EMPLOYMENT AGREEMENT OF XXXXX X. XXXXXX
THIS AGREEMENT by and between Northern States Power Company, a
Minnesota corporation (the "Company"), and Xxxxx X. Xxxxxx (the "Executive"),
dated as of the 24th day of March, 1999.
WITNESSETH THAT
WHEREAS, the Company and New Century Energies, Inc., a Delaware
corporation ("NCE"), have entered into an Agreement and Plan of Merger dated
as of March 24, 1999 (the "Merger Agreement"), whereby NCE will merge with
and into the Company (the "Merger");
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that the Executive would, absent the Merger, be expected to retire
on or about July 1, 2000; and
WHEREAS, the Board has determined that it is critical to the
successful consummation of the Merger that the Executive remain employed by
the Company through the first anniversary of the Merger, in order to ensure
that the necessary regulatory approvals of the Merger be obtained, and to
help implement a successful transition to combined operations of the Company
and NCE;
WHEREAS, the Company and NCE wish to provide for the orderly
succession of management of the surviving company in the Merger (the
"Company") following the Effective Time (as defined in the Merger Agreement);
and
WHEREAS, in light of the foregoing, the Company and NCE further
wish to provide for the employment by the Company of the Executive, and the
Executive wishes to serve the Company, in the capacities and on the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, it is hereby agreed as follows:
1. EFFECT ON PRIOR AGREEMENTS; EMPLOYMENT PERIOD.
(a) The Executive is currently employed as President and Chief
Executive Officer of the Company and Chairman of the Board pursuant to a
Summary of Terms and Conditions of Employment, amended and restated as of
January 28, 1998 (the "Prior Agreement"). The Prior Agreement shall remain
in effect without amendment until the Effective Time, except as specified
herein.
(b) From the Effective Time through the first anniversary thereof
(the "Employment Period"), the Company shall employ the Executive, and the
Executive shall serve the Company, on the terms and conditions set forth in
this Agreement.
(c) Notwithstanding any other provision of this Agreement, if the
Merger Agreement is terminated without consummation of the Merger, the
Executive shall retire upon the later of the date the Merger Agreement is so
terminated and July 1, 2001, and this Agreement shall be null and void and of
no further force or effect, except as specifically set forth in Section
3(c)(i) and Section 3(e) below.
2. POSITION AND DUTIES; LOCATION.
(a) During the Employment Period, the Executive shall continue to
serve as Chairman of the Board. In such capacity, the Executive shall be an
employee of the Company and shall have such duties and responsibilities as
are customarily assigned to such positions, and such other duties and
responsibilities not inconsistent therewith as may from time to time be
assigned to him by the Board.
(b) During the Employment Period as is customary, the Executive
shall report to the Board.
(c) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive
shall devote reasonable attention and time during normal business hours to
the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive under this
Agreement, use the Executive's reasonable best efforts to carry out such
responsibilities faithfully and efficiently. It shall not be considered a
violation of the foregoing for the Executive to serve on corporation,
industry, civic or charitable boards or committees, so long as such
activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement.
(d) The Executive's service shall be performed at the Company's
headquarters in Minneapolis, Minnesota.
3. COMPENSATION.
(a) BASE SALARY. The Executive's compensation during the
Employment Period shall be determined by the Board upon the recommendation of
the Compensation Committee of the Board, subject to the next sentence and
Section 3(b). During the Employment Period, the Executive shall receive an
annual base salary ("Annual Base Salary") at least equal to his annual base
salary as in effect immediately before the Effective Time (and in any event
not less than $730,000). The Annual Base Salary shall be payable in
accordance with the Company's regular payroll practice for its senior
executives, as in effect from time to time. Any increase in the Annual Base
Salary shall not limit or reduce any other obligation of the Company under
this Agreement.
(b) INCENTIVE COMPENSATION. During the Employment Period, the
Executive shall also be eligible for annual bonuses on the same terms and
conditions as other senior executives of the Company; PROVIDED, that the
Executive's target annual bonus (the "Target Bonus") shall equal 65 percent
of the Annual Base Salary.
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(c) OTHER BENEFITS.
(i) SUPPLEMENTAL RETIREMENT BENEFIT. Upon the termination
of the Executive's employment for any reason after the date of this
Agreement, the Executive shall receive a supplemental retirement benefit (the
"SERP Benefit"), computed as follows. The amount of the SERP Benefit shall
be such that the Executive's combined benefits from the Northern States Power
Company Pension Plan (the "Pension Plan"), the Company's Deferred
Compensation Plan (defined benefit portion) and Excess Benefit Plan (such
plans, together, the "Nonqualified Pension Plans"), and the SERP Benefit
shall equal the benefit the Executive would have received under the Pension
Plan and the Nonqualified Pension Plans if he had completed 30 years of
service; PROVIDED, however, that the SERP Benefit shall be reduced (but not
below zero) by the excess, if any, of the annual retirement benefits of
$151,296 he earned from Ameritech over the annual retirement benefit that the
Pension Plan's actuaries reasonably estimate is equivalent to the accumulated
value, at the time the Executive's pension benefit payments begin, of the
monthly benefit payments he would have received under the Pension Plan and
the Nonqualified Pension Plans prior to that time if monthly benefit payments
had commenced at the end of the month following the month he attained age 60.
The SERP Benefit shall be paid in a lump sum at retirement. The amount of
the lump sum shall be determined using the interest rate for valuing
immediate annuities used by the Pension Benefit Guaranty Corporation at
January 1 of the year in which such payment is being made, or if no such rate
has been established then the PBGC rate in effect for the previous December,
and the mortality rates to be used shall be the mortality rates set forth in
the Appendix to the Pension Plan in effect at the time the payment is made.
Notwithstanding the foregoing, if the date of the Executive's termination of
employment is after July 1, 2000, the amount of the lump sum shall be
computed as if the Executive's termination employment had occurred on July 1,
2000, and the actual SERP Benefit paid shall equal such amount, plus interest
thereon during the period from July 1, 2000 through the date of actual
payment, at a rate equal to the interest rate on long-term Treasury
obligations in effect during such period. The SERP Benefit as described
herein is a restatement of, and shall replace, the benefit provided for in
Section 13 of the Prior Agreement.
(ii) During the Employment Period, the Company shall provide
the Executive with life insurance coverage providing a death benefit to such
beneficiary or beneficiaries as the Executive may designate of not less than
five times his Annual Base Salary.
(iii) In addition, and without limiting the generality of the
foregoing, during the Employment Period and thereafter: (A) the Executive
shall be entitled to participate in all applicable incentive, savings and
retirement plans, practices, policies and programs of the Company and its
subsidiaries to the same extent as other senior executives of the Company;
and (B) the Executive and/or the Executive's family, as the case may be,
shall be eligible for participation in, and shall receive all benefits under,
all applicable welfare benefit plans, practices, policies and programs
provided by the Company and its subsidiaries, other than severance plans,
practices, policies and programs but including, without limitation, medical,
prescription, dental, disability, sick leave, employee life insurance, group
life insurance, accidental death and travel accident insurance plans and
programs, to the same extent as other
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senior executives of the Company (but excluding the Company's Senior
Executive Severance Policy and 1999 Senior Executive Severance Policy (the
"Severance Policies")).
(d) FRINGE BENEFITS; VACATION. During the Employment Period, the
Executive shall be entitled to receive fringe benefits on the same terms and
conditions as the greater of (i) the fringe benefits received by, or
available to, him from the Company immediately before the Effective Time, or
(ii) the fringe benefits provided by the Company or its subsidiaries which
are available to the Chief Executive Officer of the Company. Without
limiting the generality of the foregoing, the Executive shall receive six
weeks of vacation per year accrued on a pro rata basis, and the same paid
holidays and sick leave as is made available to other full-time benefit
non-union employees of the Company; payment of monthly dues at the
Minneapolis Club as well as for a country club of his choice; a
fully-equipped leased American car of his choice and a heated garage space
at work; PROVIDED, that personal travel outside the Company territory will be
subject to reimbursement at the rates periodically established by the
Company; and an annual physical by a doctor of his choice and a reasonable
allowance for financial planning expenses, including tax and asset
management, as requested by the Executive.
(e) SPECIAL RETENTION BONUS. In recognition of the Executive's
remaining employed through the end of the Employment Period, and his special
efforts to cause the Merger to take place and to implement a successful
transition to combined operations of the Company and NCE, the Company shall
pay the Executive a special cash bonus (the "Special Retention Bonus"), as
provided in this Section 3(e). If the Merger is consummated and the
Executive remains employed through the end of the Employment Period, the
Special Retention Bonus shall equal $7,600,000, and shall be paid on the last
day of the Employment Period; and if the Merger Agreement is terminated
without consummation of the Merger, or the Executive's employment is
terminated because of the Executive's death or Disability before the last day
of the Employment Period, the Special Retention Bonus shall equal $2,500,000
and shall be paid on the day that the Executive's employment terminates;
PROVIDED, that if after receiving the Special Retention Bonus, the Executive
commits any material breach of the covenants set forth in Section 8 below, he
shall be obligated to return $2,500,000 of such Special Retention Bonus to
the Company.
4. TERMINATION OF EMPLOYMENT.
(a) DEATH OR DISABILITY. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment
Period. The Company shall be entitled to terminate the Executive's
employment because of the Executive's Disability during the Employment
Period. "Disability" means that (i) the Executive has been unable, for a
period of 180 consecutive business days, to perform the Executive's duties
under this Agreement, as a result of physical or mental illness or injury,
and (ii) a physician selected by the Company or its insurers, and acceptable
to the Executive or the Executive's legal representative, has determined that
the Executive's incapacity is total and permanent. A termination of the
Executive's employment by the Company for Disability shall be communicated to
the Executive by written notice, and shall be effective on the 30th day after
receipt of such notice by
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the Executive (the "Disability Effective Date") unless the Executive returns
to full-time performance of the Executive's duties before the Disability
Effective Date.
(b) BY THE COMPANY.
(i) The Company may terminate the Executive's employment
during the Employment Period for Cause or without Cause. "Cause" means:
A. the willful and continued failure of the Executive
substantially to perform the Executive's duties under this
Agreement (other than as a result of physical or mental
illness or injury), after the Board of the Company
delivers to the Executive a written demand for substantial
performance that specifically identifies the manner in
which the Board believes that the Executive has not
substantially performed the Executive's duties; or
B. illegal conduct or gross misconduct by the Executive,
in either case that is willful and results in material and
demonstrable damage to the business or reputation of the
Company.
No act or failure to act on the part of the Executive shall be considered
"willful" unless it is done, or omitted to be done, by the Executive in bad
faith or without reasonable belief that the Executive's action or omission
was in the best interests of the Company. Any act or failure to act that is
based upon authority given pursuant to a resolution duly adopted by the
Board, or the advice of counsel for the Company, shall be conclusively
presumed to be done, or omitted to be done, by the Executive in good faith
and in the best interests of the Company.
(ii) A termination of the Executive's employment for Cause
shall be effected in accordance with the following procedures. The Company
shall give the Executive written notice ("Notice of Termination for Cause")
of its intention to terminate the Executive's employment for Cause, setting
forth in reasonable detail the specific conduct of the Executive that it
considers to constitute Cause and the specific provision(s) of this Agreement
on which it relies, and stating the date, time and place of the Special Board
Meeting for Cause. The "Special Board Meeting for Cause" means a meeting of
the Board called and held specifically for the purpose of considering the
Executive's termination for Cause, that takes place not less than ten and not
more than twenty business days after the Executive receives the Notice of
Termination for Case. The Executive shall be given an opportunity, together
with counsel, to be heard at the Special Board Meeting for Cause. The
Executive's termination for Cause shall be effective when and if a resolution
is duly adopted at the Special Board Meeting for Cause by an affirmative vote
of at least the greater of (A) two-thirds (2/3) of the entire membership of
the Board (excluding the Executive who shall not vote on this matter) or (B)
ten (10) members of the Board, stating that in the good faith opinion of the
Board, the Executive is guilty of the conduct described in the Notice of
Termination for Cause, and that conduct constitutes Cause under this
Agreement.
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(iii) A termination of the Executive's employment without
Cause shall be effective in accordance with the following procedures. The
Company shall give the Executive written notice ("Notice of Termination
without Cause") of its intention to terminate the Executive's employment
without Cause, stating the date, time and place of the Special Board Meeting
without Cause. The "Special Board Meeting without Cause" means a meeting of
the Board called and held specifically for the purpose of considering the
Executive's termination without Cause, that takes place not less than ten and
not more than twenty business days after the Executive receives the Notice of
Termination without Cause. The Executive shall be given an opportunity,
together with counsel, to be heard at the Special Board Meeting without
Cause. The Executive's termination without Cause shall be effective when and
if a resolution is duly adopted at the Special Board Meeting without Cause by
an affirmative vote of the greater of (A) at least two-thirds (2/3) of the
entire membership of the Board (excluding the Executive who shall not vote on
this matter) or (B) ten members of the Board stating that the Executive is
terminated without Cause.
(c) GOOD REASON.
(i) The Executive may terminate employment for Good Reason
or without Good Reason. "Good Reason" means:
A. the assignment to the Executive of any duties
inconsistent in any respect with paragraph (a) of Section
2 of this Agreement, or any other action by the Company
that results in a diminution in the Executive's position,
authority, duties or responsibilities, other than an
isolated, insubstantial and inadvertent action that is not
taken in bad faith and is remedied by the Company promptly
after receipt of notice thereof from the Executive;
B. any failure by the Company to comply with any provision
of Section 3 of this Agreement, other than an isolated,
insubstantial and inadvertent failure that is not taken in
bad faith and is remedied by the Company promptly after
receipt of notice thereof from the Executive;
C. the assignment or reassignment by the Company of the
Executive without the Executive's consent to another place
of employment more than 50 miles from the Company's
headquarters indicated in Section 2(d);
D. any purported termination of the Executive's employment
by the Company for a reason or in a manner not expressly
permitted by this Agreement;
E. any failure by the Company to comply with paragraph (c)
of Section 11 of this Agreement; or
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F. any other substantial breach of this Agreement by the
Company that either is not taken in good faith or is not
remedied by the Company promptly after receipt of notice
thereof from the Executive.
The Company and the Executive, upon mutual written Agreement, may waive any
of the foregoing provisions which would otherwise constitute Good Reason.
(ii) A termination of employment by the Executive for Good
Reason shall be effectuated by giving the Company written notice ("Notice of
Termination for Good Reason") of the termination, setting forth in reasonable
detail the specific conduct of the Company that constitutes Good Reason and
the specific provision(s) of this Agreement on which the Executive relies. A
termination of employment by the Executive for Good Reason shall be effective
on the fifth business day following the date when the Notice of Termination
for Good Reason is given, unless the notice sets forth a later date (which
date shall in no event be later than 30 days after the notice is given). For
purposes of this Section 4(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
(iii) A termination of the Executive's employment by the
Executive without Good Reason shall be effected by giving the Company written
notice of the termination.
(d) NO WAIVER. The failure to set forth any fact or circumstance
in a Notice of Termination for Cause, a Notice of Termination without Cause
or a Notice of Termination for Good Reason shall not constitute a waiver of
the right to assert, and shall not preclude the party giving notice from
asserting, such fact or circumstance in an attempt to enforce any right under
or provision of this Agreement.
(e) DATE OF TERMINATION. The "Date of Termination" means the date
of the Executive's death, the Disability Effective Date, the date on which
the termination of the Executive's employment by the Company for Cause or
without Cause or by the Executive for Good Reason is effective, or the date
on which the Executive gives the Company notice of a termination of
employment without Good Reason, as the case may be.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) BY THE COMPANY OTHER THAN FOR CAUSE OR DISABILITY; BY THE
EXECUTIVE FOR GOOD REASON. If, during the Employment Period, the Company
terminates the Executive's employment other than for Cause or Disability, or
the Executive terminates employment for Good Reason, the Company shall
continue to provide the Executive with the compensation and benefits set
forth in paragraphs (a), (b), (c) and (e) of Section 3, other than benefits
under defined benefit pension plans, as if he had remained employed by the
Company pursuant to this Agreement through the end of the Employment Period
and retired at the end of the Employment Period (at which time he will be
treated as eligible for all retiree welfare benefits and other benefits
provided to retired senior executives, as set forth in Section 3(c)(ii) and
(iii)); PROVIDED, that the annual bonus for such period shall be based upon
the Target Bonus; PRO-
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VIDED, further that, to the extent any benefits described in paragraph (c) of
Section 3 cannot be provided pursuant to the plan or program maintained by
the Company for its executives, the Company shall provide such benefits
outside such plan or program at no additional cost (including without
limitation tax cost) to the Executive and his family, and PROVIDED, further,
that during any period when the Executive is eligible to receive benefits of
the type described in clause (B) of Section 3(c)(iii) under another
employer-provided plan, the benefits provided by the Company under Section
5(a) may be made secondary to those provided under another plan. In addition
to the foregoing, any restricted stock outstanding on the Date of Termination
shall be fully vested as of the Date of Termination and all options
outstanding on the Date of Termination shall be fully vested and exercisable
and shall remain in effect and exercisable through the end of their
respective terms, without regard to the termination of the Executive's
employment. The payments and benefits provided pursuant to this Section 5(a)
are intended as liquidated damages for a termination for the Executive's
employment by the Company other than for Cause or Disability or for the
actions of the Company leading to a termination of the Executive's employment
by the Executive for Good Reason, and shall be the sole and exclusive remedy
therefor.
(b) DEATH OR DISABILITY. If the Executive's employment is
terminated by reason of the Executive's death or Disability during the
Employment Period, the Company shall pay to the Executive, or in the cause of
the Executive's death, to the Executive's designated beneficiaries (or, if
there is no such beneficiary, to the Executive's estate or legal
representative) in a lump sum in cash within 30 days after the Date of
Termination, the sum of the following amounts (the "Accrued Obligations"):
(1) any portion of the Executive's Annual Base Salary through the Date of
Termination that has not yet been paid; (2) an amount equal to the Target
Bonus times a fraction, the numerator of which is the number of days in such
period through the Date of Termination, and the denominator of which is 365;
and (3) any accrued but unpaid incentive compensation and vacation pay; and
the Company shall have no further obligations under this Agreement, except as
specified in Section 3(c)(i) and (e) above and Section 6 and Section 9 below.
If the Executive's employment is terminated by reason of Disability, he
shall be entitled to receive the maximum disability payments which can be
provided under the disability plans described in Section 3(c)(iii), reduced,
however, by actual disability benefits received under such plans.
(c) BY THE COMPANY FOR CAUSE; BY THE EXECUTIVE OTHER THAN FOR GOOD
REASON. If the Executive's employment is terminated by the Company for Cause
during the Employment Period, the Company shall pay the Executive the Annual
Base Salary through the Date of Termination and the amount of any
compensation previously deferred by the Executive (together with any accrued
interest or earnings thereon), in each case to the extent not yet paid, and
the Company shall have no further obligations under this Agreement, except as
specified in Section 3(c)(i) above and Section 6 and Section 9 below.
If the Executive voluntarily terminates employment during the Employment
Period, other than for Good Reason, the Company shall pay the Accrued
Obligations to the Executive in a lump sum in cash within 30 days of the Date
of Termination, and the Company shall have no further obligations under this
Agreement, except as specified in Section 3(c)(i) above and Section 6 and
Section 9 below.
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6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies for which the Executive may qualify, nor, subject to paragraph (f)
of Section 12, shall anything in this Agreement limit or otherwise affect
such rights as the Executive may have under any contract or agreement with
the Company or any of its affiliated companies. Vested benefits and other
amounts that the Executive is otherwise entitled to receive under any plan,
policy, practice or program of, or any contract or agreement with, the
Company or any of its affiliated companies on or after the Date of
Termination shall be payable in accordance with the terms of each such plan,
policy, practice, program, contract or agreement, as the case may be, except
as explicitly modified by this Agreement.
7. FULL SETTLEMENT. The Company's obligation to make the payments provided
for in, and otherwise to perform its obligations under this Agreement shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action that the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement and,
except as specifically provided in Section 5(a) with respect to benefits
described in clause (B) of Section 3(c)(iii), such amounts shall not be
reduced, regardless of whether the Executive obtains other employment.
8. NON-COMPETITION PROVISION AND CONFIDENTIAL INFORMATION. In
consideration for $2,500,000 of the Special Retention Bonus provided for in
Section 3(e) above, the Executive agrees to the following covenants.
(a) Without prior written consent of the Company, for the greater
of (i) the twenty-four (24) month period following the Date of Termination,
or (ii) the remaining term of this Agreement, the Executive shall not, as a
shareholder, officer, director, partner, consultant, or otherwise, engage
directly or indirectly in any business or enterprise which is "in
competition" with the Company or its successors or assigns; provided,
however, that the Executive's ownership of less than five percent of the
issued and outstanding voting securities of a publicly-traded company shall
not be deemed to constitute such competition. A business or enterprise is
deemed to be "in competition" if it is engaged in the business of generation,
purchase, transmission, distribution, or sale of electricity, or in the
purchase, transmission, distribution, sale or transportation of natural gas
within the States of Colorado, Kansas, Minnesota, New Mexico, Oklahoma, North
Dakota, South Dakota, Texas, Wisconsin or Wyoming.
(b) The Executive shall hold in a fiduciary capacity for the
benefit of the Company all secret or confidential information, knowledge or
data relating to the Company or any of its affiliated companies and their
respective businesses that the Executive obtains during the Executive's
employment by the Company or any of its affiliated companies and that is not
public knowledge (other than as a result of the Executive's violation of this
Section 8) ("Confidential Information"). The Executive shall not
communicate, divulge or disseminate Confidential Information at any time
during or after the Executive's employment with the Company, except with the
prior written consent of the Company or as otherwise required by
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law or legal process. In no event shall any asserted violation of the
provisions of this Section 8 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement.
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) 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 the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined with regard to any additional payments required
under this Section 9) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code, or any interest or penalties are
incurred by the 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 the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the 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) and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed
upon the Payments.
(b) Subject to the provisions of paragraph (c) of this Section 9,
all determinations required to be made under this Section 9, 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 a nationally recognized certified public
accounting firm designated by the Executive (the "Accounting Firm"), which
shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice from the Executive
that there has been a Payment, or such earlier time as is requested by the
Company. 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
9, shall be paid by the Company to the Executive within five days of the
receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company and the 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 paragraph (c) of this Section 9 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 the Executive.
(c) The 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 not later than ten business days after the
Executive is informed in writing of such claim and shall apprise the
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Company of the nature of such claim and the date on which such claim is
requested to be paid. The 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
the Executive in writing prior to the expiration of such period that it
desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim;
(ii) 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;
(iii) cooperate with the Company in good faith in
order effectively to contest such claim; and
(iv) 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 the Executive harmless, on an
after-tax basis, for any Excise 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 on the foregoing
provisions of this paragraph (c) of Section 9, 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 the Executive to pay the tax claimed and
xxx for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company shall determine, PROVIDED, however,
that if the Company directs the Executive to pay such claim and xxx for a
refund, the Company shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise 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 PROVIDED, further, that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the
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 the 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.
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(d) If, after the receipt by the Executive of an amount advanced
by the Company pursuant to paragraph (c) of this Section 9, the Executive
becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the requirements of
paragraph (c) of this Section 9) 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 the Executive of an amount
advanced by the Company pursuant to paragraph (c) of this Section 9, a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the 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.
10. ATTORNEY'S FEES. The Company agrees to pay, as incurred, to the fullest
extent permitted by law, all legal fees and expenses that the Executive may
reasonably incur as a result of any contest regardless of the outcome by the
Company, the Executive or others of the validity or enforceability of or
liability under or otherwise involving, any provision of this Agreement,
together with interest on any delayed payment at the applicable federal rate
provided for in Section 7872(f)(2)(A) of the Code.
11. SUCCESSORS.
(a) This Agreement is personal to the Executive and, without the
prior written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
both the Company as defined above and any such successor that assumes and
agrees to perform this Agreement, by operation of law or otherwise.
12. MISCELLANEOUS.
(a) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Minnesota, without reference to
principles of conflict of laws. The captions of this Agreement are not part
of the provisions hereof and shall have no force and effect. This Agreement
may not be amended or modified except by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
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(b) All notices and other communications under this Agreement
shall be in writing and shall be given by hand delivery to the other party or
by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive: Xxxxx X. Xxxxxx
If to the Company: Northern States Power Company
000 Xxxxxxxx Xxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: General Counsel
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph (b) of Section 12. Notices and communications
shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. If any provision of this Agreement shall be
held invalid or unenforceable in part, the remaining portion of such
provision, together with all other provisions of this Agreement, shall remain
valid and enforceable and continue in full force and effect to the fullest
extent consistent with law.
(d) Notwithstanding any other provision of this Agreement, the
Company may withhold from amounts payable under this Agreement all federal,
state, local and foreign taxes that are required to be withheld by applicable
laws or regulations.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of, or to assert any right under, this
Agreement (including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to paragraph (c) of Section 4
of this Agreement) shall not be deemed to be a waiver of such provision or
right or of any other provision of or right under this Agreement.
(f) The Executive and the Company acknowledge that this Agreement
supersedes and terminates any other severance and employment agreements
between the Executive and the Company, NCE and their respective affiliates,
except as specifically provided in Section 1 hereof. Without limiting the
generality of the foregoing, the Executive hereby expressly waives the right
to receive any payments or benefits under the Severance Policies.
(g) The rights and benefits of the Executive under this Agreement
may not be anticipated, assigned, alienated or subject to attachment,
garnishment, levy, execution or other legal or equitable process except as
required by law. Any attempt by the Executive to anticipate, alienate,
assign, sell, transfer, pledge, encumber or charge the same shall be void.
Payments hereunder shall not be considered assets of the Executive in the
event of insolvency or bankruptcy.
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(h) This Agreement may be executed in several counterparts, each
of which shall be deemed an original, and said counterparts shall constitute
but one and the same instrument.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization of its Board of Directors, the
Company has caused this Agreement to be executed in its name on its behalf,
all as of the day and year first above written.
/s/ Xxxxx X. Xxxxxx
----------------------------
Xxxxx X. Xxxxxx
NORTHERN STATES POWER COMPANY
By: /s/ Xxxxx X. Xxxxx
---------------------------------------
Name: Xxxxx X. Xxxxx
Title: Vice President - Human Resources
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