Exhibit 10(ii)
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT
AGREEMENT (the “Agreement”) dated July 7, 2008 is
made by and between LUMINANT HOLDING COMPANY LLC (the
“Company”), ENERGY FUTURE HOLDINGS CORP. (the parent
entity of the Company, “Holdings”) and MARK ALLEN
McFARLAND (the “Executive”).
WITNESSETH
WHEREAS, the Parties previously
entered into an employment agreement; and
WHEREAS, the Parties desire to amend
and restate the employment agreement, in each case on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of
the mutual promises, covenants and obligations contained herein,
the Company and Executive agree as follows:
1. Term of Employment .
Subject to the provisions of Section 8 of this Agreement, this
Agreement and Executive’s employment hereunder shall be
effective as of July 7, 2008 (“Effective Date”)
and shall continue until the third anniversary of the Effective
Date (the “Initial Term”). Subject to the provisions of
Section 8 of this Agreement, the Initial Term shall be
extended as follows: (i) this Agreement shall automatically
renew for an additional one (1) year period commencing
immediately following the last day of the Initial Term and each one
(1) year period thereafter (each, a “Renewal
Term”), unless, the Company or Executive provides the other
party written notice of non-renewal at least sixty (60) days
prior to the end of the applicable term. The period during which
Executive is employed by the Company hereunder is hereinafter
referred to as the “Employment Term”.
2. Positions .
a. During the Employment Term,
Executive shall serve as Executive Vice President and Chief
Commercial Officer of the Company and as Executive Vice President
of Holdings. As Chief Commercial Officer of the Company, Executive
shall have responsibility for Luminant Energy (the entity
responsible for the wholesale marketing, trading, origination and
other activities of the Company), Generation Development, Risk, and
fundamentals and structuring duties, and the most senior manager of
each function for which Executive is solely responsible, shall
report to Executive. As an Executive Vice President of Holdings,
Executive shall have responsibility for Corporate Strategy and
Corporate Development/M&A for Holdings and its subsidiaries. In
both positions, Executive shall have such the duties described
above and other duties, authority and responsibilities as shall be
determined from time to time by the Chief Executive Officer of the
Company or Holdings, as appropriate, which duties, authority and
responsibilities shall be customary for Executive’s position
in a business of a similar size, type and nature to that of the
Company. Executive shall report to the Chief Executive Officer of
the Company with respect to his responsibilities to the Company and
shall report to the Chief Executive Officer of Holdings with
respect to his responsibilities to Holdings. Executive shall also
serve as a member of the Strategy and Policy Committee for
Holdings.
b. During the Employment Term,
Executive will devote Executive’s full business time and best
efforts to the performance of his duties hereunder and will not
engage in any other business, profession or occupation for
compensation or otherwise which would conflict or interfere with
the rendition of such services either directly or indirectly,
without the prior written consent of the Board; provided ,
however , that nothing herein shall preclude Executive from
serving on the outside board of directors of one other company and,
subject to the prior approval of the Board, which approval shall
not be unreasonably withheld, from accepting appointment to or
continuing to serve on such additional boards of directors or
trustees of any other business, corporation or charitable
organization; provided , further , that, in each
case, such activities do not conflict or interfere with the
performance of Executive’s duties hereunder or conflict with
Section 9.
3. Base Salary and Sign On
Bonus . During the Employment Term, the Company shall pay
Executive a base salary at the annual rate of $500,000, payable in
regular installments in accordance with the Company’s usual
payment practices. Executive shall be entitled to such increases,
if any, in his base salary as may be determined from time to time
in the sole discretion of the Board, in accordance with the
Company’s normal annual review process for executives.
Executive’s annual base salary, as in effect from time to
time, is hereinafter referred to as the “Base Salary”.
Within 30 days after the Effective Date, the Company shall pay
Executive a cash sum of $150,000, provided that
Executive shall repay such cash sum to the Company in the event of
his resignation without Good Reason (and not due to his Disability)
(“Good Reason” and “Disability” are defined
below) prior to the first anniversary of the Effective
Date.
4. Annual Bonus . With
respect to each full fiscal year during the Employment Term,
Executive shall have the opportunity to earn an annual bonus award
(the “Annual Bonus”) of 75% of his Base Salary
(“Annual Bonus Target”), as in effect at the beginning
of the applicable fiscal year, based upon the achievement of annual
performance targets established by the Board; provided ,
however , if Executive achieves superior performance targets
as established by the Board, then Executive shall be eligible to
receive a bonus award constituting 200% of his Annual Bonus Target.
The Annual Bonus, if any, shall be paid to Executive within two and
one half (2.5) months after the end of the applicable fiscal
year. Executive’s Annual Bonus for 2008 shall not be prorated
and shall be payable based on Executive’s annual rate of Base
Salary, to the extent of the achievement of the applicable annual
performance targets.
5. Stock Compensation; Employee
Benefits; Perquisites; Fringe Benefits .
a. On or after the Effective Date,
the Company shall grant Executive: (i) an option to purchase
2,000,000 shares of Company common stock (“Common
Stock”) on terms and conditions set forth in the Nonqualified
Stock Option Agreement in substantially the form attached as
Exhibit I (such award, the “Option Award”); and
(ii) deferred share units (“Deferred Share Units”)
representing the right to receive 100,000 shares of Stock on terms
and conditions set forth in the Deferred Share Agreement in
substantially the form attached as Exhibit II. In addition, upon or
as soon as practicable after the Effective Date, and no later than
December 31, 2008, Executive shall have the option to purchase
up to 100,000 shares of Stock for a purchase price of $5 per share,
or $500,000 in the aggregate. The Option Award, Deferred Share
Units, and, if elected, Executive’s share purchase shall be
subject to the further terms and conditions of the Management
Stockholder’s Agreement and the Sale Participation Agreement
each in substantially the form attached as Exhibit III and IV,
respectively.
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b. During the Employment Term,
Executive shall be entitled to participate in the Company’s
group health, life, disability and other active employee and
retiree welfare benefit plans and arrangements, and tax qualified
and nonqualified savings and pension benefit plans, as in effect
from time to time (collectively “Employee Benefits”),
on a basis which is no less favorable than is provided to other
similarly situated executives of the Company, to the extent
consistent with applicable law and the terms of the applicable
plans and standard perquisites.
c. During the Employment Term,
Executive shall be entitled to fringe benefits consistent with the
practices of the Company. Fringe benefits shall be provided to
Executive to the extent the Company provides similar benefits to
other similarly situated Company executives.
6. Business Expenses .
Subject to the Company’s standard policies and procedures
with respect to expense reimbursement as applied to its executive
employees generally, the Company shall reimburse Executive for, or
pay on behalf of Executive, reasonable and appropriate expenses
incurred by Executive for business related purposes.
7. Relocation Expenses . The
Company shall reimburse Executive for all reasonable relocation
expenses directly related to Executive’s relocation from the
metropolitan Chicago, Illinois, area to the metropolitan Dallas,
Texas area in accordance with terms of the Company’s
relocation policy and as otherwise provided in Appendix A hereto.
The Company will, at its discretion, reimburse additional
relocation expenses directly related Executive’s relocation
provided they are supported by adequate documentation acceptable to
the Company. To the extent the Company’s payment or
reimbursement of such expenses are required to be included in the
Executive’s income for income tax purposes or as wages for
employment tax purposes, the Company shall pay to the Executive an
amount necessary to “gross up” Executive for state and
federal income and employment tax purposes (and for such taxes on
such gross-up payment), which gross up amount shall be paid to
Executive no later than the end of the applicable calendar year in
which the expenses were incurred.
8. Termination . The
Employment Term and Executive’s employment hereunder may be
terminated by either the Company or Executive at any time and for
any reason; provided that, unless otherwise provided herein, either
party will be required to give the other party at least sixty
(60) days advance written notice of any termination of
Executive’s employment. Notwithstanding any other provision
of this Agreement, the provisions of this Section 8 shall
exclusively govern Executive’s rights upon termination of
employment with the Company and its Affiliates (as defined in
Section 9(c) below).
a. By the Company For Cause or By
Executive Due to Voluntary Resignation Without Good Reason
.
(i) The Employment Term and
Executive’s employment hereunder may be terminated by the
Company for Cause (as defined below) or by Executive’s
voluntary resignation without Good Reason (as defined below). If
Executive’s employment is terminated by the Company for
Cause, or if Executive resigns without Good Reason, Executive shall
be entitled to receive:
(A) within ten (10) business
days following the date of termination, accrued, but unpaid Base
Salary and unused vacation, earned through the date of
termination;
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(B) accrued, but unpaid Annual
Bonus, earned for any previously completed fiscal year, paid in
accordance with Section 4 (except to the extent payment is
otherwise deferred pursuant to any applicable deferred compensation
arrangement with the Company);
(C) reimbursement, within sixty
(60) days following submission by Executive to the Company, as
applicable, of appropriate supporting documentation, for any
unreimbursed business expenses properly incurred by Executive in
accordance with the Company’s policies prior to the date of
Executive’s termination; provided claims for such
reimbursement (accompanied by appropriate supporting documentation)
are submitted to the Company within ninety (90) days following
the date of Executive’s termination of employment;
(D) such Employee Benefits and stock
compensation, if any, as to which Executive may be entitled under
the employee benefit plans of the Company or any agreement between
the Company and Executive; and
(E) any amounts payable or that may
become payable pursuant to Section 8(e)(ii) and
Section 10(g) (the amounts described in clauses
(A) through (E) hereof being referred to as the
“Accrued Rights”).
Following such termination of
Executive’s employment by the Company for Cause or voluntary
resignation by Executive without Good Reason, except as set forth
in this Section 8(a)(i) and for any rights to indemnification
and claims for liability insurance coverage under officer and
director policies, Executive shall have no further rights to any
compensation or any other benefits under this Agreement.
(ii) For purposes of this Agreement,
the terms:
(A) “ Cause ”
shall mean (i) if, in carrying out his duties to the Company,
Executive engages in conduct that constitutes (a) a material
breach of his fiduciary duty to the Company or its shareholders
(including, without limitation, a material breach or attempted
breach of the provisions under Section 9), (b) gross
neglect or (c) gross misconduct resulting in material economic
harm to the Company, provided that any such conduct described in
(a), (b) or (c) is not cured within ten
(10) business days after Executive receives from the Company
written notice thereof, or (ii) Executive’s conviction
of, or entry of a plea of guilty or nolo contendere for, a felony
or other crime involving moral turpitude.
(B) “ Good Reason
” shall mean (i) a reduction in Executive’s Base
Salary or Executive’s annual incentive compensation
opportunity (other than a general reduction in Base Salary or
annual incentive compensation opportunities that affects all
salaried
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employees of the Company proportionately);
(ii) a transfer of Executive’s primary workplace by more
than thirty-five (35) miles from the workplace on the
Effective Date; (iii) a substantial adverse change in
Executive’s duties or responsibilities; (iv) any
material breach of this Agreement; or (v) an adverse change in
Executive’s line of reporting to superior officers pursuant
to the terms of this Agreement; provided , however ,
that any isolated, insubstantial and inadvertent failure by the
Company that is not in bad faith and is cured within ten
(10) business days after Executive gives the Company written
notice of any such event set forth above, shall not constitute Good
Reason.
b. Disability or Death
.
(i) The Employment Term and
Executive’s employment hereunder shall terminate upon
Executive’s death and may be terminated by the Company if
Executive has a Disability as hereinafter defined. Upon termination
of Executive’s employment hereunder for either Disability or
death, Executive or Executive’s estate (as the case may be)
shall be entitled to receive:
(A) the Accrued Rights;
and
(B) a pro-rata portion of the Annual
Bonus Target, if any, that Executive would have been entitled to
receive pursuant to Section 4 hereof for the fiscal year of
termination, multiplied by a fraction, the numerator of which is
the number of days during which Executive was employed by the
Company in the fiscal year of Executive’s termination, and
the denominator of which is 365 (the “Pro-Rata Bonus”),
with such Pro-Rata Bonus payable to Executive pursuant to
Section 4 as if Executive’s employment had not
terminated.
Following Executive’s
termination of employment due to death or Disability, except as set
forth in this Section 8(b)(i) and for any rights to
indemnification and claims for liability insurance coverage under
officer and director policies, Executive shall have no further
rights to any compensation or any other benefits under this
Agreement.
(ii) “Disability” shall
mean Executive’s physical or mental incapacitation and
consequent inability, with reasonable accommodation, for a period
of six consecutive months to perform Executive’s duties;
provided, however, in the event the Company temporarily replaces
Executive, or transfers Executive’s duties or
responsibilities to another individual, on account of
Executive’s mental or physical impairment for a period of
time which is covered by the Company’s short term disability
plan, Executive’s employment shall not be deemed terminated
by the Company and Executive shall not be able to resign with Good
Reason. Any question as to the existence of the Disability of
Executive as to which Executive and the Company cannot agree shall
be determined in writing by a qualified independent physician
mutually acceptable to Executive and the Company. If Executive and
the Company cannot agree as to a qualified independent physician,
each shall appoint a physician and those two physicians shall
select a third who shall make such determination in writing. The
determination of Disability made in writing to the Company and
Executive shall be final and conclusive for all purposes of the
Agreement and any other agreement with Executive that incorporates
this definition of “Disability”.
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c. By the Company Without Cause;
Resignation by Executive for Good Reason . The Employment Term
and Executive’s employment hereunder may be terminated by the
Company without Cause (other than by reason of death or Disability)
or upon Executive’s resignation for Good Reason. If
Executive’s employment is terminated by the Company without
Cause (other than by reason of death or Disability) or Executive
resigns for Good Reason (except as otherwise provided in
Section 8(e)), Executive shall be entitled to
receive:
(i) the Accrued Rights;
(ii) provided Executive
(x) does not violate the restrictions set forth in
Section 9 of this Agreement and (y) executes, delivers
and does not revoke a general release of claims against the
Company, its subsidiaries and its stockholders (excluding claims
for indemnification, claims for coverage under officer and director
policies, and claims as a stockholder of the Company):
(A) for a termination occurring on
or prior to the second anniversary of the Effective Date, a lump
sum payment equal to two (2) times the sum of:
(1) Executive’s annualized Base Salary and
(2) Executive’s Annual Bonus Target, payable as soon as
practicable but no later than the earlier of:
(i) March 15 following the calendar year in which
termination occurs or (ii) ninety (90) days following
termination; or
(B) for a termination occurring
after the second anniversary of the Effective Date, a lump sum
payment of an amount equal to: (1) two (2) times
Executive’s Base Salary, (2) the Pro-Rata Bonus, and
(3) the matching contributions which would have been made on
behalf of Executive pursuant to the Company’s Salary Deferral
Program had Executive continued his participation in such plan as
in effect on the date of such termination for an additional twelve
(12) months, payable as soon as practicable but no later than
the earlier of: (i) March 15 following the calendar year
in which termination occurs or (ii) ninety (90) days
following termination.
(C) Executive, his spouse and
eligible dependents (to the extent covered immediately prior to
such termination) shall continue to be eligible to participate in
all of the Company’s group health plans on the same terms and
conditions as active employees of the Company until the earlier of
(x) two (2) years from the date of termination of
Executive’s employment (the “Severance Period”),
to the extent that Executive was eligible to participate in such
plans immediately prior to the date of termination, or
(y) until Executive is, or becomes, eligible for comparable
coverage under the group health plans of a subsequent employer,
provided that, if Executive continues to receive benefits pursuant
to this Section 8(c)(ii)(C) during a period of time during
which, in the absence of the benefits provided in this
Section 8(c)(ii)(C), Executive would not otherwise be entitled
to continuation coverage under Section 4980B of the Internal
Revenue Code of 1986, as amended (the “Code”),
Executive shall receive reimbursement for all medical expenses on
the date no later than the end of the calendar year immediately
following the calendar year in which the applicable expenses have
been incurred. The COBRA health care continuation coverage period
under Section 4980B of the Code, or any replacement or
successor provision of United States tax law, shall run
concurrently with the Severance Period.
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Following Executive’s termination of
employment by the Company without Cause (other than by reason of
Executive’s death or Disability) or upon Executive’s
resignation for Good Reason, except as set forth in this
Section 8(c) or otherwise provided in Section 8(e) and
for any rights to indemnification and claims for liability
insurance coverage under officer and director policies, Executive
shall have no further rights to any compensation or any other
benefits under this Agreement.
d. Expiration of Employment
Term .
(i) In the event Executive elects
not to extend the Employment Term pursuant to Section 1,
unless Executive’s employment is earlier terminated pursuant
to paragraphs (a), (b), (c), or (e) of this Section 8,
the Employment Term shall expire and Executive’s employment
hereunder shall terminate on the close of business on the day
immediately preceding the commencement of a subsequent Renewal
Term, and Executive shall be entitled to receive the Accrued Rights
and the rights set forth in Section 8(d)(ii) below.
(ii) In the event the Company elects
not to extend the Employment Term pursuant to Section 1,
unless Executive’s employment is earlier terminated pursuant
to paragraphs (a), (b), (c), or (e) of this Section 8,
the Employment Term shall expire and Executive’s employment
hereunder shall terminate on the close of business on the day
immediately preceding the commencement of a subsequent Renewal
Term, and Executive shall be entitled to receive the payments and
benefits applicable to a termination of Executive’s
employment without Cause pursuant to Section 8(c) or
Section 8(e), as applicable. Except as set forth in this
Section 8(d)(ii) and for any rights to indemnification and
claims for liability insurance coverage under officer and director
policies, Executive shall have no further rights to any
compensation or any other benefits under this Agreement.
e. Change in Control
.
Notwithstanding any provision
contained herein, if Executive’s employment is terminated by
the Company without Cause (other than by reason of death or
Disability) or if Executive resigns for G
