February 1, 2002
Xx. Xxxxxxx X. Xxxxxxxx
Xxxxx Affiliates, Inc.
000 Xxxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Re: EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS
Dear Xxxxx:
This letter is to confirm and implement the decision reached at the meeting of
the Compensation, Benefits and Stock Option Committee of the Board of Directors
that you attended on January 28, 2002.
Following a full discussion of the pros and cons to you and Noble Affiliates,
Inc. (the "Company") of either (1) amending your Employment Agreement with the
Company dated October 2, 2000 (the "Employment Agreement"), to provide for the
change of control benefits provided under the form of Change of Control
Agreement the Company recently entered into with certain key employees, or (2)
terminating the Employment Agreement and entering into a Change of Control
Agreement in such form, you expressed a preference for and it was mutually
agreed to implement the latter course of action. Accordingly, pursuant to the
provisions of Section 12 of the Employment Agreement and in consideration of the
execution by the Company of the Noble Affiliates, Inc. Change of Control
Agreement attached hereto as Exhibit A, the Employment Agreement is hereby
terminated in its entirety and replaced by the Noble Affiliates, Inc. Change of
Control Agreement already executed by the Company and attached hereto as
Exhibit A, such termination and replacement to be effective February 1, 2002
and upon your execution and delivery to Xx Xxxxx of both this letter and said
Change of Control Agreement.
Very truly yours,
/s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Lead Independent Director of the
Board of Directors of Noble Affiliates, Inc.
AGREED:
/s/ Xxxxxxx X. Xxxxxxxx
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Xxxxxxx X. Xxxxxxxx
NOBLE AFFILIATES, INC.
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement ("Agreement") is made and effective as of
the 1st day of February, 2002, by and between Noble Affiliates, Inc., a Delaware
corporation ("Employer"), and Xxxxxxx X. Xxxxxxxx ("Executive").
RECITALS
The Board of Directors of Employer (the "Board") has determined that it is
in the best interests of Employer to assure that Employer will have the
continued dedication of Executive, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined below). The Board believes it is
imperative to diminish the inevitable distraction of Executive by virtue of the
personal uncertainties and risks created by a pending or threatened Change of
Control, to encourage Executive's full attention and dedication to Employer
currently and in the event of any threatened or pending Change of Control, and
to provide Executive with compensation and benefit arrangements upon a
Termination Event (as defined below) that ensure that such compensation and
benefits are competitive with other corporations.
AGREEMENT
Now, therefore, in consideration of Executive's continued employment by
Employer, as well as the promises, covenants and obligations contained herein,
Employer and Executive agree as follows:
1. PAYMENT OF SEVERANCE AMOUNT. Upon the occurrence of a Termination
Event (as defined in paragraph 2), Employer shall:
(a) pay Executive all salary, unreimbursed expenses incurred by
Executive in the performance of his duties for Employer and other compensation
and benefits that are accrued but unpaid through the date of the termination
constituting such Termination Event (the "Termination Date"), payable as a lump
sum cash payment within 30 days following the Termination Date;
(b) pay Executive an amount equal to Executive's Annual Cash
Compensation (as defined in paragraph 2) multiplied by a factor of 2.99, payable
as a lump sum cash payment within 30 days following the Termination Date;
(c) pay Executive an amount equal to Executive's pro-rata (measured
as (i) the number of days expired, as of Termination Date, in the then-current
calendar year, divided by (ii) 365) target bonus for the then-current year;
(d) provide Executive with life, disability, medical and dental
insurance at the level provided at either the date of the occurrence of a Change
of Control or the Termination Date, as Executive shall in his sole discretion
elect by providing written notice to Employer, for thirty-six (36) months
following the Termination Date or such shorter period until Executive shall
obtain substantially equivalent insurance coverage from a subsequent employer,
if any, in the same manner as if Executive's employment had not been terminated
until the end of such period. Executive shall immediately notify Employer upon
obtaining any insurance from a subsequent employer and shall provide all
information required by Employer regarding such insurance to enable Employer to
make a determination of whether such insurance is substantially equivalent;
(e) notwithstanding Executive's termination of employment, preserve
Executive's rights to purchase the shares of Employer's capital stock that are
subject to then-outstanding options that have been granted to Executive by
Employer (or pursuant to a stock option plan of Employer), so that all
such options remain or become exercisable in accordance with their terms as if
Executive's employment had not terminated; and
(f) upon receiving a detailed invoice for same, reimburse, up to a
maximum cumulative amount of 15,000 Dollars, Executive for the reasonable fees
of no more than one out-placement (or similar) service provider engaged by
Executive to assist in finding employment opportunities for Executive during the
twelve-month period following a Termination Date.
2. DEFINITIONS.
(a) A "TERMINATION EVENT" shall be deemed to have occurred if at any
time within 24 months after a Change of Control, Employer or any successor
thereto shall terminate Executive's employment for any reason other than
for (A) Cause, as defined below, (B) incapacity due to physical or mental
illness or (C) death. For this purpose, Executive's employment shall be
deemed to have been terminated upon the actual termination of his
employment or upon the occurrence of a Constructive Termination (as defined
below).
(b) A "CHANGE OF CONTROL" shall be deemed to have occurred if:
(i) individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least
fifty-one percent (51%) of the Board, provided that any person becoming a
director subsequent to the date hereof whose election, or nomination for
election by Employer's stockholders was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be, for
purposes of this Agreement, considered as though such person were a member
of the Incumbent Board;
(ii) the stockholders of Employer shall approve a
reorganization, merger or consolidation, in each case, with respect to
which persons who were the stockholders of Employer immediately prior to
such reorganization, merger or consolidation do not, immediately
thereafter, own outstanding voting securities representing at least
fifty-one percent (51%) of the combined voting power entitled to vote
generally in the election of directors ("Voting Securities") of the
reorganized, merged or consolidated company;
(iii) the stockholders of Employer shall approve a liquidation or
dissolution of Employer or a sale of all or substantially all of the stock
or assets of Employer; or
(iv) any "person," as that term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other
than Employer, any of its subsidiaries, any employee benefit plan of
Employer or any of its subsidiaries, or any entity organized, appointed or
established by Employer for or pursuant to the terms of such a plan),
together with all "affiliates" and "associates" (as such terms are defined
in Rule 12b-2 under the Exchange Act) of such person (as well as any
"Person" or "group" as those terms are used in Sections 13(d) and 14(d) of
the Exchange Act), shall become the "beneficial owner" or "beneficial
owners" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, of securities of Employer representing in the
aggregate twenty-five percent (25%) or more of either (A) the then
outstanding shares of common stock, par value $3.33-1/3 per share, of
Employer ("Common Stock") or (B) the Voting Securities of Employer, in
either such case other than solely as a result of acquisitions of such
securities directly from Employer. Without limiting the foregoing, a person
who, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise has or shares the power to vote,
or to direct the voting of,
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or to dispose, or to direct the disposition of, Common Stock or other
Voting Securities of Employer shall be deemed the beneficial owner of such
Common Stock or Voting Securities.
Notwithstanding the foregoing, a "Change of Control" of Employer shall
not be deemed to have occurred for purposes of subparagraph (iv) of this
paragraph 2(b) solely as the result of an acquisition of securities by
Employer which, by reducing the number of shares of Common Stock or other
Voting Securities of Employer outstanding, increases (i) the proportionate
number of shares of Common Stock beneficially owned by any person to
twenty-five percent (25%) or more of the shares of Common Stock then
outstanding or (ii) the proportionate voting power represented by the
Voting Securities of Employer beneficially owned by any person to
twenty-five percent (25%) or more of the combined voting power of all then
outstanding Voting Securities; provided, however, that if any person
referred to in clause (i) or (ii) of this sentence shall thereafter become
the beneficial owner of any additional shares of Common Stock or other
Voting Securities of Employer (other than a result of a stock split, stock
dividend or similar transaction), then a Change of Control of Employer
shall be deemed to have occurred for purposes of subparagraph (iv) of this
paragraph 2(b).
(c) "ANNUAL CASH COMPENSATION" shall, as determined on the Termination
Date, be equal to the sum of (i) plus (ii), where "(i)" equals Executive's
annualized salary in effect on the date of the earliest Change of Control to
occur during the 18-month period prior to the Termination Date, and "(ii)"
equals the greater of (A) Executive's annual target bonus for the then-current
bonus period and (B) the average annual bonus paid or payable by Employer to
Executive for the three-year period (or for the period of Executive's
employment, if Executive has not been employed for all of such three-year
period) immediately preceding the date of the Change of Control.
(d) For purposes of this Agreement, "CAUSE" shall mean (i) the willful and
continued failure by Executive to perform his duties as President and Chief
Executive Officer of Employer or any of its subsidiaries or his continued
failure to perform duties reasonably requested or reasonably prescribed by the
Board (other than as a result of Executive's death or disability), (ii) the
engaging by Executive in conduct that is materially monetarily injurious to
Employer or any of its subsidiaries, (iii) gross negligence or willful
misconduct by Executive in the performance of his duties that results in, or
causes, material monetary harm to Employer or any of its subsidiaries, or (iv)
Executive's commission of a felony or other civil or criminal offense involving
moral turpitude. In the case of (i), (ii) and (iii) above, a finding of Cause
for termination shall be made only after reasonable notice to Executive and an
opportunity for Executive, together with counsel, to be heard before the Board.
A determination of Cause by the Board shall be effective only if agreed upon by
a majority of the directors.
(e) A "CONSTRUCTIVE TERMINATION" of Executive's employment with Employer
shall be deemed to have occurred if Employer:
(i) demotes Executive to a lesser position, in title or
responsibility, as compared to the highest position held by him with Employer at
the earlier of the occurrence of a Change of Control or the date on which a
tentative agreement is reached by Employer, or a public announcement is made,
regarding a proposed Change of Control that ultimately occurs;
(ii) decreases Executive's total annual compensation (i.e., the sum
of his annual salary, his target bonus under Employer's annual incentive bonus
plan or similar plan in effect at the applicable time and the value of other
employment benefits provided to Executive by Employer) below the level in effect
at the earlier of the occurrence of a Change of Control or the date on which a
tentative agreement is reached by Employer, or a public announcement is made,
regarding a proposed Change of
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Control that ultimately occurs; provided, however, that a decrease in total
annual compensation that results solely from an amendment or termination of any
employee or group or other executive benefit plan, which amendment or
termination is applicable to all executives of Employer, shall not constitute a
Constructive Termination; or
(iii) requires or requests Executive to relocate to a principal office
more than 50 miles from the principal office at which Executive is employed
immediately prior to a Change of Control; provided, however, that a such a
requirement or request for a relocation shall constitute a Constructive
Termination only if made in connection with, and within 12 months after
consummation of, the event or transaction that constitutes (or the approval of
which constitutes) the Change of Control, and such 12-month period shall apply,
for purposes of determining whether an event specified in this clause (iii)
constitutes a Termination Event, in lieu of the 24-month period specified in
paragraph 2(a). For purposes of this clause (iii), it shall be presumed (and
Employer shall have the burden of proof to overcome such presumption) that a
requirement or request for a relocation is "in connection with" such an event or
transaction if it is made within the 12-month period specified in this
clause (iii).
3. GROSS UP PAYMENT. In the event that (i) the Executive becomes
entitled to the payment and benefits provided under Section 1 of this Agreement
(the "Change of Control Payment") and any of the Change of Control Payment will
be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), or any successor provision, or
(ii) any payments or benefits received or to be received by the Executive
pursuant to the terms of any other plan, arrangement or agreement (the "Benefit
Payments") will be subject to the Excise Tax, the Employer shall pay to the
Executive an additional amount (the "Gross-Up Payment") such that the net amount
retained by the Executive, after deduction of any Excise Tax on the Change of
Control Payment and the Benefit Payments, and any federal, state and local
income tax and Excise Tax upon the payment provided for by this Section 3, shall
be equal to the Change of Control Payment and the Benefit Payments; provided,
however, that in determining the amount of the Gross-Up Payment, any Excise Tax
on the Change of Control Payment and the Benefit Payments shall be determined
using a rate no higher than twenty percent (20%).
For purposes of determining whether any of the Change of Control Payment
or the Benefit Payments will be subject to the Excise Tax and the amount of such
Excise Tax:
(i) any payments or benefits received or to be received by the
Executive in connection with a change in control of the Employer or the
Executive's termination of employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the
Employer, any person whose actions result in change in control or any
person affiliated with the Employer or such persons) shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2) of the Code,
and all "excess parachute payments" within the meaning of
Section 280G(b)(1) shall be treated as subject to the Excise Tax, except to
the extent that, in the opinion of tax counsel selected by the Board of
Directors of the Employer, such payments or benefits (in whole or in part)
do not constitute parachute payments, or such excess payments (in whole or
in part) represent reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the Code;
(ii) the amount of the Change of Control Payment and the Benefit
Payments that shall be treated as subject to the Excise Tax shall be equal
to the lesser of (A) the total amount of the Change of Control Payment and
the Benefits Payments or (B) the amount of excess parachute payments within
the meaning of Sections 280G(b)(1) and (4) (after applying clause (i),
above); and
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(iii) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by tax counsel, selected by the Board of
Directors of the Employer, in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rates of taxation in the state and locality of the Executive's residence on the
date of termination, net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local taxes. In the event
that the Excise Tax is subsequently determined to be less than the amount taken
into account hereunder at the time of termination of the Executive's employment,
the Executive shall repay to the Employer at that time that amount of such
reduction in Excise Tax as is finally determined to be the portion of the
Gross-Up Payment attributable to such reduction plus interest on the amount of
such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of the Executive's employment
(including by reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Employer shall make an
additional gross-up payment to the Executive in respect of such excess (plus any
interest payable with respect to such excess) at the time that the amount of
such excess is finally determined.
4. NOTICES. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid, (i) if
to Employer, then addressed to its principal business office, to the attention
of the corporate Secretary of Employer, and (ii) if to Executive, to his or her
residence address as reflected in Employer's records (or to such other address
as either party may furnish to the other in writing in accordance herewith,
except that notices of changes of address shall be effective only upon receipt).
5. APPLICABLE LAW. This contract is entered into under, and shall be
governed for all purposes by, the internal laws of the State of Texas, without
regard to principles of conflicts of law requiring the application of the law of
another State.
6. SEVERABILITY. If a court of competent jurisdiction determines that any
provision of this Agreement is invalid or unenforceable, then the invalidity or
unenforceability of that provision shall not affect the validity or
enforceability of any other provision of this Agreement, and all other
provisions shall remain in full force and effect.
7. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
8. WITHHOLDING OF TAXES. Employer may withhold from any benefits payable
under this Agreement all federal, state, city or other taxes as may be required
pursuant to any law or governmental regulation or ruling.
9. NO EMPLOYMENT AGREEMENT. Nothing in this Agreement shall give
Executive any rights (or impose any obligations) to continued employment by
Employer or any subsidiary thereof or successor thereto, nor shall it give
Employer any rights (or impose any obligations) with respect to continued
performance of duties by Executive for Employer or any subsidiary thereof or
successor thereto.
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10. PAYMENT AUTHORITY. Any officer of Employer (other than Executive) is
authorized to issue and execute a check, initiate a wire transfer or otherwise
effect payment on behalf of Employer to satisfy Employer's obligations to pay
all amounts due to Executive under this Agreement.
11. ASSIGNMENT.
(a) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder, except as provided in the
remainder of this paragraph 11. Without limiting the foregoing, Executive's
right to receive payments hereunder shall not be assignable or transferable,
whether by pledge, creation of a security interest or otherwise, other than a
transfer by his will or by the laws of descent or distribution, and in the event
of any attempted assignment or transfer contrary to this paragraph 11 Employer
shall have no liability to pay any amount so attempted to be assigned or
transferred. This Agreement shall inure to the benefit of and be enforceable by
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
(b) Employer may: (i) as long as it remains obligated with respect
to this Agreement, cause its obligations hereunder to be performed by a
subsidiary or subsidiaries for which Executive performs services, in whole or in
part; (ii) assign this Agreement and its rights hereunder in whole, but not in
part, to any party with or into which it may hereafter merge or consolidate or
to which it may transfer all or substantially all of its assets, if said party
shall by operation of law or expressly in writing assume to the reasonable
satisfaction of Executive all liabilities of Employer hereunder as fully as if
it had been originally named Employer herein; but Employer may not otherwise
assign this Agreement or its rights hereunder. Subject to the foregoing, this
Agreement shall inure to the benefit of and be enforceable by Employer's
successors and assigns.
(c) The provisions of this paragraph 11 shall not prohibit or
restrict the assignment or transfer by Executive of any otherwise assignable or
transferable right of Executive to purchase the shares of Employer's capital
stock that are subject to any outstanding option that has been granted to
Executive by Employer (or pursuant to a stock option plan of Employer).
12. RELEASE AND FULL SETTLEMENT. Any provision of this Agreement to the
contrary notwithstanding, as a condition to the receipt of any payment hereunder
upon the occurrence of a Termination Event, Executive shall first execute a
release, in such reasonable form as may be approved by the Board, releasing the
Board, Employer and Employer's affiliates, shareholders, officers, directors,
employees and agents from any and all claims and from any and all causes of
action of any kind or character, including but not limited to all claims or
causes of action arising out of Executive's employment with Employer or the
termination of such employment, and the performance of Employer's obligations
hereunder and the receipt by Executive of the payments provided hereunder shall
constitute full settlement of all such claims and causes of action.
13. MODIFICATIONS. This Agreement shall not be varied, altered, modified,
canceled, changed or in any way amended except by mutual agreement of the
parties in a written instrument executed by the parties hereto or their legal
representatives.
14. DISPUTE PROCEDURE AND ARBITRATION. Any dispute arising in connection
with this Agreement shall be resolved as follows:
(a) If Executive believes that he has been denied any payment or benefit
he is entitled to
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receive under this Agreement, within 60 days following such denial Executive
shall file a written claim for such denied payment or benefit with the Corporate
Secretary of Employer. Such written claim shall detail the arguments and attach
copies of the documents that support Executive's claim for the denied payment or
benefit. Within 30 days after the receipt of such written claim, the Corporate
Secretary shall cause such claim to be reviewed by the appropriate officer(s) or
director(s) of the Employer and notify Executive as to whether he is entitled to
such payment or benefit. Such a notification from the Corporate Secretary shall
be in writing and, if denying Executive's claim for such payment or benefit,
shall set forth the specific reason or reasons for the denial and make specific
reference to the pertinent provisions of this Agreement.
(b) Any dispute arising in connection with this Agreement that is not
resolved to the satisfaction of Executive pursuant to the procedure provided for
in paragraph 14(a) above, shall be finally resolved by arbitration in Houston,
Texas, governed by the Federal Arbitration Act and conducted pursuant to and in
accordance with the National Rules for the Resolution of Employment Disputes of
the American Arbitration Association. Either the Employer or the Executive may
request arbitration by sending written notice to the other party. In any such
arbitration, the only issues to be considered and determined by the
arbitrator(s) shall be issues pertaining to legal and equitable rights and
obligations of the parties under this Agreement and any applicable law. A
decision and award of the arbitrator(s) shall be final, and may be entered in
any court having jurisdiction thereof, and application may be made to such court
for judicial acceptance and/or an order enforcing such decision and/or award.
Judicial review of any decision or award shall be in accordance with the Federal
Arbitration Act, except that review of any award of punitive or exemplary
damages shall be conducted as if the award of such damages were made by a jury
sitting in a federal district court in Houston, Texas. In the event the
arbitrator(s) determine there is a prevailing party in the arbitration, the
prevailing party shall recover from the losing party all costs of arbitration,
including but not limited to the fees of the arbitrator(s) and reasonable
attorneys' fees incurred by the prevailing party. The provisions of this
paragraph 14(b) shall not be construed to limit or to preclude either party from
bringing an action in any court of competent jurisdiction for injunctive relief.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the day and year first above written.
NOBLE AFFILIATES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
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Name: Xxxxxxx X. Xxxxxx
Title: Lead Independent Director
Board of Directors
EXECUTIVE
/s/ Xxxxxxx X. Xxxxxxxx
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Xxxxxxx X. Xxxxxxxx
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