EX-10.2 3 dex102.htm EMPLOYMENT AGREEMENT BETWEEN THE COMPANY AND BOB R. SIMPSON EMPLOYMENT AGREEMENT
EXHIBIT 10.2
This Employment Agreement (“Agreement”) is entered into this 16th day of May, 2006 (the “Effective Date”), between XTO Energy Inc., a Delaware corporation (“XTO Energy”) (XTO Energy and, to the extent applicable, one or more of its subsidiaries, being collectively referred to herein as “Employer”), and Xxx X. Xxxxxxx, who resides in Fort Worth, Texas (“Employee”).
WHEREAS, Employee and XTO Energy entered into that certain Amended and Restated Employment Agreement dated and effective May 17, 2000, as amended by the Amendment to the Amended and Restated Employment Agreement dated and effective August 20, 2002 (the “Original Agreement”); and
WHEREAS, Employee and XTO Energy desire to replace the Original Agreement with this Agreement; and
WHEREAS, Employee desires to be so employed.
6. Incentive Compensation and Other Benefits.
6.1 Employer shall pay to Employee cash incentive compensation as shall be determined by the Board (or any committee thereof) from time to time. Employee shall be entitled to participate in any such plan established at a level to provide Employee compensation commensurate with Employee’s position and responsibilities. Upon the establishment of any such plan, this Agreement shall be deemed to be automatically amended to include all applicable terms of each such plan.
6.2 Employee shall be qualified to participate in the XTO Energy 2004 Stock Incentive Plan, as amended, or any other similar subsequently adopted equity compensation plans.
6.3 Employer shall also provide the following employee benefits to Employee during the term of this Agreement:
(a) Life Insurance. Employer will provide Employee with life insurance having a death benefit equal to $3,000,000, which shall be in addition to the life insurance
2
benefit provided to each employee of Employer. Employee shall have the right to designate on each policy the primary and contingent beneficiaries thereunder.
(b) Medical Insurance. Employer shall maintain in full force and effect, and Employee shall be entitled to participate in, any medical or health benefit plan provided by XTO Energy or any of its subsidiaries, subject to the terms and conditions of each such plan.
(c) Disability. Employer shall maintain in full force and effect, and Employee shall be entitled to receive, such disability insurance protection as is provided to other full-time executives of XTO Energy or any of its subsidiaries, subject to the terms and conditions of any plan or program sponsored by Employer providing such disability insurance protection.
(d) Vacations. Employee shall be entitled to four weeks paid vacation in each calendar year and to compensation in respect of earned but unused vacation days, determined in accordance with Employer’s vacation plan, if such plan so provides. Employee shall also be entitled to all paid holidays given by Employer to the executives of XTO Energy or any of its subsidiaries.
(e) Automobile and Related Expenses. Employee shall be paid a minimum monthly automobile allowance of $3,500 and shall be reimbursed for all fees, tags, insurance premiums and fuel and maintenance expenses regarding such automobile.
(f) Other Benefits. Employee shall be entitled to all other benefits and to participate in and be covered by all other employee benefit plans, including deferred compensation programs, if any, as are provided to other full-time executive employees of XTO Energy or any of its subsidiaries from time to time.
6.4 Nothing paid to Employee under any plan or arrangement presently in effect or made available in the future shall be deemed to be in lieu of the Regular Salary payable to Employee pursuant to Section 5. Employer shall not make any changes in any plans or arrangements provided pursuant to this Section 6 that would adversely affect Employee’s rights or benefits thereunder unless such change occurs pursuant to a program applicable to all executives of XTO Energy or any of its subsidiaries and does not result in a proportionately greater reduction in the rights or benefits to Employee as compared with any other executive of XTO Energy or any of its subsidiaries.
3
Code of 1986, as amended (the “Code”); provided, however, that Employee shall be reimbursed for such expenses, whether or not such expenses are deductible by Employer under the Code.
10. Termination of Employment.
(a) upon the death of Employee;
(b) upon the disability of Employee, which for the purposes of this Agreement shall be the physical or mental inability of Employee to carry out the normal and usual duties of his employment on a full-time basis for the entire period of six (6) continuous months with the reasonable likelihood, as determined by a majority of the non-employee members of the Board, in their sole discretion, that Employee will be unable to carry out the normal and usual duties of his employment on a full-time basis for the following continuous period of six (6) months; however, Employee may not be terminated for disability if, within thirty (30) days after Notice of Termination (as defined in Section 10.5 below) is given, Employee shall return to the performance of his duties on a full-time basis and a majority of the non-employee members of the Board shall determine, in their sole discretion, that Employee is capable of carrying out such duties on a full-time basis (subject to the terms of Sections 6.3(c) and 11);
(c) for “Cause” (as defined in Section 10.2 below), upon written notice of termination for Cause given by Employer to Employee after compliance with Section 10.2 below;
(d) for “Good Reason” (as defined in Section 10.3 below), upon written notice of termination given by Employee to Employer;
(e) without “Cause” (as defined in Section 10.2 below), upon written notice of termination given by Employer to Employee;
(f) upon Employee’s “Retirement” (as defined in Section 10.4 below);
(g) upon Employee’s voluntary resignation of employment for any reason other than Good Reason or Retirement; or
(h) on the Expiration Date (subject to the terms of Section 2).
4
shall have been provided an opportunity to be heard by the non-employee members of the Board (with the assistance of Employee’s counsel if Employee so desires), and (z) a resolution is adopted in good faith by two-thirds (2/3) of such members of the Board confirming such violation (excluding the vote of Employee). No act, nor failure to act, on Employee’s part, shall be considered “willful” unless he has acted or failed to act with an absence of good faith and without a reasonable belief that his action or failure to act was in the best interest of Employer. Notwithstanding anything contained in this Agreement to the contrary, no failure to perform by Employee after Notice of Termination is given by or to Employee shall constitute Cause.
(a) a change in Employee’s status, title, position or responsibilities (including reporting responsibilities) which, in Employee’s reasonable judgment, represents a substantial reduction of the status, title, position or responsibilities as in effect immediately prior thereto; the assignment to Employee of any duties or responsibilities which, in Employee’s reasonable judgment, are inconsistent with such status, title, position or responsibilities; or any removal of Employee from, or failure to reappoint or reelect him to, any of such positions (and Employee is not reappointed or reelected within thirty (30) days), except in connection with the termination of his employment for Cause, as a result of his disability or death, or by Employee other than for Good Reason;
(b) a reduction in Employee’s Regular Salary below $1,200,000 per annum;
(c) Employer’s requiring Employee (without the consent of Employee) to be based at any place outside a twenty-five (25) mile radius of his place of employment immediately prior to such proposed relocation, except for reasonably required travel on Employer’s business which is not materially greater than such travel requirements prior thereto, or, in the event Employee consents to any relocation beyond such 25-mile radius, the failure by Employer to pay (or reimburse Employee) for all reasonable moving expenses incurred by him relating to a change of his principal residence in connection with such relocation and to indemnify Employee against any loss (defined as the difference between the actual sale price of such residence and the higher of (x) his aggregate investment in such residence or (y) the fair market value of such residence as determined by a real estate appraiser designated by Employee and reasonably satisfactory to Employer) realized on the sale of Employee’s principal residence in connection with any such change of residence;
(d) any material breach by Employer of any provision of this Agreement;
(e) any purported termination of Employee’s employment for Cause by Employer which does not otherwise comply with the terms of this Agreement; or
(f) if Employer gives written notice to Employee in accordance with Section 2 of its intent not renew this Agreement.
5
procedures set forth in Section 10.2 above that, prior to receipt of Employee’s Notice of Termination, it had grounds to terminate Employee’s employment for Cause. In the event Employer provides Employee with written notice that it had grounds to terminate Employee’s employment for Cause, the procedures set forth in Section 10.2 above shall apply and, if Employer cannot terminate Employee for Cause, Employee shall be deemed to have terminated due to Retirement.
11. Compensation Upon Certain Employment Terminations or Change in Control.
11.1 Termination without Cause, for Good Reason, by Death or Disability or Change in Control. If (i) Employee’s employment is terminated (A) by Employer without Cause, (B) by Employee for Good Reason, (C) by Employees’ death or disability, or (ii) there shall occur a
6
Change in Control (as defined in Section 11.5), Employee shall be entitled to the following severance benefits (collectively, “Severance Benefits”):
(a) Employer shall pay to Employee an amount in cash equal to three (3) times:
(i) the sum of (x) Employee’s Regular Salary and (y) two (2) times an amount equal to the greater of Employee’s two most recent bonuses awarded under the Key Management Incentive Bonus Plan adopted by XTO Energy (or any successor or substitute bonus plan or program then in effect), plus
(ii) the amount, if any, of the Employee’s monthly car allowance, multiplied by twelve (12), plus
(iii) the amount, if any, equal to any special bonus, and any other amounts not described in item (i) or (ii) above that are required to be designated as a bonus under the rules and regulations of the Securities and Exchange Commission, awarded to the Employee during the three (3) years preceding the Date of Termination or Change in Control; special bonus will include any bonus paid as a result of an individual becoming an employee of Employer but will not include any bonus paid related to moving expenses.
The amount determined in this paragraph (a) shall be paid on or before ten (10) days after the Date of Termination or forty-five (45) days after the Change in Control, whichever event is applicable.
(b) For a period of eighteen (18) months after Employee’s termination of employment by Employer without Cause, by Employee for Good Reason, or after a Change in Control, Employer shall, at its sole expense, continue on behalf of Employee and his covered dependents and beneficiaries, all medical, dental, vision, and health benefits and insurance coverage that were being provided to Employee at the time of termination of employment. The benefits provided in this Section 11.1(b) shall be no less favorable to Employee, in terms of amounts and deductibles and costs to him, than the coverage provided Employee under the plans providing such benefits at the time of termination. Employer’s obligation hereunder to provide a benefit shall terminate if Employee obtains comparable coverage under a subsequent employer’s benefit plan. For purposes of the preceding sentence, benefits will not be comparable during any waiting period for eligibility for such benefits or during any period during which there is a preexisting condition limitation on such benefits. Employer also shall pay a lump sum equal to the amount of any additional income tax payable by Employee and attributable to the benefits provided under this Section 11.1(b) at the time such tax is imposed upon Employee. In the event that Employee’s participation in any such coverage is barred under the general terms and provisions of the plans and programs under which such coverage is provided, or any such coverage is discontinued or the benefits thereunder are materially reduced, Employer shall provide or arrange to provide Employee with benefits substantially similar to those which Employee was entitled to receive under such coverage immediately prior to the Termination Notice. At the end of the period of coverage set forth above, Employee shall have the option to have assigned to him at no cost to Employee and with no apportionment of prepaid premiums, any assignable insurance owned by Employer and relating specifically to Employee, and Employee shall be entitled to all health and similar benefits that are or would have been made available to Employee under law.
7
(c) Employer shall transfer to Employee all right, title or other ownership interest it may have in any automobile then being provided by Employer for use by Employee.
(d) Employer shall transfer to Employee any right, title or ownership in any club memberships provided by Employer for use by Employee.
(e) Employer shall transfer to Employee any right, title or ownership in any life insurance owned by Employer on Employee’s life.
(f) (i) Notwithstanding any provision to the contrary in any option agreement, restricted stock agreement, or other agreement relating to equity-type compensation that may be outstanding between Employee and Employer, all units, stock options, incentive stock options, performance shares, stock appreciation rights and royalty trust options (under the XTO Energy 2004 Stock Incentive Plan or any other plan or arrangement) (hereafter sometimes referred to as the “Rights”) held by Employee immediately prior to the Date of Termination (without Cause or for Good Reason) or the Change in Control, whichever is applicable, and any such Rights received by Employee after such Date of Termination or the Change in Control, whichever is applicable (whether or not received in exchange for or in substitution for existing Rights), shall immediately become 100% vested and exercisable, and Employee shall become 100% vested in all shares of restricted stock held by or for the benefit of Employee; provided, however, that to the extent Employer is unable to provide for such acceleration of vesting with respect to any such Rights or shares of restricted stock, Employer shall provide in lieu thereof a lump-sum cash payment equal to the difference between the total value of such unaccelerated Rights or shares of restricted stock (the “Stock Rights”) as of the date of Employee’s termination of employment or a Change in Control and the total value of the Stock Rights in which Employee is vested as of the date of his termination of employment. The value of such accelerated vesting in Employee’s Stock Rights shall be determined by the Board in good faith based on a valuation performed by an independent consultant selected by the Board; any such Stock Rights which are not in existence at the time of Employee’s termination of employment or a Change in Control shall be valued as of the date of the Date of Termination (as described herein) or the Change in Control, whichever is applicable.
(ii) Notwithstanding any provision to the contrary in any option agreement that may be outstanding between Employee and Employer, Employee’s right to exercise any previously unexercised options under any such option agreement shall not terminate until the latest date on which the option granted under such agreement would expire under the terms of such agreement but for Employee’s termination of employment. However, with respect to any option (or portion of an option) for which either (i) Employer is unable to provide for the extension of the expiration date as provided in the preceding sentence for any reason, or (ii) providing for the extension of the expiration date as provided in the preceding sentence would cause an option (or a portion of an option) to be subject to Section 409A of the Code, then the expiration date of such option (or portion of an option) shall not be extended beyond the time it would otherwise terminate according to its terms, and Employer shall make a lump sum cash payment to Employee within thirty (30) days after the date of Employee’s termination of employment of an amount equal to the value, as of the date of Employee’s termination of employment,
8
of the extension of the expiration date for all options (or portions of options) which cannot be so extended. Such value of such extension of exercisability shall be determined by the Board in good faith based on a valuation performed by an independent consultant selected by the Board. Notwithstanding the foregoing, if, in accordance with the foregoing, an incentive stock option held by Employee may be extended without causing application of Section 409A of the Code, the extension of the right to exercise such options under this Section 11.1(f)(ii) shall only be applicable if Employee has not exercised such option within three (3) months after Employee’s termination of employment, and, in that event, such options shall immediately convert to nonqualified stock options.
(a) Employer will retain Employee effective as of the Date of Termination for a period of eighteen (18) months (the “Consulting Period”) to render such consulting and advisory services (the “Consulting Services”) as Employer may reasonably request from time to time during the Consulting Period. Employee shall perform the Consulting Services at such times and places as an officer designated by Employer or the Board shall from time to time reasonably request.
(b) As compensation for the Consulting Services, Employee shall receive each month at least the same monthly salary that he was receiving immediately prior to Employee’s retirement (the “Consulting Fee”), which shall be paid in accordance with the customary payroll practices of Employer. Any Consulting Fee payment payable to Employee hereunder in respect of any calendar month during which the Consulting Period ends prior to the end of such calendar month shall be prorated based on the ratio of the number of days in such calendar month during which Employee is retained as a consultant hereunder to the number of days in such calendar month.
(c) Employee shall receive $10,000 per calendar month as part of the Consulting Fee during the Consulting Period for the purposes of (i) the use of office space and office equipment, and (ii) expenses incurred by Employee in rendering the Consulting Services during the Consulting Period, which shall include without limitation travel, lodging, meals, and car rentals or taxi fares when out of town, long distance telephone calls to or for Employer, facsimile transmissions charges, and mailing expenses incurred by Employee in rendering the Consulting Services.
(d) Employer and Employee shall enter into a consulting agreement. Employee shall be an independent contractor in performing the Consulting Services, with authority to select the means and method of performing the Consulting Services. Employee shall not be an employee or agent of Employer. Unless otherwise specifically authorized by the consulting agreement, Employee shall have no authority to transact any business or make any representations or promises in the name of Employer.
(e) The consulting arrangement created by this Section 11.2 (i) shall terminate automatically upon the death of Employee; and (ii) shall terminate automatically at the expiration of the Consulting Period. Upon a termination of the consulting arrangement, neither of the parties hereto shall have any further duty or obligation under this Section
9
11.2; provided, however, that termination of the consulting arrangement shall not affect the duties and obligations set forth in the other sections of this Agreement.
(f) As of the Date of Termination (for Retirement), Employee shall be eligible for retiree medical coverage comparable to the coverage provided to retirees under Employer’s retiree medical program as in effect on such Date of Termination, and as such program may be changed from time to time, on the same terms and conditions as similarly situated former employees.
(g) (i) Notwithstanding any provision to the contrary in any option agreement or restricted stock agreement relating to equity-type compensation that may be outstanding between Employee and Employer, all Rights (as defined in Section 11.1(f)) held by Employee immediately prior to the Date of Termination (for Retirement), and any such Rights received by Employee after such Date of Termination, (whether or not received in exchange for or in substitution for existing Rights), shall immediately become 100% vested and exercisable, and Employee shall become 100% vested in all shares of restricted stock held by or for the benefit of Employee; provided, however, that to the extent Employer is unable to provide for such acceleration of vesting with respect to any such Stock Rights (as defined in Section 11.1(f)), Employer shall provide in lieu thereof a lump-sum cash payment equal to the difference between the total value of such unaccelerated Stock Rights as of the date of Employee’s termination of employment and the total value of the Stock Rights in which Employee is vested as of the date of his termination of employment. The value of such accelerated vesting in Employee’s Stock Rights shall be determined by the Board in good faith based on a valuation performed by an independent consultant selected by the Board; any such Stock Rights which are not in existence at the time of Employee’s termination of employment shall be valued as of the date of the Date of Termination (as described herein).
(ii) Notwithstanding any provision to the contrary in any option agreement that may be outstanding between Employee and Employer, Employee’s right to exercise any previously unexercised options under any such option agreement shall not terminate until the latest date on which the option granted under such agreement would expire under the terms of such agreement but for Employee’s termination of employment. However, with respect to any option (or portion of an option) for which either (i) Employer is unable to provide for the extension of the expiration date as provided in the preceding sentence for any reason, or (ii) providing for the extension of the expiration date as provided in the preceding sentence would cause an option (or a portion of an option) to be subject to Section 409A of the Code, then the expiration date of such option (or portion of an option) shall not be extended beyond the time it would otherwise terminate according to its terms, and Employer shall make a lump sum cash payment to Employee within thirty (30) days after the date of Employee’s termination of employment of an amount equal to the value, as of the date of Employee’s termination of employment, of the extension of the expiration date for all options (or portions of options) which cannot be so extended. Such value of such extension of exercisability shall be determined by the Board in good faith based on a valuation performed by an independent consultant selected by the Board. Notwithstanding the foregoing, if, in accordance with the foregoing, an incentive stock option held by Employee may be extended without causing application of Section 409A of the Code, the extension of the right to exercise such options under this Section 11.2(g)(ii) shall only be applicable if Employee has not exercised such option within three (3) months after Employee’s termination of employment, and, in that event, such options shall immediately convert to nonqualified stock options.
10
(a) For purposes of this Agreement, a “Change in Control” shall mean the occurrence of one or more of the following events as objectively determined based upon all of the facts and circumstances without the exercise of discretion by the Board: (i) a Change in Ownership of Employer; (ii) a Change in Effective Control of Employer or (iii) a Change in the Ownership of a Substantial Portion of the Assets of Employer. For purposes hereof:
(i) “Acting as a Group” shall mean “acting as a group” as such phrase is defined under Section 409A of the Code and the regulations or other guidance issued thereunder.
(ii) “Change in Ownership” shall mean that any one person or more than one person Acting as a Group acquires ownership of stock of Employer that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of Employer; provided, however, that if any one person or more than one person Acting as a Group, is considered to own more than 50% of the total fair market value or total voting power of the stock of Employer, the acquisition of any additional stock by the same person or persons shall not be considered a Change in Ownership or a Change in Effective Control.
(iii) “Change in Effective Control” shall mean that either:
(1) any one person or more than one person Acting as a Group acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of the stock of Employer possessing 35% or more of the total voting power of the stock of Employer; or
(2) a majority of members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election, provided that for purposes of this paragraph (2) Employer refers solely to the “relevant corporation” (as such term is
11
defined in Section 409A of the Code and the regulations or other guidance issued thereunder) for which no other corporation is a majority shareholder.
Notwithstanding the foregoing, if any one person or more than one person Acting as a Group, is considered to effectively control Employer, the acquisition of additional control by the same person or persons shall not be considered to cause a Change in Effective Control.
(iv) “Change in the Ownership of a Substantial Portion of the Assets” shall mean any one person or more than one person Acting as a Group acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from Employer that have a total Gross Fair Market Value equal to more than 40% of the total Gross Fair Market Value of all of the assets of Employer immediately prior to such acquisition or acquisitions.
A Change in the Ownership of a Substantial Portion of the Assets shall not be deemed to have occurred if Employer assets are transferred to:
(1) a shareholder of Employer (immediately before the asset transfer) in exchange for or with respect to its stock;
(2) an entity, 50% or more of the total value of voting power of which is owned, directly or indirectly, by Employer;
(3) a person, or more than one person Acting as a Group, that owns, directly or indirectly, 50% or more of the total value or voting power of all the outstanding stock of Employer; or
(4) an entity, at least 50% of the total value or voting power of which is owned, directly or indirectly, by a person described in paragraph (iv)(3).
For purposes of this paragraph and except as otherwise provided, a person’s status is determined immediately after the transfer of assets.
For purposes of this Section 11.5(a), “Gross Fair Market Value” shall mean the value of Employer’s assets, or the value of Employer’s assets being disposed of, determined without regard to any liabilities associated with such assets.
(b) Notwithstanding anything herein to the contrary, under no circumstances will a change in the constitution of the board of directors of any subsidiary, a change in the beneficial ownership of any subsidiary, the merger or consolidation of a subsidiary with any other entity, the sale of all or substantially all of the assets of any subsidiary or the liquidation or dissolution of any subsidiary constitute a “Change in Control” under this Agreement.
12
12. XTO Energy’s Guarantee of Severance Benefits.
12.1 In the event Employee becomes entitled to receive Severance Benefits under Section 11.1 above and Employee’s employer fails to pay or provide such Severance Benefits, XTO Energy shall assume the obligation of such employer to pay or provide such Severance Benefits. In consideration of XTO Energy’s assumption of the obligation to pay or provide such Severance Benefits provided under this Agreement, XTO Energy shall be subrogated to any recovery (irrespective of whether there is recovery from the third party of the full amount of all claims against the third party) or right to recovery of either Employee or his legal representative against Employer or any person or entity. Employee or his legal representative shall cooperate in doing what is reasonably necessary to assist XTO Energy in exercising such rights, including but not limited to notifying XTO Energy of the institution of any claim against a third party and notifying the third party and the third party’s insurer, if any, of XTO Energy’s subrogation rights. Neither Employee nor his legal representative shall do anything after a loss to prejudice such rights.
12.2 In its sole discretion, XTO Energy reserves the right to prosecute an action in the name of Employee or his legal representative against any third parties potentially liable to Employee. XTO Energy shall have the absolute discretion to settle subrogation claims on any basis it deems appropriate under the circumstances. If Employee or his legal representative initiates a
13
lawsuit against any third parties potentially liable to Employee, XTO Energy shall not be responsible for any attorneys’ fees or court costs that may be incurred in such liability claim.
12.3 XTO Energy shall be entitled, to the extent of any payments made to or on behalf of Employee or a dependent of Employee, to be paid first from the proceeds of any settlement or judgment that may result from the exercise of any rights of recovery asserted by or on behalf of Employee or his legal representative against any person or entity legally responsible for the injury for which such payment was made. XTO Energy shall be reimbursed by Employee or his legal representative an amount of money equal to all sums paid by XTO Energy under this Agreement to or on behalf of Employee and all expenses, costs and attorneys’ fees incurred by XTO Energy in connection with the prosecution and collection of XTO Energy’s subrogation interest. The right is also hereby given XTO Energy to receive directly from Employer or any third party(ies), attorney(s) or insurance company(ies) an amount equal to the amount paid to or on behalf of Employee.
13.1 In the event it shall be determined that any payment or distribution of any type by Employer to or for the benefit of Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the “Total Payments”), would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are collectively referred to as the “Excise Tax”), then Employee shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that, after payment by Employee of all taxes (including additional excise taxes under said Section 4999 and any interest and penalties imposed with respect to any taxes) imposed upon the Gross-Up Payment, Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Total Payments. Employer shall pay the Gross-Up Payment to Employee within twenty (20) business days after the date on which Employee is entitled to a Severance Benefit after a Change in Control (the “Payment Date”).
13.2 All determinations required to be made under this Section 13 including whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be made by the independent accounting firm retained by Employer on the date of determination (the “Accounting Firm”), which shall provide detailed supporting calculations both to Employer and Employee within fifteen (15) business days of the Payment Date, if applicable, or such earlier time as is requested by Employer. If the Accounting Firm determines that no Excise Tax is payable by Employee, it shall furnish Employee with an opinion that he has substantial authority not to report any Excise Tax on his federal income tax return. Any determination by the Accounting Firm shall be binding upon Employer and Employee. 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 Employer should have been made (“Underpayment”), consistent with the calculations required to be made hereunder. In the event that Employer exhausts its remedies pursuant to Section 13.3 and Employee 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 Employer to or for the benefit of Employee.
13.3 Employee shall notify Employer in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by Employer of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten (10) business days after Employee is notified in writing of such claim and shall apprise Employer of the nature of such claim and the date on which such claim is requested to be paid. Employee shall not pay such claim prior
14
to the expiration of the thirty (30)-day period following the date on which he gives such notice to Employer (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If Employer notifies Employee in writing prior to the expiration of such period that it desires to contest such claim, Employee shall (w) give Employer any information reasonably requested by Employer relating to such claim, (x) take such action in connection with contesting such claim as Employer 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 Employer, (y) cooperate with Employer in good faith in order to effectively contest such claim, and (z) permit Employer to participate in any proceedings relating to such claim, provided, however, that Employer 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 Employee 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 Section 13.3, Employer 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 Employee to pay the tax claimed and xxx for a refund, or contest the claim in any permissible manner, and Employee 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 Employer shall determine; provided, however, that if Employer directs Employee to pay such claim and xxx for a refund, Employer shall advance the amount of such payment to Employee, on an interest-free basis and shall indemnify and hold Employee 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 further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of Employee with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, Employer’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Employee 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.
13.4 If, after the receipt by Employee of an amount advanced by Employer pursuant to Section 13.3, Employee becomes entitled to receive any refund with respect to such claim, Employee shall (subject to Employer’s complying with the requirements of Section 13.3) promptly pay to Employer the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Employee of an amount advanced by Employer pursuant to Section 13.3, a determination is made that Employee shall not be entitled to any refund with respect to such claim and Employer does not notify Employee in writing of its intent to contest such denial of refund prior to the expiration of thirty days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
14. Counsel Fees and Indemnification.
14.1 In the event Employer or Employee is required to employ legal counsel to enforce the performance of this Agreement or recover damages because of any breach of this Agreement, the prevailing party shall be entitled to recover from the other party reasonable attorneys’ fees and the reimbursement of all necessary expenses, court costs and arbitration fees.
14.2 Employer shall indemnify and hold Employee harmless to the maximum extent permitted by law against judgments, fines, amounts paid in settlement and reasonable expenses,
15
including attorneys’ fees and costs incurred by Employee, in connection with the defense of, or as a result of any action or proceeding or any appeal from any action or proceeding, in which Employee is made or is threatened to be made a party by reason that Employee is or was an officer or director of XTO Energy or any of its subsidiaries or affiliates, regardless of whether such action or proceeding is one brought by or in the right of XTO Energy or any of its subsidiaries or affiliates, to procure a judgment in their favor (or other than by or in the right of XTO Energy or any of its subsidiaries or affiliates).
14.3 The undertakings of Section 14.1 above are independent of, and shall not be limited or prejudiced by, the undertakings of Section 14.2 above.
XTO Energy/Employer: | XTO Energy Inc. | |||
000 Xxxxxxx Xxxxxx | ||||
Xxxx Xxxxx, Xxxxx 00000 | ||||
Attention: Board of Directors | ||||
Employee: | Xxx X. Xxxxxxx | |||
0000 Xxxx Xxxxx Xxxxx | ||||
Xxxx Xxxxx, Xxxxx 00000 |
Any party may change its address for purposes of this Section 15 by giving the other party written notice of the new address in the manner set forth above.
16
21. Governing Law. This Agreement shall be governed by and construed under the laws of the State of Texas.
(a) Arbitrators. The arbitration shall be heard and determined by one arbitrator, who shall be impartial and who shall be selected by mutual agreement of the parties; provided, however, that if the dispute involves more than $2,000,000, then the arbitration shall be heard and determined by three (3) arbitrators. If three (3) arbitrators are necessary as provided above, then (i) each side shall appoint an arbitrator of its choice within thirty (30) days of the submission of a notice of arbitration and (ii) the party-appointed arbitrators shall in turn appoint a presiding arbitrator of the tribunal within thirty (30) days following the appointment of the last party-appointed arbitrator. If (x) the parties cannot agree on the sole arbitrator, (y) one party refuses to appoint its party-appointed arbitrator within said thirty (30) day period or (z) the party-appointed arbitrators cannot reach agreement on a presiding arbitrator of the tribunal, then the appointing authority for the implementation of such procedure shall be the Senior United States District Judge for the Northern District of Texas, who shall appoint an independent arbitrator who does not have any financial interest in the dispute, controversy or claim. If the Senior United States District Judge for the Northern District of Texas refuses or fails to act as the appointing authority within ninety (90) days after being requested to do so, then the appointing authority shall be the Chief Executive Officer of the American Arbitration Association, who shall appoint an independent arbitrator who does not have any financial interest in the dispute, controversy or claim. All decisions and awards by the arbitration tribunal shall be made by majority vote.
17
(i) The arbitration proceedings shall be held in Fort Worth, Texas, at a site chosen by mutual agreement of the parties, or if the parties cannot reach agreement on a location within thirty (30) days of the appointment of the last arbitrator, then at a site chosen by the arbitrator(s);
(ii) The arbitrator(s) shall be and remain at all times wholly independent and impartial;
(iii) The arbitration proceedings shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association, as amended from time to time;
(iv) Any procedural issues not determined under the arbitral rules selected pursuant to item (iii) above shall be determined by the law of the place of arbitration, other than those laws which would refer the matter to another jurisdiction;
(v) The costs of the arbitration proceedings (including attorneys’ fees and costs) shall be borne in the manner determined by the arbitrator(s);
(vi) The decision of the arbitrator(s) shall be reduced to writing; final and binding without the right of appeal; the sole and exclusive remedy regarding any claims, counterclaims, issues or accounting presented to the arbitrator(s); made and promptly paid in United States dollars free of any deduction or offset; and any costs or fees incident to enforcing the award shall, to the maximum extent permitted by law, be charged against the party resisting such enforcement;
(vii) The award shall include interest from the date of any breach or violation of this Agreement, as determined by the arbitral award, and from the date of the award until paid in full, at 6% per annum; and
(viii) Judgment upon the award may be entered in any court having jurisdiction over the person or the assets of the party owing the judgment or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be.
18
any cash incentive compensation plan or stock option plan established by Employer subsequent to the date hereof in accordance with terms previously outlined by Employer shall automatically become part of this Agreement when established.
XTO ENERGY INC. | ||
By: | /S/ Xxxxxx X. Xxxxxxxxxx XX | |
Xxxxxx X. Xxxxxxxxxx XX | ||
Senior Executive Vice President and Chief of Staff | ||
EMPLOYEE: | ||
/S/ Xxx X. Xxxxxxx | ||
Xxx X. Xxxxxxx |
19