Document:

EXHIBIT 10.7

 

EMPLOYMENT AGREEMENT

 

W. Thaddeus Miller

 

This EMPLOYMENT AGREEMENT (the “Agreement”) is dated
as of December 15, 2004 (the “Effective Date”) by and between Texas Genco
LLC (the “Company”), Texas Genco Operating Services LLC, a wholly owned subsidiary
of the Company (the “Service Company”) and W. Thaddeus Miller (the “Executive”).

 

WHEREAS, pursuant to a Transaction Agreement dated as
of July 21, 2004, the Company has agreed to, among other things, acquire
Texas Genco Holdings, Inc. (“TGH”), in a multi-step transaction; and

 

WHEREAS, as of the Effective Date, the Company desires
to employ Executive and to enter into an agreement embodying the terms of such
employment and Executive desires to accept such employment and enter into such
an agreement.

 

NOW, THEREFORE, in consideration of the premises and
mutual covenants herein and for other good and valuable consideration, the
parties agree as follows:

 

1.                                       Term of
Employment.  Subject to the
provisions of Section 8 of this Agreement, Executive shall be employed by
the Company for a period commencing on December 15, 2004 and ending on December 31,
2009 (the “Employment Term”); provided, however, that commencing with December 31,
2009 and on each December 31 thereafter (each an “Extension Date”), the Employment
Term shall be automatically extended for an additional one year period, unless
the Company or Executive provides the other party hereto at least 60 days prior
written notice before the next Extension Date that the Employment Term shall
not be so extended (“Notice of Nonrenewal”).

 

2.                                       Position.

 

a.                                       During the Employment Term,
Executive shall serve as the Chief Legal Officer of the Company and of the
Company’s significant subsidiaries.  In
such position, Executive shall, subject to any limitations or other directions
determined from time to time by the Board of Managers of the Company (the “Board”)
or the Chief Executive Officer of the Company (the “Chief Executive Officer”),
have such duties and authority as are consistent with the position of chief
legal officer of a company (and subsidiaries) of similar size and nature.  Executive shall report directly to the Board
and Chief Executive Officer.

 

b.                                      During the Employment Term,
Executive will devote Executive’s full business time to the performance of
Executive’s 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 that nothing
herein shall preclude Executive, subject to the prior approval of the Board,
from accepting appointment to or continuing to serve on any board of directors
or trustees of any business corporation or any charitable organization; provided,
further,

 

 

in each case, and in the
aggregate, that such activities do not conflict or interfere with the
performance of Executive’s duties hereunder or conflict with Section 9.  Except as otherwise provided in the
immediately preceding sentence, nothing contained herein shall preclude
Executive from continuing to provide services to Texas Pacific Group Partners
or any of its affiliates in connection with the completion of the Portland
Energy acquisition, or of a nature similar to the services he was providing
prior to the Effective Time, provided that such activities do not conflict or
interfere with the performance of Executive’s duties hereunder.

 

3.                                       Base Salary.  During the Employment Term, the Company shall
pay Executive a base salary at the annual rate of $450,000, payable in regular
installments in accordance with the Company’s usual payment practices.  Commencing in 2006, and annually thereafter,
the Board (or its Compensation Committee, as appropriate) shall review Executive’s
base salary in light of the performance of Executive and the Company, and may,
in its sole discretion, increase (but not decrease) such base salary by an
amount it determines to be appropriate. 
Executive’s annual base salary, as in effect from time to time, is
hereinafter referred to as the “Base Salary.”

 

4.                                       Annual
Bonus.  During the Employment Term,
Executive shall be eligible to earn an annual bonus award in respect of each
fiscal year of the Company (or, for each of the first and last years of the
Employment Term, a pro rata bonus award based on the ratio that the number of
days of such fiscal year during the Employment Term bears to 365) (each an “Annual
Bonus”), in a target amount equal to 65% of Executive’s Base Salary (the “Target
Bonus”), with a maximum bonus opportunity of 130% (increasing in a linear
progression above 65% and up to 130% of Executive’s Base Salary), with no bonus
payable unless the Company achieves the threshold level of performance
established by the Board (for which the threshold bonus will be 21% of
Executive’s Base Salary), payable pursuant to the terms of the applicable
incentive compensation plan to be established by the Board as soon as
practicable after the Effective Date (the “Incentive Plan”).  Each Annual Bonus shall be payable promptly
following a determination by the Board (or a designated committee thereof) that
the applicable performance criteria have been satisfied, but in no event later
than 30 days after the audited consolidated financial statements for the Company
are prepared for each such fiscal year.

 

5.                                       Equity
Participation.  Executive’s equity participation in the Company shall be as set
forth in the Equity Term Sheet attached hereto as Exhibit A. Such
terms shall be documented pursuant to the Texas Genco LLC 2004 Unit Plan (the “Unit
Plan”), Management Unitholder’s Agreement, Unit Plan Award Agreements, and
Amended and Restated Limited Liability Company Agreement of the Company (the “LLC
Agreement”), as amended from time to time, each as executed by Executive, the
Company, and its members, as applicable, in such forms as are agreed to by the
parties and consistent with Exhibit A (collectively, the “Equity Documents”).  The Company and Executive each acknowledges
that the terms and conditions of the aforementioned Equity Documents govern
Executive’s acquisition, holding, sale or other disposition of Executive’s
equity in the Company, and all of Executive’s and the Company’s rights with
respect thereto, notwithstanding any provision of this Agreement to the contrary.

 

6.                                       Employee
Benefits.

 

a.                                       During the Employment Term,
Executive shall be entitled to (1) participation in the Company’s employee
401(k), health and welfare benefit plans and all fringe

 

2

 

benefits and executive perquisites as in effect from time to time, (2) 20
paid vacation days per year and (3) sick leave, paid holidays and other
paid time off in accordance with the Company’s policies as in effect from time
to time (collectively “Employee Benefits”), on a basis no less favorable than
those benefits generally made available to other senior executives of the  Company or to the
Company’s employees generally.

 

b.                                      For a period of six months
following the Effective Date, Executive shall work both in the Company’s office
located in Houston, Texas and his home office in Southampton, New York;
provided, however, that Executive understands that he may be required to work
in the Company’s Houston office at such times as the Board determines.  Until May 31, 2005, the Company shall
reimburse Executive for temporary living expenses to cover accommodation,
transportation between Southhampton and the Company’s Houston office and
miscellaneous living expenses (but not meal expenses).  The Company shall reimburse Executive for all
reasonable, standard and customary costs and expenses incurred by Executive
that are associated with (i) the physical move of Executive’s family and
belongings to Houston, Texas (e.g., packing, storing, transportation, and
unpacking of household items), (ii) the sale of Executive’s current home
and Executive’s purchase of a primary residence in Houston, Texas (e.g.,
brokers’ commissions, taxes, legal fees, inspection, appraisal and survey
charges, title search and insurance charges, closing costs, points and transfer
taxes), and (iii) up to four trips for Executive’s family to Houston,
Texas for house hunting (e.g., air fare, hotel, car rental, meals), and (iv) an
amount which, after payment of any Federal, state or local taxes imposed thereon,
shall equal the amount of any Federal, state or local taxes imposed on the
Executive with respect to any of the payments described in clauses (i), (ii) or
(iii) of this sentence.  The Company
shall reimburse such costs and expenses promptly following Executive’s
submission of written documentation reasonably satisfactory to the Company
evidencing that Executive has incurred such costs and expenses.

 

7.                                       Business
Expenses.  During the
Employment Term, reasonable business expenses incurred by Executive in the
performance of Executive’s duties hereunder shall be reimbursed by the Company
in accordance with Company policies.

 

8.                                       Termination.  The Employment Term and Executive’s
employment hereunder may be terminated by either party at any time and for any
reason; provided that Executive will be required to give the Company at least
60 days advance written notice of any resignation 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; provided, however, that Executive’s rights with
respect to his equity participation shall be governed solely by the Equity
Documents.

 

a.                                       By the Company For Cause or By
Executive Resignation Without Good Reason.

 

(i)  The Employment Term
and Executive’s employment hereunder may be terminated by the Company for Cause
(as defined below) and shall terminate automatically upon Executive’s
resignation without Good Reason (as defined in Section 8(c)); provided
that Executive shall be required to give the Company at least 60 days advance
written notice of a resignation without Good Reason.

 

3

 

(ii)  For purposes of this
Agreement, “Cause” shall mean (A) Executive’s willful and continued
failure substantially to perform Executive’s duties hereunder (other than as a
result of total or partial incapacity actually suffered by Executive as a
result of any illness or other disability) for a period of 15 days following
written notice by the Company to Executive of such failure (where such notice
specifically identifies the manner in which the Company believes Executive has
not substantially performed his duties), (B) Executive’s conviction of, or
plea of nolo  contendere to, a crime constituting (x) a felony
under the laws of the United States or any state thereof or (y) a misdemeanor
involving moral turpitude, (C) Executive’s willful malfeasance or willful
misconduct in connection with Executive’s duties hereunder or any willful act
or omission which is materially injurious to the financial condition or
business reputation of the Company or any of its subsidiaries or affiliates, (D) Executive’s
willful and material breach of the provisions of Sections 9 or 10 of this
Agreement; provided, however, that Executive shall not be terminated for Cause
under any of clauses (A), (C) or (D) above unless there shall have
been delivered to Executive a copy of a resolution duly adopted by the Board,
at a meeting of such Board (after reasonable notice to Executive and an
opportunity for Executive, together with his counsel, to be heard at such
meeting), finding that in the good faith opinion of the Board, Executive had
engaged in conduct of the type described in any of clauses (A), (C) or (D) above
and specifying the particulars thereof.

 

(iii)  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)      the Base Salary through the date of termination;

 

(B)        any Annual Bonus earned but unpaid as of the date of
termination for any previously completed fiscal year;

 

(C)        reimbursement for any unreimbursed business expenses
properly incurred by Executive in accordance with Company policy prior to the
date of Executive’s termination; and

 

(D)       such
Employee Benefits, if any, as to which Executive may be entitled under the
employee benefit plans of the Company for Executive and his family (the amounts
described in clauses (A) through (D) hereof being referred to as the “Accrued
Rights”).

 

Following such termination of Executive’s employment
by the Company for Cause or resignation by Executive without Good Reason,
except as set forth in this Section 8(a)(iii),
and Sections 13 and 14 of this Agreement, Executive shall have no further
rights to any compensation or any other benefits under this Agreement;
provided, however, that Executive’s rights with respect to his equity
participation shall be governed solely by the Equity Documents.

 

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 becomes physically or mentally
incapacitated and is therefore unable for a period of six (6) consecutive
months or for an aggregate of nine (9) months in any twenty-four (24)
consecutive month period to perform Executive’s duties (such incapacity is
hereinafter referred to as “Disability”). 
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

 

4

 

mutually
acceptable to Executive and the Company. 
If Executive and the Company cannot agree as to a qualified independent
physician, each shall appoint such 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
this Agreement.

 

(ii)  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
lump sum payment of the pro rata portion (based upon the number of days in the
applicable fiscal year during which Executive was employed with the Company
through the date of such termination, relative to the number of days in the
applicable fiscal year) of any Annual Bonus, if any, that Executive would have
been entitled to receive pursuant to the Incentive Plan in respect of the
Fiscal Year in which such termination occurs, payable when such Annual Bonus
would have otherwise been payable had Executive’s employment not terminated,

 

Following Executive’s termination of employment due to
death or Disability, except as set forth in this Section 8(b)(ii), and Sections 13 and 14 of this Agreement, Executive
shall have no further rights to any compensation or any other benefits under
this Agreement; provided, however, that Executive’s rights with respect to his
equity participation shall be governed solely by the Equity Documents.

 

c.                                       By the Company Without Cause or
Resignation by Executive for Good Reason.

 

(i)  The Employment Term
and Executive’s employment hereunder may be terminated by the Company without
Cause or by Executive’s resignation for Good Reason.

 

(ii)  For purposes of this
Agreement, “Good Reason” shall mean (A) any material breach by the Company
of this Agreement or failure by the Company to execute or deliver the Equity
Documents, (B) any sustained diminution, other than in an inconsequential
or immaterial aspect, in Executive’s authority, title, duties or
responsibilities from those described in Section 2 hereof, (C) the
assignment to Executive of a material amount of different or additional duties
that are significantly inconsistent with Executive’s position, (D) a
merger or other business combination or a material divestiture of all or
substantially all of its assets, whereby the Company is no longer primarily in
the energy related business, or (E) the relocation of Executive, the
Company’s principal executive offices or all or substantially all of the
Company’s executive level employees without Executive’s consent, to any
location outside of the Houston, Texas metropolitan region.  Executive shall have the right to terminate
his employment for “Good Reason” by giving the Company notice in writing of the
reason for such termination and the Employment Term shall terminate on the date
of Executive’s termination of employment; provided that either of the
events described in this Section 8(c)(ii) shall constitute Good
Reason only if the Company fails to cure such event within 30 days after
receipt from Executive of written notice of the event which constitutes Good
Reason; provided, further, that “Good Reason” shall cease to
exist for an event on the 60th day following the later of its
occurrence or Executive’s knowledge thereof, unless Executive has given the
Company written

 

5

 

notice
thereof prior to such date.  Executive’s
failure to resign in connection with any event, or occurrence, which constitutes
Good Reason shall not be deemed a waiver of any other
event or occurrence thereafter which constitutes Good Reason.

 

(iii)  If Executive’s
employment is terminated by the Company without Cause (other than by reason of
death or Disability) or if Executive resigns for Good Reason, Executive shall
be entitled to receive:

 

(A)      the Accrued Rights;

 

(B)        subject to Executive’s continued compliance
with the provisions of Sections 9 and 10, a payment equal to the sum of (x) the
Base Salary at the rate in effect immediately prior to the Date of Termination
(without regard to any decrease which constitutes a breach of this Agreement as
described in clause (A) of Section 8(c)(ii) which is the basis
for Executive’s resignation for Good Reason) and (y) the Target Bonus for the
year in which such termination occurs, payable in equal monthly installments
over the twelve (12) month period commencing on the date of such termination; provided,
however, that the aggregate amount described in this subsection (B) shall
be reduced by any amounts owed by Executive to the Company and any amounts for
any loans, or funds advanced, to, Executive; provided, further,
that if, on or after a Change in Control (as defined in Exhibit A attached
hereto), Executive’s employment is (or has previously been) terminated by the
Company without Cause (other than by death or Disability) or if Executive
resigns (or has previously resigned) for Good Reason, a lump sum amount equal
to the aggregate amount remaining payable under this subsection (B) shall,
as soon as practicable, but in no event later than 15 days, after the later of
the effective date of such termination or such Change in Control, be paid to
Executive, subject to repayment unless Executive continues to comply with the
provisions of Sections 9 and 10; provided, that such repayment shall be
paid in a lump sum upon demand by the Company, and shall be in an amount equal
to the lump sum payment made pursuant to this subsection (B) multiplied
by a fraction, the numerator of which is the number of months the Executive
fails to comply with the provisions of Sections 9 or 10 during the first 12
months following the effective date of Executive’s termination of employment,
and the denominator of which is the number of monthly installments comprising
the lump sum payment which was paid to Executive; and

 

(C)        subject to Executive’s continued compliance
with the provisions of Sections 9 and 10, continuation of welfare benefits for
Executive and his family (pursuant to the same benefit plans as in effect for
active executive employees of the 
Company) (i) for a period through the later of (x) the second
anniversary of the date of such termination, or (y) the date on which the
Employment Term would have otherwise expired, or (ii) if Executive
commences receiving coverage under comparable welfare benefit plans from any
subsequent employer (“Comparable Coverage”) prior to the occurrence of (x) or
(y) of the preceding clause, through the date such Comparable Coverage
commences.

 

Following Executive’s termination of employment by the
Company without Cause (other than by reason of Executive’s death or Disability)
or by Executive’s resignation for Good Reason, except as set forth in this Section 8(c)(iii),
and Sections 13 and 14 of this

 

6

 

Agreement, Executive shall have no further rights to
any compensation or any other benefits under this Agreement; provided, however,
that Executive’s rights with respect to his equity participation shall be
governed solely by the Equity Documents, which shall provide, among any
additional rights, that in the event Executive’s employment is terminated for
Good Reason under Section 8(c)(ii)(D), all unvested Options (as defined in
Exhibit A attached hereto) shall vest and become immediately exercisable.

 

d.                                      Expiration
of Employment Term. 
In the event
either party delivers a Notice of Nonrenewal, unless Executive’s employment is
earlier terminated pursuant to paragraphs (a), (b) or (c) of this Section 8,
Executive’s termination of employment hereunder (whether or not Executive
continues as an employee of the Company thereafter) shall be deemed to occur on
the close of business on the next scheduled Extension Date and Executive shall
be entitled to receive the Accrued Rights (including, without limitation, his
full Annual Bonus for his final year of employment).  Following such termination of Executive’s
employment hereunder as a result of either party’s election not to extend the
Employment Term, except as set forth in this Section 8(d), and in Sections
13 and 14, Executive shall have no further rights to any compensation or any
other benefits under this Agreement, and the Executive shall have no further
obligations under Section 9; provided, however, that Executive’s rights
with respect to his equity participation shall be governed solely by the Equity
Documents, and solely in respect of the Executive’s rights under the Equity
Documents: (i) if the Company delivers a Notice of Nonrenewal, and
Executive subsequently terminates his employment with the Company, Executive’s
employment shall be deemed terminated by Executive for Good Reason; and (ii) if
the Executive delivers a Notice of Nonrenewal, and Executive subsequently
terminates his employment with the Company, Executive’s employment shall be
deemed terminated by Executive without Good Reason.  For the avoidance of doubt, any changes set
forth in this Section 8(d) relating to the termination of Executive’s
employment by Executive after either party delivers a Notice of Nonrenewal
shall apply only for purposes of the Equity Documents, and shall have no
further effect on this Agreement. 
Notwithstanding the foregoing, if the Company elects, in its sole
discretion, that Section 9 shall apply for a period of up to one year
following Executive’s termination of employment under this Section 8(d),
Executive shall be paid one hundred sixty-five percent (165%) of the Base
Salary at the rate in effect immediately prior to the termination of Executive’s
employment for such 
period.  In order to make the
election described in the preceding sentence, the Company must deliver written
notice to Executive, at least 60 days prior to the end of the Term, which
explains that the Company has made such election and sets forth the period of
time that Section 9 shall continue to apply (and that Executive shall
continue to be paid 165% of the Base Salary).

 

e.                                       Notice of Termination.  Any purported termination of employment by
the Company or by Executive (other than due to Executive’s death) shall be
communicated by written Notice of Termination to the other party hereto in
accordance with Section 12(h) hereof. 
For purposes of this Agreement, a “Notice of Termination” shall mean a
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of employment under
the provision so indicated.

 

f.                                         Board/Committee Resignation.  Upon termination of Executive’s employment
for any reason, Executive agrees to resign, as of the date of such termination
and to

 

7

 

the extent applicable, from the
Board (and any committees thereof), and any board of directors or managers (and
any committees thereof) of any of the Company’s affiliates.

 

g.                                      Payments
to Executive. 
Except where provided otherwise, all payments required to be made by the
Company to Executive under this Section 8 in connection with the
termination of Executive’s employment shall be payable within 15 days after the
effective date of such termination; provided, however, that nothing shall
affect or impair such rights as Executive shall have pursuant to the Equity
Documents.

 

9.                                       Non-Competition.

 

a.                                       Executive acknowledges and
recognizes the highly competitive nature of the businesses of the Company and
its subsidiaries and accordingly agrees as follows:

 

(1)                                                                                  During
the Employment Term and, except as provided in Section 8(d), for a period
of one year following the date Executive ceases to be employed by the Company
(the “Restricted Period”), Executive will not, whether on Executive’s own
behalf or on behalf of or in conjunction with any person, firm, partnership,
joint venture, association, corporation or other business organization, entity
or enterprise whatsoever (“Person”), directly or indirectly:

 

(i)                                     engage
in any business that competes with the business of the Company or its
subsidiaries (including, without limitation, businesses which the Company or
its subsidiaries have specific plans to conduct in the future and as to which
Executive is aware of such planning) in any geographical area that is within
100 miles of any geographical area where the Company or its subsidiaries
materially operates, produces, sells, leases, rents, licenses or otherwise
provides material products or services (a “Competitive Business”);

 

(ii)                                  enter
the employ of, or render any services to, any Person (or any division or
controlled or controlling affiliate of any Person) who or which engages in a
Competitive Business;

 

(iii)                               acquire
a financial interest in, or otherwise become actively involved with, any
Competitive Business, directly or indirectly, as an individual, partner,
shareholder, officer, director, principal, agent, trustee or consultant; or

 

(iv)                              interfere with, or attempt to interfere with, business
relationships (whether formed before, on or after the date of this Agreement)
between the Company or any of its subsidiaries and customers, clients, or
suppliers of the Company or its subsidiaries.

 

(2)                                                                                  Notwithstanding
anything to the contrary in this Agreement, Executive may, directly or
indirectly own, solely as an investment, securities of any Person engaged in
the business of the Company or its subsidiaries which are publicly traded on a
national or regional stock exchange or on the over-the-counter market if
Executive (i) is not a controlling person of, or a member of a group which
controls, such Person and (ii) does not, directly or indirectly, own 5% or
more of any class of securities of such Person.

 

8

 

(3)                                                                                  During
the Restricted Period, Executive will not, whether on Executive’s own behalf or
on behalf of or in conjunction with any Person, directly or indirectly:

 

(i)                                     solicit
or encourage any employee of the Company or its subsidiaries to leave the
employment of the Company or its subsidiaries; or

 

(ii)                                  hire
any such employee who was employed by the Company or its subsidiaries as of the
date of Executive’s termination of employment with the Company or who left the
employment of the Company or its subsidiaries coincident with, or within one
year prior to or after, the termination of Executive’s employment with the
Company.

 

(4)                                                                                  During
the Restricted Period, Executive will not, directly or indirectly, solicit or encourage to cease to work with the Company or
its subsidiaries any consultant then under contract with the Company or its
subsidiaries.

 

b.                                      It is expressly understood and
agreed that although Executive and the Company consider the restrictions
contained in this Section 9 to be reasonable, if a final judicial
determination is made by a court of competent jurisdiction that the time or
territory or any other restriction contained in this Agreement is an
unenforceable restriction against Executive, the provisions of this Agreement
shall not be rendered void but shall be deemed amended to apply as to such
maximum time and territory and to such maximum extent as such court may
judicially determine or indicate to be enforceable.  Alternatively, if any court of competent
jurisdiction finds that any restriction contained in this Agreement is
unenforceable, and such restriction cannot be amended so as to make it
enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained herein.

 

10.                                 Confidentiality;
Intellectual Property.

 

a.                                       Confidentiality.

 

(i)  Executive
will not at any time (whether during or after Executive’s employment with the
Company) (x) retain or use for the benefit, purposes or account of Executive or
any other Person outside the Company; or (y) disclose, divulge, reveal,
communicate, share, transfer or provide access to any Person outside the
Company (other than its professional advisers who are bound by confidentiality
obligations), any non-public, proprietary or confidential information —including
without limitation trade secrets, know-how, research and development, software,
databases, inventions, processes, formulae, technology, designs and other
intellectual property, information concerning finances, investments, profits,
pricing, costs, products, services, vendors, customers, clients, partners,
investors, personnel, compensation, recruiting, training, advertising, sales,
marketing, promotions, government and regulatory activities and approvals — concerning
the past, current or future business, activities and operations of the Company,
its subsidiaries or affiliates and/or any third party that has disclosed or
provided any of same to the Company on a confidential basis (“Confidential
Information”) without the prior written authorization of the Board.

 

(ii)  “Confidential
Information” shall not include any information that is (a) generally known
to the industry or the public other than as a result of Executive’s breach of
this covenant or any breach of other confidentiality obligations by third
parties; (b) made legitimately

 

9

 

available to Executive by a
third party without breach of any confidentiality obligation; or (c) required
by law to be disclosed; provided that Executive shall give prompt
written notice to the Company of such requirement, disclose no more information
than is so required, and cooperate with any attempts by the Company to obtain a
protective order or similar treatment.

 

(iii)  Upon termination of
Executive’s employment with the Company for any reason, Executive shall (x)
cease and not thereafter commence use of any Confidential Information or
intellectual property (including without limitation, any patent, invention,
copyright, trade secret, trademark, trade name, logo, domain name or other
source indicator) owned or used by the Company, its subsidiaries or affiliates;
(y) immediately destroy, delete, or return to the Company, at the Company’s
option, all originals and copies in any form or medium (including memoranda,
books, papers, plans, computer files, letters and other data) in Executive’s
possession or control (including any of the foregoing stored or located in
Executive’s office, home, laptop or other computer, whether or not Company property)
that contain Confidential Information or otherwise relate to the business of
the Company, its affiliates and subsidiaries, except that Executive may retain
only those portions of any personal notes, notebooks and diaries that do not
contain any Confidential Information; and (z) notify and fully cooperate with
the Company regarding the delivery or destruction of any other Confidential
Information of which Executive is or becomes aware.

 

b.                                      Intellectual Property.

 

(i)  If Executive creates,
invents, designs, develops, contributes to or improves any works of authorship,
inventions, intellectual property, materials documents or other work product
(including without limitation, research, reports, software, databases, systems,
applications, presentations, textual works, content or audiovisual materials) (“Works”)
either alone or with third parties, at any time during Executive’s employment
by the Company and within the scope of such employment and/or with the use of
any Company resources (“Company Works”), Executive shall promptly and fully
disclose same to the Company and hereby irrevocably assigns, transfers and
conveys, to the maximum extent permitted by applicable law, all rights and
intellectual property rights therein (including rights under patent, industrial
property, copyright, trademark, trade secret, unfair competition and related
laws) to the Company to the extent ownership of any such rights does not vest
originally in the Company.

 

(ii)  Executive shall take
all requested actions and execute all requested documents (including any
licenses or assignments required by a government contract) at the Company’s
expense (but without further remuneration) to assist the Company in validating,
maintaining, protecting, enforcing, perfecting, recording, patenting or
registering any of the Company’s rights in the Company Works.  If the Company is unable for any other reason
to secure Executive’s signature on any document for this purpose, then
Executive hereby irrevocably designates and appoints the Company and its duly
authorized officers and agents as Executive’s agent and attorney in fact, to
act for and in Executive’s behalf and stead to execute any documents and to do
all other lawfully permitted acts in connection with the foregoing.

 

(iii)  Executive shall not
improperly use for the benefit of, bring to any premises of, divulge, disclose,
communicate, reveal, transfer or provide access to, or share with the Company
any confidential, proprietary or non-public information or intellectual
property relating to a former employer or other third party without the prior
written permission of such third party. 
Executive hereby indemnifies, holds harmless and agrees to defend the
Company

 

10

 

and
its officers, directors, partners, employees, agents and representatives from
any breach of the foregoing covenant. 
Executive shall comply with all relevant policies and guidelines of the
Company, including regarding the protection of confidential information and
intellectual property and potential conflicts of interest.  Executive acknowledges that the Company may
amend any such policies and guidelines from time to time, and that Executive
remains at all times bound by their most current version.

 

(iv)  The
provisions of Section 10 shall survive the termination of Executive’s
employment for any reason.

 

11.                                 Specific
Performance.  Executive
acknowledges and agrees that the Company’s remedies at law for a breach of any
of the provisions of Section 9 or Section 10 would be inadequate and
the Company would suffer irreparable damages as a result of such breach.  In recognition of this fact, Executive agrees
that, in the event of such a breach, in addition to any remedies at law, the
Company, without posting any bond, shall be entitled to cease making any
payments or providing any benefit otherwise required by this Agreement and
obtain equitable relief in the form of specific performance, temporary
restraining order, temporary or permanent injunction or any other equitable
remedy which may then be available; provided, however, that if the Company does
not institute and prevail in an action to obtain such an equitable remedy,
the  Company shall re-pay and otherwise
reimburse Executive for the payments and benefits which the Company ceased
making or providing, and interest on such payments at the Company’s reference
lending rate with its principal bank lender. 
Notwithstanding anything contained in this Section 11, Executive’s
rights with respect to his equity participation shall be governed solely by the
Equity Documents.

 

12.                                 Miscellaneous.

 

a.                                       Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without regard to
conflicts of laws principles thereof.

 

b.                                      Entire Agreement/Amendments.  This Agreement contains the entire
understanding of the parties with respect to the employment of Executive by the
Company.  There are no restrictions,
agreements, promises, warranties, covenants or undertakings between the parties
with respect to the subject matter herein other than those expressly set forth
herein.  This Agreement may not be
altered, modified, or amended except by written instrument signed by the
parties hereto.  The Company may cause
the Service Company or another subsidiary to discharge the Company’s
obligations to Executive to make cash payments and provide benefits as set
forth in this Agreement (except with respect to any equity participation rights
pursuant to the Equity Documents), and any such discharge of the Company’s obligations
by the Service Company or another subsidiary shall not be deemed to modify this
Agreement.

 

c.                                       No Waiver.  The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver of such party’s rights or deprive such party of the right thereafter
to insist upon strict adherence to that term or any other term of this
Agreement.

 

d.                                      Severability.  In the event that any one or more of the
provisions of this Agreement shall be or become invalid, illegal or
unenforceable in any respect, the validity,

 

11

 

legality and enforceability of the
remaining provisions of this Agreement shall not be affected thereby.

 

e.                                       Assignment.  This Agreement, and
all of Executive’s rights and duties hereunder, shall not be assignable or
delegable by Executive or the Company, except as set forth below.  Any purported assignment or delegation by
Executive in violation of the foregoing shall be null and void ab initio and of no force and
effect.  This Agreement may be assigned
by the Company only to a Person which is a successor in interest to
substantially all of the business operations of the Company.  Upon such assignment, the rights and
obligations of the Company hereunder shall become the rights and obligations of
such successor Person.

 

f.                                         Successors; Binding Agreement.  This Agreement shall inure to the benefit of
and be binding upon personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.

 

g.                                      Set Off; Mitigation.  The Company’s obligation to pay Executive the
amounts provided and to make the arrangements provided hereunder shall not be
subject to set-off, counterclaim or recoupment, except for any amounts loaned
or advanced to Executive by the Company or its affiliates or otherwise as
provided in Section 8(c)(iii) hereof. 
Notwithstanding the foregoing, Executive shall not be required to
mitigate the amount of any payment provided for pursuant to this Agreement by
seeking other employment or otherwise and the amount of any payment provided
for pursuant to this Agreement shall not be reduced by any compensation earned
as a result of Executive’s other employment or otherwise.

 

h.                                      Notice.  For the purpose of this Agreement, notices
and all other communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered by hand or overnight
courier or three days after it has been mailed by United States registered
mail, return receipt requested, postage prepaid, addressed to the respective
addresses set forth below in this Agreement, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon receipt.

 

	
  If to the Company:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Texas Genco LLC

  	
   

  	
   

  
	
  c/o Texas Genco
  Operating Services LLC

  	
   

  	
   

  
	
  12301 Kurland Avenue

  	
   

  	
   

  
	
  Houston, Texas 77034

  	
   

  	
   

  
	
  Telecopy:

  	
  (713) 945-3500

  	
   

  	
   

  
	
  Attention:

  	
  Chief Executive Officer

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  with a copy to

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Simpson Thacher &
  Bartlett LLP

  	
   

  	
   

  
	
  425 Lexington Avenue

  	
   

  	
   

  
	
  New York, New York
  10017

  	
   

  	
   

  
	
  Telecopy:

  	
  (212) 455-2502

  	
   

  	
   

  
	
  Attention:

  	
  David J. Sorkin

  	
   

  	
   

  
	
   

  	
  Brian M. Stadler

  	
   

  	
   

  

 

12

 

	
  If to Executive:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  To the most recent
  address of Executive set forth in the personnel records of the Company and
  with a copy to:

  
	
   

  	
   

  	
   

  
	
  Stroock &
  Stroock & Lavan LLP

  	
   

  	
   

  
	
  180 Maiden Lane

  	
   

  	
   

  
	
  New York, New York
  10038

  	
   

  	
   

  
	
  Telecopy:

  	
  (212) 806-7836

  	
   

  	
   

  
	
  Attention:

  	
  Mark S. Wintner

  	
   

  	
   

  
	
   

  	
  Martin H. Neidell

  	
   

  	
   

  

 

i.                                          Executive Representation.  Executive hereby represents to the Company
that the execution and delivery of this Agreement by Executive and the
performance by Executive of Executive’s duties hereunder shall not constitute a
breach of, or otherwise contravene, the terms of any employment agreement or
other agreement or policy to which Executive is a party or otherwise bound.

 

j.                                          Cooperation.  Executive shall provide Executive’s
reasonable cooperation in connection with any action or proceeding (or any
appeal from any action or proceeding) which relates to events occurring during
Executive’s employment hereunder, but shall be done to the extent reasonably
possible in a manner as to reduce interference in Executive’s new position
after his employment hereunder ends.  The
Company shall reimburse Executive for any reasonable out of pocket expenses he
incurs in connection with such cooperation. 
This provision shall survive any termination of this Agreement.

 

k.                                       Withholding Taxes.  The Company may withhold from any amounts
payable under this Agreement such Federal, state and local taxes as may be
required to be withheld pursuant to any applicable law or regulation.

 

l.                                          Counterparts.  This Agreement may be signed in counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.

 

13.                                 Excise
Taxes.

 

a.                                       If, after the Company becomes
taxable as a corporation for federal income tax purposes and the Company has
issued stock that is “readily tradeable on an established securities market” as
described in Section 280G of the Internal Revenue Code of 1986, as amended
(the “Code”), it shall be determined (as hereafter provided) that any payment,
benefit or distribution (or combination thereof) by the Company, any of its
affiliates, one or more trusts established by the Company for the benefit of
its employees, or any other person or entity, to or for the benefit of
Executive, whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise pursuant to or by reason of any other
agreement, policy, plan, program or arrangement, including without limitation
any stock option, restricted stock award, stock appreciation right or similar
right, or the lapse or termination of any restriction on or the vesting or
exercisability of any of the foregoing (a “Payment”), would be subject to the
excise tax imposed by Section 4999 of the Code (or any successor provision
thereto) by reason of being “contingent on a change in ownership or effective
control or a change

 

13

 

in the ownership of a substantial portion of the assets” of the Company
or an affiliate, within the meaning of Section 280G of the Code (or any
successor provision thereto) or to any similar tax imposed by state or local
law, or any interest or penalties with respect to such excise tax (such tax or
taxes, together with any such interest and penalties, are hereafter
collectively referred to as the “Excise Tax”), then the Company shall make an
additional payment (the “Gross-Up Payment”) to Executive such that, after
payment of all Excise Taxes and any other taxes payable in respect of such
Gross-Up Payment, Executive shall retain the same amount as if no Excise Tax
had been imposed.

 

b.                                      Subject to the provisions of Section 13(a) hereof,
all determinations required to be made under this Section 13, including
whether an Excise Tax is payable by Executive and the amount of such Excise Tax,
shall be made by the nationally recognized firm of certified public accountants
(the “Accounting Firm”) used by the Company prior to the change in control (or,
if such Accounting Firm declines to serve, the Accounting Firm shall be a
nationally recognized firm of certified public accountants selected by
Executive).  The Accounting Firm shall be
directed by the Company or Executive to submit its preliminary determination
and detailed supporting calculations to both the Company and Executive within
15 calendar days after the receipt of notice from Executive or the Company that
there has been a Payment, or any other such time or times as may be requested
by the Company or Executive.  If the
Accounting Firm determines that any Excise Tax is payable by Executive, the
Company shall make the Gross-Up Payment. 
If the Accounting Firm determines that no Excise Tax is payable by
Executive, it shall, at the same time as it makes such determination, furnish
Executive with an opinion that he has substantial authority not to report any
Excise Tax on his federal, state, local income or other tax return. Any
determination by the Accounting Firm shall be binding upon the Company and
Executive absent a contrary determination by the Internal Revenue Service or a
court of competent jurisdiction; provided, however, that no such
determination shall eliminate or reduce the Company’s obligation to provide any
Gross-Up Payment that shall be due as a result of such contrary
determination.  As a result of the
uncertainty in the application of Section 4999 of the Code (or any
successor provision thereto) and the possibility of similar uncertainty
regarding state or local tax law at the time of any determination by the
Accounting Firm hereunder, it is possible that the amount of the Gross-Up
Payment determined by the Accounting Firm to be due to (or on behalf of)
Executive was lower than the amount actually due (the “Underpayment”).  In the event that the Company exhausts its
remedies pursuant to Section 13(d) below, and 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 as promptly as
possible and notify the Company and Executive of such calculations, and any
such Underpayment (including the Gross-Up Payment to Executive) shall be
promptly paid by the Company to or for the benefit of Executive within five (5) business
days after receipt of such determination and calculations. All fees and
expenses of the Accounting Firm shall be paid by the Company in connection with
the calculations required by this section.

 

c.                                       The federal, state and local
income or other tax returns filed by Executive (or any filing made by a
consolidated tax group which includes the Company) shall be prepared and filed
on a consistent basis with the determination of the Accounting Firm with
respect to the Excise Tax payable by Executive. 
Executive shall make proper payment of the amount of any Excise Tax, and
at the request of the Company, provide to the Company true and correct copies
(with any amendments) of his federal income tax return as filed with the Internal
Revenue Service and corresponding state and local tax returns, if relevant, as
filed with the

 

14

 

applicable
taxing authority, and such other documents reasonably requested by the Company,
evidencing such payment.

 

d.                                      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 any Gross-Up Payment.
Such notification shall be given as soon as practicable but no later than ten (10) business
days after Executive is informed in writing of such claim and shall apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid. Executive shall not pay such claim prior to the
expiration of the thirty (30) day period following the date on which he 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
Executive in writing prior to the expiration of such period that it desires to
contest such claim, Executive shall (w) give the Company any information which
is in Executive’s possession reasonably requested by the Company relating to
such claim, (x) 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, (y) cooperate with the
Company in good faith in order to effectively contest such claim, and (z)
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 Executive harmless, on an
after-tax basis, from 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 Section 13, the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego 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 Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and 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, further, that if the Company directs
Executive to pay such claim and sue for a refund, the Company shall pay the
amount of such payment to Executive, and Executive shall use such amount
received to pay such claim, and the Company shall indemnify and hold 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
payment or with respect to any imputed income with respect to such payment
(including the applicable Gross-Up Payment); provided, further, that if
Executive is required to extend the statute of limitations to enable the
Company to contest such claim, Executive may limit this extension solely to
such contested amount. 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
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.

 

e.                                       If, after the receipt by
Executive of an amount paid or advanced by the Company pursuant to this Section 13,
Executive becomes entitled to receive any refund with respect to a Gross-Up Payment,
Executive shall (subject to the Company’s complying with the requirements of Section 13(d))
promptly pay to the Company the amount of such refund received (together with
any interest paid or credited thereon after taxes applicable thereto) (or, to the

 

15

 

extent such payment would be deemed
prohibited by applicable law, shall be treated as a prepayment by the Company
of any amounts owed to Executive). If, after the receipt by Executive of an
amount advanced by the Company pursuant to Section 13(d), a determination
is made that Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify Executive in writing of its intent to
contest such denial of refund prior to the expiration of thirty (30) days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such payment made to Executive
thereunder shall offset, to the extent thereof, the amount of the Gross-Up
Payment required to be paid.

 

f.                                         The Company’s obligations under
this Section 13 shall survive any termination of Executive’s employment
with the Company, other than a termination by the Company for Cause.

 

14.                                 Indemnification.  During the Employment Term and thereafter,
the Company shall indemnify Executive to the fullest extent permitted by law
against any judgments, fines, amounts paid in settlement and reasonable
expenses (including attorneys’ fees) in connection with any claim, action or
proceeding (whether civil or criminal) against Executive as a result of
Executive serving as an officer or director of the Company or in any capacity
at the request of the Company, in or with regard to any other entity, employee
benefit plan or enterprise (other than arising out of Executive’s act of
willful misconduct, gross negligence, misappropriation of funds, fraud or
breach of this Agreement).  This
indemnification shall be in addition to, and not in lieu of, any other
indemnification Executive shall be entitled to pursuant to the LLC Agreement,
the Company’s Certificate of Incorporation or otherwise.  Following Executive’s termination of
employment, the Company shall continue to cover Executive under the Company’s
directors and officer’s insurance, if any, for the period during which
Executive may be subject to potential liability for any claim, action or
proceeding (whether civil or criminal) as a result of his service as an officer
or director of the Company or in any capacity at the request of the Company, in
or with regard to any other entity, employee benefit plan or enterprise on the
same terms such coverage was provided during the Employment Term, at the
highest level then maintained for any then current or former officer.

 

[Signatures on next page.]

 

16

 

IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the day and year first above written.

 

 

	
   

  	
   

  	
  Texas Genco
  LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Donald
  M. McArthur

  	
   

  
	
   

  	
   

  	
  Name: Donald
  M. McArthur

  
	
   

  	
   

  	
  Title: Vice
  President and Assistant Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Texas Genco
  Operating Services LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Donald
  M. McArthur

  	
   

  
	
   

  	
   

  	
  Name: Donald
  M. McArthur

  
	
   

  	
   

  	
  Title: Vice
  President and Assistant Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Executive:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Thad
  Miller

  	
   

  
	
   

  	
   

  	
  Thad Miller

  

 

17EXHIBIT 10.8

 

EMPLOYMENT AGREEMENT

 

Thomas
M. Boehlert

 

This EMPLOYMENT AGREEMENT (the “Agreement”) is dated
as of January 12, 2005 (the “Effective Date”) by and between Texas Genco
LLC (the “Company”), Texas Genco Operating Services LLC, a wholly owned subsidiary
of the Company (the “Service Company”) and Thomas M. Boehlert (the “Executive”).

 

WHEREAS, pursuant to a Transaction Agreement dated as
of July 21, 2004, the Company has agreed to, among other things, acquire
Texas Genco Holdings, Inc. (“TGH”), in a multi-step transaction; and

 

WHEREAS, as of the Effective Date, the Company desires
to employ Executive and to enter into an agreement embodying the terms of such
employment and Executive desires to accept such employment and enter into such
an agreement.

 

NOW, THEREFORE, in consideration of the premises and
mutual covenants herein and for other good and valuable consideration, the
parties agree as follows:

 

1.                                       Term of
Employment.  Subject to the
provisions of Section 8 of this Agreement, Executive shall be employed by
the Company for a period commencing on a date selected by the Executive which
shall be no later than March 31, 2005 and ending on December 31, 2009
(the “Employment Term”); provided, however, that commencing with December 31,
2009 and on each December 31 thereafter (each an “Extension Date”), the
Employment Term shall be automatically extended for an additional one year
period, unless the Company or Executive provides the other party hereto at
least 60 days prior written notice before the next Extension Date that the
Employment Term shall not be so extended (“Notice of Nonrenewal”).

 

2.                                       Position.

 

a.                                       During the Employment Term,
Executive shall serve as Executive Vice President, Chief Financial Officer of
the Company and of the Company’s significant subsidiaries.  In such position, Executive shall, subject to
any limitations or other directions determined from time to time by the Board
of Managers of the Company (the “Board”) or the Chief Executive Officer of the
Company (the “Chief Executive Officer”), have such duties and authority as are
consistent with the position of chief financial officer of a company (and
subsidiaries) of similar size and nature. 
Executive shall report directly to the Board and Chief Executive
Officer.

 

b.                                      During the Employment Term,
Executive will devote Executive’s full business time to the performance of
Executive’s 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
that nothing herein shall preclude Executive, subject to the prior approval of
the Board, from accepting appointment to or continuing to serve on any board of
directors or trustees of any business corporation or any charitable
organization; provided, further, in each case, and in the
aggregate, that such activities do not conflict or interfere with the
performance of Executive’s duties hereunder or conflict with Section 9.

 

3.                                       Base Salary.  During the Employment Term, the Company shall
pay Executive a base salary at the annual rate of $450,000, payable in regular
installments in accordance with the Company’s usual payment practices.  Commencing in 2006, and annually thereafter,
the Board (or its Compensation Committee, as appropriate) shall review
Executive’s base salary in light of the performance of Executive and the
Company, and may, in its sole discretion, increase (but not decrease) such base
salary by an amount it determines to be appropriate.  Executive’s annual base salary, as in effect
from time to time, is hereinafter referred to as the “Base Salary.”

 

4.                                       Bonus
Payments.

 

a.                                       Annual Bonus.  During the Employment Term, Executive shall
be eligible to earn an annual bonus award in respect of each fiscal year of the
Company (or, for each of the first and last years of the Employment Term, a pro
rata bonus award based on the ratio that the number of days of such fiscal year
during the Employment Term bears to 365) (each an “Annual Bonus”), in a target
amount equal to 65% of Executive’s Base Salary (the “Target Bonus”), with a
maximum bonus opportunity of 130% (increasing in a linear progression above 65%
and up to 130% of Executive’s Base Salary), with no bonus payable unless the
Company achieves the threshold level of performance established by the Board
(for which the threshold bonus will be 21% of Executive’s Base Salary), payable
pursuant to the terms of the applicable incentive compensation plan to be
established by the Board as soon as practicable after the Effective Date (the “Incentive
Plan”).  Each Annual Bonus shall be
payable promptly following a determination by the Board (or a designated
committee thereof) that the applicable performance criteria have been
satisfied, but in no event later than 30 days after the audited consolidated
financial statements for the Company are prepared for each such fiscal year.

 

b.                                      Signing
Bonus. 
Executive
shall be entitled to a one-time payment of $450,000 (the “Signing Bonus”),
which shall be paid to Executive in cash in a single lump sum as soon as
practicable after Executive takes up residence in the United States and he
actually commences employment with the Company, provided, however,
if Executive receives any bonus in respect of 2004 from his previous employer,
then the Signing Bonus shall be reduced by such amount (or, if Executive was
already paid the Signing Bonus, such amount shall be repaid by Executive to the
Company within 10 business days).

 

5.                                       Equity
Participation.  Promptly
following the initiation of the Company’s management equity program (the “Equity
Program”), Executive will be provided a
confidential information memorandum (the “PPM”) regarding the Equity
Program.  The Company will offer
Executive the opportunity to invest $750,000 in Units of the Company on the
terms in the PPM and Equity Documents (defined below), at a price of $5 per
Unit.  Subject to receipt and
satisfactory review of such PPM, Executive intends to subscribe for $750,000 in
Units of the

 

2

 

Company.  Executive
will be offered the opportunity to make such investment in the Company promptly
following the availability of the PPM (and in any event no later than March 31,
2005).  Executive’s
equity participation in the Company shall be documented pursuant to the Texas
Genco LLC 2004 Unit Plan (the “Unit Plan”), Management Unitholder’s Agreement
(substantially in the form attached hereto), Unit Option Agreements (substantially
in the forms attached hereto), which shall be executed by the Company and
delivered to Executive within 10 business days following the Effective Date
(the “Award Agreements”), and Amended and Restated Limited Liability Company
Agreement of the Company, dated as of December 15, 2004 (the “LLC
Agreement”), as amended from time to time, each as executed by Executive, the
Company, and its members, as applicable, in such forms as are agreed to by the
parties (collectively, the “Equity Documents”). 
The Company and Executive each acknowledges that the terms and
conditions of the aforementioned Equity Documents govern Executive’s
acquisition, holding, sale or other disposition of Executive’s equity in the
Company, and all of Executive’s and the Company’s rights with respect
thereto.  In the event that for any
reason Executive does not commence employment with the Company on or prior to March 31,
2005, to the extent Executive has purchased or subscribed for any Units or been
granted any Options, commencing on March 31, 2005, Executive’s Equity
Documents shall terminate in respect of any right of the Executive in respect
of such Units or Options and any right to subscribe for additional Units or
Options, and the Company shall have the right and obligation to repurchase any
such Units for a purchase price equal to the purchase price paid by Executive
for such Units, and the right to cancel and extinguish any such Options without
payment.

 

6.                                       Employee
Benefits.

 

a.                                       During the Employment Term,
Executive shall be entitled to (1) participation in the Company’s employee
401(k), health and welfare benefit plans and all fringe benefits and executive
perquisites as in effect from time to time, (2) 20 paid vacation days per
year and (3) sick leave, paid holidays and other paid time off in
accordance with the Company’s policies as in effect from time to time
(collectively “Employee Benefits”), on a basis no less favorable than those
benefits generally made available to other senior executives of the  Company or to the Company’s employees
generally.

 

b.                                      For a period of six months
following the date Executive commences his employment with the Company,
Executive shall work both in the Company’s office located in Houston, Texas and
his home office in Toronto, Ontario; provided, however, that Executive
understands that he may be required to work in the Company’s Houston office at
such times as the Board determines. 
Until June 30, 2005, the Company shall reimburse Executive for
temporary living expenses to cover accommodation, transportation between
Toronto and the Company’s Houston office and miscellaneous living expenses (but
not meal expenses).  The Company shall
reimburse Executive for all reasonable, standard and customary costs and
expenses incurred by Executive that are associated with (i) the physical
move of Executive’s family and belongings to Houston, Texas (e.g., packing,
storing, transportation, and unpacking of household items) and temporary living
expenses for up to ten days for the Executive’s family in Houston, (ii) the
sale of Executive’s current home and Executive’s purchase of a primary
residence in Houston, Texas (e.g., brokers’ commissions, taxes, legal fees,
inspection, appraisal and survey charges, title search and insurance charges,
closing costs, points and transfer taxes), (iii) up to four trips for
Executive’s family to Houston, Texas for house

 

3

 

hunting (e.g., air fare, hotel, car rental, meals); and (iv) an
amount which, after payment of any Federal, state or local taxes imposed
thereon, shall equal the amount of any Federal, state or local taxes imposed on
the Executive with respect to any of the payments described in clauses (i), (ii) or
(iii) of this sentence.  For
purposes of  (ii) under this subsection (b),
the Company’s reimbursement in connection with the sale of Executive’s current
home shall include the payment of the deficiency, if any, in the difference
between the original equity contribution to the purchase of his
residence,determined in U.S. dollars as of such purchase date, and the amount
of the sales price of Executive’s residence (reduced by the amount of any
indebtedness incurred in connection with the purchase thereof), determined in
U.S. dollars as of such date of sale. 
The Company shall reimburse such costs and expenses promptly following
Executive’s submission of written documentation reasonably satisfactory to the
Company evidencing that Executive has incurred such costs and expenses.

 

7.                                       Business
Expenses.  During the
Employment Term, reasonable business expenses incurred by Executive in the
performance of Executive’s duties hereunder shall be reimbursed by the Company
in accordance with Company policies.

 

8.                                       Termination.  The Employment Term and Executive’s
employment hereunder may be terminated by either party at any time and for any
reason; provided that Executive will be required to give the Company at least
60 days advance written notice of any resignation 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; provided, however, that Executive’s rights with
respect to his equity participation shall be governed solely by the Equity
Documents.

 

a.                                       By the Company For Cause or By
Executive Resignation Without Good Reason.

 

(i)  The Employment Term
and Executive’s employment hereunder may be terminated by the Company for Cause
(as defined below) and shall terminate automatically upon Executive’s
resignation without Good Reason (as defined in Section 8(c)); provided
that Executive shall be required to give the Company at least 60 days advance
written notice of a resignation without Good Reason.

 

(ii)  For purposes of this
Agreement, “Cause” shall mean (A) Executive’s willful and continued
failure substantially to perform Executive’s duties hereunder (other than as a
result of total or partial incapacity actually suffered by Executive as a
result of any illness or other disability) for a period of 15 days following
written notice by the Company to Executive of such failure (where such notice
specifically identifies the manner in which the Company believes Executive has
not substantially performed his duties), (B) Executive’s conviction of, or
plea of nolo  contendere to, a crime constituting (x) a felony
under the laws of the United States or any state thereof or (y) a misdemeanor
involving moral turpitude, (C) Executive’s willful malfeasance or willful
misconduct in connection with Executive’s duties hereunder or any willful act
or omission which is materially injurious to the financial condition or
business reputation of the Company or any of its subsidiaries or affiliates, (D) Executive’s
willful and material breach of the provisions of Sections 9 or 10 of this
Agreement; provided, however, that Executive shall not be terminated for Cause
under any of clauses (A), (C) or (D) above unless

 

4

 

there shall have been delivered
to Executive a copy of a resolution duly adopted by the Board, at a meeting of
such Board (after reasonable notice to Executive and an opportunity for
Executive, together with his counsel, to be heard at such meeting), finding
that in the good faith opinion of the Board, Executive had engaged in conduct
of the type described in any of clauses (A), (C) or (D) above and
specifying the particulars thereof.

 

(iii)  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)                              the
Base Salary through the date of termination;

 

(B)                                any
Annual Bonus earned but unpaid as of the date of termination for any previously
completed fiscal year;

 

(C)                                reimbursement
for any unreimbursed business expenses properly incurred by Executive in
accordance with Company policy prior to the date of Executive’s termination;
and

 

(D)                               such
Employee Benefits, if any, as to which Executive may be entitled under the
employee benefit plans of the Company for Executive and his family (the amounts
described in clauses (A) through (D) hereof being referred to as the “Accrued
Rights”).

 

Following such termination of Executive’s employment
by the Company for Cause or resignation by Executive without Good Reason,
except as set forth in this Section 8(a)(iii) and Sections 13 and 14
of this Agreement, Executive shall have no further rights to any compensation
or any other benefits under this Agreement; provided, however, that Executive’s
rights with respect to his equity participation shall be governed solely by the
Equity Documents.

 

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 becomes physically or mentally
incapacitated and is therefore unable for a period of six (6) consecutive
months or for an aggregate of nine (9) months in any twenty-four (24)
consecutive month period to perform Executive’s duties (such incapacity is
hereinafter referred to as “Disability”). 
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 such 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 this Agreement.

 

(ii)  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:

 

5

 

(A)                              the
Accrued Rights; and

 

(B)                                a
lump sum payment of the pro rata portion (based upon the number of days in the
applicable fiscal year during which Executive was employed with the Company
through the date of such termination, relative to the number of days in the
applicable fiscal year) of any Annual Bonus, if any, that Executive would have
been entitled to receive pursuant to the Incentive Plan in respect of the
Fiscal Year in which such termination occurs, payable when such Annual Bonus
would have otherwise been payable had Executive’s employment not terminated,

 

Following Executive’s termination of employment due to
death or Disability, except as set forth in this Section 8(b)(ii), and
Sections 13 and 14 of this Agreement, Executive shall have no further rights to
any compensation or any other benefits under this Agreement; provided, however,
that Executive’s rights with respect to his equity participation shall be
governed solely by the Equity Documents.

 

c.                                       By the Company Without Cause or
Resignation by Executive for Good Reason.

 

(i)  The Employment Term
and Executive’s employment hereunder may be terminated by the Company without
Cause or by Executive’s resignation for Good Reason.

 

(ii)  For purposes of this
Agreement, “Good Reason” shall mean (A) any material breach by the Company
of this Agreement, failure by the Company to execute or deliver the Award
Agreements within 10 business days of the Effective Date, or execute or deliver
the other Equity Documents as soon as practicable (and in no event later than March 31,
2005), (B) any sustained diminution, other than in an inconsequential or
immaterial aspect, in Executive’s authority, title, duties or responsibilities
from those that are consistent with the position of chief financial officer of
a company (and subsidiaries) of similar size and natue, (C) the assignment
to Executive of a material amount of different or additional duties that are
significantly inconsistent with Executive’s position, (D) a merger or
other business combination or a material divestiture of all or substantially
all of its assets, whereby the Company is no longer primarily in the energy
related business, or (E) the relocation of Executive, the Company’s
principal executive offices or all or substantially all of the Company’s
executive level employees without Executive’s consent, to any location outside
of the Houston, Texas metropolitan region. 
Executive shall have the right to terminate his employment for “Good
Reason” by giving the Company notice in writing of the reason for such
termination and the Employment Term shall terminate on the date of Executive’s
termination of employment; provided that either of the events described
in this Section 8(c)(ii) shall constitute Good Reason only if the
Company fails to cure such event within 30 days after receipt from Executive of
written notice of the event which constitutes Good Reason; provided, further,
that “Good Reason” shall cease to exist for an event on the 60th day
following the later of its occurrence or Executive’s knowledge thereof, unless
Executive has given the Company written notice thereof prior to such date.  Executive’s failure to resign in connection
with any event, or occurrence, which constitutes Good Reason shall not be
deemed a waiver of any other event or occurrence thereafter which constitutes
Good Reason.

 

6

 

(iii)  If Executive’s
employment is terminated by the Company without Cause (at any time after the
Effective Date and prior to, or during, the Employment Term), other than by
reason of death or Disability, or if Executive resigns for Good Reason (during
the Employment Term), Executive shall be entitled to receive:

 

(A)                              the
Accrued Rights;

 

(B)                                subject
to Executive’s continued compliance with the provisions of Sections 9 and 10, a
payment equal to the sum of (x) the Base Salary at the rate in effect
immediately prior to the Date of Termination (without regard to any decrease
which constitutes a breach of this Agreement as described in clause (A) of
Section 8(c)(ii) which is the basis for Executive’s resignation for
Good Reason) and (y) the Target Bonus for the year in which such termination
occurs, payable in equal monthly installments over the twelve (12) month period
commencing on the date of such termination; provided, however,
that the aggregate amount described in this subsection (B) shall be
reduced by any amounts owed by Executive to the Company and any amounts for any
loans, or funds advanced, to, Executive; provided, further, that
if, on or after a Change of Control (as defined in the LLC Agreement),
Executive’s employment is (or has previously been) terminated by the Company
without Cause (other than by death or Disability) or if Executive resigns (or
has previously resigned) for Good Reason, a lump sum amount equal to the
aggregate amount remaining payable under this subsection (B) shall,
as soon as practicable, but in no event later than 15 days, after the later of
the effective date of such termination or such Change of Control, be paid to
Executive, subject to repayment unless Executive continues to comply with the
provisions of Sections 9 and 10; provided, that such repayment shall be
paid in a lump sum upon demand by the Company, and shall be in an amount equal
to the lump sum payment made pursuant to this subsection (B) multiplied
by a fraction, the numerator of which is the number of months the Executive
fails to comply with the provisions of Sections 9 or 10 during the first 12
months following the effective date of Executive’s termination of employment,
and the denominator of which is the number of monthly installments comprising
the lump sum payment which was paid to Executive; and

 

(C)                                subject
to Executive’s continued compliance with the provisions of Sections 9 and 10,
continuation of welfare benefits for Executive and his family (pursuant to the
same benefit plans as in effect for active executive employees of the  Company) (i) for a period through the
later of (x) the second anniversary of the date of such termination, or (y) the
date on which the Employment Term would have otherwise expired, or (ii) if
Executive commences receiving coverage under comparable welfare benefit plans
from any subsequent employer (“Comparable Coverage”) prior to the occurrence of
(x) or (y) of the preceding clause, through the date such Comparable Coverage
commences.

 

Following Executive’s termination of employment by the
Company without Cause (other than by reason of Executive’s death or Disability)
or by Executive’s resignation for Good Reason, except as set forth in this Section 8(c)(iii),
and Sections 13 and 14 of this Agreement, Executive shall have no further
rights to any compensation or any other benefits

 

7

 

under this Agreement; provided, however,
that Executive’s rights with respect to his equity participation shall be
governed solely by the Equity Documents.

 

d.                                      Expiration
of Employment Term. 
In the event
either party delivers a Notice of Nonrenewal, unless Executive’s employment is
earlier terminated pursuant to paragraphs (a), (b) or (c) of this Section 8,
Executive’s termination of employment hereunder (whether or not Executive
continues as an employee of the Company thereafter) shall be deemed to occur on
the close of business on the next scheduled Extension Date and Executive shall
be entitled to receive the Accrued Rights (including, without limitation, his
full Annual Bonus for his final year of employment).  Following such termination of Executive’s
employment hereunder as a result of either party’s election not to extend the
Employment Term, except as set forth in this Section 8(d) and in
Sections 13 and 14, Executive shall have no further rights to any compensation
or any other benefits under this Agreement, and the Executive shall have no
further obligations under Section 9, provided, however, that Executive’s
rights with respect to his equity participation shall be governed solely by the
Equity Documents, and solely in respect of the Executive’s rights under the
Equity Documents: (i) if the Company delivers a Notice of Nonrenewal, and
Executive subsequently terminates his employment with the Company, Executive’s
employment shall be deemed terminated by Executive for Good Reason; and (ii) if
the Executive delivers a Notice of Nonrenewal, and Executive subsequently
terminates his employment with the Company, Executive’s employment shall be
deemed terminated by Executive without Good Reason.  For the avoidance of doubt, any changes set
forth in this Section 8(d) relating to the termination of Executive’s
employment by Executive after either party delivers a Notice of Nonrenewal
shall apply only for purposes of the Equity Documents, and shall have no
further effect on this Agreement.  Notwithstanding
the foregoing, if the Company elects, in its sole discretion, that Section 9
shall apply for a period of up to one year following Executive’s termination of
employment under this Section 8(d), Executive shall be paid one hundred
sixty-five percent (165%) of the Base Salary at the rate in effect immediately
prior to the termination of Executive’s employment for such  period. 
In order to make the election described in the preceding sentence, the
Company must deliver written notice to Executive, at least 60 days prior to the
end of the Term, which explains that the Company has made such election and
sets forth the period of time that Section 9 shall continue to apply (and
that Executive shall continue to be paid 165% of the Base Salary).

 

e.                                       Notice of Termination.  Any purported termination of employment by
the Company or by Executive (other than due to Executive’s death) shall be
communicated by written Notice of Termination to the other party hereto in
accordance with Section 12(h) hereof. 
For purposes of this Agreement, a “Notice of Termination” shall mean a
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of employment under
the provision so indicated.

 

f.                                         Board/Committee Resignation.  Upon termination of Executive’s employment
for any reason, Executive agrees to resign, as of the date of such termination
and to the extent applicable, from the Board (and any committees thereof), and
any board of directors or managers (and any committees thereof) of any of the
Company’s affiliates.

 

8

 

g.                                      Payments
to Executive. 
Except where provided otherwise, all payments required to be made by the
Company to Executive under this Section 8 in connection with the
termination of Executive’s employment shall be payable within 15 days after the
effective date of such termination; provided, however, that nothing shall
affect or impair such rights as Executive shall have pursuant to the Equity
Documents.

 

9.                                       Non-Competition.

 

a.                                       Executive acknowledges and
recognizes the highly competitive nature of the businesses of the Company and
its subsidiaries and accordingly agrees as follows:

 

(1)                                                                                  During
the Employment Term and, except as provided in Section 8(d), for a period
of one year following the date Executive ceases to be employed by the Company
(the “Restricted Period”), Executive will not, whether on Executive’s own behalf
or on behalf of or in conjunction with any person, firm, partnership, joint
venture, association, corporation or other business organization, entity or
enterprise whatsoever (“Person”), directly or indirectly:

 

(i)                                     engage
in any business that competes with the business of the Company or its
subsidiaries (including, without limitation, businesses which the Company or
its subsidiaries have specific plans to conduct in the future and as to which
Executive is aware of such planning) in any geographical area that is within
100 miles of any geographical area where the Company or its subsidiaries
materially operates, produces, sells, leases, rents, licenses or otherwise
provides material products or services (a “Competitive Business”);

 

(ii)                                  enter
the employ of, or render any services to, any Person (or any division or
controlled or controlling affiliate of any Person) who or which engages in a
Competitive Business;

 

(iii)                               acquire
a financial interest in, or otherwise become actively involved with, any Competitive
Business, directly or indirectly, as an individual, partner, shareholder,
officer, director, principal, agent, trustee or consultant; or

 

(iv)                              interfere
with, or attempt to interfere with, business relationships (whether formed
before, on or after the date of this Agreement) between the Company or any of
its subsidiaries and customers, clients, or suppliers of the Company or its
subsidiaries.

 

(2)                                                                                  Notwithstanding
anything to the contrary in this Agreement, Executive may, directly or
indirectly own, solely as an investment, securities of any Person engaged in
the business of the Company or its subsidiaries which are publicly traded on a
national or regional stock exchange or on the over-the-counter market if
Executive (i) is not a controlling person of, or a member of a group which
controls, such Person and (ii) does not, directly or indirectly, own 5% or
more of any class of securities of such Person.

 

9

 

(3)                                                                                  During
the Restricted Period, Executive will not, whether on Executive’s own behalf or
on behalf of or in conjunction with any Person, directly or indirectly:

 

(i)                                     solicit
or encourage any employee of the Company or its subsidiaries to leave the
employment of the Company or its subsidiaries; or

 

(ii)                                  hire
any such employee who was employed by the Company or its subsidiaries as of the
date of Executive’s termination of employment with the Company or who left the
employment of the Company or its subsidiaries coincident with, or within one
year prior to or after, the termination of Executive’s employment with the
Company.

 

(4)                                                                                  During
the Restricted Period, Executive will not, directly or indirectly, solicit or
encourage to cease to work with the Company or its subsidiaries any consultant
then under contract with the Company or its subsidiaries.

 

b.                                      It is expressly understood and
agreed that although Executive and the Company consider the restrictions
contained in this Section 9 to be reasonable, if a final judicial
determination is made by a court of competent jurisdiction that the time or
territory or any other restriction contained in this Agreement is an
unenforceable restriction against Executive, the provisions of this Agreement
shall not be rendered void but shall be deemed amended to apply as to such
maximum time and territory and to such maximum extent as such court may
judicially determine or indicate to be enforceable.  Alternatively, if any court of competent
jurisdiction finds that any restriction contained in this Agreement is
unenforceable, and such restriction cannot be amended so as to make it
enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained herein.

 

10.                                 Confidentiality;
Intellectual Property.

 

a.                                       Confidentiality.

 

(i)  Executive
will not at any time (whether during or after Executive’s employment with the
Company) (x) retain or use for the benefit, purposes or account of Executive or
any other Person outside the Company; or (y) disclose, divulge, reveal,
communicate, share, transfer or provide access to any Person outside the
Company (other than its professional advisers who are bound by confidentiality
obligations), any non-public, proprietary or confidential information —including
without limitation trade secrets, know-how, research and development, software,
databases, inventions, processes, formulae, technology, designs and other
intellectual property, information concerning finances, investments, profits,
pricing, costs, products, services, vendors, customers, clients, partners, investors,
personnel, compensation, recruiting, training, advertising, sales, marketing,
promotions, government and regulatory activities and approvals — concerning the
past, current or future business, activities and operations of the Company, its
subsidiaries or affiliates and/or any third party that has disclosed or
provided any of same to the Company on a confidential basis (“Confidential
Information”) without the prior written authorization of the Board.

 

10

 

(ii)  “Confidential
Information” shall not include any information that is (a) generally known
to the industry or the public other than as a result of Executive’s breach of
this covenant or any breach of other confidentiality obligations by third
parties; (b) made legitimately available to Executive by a third party
without breach of any confidentiality obligation; or (c) required by law
to be disclosed; provided that Executive shall give prompt written
notice to the Company of such requirement, disclose no more information than is
so required, and cooperate with any attempts by the Company to obtain a
protective order or similar treatment.

 

(iii)  Upon termination of
Executive’s employment with the Company for any reason, Executive shall (x)
cease and not thereafter commence use of any Confidential Information or
intellectual property (including without limitation, any patent, invention,
copyright, trade secret, trademark, trade name, logo, domain name or other
source indicator) owned or used by the Company, its subsidiaries or affiliates;
(y) immediately destroy, delete, or return to the Company, at the Company’s
option, all originals and copies in any form or medium (including memoranda,
books, papers, plans, computer files, letters and other data) in Executive’s
possession or control (including any of the foregoing stored or located in
Executive’s office, home, laptop or other computer, whether or not Company
property) that contain Confidential Information or otherwise relate to the
business of the Company, its affiliates and subsidiaries, except that Executive
may retain only those portions of any personal notes, notebooks and diaries
that do not contain any Confidential Information; and (z) notify and fully
cooperate with the Company regarding the delivery or destruction of any other
Confidential Information of which Executive is or becomes aware.

 

b.                                      Intellectual Property.

 

(i)  If Executive creates,
invents, designs, develops, contributes to or improves any works of authorship,
inventions, intellectual property, materials documents or other work product
(including without limitation, research, reports, software, databases, systems,
applications, presentations, textual works, content or audiovisual materials) (“Works”)
either alone or with third parties, at any time during Executive’s employment
by the Company and within the scope of such employment and/or with the use of
any Company resources (“Company Works”), Executive shall promptly and fully
disclose same to the Company and hereby irrevocably assigns, transfers and
conveys, to the maximum extent permitted by applicable law, all rights and
intellectual property rights therein (including rights under patent, industrial
property, copyright, trademark, trade secret, unfair competition and related
laws) to the Company to the extent ownership of any such rights does not vest
originally in the Company.

 

(ii)  Executive shall take
all requested actions and execute all requested documents (including any
licenses or assignments required by a government contract) at the Company’s
expense (but without further remuneration) to assist the Company in validating,
maintaining, protecting, enforcing, perfecting, recording, patenting or
registering any of the Company’s rights in the Company Works.  If the Company is unable for any other reason
to secure Executive’s signature on any document for this purpose, then
Executive hereby irrevocably designates and appoints the Company and its duly
authorized officers and agents as Executive’s agent and attorney in fact, to
act for and in Executive’s behalf and stead to execute any documents and to do
all other lawfully permitted acts in connection with the foregoing.

 

11

 

(iii)  Executive shall not
improperly use for the benefit of, bring to any premises of, divulge, disclose,
communicate, reveal, transfer or provide access to, or share with the Company
any confidential, proprietary or non-public information or intellectual
property relating to a former employer or other third party without the prior
written permission of such third party. 
Executive hereby indemnifies, holds harmless and agrees to defend the
Company and its officers, directors, partners, employees, agents and
representatives from any breach of the foregoing covenant.  Executive shall comply with all relevant
policies and guidelines of the Company, including regarding the protection of
confidential information and intellectual property and potential conflicts of
interest.  Executive acknowledges that
the Company may amend any such policies and guidelines from time to time, and
that Executive remains at all times bound by their most current version.

 

(iv)  The provisions of Section 10
shall survive the termination of Executive’s employment for any reason.

 

11.                                 Specific
Performance.  Executive
acknowledges and agrees that the Company’s remedies at law for a breach of any
of the provisions of Section 9 or Section 10 would be inadequate and
the Company would suffer irreparable damages as a result of such breach.  In recognition of this fact, Executive agrees
that, in the event of such a breach, in addition to any remedies at law, the
Company, without posting any bond, shall be entitled to cease making any
payments or providing any benefit otherwise required by this Agreement and obtain
equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy which
may then be available; provided, however, that if the Company does not
institute and prevail in an action to obtain such an equitable remedy, the  Company shall re-pay and otherwise reimburse
Executive for the payments and benefits which the Company ceased making or
providing, and interest on such payments at the Company’s reference lending
rate with its principal bank lender. 
Notwithstanding anything contained in this Section 11, Executive’s
rights with respect to his equity participation shall be governed solely by the
Equity Documents.

 

12.                                 Miscellaneous.

 

a.                                       Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without regard to
conflicts of laws principles thereof.

 

b.                                      Entire Agreement/Amendments.  This Agreement contains the entire
understanding of the parties with respect to the employment of Executive by the
Company.  There are no restrictions,
agreements, promises, warranties, covenants or undertakings between the parties
with respect to the subject matter herein other than those expressly set forth
herein.  This Agreement may not be
altered, modified, or amended except by written instrument signed by the
parties hereto.  The Company may cause
the Service Company or another subsidiary to discharge the Company’s
obligations to Executive to make cash payments and provide benefits as set
forth in this Agreement (except with respect to any equity participation rights
pursuant to the Equity Documents), and any such discharge of the Company’s
obligations by the Service Company or another subsidiary shall not be deemed to
modify this Agreement.

 

12

 

c.                                       No Waiver.  The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver of such party’s rights or deprive such party of the right thereafter
to insist upon strict adherence to that term or any other term of this
Agreement.

 

d.                                      Severability.  In the event that any one or more of the
provisions of this Agreement shall be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions of this Agreement shall not be affected thereby.

 

e.                                       Assignment.  This Agreement, and all of Executive’s rights
and duties hereunder, shall not be assignable or delegable by Executive or the
Company, except as set forth below.  Any
purported assignment or delegation by Executive in violation of the foregoing
shall be null and void ab initio
and of no force and effect.  This
Agreement may be assigned by the Company only to a Person which is a successor
in interest to substantially all of the business operations of the
Company.  Upon such assignment, the
rights and obligations of the Company hereunder shall become the rights and
obligations of such successor Person.

 

f.                                         Successors; Binding Agreement.  This Agreement shall inure to the benefit of
and be binding upon personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.

 

g.                                      Set Off; Mitigation.  The Company’s obligation to pay Executive the
amounts provided and to make the arrangements provided hereunder shall not be
subject to set-off, counterclaim or recoupment, except for any amounts loaned
or advanced to Executive by the Company or its affiliates or otherwise as
provided in Section 8(c)(iii) hereof. 
Notwithstanding the foregoing, Executive shall not be required to
mitigate the amount of any payment provided for pursuant to this Agreement by
seeking other employment or otherwise and the amount of any payment provided
for pursuant to this Agreement shall not be reduced by any compensation earned
as a result of Executive’s other employment or otherwise.

 

h.                                      Notice.  For the purpose of this Agreement, notices
and all other communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered by hand or overnight
courier or three days after it has been mailed by United States registered
mail, return receipt requested, postage prepaid, addressed to the respective
addresses set forth below in this Agreement, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon receipt.

 

If to the Company:

 

Texas Genco LLC

c/o Texas Genco Operating Services LLC

12301 Kurland Avenue

Houston, Texas 77034

Telecopy:                                           (713) 945-3500

Attention:                                         Chief
Executive Officer

 

13

 

with a copy to

 

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, New York 10017

Telecopy:                                           (212) 455-2502

Attention:                                         David J.
Sorkin

Brian M. Stadler

 

If to Executive:

 

To the most recent address of Executive set forth in the personnel
records of the Company and with a copy to:

 

Dickstein Shapiro Morin & Oshinsky LLP

1177 Avenue of the Americas

46th Floor

New York, NY 10036

Telecopy:                                           (212)
997-9880

Attention:                                         Gary
L. Schoenbrun

 

i.                                          Executive Representation.  Executive hereby represents to the Company
that the execution and delivery of this Agreement by Executive and the
performance by Executive of Executive’s duties hereunder shall not constitute a
breach of, or otherwise contravene, the terms of any employment agreement or
other agreement or policy to which Executive is a party or otherwise bound.

 

j.                                          Cooperation.  Executive shall provide Executive’s
reasonable cooperation in connection with any action or proceeding (or any
appeal from any action or proceeding) which relates to events occurring during
Executive’s employment hereunder, but shall be done to the extent reasonably
possible in a manner as to reduce interference in Executive’s new position
after his employment hereunder ends.  The
Company shall reimburse Executive for any reasonable out of pocket expenses he
incurs in connection with such cooperation.  This provision shall survive any termination
of this Agreement.

 

k.                                       Withholding Taxes.  The Company may withhold from any amounts
payable under this Agreement such Federal, state and local taxes as may be
required to be withheld pursuant to any applicable law or regulation.

 

l.                                          Counterparts.  This Agreement may be signed in counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.

 

14

 

13.                                 Excise
Taxes.

 

a.                                       If, after the Company becomes
taxable as a corporation for federal income tax purposes and the Company has
issued stock that is “readily tradeable on an established securities market” as
described in Section 280G of the Internal Revenue Code of 1986, as amended
(the “Code”), it shall be determined (as hereafter provided) that any payment,
benefit or distribution (or combination thereof) by the Company, any of its
affiliates, one or more trusts established by the Company for the benefit of
its employees, or any other person or entity, to or for the benefit of
Executive, whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise pursuant to or by reason of any other
agreement, policy, plan, program or arrangement, including without limitation
any stock option, restricted stock award, stock appreciation right or similar
right, or the lapse or termination of any restriction on or the vesting or
exercisability of any of the foregoing (a “Payment”), would be subject to the
excise tax imposed by Section 4999 of the Code (or any successor provision
thereto) by reason of being “contingent on a change in ownership or effective
control or a change in the ownership of a substantial portion of the assets” of
the Company or an affiliate, within the meaning of Section 280G of the
Code (or any successor provision thereto) or to any similar tax imposed by
state or local law, or any interest or penalties with respect to such excise
tax (such tax or taxes, together with any such interest and penalties, are
hereafter collectively referred to as the “Excise Tax”), then the Company shall
make an additional payment (the “Gross-Up Payment”) to Executive such that,
after payment of all Excise Taxes and any other taxes payable in respect of
such Gross-Up Payment, Executive shall retain the same amount as if no Excise
Tax had been imposed.

 

b.                                      Subject to the provisions of Section 13(a) hereof,
all determinations required to be made under this Section 13, including
whether an Excise Tax is payable by Executive and the amount of such Excise
Tax, shall be made by the nationally recognized firm of certified public
accountants (the “Accounting Firm”) used by the Company prior to the change in
control (or, if such Accounting Firm declines to serve, the Accounting Firm
shall be a nationally recognized firm of certified public accountants selected
by Executive).  The Accounting Firm shall
be directed by the Company or Executive to submit its preliminary determination
and detailed supporting calculations to both the Company and Executive within
15 calendar days after the receipt of notice from Executive or the Company that
there has been a Payment, or any other such time or times as may be requested
by the Company or Executive.  If the
Accounting Firm determines that any Excise Tax is payable by Executive, the
Company shall make the Gross-Up Payment. 
If the Accounting Firm determines that no Excise Tax is payable by
Executive, it shall, at the same time as it makes such determination, furnish
Executive with an opinion that he has substantial authority not to report any
Excise Tax on his federal, state, local income or other tax return. Any
determination by the Accounting Firm shall be binding upon the Company and
Executive absent a contrary determination by the Internal Revenue Service or a
court of competent jurisdiction; provided, however, that no such
determination shall eliminate or reduce the Company’s obligation to provide any
Gross-Up Payment that shall be due as a result of such contrary
determination.  As a result of the
uncertainty in the application of Section 4999 of the Code (or any
successor provision thereto) and the possibility of similar uncertainty
regarding state or local tax law at the time of any determination by the
Accounting Firm hereunder, it is possible that the amount of the Gross-Up
Payment determined by the Accounting Firm to be due to (or on behalf of)
Executive was lower than the amount actually due (the “Underpayment”).  In the event that the Company exhausts its
remedies pursuant to Section 13(d) below, and Executive thereafter is
required to make a payment of any Excise Tax, the

 

15

 

Accounting Firm shall determine the amount of the Underpayment that has
occurred as promptly as possible and notify the Company and Executive of such
calculations, and any such Underpayment (including the Gross-Up Payment to
Executive) shall be promptly paid by the Company to or for the benefit of
Executive within five (5) business days after receipt of such
determination and calculations. All fees and expenses of the Accounting Firm
shall be paid by the Company in connection with the calculations required by
this section.

 

c.                                       The federal, state and local
income or other tax returns filed by Executive (or any filing made by a
consolidated tax group which includes the Company) shall be prepared and filed
on a consistent basis with the determination of the Accounting Firm with
respect to the Excise Tax payable by Executive. 
Executive shall make proper payment of the amount of any Excise Tax, and
at the request of the Company, provide to the Company true and correct copies
(with any amendments) of his federal income tax return as filed with the
Internal Revenue Service and corresponding state and local tax returns, if
relevant, as filed with the applicable taxing authority, and such other
documents reasonably requested by the Company, evidencing such payment.

 

d.                                      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 any Gross-Up Payment.
Such notification shall be given as soon as practicable but no later than ten (10) business
days after Executive is informed in writing of such claim and shall apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid. Executive shall not pay such claim prior to the
expiration of the thirty (30) day period following the date on which he 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
Executive in writing prior to the expiration of such period that it desires to
contest such claim, Executive shall (w) give the Company any information which
is in Executive’s possession reasonably requested by the Company relating to
such claim, (x) 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, (y) cooperate with the
Company in good faith in order to effectively contest such claim, and (z)
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 Executive harmless, on an
after-tax basis, from 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 Section 13, the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego 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 Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and 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, further, that if the Company directs
Executive to pay such claim and sue for a refund, the Company shall pay the
amount of such payment to Executive, and Executive shall use such amount
received to pay such claim, and the Company shall indemnify and hold Executive

 

16

 

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 payment or with respect to any imputed income with respect to such payment
(including the applicable Gross-Up Payment); provided, further, that if Executive
is required to extend the statute of limitations to enable the Company to
contest such claim, Executive may limit this extension solely to such contested
amount. 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 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.

 

e.                                       If, after the receipt by
Executive of an amount paid or advanced by the Company pursuant to this Section 13,
Executive becomes entitled to receive any refund with respect to a Gross-Up
Payment, Executive shall (subject to the Company’s complying with the
requirements of Section 13(d)) promptly pay to the Company the amount of
such refund received (together with any interest paid or credited thereon after
taxes applicable thereto) (or, to the extent such payment would be deemed
prohibited by applicable law, shall be treated as a prepayment by the Company of
any amounts owed to Executive). If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 13(d), a determination is made
that Executive shall not be entitled to any refund with respect to such claim
and the Company does not notify Executive in writing of its intent to contest
such denial of refund prior to the expiration of thirty (30) days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such payment made to Executive thereunder shall
offset, to the extent thereof, the amount of the Gross-Up Payment required to
be paid.

 

f.                                         The Company’s obligations under
this Section 13 shall survive any termination of the Executive’s
employment with the Company, other than a termination by the Company for Cause.

 

14.                                 Indemnification.  During the Employment Term and thereafter,
the Company shall indemnify Executive to the fullest extent permitted by law
against any judgments, fines, amounts paid in settlement and reasonable
expenses (including attorneys’ fees) in connection with any claim, action or
proceeding (whether civil or criminal) against Executive as a result of
Executive serving as an officer or director of the Company or in any capacity
at the request of the Company, in or with regard to any other entity, employee
benefit plan or enterprise (other than arising out of Executive’s act of
willful misconduct, gross negligence, misappropriation of funds, fraud or
breach of this Agreement).  This
indemnification shall be in addition to, and not in lieu of, any other
indemnification Executive shall be entitled to pursuant to the LLC Agreement,
the Company’s Certificate of Incorporation or otherwise.  Following Executive’s termination of
employment, the Company shall continue to cover Executive under the Company’s
directors and officer’s insurance, if any, for the period during which
Executive may be subject to potential liability for any claim, action or
proceeding (whether civil or criminal) as a result of his service as an officer
or director of the Company or in any capacity at the request of the Company, in
or with regard to any other entity, employee benefit plan or enterprise on the
same terms such coverage was provided during the Employment Term, at the
highest level then maintained for any then current or former officer.

 

17

 

[Signatures on next page.]

 

18

 

IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the day and year first above written.

 

 

	
   

  	
  Texas Genco LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jack Fusco

  	
   

  
	
   

  	
  Name: Jack Fusco

  	
   

  
	
   

  	
  Title: Chief Executive Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Texas Genco Operating Services LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jack Fusco

  	
   

  
	
   

  	
  Name: Jack Fusco

  	
   

  
	
   

  	
  Title: Chief Executive Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Executive:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Thomas M. Boehlert

  	
   

  
	
   

  	
  Thomas M. Boehlert

  	
   

  

 

19

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