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EXHIBIT 10.40
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of August 11, 2000 (the
"Agreement"), is made by and between COGENTRIX ENERGY, INC., a North Carolina
corporation (the "Company"), and Xxxxx X. Xxxxx, a resident of Charlotte, North
Carolina (the "Employee").
WHEREAS, the Company is in the business of developing and
operating independent power and cogeneration facilities (the "Business"); and
WHEREAS, the Company and the Employee are mutually desirous
that the Company employ the Employee, and the Employee accept employment, as
Chairman of the Board ("Chairman") and Chief Executive Officer of the Company
upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements of the parties herein contained, the Company
and the Employee hereby agree as follows:
1. Duties.
1.1 During the Term (as defined below), the Employee shall be
the Chairman and Chief Executive Officer of the Company (or such other and
comparable titles and positions as shall be given the Employee by the Board of
Directors of the Company (the "Board")), shall faithfully perform for the
Company the duties of said offices and shall perform such other duties of an
executive nature as shall be requested from time to time by the Board of the
Company. The Employee shall have such corporate power and authority as are
necessary to perform the duties of such office and any other office(s) that are
so assigned to him. The Employee shall report directly to the Board. The
Employee shall devote substantially all of his business time and effort to the
performance of his duties hereunder, shall use his best efforts to advance the
best interests of the Company and shall not engage in outside business
activities which materially interfere with the performance of his duties
hereunder.
1.2 The duties to be performed by the Employee hereunder shall
be performed primarily in Charlotte, North Carolina, subject to reasonable
travel requirements on behalf of the Company. The Company shall not relocate the
Employee outside of Charlotte, North Carolina, without his prior written
consent.
2. Term. Unless sooner terminated in accordance with the
provisions of section 4, the Company hereby employees the Employee, and the
Employee hereby accepts such employment, for a term commencing on August 11,
2000 (the "Commencement Date"), and ending on the fifth anniversary of the
Commencement Date, except that this five year term shall be automatically
extended one year, creating a new five year term, on each anniversary of the
Commencement Date, unless the Board, based on a vote of two-thirds of the
directors then in office, or Employee, gives notice to the other party at least
ninety (90) days prior to an
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anniversary of the Commencement Date that the then five year term shall not be
extended for an additional year.
3. Compensation.
3.1 Base Salary. During the Term and subject to the next
sentence of this Section 3.1, the Employee shall be compensated at the annual
rate of $610,152.00 ("Base Salary"), payable on a monthly basis in accordance
with the Company's standard payroll procedures. At the beginning of each
calendar year, the Base Salary shall be increased by an amount, if positive,
which will reflect increases in the cost of living in accordance with the
Company's standard policies and procedures.
3.2 Incentive Compensation. In addition to the Base Salary,
the Employee shall be entitled to receive a cash bonus ("Bonus") in an amount to
be determined in the sole discretion of the Board following the conclusion of
each fiscal year of the Company during the Term. In fixing the amount of the
Employee's Bonus, the Board will consider the change in (i) total business
return (TBR), (ii) net income, (iii) generating capacity (iv) the incentive
compensation paid to executives at the Company and to similarly situated
employees at similarly performing companies, and (v) such other metrics as the
Board deems relevant in gauging the Employee's performance for the past fiscal
year. Any Bonus to which the Employee is entitled under this Section 3.2 shall
be paid to the Employee during the month of March immediately following the
fiscal year to which such Bonus relates in a manner consistent with the
Company's past practice with respect to the payment of bonuses.
3.3 Profit Sharing. The Employee shall be entitled to
participate in the Company's existing profit sharing plan (the "Plan"). The
Employee shall be entitled to receive an amount in cash (a "Plan Distribution")
equal to the product of (i) 1.25% and (ii) the Company's net income before taxes
for each fiscal year of the Company commencing with fiscal year 2000 and
continuing through the Term. The Employee shall receive a pro-rated portion of
any Plan Distribution for any partial fiscal year during the Term. Subject to
the next sentence of this Section 3.3, Plan Distributions shall be paid in
accordance with the terms of the Plan in a manner consistent with the Company's
past practice. Notwithstanding anything to the contrary in this Agreement or the
Plan, the Employee and the Company agree that the Employee's entitlement to
receive Plan Distributions under the Plan upon termination of the Employee's
employment during the Term of this Agreement for any reason (other than under
Section 4.2) shall be governed by this Agreement and not the Plan to the extent
of any conflict or inconsistency between this agreement and the plan.
3.4 Expenses. Upon submission of appropriate invoices or
vouchers, the Company shall pay or reimburse the Employee for all reasonable
expenses actually incurred or paid by him during the Term in the performance of
his duties hereunder.
3.5 Participation in Benefit Plans. The Employee shall be
entitled to participate in any health benefit or other employee benefit plans
available to the Company's key employees as in effect from time to time, to the
extent that he may be eligible to do so under the applicable provisions of any
such plan.
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3.6 Vacation. The Employee shall be entitled to 6 weeks of
annual vacation and shall otherwise be subject to the Company's standard
vacation policy applicable to someone of his position and seniority. Unused
vacation shall not be carried over into any subsequent year during the Term. The
Company shall have no obligation to pay the Employee for any unused vacation,
except as provided in Section 4.4.
3.7. Insurance. In addition to providing Employee the
insurance coverage required under Section 3.5, the Company shall, at its sole
cost and expense, provide for the benefit of the Employee during the Term a term
life insurance policy in the amount of $10 million, which policy shall be owned
by the Employee. The Company shall pay the Employee such amounts in cash as are
necessary during the Term to pay any income tax liability the Employee may incur
in connection with or arising out of (i) the term life insurance policy
described above and (ii) the Company's agreement to pay any such income tax
liability arising therefrom. Upon termination of employment and upon fulfillment
of any Company obligation that may arise under Section 4 to continue providing
the insurance coverage contemplated by this Section, the Employee shall have the
right, at his sole cost and expense, to assume the insurance policy described
above.
4. Termination. The Employee's employment hereunder may be
terminated only upon the expiration of the Term of this Agreement pursuant to
Section 2 above or under the following circumstances:
4.1 Death. The Employee's employment hereunder shall terminate
automatically upon his death, in which event the Company shall pay to the
Employee's written designee or, if he has no written designee, to his spouse or,
if he leaves no spouse and has no written designee, to his estate, (i) accrued
but unpaid Base Salary through the date of death, (ii) Base Salary payable for
the remainder of the Term, such amounts to be paid in the same manner through
the remainder of the term as if the Employee's employment were not terminated,
(iii) accrued but unpaid Bonus through the date of death and (iv) all reasonable
expenses actually incurred or paid by the Employee in the performance of his
duties hereunder prior to the date of death.
4.2 Disability. The Company may terminate the Employee's
employment hereunder if (i) as a result of the Employee's incapacity due to
physical or mental illness, the Employee shall have been absent from his duties
hereunder on a full-time basis for an aggregate of 180 consecutive or
non-consecutive business days in any 12 consecutive-month period and (ii) within
10 days after written notice of termination hereunder is given by the Company,
the Employee shall not have returned to the performance of his duties hereunder
on a full-time basis. The determination of incapacity or disability under the
preceding sentence shall be made in good faith by the Company based upon
information supplied by a physician selected by the Company or its insurers and
reasonably acceptable to the Employee or his legal representative. During any
period that the Employee fails to perform his duties hereunder as a result of
incapacity due to physical or mental illness (the "Disability Period"), the
Employee shall continue to receive his full Base Salary hereunder until his
employment is terminated pursuant to this Section 4.2, provided that amounts
payable to the Employee shall be reduced by the sum of the amounts, if
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any, paid to the Employee during the Disability Period under any disability
benefit plans of the Company. Upon termination pursuant to this paragraph 4.2,
Employee shall continue to receive his full Base Salary payable for the
remainder of the Term, such amounts to be paid in the same manner through the
remainder of the Term as if the Employee's employment were not terminated,
provided that amounts payable to the Employee shall be reduced by the sum of the
amounts, if any, paid to the Employee during the remainder of the Term under any
disability benefit plans of the Company.
4.3 Termination by the Company.
4.3.1 The Company (i) shall have "cause" to terminate the
Employee's employment hereunder upon the Employee (A) being convicted of a
felony, a crime of moral turpitude or any crime involving the Company (other
than pursuant to actions taken at the direction or with the approval of the
Board), (B) being found by reasonable determination of the Board, made in good
faith, and as the result of a vote of at least two-thirds of the directors then
in office, to have engaged in (1) willful misconduct, (2) willful or gross
neglect, (3) fraud, (4) misappropriation or (5) embezzlement in the performance
of his duties hereunder or (C) having breached in any material respect the terms
and provisions of this Agreement and failed to cure such breach within 15 days
following written notice from the Company specifying such breach and (ii) may
terminate the Employee's employment for "cause" based on a vote of at least
two-thirds of the Directors then in office by issuing a written notice to the
Employee at any time following the occurrence of any of the events described in
clauses (i)(A) and (i)(B) above and on written notice given to the Employee at
any time not less than 60 days following the occurrence of any of the events
described in clause (i)(C) above. In the event the Employee's employment is
terminated by the Company for "cause", the Employee shall be entitled to
continue to receive Base Salary accrued but unpaid and expenses incurred but not
repaid to the Employee, in each case only until the effective date of such
termination.
4.3.2 In the event the Employee's employment is terminated by
the Company other than for "cause", the Employee shall be entitled to continue
to receive (i) Base Salary, (ii) an amount equal to the average Bonus paid to
the Employee during the three-year period immediately prior to termination by
the Company other than for "cause" (iii) Plan Distributions and (iv) the
benefits contemplated by Section 3.5 and 3.7 of this Agreement, in each case for
the remainder of the Term as if such employment had not been terminated, such
amounts to be paid (and benefits to be provided) in the same manner through the
remainder of the Term as if such employment were not terminated and without
offset for earnings from subsequent employment or otherwise. Notwithstanding the
foregoing, if the benefit plans with respect to the benefits described above do
not provide coverage for or with respect to the Employee after the Employee's
employment is terminated by the Company other than for "cause", the Company
shall, at its sole cost and expense, provide the Employee supplemental benefits
to the extent necessary to afford the Employee the same benefit coverage that
would have been available to the Employee for the remainder of the Term had his
employment not been terminated.
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4.4 Termination by the Employee.
4.4.1 Definitions. For purposes of this Section 4.4, the
following terms shall have the respective meanings set forth below:
(a) "Affiliate" means, with respect to the Company, any entity
directly or indirectly controlled, controlling or under common control
with the Company.
(b) "Acceleration Payment" means an amount in cash equal to
the value of (i) any Bonus or Profit Sharing accrued but unpaid prior
to the date of termination, (ii) any vacation accrued but unused prior
to the date of termination and (iii) all stock options, restricted
stock awards, stock appreciation rights and any other similar Company
capital-stock based compensation awards (whether vested or not vested),
if any, that have been granted or awarded to the Employee prior to the
date of termination.
(c) "Change of Control" means: (i) a person, corporation,
entity or group acquires, directly or indirectly, the beneficial
ownership of 50% or more of the issued and outstanding stock of the
Company in a single transaction or series of transactions, (ii) the
Company is a party to a merger, consolidation or similar transaction
and following such transaction 50% or more of the issued and
outstanding securities of said party is beneficially owned by a person,
corporation, entity or group other than the Company or an Affiliate of
the Company, (iii) the Company sells or transfers 50% or more of its
assets to any other person or persons other than an Affiliate of the
Company, (iv) the shareholders of the Company approve a plan or
proposal for the liquidation or dissolution of the Company or (v)
during any two-year period, individuals who comprise a majority of the
Board at the beginning of such two-year period do not comprise a
majority of the Board at the end of such two-year period (such Board
composition being referred to as a "Continuing Majority"), or (vi) any
individual is elected to the Board at any time without notice to and
the concurrence of the Employee.
(d) "Good reason" means: (i) the assignment to the Employee of
any duties inconsistent with his status as Chairman and Chief Executive
Officer of the Company or a material adverse alteration in the nature
or status of his responsibilities from those provided herein or the
transfer of a significant portion of such responsibilities to one or
more other persons; (ii) the failure by the Company to pay or provide
to the Employee, within 30 days of a written demand therefor, any
amount of compensation or any benefit which is due, owing and payable
pursuant to the terms hereof or of any applicable plan, program,
arrangement or policy; (iii) the breach in any material respect by the
Company of any of its other obligations or agreements set forth herein
and the failure by the Company to cure such breach within 30 days after
written notice thereof from the Employee; or (iv) the occurrence of a
Change of Control.
(e) "Severance" means the sum of (i) the highest Base Salary
that was paid to the Employee at any time prior to termination by the
Employee for good reason, (ii) the average Bonus paid to the Employee
during the three-year period immediately prior to termination by the
Employee for good reason, and (iii) the average Plan Distribution paid
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to the Employee during the three-year period immediately prior to
termination by the Employee for good reason.,
(f) "Severance Benefits" means the benefits contemplated by
Section 3.5 and 3.7 of this Agreement.
(g) "Severance Term" means five (5) years.
4.4.2 At the election of the Employee for "good reason," the
Employee may terminate his employment immediately upon written notice to the
Company; provided, such notice is given by Employee within 365 days of the event
or action which constitutes "good reason". If during the Term the Employee's
employment is terminated by the Employee for good reason, the Employee shall be
entitled to receive from the Company (i) Severance and Severance Benefits,
payable during each year during the Severance Term, and the Acceleration
Payment, payable immediately, and (ii) in addition to the amounts described
above, cash payments in an amount sufficient to ensure that the amounts received
under this Section 4.4.2 as a result of a Change of Control are not subject to
net reductions due to the imposition of excise taxes under Section 4999 of the
Internal Revenue Code of 1986, as amended.
4.4.3 Upon 90 days' prior written notice, the Employee may
terminate his employment with the Company other than for good reason. If the
Employee voluntarily terminates his employment with the Company other than for
good reason, no further payment shall be due the Employee pursuant to Section 3
above (other than payments for accrued and unpaid Base Salary and expenses
incurred but not repaid to the Employee, in each case prior to such termination
and such amounts as may be payable under the provisions of the Profit Sharing
Plan.).
4.5 Effect of Termination on Certain Obligations. No
termination of the employment of the Employee, whether voluntary or involuntary,
shall terminate, affect or impair any of the obligations or rights of the
parties set forth in Sections 3.7, 4 and 5 of this Agreement, all of which
obligations and rights shall survive any termination of employment of the
Employee hereunder.
5. Covenants of the Employee.
5.1 Covenant Against Competition. The Employee acknowledges
that (i) the Company is one of a limited number of persons who have developed
the Business; (ii) the Business is national and international in scope; (iii)
the Employee's work for the Company will give him access to the confidential
affairs and proprietary information of the Company; (iv) the agreements and
covenants of the Employee contained in this Section 5 are essential to the
business and goodwill of the Company; and (v) the Company would not have entered
into this Agreement but for the covenants and agreements set forth in this
Section 5. Accordingly, the Employee covenants and agrees that:
(a) During the period Employee receives compensation
as an Employee, and during the period Employee receives any severance, the
Employee shall not, in
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the United States or Asia, directly or indirectly, (1) engage in any business
that competes with the Business (or any part thereof) for the Employee's own
account; (2) render any services to any person (other than the Company) engaged
in such activities; or (3) become interested in any such person (other than the
Company) as a partner, shareholder, principal, agent, consultant or in any other
relationship or capacity; provided, however, that notwithstanding the above, the
Employee may own, directly or indirectly, solely as an investment, securities of
any such person which are traded on any national securities exchange or NASDAQ
if the Employee (A) is not a controlling person of, or a member of a group which
controls, such person and (B) does not, directly or indirectly, own 2% or more
of any class of securities of such person.
(b) During the Term and for the period ending five
years following the date upon which the Employee ceases to be an employee of the
Company (the "Restricted Period"), the Employee shall keep secret and retain in
strictest confidence, and shall not use for his benefit or the benefit of
others, except in connection with the business and affairs of the Company and
its affiliates, all confidential matters relating to the Business or to the
Company and its affiliates learned by the Employee heretofore or hereafter,
directly or indirectly, from the Company and its affiliates, including, without
limitation, information with respect to (i) prospective facilities, (ii) sales
figures, (iii) profit or loss figures, and (iv) customers, clients, suppliers,
sources of supply and customer lists (the "Confidential Information"), and shall
not disclose such Confidential Information to anyone outside of the Company and
its affiliates except with the Company's express prior written consent and
except for Confidential Information which (A) is at the time of receipt or
thereafter becomes publicly known through no wrongful act of the Employee or (B)
is received from a third party not under an obligation to keep such information
confidential and without breach of this Agreement; provided, however, Employee's
obligation not to compete shall be governed solely by paragraph 5.1(a) and shall
not be extended by the interpretation or enforcement of this provision.
(c) All memoranda, notes, lists, records and other
documents (and all copies thereof) made or compiled by the Employee or made
available to the Employee concerning the Business or the Company shall be the
Company's property and shall be delivered to the Company at any time on request.
5.2 Rights and Remedies upon Breach. If the Employee breaches,
or threatens to commit a breach of, any of the provisions of Section 5.1 (the
"Restrictive Covenants"), the Company shall have the following rights and
remedies (upon compliance with any necessary prerequisites imposed by law upon
the availability of such remedies), each of which rights and remedies shall be
independent of the other and severally enforceable, and all of which rights and
remedies shall be in addition to, and not in lieu of, any other rights and
remedies available to the Company under law or in equity:
(a) The right and remedy to have the Restrictive
Covenants specifically enforced by any court having equity jurisdiction,
including, without limitation, the right to an entry against the Employee of
restraining orders and injunctions (preliminary, mandatory, temporary and
permanent) against violations, threatened or actual, and whether or not then
continuing, of such covenants, it being acknowledged and agreed that any such
breach
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or threatened breach will cause irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company.
6. Severability. The Employee acknowledges and agrees that (i)
he has had an opportunity to seek advice of counsel in connection with this
Agreement and (ii) the Restrictive Covenants are reasonable in geographical and
temporal scope and in all other respects. If it is determined that any of the
provisions of this Agreement, including, without limitation, any of the
Restrictive Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the provisions of this Agreement shall not thereby be affected and
shall be given full effect, without regard to the invalid portions.
7. Blue-Pencilling. If any court determines that any of the
covenants contained in this Agreement, including, without limitation, any of the
Restrictive Covenants, or any part thereof, is unenforceable because of the
duration or geographical scope of such provision, the duration or scope of such
provisions, as the case may be, shall be reduced so that such provision becomes
enforceable and, in its reduced form, such provision shall then be enforceable
and shall be enforced.
8. Enforceability; Jurisdictions. The Company and the Employee
intend to and hereby confer jurisdiction to enforce the Restrictive Covenants
upon the courts of any jurisdiction within the geographical scope of the
Restrictive Covenants, provided the courts apply North Carolina law in
interpreting this Agreement.
9. Indemnification. To the fullest extent permitted or
required by the laws of the State of North Carolina, the Company shall indemnify
and hold harmless (including the advance payment of expenses) the Employee, in
accordance with the terms of such laws, if the Employee is made a party, or
threatened to be made a party, to any threatened, pending, or contemplated suit
or proceeding (whether civil, criminal, administrative or investigative) by
reason of the fact that the Employee is or was an officer or director of the
Company or any subsidiary or affiliate of the Company, against expenses
(including reasonable attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with any such
action, suit or proceeding. The Company's obligations under this paragraph will
survive the termination of this Agreement for any reason whatsoever.
10. D&O Liability Insurance. During the Term, and Severance
Term, if any, the Company shall maintain customary directors' and officers'
liability insurance.
11. Notice. Any notice or other communication hereunder shall
be in writing and shall be mailed or delivered to the respective parties hereto
as follows:
(a) If to the Company:
Cogentrix Energy, Inc.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000-0000
Attention: General Counsel
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(b) If to the Employee:
Xxxxx X. Xxxxx
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
The addresses of either party hereto above may be changed by written notice to
the other party.
12. Amendment; Waiver; Renegotiation.
12.1 This Agreement may be amended, modified, superseded,
cancelled, renewed or extended and the terms of covenants hereof may be waived,
only by a written instrument executed by the party against whom such
modification or waiver is sought to be enforced. The failure of either party at
any time or times to require performance of any provision hereof shall in no
manner affect the right at a later time to enforce the same. No waiver by either
party of the breach of any term or covenant contained in this Agreement, whether
by conduct or otherwise, in any one or more instances, shall be deemed to be, or
construed as, a further or continuing waiver of any such breach, or a waiver of
the breach of any other term or covenant contained in this Agreement.
12.2 The Board shall review Employee's Base Salary, Bonus,
Profit Sharing, Insurance, and other Benefits then being paid to him annually in
light of the results of operations and current salaries and benefits then being
paid to other persons holding similar positions. Following such review, the
Board may increase (but shall not be required to increase) the Base Salary,
Bonus, Profit Sharing, Insurance, or other Benefits, but may not decrease the
Base Salary, Profit Sharing, Insurance, and other Benefits from the then
existing level.
13. Benefit and Binding Effect. This Agreement shall inure to
the benefit of and be binding upon the successors and assigns of the Company,
but shall be personal to and not assignable by the Employee. The obligations of
the Company hereunder are personal to the Employee or where applicable to his
spouse or estate. The Company may assign its rights, together with its
obligations, to any corporation which is a direct or indirect wholly-owned
subsidiary of the Company; provided, however, that the Company shall not be
released from its obligations hereunder without the prior written consent of the
Employee, which consent shall not be unreasonably withheld.
14. Governing Law. This Agreement shall be governed by the
laws of the State of North Carolina regardless of the laws that might be
applicable under principles of conflicts of law.
15. Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original but all such counterparts together shall
constitute one and the same instrument. Each counterpart may consist of two
copies hereof each signed by one of the parties hereto.
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16. Headings. The headings in this Agreement are for reference
only and shall not affect the interpretation of this Agreement.
17. Entire Agreement. This Agreement constitutes the entire
understanding between the parties with respect to the subject matter hereof,
superseding all negotiations, prior discussions and preliminary agreements. No
subsequent modification may be made to this Agreement except by signed writing
of the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
Employee:
Witness: /s/ Xxxxxx X. Xxxxxxxxx /s/ Xxxxx X. Xxxxx (SEAL)
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Xxxxx X. Xxxxx
Chairman of the Board and Chief Executive
Officer
COGENTRIX ENERGY, INC.
By: /s/ Xxxx X. Xxxxxx
---------------------------------------
Name: Xxxx X. Xxxxxx
Title: President and Chief Operating
Officer Per Board Resolution
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