EXHIBIT 10.2
AMENDMENT TO SEVERANCE AGREEMENT
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This AMENDMENT TO SEVERANCE AGREEMENT is made and effective as of the 13th
day of April 2003, by and between RELIANT RESOURCES, INC., a Delaware
corporation having its principal place of business in Houston, ▇▇▇▇▇▇ County,
Texas (the "Company"), and R. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, an individual currently residing
in Houston, ▇▇▇▇▇▇ County, Texas ("Executive").
WHEREAS, Executive was employed by the Company as the Chief Executive
Officer and served as Chairman of the Board of Directors of the Company (the
"Board"); and
WHEREAS, Executive has resigned his employment as the Company's Chief
Executive Officer and as a member of the Board and all of his other positions
with the Company and its affiliates, effective as of April 13, 2003; and
WHEREAS, the Company and the Executive have previously entered into that
certain Severance Agreement, effective as of January 14, 2003 (the
"Agreement"); and
WHEREAS, the Company considers it in the best interest of the stockholders
to amend certain provisions of the Agreement.
NOW, THEREFORE, the Company and Executive have entered into this amendment
to the Agreement, effective as of April 13, 2003, as follows:
1. The definition of "Covered Termination" in Section 1 of the Agreement
is hereby amended to add the following sentence to the end thereof:
"Furthermore, notwithstanding the foregoing, a Covered Termination shall also
include Executive's voluntary resignation of employment on April 13, 2003,
pursuant to his letter of resignation dated that same date."
2. Section 2(b) of the Agreement is hereby amended in its entirety to
read as follows:
"(b) PRO RATED BONUS: Executive will receive an amount equal to the product
of (1) the Salary and (2) 200%, 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, with such amount being equal to $747,946. Such
bonus shall be paid within 15 days after the expiration of the Waiver and
Release revocation period."
3. Section 2(c) of the Agreement is hereby amended to add the following
sentence to the end thereof:
"The foregoing notwithstanding, with respect to medical, dental and vision
coverage for Executive and his eligible dependents, Executive may elect to
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participate in the Company's retiree medical, dental and vision plan in
which event (i) Executive shall pay premiums at the active employee rate,
as in effect from time to time, until age 65, (ii) the Company will cause
such coverage for Executive and his eligible dependents to be maintained at
a cost to Executive equal to the active employee rate until Executive
attains age 65, and (iii) upon attaining age 65, Executive and his eligible
dependents will continue to be eligible to participate in the retiree
medical, dental and vision plan, if any, at retiree rates as then in effect
for other retirees."
4. Section 2(e) of the Agreement is hereby amended in its entirety
to read as follows:
"(e) FINANCIAL PLANNING: Continued access, for the remainder of the
calendar year 2003, to financial planning services up to a maximum direct
cost to the Company of $25,000."
5. Section 8 of the Agreement is hereby amended in its entirety to
read as follows:
"8. NON-SOLICITATION AND NON-COMPETITION:
(a) In consideration for the full vesting on April 13, 2004 of
Executive's unvested Performance Shares for the 2001-2003 period and
2002-2004 period, at target, and the unvested time-based restricted shares
under the Company's long-term incentive plans that are outstanding as of
Executive's termination date and that would otherwise terminate and expire
as of such date, and for such other 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 for the one-year period
commencing on April 13, 2003, 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 set forth in Section 8(a)
above, Executive agrees that for one year following April 13, 2003, 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 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.
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(c) The restrictions contained in this Section 8 are limited to the
geographic area of the state of Texas.
(d) Executive acknowledges that these restrictive covenants under this
Agreement, for which Executive received valuable consideration from the Company
as provided in this Agreement, 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."
6. The Agreement is hereby amended to add Section 18 thereto, as
follows:
"18. CONSULTING AGREEMENT: The Company agrees to retain Executive
commencing on April 14, 2003 (the "Effective Date"), as an independent
consultant, and Executive agrees to render consulting services for the period
described in Section 18(a) hereof and upon the other terms and conditions
herein provided.
(a) The period of Executive's engagement as a consultant shall
commence on the Effective Date and will continue (unless sooner terminated
pursuant to Section 18(g) hereof) until April 13, 2004, provided that the
Company or Executive gives 30 days' written notice to the other in advance
of such expiration date that the Company or Executive, as applicable,
intends not be extend the term of the engagement. If the engagement is not
so terminated as provided in the foregoing sentence, then the term of this
engagement shall be automatically extended for an additional month
following the expiration of the original 12-month term and thereafter shall
be automatically extended for additional successive one-month periods
unless, and until, the Company or Executive gives 30 days' written notice
in advance of a monthly anniversary date that the Company or Executive, as
applicable, intends not to further extend the term.
(b) Executive hereby engages to provide during the term of this
engagement such services of a consulting or advisory nature as the Company
may reasonably request with respect to matters arising out of the conduct
of the Company's business during the period that Executive was en employee
of the Company. During the term of such engagement, Executive will provide
consulting service with respect to matters, including, but not limited to,
assisting the Company in responding to (i) investigations, inquiries or any
other proceeding relating to the Company's
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activities by governmental bodies and agencies or (ii) disputes or
litigation involving the Company or any of its subsidiaries. Subject to
Executive's obligations and responsibilities with respect to any other
employment Executive obtains, Executive will devote his efforts and time
during the term of such engagement as shall be reasonably necessary to
perform his services as requested hereunder and to advance the interests of
the Company. Executive will act solely in a consulting capacity hereunder
and in consequence shall not have authority to act for the Company or to
give instructions or orders on behalf of the Company or otherwise to make
commitments for or on behalf of the Company. Executive will not be an
employee of the Company during the term of this engagement, but shall act
in the capacity of an independent contractor. The Company shall not
exercise control over the detail, manner or methods of the performance of
the services by Executive as a consultant under this Agreement.
(c) The Company shall pay Executive $83,333.33 each month during the
term of his engagement under this Section 18, with the first payment being
made on or about May 1, 2003, or, if later, as soon as administratively
practicable after the expiration of the Waiver and Release revocation
period, and each monthly payment made thereafter on or about the first
business day of the applicable month. Moreover, for each hour of consulting
services provided that exceeds 1040 hours during the first year (or that
exceed 85 hours during any month after the first year), Executive shall be
paid at the rate of $500 per hour for consulting services actually
performed under this Agreement.
(d) The Company shall reimburse Executive for reasonable expenses
incurred in the performance of consulting services hereunder, including
travel and the cost of necessary office equipment or supplies.
(e) Executive's sole compensation for the services rendered pursuant
to this Agreement following his termination date shall be the amount
provided for above in Section 18(c). Executive will not be entitled to
participate in any employee benefit or compensation plan or arrangement of
the Company with respect to the work done under this Agreement as a
consultant, and no service pursuant to this Agreement shall be credited as
service for any purposes under any employee benefit or compensation plan or
arrangement of the Company. Executive hereby waives any rights to benefits
under any employee benefit or compensation plan or arrangement should any
judicial or administrative determination conclude that Executive was
otherwise eligible or such plan or arrangement.
(f) Executive will submit monthly invoices for charges and
reimbursements (excluding the monthly payments provided in Section 18(c)
above) due for services as a consultant under this Agreement to ▇.▇. ▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: General Counsel.
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Each invoice must detail any reasonable and necessary reimbursable expenses
incurred in performing Executive's obligations under this Agreement and
include any other information the Company reasonably requests. Payment for
said invoiced amounts shall be payable by the Company within 15 days after
receipt of invoice by the Company. Should the Company dispute any portion
of Executive's monthly invoice, the Company shall pay the undisputed
portion of the invoice and advise Executive in writing of the disputed
portion.
(g) Executive's engagement as a consultant will terminate
automatically upon his death. If Executive's death occurs during the first
12-month period of his consulting engagement, the remainder of the monthly
payments due for such 12-month period will be paid to Executive's estate or
his designated beneficiary (as designated by Executive in writing and
provided to the Company in a form acceptable to the Company) no later than
15 days after notification of his death. Upon any termination or expiration
of Executive's engagement hereunder, he shall continue to be subject to the
provisions of Section 8 of the Agreement (it being understood and agreed
that such provisions shall survive any termination or expiration of
Executive's engagement hereunder for any reason).
(h) Since Executive will not be an employee of the Company during the
term of this Agreement, but shall act in the capacity of an independent
contractor, the Company will not withhold from any amounts payable for
Executive's services as a consultant under this Agreement federal, state,
city or any other taxes. Executive agrees and acknowledges that it is his
responsibility to pay all such taxes that shall be required pursuant to any
law or governmental regulation or ruling and Executive agrees to indemnify
and hold the Company harmless from any liability for such taxes. If the
Internal Revenue Service makes a claim, which, if successful, would require
the Company to make a payment or withhold any such taxes, Executive agrees
to cooperate in good faith with the Company concerning the contest of the
claim."
7. The Agreement is hereby amended to add Section 19 thereto, as follows:
"19. 1985 DEFERRAL PLAN: Executive's benefit under the 1985 Deferral Plan
('Deferral Plan') will be paid to Executive in 15 annual installments of $49,152
each, with the first payment due May 1, 2003 or, if later, within five days
after the expiration of the Waiver and Release revocation period. Except as
provided herein, such benefit shall be subject to all applicable terms and
conditions of the Deferral Plan."
8. The Agreement is hereby amended to add Section 20 thereto, as follows:
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"20. SPLIT-DOLLAR LIFE INSURANCE: Executive will have the right to elect
to purchase the split-dollar life insurance policy currently maintained by the
Company on his life in accordance with the terms and conditions of such
split-dollar arrangement at the greater of (a) the cash surrender value of the
policy or (b) the total premiums paid by the Company with respect to the policy
as of his termination date. The foregoing right shall expire, terminate and be
of no further force and effect if Executive fails to exercise such right prior
to the date payment of the annual policy premium is due, October 1, 2003, and
the policy will be terminated by the Company as of such date. The Company agrees
not to terminate the split-dollar life insurance policy prior to October 1,
2003."
9. The Agreement is hereby amended to add Section 21 thereto, as follows:
"21. EXECUTIVE OFFICE SPACE: Executive will be provided office space, as
assigned by the Company, on the 18th floor in the Company's existing building
located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇, together with parking, related
facilities and secretarial assistance on an ad hoc basis, commencing on the date
he executes the Amendment to the Agreement until the date the Company relocates
its employees officing on the 18th floor of such building ('Relocation Date') to
the Company's new building located at ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ('New
Building'). Executive will be provided office space, as assigned by the Company,
in the Company's New Building, together with parking, related facilities and
secretarial assistance on an ad hoc basis, for a period of three years
commencing on the Relocation Date."
10. The Agreement is hereby amended to add Section 22 thereto, as follows:
"22. CLUB MEMBERSHIP: The Company agrees to transfer the Company's
Lochinvar membership to Executive and the Company agrees to pay to Lochinvar any
related transfer fees not to exceed $7500."
11. The Agreement is hereby amended to add Section 23 thereto, as follows:
"23. SECURITY: The Company agrees to continue to provide Executive security
monitoring of Executive's primary residence located in ▇▇▇▇▇▇ County, Texas,
under the Company's existing security monitoring program and policies as in
force from time to time, until Executive attains age 65, and thereafter at the
incremental cost to the Company of installing, maintaining, monitoring and
otherwise providing security service. Such service shall be of the same kind and
quality as afforded to Company senior executives. Should such service be
discontinued to all Company executives, the Company shall have no further
obligation to Executive under this Section 23."
12. The Agreement is hereby amended to add Section 24 thereto, as follows:
"24. D&O INSURANCE AND INDEMNIFICATION RIGHTS: The Company will continue to
maintain in effect as to Executive (a) any rights to
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indemnification and contribution afforded under the Company's charter and
bylaws provisions and provisions of any other indemnification agreement
currently in effect that apply to Executive's services to the Company, and
(b) for a period of six years after Executive's termination date, coverage
under directors' and officers' liability insurance policies that, by their
terms, apply to Executive's acts and omissions while serving the Company in
the same amount(s) and to the same extent as such coverage is maintained
for the directors and officers of the Company. Executive agrees to sign an
agreement, in the form attached hereto, to repay all sums advanced by the
Company in connection with its indemnification obligations in the event it
is ultimately determined that Executive is not entitled to be indemnified
by the Company in accordance with the Company's Bylaws and Delaware
Corporation Law."
13. The Company will pay all reasonable legal, accounting and
financial expenses incurred by Executive in the negotiation of this amendment
to the Agreement.
14. Except as otherwise expressly provided in this amendment to the
Agreement to the contrary, and without duplication of benefits, Executive shall
be entitled to the benefits as provided under the terms of the Agreement, and
all terms, conditions, and restrictions set forth in the Agreement, including,
but not limited to, the Waiver and Release requirement, shall continue in full
force and effect and shall apply with respect to this amendment.
15. This amendment may be executed in one or more counterparts, each
of which shall be deemed to be an original, but all of which together will
constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this amendment to
the Agreement to be executed as of the date set forth below, but effective as
of April 13, 2003.
RELIANT RESOURCES, INC.
By: /s/ ▇▇▇▇ ▇. Staff
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Name: ▇▇▇▇ ▇. STAFF
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Title: CHAIRMAN & CEO
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Signature Date: 5/1/03
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EXECUTIVE
/s/ R. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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R. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Signature Date: 4-30-03
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ATTACHMENT TO AMENDMENT TO
SEVERANCE AGREEMENT
April __, 2003
Mr. R. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Re: Indemnification Agreement
Dear ▇▇▇▇▇:
In accordance with the Bylaws of Reliant Resources, Inc. (the "Company")
and Delaware Corporation Law, the Company has agreed to advance reasonable
attorneys' fees and expenses that may be incurred by you in connection with the
current inquiries into the Company's business, accounting practices and other
related matters. In order for the Company to advance these fees and expenses,
we are required pursuant to Delaware law to obtain your agreement to the
following.
You understand that the Company shall halt any further advancement of fees
if it is ultimately determined in accordance with the Company's Bylaws and
Delaware Corporation Law that you are not entitled to indemnification by the
Company.
You understand and agree to repay all amounts advanced in accordance with this
agreement, if it is ultimately determined that you are not entitled to
indemnification by the Company in accordance with the Company's Bylaws and
Delaware Corporation Law.
Sincerely yours,
--------------------------------
Name:
--------------------------
Title:
--------------------------
The foregoing is acceptable and agreed to:
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R. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
