THIS AGREEMENT is
made as of March 3, 2006, between NRG Energy, Inc. (the
“Company”), and David W. Crane
(“Executive”).
WHEREAS, the
Company has employed the Executive as its President and Chief
Executive Officer since December 1, 2003, pursuant to the
terms of an Employment Agreement (“Original
Agreement”), scheduled to expire by its terms on
December 1, 2006; and
WHEREAS, the
parties wish to extend and modify the Original Agreement to more
accurately reflect current circumstances.
NOW, THEREFORE, in
consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as
follows:
1.
Employment . The Company shall continue to employ Executive,
and Executive hereby agrees to continue in employment with the
Company, upon the terms and conditions set forth in this Agreement
for the period beginning on March 3, 2006 (the
“Effective Date”) and ending as provided in
Section 5 hereof (the “Employment
Period”).
(a) During
the Employment Period, Executive shall serve as the President and
Chief Executive Officer (“CEO”) of the Company and
shall have the normal duties, responsibilities, functions and
authorities customarily exercised by the President and CEO of a
company of similar size and nature as the Company. During the
Employment Period, Executive shall render such administrative,
financial and other executive and managerial services to the
Company and its affiliates which are consistent with
Executive’s position, as the Board of Directors of the
Company (the “Board”) may from time to time
direct.
(b) During
the Employment Period, Executive shall report to the Board and
shall devote his best efforts and his full business time and
attention (except for permitted vacation periods and reasonable
periods of illness or other incapacity) to the business and affairs
of the Company. Executive shall perform his duties,
responsibilities and functions to the Company hereunder to the best
of his abilities in a diligent, trustworthy, professional and
efficient manner and shall comply with the Company’s policies
and procedures in all material respects. In performing his duties
and exercising his authority under this Agreement, Executive shall
support and implement the business and strategic plans approved
from time to time by the Board. During the Employment Period,
Executive shall not serve as an officer or director of, or
otherwise perform services for compensation for, any other entity
without the prior written consent of the Board. Executive may serve
as an officer or director of, or otherwise participate in, purely
educational, welfare, social, religious and civic organizations so
long as such activities do not interfere with Executive’s
employment. Nothing contained herein shall preclude Executive from
(i) engaging in charitable and community activities;
(ii) participating in industry and trade organization
activities; (iii) managing his and his family’s personal
investments and
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affairs; and
(iv) delivering lectures, fulfilling speaking engagements or
teaching at educational institutions; provided, that such
activities do not materially interfere with the regular performance
of his duties and responsibilities under this Agreement.
3.
Compensation and Benefits .
(a) Beginning
on the Effective Date, and ending on December 31, 2006,
Executive’s annual base salary shall be One Million Dollars
($1,000,000.00). For each subsequent annual period thereafter, the
Executive’s annual base salary shall be reviewed by the
Board, which shall determine whether to grant an increase (such
initial annual base salary and the annual base salary as determined
and adjusted upward from time to time by the Board are referred to
herein as the “Base Salary”). The Base Salary shall be
payable by the Company in regular installments in accordance with
the Company’s general payroll practices (in effect from time
to time) but in any event no less frequently than monthly. For
purposes of this Agreement, the Base Salary shall not include any
other type of compensation or benefit paid or payable to the
Executive.
(b)
Bonuses and Incentive Compensation .
(i)
Annual Bonus . Beginning for fiscal year 2006 and for each
fiscal year thereafter during the Employment Period, based on
achievement of criteria determined by the Board as soon as
administratively practicable following the beginning of each such
fiscal year with input from Executive, Executive will be entitled
to an annual bonus with a target amount equal to 100% of the
Executive’s then Base Salary (the “Annual
Bonus”). The Company shall pay the Annual Bonus in a single
cash lump-sum after the end of the Company’s fiscal year in
accordance with procedures established
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by the Board,
but in no event later than two and one-half months after the end of
such fiscal year.
(ii)
Maximum Bonus . In addition to the Annual Bonus referenced
in paragraph 3(b)(i), beginning for fiscal year 2006 and for each
fiscal year thereafter during the Employment Period, based on
achievement of criteria determined by the Board as soon as
administratively practicable following the beginning of each such
fiscal year with input from Executive, Executive shall be eligible
to receive a “maximum bonus” in an amount up to, but
not exceeding, 100% of Executive’s then Base Salary (the
“Maximum Bonus”). The Company shall pay the Maximum
Bonus in a single cash lump-sum following the end of the
Company’s fiscal year in accordance with procedures
established by the Board, but in no event later than two and
one-half months after the end of such fiscal year.
(iii)
Long Term Incentive . The Company has previously provided
Executive with a combination of restricted stock or units
(“restricted stock”) and stock options (the
“Executive LTIP”), pursuant to paragraph 3(b)(iv) of
the Original Agreement, which is incorporated herein by reference.
The Executive LTIP shall be governed by the terms of paragraph
3(b)(iv) of the Original Agreement and the applicable award
agreements entered into by the Company and the Executive. In
addition, Executive shall be eligible to participate in the NRG
Energy, Inc. Long-Term Incentive Plan, on such terms and conditions
as are stated therein.
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(c) During
the Employment Period, the Company shall promptly reimburse
Executive for all reasonable business expenses incurred by him in
the course of performing his duties and responsibilities under this
Agreement which are consistent with the Company’s policies in
effect from time to time with respect to travel, entertainment and
other business expenses, subject to the Company’s
requirements with respect to reporting and documentation of such
expenses. The Company will promptly reimburse Executive for
reasonable expenses incurred for annual tax return preparation, and
ongoing tax advice and financial planning, and for reasonable legal
expenses incurred in connection with negotiating this Agreement and
the other agreements referred to herein.
(d) In
addition to the Base Salary and any bonuses and incentives payable
to Executive pursuant to this Section 3, Executive shall also
be entitled to the following benefits during the Employment Period,
unless otherwise modified by the Board:
(i)
participation in the Company’s retirement plans, health and
welfare plans and disability insurance plans, under the terms of
such plans and to the same extent and under the same conditions
such participation and coverages are provided to other senior
management of the Company;
(ii)
term life insurance with a death benefit of $7.75 million
through the continuation of the term life insurance provided to
Executive by his former employer (other than adjustable rate life
insurance) immediately prior to the Executive’s employment
with the Company;
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(iii)
prompt reimbursement of the costs, not to exceed $10,000 per year,
Executive incurs in obtaining additional disability insurance
coverage with a monthly disability benefit of up to
$30,000;
(iv)
five weeks paid vacation each calendar year; and
(v)
coverage under the Company’s director and officer liability
insurance policy.
4.
Board Membership . With respect to all regular elections of
directors during the Employment Period, the Company shall nominate,
and use its reasonable efforts to cause the election of, Executive
to serve as a member of the Board. Effective upon the termination
or expiration of the Employment Period, Executive shall resign as a
director of the Company and its affiliates, as the case may
be.
(a) The
Employment Period shall end on December 31, 2008, provided,
however, that the Employment Period shall be automatically renewed
for successive one-year terms thereafter on the same terms and
conditions set forth herein unless either party provides the other
party with notice that it has elected not to renew the Employment
Period at least 90 days prior to the end of the initial
Employment Period or any subsequent extension thereof.
Notwithstanding the foregoing, (i) the Employment Period shall
terminate immediately upon Executive’s resignation (with or
without “Good Reason,” as defined in the
Company’s Executive Change in Control and General Severance
Plan, as in effect from time to time (the “Severance
Plan”)), death or Disability (as defined herein) or
(ii) the Employment Period may be terminated by the
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Company at any
time prior to such date for “Cause” (as defined in the
Severance Plan) or without Cause. Except as otherwise provided
herein, any termination of the Employment Period by the Company
shall be effective as specified in a written notice from the
Company to Executive, but in no event more than 30 days from
the date of such notice.
(b) For
purposes of this Agreement, the definition of Good Reason shall
also include the following:
(i)
any failure by the Company to comply with any of the provisions of
this Agreement, other than any isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of written notice
thereof given by the Executive; or
(ii)
any failure to elect Executive to the Board at any regular election
of directors during the Employment Period, or any removal of
Executive from the Board, for any reason, during the Employment
Period; or
(iii)
a change in reporting structure of the Company where Executive is
required to report to someone other than the Board.
(a)
Termination without Cause or for Good Reason .
(i)
In the event of Executive’s termination of employment with
the Company (i) by the Company without Cause, (ii) by
Executive for Good Reason or (iii) if the Company notifies
Executive pursuant to Section 5 that it has elected not to
renew this Agreement after the initial term or any subsequent
one-year term, Executive shall be
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entitled to the
severance benefits set forth below in Section 6(a)(ii);
provided, however, if such termination of employment or election of
non-renewal occurs within twenty-four (24) months immediately
following a “Change in Control” (as defined in the
Severance Plan) of the Company, Executive shall in lieu of the
severance benefits provided under Section 6(a)(ii) hereof
become entitled to the severance benefits set forth below in
Section 6(a)(iii).
(ii)
As a condition to the payment of the following severance benefits,
the Executive shall execute and deliver the “Release”
in the form attached hereto as Exhibit A, in consideration for
which the Company agrees to the following:
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(A)
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The
Company shall pay Executive, within 45 days after termination
of employment, a lump-sum cash payment in an amount equal to two
times the Executive’s annual Base Salary (as in effect at the
date of Executive’s termination determined without regard to
any reduction in such Base Salary constituting Good
Reason).
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(B)
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The
Company shall pay Executive, within 45 days after termination
of employment, a lump-sum payment in an amount equal to 50% of his
target Annual Bonus then in effect (excluding the Maximum Bonus but
determined without regard to any reduction in such target Annual
Bonus constituting Good Reason) pro-rated for the number of days
during such year that Executive was employed by the
Company.
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(C)
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All
restricted stock, stock options and other equity awards granted
under the Executive LTIP, described in paragraph 3(b)(iv) of the
Original Agreement, shall vest in full on the date of such
termination of employment, and all stock options shall continue to
be exercisable for the remainder of their stated terms.
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(D)
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For
eighteen (18) months from the date of termination (the
“Benefits Continuation Period”), the Company shall
arrange to provide Executive and his dependents, at the
Company’s cost, medical and dental coverage providing
substantially similar benefits to those which Executive and his
dependents were receiving immediately prior to such date.
Notwithstanding the foregoing, the period for which
Executive’s eligibility for COBRA benefits continuation
coverage is measured shall commence upon Executive’s
termination of employment and shall run concurrently with the
Benefits Continuation Period.
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(E)
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The
Company shall pay Executive the amounts described in
Section 6(d).
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(iii)
As a condition to the payment of the following severance benefits,
the Executive shall execute and deliver the “Release”
in the form attached hereto as Exhibit A, in consideration for
which the Company agrees to the following:
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(A)
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The
Company shall pay Executive, within 45 days after termination
of employment, a lump-sum cash payment in an
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amount equal to two and ninety-nine
one-hundredths (2.99) times the sum of the following:
(x) Executive’s annual Base Salary (as in effect at the
date of Executive’s termination determined without regard to
any reduction in such Base Salary constituting Good Reason) and
(y) Executive’s target Annual Bonus (excluding the
Maximum Bonus but determined without regard to any reduction in
such target Annual Bonus constituting Good Reason) for the year in
which the termination of employment occurs.
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(B)
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The
Company shall pay Executive, within 45 days after termination
of employment, a lump-sum cash payment in an amount equal to
Executive’s then current target Annual Bonus (excluding the
Maximum Bonus but determined without regard to any reduction in
such target Annual Bonus constituting Good Reason) for the year in
which the termination of employment occurs, adjusted on a pro rata
basis based on the number of days Executive was actually employed
during the year in which the termination of employment
occurs.
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(C)
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All
restricted stock, stock options and other equity awards granted
under the Executive LTIP, described in paragraph 3(b)(iv) of the
Original Agreement, shall vest in full on the date of such
termination of employment, and all stock options shall continue to
be exercisable for the remainder of their stated terms.
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(D)
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For
eighteen (18) months from the date of termination (the
“Change in Control Benefits Continuation Period”), the
Company shall arrange to provide Executive and his dependents, at
the Company’s cost, medical and dental coverage providing
substantially similar benefits to those which Executive and his
dependents were receiving immediately prior to such date.
Notwithstanding the foregoing, the period for which
Executive’s eligibility for COBRA benefits continuation
coverage is measured shall commence upon Executive’s
termination of employment and shall run concurrently with the
Change in Control Benefits Continuation Period.
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(E)
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The
Company shall pay Executive the amounts described in
Section 6(d).
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(iv)
Notwithstanding anything in this Section 6(a) to the contrary, the
benefits provided pursuant to Section 6(a)(ii)(D) and
Section 6(a)(iii)(D) shall be discontinued prior to the end of
the Benefits Continuation Period or Change in Control Benefits
Continuation Period, as applicable, in the event Executive receives
substantially similar benefits from a subsequent employer, as
determined by the Company in good faith. Executive shall be deemed
to have a duty to inform the Company as to the terms and conditions
of any subsequent employment and the corresponding benefits earned
from such employment, and shall provide, or cause to be provided,
to the Company in writing correct, complete and timely information
concerning the same.
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(v)
Notwithstanding anything herein to the contrary, if Executive is a
“specified employee” (within the meaning of
Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”)) as of his termination of employment, then
to the extent necessary to comply with the requirements of
Section 409A of the Code, no payment due Executive under this
Section 6(a) shall be made earlier than the date that is six months
following Executive’s termination of employment, at which
time all payments that would otherwise have been made within that
six month period shall be paid to Executive in a lump
sum.
(b)
Termination for Cause or Voluntary Resignation . In the
event Executive’s employment with the Company is terminated
(i) by the Board for Cause (as defined herein), or (ii) by
Executive’s resignation from the Company for any reason other
than Good Reason or Disability the Company agrees to the
following:
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(A)
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The
Company shall pay Executive the amounts described in
Section 6(d).
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(B)
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The
Company shall treat all restricted stock, stock options and other
equity awards outstanding under the Executive LTIP or any other
Company equity plans in accordance with the terms of the plans or
agreements under which such awards were created or maintained. If
Executive resigns from the Company for any reason on or after
November 10, 2006, all stock options granted under the
Executive LTIP will remain exercisable for the remainder of their
stated terms.
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(c)
Death or Disability . In the event that Executive’s
employment with the Company is terminated as a result of
Executive’s death or Disability, the Company agrees to the
following:
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(A)
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The
Company shall pay Executive, or his estate or legal representative,
within fifteen (15) days after such termination, a lump-sum
payment in an amount equal to 50% of the target Annual Bonus then
in effect (excluding the Maximum Bonus but determined without
regard to any reduction in such target Annual Bonus constituting
Good Reason) pro-rated for the number of days during such year that
Executive was employed by the Company. Any stock options granted
under the Executive LTIP that have vested will remain exercisable
for the remainder of their stated terms.
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(B)
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If
the Executive is terminated as a result of his death or Disability
prior to December 1, 2006, his “restricted stock”
(as defined above) shall vest on a pro rata basis (based on the
ratio of (x) the number of complete months beginning on the
Commencement Date (as such term is defined in the Original
Agreement) and ending on the date of Executive’s termination
of employment to (y) thirty-six (36)).
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(C)
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The
Company shall treat all stock options under the Executive LTIP or
other equity under any other Company plans in
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accordance with the terms of the
plans or agreements under which such awards were created or
maintained.
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(D)
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The
Company shall pay Executive the amounts described in
Section 6(d).
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For purposes of
this Section 6(c), “Disability” shall mean
“disabled” as defined in Section 409A(a)(2)(C) of the
Code and the regulations promulgated thereunder. Executive shall
cooperate in all respects with the Company if a question arises as
to whether he has become disabled (including, without limitation,
submitting to an examination by a medical doctor or other health
care specialists selected by the Company and reasonably acceptable
to Executive and authorizing such medical doctor or such other
health care specialist to discuss Executive’s condition with
the Company).
(d) In
the case of any termination of Executive’s employment with
the Company, Executive or his estate or legal representative shall
be entitled to receive from the Company (i) Executive’s
Base Salary through the date of termination to the extent not
theretofore paid, (ii) to the extent not theretofore paid and
not otherwise addressed in this Section 6, the amount of any
bonus, incentive compensation, deferred compensation and other
compensation earned or accrued by Executive as of the date of
termination under any compensation and benefit plans, programs or
arrangements maintained in force by the Company (for this purpose,
Executive’s Annual Bonus, if any, for any fiscal year shall
be deemed to have accrued on the last day of such fiscal year),
(iii) any vacation pay, expense reimbursements and other cash
entitlements accrued by Executive, in accordance with Company
policy, as of the date of termination to the extent not theretofore
paid, and (iv) all benefits accrued by Executive under all
benefit plans and qualified and nonqualified retirement, pension,
401(k) and similar plans and arrangements of the
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Company, in
such manner and at such time as are provided under the terms of
such plans and arrangements. In the event Executive becomes
entitled to receive the benefits described in Section 6(a) hereof,
such benefits shall be in lieu of other compensation to which
Executive may have been entitled pursuant to all other agreements
and plans, including without limitation, the Severance
Plan.
(e)
No Other Payments . Except as provided in (a), (b),
(c) or (d) above, all of Executive’s rights to
salary, bonuses, employee benefits and other compensation hereunder
which would have accrued or become payable after the termination or
expiration of the Employment Period shall cease upon such
termination or expiration, other than those expressly required
under applicable law.
(f)
No Mitigation, Et Cetera . In the event of Executive’s
termination of employment for whatever reason or in the event of
breach of this Agreement by the Company, Executive shall be under
no obligation to seek other employment or to otherwise mitigate his
damages.
(g)
Offset . The Company may offset, to the fullest extent of
the law, any amounts due to the Company from the Executive, or
advanced or loaned to the Executive by the Company, from any monies
owed to Executive or Executive’s estate by reason of his
termination of employment.
(a) The
Company agrees that (i) if Executive is made a party, or is
threatened to be made a party, to any threatened or actual action,
suit or proceeding, whether civil, criminal,
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administrative,
investigative, appellate or other (each, a “Proce
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