 days after the expiration of the
Waiver and Release revocation period.
(c) TREATMENT OF EQUITY AWARDS. Executive will become fully
vested in each outstanding stock option, restricted stock, performance
share and other equity based award from the Company that was granted to
Executive prior to January 1, 2004 (including, without limitation, the
grant of 212,000 shares of restricted stock made to Executive in May,
2003) and, to the extent that any such award contains a provision for
an exercise period, the exercise period for each such award shall be
extended through the maximum term of the award, which maximum term
shall not be shortened due to the termination of Executive's employment
with the Company or any Affiliate.
(d) WELFARE BENEFIT COVERAGE: Continued Welfare Benefit
Coverage for Executive and his/her eligible dependents at the active
employee rate for a period of (1) 3 years following the date of
Executive's Covered Termination which occurs following a Change of
Control or (2) 18 months following any other Covered Termination. Such
entitlement shall apply only to those Welfare Benefit Coverages that
the Company has in effect from time to time for active employees. If
Executive's employment is terminated following a Change of Control and
Executive would have become entitled to benefits under the Company's
postretirement health care or life insurance plans, as in effect
immediately prior to the termination or of his employment (or, if more
favorable to Executive, as in effect immediately prior to the first
occurrence of an event or circumstance constituting Good Reason), had
the Executive's employment terminated at any time during the period of
three years following the date upon which Executive's employment was
terminated, the Company shall provide such post-retirement health care
or life insurance benefits to Executive and Executive's dependents
commencing on the later of (i) the date on which such coverage would
have first become available and (ii) the date on which benefits
described in the first sentence of this paragraph 2(c) terminate.
Benefits otherwise receivable by Executive pursuant to this Section
2(c) shall be reduced to the extent Executive becomes eligible to
receive benefits pursuant to a government-sponsored health insurance or
health care program.
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(e) OUTPLACEMENT: Reimbursement for fees incurred for
outplacement services within twenty-four months of the date of
Executive's Covered Termination in connection with Executive's efforts
to obtain new employment, up to a maximum of $100,000.
(f) FINANCIAL PLANNING: Continued access, for the remainder of
the calendar year in which the Covered Termination occurs or for 60
days (if greater), to the financial planning services available to
executive employees at the time of Covered Termination.
3. CHANGE OF CONTROL EQUITY-BASED BENEFITS: Without limiting the
provisions of Section 2(c), immediately upon any Change of Control or, if
earlier, immediately upon a Covered Termination, Executive shall be entitled to
receive, as additional compensation for services rendered to the Company
(including its Affiliates), benefits with respect to any equity based
compensation in accordance with the applicable plans and agreements.
4. CERTAIN ADDITIONAL PAYMENTS: 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 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 4 (a "Payment")) would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties incurred by
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 Executive of all taxes (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, 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 4, all
determinations required to be made under this Section 4, 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 Executive within 15 business
days of the receipt of notice from 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 Change of Control, the Executive may 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 4, shall be paid by the Company to 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 Executive, it shall furnish
Executive with a written opinion that failure to report the Excise Tax on
Executive's applicable
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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 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 4 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 Executive.
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 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. 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 Executive in writing prior to the expiration of such period
that it desires to contest such claim, 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 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 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 4, 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 Executive to pay the tax claimed and xxx for a refund
or contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or
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more appellate courts, as the Company shall determine; provided, however, that
if the Company directs Executive to pay such claim and xxx for a refund, the
Company shall advance the amount of such payment to Executive, on an
interest-free basis and shall indemnify and hold 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 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
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 Executive of an amount advanced by
the Company pursuant to the foregoing provisions of this Section 4, Executive
becomes entitled to receive any refund with respect to such claim, Executive
shall (subject to the Company complying with the requirements of this Section 4)
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 Executive of an amount advanced by the Company pursuant to the
foregoing provisions of this Section 4, a determination is made that Executive
shall not be entitled to any refund with respect to such claim and the Company
does not notify 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 one
or more Welfare Benefit Coverages pursuant to Section 2(c), and the amount of
such benefits or the value of such benefit coverage (including 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 or such welfare
benefit coverage.
5. LEGAL FEES AND EXPENSES: It is the intent of the Company that
Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of 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 Executive
hereunder. Accordingly, if it should appear to 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
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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 Executive hereunder, the Company irrevocably
authorizes the Executive from time to time to retain counsel of Executive's
choice, at the expense of the Company as hereafter provided, to advise and
represent 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 Executive entering into an attorney-client relationship with such
counsel, and in that connection the Company and Executive agree that a
confidential relationship will exist between Executive and such counsel. Without
regard to whether 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 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 Executive
was frivolous. In such a case, the portion of such fees and expenses incurred by
Executive as a result of such frivolous claim or defense shall become
Executive's sole responsibility and any funds advanced by the Company or by a
trust created to secure such payment shall be repaid.
In the event a Change of Control occurs, the performance of
the Company's obligations under this Section 5 will be funded by amounts
deposited or which may be deposited in trust pursuant to certain trust
agreements to which the Company may be a party providing that the fees and
expenses of counsel selected from time to time by Executive pursuant to this
Section 5 will be paid, or reimbursed to Executive if paid by Executive, either
in accordance with the terms of such trust agreements, or, if not so provided,
on a regular, periodic basis upon presentation by Executive to the Company or 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, if any, contemplated immediately above. The pendency
of a claim by the Company that a claim or defense of Executive is frivolous or
otherwise lacking merit shall not excuse the Company (or the trustee of a Trust
contemplated by this Section 5) 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 5 will not
limit the rights of Executive hereunder. Subject to the foregoing, 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.
6. CONFIDENTIALITY: Executive acknowledges that pursuant to this
Agreement, the Company agrees to provide to him Confidential Information
regarding the Company and the Company's business and has previously provided him
other such Confidential Information. In return for this and other consideration
provided under this Agreement, Executive agrees that he will not, while employed
by the Company and thereafter, disclose or make available to any other person or
entity, or use for his own personal gain, any Confidential Information, except
for such disclosures as required in the performance of his duties hereunder as
may otherwise be required by law or legal process (in which case Executive and
shall notify the Company of such legal or
12
judicial proceeding as soon as practicable following his receipt of notice of
such a proceeding, and permit the Company to seek to protect its interests and
information). For purposes of this Agreement, "Confidential Information" shall
mean any and all information, data and knowledge that has been created,
discovered, developed or otherwise become known to the Company or any of its
affiliates or ventures or in which property rights have been assigned or
otherwise conveyed to the Company or any of its affiliates or ventures, which
information, data or knowledge has commercial value in the business in which the
Company is engaged, except such information, data or knowledge as is or becomes
known to the public without violation of the terms of this Agreement. By way of
illustration, but not limitation, Confidential Information includes business
trade secrets, secrets concerning the Company's plans and strategies, nonpublic
information concerning material market opportunities, technical trade secrets,
processes, formulas, know-how, improvements, discoveries, developments, designs,
inventions, techniques, marketing plans, manuals, records of research, reports,
memoranda, computer software, strategies, forecasts, new products, unpublished
financial information, projections, licenses, prices, costs, and employee,
customer and supplier lists or parts thereof.
7. RETURN OF PROPERTY: Executive agrees that at the time of leaving the
Company's employ, he will deliver to the Company (and will not keep in his
possession, recreate or deliver to anyone else) all Confidential Information as
well as all other devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches, materials,
equipment, customer or client lists or information, or any other documents or
property (including all reproductions of the aforementioned items) belonging to
the Company or any of its affiliates or ventures, regardless of whether such
items were prepared by Executive.
8. NON-SOLICITATION AND NON-COMPETITION:
(a) For consideration provided under this Agreement, including
but not limited to the Company's agreement to provide Executive with
Confidential Information regarding the Company and the Company's
business, Executive agrees that while employed by the Company and for
one year following a Covered Termination that does not occur following
a Change of Control, he shall not, without the prior written consent of
the Company, directly or indirectly, (i) hire or induce, entice or
solicit (or attempt to induce entice or solicit) any employee of the
Company or any of its affiliates or ventures to leave the employment of
the Company or any of its affiliates or ventures or (ii) solicit or
attempt to solicit the business of any customer or acquisition prospect
of the Company or any of its affiliates or ventures with whom Executive
had any actual contact while employed at the Company.
(b) Additionally, for consideration provided under this
Agreement, including but not limited to the Company's agreement to
provide Executive with Confidential Information regarding the Company
and the Company's business, Executive agrees that while employed by the
Company and for one year following a Covered Termination that does not
occur following a Change of Control, he will not, without the prior
written consent of the Company, acting alone or in conjunction with
others, either directly or indirectly, engage in any business that
13
is in competition with the Company or accept employment with or render
services to such a business as an officer, agent, employee, independent
contractor or consultant, or otherwise engage in activities that are in
competition with the Company.
(c) The restrictions contained in this Paragraph 8 are limited
to a 50-mile radius around any geographical area in which the Company
engages (or has definite plans to engage) in operations or the
marketing of its products or services at the time of a Covered
Termination.
(d) Executive acknowledges that these restrictive covenants
under this Agreement, for which Executive received valuable
consideration from the Company as provided in this Agreement, including
but not limited to the Company's agreement to provide Executive with
Confidential Information regarding the Company and the Company's
business are ancillary to otherwise enforceable provisions of this
Agreement that the consideration provided by the Company gives rise to
the Company's interest in restraining Executive from competing and that
the restrictive covenants are designed to enforce Executive's
consideration or return promises under this Agreement. Additionally,
Executive acknowledges that these restrictive covenants contain
limitations as to time, geographical area, and scope of activity to be
restrained that are reasonable and do not impose a greater restraint
than is necessary to protect the goodwill or other legitimate business
interests of the Company, including but not limited to the Company's
need to protect its Confidential Information.
9. NOTICES: For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to Company: Reliant Resources, Inc.
0000 Xxxxxxxxx
Xxxxxxx, Xxxxx 00000
ATTENTION: Chairman of the Board
If to Executive: Xxxxxx X. Xxxxxx
0000 Xxxxx
Xxxxxxx, Xxxxx 00000
or to such other address as either party may furnish to the other in writing in
accordance herewith, except that notices of changes of address shall be
effective only upon receipt.
10. APPLICABLE LAW: The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Texas, including the Texas statute of
limitations, but without giving effect to the principles of conflict of laws of
such State.
14
11. SEVERABILITY: If a court of competent jurisdiction determines that
any provision of this Agreement is invalid or unenforceable, then the invalidity
or unenforceability of that provision shall not affect the validity or
enforceability of any other provision of this Agreement and all other provisions
shall remain in full force and effect.
12. WITHHOLDING OF TAXES: The Company may withhold from any payments
payable under this Agreement all federal, state, city or other taxes as may be
required pursuant to any law or governmental regulation or ruling.
13. NO ASSIGNMENT; SUCCESSORS: Executive's right to receive payments or
benefits hereunder shall not be assignable or transferable, whether by pledge,
creation or a security interest or otherwise, whether voluntary, involuntary, by
operation of law or otherwise, other than a transfer by will or by the laws of
descent or distribution, and in the event of any attempted assignment or
transfer contrary to this Section 13 the Company shall have no liability to pay
any amount so attempted to be assigned or transferred. 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.
This Agreement shall be binding upon and inure to the benefit
of the Company, its successors and assigns (including, without limitation, any
company into or with which the Company may merge or consolidate).
14. PAYMENT OBLIGATIONS ABSOLUTE: Except for the requirement of the
Executive to execute and return to the Company the Waiver and Release in
accordance with Section 2, the Company's obligation to pay (or cause one of its
Affiliates to pay) Executive the amounts and to make the arrangements provided
herein shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Company (including its Affiliates)
may have against him/her or anyone else. All amounts payable by the Company
(including its Affiliates hereunder) shall be paid without notice or demand.
Executive shall not be obligated to sign an agreement not to compete with the
Company or to seek other employment in mitigation of the amounts payable or
arrangements made under any provision of this Agreement, and the obtaining of
any other employment shall in no event effect any reduction of the Company's
obligations to make (or cause to be made) the payments and arrangements required
to be made under this Agreement.
15. NUMBER AND GENDER: Wherever appropriate herein, words used in the
singular shall include the plural and the plural shall include the singular. The
masculine gender where appearing herein shall be deemed to include the feminine
gender.
16. CONFLICTS: This Agreement constitutes the entire understanding of
the parties with respect to the subject matter hereof and supersedes any other
prior agreement or other understanding, whether oral or written, express or
implied, between them concerning, related to or otherwise in connection with,
the subject matter hereof (including any statement, agreement or understanding
which may have been made or reached in connection with the negotiation of an
employment agreement between Executive and the Company (or any predecessor of
the
15
Company) and that, following the date hereof, no such agreement or understanding
shall be of any further force or effect. Executive acknowledges that he has no
rights or claims against CenterPoint Energy, Inc. ("CenterPoint") with respect
to any purported employment agreement between Executive and CenterPoint.
17. TERM: The effective date of the Agreement is May 30, 2003. The term
of this Agreement shall be for a period of three years after such effective
date; provided, however, upon each anniversary of the effective date, the term
shall be extended automatically for an additional one-year period unless the
Company shall have delivered to Executive written notice of nonrenewal prior to
the applicable anniversary. Upon the occurrence of a Change of Control, the term
shall be automatically extended to a date, which is three years from the date
upon which the Change of Control occurs. If Executive's employment is terminated
prior to the occurrence of a Change of Control this Agreement shall immediately
terminate, except that terms of this Agreement, which must survive the
termination this Agreement in order to be effectuated (including the provisions
of Sections 2,5,6,7 and 8) shall survive.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered this 30th day of May 2003, but effective as of the day
and year first above written.
RELIANT RESOURCES, INC.
By /s/ XXXX X. STAFF
---------------------------------------
Xxxx X. Staff
Chairman and Chief Executive Officer
EXECUTIVE
/s/ XXXXXX X. XXXXXX
-----------------------------------------
Xxxxxx X. Xxxxxx
16
EXHIBIT A
WAIVER AND RELEASE
In exchange for the payment to me of the severance benefits
described in Section 2 of the Severance Agreement between Reliant Resources,
Inc. (the "Company") and me effective as of _______, 200_ (the "Agreement") and
of other remuneration and consideration provided for in the Agreement (the
"Benefits"), which is in addition to any remuneration or benefits to which I am
already entitled, I agree not to xxx and to release and forever discharge the
Company and all of its parents, subsidiaries, affiliates and unincorporated
divisions, and its or their respective officers, directors, agents, servants,
employees, successors, assigns, insurers, employee benefit plans and
fiduciaries, and agents of any of the foregoing (collectively, the "Corporate
Group") from any and all damages, losses, causes of action, expenses, demands,
liabilities, and claims on behalf of myself, my heirs, executors,
administrators, and assigns with respect to all matters relating to or arising
out of my employment with or separation from the Company, under any employee
benefit plan or claims for indemnity arising as a result of my being an officer
or fiduciary of the Corporate Group. The release does not apply to claims or
causes of action accruing after the date hereof.
I ACKNOWLEDGE THAT SIGNING THIS WAIVER AND RELEASE IS AN
IMPORTANT LEGAL ACT AND THAT I HAVE BEEN ADVISED IN WRITING TO CONSULT AN
ATTORNEY PRIOR TO EXECUTION. I ALSO UNDERSTAND THAT, IN ORDER TO BE ELIGIBLE FOR
THE BENEFITS, I MUST SIGN AND RETURN THIS WAIVER AND RELEASE TO THE COMPANY'S
GENERAL COUNSEL. I ACKNOWLEDGE THAT I HAVE BEEN GIVEN AT LEAST 21 DAYS TO
CONSIDER WHETHER TO EXECUTE THIS WAIVER AND RELEASE.
In exchange for the payment to me of the Benefits, which is in
addition to any remuneration or benefits to which I am already entitled, (1) I
agree not to xxx in any local, state or federal court regarding or relating in
any way to my employment with or separation from the Company or any member of
the Corporate Group, and (2) I knowingly and voluntarily waive all claims and
release the Corporate Group from any and all claims, demands, actions,
liabilities, and damages, whether known or unknown, arising out of or relating
in any way to my employment with or separation from the Company or any member of
the Corporate Group, except to the extent that my rights are vested under the
terms of employee benefit plans sponsored by the Corporate Group, rights
described in the Agreement, claims for indemnity from the Corporate Group
arising as a result of being an officer or fiduciary of the Corporate Group, and
except with respect to such rights or claims as may arise after the date this
Waiver and Release is executed. Except for the matters identified above that are
not the subject of this Waiver and Release, this Waiver and Release includes,
but is not limited to, claims and causes of action under: Title VII of the Civil
Rights Act of 1964, as amended; the Age Discrimination in Employment Act of
1967, as amended, including the Older Workers Benefit Protection Act of 1990;
the Civil Rights Act of 1866, as amended; the Civil Rights Act of 1991; the
Americans with Disabilities Act of 1990; the Energy Reorganization Act, as
amended, 42 U.S.C. 5851; the Workers Adjustment and Retraining Notification Act
of 1988; the Pregnancy Discrimination Act of 1978; the Employee Retirement
Income Security Act of 1974, as amended; the Family and
17
Medical Leave Act of 1993; the Fair Labor Standards Act; the Occupational Safety
and Health Act; the Texas Labor Code 1.001 et. seq.; the Texas Labor Code;
the Xxxxxxxx-Xxxxx Act of 2002; claims in connection with workers' compensation
or "whistle blower" statutes; and claims for breach of contract (whether written
or oral, expressed or implied), tort, personal injury, defamation, negligence or
wrongful termination; and any other claims under the statutory, regulatory,
administrative, constitutional or common law of any nation, state, locality or
any other jurisdiction.
Further, I expressly represent that no promise or agreement
which is not expressed in this Waiver and Release has been made to me in
executing this Waiver and Release, and that I am relying on my own judgment in
executing this Waiver and Release, and that I am not relying on any statement or
representation of any member of the Corporate Group or any of their agents. I
agree that this Waiver and Release is valid, fair, adequate and reasonable, is
with my full knowledge and consent, was not procured through fraud, duress or
mistake and has not had the effect of misleading, misinforming or failing to
inform me. I acknowledge and agree that the Company will withhold any taxes
required by federal or state law from the Benefits otherwise payable to me.
I understand that for a period of seven calendar days
following the Company's receipt of this Waiver and Release executed by me, I may
revoke my acceptance of the offer of the Benefits by delivering a written
statement to the Company's General Counsel, by hand or by registered-mail, in
which case the Waiver and Release will not become effective. In the event I
revoke my acceptance of this offer, the Company shall have no obligation to
provide me the Benefits. I understand that failure to revoke my acceptance of
the offer within seven days after the date I sign this Waiver and Release will
result in this Waiver and Release being permanent and irrevocable.
I agree that the terms of this Waiver and Release are
CONFIDENTIAL and that any disclosure to anyone for any purpose whatsoever
except as required by law by me or my agents, representatives, heirs, spouse,
employees or spokespersons shall be a breach of this Waiver and Release.
I agree that this Waiver and Release is valid. I agree that
this Waiver and Release is fair, adequate and reasonable. I agree that my
consent to this Waiver and Release was with my full knowledge and was not
procured through fraud, duress or mistake.
I acknowledge that payment of the Benefits is not an admission
by any member of the Corporate Group that they engaged in any wrongful or
unlawful act or that any member of the Corporate Group violated any law or
regulation. I understand that nothing in this Waiver and Release is intended to
prohibit, restrict or otherwise discourage me from engaging in any activity
related to matters of public or employee health or safety, specifically to
include activity protected under 42 U.S.C. Section 5851 and 10 C.F.R. Section
50.7, including, but not limited to, providing information to the Nuclear
Regulatory Commission ("NRC") regarding nuclear safety or quality concerns,
potential violations or other matters within the NRC's jurisdiction. Similarly,
nothing herein is intended to prohibit, restrict or otherwise discourage me or
any other individual from making reports of unsafe, wrongful or illegal conduct
to any agency or branch of the local, state
18
or federal government, including law enforcement authorities, public utility
commissions, energy regulatory commissions or any other lawful authority.
I understand and agree that in the event of any breach of the
provisions of Sections 6 or 8 of the Agreement, or threatened breach, by me, the
Company, in its discretion, may initiate appropriate action as provided in those
Sections and may recover all lawful damages which it may prove by a
preponderance of the evidence in accordance with the law specified in those
Sections.
I acknowledge that this Waiver and Release set forth the
entire understanding and agreement between me and the Company concerning the
subject matter of this Waiver and Release and supersede any prior or
contemporaneous oral and/or written agreements or representations, if any,
between me and Company or any other member of the Corporate Group. The
invalidity or enforceability of any provisions hereof shall in no way affect the
validity or enforceability of any other provision.
------------------------------------
Name
------------------------------------
Social Security Number
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Signature Date
19
