EMPLOYMENT AGREEMENT OF WAYNE H. BRUNETTI

 

                  THIS AGREEMENT by and between Northern States Power Company, a

Minnesota corporation (the "Company"), and New Century Energies, Inc., a

Delaware corporation ("NCE"), and Wayne H. Brunetti (the "Executive"), dated as

of the 24th day of March, 1999.

 

                                 WITNESSETH THAT

 

                  WHEREAS, the Company and NCE have entered into an Agreement

and Plan of Merger dated as of March 24, 1999 (the "Merger Agreement"), whereby

NCE will merge with and into the Company (the "Merger");

 

                  WHEREAS, the Company and NCE wish to provide for the orderly

succession of management of the surviving company in the Merger (the "Company")

following the Effective Time (as defined in the Merger Agreement); and

 

                  WHEREAS, the Company and NCE further wish to provide for the

employment by the Company of the Executive, and the Executive wishes to serve

the Company, in the capacities and on the terms and conditions set forth in this

Agreement;

 

                  NOW, THEREFORE, it is hereby agreed as follows:

 

1.       EFFECT ON PRIOR AGREEMENTS; EMPLOYMENT PERIOD.

 

                  (a) The Executive is currently employed by NCE pursuant to an

Employment Agreement dated as of August 1, 1997 (the "Prior Agreement"). The

Prior Agreement shall remain in effect without amendment until the Effective

Time (as defined in the Merger Agreement), and this Agreement shall supersede

the Prior Agreement at the Effective Time. The Change in Control Agreement

between NCE and the Executive shall remain in effect from and after the date of

this Agreement, except that the Executive hereby waives any right that he might

otherwise have to receive any severance or other payment or benefit under the

Change In Control Agreement that would be duplicative of a payment or benefit to

which he is entitled under this Agreement.

 

                  (b) The Company shall employ the Executive, and the Executive

shall serve the Company, on the terms and conditions set forth in this

Agreement, for an initial period (the "Initial Period") and a further period

(the "Secondary Period") (the Initial Period and the Secondary Period are

hereinafter referred to in the aggregate as the "Employment Period"). The

Initial Period shall begin at the Effective Time and end on the first

anniversary of the Effective Time. The Secondary Period shall begin on the first

day after the end of the Initial Period and end on the third anniversary of such

day; provided, that on each anniversary of such day, the Secondary Period shall

be automatically extended by an additional year unless either the Company or the

Executive shall have given notice to the other, not less than 60 days before

such anniversary, that the Secondary Period shall not be so extended.

 

 

<PAGE>   2

 

 

                  (c) Notwithstanding any other provision of this Agreement,

this Agreement shall be null and void and of no force or effect unless and until

the Merger is consummated.

 

2.       POSITION AND DUTIES; LOCATION.

 

                  (a) During the Initial Period, the Executive shall serve as

Chief Executive Officer and President of the Company. During the Second Period,

the Executive shall serve as Chief Executive Officer of the Company and Chairman

of the Board of Directors of the Company (the "Board"). The Executive shall

serve in each such case as an employee of the Company and with such duties and

responsibilities as are customarily assigned to such positions, and such other

duties and responsibilities not inconsistent therewith as may from time to time

be assigned to him by the Board. The Executive shall be a member of the Board on

the first day of the Employment Period, and the Board shall propose the

Executive for re-election to the Board throughout the Employment Period.

 

                  (b) During the Employment Period as is customary, the

Executive shall report to the Board.

 

                  (c) During the Employment Period, and excluding any periods of

vacation and sick leave to which the Executive is entitled, the Executive shall

devote reasonable attention and time during normal business hours to the

business and affairs of the Company and, to the extent necessary to discharge

the responsibilities assigned to the Executive under this Agreement, use the

Executive's reasonable best efforts to carry out such responsibilities

faithfully and efficiently. It shall not be considered a violation of the

foregoing for the Executive to serve on corporation, industry, civic or

charitable boards or committees, so long as such activities do not significantly

interfere with the performance of the Executive's responsibilities as an

employee of the Company in accordance with this Agreement.

 

                  (d) During the period beginning on the first day of the

Employment Period and ending as soon as practicable thereafter but in no event

later than the date of the first subsequent annual meeting of the shareholders

of the Company (the "Transition Period"), the Executive's service shall be

performed at the Company's headquarters in Minneapolis, Minnesota and at NCE's

headquarters in Denver, Colorado. After the end of the Transition Period, the

Executive shall spend the majority of his time and perform the majority of his

duties at the Company's headquarters in Minneapolis, Minnesota. No later than

the end of the Transition Period, the Executive shall relocate the residence at

which he spends the majority of his time to the Twin Cities area. The Company

shall reimburse the Executive for all of his moving expenses incurred in such

relocation, and during the period from the first day of the Employment Period

through the earlier of the end of the Transition Period and the date of such

relocation, the Company shall provide the Executive with an apartment in

Minneapolis and reimburse him for reasonable expenses of meals while in

Minneapolis and travel between Minneapolis and his principal residence, provided

in each case that the Executive complies with the policies, practices and

procedures of the Company for submission of expense reports, receipts, or

similar documentation of such expenses.

 

 

 

 

 

                                      -2-

 

<PAGE>   3

 

 

3.       COMPENSATION.

 

                  (a) Base Salary. The Executive's compensation during the

Employment Period shall be determined by the Board upon the recommendation of

the Compensation Committee of the Board, subject to the next sentence and

Section 3(b). During the Employment Period, the Executive shall receive an

annual base salary (the "Annual Base Salary") at least equal to his annual base

salary as in effect immediately before the Effective Time. The Annual Base

Salary shall be payable in accordance with the Company's regular payroll

practice for its senior executives, as in effect from time to time. During the

Employment Period, the Annual Base Salary shall be reviewed at least annually

for possible increase. Any increase in the Annual Base Salary shall not limit or

reduce any other obligation of the Company under this Agreement.

 

                  (b) Incentive Compensation. During the Employment Period, the

Executive shall participate in short-term incentive compensation plans and

long-term incentive compensation plans (the latter to consist of plans offering

stock options, restricted stock and other long-term incentive compensation)

providing him with the opportunity to earn, on a year-by-year basis, short-term

and long-term incentive compensation (the "Incentive Compensation") at least

equal to the amounts that he had the opportunity to earn under the comparable

plans of NCE as in effect immediately before the Effective Time.

 

                  (c) Other Benefits.

 

                      (i) Supplemental Executive Retirement Plan. During the

Employment Period, the Executive shall participate in a supplemental executive

retirement plan ("SERP") such that the aggregate value of the retirement

benefits that he and his spouse will receive at the end of the Employment Period

under all defined benefit plans of the Company and its affiliates (whether

qualified or not) will be not less than the aggregate value of the benefits he

and his spouse would have received (and with the same forms of benefit payments)

had he continued, through the end of the Employment Period, to accrue the

supplemental retirement benefits provided by the terms of his employment

agreement with NCE as in effect immediately before the Effective Time and those

of Public Service Company of Colorado ("PSCo") as in effect as of August 1,

1997.

 

                      (ii) During the Employment Period, the Company shall

provide the Executive with life insurance coverage providing a death benefit to

such beneficiary or beneficiaries as the Executive may designate of not less

than 400% of the Executive's then-current Annual Base Salary if death occurs

during employment, and equal to 200% his final Annual Base Salary if death

occurs following termination of employment.

 

                      (iii) In addition, and without limiting the generality of

the foregoing, during the Employment Period and thereafter: (A) the Executive

shall be entitled to participate in all applicable incentive, savings and

retirement plans, practices, policies and programs of the Company and its

subsidiaries to the same extent as other senior executives of the Company; and

(B) the Executive and/or the Executive's family, as the case may be, shall be

eligible for participation in, and shall receive all benefits under, all

applicable welfare benefit

 

 

 

                                      -3-

 

<PAGE>   4

 

 

plans, practices, policies and programs provided by the Company and its

subsidiaries, other than severance plans, practices, policies and programs but

including, without limitation, medical, prescription, dental, disability, sick

leave, employee life insurance, group life insurance, accidental death and

travel accident insurance plans and programs, to the same extent as other senior

executives of the Company (but excluding the Company's Senior Executive

Severance Policy and 1999 Senior Executive Severance Policy and NCE's 1999

Senior Executive Severance Policy (the "Severance Policies").

 

                  (d) Fringe Benefits. During the Employment Period, the

Executive shall be entitled to receive fringe benefits on the same terms and

conditions as the greater of (i) the fringe benefits received by, or available

to, him from NCE immediately before the Effective Time, or (ii) the fringe

benefits provided by the Company or its subsidiaries which are available to the

next highest executive officer of the Company for the year.

 

4.       TERMINATION OF EMPLOYMENT.

 

                  (a) Death or Disability. The Executive's employment shall

terminate automatically upon the Executive's death during the Employment Period.

The Company shall be entitled to terminate the Executive's employment because of

the Executive's Disability during the Employment Period. "Disability" means that

(i) the Executive has been unable, for a period of 180 consecutive business

days, to perform the Executive's duties under this Agreement, as a result of

physical or mental illness or injury, and (ii) a physician selected by the

Company or its insurers, and acceptable to the Executive or the Executive's

legal representative, has determined that the Executive's incapacity is total

and permanent. A termination of the Executive's employment by the Company for

Disability shall be communicated to the Executive by written notice, and shall

be effective on the 30th day after receipt of such notice by the Executive (the

"Disability Effective Date") unless the Executive returns to full-time

performance of the Executive's duties before the Disability Effective Date.

 

                  (b) By the Company.

 

                      (i) The Company may terminate the Executive's employment

during the Employment Period for Cause or without Cause. "Cause" means:

 

                          A. the willful and continued failure of the Executive

                      substantially to perform the Executive's duties under this

                      Agreement (other than as a result of physical or mental

                      illness or injury), after the Board of the Company

                      delivers to the Executive a written demand for substantial

                      performance that specifically identifies the manner in

                      which the Board believes that the Executive has not

                      substantially performed the Executive's duties; or

 

                          B. illegal conduct or gross misconduct by the

                      Executive, in either case that is willful and results in

                      material and demonstrable damage to the business or

                      reputation of the Company.

 

 

 

                                      -4-

 

<PAGE>   5

 

 

No act or failure to act on the part of the Executive shall be considered

"willful" unless it is done, or omitted to be done, by the Executive in bad

faith or without reasonable belief that the Executive's action or omission was

in the best interests of the Company. Any act or failure to act that is based

upon authority given pursuant to a resolution duly adopted by the Board, or the

advice of counsel for the Company, shall be conclusively presumed to be done, or

omitted to be done, by the Executive in good faith and in the best interests of

the Company.

 

                      (ii) A termination of the Executive's employment for Cause

shall be effected in accordance with the following procedures. The Company shall

give the Executive written notice ("Notice of Termination for Cause") of its

intention to terminate the Executive's employment for Cause, setting forth in

reasonable detail the specific conduct of the Executive that it considers to

constitute Cause and the specific provision(s) of this Agreement on which it

relies, and stating the date, time and place of the Special Board Meeting for

Cause. The "Special Board Meeting for Cause" means a meeting of the Board called

and held specifically for the purpose of considering the Executive's termination

for Cause, that takes place not less than ten and not more than twenty business

days after the Executive receives the Notice of Termination for Case. The

Executive shall be given an opportunity, together with counsel, to be heard at

the Special Board Meeting for Cause. The Executive's termination for Cause shall

be effective when and if a resolution is duly adopted at the Special Board

Meeting for Cause by an affirmative vote of at least the greater of (A)

two-thirds (2/3) of the entire membership of the Board (excluding the Executive

who shall not vote on this matter) or (B) ten (10) members of the Board, stating

that in the good faith opinion of the Board, the Executive is guilty of the

conduct described in the Notice of Termination for Cause, and that conduct

constitutes Cause under this Agreement.

 

                      (iii) A termination of the Executive's employment without

Cause shall be effective in accordance with the following procedures. The

Company shall give the Executive written notice ("Notice of Termination without

Cause") of its intention to terminate the Executive's employment without Cause,

stating the date, time and place of the Special Board Meeting without Cause. The

"Special Board Meeting without Cause" means a meeting of the Board called and

held specifically for the purpose of considering the Executive's termination

without Cause, that takes place not less than ten and not more than twenty

business days after the Executive receives the Notice of Termination without

Cause. The Executive shall be given an opportunity, together with counsel, to be

heard at the Special Board Meeting without Cause. The Executive's termination

without Cause shall be effective when and if a resolution is duly adopted at the

Special Board Meeting without Cause by an affirmative vote of the greater of (A)

at least two-thirds (2/3) of the entire membership of the Board (excluding the

Executive who shall not vote on this matter) or (B) ten members of the Board

stating that the Executive is terminated without Cause.

 

                  (c) Good Reason.

 

                      (i) The Executive may terminate employment for Good Reason

or without Good Reason. "Good Reason" means the occurrence (without the

Executive's express written consent) of any of the following acts by the

Company, or failures by the Company to

 

 

 

 

                                      -5-

 

<PAGE>   6

 

 

act, unless such act or failure to act is corrected within thirty days of a

Notice of Termination for Good Reason (as that term is defined below) given in

respect thereof:

 

                          A. the Executive's duties and responsibilities are

                      materially and adversely diminished in comparison to the

                      duties and responsibilities set forth in Section 2(a) of

                      this Agreement (for purposes of this Agreement, it shall

                      be considered a material and adverse diminishment of

                      duties and responsibilities if the Executive occupies the

                      same position but only with a non-publicly held company);

 

                          B. any failure by the Company to comply with any

                      provision of Section 3 of this Agreement;

 

                          C. any purported termination of the Executive's

                      employment by the Company for a reason or in a manner not

                      expressly permitted by this Agreement;

 

                          D. any failure by the Company to comply with paragraph

                      (c) of Section 11 of this Agreement;

 

                          E. any other substantial breach of this Agreement by

                      the Company; or

 

                          F. the Executive is no longer a member of the Board or

                      the Board fails to propose the Executive for re-election

                      to the Board.

 

The Company and the Executive, upon mutual written Agreement, may waive any of

the foregoing provisions which would otherwise constitute Good Reason.

 

                      (ii)A termination of employment by the Execute for Good

Reason shall be effectuated by giving the Company written notice ("Notice of

Termination for Good Reason") of the termination within one year (but not after

the end of the Employment Period) of the date of the event which is the basis of

the Notice of Termination for Good Reason, setting forth in reasonable detail

the specific conduct of the Company that constitutes Good Reason and the

specific provision(s) of this Agreement on which the Executive relies. A

termination of employment by the Executive for Good Reason shall be effective on

the fifth business day following the date when the Notice of Termination for

Good Reason is given, unless the notice sets forth a later date (which date

shall in no event be later than 30 days after the notice is given). For purposes

of this Section 4(c), any good faith determination of "Good Reason" made by the

Executive shall be conclusive.

 

                     (iii)A termination of the Executive's employment by the

Executive without Good Reason shall be effected by giving the Company written

notice of the termination.

 

 

 

 

                                      -6-

 

<PAGE>   7

 

 

                  (d) No Waiver. The failure to set forth any fact or

circumstance in a Notice of Termination for Cause, a Notice of Termination

without Cause or a Notice of Termination for Good Reason shall not constitute a

waiver of the right to assert, and shall not preclude the party giving notice

from asserting, such fact or circumstance in an attempt to enforce any right

under or provision of this Agreement.

 

                  (e) Date of Termination. The "Date of Termination" means the

date of the Executive's death, the Disability Effective Date, the date on which

the termination of the Executive's employment by the Company for Cause or

without Cause or by the Executive for Good Reason is effective, or the date on

which the Executive gives the Company notice of a termination of employment

without Good Reason, as the case may be.

 

5.       OBLIGATIONS OF THE COMPANY UPON TERMINATION.

 

                  (a) By the Company other than for Cause or Disability; by the

Executive for Good Reason. If, during the Employment Period, the Company

terminates the Executive's employment other than for Cause or Disability, or the

Executive terminates employment for Good Reason, the Company shall continue to

provide the Executive with the compensation and benefits set forth in paragraphs

(a), (b) and (c) of Section 3 as if he had remained employed by the Company

pursuant to this Agreement through the end of the Employment Period and then

retired (at which time he will be treated as eligible for all retiree welfare

benefits and other benefits provided to retired senior executives, as set forth

in Section 3(c)(ii) and (iii); provided, that the Incentive Compensation for

such period shall be based upon the target Incentive Compensation for the year

in which the Date of Termination occurs; provided, further, that in lieu of

stock options, restricted stock and other stock-based awards, the Executive

shall be paid cash equal to the fair market value as of the Date of Termination

(without regard to any restrictions and based upon a valuation model generally

utilized for purposes of valuing comparable stock-based compensation awards) of

the stock options, restricted stock and other stock-based awards that would

otherwise have been granted with such cash being paid within 90 days after the

Date of Termination; provided, further that, to the extent any benefits

described in paragraph (c) of Section 3 cannot be provided pursuant to the plan

or program maintained by the Company for its executives, the Company shall

provide such benefits outside such plan or program at no additional cost

(including without limitation tax cost) to the Executive and his family, and

provided, finally, that during any period when the Executive is eligible to

receive benefits of the type described in clause (B) of paragraph (c)(iii) of

Section 3 under another employer-provided plan, the benefits provided by the

Company under paragraph (a) of Section 5 may be made secondary to those provided

under another plan. In addition to the foregoing, any restricted stock

outstanding on the Date of Termination shall be fully vested as of the Date of

Termination and all options outstanding on the Date of Termination shall be

fully vested and exercisable and shall remain in effect and exercisable through

the end of their respective terms, without regard to the termination of the

Executive's employment. The payments and benefits provided pursuant to this

paragraph (a) of Section 5 are intended as liquidated damages for a termination

for the Executive's employment by the Company other than for Cause or Disability

or for the actions of the Company leading to a termination of the Ex-

 

 

 

 

 

                                      -7-

 

 

 

 

 

 

<PAGE>   8

 

 

ecutive's employment by the Executive for Good Reason, and shall be the sole

and exclusive remedy therefor.

 

                  (b) Death or Disability. If the Executive's employment is

terminated by reason of the Executive's death or Disability during the

Employment Period, the Company shall pay to the Executive, or in the cause of

the Executive's death, to the Executive's designated beneficiaries (or, if there

is no such beneficiary, to the Executive's estate or legal representative) in a

lump sum in cash within 30 days after the Date of Termination, the sum of the

following amounts (the "Accrued Obligations"): (1) any portion of the

Executive's Annual Base Salary through the Date of Termination that has not yet

been paid; (2) an amount representing the target Incentive Compensation for the

year that includes the Date of Termination, computed by assuming that the amount

of all such target Incentive Compensation would be equal to the amount of such

target Incentive Compensation that the Executive would have been eligible to

earn for such period, and multiplying that amount by a fraction, the numerator

of which is the number of days in such period through the Date of Termination,

and the denominator of which is the total number of days in the relevant period;

(3) any compensation previously deferred by the Executive (together with any

accrued interest or earnings thereon) that has not yet been paid; and (4) any

accrued but unpaid Incentive Compensation and vacation pay; and the Company

shall have no further obligations under this Agreement, except as specified in

Section 6 below. If the Executive's employment is terminated by reason of

Disability, he shall be entitled to receive the maximum disability payments

which can be provided under the disability plans described in Section 3(c)(iii),

reduced, however, by actual disability benefits received under such plans.

 

                  (c) By the Company for Cause; by the Executive other than for

Good Reason. If the Executive's employment is terminated by the Company for

Cause during the Employment Period, the Company shall pay the Executive the

Annual Base Salary through the Date of Termination and the amount of any

compensation previously deferred by the Executive (together with any accrued

interest or earnings thereon), in each case to the extent not yet paid, and the

Company shall have no further obligations under this Agreement, except as

specified in Section 6 below. If the Executive voluntarily terminates employment

during the Employment Period, other than for Good Reason, the Company shall pay

the Accrued Obligations to the Executive in a lump sum in cash within 30 days of

the Date of Termination, and the Company shall have no further obligations under

this Agreement, except as specified in Section 6 below.

 

6.       NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or

limit the Executive's continuing or future participation in any plan, program,

policy or practice provided by the Company or any of its affiliated companies

for which the Executive may qualify, nor, subject to paragraph (f) of Section

12, shall anything in this Agreement limit or otherwise affect such rights as

the Executive may have under any contract or agreement with the Company or any

of its affiliated companies. Vested benefits and other amounts that the

Executive is otherwise entitled to receive under the SERP or any other plan,

policy, practice or program of, or any contract or agreement with, the Company

or any of its affiliated companies on or after the Date of Termination shall be

payable in accordance with the terms

 

 

 

 

                                      -8-

 

<PAGE>   9

 

 

of each such plan, policy, practice, program, contract or agreement, as the case

may be, except as explicitly modified by this Agreement.

 

7.       FULL SETTLEMENT. The Company's obligation to make the payments provided

for in, and otherwise to perform its obligations under this Agreement shall not

be affected by any set-off, counterclaim, recoupment, defense or other claim,

right or action that the Company may have against the Executive or others. In no

event shall the Executive be obligated to seek other employment or take any

other action by way of mitigation of the amounts payable to the Executive under

any of the provisions of this Agreement and, except as specifically provided in

paragraph (a) of Section 5 with respect to benefits described in clause (B) of

paragraph (c)(iii) of Section 3, such amounts shall not be reduced, regardless

of whether the Executive obtains other employment.

 

8.       NON-COMPETITION PROVISION AND CONFIDENTIAL INFORMATION.

 

                  (a) Without the prior written consent of the Company, while

actively employed, and if and only if the Executive becomes entitled to receive

severance benefits pursuant to Section 5(a) hereof, for 24 months following the

termination of the Executive's employment, the Executive shall not, as a

shareholder, officer, director, partner, consultant, or otherwise, engage

directly or indirectly in any business or enterprise which is "in competition"

with the Company or its successors or assigns; provided, however, that the

Executive's ownership of less than five percent of the issued and outstanding

voting securities of a publicly-traded company shall not be deemed to constitute

such competition. A business or enterprise is deemed to be "in competition" if

it is engaged in the business of generation, purchase, transmission,

distribution, or sale of electricity, or in the purchase, transmission,

distribution, sale or transportation of natural gas within the States of

Colorado, Kansas, Minnesota, New Mexico, North Dakota, Oklahoma, South Dakota,

Texas, Wisconsin or Wyoming.

 

                  (b) The Executive shall hold in a fiduciary capacity for the

benefit of the Company all secret or confidential information, knowledge or data

relating to the Company or any of its affiliated companies and their respective

businesses that the Executive obtains during the Executive's employment by the

Company or any of its affiliated companies and that is not public knowledge

(other than as a result of the Executive's violation of this Section 8)

("Confidential Information"). The Executive shall not communicate, divulge or

disseminate Confidential Information at any time during or after the Executive's

employment with the Company, except with the prior written consent of the

Company or as otherwise required by law or legal process. In no event shall any

asserted violation of the provisions of this Section 8 constitute a basis for

deferring or withholding any amounts otherwise payable to the Executive under

this Agreement.

 

9.       CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.

 

                  (a) Anything in this Agreement to the contrary

notwithstanding, in the event it shall be determined that any payment or

distribution by the Company to or for the benefit of the Executive (whether paid

or payable or distributed or distributable pursuant to the terms of this

Agreement or otherwise, but determined with regard to any additional payments

required

 

 

 

                                      -9-

 

<PAGE>   10

 

 

under this Section 9) (a "Payment") would be subject to the excise tax imposed

by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"),

or any interest or penalties are incurred by the Executive with respect to such

excise tax (such excise tax, together with any such interest and penalties, are

hereinafter collectively referred to as the "Excise Tax"), then the Executive

shall be entitled to receive an additional payment (a "Gross-Up Payment") in an

amount such that after payment by the Executive of all taxes (including any

interest or penalties imposed with respect to such taxes) including, without

limitation, any income taxes (and any interest and penalties imposed with

respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive

retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon

the Payments.

 

                  (b) Subject to the provisions of paragraph (c) of this Section

9, all determinations required to be made under this Section 9, including

whether and when a Gross-Up Payment is required and the amount of such Gross-Up

Payment and the assumptions to be utilized in arriving at such determination,

shall be made by Arthur Andersen LLP (the "Accounting Firm"), which shall

provide detailed supporting calculations both to the Company and the Executive

within 15 business days of the receipt of notice from the Executive that there

has been a Payment, or such earlier time as is requested by the Company. All

fees and expenses of the Accounting Firm shall be borne solely by the Company.

Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by

the Company to the Executive within five days of the receipt of the Accounting

Firm's determination. Any determination by the Accounting Firm shall be binding

upon the Company and the Executive. As a result of the uncertainty in the

application of Section 4999 of the Code at the time of the initial determination

by the Accounting Firm hereunder, it is possible that Gross-Up Payments which

will not have been made by the Company should have been made ("Underpayment")

consistent with the calculations required to be made hereunder. In the event

that the Company exhausts its remedies pursuant to paragraph (c) of this Section

9 and the Executive thereafter is required to make a payment of any Excise Tax,

the Accounting Firm shall determine the amount of the Underpayment that has

occurred and any such Underpayment shall be promptly paid by the Company to or

for the benefit of the Executive.

 

                  (c) The Executive shall notify the Company in writing of any

claim by the Internal Revenue Service that, if successful, would require the

payment by the Company of the Gross-Up Payment. Such notification shall be given

as soon as practicable but not later than ten business days after the Executive

is informed in writing of such claim and shall apprise the Company of the nature

of such claim and the date on which such claim is requested to be paid. The

Executive shall not pay such claim prior to the expiration of the 30-day period

following the date on which it gives such notice to the Company (or such shorter

period ending on the date that any payment of taxes with respect to such claim

is due). If the Company notifies the Executive in writing prior to the

expiration of such period that it desires to contest such claim, the Executive

shall:

 

                      (i) give the Company any information reasonably requested

                  by the Company relating to such claim;

 

 

 

 

 

                                      -10-

 

<PAGE>   11

 

 

                      (ii) take such action in connection with contesting such

                  claim as the Company shall reasonably request in writing from

                  time to time, including, without limitation, accepting legal

                  representation with respect to such claim by an attorney

                  reasonably selected by the Company;

 

                      (iii)cooperate with the Company in good faith in order

                  effectively to contest such claim; and

 

                      (iv) permit the Company to participate in any proceedings

                  relating to such claim;

 

provided, however, that the Company shall bear and pay directly all costs and

expenses (including additional interest and penalties) incurred in connection

with such contest and shall indemnify and hold the Executive harmless, on an

after-tax basis, for any Excise Tax or income tax (including interest and

penalties with respect thereto) imposed as a result of such representation and

payment of costs and expenses. Without limitation on the foregoing provisions of

this paragraph (c) of Section 9, the Company shall control all proceedings taken

in connection with such contest and, at its sole option, may pursue or forgo any

and all administrative appeals, proceedings, hearings and conferences with the

taxing authority in respect of such claim and may, at its sole option, either

direct the Executive to pay the tax claimed and sue for a refund or contest the

claim in any permissible manner, and the Executive agrees to prosecute such

contest to a determination before any administrative tribunal, in a court of

initial jurisdiction and in one or more appellate courts, as the Company shall

determine, provided, however, that if the Company directs the Executive to pay

such claim and sue for a refund, the Company shall advance the amount of such

payment to the Executive, on an interest-free basis and shall indemnify and hold

the Executive harmless, on an after-tax basis, from any Excise Tax or income tax

(including interest or penalties with respect thereto) imposed with respect to

such advance or with respect to any imputed income with respect to such advance;

and provided, further, that any extension of the statute of limitations relating

to payment of taxes for the taxable year of the Executive with respect to which

such contested amount is claimed to be due is limited solely to such contested

amount. Furthermore, the Company's control of the contest shall be limited to

issues with respect to which a Gross-Up Payment would be payable hereunder and

the Executive shall be entitled to settle or contest, as the case may be, any

other issue raised by the Internal Revenue Service or any other taxing

authority.

 

                  (d) If, after the receipt by the Executive of an amount

advanced by the Company pursuant to paragraph (c) of this Section 9, the

Executive becomes entitled to receive any refund with respect to such claim, the

Executive shall (subject to the Company's complying with the requirements of

paragraph (c) of this Section 9) promptly pay to the Company the amount of such

refund (together with any interest paid or credited thereon after taxes

applicable thereto). If after the receipt by the Executive of an amount advanced

by the Company pursuant to paragraph (c) of this Section 9, a determination is

made that the Executive shall not be entitled to any refund with respect to such

claim and the Company does not notify the Executive in writing of its intent to

contest such denial of refund prior to the expiration of 30 days after such

determination, then such advance shall be forgiven and shall not be required to

be

 

 

 

 

                                      -11-

 

<PAGE>   12

 

 

repaid and the amount of such advance shall offset, to the extent thereof, the

amount of Gross-Up Payment required to be paid.

 

10.      ATTORNEY'S FEES. The Company agrees to pay, as incurred, to the fullest

extent permitted by law, all legal fees and expenses that the Executive may

reasonably incur as a result of any contest regardless of the outcome by the

Company, the Executive or others of the validity or enforceability of or

liability under or otherwise involving, any provision of this Agreement,

together with interest on any delayed payment at the applicable federal rate

provided for in Section 7872(f)(2)(A) of the Code.

 

11.      SUCCESSORS.

 

                  (a) This Agreement is personal to the Executive and, without

the prior written consent of the Company, shall not be assignable by the

Executive otherwise than by will or the laws of descent and distribution. This

Agreement shall inure to the benefit of and be enforceable by the Executive's

legal representatives.

 

                  (b) This Agreement shall inure to the benefit of and be

binding upon the Company and its successors and assigns.

 

                  (c) The Company shall require any successor (whether direct or

indirect, by purchase, merger, consolidation or otherwise) to all or

substantially all of the business and/or assets of the Company expressly to

assume and agree to perform this Agreement in the same manner and to the same

extent that the Company would have been required to perform it if no such

succession had taken place. As used in this Agreement, "Company" shall mean both

the Company as defined above and any such successor that assumes and agrees to

perform this Agreement, by operation of law or otherwise.

 

12.      MISCELLANEOUS.

 

                  (a) This Agreement shall be governed by, and construed in

accordance with, the laws of the State of Minnesota, without reference to

principles of conflict of laws. The captions of this Agreement are not part of

the provisions hereof and shall have no force and effect. This Agreement may not

be amended or modified except by a written agreement executed by the parties

hereto or their respective successors and legal representatives.

 

                  (b) All notices and other communications under this Agreement

shall be in writing and shall be given by hand delivery to the other party or by

registered or certified mail, return receipt requested, postage prepaid,

addressed as follows:

 

 

 

 

 

 

 

                                      -12-

 

<PAGE>   13

 

 

         If to the Executive:       Wayne H. Brunetti

 

 

 

 

         If to the Company:         Northern States Power Company

                                    414 Nicollet Mall

                                    Minneapolis, Minnesota  55401

                                    Attention:  General Counsel

 

or to such other address as either party furnishes to the other in writing in

accordance with this paragraph (b) of Section 12. Notices and communications

shall be effective when actually received by the addressee.

 

                  (c) The invalidity or unenforceability of any provision of

this Agreement shall not affect the validity or enforceability of any other

provision of this Agreement. If any provision of this Agreement shall be held

invalid or unenforceable in part, the remaining portion of such provision,

together with all other provisions of this Agreement, shall remain valid and

enforceable and continue in full force and effect to the fullest extent

consistent with law.

 

                  (d) Notwithstanding any other provision of this Agreement, the

Company may withhold from amounts payable under this Agreement all federal,

state, local and foreign taxes that are required to be withheld by applicable

laws or regulations.

 

                  (e) The Executive's or the Company's failure to insist upon

strict compliance with any provision of, or to assert any right under, this

Agreement (including, without limitation, the right of the Executive to

terminate employment for Good Reason pursuant to paragraph (c) of Section 4 of

this Agreement) shall not be deemed to be a waiver of such provision or right or

of any other provision of or right under this Agreement.

 

                  (f) The Executive and the Company acknowledge that this

Agreement supersedes and terminates any other severance and employment

agreements between the Executive and the Company, NCE and their respective

affiliates, except as specifically provided in Section 1 hereof. Without

limiting the generality of the foregoing, the Executive hereby expressly waived

any right that he might otherwise have to receive any payments or benefits under

the Severance Policies.

 

                  (g) The rights and benefits of the Executive under this

Agreement may not be anticipated, assigned, alienated or subject to attachment,

garnishment, levy, execution or other legal or equitable process except as

required by law. Any attempt by the Executive to anticipate, alienate, assign,

sell, transfer, pledge, encumber or charge the same shall be void. Payments

hereunder shall not be considered assets of the Executive in the event of

insolvency or bankruptcy.

 

 

 

 

                                      -13-

 

<PAGE>   14

 

 

                  (h) This Agreement may be executed in several counterparts,

each of which shall be deemed an original, and said counterparts shall

constitute but one and the same instrument.

 

 

 

 

 

 

                  IN WITNESS WHEREOF, the Executive has hereunto set the

Executive's hand and, pursuant to the authorization of their respective Boards

of Directors, the Company and NCE have caused this Agreement to be executed in

their names on their behalf, all as of the day and year first above written.

 

 

 

                              /s/ Wayne H. Brunetti

                              --------------------------------------------------

                              Wayne H. Brunetti

 

 

                              NORTHERN STATES POWER COMPANY

 

 

 

                              By: /s/ Grady P. Butts

                                  ----------------------------------------------

                                  Name:  Grady P. Butts

                                  Title: Vice President - Human Resources

 

 

                              NEW CENTURY ENERGIES, INC.

 

 

                              By:  /s/ Bill D. Helton

                                   ---------------------------------------------

                                   Name: Bill D. Helton

                                   Title: Chairman and Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

                                      -15-