SEVERANCE AGREEMENT
AGREEMENT between SEAGULL ENERGY CORPORATION, a Texas corporation
(the "Company"), and Xxxxx X. Xxxx ("Executive"),
W I T N E S S E T H :
WHEREAS, the Company desires to retain certain key employee personnel
and, accordingly, the Board of Directors of the Company (the "Board") has
approved the Company entering into a severance agreement with Executive in order
to encourage his continued service to the Company; and
WHEREAS, Executive is prepared to commit such services in return for
specific arrangements with respect to severance compensation and other benefits;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the Company and Executive agree as follows:
1. Definitions.
(a) "Change in Duties" shall mean the occurrence, within two
years after the date upon which a Change of Control occurs, of any one or more
of the following:
(i) A significant reduction in the duties of
Executive from those applicable to him immediately prior to the date on
which a Change of Control occurs;
(ii) A reduction in Executive's annual salary or
target opportunity under any applicable bonus or incentive compensation
plan from that provided to him immediately prior to the date on which a
Change of Control occurs;
(iii) Receipt of employee benefits (including but not
limited to medical, dental, life insurance, accidental, death, and
dismemberment, and long-term disability plans) and perquisites by
Executive that are materially inconsistent with the employee benefits
and perquisites provided by the Company to executives with comparable
duties; or
(iv) A change in the location of Executive's
principal place of employment by the Company by more than 50 miles from
the location where he was principally employed immediately prior to the
date on which a Change of Control occurs.
(b) "Change of Control" means the occurrence of either of the
following events:
(i) The Company (A) shall not be the surviving entity
in any merger, consolidation or other reorganization (or survives only
as a subsidiary of an entity other than a previously wholly-owned
subsidiary of the Company) or (B) is to be dissolved and liquidated,
and as a result of or in connection such transaction, the persons who
were directors of the Company before such transaction shall cease to
constitute a majority of the Board; or
-1-
(ii) Any person or entity, including a "group" as
contemplated by Section 13(d)(3) of the Securities Exchange Act of
1934, as amended, acquires or gains ownership or control (including,
without limitation, power to vote) of 20% or more of the outstanding
shares of the Company's voting stock (based upon voting power), and as
a result of or in connection with such transaction, the persons who
were directors of the Company before such transaction shall cease to
constitute a majority of the Board.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Compensation" shall mean the greater of:
(i) Executive's annual salary plus his Targeted EIP
Award immediately prior to the date on which a Change of Control
occurs, or
(ii) Executive's annual salary plus his Targeted EIP
Award at the time of his Involuntary Termination.
(e) "EIP" shall mean the Seagull Energy Corporation Executive
Incentive Plan or any successor thereto.
(f) "Involuntary Termination" shall mean any termination of
Executive's employment with the Company which:
(i) does not result from a resignation by Executive
(other than a resignation pursuant to clause (ii) of this subparagraph
(f) or a resignation at the request of the Company); or
(ii) results from a resignation by Executive on or
before the date which is sixty days after the date upon which Executive
receives notice of a Change in Duties;
provided, however, the term "Involuntary Termination" shall not include a
Termination for Cause or any termination as a result of death, disability under
circumstances entitling him to benefits under the Company's long-term disability
plan, or Retirement.
(g) "Retirement" shall mean Executive's resignation on or
after the date he reaches age sixty-five.
(h) "Severance Amount" shall mean an amount equal to 2.99
times Executive's Compensation, reduced by the present value of any salary
continuation or severance payments payable to Executive under any other Company
plan, policy or agreement, other than a "plan" within the meaning of section
3(3) of the Employee Retirement Income Security Act of 1974, as amended. Such
present value shall be determined using the rate of interest referred to in
Paragraph 4 hereof as of the last day of Executive's employment with the
Company.
-2-
(i) "Targeted EIP Award" shall mean Executive's Incentive
Target as set forth under the EIP in effect for the year with respect to which
such award is being determined, if any, or for the last preceding year in which
an EIP was in effect, expressed as a dollar amount based on such Executive's
annual salary for such year.
(j) "Termination for Cause" shall mean termination of
Executive's employment by the Company (or its subsidiaries) by reason of
Executive's (i) gross negligence in the performance of his duties, (ii) willful
and continued failure to perform his duties, (iii) willful engagement in conduct
which is materially injurious to the Company or its subsidiaries (monetarily or
otherwise) or (iv) conviction of a felony or a misdemeanor involving moral
turpitude.
(k) "Welfare Benefit Coverages" shall mean the medical,
dental, life insurance, accidental death and dismemberment and long-term
disability coverages provided by the Company to its active employees.
2. Services. Executive agrees that he will render services to the
Company (as well as any subsidiary thereof or successor thereto) during the
period of his employment to the best of his ability and in a prudent and
businesslike manner and that he will devote substantially the same time, efforts
and dedication to his duties as heretofore devoted.
3. Severance Benefits. If Executive's employment by the Company or any
subsidiary thereof or successor thereto shall be subject to an Involuntary
Termination which occurs within two years after the date upon which a Change of
Control occurs, then Executive shall be entitled to receive, as additional
compensation for services rendered to the Company (including its subsidiaries),
the following severance benefits:
(a) A lump sum cash payment in an amount equal to Executive's
Severance Amount.
(b) A lump sum cash payment in an amount equal to the
remaining portion of any award to Executive under any prior years' EIP. Further,
if Executive's Involuntary Termination occurs on or after the date an award has
been earned under the EIP, but prior to the date such award is paid, Executive
shall receive an additional lump sum cash payment in an amount equal to his
Targeted EIP Award.
(c) Executive shall be entitled to continue the Welfare
Benefit Coverages for himself and, where applicable, his eligible dependents
following his Involuntary Termination for up to thirty-six months, as long as
Executive continues either to pay the premiums paid by active employees of the
Company for such coverages or to pay the actual (nonsubsidized) cost of such
coverages for which the Company does not subsidize for active employees. Such
benefit rights shall apply only to those Welfare Benefit Coverages which the
Company has in effect from time to time for active employees, and the applicable
payments shall adjust as premiums for active employees of the Company or actual
costs, whichever is applicable, change. Welfare Benefit Coverage(s) shall
immediately end upon Executive's obtainment of new employment and eligibility
for similar Welfare
-3-
Benefit Coverage(s) (with Executive being obligated hereunder to promptly report
such eligibility to the Company). Nothing herein shall be deemed to adversely
affect in any way the additional rights, after consideration of this extension
period, of Executive and his eligible dependents to health care continuation
coverage as required pursuant to Part 6 of Title I of the Employee Retirement
Income Security Act of 1974, as amended.
(d) Executive shall be entitled to receive out-placement
services in connection with obtaining new employment up to a maximum cost of
$6,000.
(e) The severance benefits payable under this Agreement shall
be paid to an Executive on or before the fifth day after the last day of
Executive's employment with the Company. Any severance benefits paid pursuant to
this Paragraph will be deemed to be a severance payment and not compensation for
purposes of determining benefits under the Company's qualified plans and shall
be subject to any required tax withholding.
4. Interest on Late Benefit Payments. If any payment provided for in
Paragraph 3(a) or 3(b) hereof is not made when due, the Company shall pay to
Executive interest on the amount payable from the date that such payment should
have been made under such paragraph until such payment is made, which interest
shall be calculated at the prime or base rate of interest announced by Texas
Commerce Bank N.A. (or any successor thereto) at its principal office in
Houston, Texas and shall change when and as any such change in such prime or
base rate shall be announced by such bank.
5. Certain Additional Payments by the Company. Notwithstanding anything
in this Agreement to the contrary, if the severance benefits provided for in
Paragraph 3, together with any other payments which Executive has the right to
receive from the Company, would constitute a "parachute payment " (as defined in
Section 280G(b)(2) of the Code), the severance benefits provided hereunder shall
be either (a) reduced (but not below zero) so that the present value of such
total amounts received by Executive from the Company will be one dollar ($1.00)
less than three times Executive's base amount (as defined in Section 280G of the
Code) and so that no portion of such amounts received by Executive shall be
subject to the excise tax imposed by Section 4999 of the Code or (b) paid in
full, whichever produces the better net after-tax position to Executive (taking
into account any applicable excise tax under Section 4999 of the Code and any
applicable income tax). The Company and Executive shall make an initial
determination as to whether a reduction is required and, if so required, the
amount of any such reduction. Executive shall notify the Company immediately in
writing of any claim by the Internal Revenue Service which, if successful, would
require the Company to make a reduction (or a further reduction in excess of
that, if any, initially determined by the Company and Executive) within five
days of the receipt of such claim. The Company shall notify Executive in writing
at least five days prior to the due date of any response required with respect
to such claim if it plans to contest the claim. If the Company decides to
contest such claim, Executive shall cooperate fully with the Company in such
action; provided, however, the Company shall bear and pay directly or indirectly
all costs and expenses (including additional interest and penalties) incurred in
connection with such action. If, as a result of the Company's action with
respect to a claim, the amount of the reduction is found to have been in excess
of the correct
-4-
reduction amount, the Company shall promptly pay to Executive the difference
between such amounts with respect to such claim.
6. General.
(a) Term. The effective date of this Agreement is March 17,
1997. Within sixty days from and after the expiration of two years after said
effective date and within sixty days after each successive two-year period of
time thereafter that this Agreement is in effect, the Company shall have the
right to review this Agreement, and in its sole discretion either continue and
extend this Agreement, terminate this Agreement, and/or offer Executive a
different agreement. The Board (excluding any member of the Board who is covered
by this Agreement or by a similar agreement with the Company) will vote on
whether to so extend, terminate, and/or offer Executive a different agreement
and will notify Executive of such action within said sixty-day time period
mentioned above. This Agreement shall remain in effect until so terminated
and/or modified by the Company. Failure of the Board to take any action within
said sixty days shall be considered as an extension of this Agreement for an
additional two-year period of time. Notwithstanding anything to the contrary
contained in this "sunset provision," it is agreed that if a Change of Control
occurs while this Agreement is in effect, then this Agreement shall not be
subject to termination or modification under this "sunset provision," and shall
remain in force for a period of two years after such Change of Control, and if
within said two years the contingency factors occur which would entitle
Executive to the benefits as provided herein, this Agreement shall remain in
effect in accordance with its terms. If, within such two years after a Change of
Control, the contingency factors that would entitle Executive to said benefits
do not occur, thereupon this two-year "sunset provision" shall again be
applicable with the sixty-day time period for Board action to thereafter
commence at the expiration of said two years after such Change of Control and on
each two-year anniversary date thereafter.
(b) Indemnification. If Executive shall obtain any money
judgment or otherwise prevail with respect to any litigation brought by
Executive or the Company to enforce or interpret any provision contained herein,
the Company, to the fullest extent permitted by applicable law, hereby
indemnifies Executive for his reasonable attorneys' fees and disbursements
incurred in such litigation and hereby agrees (i) to pay in full all such fees
and disbursements and (ii) to pay prejudgment interest on any money judgment
obtained by Executive from the earliest date that payment to him should have
been made under this Agreement until such judgment shall have been paid in full,
which interest shall be calculated at the prime or base rate of interest
announced by Texas Commerce Bank N.A. (or any successor thereto) at its
principal office in Houston, Texas, and shall change when and as any such change
in such prime or base rate shall be announced by such bank.
(c) Payment Obligations Absolute. The Company's obligation to
pay (or cause one of its subsidiaries to pay) Executive the amounts and to make
the arrangements provided herein shall be absolute and unconditional and shall
not be affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which the Company
(including its subsidiaries) may have against him or anyone else. All amounts
payable by the Company (including its subsidiaries hereunder) shall be paid
without notice or demand. Executive shall not be obligated to seek other
employment in mitigation of the amounts payable or arrangements made under any
provision of this Agreement, and, except as provided in Paragraph 3(c) hereof,
the
-5-
obtaining of any such other employment shall in no event effect any reduction of
the Company's obligations to make (or cause to be made) the payments and
arrangements required to be made under this Agreement.
(d) Successors. This Agreement shall be binding upon and inure
to the benefit of the Company and any successor of the Company, by merger or
otherwise. This Agreement shall also be binding upon and inure to the benefit of
Executive and his estate. If Executive shall die prior to full payment of
amounts due pursuant to this Agreement, such amounts shall be payable pursuant
to the terms of this Agreement to his estate.
(e) Severability. Any provision in this Agreement which is
prohibited or unenforceable in any jurisdiction by reason of applicable law
shall, as to such jurisdiction, be ineffective only to the extent of such
prohibition or unenforceability without invalidating or affecting the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
(f) Non-Alienation. Executive shall not have any right to
pledge, hypothecate, anticipate or assign this Agreement or the rights
hereunder, except by will or the laws of descent and distribution.
(g) Notices. Any notices or other communications provided for
in this Agreement shall be sufficient if in writing. In the case of Executive,
such notices or communications shall be effectively delivered if hand delivered
to Executive at his principal place of employment or if sent by registered or
certified mail to Executive at the last address he has filed with the Company.
In the case of the Company, such notices or communications shall be effectively
delivered if sent by registered or certified mail to the Company at its
principal executive offices.
(h) Controlling Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas. Further, Executive
agrees that any legal proceeding to enforce the provisions of this Agreement
shall be brought in Houston, Xxxxxx County, Texas, and hereby waives his right
to any pleas regarding subject matter or personal jurisdiction and venue.
(i) Release. As a condition to the receipt of any benefit
under Paragraph 3 hereof, Executive shall first execute a release, in the form
established by the Company, releasing the Company, its shareholders, partners,
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 the
Company or the termination of such employment.
(j) Full Settlement. If Executive is entitled to and receives
the benefits provided hereunder, performance of the obligations of the Company
hereunder will constitute full settlement of all claims that Executive might
otherwise assert against the Company on account of his termination of
employment.
(k) Unfunded Obligation. The obligation to pay amounts under
this Agreement is an unfunded obligation of the Company (including its
subsidiaries), and no such obligation shall
-6-
create a trust or be deemed to be secured by any pledge or encumbrance on any
property of the Company (including its subsidiaries).
(l) Not a Contract of Employment. This Agreement shall not be
deemed to constitute a contract of employment, nor shall any provision hereof
affect (i) the right of the Company (or its subsidiaries) to discharge Executive
at will or (ii) the terms and conditions of any other agreement between the
Company and Executive except as provided herein.
(m) Number and Gender. Wherever appropriate herein, words used
in the singular shall include the plural and the plural shall include the
singular. The masculine gender where appearing herein shall be deemed to include
the feminine gender.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the 29th day of April, 1997.
"EXECUTIVE"
/s/Xxxxx X. Xxxx
"COMPANY"
SEAGULL ENERGY CORPORATION
By: /s/Xxxx X. Xxxxxxxxx
Name: Xxxx X. Xxxxxxxxx
Title: Vice President, Human Resources
VEHOU02:68909.1
-7-
AMENDMENT TO
SEVERANCE AGREEMENT
WHEREAS, SEAGULL ENERGY CORPORATION (the "Company") and
Xxxxx X. Xxxx ("Executive") have entered into a severance agreement
effective as of March 17, 1997 (the "Agreement"); and
WHEREAS, the Company and Executive desire to amend the Agreement in certain
respects;
NOW, THEREFORE, the Agreement shall be amended as follows, effective as
of July 15, 1998:
1. Paragraph 5 of the Agreement shall be deleted and the following
shall be substituted therefor:
"5. Certain Additional Payments by the Company.
Notwithstanding anything to the contrary in this Agreement, in the
event that any payment or distribution by the Company to or for the
benefit of Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (a
"Payment"), 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 or penalties, are
hereinafter collectively referred to as the "Excise Tax"), the Company
shall pay to Executive an additional payment (a "Gross-up Payment") in
an amount such that after payment by Executive of all taxes (including
any interest or penalties imposed with respect to such taxes),
including any Excise Tax imposed on any Gross-up Payment, Executive
retains an amount of the Gross-up Payment equal to the Excise Tax
imposed upon the Payment. The Company and Executive shall make an
initial determination as to whether a Gross-up Payment is required and
the amount of any such Gross-up Payment. Executive shall notify the
Company in writing of any claim by the Internal Revenue Service which,
if successful, would require the Company to make a Gross-up Payment (or
a Gross-up Payment in excess of that, if any, initially determined by
the Company and Executive) within ten days of the receipt of such
claim. The Company shall notify Executive in writing at least ten days
prior to the due date of any response required with respect to such
claim if it plans to contest the claim. If the Company decides to
contest such claim, Executive shall cooperate fully with the Company in
such action; provided, however, the Company shall bear and pay directly
or indirectly all costs and expenses (including additional interest and
penalties) incurred in connection with such action and shall indemnify
and hold 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 the Company's action. If, as a result of the
Company's action with respect to a claim, Executive receives a refund
of any amount paid by the Company with respect to such claim, Executive
shall promptly pay such refund to the
-1-
Company. If the Company fails to timely notify Executive whether it
will contest such claim or the Company determines not to contest such
claim, then the Company shall immediately pay to Executive the portion
of such claim, if any, which it has not previously paid to Executive."
2. As amended hereby, the Agreement is specifically ratified and
reaffirmed.
EXECUTED this 19th day of August, 1998.
"EXECUTIVE"
/s/ Xxxxx X. Xxxx
"COMPANY"
SEAGULL ENERGY CORPORATION
By: /s/ Xxxx X. Xxxxxxxxx
Name: Xxxx X. Xxxxxxxxx
Title: Vice President,
Human Resources
VEHOU02:114735.1
-2-
SECOND AMENDMENT TO
SEVERANCE AGREEMENT
WHEREAS, SEAGULL ENERGY CORPORATION (the "Company") and Xxxxx X. Xxxx
("Executive") have entered into a severance agreement effective as of March 17,
1997 (the "Agreement"); and
WHEREAS, the Company and Executive desire to amend the Agreement in
certain respects;
NOW, THEREFORE, the Agreement shall be amended as follows, effective as
of September 16, 1998:
1. Paragraph 1(b) of the Agreement shall be deleted and the following
shall be substituted therefor:
"(b) 'Change of Control' means the occurrence of one of the
following events:
(i) The Company (A) shall not be the surviving entity
in any merger, consolidation or other reorganization (or
survives only as a subsidiary of an entity other than a
previously wholly-owned subsidiary of the Company) or (B) is
to be dissolved and liquidated, and as a result of or in
connection such transaction, the persons who were directors of
the Company before such transaction shall cease to constitute
a majority of the Board;
(ii) Any person or entity, including a 'group' as
contemplated by Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended, acquires or gains ownership or
control (including, without limitation, power to vote) of 20%
or more of the outstanding shares of the Company's voting
stock (based upon voting power), and as a result of or in
connection with such transaction, the persons who were
directors of the Company before such transaction shall cease
to constitute a majority of the Board; or
(iii) The Company sells all or substantially all of
the assets of the Company to any other person or entity (other
than a wholly-owned subsidiary of the Company) in a
transaction that requires shareholder approval pursuant to the
Texas Business Corporation Act."
-1-
2. Paragraph 1(g) of the Agreement shall be deleted and the following
shall be substituted therefor:
"(g) 'Retirement' shall mean Executive's voluntary resignation
on or after the date he reaches age sixty-five (other than a
resignation within sixty days after the date Executive receives notice
of a Change in Duties or a resignation at the request of the Company)."
3. Paragraph 1(j) of the Agreement shall be deleted and the following
shall be substituted therefor:
"(j) 'Termination for Cause' shall mean termination of
Executive's employment by the Company (or its subsidiaries) by reason
of Executive's gross negligence, gross neglect or willful misconduct in
the performance of his duties or Executive's final conviction of a
felony or of a misdemeanor involving moral turpitude, excluding
misdemeanor convictions relating to the operation of a motor vehicle."
4. Paragraph 3(d) of the Agreement shall be deleted and the following
shall be substituted therefor:
"(d) Executive shall be entitled to receive out-placement
services in connection with obtaining new employment up to a maximum
cost of $6,000, or an equivalent cash payment, if Executive either has
or is not seeking new employment."
5. Paragraph 4 of the Agreement shall be deleted and the following
shall be substituted therefor:
"4. Interest on Late Benefit Payments. If any payment provided
for in Paragraph 3(a) or 3(b) hereof is not made when due, the Company
shall pay to Executive interest on the amount payable from the date
that such payment should have been made under such paragraph until such
payment is made, which interest shall be calculated at a rate equal to
two percentage points over the prime or base rate of interest announced
by Chase Bank of Texas, N.A. (or any successor thereto) at its
principal office in Houston, Texas and shall change when and as any
such change in such prime or base rate shall be announced by such
bank."
6. Paragraph 6(b) of the Agreement shall be deleted and the following
shall be substituted therefor:
"(b) Indemnification. If Executive shall obtain any money
judgment or otherwise prevail with respect to any litigation brought by
Executive or the Company to enforce or interpret any provision
contained herein, the Company, to the fullest
-2-
extent permitted by applicable law, hereby indemnifies Executive for
his reasonable attorneys' fees and disbursements incurred in such
litigation and hereby agrees (i) to pay in full all such fees and
disbursements and (ii) to pay prejudgment interest on any money
judgment obtained by Executive from the earliest date that payment to
him should have been made under this Agreement until such judgment
shall have been paid in full, which interest shall be calculated at a
rate equal to two percentage points over the prime or base rate of
interest announced by Chase Bank of Texas, N.A. (or any successor
thereto) at its principal office in Houston, Texas, and shall change
when and as any such change in such prime or base rate shall be
announced by such bank."
7. As amended hereby, the Agreement is specifically ratified and
reaffirmed.
EXECUTED this 28th day of October, 1998.
"EXECUTIVE"
/s/ Xxxxx X. Xxxx
"COMPANY"
SEAGULL ENERGY CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
Name: Xxxxxxx X. Xxxxxxxx
Title: Executive Vice
President & Chief
Financial Officer
VEHOU02:121318.1
-3-
