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EXHIBIT 10.19
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (hereinafter called this "Agreement") is
entered into effective as of December 2, 1996 (the "Effective Date"), by and
between MARINER ENERGY, INC. (hereinafter called "Company") and Xxxxx X. Xxxx
(hereinafter called "Employee").
WHEREAS, Company desires to employ Employee upon the terms and
conditions set forth herein; and
WHEREAS, Employee desires to be employed by Company upon the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
1. Employment.
Company hereby employs Employee to serve as Vice President -
Finance and Chief Financial Officer of Company. The permanent
place of Employee's employment shall be at a location within a
50-mile radius of the central business district of the City of
Houston, Texas; provided, however, Employee shall be required
to undertake such ordinary and usual travel as is necessary to
properly discharge his duties and responsibilities hereunder.
Employee hereby accepts such employment, and agrees to serve
Company faithfully, diligently and in a good and workmanlike
manner.
2. Term.
The term of employment shall be for a term of one (1) year
beginning on the Effective Date (the "initial term"), subject,
however, to the provisions of paragraph 3.
3. Extension and Termination.
3.1 If either Employee or Company elects to terminate
this Agreement at the end of the initial term, or at
the end of any extended term hereof as hereinafter
provided, notice of the election to terminate shall
be given to the other party no later than six (6)
months before the end of this Agreement. Except as
otherwise provided in paragraph 21.1, if no such
six-month notice is given by either party on or
before June 2, 1997, the initial term shall be deemed
to have been extended for an additional one and
one-half (1 1/2) years through June 1, 1999 (the
"first extended term"), and thereafter if no such
six-month notice is given by either party before the
end of the first extended term, or at the end of any
subsequent extended
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
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term, the first extended term and any such subsequent
extended term of this Agreement, as the case may be,
shall be deemed to have been extended for an
additional six (6) months.
3.2 In the event Company elects to terminate this
Agreement as provided in paragraph 3.1 above:
3.2.1 Company shall pay to Employee his salary and
other benefits provided elsewhere in this
Agreement for Employee's services rendered to
Company hereunder through the end of such
term or extended term.
3.2.2 Company shall pay to Employee, on or before
the last day of his employment hereunder, a
lump sum cash payment equal to six (6)
months' salary at Employee's monthly rate for
the month immediately preceding the month in
which Company elects to terminate this
Agreement.
3.2.3 Company shall pay to Employee, on or before
the last day of his employment hereunder, a
lump sum cash payment for all (a) vacation
time carried forward from a previous year in
accordance with paragraph 8, and (b) all
earned and unused vacation time for the then
current year. Earned vacation time shall,
for the purpose of this paragraph, be
calculated by dividing the number of days in
the calendar year which have transpired by
365, and then multiplying the result by the
number of vacation days to which Employee is
entitled for that year pursuant to paragraph
8.
3.2.4 If Employee has a leased automobile, the
lease payments on which are guaranteed by
Company, Employee shall have the option, to
be exercised on or before the last day of his
employment hereunder, of assuming the
remaining lease payments and retaining the
automobile, or assigning the lease agreement
to Company in return for Company's agreement
to assume the remaining lease payments.
3.2.5 Interests vested in Employee under paragraph
9 of this Agreement shall be assigned in due
course in compliance with paragraph 9.4.
Company and Employee agree that the promises,
covenants and undertakings of paragraph 9
shall survive the termination of employment
of Employee and shall be binding on all
assigns of Company.
3.3 In the event Employee elects to terminate this
Agreement as provided in paragraph 3.1 above:
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3.3.1 Employee agrees to serve to the end of the
term, or extended term hereof, unless waived
by Company.
3.3.2 The provisions of paragraphs 3.2.1, 3.2.3,
3.2.4, and 3.2.5 shall be applicable, but
Employee shall not be entitled to the payment
provided for in paragraph 3.2.2.
3.4 Company may at its option consent to a request by
Employee to terminate this Agreement at a time other
than that stated in paragraph 2, as extended, in
which case the date requested by Employee and agreed
to by Company will be the end of the term of this
Agreement and the provisions of paragraph 3.3 shall
be applicable.
3.5 Company may terminate this Agreement for "Cause" (as
hereinafter defined in this paragraph 3.5) upon
written notice of such termination to Employee by
Company. Any termination of this Agreement by
Company for Cause shall be effective thirty (30) days
after written notice of termination for Cause is
given by Company to Employee. If Company terminates
this Agreement for Cause, Company shall have no
liability or obligation to Employee thereafter under
this Agreement except (i) for the payment of his
salary and other benefits through the month of
discharge, prorated in the case of salary for the
month of discharge on a daily basis to the date of
termination, and (ii) that the provisions of
paragraph 3.2.5 shall be applicable. As used in this
Agreement, the term "Cause" means (a) Employee is
found guilty of, admits in writing facts amounting
to, or is held civilly liable for fraud, embezzlement
or dishonesty, (b) Employee is convicted of a felony
involving a crime of moral turpitude or any other
felony if the Board of Directors of the Company in
good faith determines that the continued employment
of the Employee would be materially detrimental to
the Company (in any case which felony through lapse
of time or otherwise is not subject to appeal), (c)
Employee knowingly discloses trade secrets or
confidential Company matters to unauthorized persons,
(d) Employee willfully breaches or habitually
neglects any duties he is required to perform under
the terms of this Agreement and any such breach or
neglect is not cured within thirty (30) days after
Company has provided Employee with written notice of
such breach or neglect, (e) Employee materially
breaches any of the other material terms of this
Agreement and any such breach is not cured within
thirty (30) days after the Company has provided
Employee with written notice of such breach, and (f)
the occurrence of an action or finding described in
paragraph 17, except as otherwise provided in
paragraph 17. The waiver by Company of a breach of
any provision of this Agreement by Employee shall not
operate or be construed as a waiver of any subsequent
breach by Employee.
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3.6 In the event Company terminates this Agreement or
discharges Employee other than as provided in
paragraphs 3.1, 3.4 or 3.5 above, Employee shall be
entitled to receive on the date of such termination
or discharge:
3.6.1 A lump sum cash payment equal to Employee's
salary, at Employee's monthly rate for the
month immediately preceding the month in
which such termination or discharge occurs,
for the unexpired portion of the term or
extended term hereof then in effect.
3.6.2 The payments and other benefits provided for
in paragraphs 3.2.2, 3.2.3, 3.2.4 and 3.2.5
hereof.
3.7 In the event Employee terminates this Agreement for
"Good Reason" (as defined in paragraph 3.9), and
prior to such termination Employee has not terminated
this Agreement under paragraph 3.1 hereof, Employee
shall be entitled to receive from Company on the date
of such termination:
3.7.1 A lump sum cash payment equal to Employee's
salary, at Employee's monthly rate in effect
at the effective time of such termination
(but prior to giving effect to any reduction
therein which precipitated such termination),
for the unexpired portion of the term or
extended term hereof then in effect.
3.7.2 A lump sum cash payment equal to six (6)
months' salary, at Employee's rate in effect
at the time of such termination (but prior to
giving effect to any reduction therein which
precipitated such termination).
3.7.3 The payments and other benefits provided for
in paragraphs 3.2.3, 3.2.4 and 3.2.5.
3.8 Any termination of this Agreement by Employee for
Good Reason shall be effective thirty (30) days after
written notice of termination for Good Reason is
given by Employee to Company
3.9 As used in this Agreement, the term "Good Reason"
means any one or more of the following events has
occurred:
3.9.1 The assignment to Employee of any duties
materially inconsistent with Employee's
position (including office, title and
reporting requirements), authority, duties or
responsibilities with Company or any other
action that results in a material diminution
in, or interference with, such position,
authority, duties or responsibilities, and
any such assignment or action is not cured
within thirty (30) days after Employee has
provided Company with written notice of such
assignment or action;
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3.9.2 The failure to continue to provide Employee
with office space, related facilities and
support personnel (including, but not limited
to, administrative and secretarial
assistance) (a) that are both commensurate
with Employee's responsibilities to and
position with Company and not materially
dissimilar to the office space, related
facilities and support personnel provided to
other employees of Company having comparable
responsibility to that of Employee or (b)
that are physically located at Company's
principal executive offices, and any such
failure is not cured within thirty (30) days
after Employee has provided Company with
written notice of such failure;
3.9.3 Any (a) reduction in Employee's monthly
salary as established in paragraph 5
(including subsequent increases), (b)
reduction in, discontinuance of, or failure
to allow or continue to allow Employee's
participation in, the incentive compensation
program provided under paragraph 9 hereof, or
(c) reduction in, or failure to allow or
continue Employee's participation in, any
employee benefit plan or program (except when
such benefit plan or program is replaced with
another benefit plan, program or arrangement
that provides Employee, in the aggregate,
with reasonably comparable benefits) in which
Employee is participating or is eligible to
participate prior to such reduction or
failure (other than as a result of the
expiration of such plan or program), and any
such reduction, discontinuance or failure is
not cured within thirty (30) days after
Employee has provided Company with written
notice of such reduction or failure;
3.9.4 The relocation of Employee's or Company's
principal office and principal place of
Employee's performance of his duties and
responsibilities to a location more than 50
miles outside of the central business
district of the City of Houston, Texas; or
3.9.5 A breach of any material provision of this
Agreement by Company (other than any breach
described in paragraphs 3.9.1, 3.9.2, 3.9.3,
and 3.9.4) which is not cured within thirty
(30) days after Employee has provided Company
with written notice of such breach.
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4. Confidential Information.
4.1 Employee agrees that he will, during the term of this
Agreement, and for a period of four (4) years from
the date of termination of his employment hereunder,
keep secret and confidential and not disclose to any
party not a party to this Agreement, land or lease
data, geological or geophysical data, well data or
any other information which he may receive as a
result of the performance of his duties hereunder,
except when disclosure is necessary for the
performance of his duties to Company hereunder. This
paragraph shall not apply to information that is in
the public domain through no action of Employee.
4.2 Upon termination of this employment hereunder,
Employee shall promptly deliver to Company all
written information and documents (whether
confidential or not), and all copies thereof,
relating to Company's business and activities and
which are in the possession of or under the control
of Employee.
5. Salary; Signing Bonus
5.1 As compensation for his services rendered to Company
hereunder, Company shall pay to Employee a salary at
the rate of $12,166.67 per month. Employee's salary
may be reviewed at such times as may be determined by
Company, and Company may at its discretion increase
this salary. Employee's salary shall be paid in two
equal monthly installments, payable on the fifteenth
and last days of each month (or on the first business
day of Company thereafter if any such payment date is
not a business day of Company), subject to any and
all necessary withholdings and deductions.
5.2 Company shall pay Employee a bonus in the amount of
$20,000.00 upon the commencement of the initial term
of this Agreement.
6. Automobile Allowance.
Company agrees to pay an automobile allowance of $250.00
dollars per month to Employee. In addition to such monthly
allowance, Company shall pay, in accordance with Company
policy, for all gasoline, insurance and maintenance required
for use of the automobile.
7. Business Expenses.
Employee is authorized to incur reasonable business expenses
in accordance with Company's policies as may be established
from time to time for promoting the business of Company,
including expenditures for entertainment and travel. Company
shall reimburse Employee from time
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to time for all such business expenses in accordance with
those policies adopted by Company which include, but are not
limited to, the requirement that Employee timely present to
Company:
7.1 The amount of the expenditure;
7.2 The time, place and description of the expense;
7.3 The business reason for the expenditure and business
benefit derived or expected to be derived therefrom;
and
7.4 The name and occupation of the person or persons
entertained to establish the business relationship
with Company.
With respect to any reimbursable business expense contemplated
above exceeding twenty-five dollars ($25.00), Employee will
furnish documentary evidence of such expense to Company.
8. Vacation.
Employee shall be entitled to an annual vacation leave of
twenty (20) days per calendar year at full pay. The timing
and use of such vacation days shall be requested by Employee
and approved by Company in accordance with its policy. Up to
five (5) days of unused vacation may be carried over from one
calendar year to the next calendar year. Employee shall not
be entitled to receive payment in lieu of unused vacation time
except as otherwise provided herein. With prior approval,
vacation may be deferred if business matters keep Employee
from taking his normal vacation.
9. Incentive Compensation.
9.1 Definitions.
An "AFFILIATE" of a specified person is any person that,
directly or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with
that specified person.
"BENEFICIAL OWNERSHIP" of a security shall be determined in
accordance with Rule 13d-3 promulgated under the Securities
Exchange Act of 1934.
A "CHANGE IN CONTROL" shall have occurred if, after the
Effective Date:
(i) Any person or group of affiliated
persons (other than Joint Energy Development
Investments Limited Partnership ("JEDI") or an
affiliate of Enron Corp.) shall become the beneficial
owner, directly or indirectly, of 66-2/3 percent or
more of the outstanding Voting Stock of Newco unless
Newco becomes a subsidiary of an entity which does
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not have a beneficial owner, directly or indirectly,
of 66 2/3 percent or more of the outstanding Voting
Stock of such entity (other than JEDI or an affiliate
of Enron Corp.); or
(ii) Newco shall approve (x) a merger or
consolidation of Newco with or into any other person,
if as a result any person (other than JEDI or an
affiliate of Enron Corp.) shall become the beneficial
owner, directly or indirectly, of 66-2/3 percent or
more of the outstanding Voting Stock of Newco unless
Newco becomes a subsidiary of an entity which does
not have a beneficial owner, directly or indirectly,
of 66-2/3 percent or more of the outstanding Voting
Stock of such entity (other than JEDI or an affiliate
of Enron Corp.), (y) any sale, lease, exchange or
other transfer of two-thirds or more of the
consolidated assets of Newco and its subsidiaries
taken as a whole in one transaction or a series of
related transactions whether by direct sale of
assets, sale of stock of a subsidiary or a merger
involving any subsidiary, or (z) the dissolution of
Newco; or
(iii) Recognizing that the events
described in this clause and the events described in
clause (ii) above may not necessarily be mutually
exclusive, any sale, exchange or other transfer of
two-thirds or more of the outstanding Voting Stock of
the Company or any sale, lease, exchange or other
transfer of two-thirds or more of the consolidated
assets of the Company and its subsidiaries (if any)
taken as a whole in one transaction or a series of
related transactions.
"COMPANY" means Mariner Energy, Inc., a Delaware corporation.
"COMPANY GROUP" means any or all of Company or any of its
affiliates, Hardy Oil & Gas plc or any of its affiliates,
Joint Energy Development Investments Limited Partnership or
any of its affiliates, Enron Capital & Trade Resources Corp.
or any of its affiliates, and any and all other persons paying
introduction/placement fees to Joint Energy Development
Investments Limited Partnership or any of its affiliates or
Enron Capital & Trade Resources Corp. or any of its affiliates
for access to one or more Working Interests of Company.
"COMPANY'S WORKING INTEREST" and "WORKING INTEREST OF COMPANY"
mean, with respect to any Prospect, the Working Interest in
such Prospect acquired by Company and, for purposes of this
paragraph 9, shall include each portion thereof that Company
may subsequently transfer to another member of Company Group
or to any other person.
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"CONTROL" means (a) holding, directly or indirectly, more than
50 percent of the outstanding voting securities of a
non-individual person, (b) having the right, directly or
indirectly, to more than 50 percent of the profits of a
non-individual person, (c) having the right, directly or
indirectly, to more than 50 percent of the assets of a
non-individual person if it is dissolved or (d) having the
contractual power to designate more than 50 percent of the
directors (or individuals exercising similar functions) of a
non-individual person.
"DEVELOPMENT ACREAGE" means the acreage within a Prospect
covering a known or inferred geologic structure upon which
Company and/or its joint working interest owners or a farmee
of Company's Working Interest in a Prospect have drilled a
well capable of commercial oil and/or gas production. Such
acreage shall be deemed to be Development Acreage from the
surface of the earth down through the deepest known productive
horizon. The committee described in paragraph 9.5.1(a),
below, shall designate acreage within a Prospect as
Development Acreage based upon the most current interpretation
available at the time of designation.
"EFFECTIVE DATE" means the effective date of this amended and
restated Employment Agreement.
"EXPLORATION AND DEVELOPMENT COSTS" means, with respect to any
Prospect or Prospects, and without duplication, all direct,
capital costs actually incurred by Company Group in connection
with exploration and development of such Prospect or
Prospects, including, without limitation, all costs incurred
in preparing for drilling, drilling, testing, completing,
equipping (including, without limitation, installation of
platforms, facilities and pipelines and dry hole costs) and
recompleting xxxxx, all geological and geophysical costs, and
all leasehold costs (including bonus, delay rentals and all
other costs of acquiring and maintaining in force the leases,
or portions thereof or undivided interests therein, included
in such Prospects). Exploration and Development Costs shall
not include lease operating expenses or general and
administrative expenses of the Company Group.
"EXPLORATORY ACREAGE" means the acreage comprising a Prospect
which has not been designated by the committee described in
paragraph 9.5.1(a), below, as either Development Acreage or a
Producing Property Acquisition. Exploratory Acreage shall not
be limited as to depth (except to the extent, if any, to which
Company's Working Interest therein is limited as to depth).
"FPF/TLP EXPLOITATION PROSPECT" means any Prospect containing
a hydrocarbon reservoir which (a) exhibits a sufficient
likelihood of such hydrocarbon reservoir being economic, based
on commercially producible shows of hydrocarbons in a well
drilled within such reservoir, together with other geological
and geophysical data and interpretations, such that
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Company in its reasonable judgment plans to develop such
reservoir, and (b) is reasonably expected by Company to be
exploited and/or developed by utilizing a floating production
facility and/or a tension leg platform.
"FPF/TLP EXPLORATION PROSPECT" means any Prospect (other than
an FPF/TLP Exploitation Prospect) with respect to which
Company reasonably expects to utilize a floating production
facility and/or a tension leg platform in connection with
operations to be conducted on such Prospect.
"INITIAL WELL" means, with respect to a Prospect, the first
well drilled on such Prospect in which Company participates as
a Working Interest owner or with respect to which Company
retains an overriding royalty or other interest in oil and gas
production from such well.
"MAJOR PROSPECT" means any FPF/TLP Exploration Prospect,
FPF/TLP Exploitation Prospect, Subsea Tieback Exploration
Prospect or Subsea Tieback Exploitation Prospect with respect
to which the total amount estimated by Company for Exploration
and Development Costs to be incurred by Company Group (i.e.,
net to Company Group's interest) through the end of the
primary development period for the field comprising such
Prospect exceeds $30 million.
"NET PROFIT SHARE LEASE" means an oil and gas lease which
provides for sharing between lessor and lessee of the net
profits or net proceeds, as defined in said lease, from the
sale of oil and/or gas produced therefrom.
"NEWCO" means Mariner Holdings, Inc., a Delaware corporation,
or its successors.
"OVERRIDING ROYALTY INTEREST" means an interest in gross
production of oil and gas under each oil and gas lease (or
portion thereof) included within a Prospect, which interest
(except as herein otherwise provided) shall be free of all
costs of acquisition, exploration, drilling, completing,
equipping, operating and developing any oil and gas produced
from such lease.
A "PARENT" of a specified person is another person that
controls such specified person directly or indirectly through
one or more intermediaries.
"PAYOUT" means, for each Initial Well and each subsequent well
drilled on a Prospect, the point in time at which the revenue
to Company or its assigns from its interest in oil and gas
production from such well (after deduction of Company's or its
assigns' prorata part of the burden of (i) all landowners'
royalties, overriding royalties, net profits interests,
production payments or other burdens upon, measured by or
payable out of such production and (ii) all applicable ad
valorem, production, severance, sales, gathering, windfall
profits excise and similar taxes) equals the sum incurred by
or for the account of Company or its assigns
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(x) in preparing for drilling, drilling, testing, completing,
equipping (including, without limitation, installation of
platforms, facilities and pipelines), operating, reworking and
recompleting the well, and marketing the production therefrom,
and (y) for such well's allocable share of geological and
geophysical costs, leasehold costs and other common costs.
"Leasehold costs" shall mean payments for bonus, delay
rentals, and all other costs of acquiring from the landowners
(or, in the case of an acquisition by Company (but not any
assignee of Company), from predecessors in title to such
leases) and maintaining in force the leases allocated to the
well. Leases "allocated" to a well shall mean the leases or
portions thereof or undivided interests therein to which
production from a well is attributed, whether on a lease or
unit basis. With respect to each such well, "common costs"
shall mean capital costs that are attributable to (a) such
Prospect as a whole or (b) such well and one or more other
xxxxx (but not all xxxxx) on such Prospect and shall include,
without limitation, costs of drilling, plugging and abandoning
non-productive xxxxx on such Prospect. Each such well's
allocable share of common costs shall be determined by Company
in any manner it deems appropriate from time to time.
The expression "2.5 TIMES PAYOUT" means, for each Initial Well
and each subsequent well drilled on a Prospect, the point in
time at which such revenue to Company or its assigns from its
interest in oil and gas production from such well, after such
deductions mentioned above, equals the product of 2.5 times
the sum incurred by or for the account of Company or its
assigns (x) in preparing for drilling, drilling, testing,
completing, equipping, operating, reworking and recompleting
the well, and marketing the production therefrom, and (y) for
such well's allocable share of geological and geophysical
costs, leasehold costs and other common costs as mentioned
above.
A "PERSON" is an individual, a corporation, a trust, a
partnership, a limited liability company, an association or
any other entity.
"PRODUCING PROPERTY ACQUISITION" means a lease or leases, or
portions thereof or undivided interests therein, acquired by
Company during the term or extended term of this Agreement
principally for the value of existing oil and gas production
thereon and further development of oil and gas reserves
considered proved under such lease or leases at the time of
acquisition. A Producing Property Acquisition shall include
acquisition of such leasehold interests even though Company
may have previously acquired interests in some or all of the
same leases as a Prospect acquisition (i.e., prior to the time
such leases were considered to contain proved oil and gas
reserves). Company may in its sole discretion designate a
Producing Property Acquisition in whole or in part as a
Prospect.
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"PROSPECT" means the lease or leases, or portions thereof or
undivided interests therein, acquired by Company within the
United States and its coastal waters while Employee is
employed by Company and during the term or extended term of
this Agreement covering lands which in the sole opinion of
Company may contain one or more hydrocarbon accumulations
capable of being commercially produced. For purposes of this
definition of Prospect, the acquisition of a lease or leases
shall mean the acquisition by Company of legal or beneficial
rights or interests in a lease or leases, including (without
limitation) contractual rights to acquire or earn a lease or
leases (whether by farmout agreement or otherwise, and whether
such contractual rights are subject to certain conditions such
as the drilling or completion of a commercial well, and
without regard to the results of the drilling or completion of
any such well under such contract). A Prospect shall not
include a prospect acquired by Company by merger or
consolidation of Company with or into another entity unless
such prospect is so designated by Company. A Prospect shall
not include a Producing Property Acquisition unless such
Prospect is so designated by Company, and shall not include
leases included in a Prospect under previous Employee
Incentive Compensation Plans. All Prospects shall be deemed
to be without depth limitation unless the Company designates
specified depths only at the time said Prospect is initially
acquired by Company. Notwithstanding the date or dates on
which leases in a Prospect are actually acquired by Company,
solely for purposes of determining the employees of Company
who are entitled to receive an Overriding Royalty Interest
therein, such leases, or portions thereof or undivided
interests therein, shall be deemed to have been acquired by
Company as of the date on which Company's management approved
such Prospect acquisition.
"SUBSEA TIEBACK EXPLOITATION PROSPECT" means any Prospect
containing a hydrocarbon reservoir which (a) exhibits a
sufficient likelihood of such hydrocarbon reservoir being
economic, based on commercially producible shows of
hydrocarbons in a well drilled within such reservoir, together
with other geological and geophysical data and
interpretations, such that Company in its reasonable judgment
plans to develop such reservoir, and (b) is reasonably
expected by Company to be exploited and/or developed by
utilizing a subsea tieback system.
"SUBSEA TIEBACK EXPLORATION PROSPECT" means any Prospect
(other than a Subsea Tieback Exploitation Prospect) with
respect to which Company reasonably expects to utilize a
subsea tieback system in connection with operations to be
conducted on such Prospect.
A "SUBSIDIARY" of a specified person is an entity controlled
by such person directly or indirectly through one or more
intermediaries.
"VOTING STOCK" means shares of capital stock of the specified
entity the holders of which are entitled to vote for election
of directors thereof.
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"WORKING INTEREST" means the leasehold working interest, or
undivided interest therein, under an oil and gas lease which
obligates the owner thereof to bear his percentage of the
costs and expenses relating to the maintenance and development
of, and operations relating to, such lease and the well or
xxxxx associated therewith.
9.2 Employee's Property Interest.
Subject to the other provisions of this paragraph 9, Employee
shall own, be immediately vested with, and be entitled to
receive the benefits of an Overriding Royalty Interest equal
to an undivided percentage of Company's Working Interest, more
specifically described below, in each well on a Prospect and
the lease or leases allocated thereto, as follows:
EMPLOYEE: XXXXX X. XXXX
OVERRIDING ROYALTY INTEREST
IN
FPF/TLP EXPLORATION PROSPECTS,
FPF/TLP EXPLOITATION PROSPECTS,
SUBSEA TIEBACK EXPLORATION PROSPECTS
AND
SUBSEA TIEBACK EXPLOITATION PROSPECTS
GROUP TIME PERIOD BEFORE PAYOUT AFTER PAYOUT
----- ----------- ------------- ------------
Group XIX 12/2/96 and Thereafter 0.085937 0.343748
OVERRIDING ROYALTY INTEREST
IN
ALL OTHER PROSPECTS
GROUP TIME PERIOD BEFORE PAYOUT AFTER PAYOUT
----- ----------- ------------- ------------
Group XIX 12/2/96 and Thereafter 0.09375 0.37500
At 7:00 a.m. on the first day of the month following the month
in which Payout of such well occurs, the Overriding Royalty
Interest shall increase from the applicable before-Payout
percentage to the applicable after-Payout percentage. Except
as herein otherwise expressly provided, references in this
paragraph 9 to Employee's "Overriding Royalty Interest" with
respect to any Prospect shall mean the applicable
before-Payout and after-Payout percentages of Company's
Working Interest in such Prospect as set forth above.
9.3 Governmental Filings.
Company will assist Employee in Filing an 83b Election with
the Internal Revenue Service on each Prospect, on a prospect
by prospect or lease by lease basis, as the case may be,
denoting the transfer to Employee of the Overriding Royalty
Interest and stating the value of such interest for the
purposes at the time the interest is acquired.
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
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9.4 Assignment of Overriding Royalty Interest.
Except as otherwise expressly provided in paragraphs 9.4.8 and
9.4.9, Employee shall not be entitled to obtain recordable
assignments of his interest under this paragraph 9 until his
completion of three years of employment by Company and, except
as otherwise expressly provided herein, Employee shall forfeit
ownership of such interest if Employee's employment is
terminated by Company pursuant to paragraph 3.5 or by Employee
without Good Reason as defined in paragraph 3.9, prior to the
completion of such three years of employment. Upon completion
of three years of employment of Employee by Company,
Employee's ownership of interests theretofore or thereafter
transferred to him pursuant to this Agreement will no longer
be subject to forfeiture, and assignments will be made in
accordance with this paragraph 9.4. Subject to the other
provisions of this paragraph 9, Employee shall be entitled to
the revenue arising from his Overriding Royalty Interest
whether or not he is entitled to a recordable assignment.
Subject to the foregoing provisions of this paragraph 9.4 and
to the provisions of paragraph 9.5, as soon as practicable
after the end of each calendar quarter during the term or
extended term of this Agreement, Employee shall be entitled to
receive recordable assignments of his Overriding Royalty
Interest in a lease or leases (or portions thereof) acquired
by Company in a Prospect during such calendar quarter. If
Employee's employment is terminated by Company pursuant to
paragraph 3.5 or by Employee without Good Reason as defined in
paragraph 3.9, during any such calendar quarter, Employee
shall not be entitled to receive recordable assignments that
would otherwise have been due under this paragraph in respect
of any lease or leases (or portions thereof) acquired by
Company in a Prospect during such calendar quarter or
thereafter (and Employee shall not own, be vested with or be
entitled to receive the benefits of any Overriding Royalty
Interest that would have been granted by such recordable
assignments) unless the termination is at the end of the term
or extended term of this Agreement. As soon as practicable
after the end of each such calendar quarter, Company shall
provide Employee with the following:
(a) A recordable assignment of his Overriding
Royalty Interest in the leases (or portions
thereof) acquired by Company in each Prospect
during such calendar quarter.
(b) A plat outlining the geographical limits of
each such Prospect. Company shall review
each Prospect plat each calendar quarter in
light of drilling activity on or near the
Prospect, and expand the plat boundary if new
leases are acquired which Company believes to
contain a prospective hydrocarbon
accumulation that is located on the same
geological feature as such Prospect.
Employee shall be entitled to his Overriding
Royalty Interest in any lease acquired by
Company within the Prospect plat boundary
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
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15
(and, to the extent provided in paragraph
9.7.2, in any renewal, extension or new lease
within the Prospect plat boundary) for as
long as such lease within the boundary
remains in effect.
9.4.1 Upon execution and delivery of such recordable
assignment to Employee, Company shall record the
assignment.
9.4.2 If, prior to the drilling of the Initial Well on a
Prospect or thereafter, Company believes in good
faith that there is a substantial likelihood that it
may be necessary to exercise its discretion under
paragraph 9.5 with respect to adjustment of
Employee's Overriding Royalty Interest in leases
included within such Prospect, Company may defer
delivery of a recordable assignment of Employee's
Overriding Royalty Interest pending a determination
under paragraph 9.5.
9.4.3 Upon request by Company, Employee agrees to execute
and deliver any and all transfer orders, division
orders and other documents as may be necessary or
appropriate to cause all revenue attributable to his
interest in a well to be paid to Company on his
behalf until delivery by Company to Employee of a
recordable assignment of his interest in such well
pursuant to this paragraph 9. In such event, Company
agrees promptly to process such funds and pay all
funds due Employee at the same time third parties are
paid revenue distributions from such well by Company.
After an assignment is delivered to Employee, Company
shall promptly give appropriate notice to the
disbursing entities in order to facilitate direct
payment to Employee of all revenue attributable to
his interest in such well.
9.4.4. Subject to the last sentence of this paragraph 9.4.4,
Company or its assigns shall quarterly perform Payout
calculations on each well which has not reached
Payout in every Prospect so that payments to Employee
may be made on a proper before payout/after payout
basis on each well in every Prospect. Company or its
assigns shall prepare a quarterly Payout statement
for each well within each Prospect and shall provide
Employee a copy of said quarterly Payout statements
within ninety (90) days following the end of the
quarter. If Company or its assigns fails to provide
said quarterly Payout statements for any such well(s)
to at least five (5) employees (whether or not such
employees include the Employee) who are entitled to
receive an Overriding Royalty Interest in such
well(s) pursuant to this Agreement and/or other
employment agreements with Company for a period of
four (4) consecutive quarters, any such employee
(including without limitation, the Employee) may give
Company written notice of said failure. If Company
or its assigns does not provide the overdue quarterly
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
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Payout statements to each employee entitled to same
within thirty (30) days following receipt of such
notice, all xxxxx within such Prospect which had
previously been considered before Payout pursuant to
paragraph 9.2 shall be deemed to be after Payout
pursuant to paragraph 9.2 as of the first day of the
month following the month in which the earliest
delinquent quarterly Payout statement should have
been provided. When Payout status is reached on a
well, Company or its assigns shall deliver notice of
such event to Employee, the operator of such well and
each purchaser of production from such well and
Company or its assigns shall direct such operator or
purchaser of production (as appropriate) to disburse
future revenues attributable to Employee's and
Company's respective interests in such well on an
after-Payout basis. Notwithstanding the foregoing,
if Employee's Overriding Royalty Interest in any such
well is adjusted pursuant to any provisions of this
paragraph 9 so as to be the same percentage before
and after Payout of such well, then the provisions of
this paragraph 9.4.4 shall no longer apply from and
after the date of such adjustment.
9.4.5 Should Employee be married or divorced at such time
as Employee earns the right to have an Overriding
Royalty Interest assigned to him hereunder, Company
shall have no obligation to make assignments to
Employee's spouse/or former spouse. Any division of
community property shall be the responsibility of
Employee.
9.4.6 All interests assigned by Company to Employee shall
be subject to the terms, conditions and provisions of
(a) any joint operating agreement at any time
theretofore or thereafter entered into by Company or
its assigns with other Working Interest owners
covering any of the leases affected by the Overriding
Royalty Interest herein provided for, and (b) any
farm-out or other agreements under which Company
acquires or may acquire its interest in the leases;
including, particularly, by way of illustration and
not by way of limitation, (i) any provision of an
applicable farm-out agreement requiring reduction of
Company's interest in the leases after "payout" of an
earning well or xxxxx thereunder, in which event
Employee's Overriding Royalty in such leases shall be
proportionately reduced, and (ii) any provision
requiring forfeiture of interest for
nonparticipation, recoupment of multiple recovery
costs and the like to the extent that Company would
forfeit its Working Interest for nonparticipation
either forever or until recoupment of drilling and/or
operating costs by the third parties electing to
participate, or such other like reason; and in the
event any such provisions come into effect,
Employee's Overriding Royalty in such leases shall be
suspended until such time, if ever, as such multiple
recovery of costs by the participating leasehold
owners has been recovered or such other cause for
suspension is removed and such Working Interest of
Company is reinstated, at which time Employee's
Overriding Royalty shall be so reinstated.
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
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All interests assigned by Company to Employee shall
be subject to the terms, conditions and provisions of
the leases, any assignments and/or subleases thereof
theretofore made or agreed to be made by Company, and
any amendments or modifications of the leases,
theretofore or thereafter made, and Employee agrees
that any such amendments or modifications may be made
without the consent or joinder of Employee.
9.4.7 Company or its assigns shall not have the right to
sell, assign, farmout, convey or otherwise encumber
Employee's Overriding Royalty Interest, except as
otherwise provided in this paragraph 9.
9.4.8(a) Except as otherwise provided in the
fifth sentence of paragraph 9.4, and
notwithstanding anything (other than
such fifth sentence of paragraph
9.4) contained herein to the
contrary, if, after the Effective
Date and during the term or extended
term hereof, there shall have been a
Change in Control, then Employee
shall be entitled to receive
recordable assignments of his
Overriding Royalty Interest,
adjusted in the manner described
hereinbelow, in any lease or leases
(or portions thereof or undivided
interests therein) theretofore
acquired by Company and not yet
assigned during the term or extended
term hereof and, upon subsequent
acquisition by Company, in any lease
or leases (or portions thereof or
undivided interests therein)
thereafter acquired by Company, in
all Prospects acquired by Company
prior to such Change in Control
(without regard to whether or not
Employee has then completed three
years of employment by Company).
Said Overriding Royalty Interest
shall be assigned in the following
manner:
Employee's after-Payout interest
shall be reduced to one-half of
Employee's after-Payout interest
stated in paragraph 9.2 (as such
after-Payout interest stated in
paragraph 9.2 may have previously
been reduced pursuant to other
provisions of this paragraph 9) and
Employee's before-Payout interest
shall be increased to twice
Employee's before-Payout interest
stated in paragraph 9.2 (as such
before-Payout interest stated in
paragraph 9.2 may have previously
been reduced pursuant to other
provisions of this paragraph 9) with
the result that Employee's interests
before and after Payout shall be
equal.
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
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9.4.8(b) Except as otherwise provided in the
fifth sentence of paragraph 9.4, and
notwithstanding anything (other than
such fifth sentence of paragraph
9.4) contained herein to the
contrary, if, after the Effective
Date and during the term or extended
term hereof, the Company's Working
Interest in any Prospect is sold,
transferred or conveyed to the
holder of any indebtedness of the
Company or of Newco or of any parent
or subsidiary of the Company or
Newco, or to any unaffiliated third
party, by or pursuant to a
foreclosure of any mortgage or other
security interest therein securing
such indebtedness or any part
thereof or by transfer or conveyance
in lieu of such foreclosure, then
Employee shall be entitled to
receive, prior to the consummation
of such sale, transfer or
conveyance, a recordable assignment
of his Overriding Royalty Interest,
adjusted in the manner described in
paragraph 9.4.8(a), in any lease or
leases (or portions thereof or
undivided interests therein)
theretofore acquired by Company and
not yet assigned during the term or
extended term hereof and, upon
subsequent acquisition by Company,
in any lease or leases (or portions
thereof or undivided interests
therein) thereafter acquired by
Company, in all Prospects acquired
by Company prior to such sale,
transfer or conveyance (without
regard to whether or not Employee
has then completed three years of
employment by Company).
9.4.9 Except as otherwise provided in the fifth sentence of
paragraph 9.4, and notwithstanding anything (other
than such fifth sentence of paragraph 9.4) contained
herein to the contrary, if, during the term or
extended term hereof, all or substantially all of the
Company's Working Interests in all or substantially
all Exploratory Acreage then owned by the Company are
sold, transferred or conveyed to an unaffiliated
third party, then Employee shall be entitled to
receive, prior to the consummation of such sale,
transfer or conveyance, recordable assignments of his
Overriding Royalty Interest, adjusted in the manner
described in paragraph 9.4.8(a), in all leases (or
portions thereof or undivided interests therein) that
cover and include such Exploratory Acreage not yet
assigned during the term or extended term hereof
(without regard to whether or not Employee has then
completed three years of employment by Company).
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
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9.5 Retained Company Discretion
9.5.1 Employee and Company recognize that in instances
where all or a portion of Company's Working Interest
in a lease or leases will be sold or farmed out to
unaffiliated third parties, Employee's Overriding
Royalty Interest might in some circumstances have a
negative effect on the marketability of Company's
Working Interest to third parties. In such cases,
Company will in good faith attempt to transfer
Company's Working Interest subject to Employee's
Overriding Royalty Interest provided for in this
paragraph 9; provided, however, if, in Company's good
faith judgment, Company's Working Interest cannot be
sold or farmed out subject to Employee's Overriding
Royalty Interest, Company may elect to adjust
Employee's Overriding Royalty Interest as hereinafter
provided.
9.5.1(a) The Board of Directors of Company
shall designate a committee of not
less than three individual persons
employed by Company, at least half
of whom has been granted an employee
Overriding Royalty Interest by
Company, to exercise discretion on
behalf of Company in reducing or
modifying, pursuant to this
paragraph 9.5.1 only, the Overriding
Royalty Interests provided for in
this paragraph 9; provided, however,
that the Board of Directors of the
Company shall have the right to
designate a non-voting member of
such committee, who may be a
director of the Company or
otherwise, and such member shall
have the right to participate in all
meetings of such committee (and
shall receive reasonable advance
notice of any such meetings) and
shall be entitled to the same
information as is available to the
other members of the committee.
Such committee shall make all
decisions under this paragraph 9.5.1
subject to obtaining the approval of
the Board of Directors of Company
where such approval is required
under the provisions of this
paragraph 9.5.1. Any decision made
by the committee shall require the
approval of a majority of the
members of the committee. Any
change to this paragraph 9.5.1(a)
shall require the approval of the
Board of Directors of the Company
and a majority of the Management
Directors (as that term is defined
in the Stockholders' Agreement dated
April 2, 1996, between Enron Capital
& Trade Resources Corp., Newco and
certain employees of and consultants
to the Company, as it may be amended
from time to time) who became
stockholders pursuant to Section B.1
of that agreement.
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
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9.5.1(b) With respect to any Prospect on
which no initial Well has been
drilled and no assignments of
Overriding Royalty Interests have
been made to Employee, the committee
may modify or reduce the Overriding
Royalty Interest of Employee in
leases included within such Prospect
in any manner necessary in the good
faith judgment of the committee to
make an interest in such Prospect
saleable to any person not in
Company Group; provided, however, in
connection with any sale by Company
of an interest in such Prospect to
any such person, Employee's
Overriding Royalty Interest shall be
reduced to zero unless the committee
recommends a lesser reduction and
such recommendation is approved by
the Board of Directors of Company.
Such modification or reduction shall
apply only to the interest sold to
such a person, and shall not affect
the interest retained by the
Company. Any reduction or exercise
of discretion by Company under this
paragraph shall be applied
proportionately to all participants
who are entitled to receive from
Company an Overriding Royalty
Interest in leases included within
such Prospect.
9.5.1(c) With respect to any Prospect on
which the Initial Well has been
drilled and which Prospect has not
been determined by Company to be
capable of producing oil and/or gas,
should Company desire to sell all or
any portion of its Working Interest
in such Prospect to unaffiliated
third parties, the committee may
adjust the Overriding Royalty
Interest of Employee in leases
included within such Prospect in the
following manner:
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
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Employee's after-Payout interest
shall be reduced to one-half of
Employee's after-Payout interest
stated in paragraph 9.2 (as such
after-Payout interest stated in
paragraph 9.2 may have previously
been reduced pursuant to other
provisions of this paragraph 9) and
Employee's before-Payout interest
shall be increased to twice
Employee's before-Payout interest
stated in paragraph 9.2 (as such
before-Payout interest stated in
paragraph 9.2 may have previously
been reduced pursuant to other
provisions of this paragraph 9),
with the result that Employee's
interests before and after Payout
shall be equal.
Such adjustment shall apply only to
the interest sold to unaffiliated
third parties, and shall not affect
the interest retained by Company.
Any exercise of discretion by
Company under this paragraph shall
be applied in like manner to all
participants who are entitled to
receive from Company an Overriding
Royalty Interest in leases included
within such Prospect.
Notwithstanding anything contained
herein to the contrary, if, after
the Effective Date and during the
term or extended term hereof, there
shall have been a Change in Control,
then neither Company nor the person
acquiring the control shall have any
right to make the adjustment
described above in this paragraph
9.5.1(c).
Notwithstanding anything contained
herein to the contrary, if, after
the Effective Date and during the
term or extended term hereof, the
Company's Working Interest in any
Prospect is sold, transferred or
conveyed to the holder of any
indebtedness of the Company or of
Newco or of any parent or subsidiary
of the Company or Newco, or to any
unaffiliated third party, by or
pursuant to a foreclosure of any
mortgage or other security interest
therein securing such indebtedness
or any part thereof or by transfer
or conveyance in lieu of such
foreclosure, then such holder or
other third party shall not have any
right to make the adjustment
described above in this paragraph
9.5.1.(c).
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
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9.5.1(d) With respect to any Prospect which
has not been determined by Company
to be capable of producing oil
and/or gas, and regardless of
whether or not the Initial Well has
been drilled thereon, should Company
desire to farmout all or any portion
of its Working Interest in such
Prospect to unaffiliated third
parties, the committee shall (unless
the committee recommends otherwise
and the Board of Directors approves
such recommendation) adjust the
Overriding Royalty Interest of
Employee in leases included within
such Prospect in the following
manner:
Employee's Overriding Royalty
Interest shall be calculated by
multiplying Employee's percentage
interests stated in paragraph 9.2
above (as such interests may have
previously been reduced pursuant to
other provisions of this paragraph
9) by Company's overriding royalty
interest set forth in the particular
farmout agreement for said Prospect,
for and during the period of time in
which Company receives such
overriding royalty interest.
To the extent, if any, that
Company's overriding royalty
interest set forth in such farmout
agreement converts to a Working
Interest in such Prospect (whether
by election of Company or
otherwise), then, from and after
such conversion, Employee's
Overriding Royalty Interest shall be
based upon such Working Interest of
Company pursuant to paragraph 9.2
above; provided, however, if
pursuant to such farmout agreement,
only a portion of Company's
overriding royalty interest converts
to a Working Interest and Company
retains, following such conversion,
some overriding royalty interest in
addition to such Working Interest,
Employee shall be entitled to
receive, as part of Employee's
Overriding Royalty Interest based
upon Company's Working Interest, an
interest equal to the percentage
stated in paragraph 9.2 above (as
such interest may have previously
been reduced pursuant to other
provisions of this paragraph 9)
multiplied by Company's retained
overriding royalty interest.
Such adjustment shall apply only to
the interest farmed out to
unaffiliated third parties, and
shall not affect the interest
retained by Company. Any exercise of
discretion by Company under this
paragraph shall
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
-22-
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be applied in like manner to all
participants who are entitled to
receive from Company an Overriding
Royalty Interest in leases included
within such Prospect.
With respect to each well drilled on
the Prospect by a farmee of
Company's Working Interest and
solely for the purpose of this
paragraph 9.5.1 (d), Payout shall be
defined as the point in time at
which the revenue to Company from
its interest in oil and gas
production from such well (after
deduction of Company's prorata part
of the burden of (i) all landowners'
royalties, overriding royalties, net
profits interests, production
payments or other burdens upon,
measured by or payable out of such
production and (ii) all applicable
ad valorem, production, severance,
sales, gathering, windfall profits
excise and similar taxes) equals the
sum incurred by or for the account
of Company (x) in preparing for
drilling, drilling, testing,
completing, equipping (including,
without limitation, installation of
platforms, facilities and
pipelines), operating, reworking and
recompleting the well, and marketing
the production therefrom, and (y)
for such well's allocable share of
geological and geophysical costs,
leasehold costs, all other costs of
acquiring and maintaining in force
the leases allocated to the well and
other common costs. Leases
"allocated" to a well and "common
costs" shall have the respective
meanings ascribed thereto in the
definition of "Payout" set forth in
paragraph 9.1.
Notwithstanding anything contained
herein to the contrary, if, after
the Effective Date and during the
term or extended term hereof, there
has been a Change in Control, then
neither Company nor the person
acquiring the control shall have any
right to make the adjustment
described above in this paragraph
9.5.1(d).
Notwithstanding anything contained
herein to the contrary, if, after
the Effective Date and during the
term or extended term hereof, the
Company's Working Interest in any
Prospect is sold, transferred or
conveyed to the holder of any
indebtedness of the Company or of
Newco or of any parent or subsidiary
of the Company or Newco, or to any
unaffiliated third party, by or
pursuant to a foreclosure of any
mortgage or other security interest
therein securing
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
-23-
24
such indebtedness or any part
thereof or by transfer or conveyance
in lieu of such foreclosure, then
such holder or other third party
shall not have any right to make the
adjustment described above in this
paragraph 9.5.1.(d).
9.5.1(e) With respect to any Prospect on
which the Initial Well has been
drilled and which Prospect has been
determined by Company to be capable
of producing oil and/or gas, should
Company desire to sell or farmout
all or any portion of its Working
Interest in such Prospect to
unaffiliated third parties, the
committee shall categorize
geographical areas of the leases
comprising the Prospect into
Development Acreage and Exploratory
Acreage.
Any sale or farmout of the Company's
Working Interest in any such
Development Acreage will be made
subject to Employee's Overriding
Royalty Interest provided for in
paragraph 9.2 hereinabove (as such
interest may have previously been
adjusted pursuant to other
provisions of this paragraph 9);
provided, however, with respect to
each well drilled on the Prospect by
a purchaser or farmee or their
assigns of Company's Working
Interest, and solely for the purpose
of this paragraph 9.5.1(e), Payout
shall be defined as the point in
time at which the revenue to
purchaser or farmee or their assigns
from its or their interest purchased
or farmed in from Company in oil
and/or gas production from such well
(after deduction of purchaser's or
farmee's prorata part of the burden
of (i) all landowners' royalties,
overriding royalties, net profits
interests, production payments or
other burdens upon, measured by or
payable out of such production and
(ii) all applicable ad valorem,
production, severance, sales,
gathering, windfall profits excise
and similar taxes) equals the sum
incurred by or for the account of
purchaser or farmee or their assigns
in preparing for drilling, drilling,
testing, completing, equipping,
operating, reworking and
recompleting the well, and marketing
the production therefrom.
With respect to the Company's
Working Interest in Exploratory
Acreage to be sold by Company, the
committee may adjust the Overriding
Royalty Interest of Employee in the
following manner:
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
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Employee's after-Payout interest
shall be reduced to one-half of
Employee's after-Payout interest
stated in paragraph 9.2 (as such
after-Payout interest stated in
paragraph 9.2 may have previously
been reduced pursuant to other
provisions of this paragraph 9) and
Employee's before-Payout interest
shall be increased to twice
Employee's before-Payout interest
stated in paragraph 9.2 (as such
before-Payout interest stated in
paragraph 9.2 may have previously
been reduced pursuant to other
provisions of this paragraph 9),
with the result that Employee's
interests before and after Payout
shall be equal.
With respect to the Company's
Working Interest in Exploratory
Acreage to be farmed out by Company,
the committee shall (unless the
committee recommends otherwise and
the Board of Directors approves such
recommendation) adjust the
Overriding Royalty Interest of
Employee in the following manner:
Employee's Overriding Royalty
Interest shall be calculated by
multiplying Employee's percentage
interests stated in paragraph 9.2
above (as such interests stated in
paragraph 9.2 may have previously
been reduced pursuant to other
provisions of this paragraph 9) by
Company's overriding royalty
interest set forth in the particular
farmout agreement for said Prospect,
for and during the period of time in
which Company receives such
overriding royalty interest.
To the extent, if any, that
Company's overriding royalty
interest set forth in such farmout
agreement converts to a Working
Interest in such Prospect (whether
by election of Company or
otherwise), then, from and after
such conversion, Employee's
Overriding Royalty Interest shall be
based upon such Working Interest of
Company pursuant to paragraph 9.2
above; provided, however, if
pursuant to such farmout agreement,
only a portion of Company's
overriding royalty interest converts
to a Working Interest and Company
retains, following such conversion,
some overriding royalty interest in
addition to such Working Interest,
Employee shall be
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
-25-
26
entitled to receive, as part of
Employee's Overriding Royalty
Interest and in addition to such
Overriding Royalty Interest based
upon Company's Working Interest, an
interest equal to the percentage
stated in paragraph 9.2 above (as
such interest may have previously
been reduced pursuant to other
provisions of this paragraph 9)
multiplied by Company's retained
overriding royalty interest.
Such adjustment shall apply only to
the interest sold or farmed out to
unaffiliated third parties, and
shall not affect the interest
retained by Company. Any exercise
of discretion by Company under this
paragraph shall be applied in like
manner to all participants who are
entitled to receive from Company an
Overriding Royalty Interest in
leases included within such
Prospect.
Notwithstanding anything contained
herein to the contrary, if, after
the Effective Date and during the
term or extended term hereof, there
shall have been a Change in Control,
then neither Company nor the person
acquiring the control shall have any
right to make the adjustment
described above in this paragraph
9.5.1(e).
Notwithstanding anything contained
herein to the contrary, if, after
the Effective Date and during the
term or extended term hereof, the
Company's Working Interest in any
Prospect is sold, transferred or
conveyed to the holder of any
indebtedness of the Company or of
Newco or of any parent or subsidiary
of the Company or Newco, or to any
unaffiliated third party, by or
pursuant to a foreclosure of any
mortgage or other security interest
therein securing such indebtedness
or any part thereof or by transfer
or conveyance in lieu of such
foreclosure, then such holder or
other third party shall not have any
right to make the adjustment
described above in this paragraph
9.5.1.(e).
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
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27
If any of the events set forth in
the two immediately preceding
sentences hereof should occur, such
that the adjustment described above
in this paragraph 9.5.1(e) with
respect to the Overriding Royalty
Interest of Employee in leases in
such Exploratory Acreage is
precluded from occurring as provided
above, then, with respect to each
well drilled on such Exploratory
Acreage by a purchaser or farmee or
their assigns of Company's Working
Interest, and solely for purposes of
this paragraph 9.5.1(e), Payout
shall be defined as set forth above
in this paragraph 9.5.1(e).
9.5.2 Within sixty (60) days after the end of each fiscal
year of Company, Company may in its sole discretion
elect to reduce the Overriding Royalty Interest set
forth in paragraph 9.2 with respect to Prospects
subject to this Agreement that were acquired by
Company during such fiscal year (which election, if
timely made as above provided, shall be effective as
of the beginning of such fiscal year) based on actual
Exploration and Development Costs incurred by Company
Group during such fiscal year in respect of all
Prospects subject to this Agreement, as follows (with
linear interpolation between indicated levels of
costs):
Total E & D
Costs Level Permitted Reduction
----------- -------------------
under $35 million no reduction
$70 million 25.00%
$105 million 33.33%
$140 million 38.33%
$175 million 41.67%
over $175 million **
**Permitted Reduction shall be determined in the sole discretion of
Company.
The total Exploration and Development Costs levels
and resultant ranges and escalation increments
provided for above are "Base Year" figures for fiscal
year 1996-1997, and shall be adjusted annually on a
compound basis beginning with the fiscal year
commencing April 1, 1997, according to the then
current Council of Petroleum Accountants Societies'
(XXXXX) adjustment rate (based upon the percentage
increase or decrease in the average weekly earnings
of Crude Petroleum and Gas Production Workers as of
April 1 as published by the United States Department
of Labor, Bureau of Labor Statistics).
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
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The "Permitted Reduction" shall mean the percentage
by which Employee's Overriding Royalty Interest (both
before and after Payout) may be adjusted downward.
Each such adjustment shall determine Employee's
Overriding Royalty Interest for the fiscal year in
question, and shall be uniform on Prospects acquired
during that period (subject to paragraphs 9.5.1 and
9.5.3). Without limiting the foregoing, a Permitted
Reduction shall apply to any Major Prospect subject
to this Agreement that was acquired by Company during
such fiscal year, whether or not an adjustment of
Employee's Overriding Royalty Interest in such Major
Prospect shall have been made pursuant to paragraph
9.5.3.
All leases acquired in those Prospects, whether
during the same fiscal year or thereafter, shall be
subject to the same Employee's Overriding Royalty
Interest established at the time the Prospect was
acquired, subject, however, to adjustment as provided
for in this paragraph 9. A Permitted Reduction in
Employee's Overriding Royalty Interest for a
particular fiscal year, however, shall not operate to
reduce Employee's Overriding Royalty Interest stated
in paragraph 9.2 in respect of any Prospects acquired
by Company in any subsequent fiscal year during the
term or extended term hereof.
9.5.2(a) Notwithstanding the foregoing
provisions of this paragraph 9.5.2,
with respect to any FPF/TLP
Exploitation Prospects acquired by
Company during a fiscal year of
Company for which Company's estimate
of Exploration and Development Costs
incurred or to be incurred by
Company Group in respect of all
FPF/TLP Exploitation Prospects
acquired in such fiscal year exceeds
$30 million through the end of the
respective primary development
periods for the fields comprising
such FPF/TLP Exploitation Prospects
(which periods, solely for purposes
of the adjustment provided for in
this paragraph, shall not exceed
five (5) years), an alternative
calculation will be made prior to
determining the applicable
"Permitted Reduction" of Employee's
Overriding Royalty Interest with
respect to such FPF/TLP Exploitation
Prospects. Such alternative
calculation shall be based upon the
assumptions that the total
Exploration and Development Costs to
be incurred by Company Group in
respect of all such FPF/TLP
Exploitation Prospects will be
incurred over a two (2) year period
and that such Exploration and
Development Costs will be in
addition to a "base level" of $70
million in Exploration and
Development Costs to be incurred by
Company
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
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Group exclusive of the identified
FPF/TLP Exploitation Prospects. Such
alternative Exploration and
Development Costs level (the
"alternative E & D Costs level")
shall be determined as follows:
The alternative E & D Costs level
shall be the sum of:
(i) One-half of Company's estimate
of Exploration and
Development Costs incurred or
to be incurred by Company
Group through the end of the
respective primary
development periods in
respect of all FPF/TLP
Exploitation Prospects
acquired in such fiscal year,
plus
(ii) $70 million.
The Overriding Royalty Interest set
forth in paragraph 9.2 with respect
to such FPF/TLP Exploitation
Prospects (both before and after
Payout) may, in Company's sole
discretion, be reduced by the
greater of (x) the "Permitted
Reduction" percentage set forth in
the table above in this paragraph
for the actual "Total E & D Costs
Level" for such fiscal year and (y)
the "Permitted Reduction" percentage
set forth in the table above that
would be applicable if the "Total E
& D Costs Level" for such fiscal
year were equal to such "alternative
E & D Costs level".
If the Overriding Royalty Interest
set forth in paragraph 9.2 with
respect to such FPF/TLP Exploitation
Prospects, when reduced pursuant to
the foregoing provisions of this
paragraph, exceeds two-thirds of the
Overriding Royalty Interest set
forth in paragraph 9.2, Company may,
in its sole discretion, further
reduce such Overriding Royalty
Interest to an interest equal to
two- thirds (before and after
Payout, respectively) of such
Overriding Royalty Interest set
forth in paragraph 9.2. Further, if
the Overriding Royalty Interest set
forth in paragraph 9.2 with respect
to any such FPF/TLP Exploitation
Prospect, when reduced to such
two-thirds level pursuant to the
foregoing provisions of this
paragraph, exceeds the Overriding
Royalty Interest in such Prospect
that would result from multiplying
the Overriding Royalty Interest
percentage set forth in paragraph
9.2 times a Working Interest
percentage of 50% of 8/8ths, Company
may, in its sole discretion, further
reduce such Overriding Royalty
Interest set forth in
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
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paragraph 9.2 with respect to such
FPF/TLP Exploitation Prospect to a
percentage (before and after Payout,
respectively) that, when multiplied
times Company's Working Interest in
such FPF/TLP Exploitation Prospect,
would equal the Overriding Royalty
Interest percentage (before and
after Payout, respectively) set
forth in paragraph 9.2 times a
Working Interest percentage of 50%
of 8/8ths.
9.5.2(b) Notwithstanding the foregoing
provisions of this paragraph 9.5.2,
with respect to any Subsea Tieback
Exploitation Prospects acquired by
Company during such fiscal year, if
the Overriding Royalty Interest set
forth in paragraph 9.2 with respect
to such Subsea Tieback Exploitation
Prospects, when reduced pursuant to
the foregoing provisions of this
paragraph, exceeds the Overriding
Royalty Interest in such Prospect
that would result from multiplying
the Overriding Royalty Interest
percentage set forth in paragraph
9.2 times a Working Interest
percentage of 50% of 8/8ths, Company
may, in its sole discretion, further
reduce such Overriding Royalty
Interest set forth in paragraph 9.2
with respect to such Subsea Tieback
Exploitation Prospect to a
percentage (before and after Payout,
respectively) that, when multiplied
times Company's Working Interest in
such Subsea Tieback Exploitation
Prospect, would equal the Overriding
Royalty Interest percentage (before
and after Payout, respectively) set
forth in paragraph 9.2 times a
Working Interest percentage of 50%
of 8/8ths.
9.5.2(c) Notwithstanding the foregoing
provisions of this paragraph 9.5.2,
with respect to any FPF/TLP
Exploration Prospects acquired by
Company during such fiscal year, if
the Overriding Royalty Interest set
forth in paragraph 9.2 with respect
to any such FPF/TLP Exploration
Prospects, when reduced pursuant to
the foregoing provisions of this
paragraph, exceeds two-thirds of the
Overriding Royalty Interest set
forth in paragraph 9.2, Company may,
in its sole discretion, further
reduce such Overriding Royalty
Interest to an interest equal to
two-thirds (before and after Payout,
respectively) of such Overriding
Royalty Interest set forth in
paragraph 9.2. Further, if the
Overriding Royalty Interest set
forth in paragraph 9.2 with respect
to any such FPF/TLP Exploration
Prospect, when reduced to such
two-thirds level pursuant to the
foregoing
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
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provisions of this paragraph,
exceeds the Overriding Royalty
Interest in such Prospect that would
result from multiplying the
Overriding Royalty Interest
percentage set forth in paragraph
9.2 times a Working Interest
percentage of 50% of 8/8ths, Company
may, in its sole discretion, further
reduce such Overriding Royalty
Interest set forth in paragraph 9.2
with respect to such FPF/TLP
Exploration Prospect to a percentage
(before and after Payout,
respectively) that, when multiplied
times Company's Working Interest in
such FPF/TLP Exploration Prospect,
would equal the Overriding Royalty
Interest percentage (before and
after Payout, respectively) set
forth in paragraph 9.2 times a
Working Interest percentage of 50%
of 8/8ths.
9.5.2(d) Notwithstanding the foregoing
provisions of this paragraph 9.5.2,
with respect to any Subsea Tieback
Exploration Prospects acquired by
Company during such fiscal year, if
the Overriding Royalty Interest set
forth in paragraph 9.2 with respect
to any such Subsea Tieback
Exploration Prospects, when reduced
pursuant to the foregoing provisions
of this paragraph, exceeds the
Overriding Royalty Interest in such
Prospect that would result from
multiplying the Overriding Royalty
Interest percentage set forth in
paragraph 9.2 times a Working
Interest percentage of 50% of
8/8ths, Company may, in its sole
discretion, further reduce such
Overriding Royalty Interest set
forth in paragraph 9.2 with respect
to such Subsea Tieback Exploration
Prospect to a percentage (before and
after Payout, respectively) that,
when multiplied times Company's
Working Interest in such Subsea
Tieback Exploration Prospect, would
equal the Overriding Royalty
Interest percentage (before and
after Payout, respectively) set
forth in paragraph 9.2 times a
Working Interest percentage of 50%
of 8/8ths.
9.5.3 With respect to any Major Prospect, Company may in
its sole discretion elect to adjust the Overriding
Royalty Interest set forth in paragraph 9.2,
effective as of the date of Company's acquisition of
such Major Prospect, as follows:
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
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Employee's before-Payout interest shall be reduced
by the following formula:
original before-Payout interest reduced before-
------------------------------- = Payout interest
X
---
Y
where "X" equals the total amount estimated by
Company for Exploration and Development Costs to be
incurred by Company Group in respect of such Major
Prospect through the end of the primary development
period for the field comprising such Major Prospect
(which period, solely for purposes of such adjustment
calculation, shall not exceed five (5) years), and
where "Y" equals $30 million.
Employee's after-Payout interest shall be increased
by adding thereto the full amount of the percentage
interest so deducted from Employee's before-Payout
interest until 2.5 times Payout is reached, at which
time Employee's after-Payout interest shall be
reduced by subtracting therefrom the same percentage
interest that was previously added thereto pursuant
to this sentence.
Such election may be made by Company whether or not
Employee's Overriding Royalty Interest in such Major
Prospect shall have been reduced pursuant to
paragraph 9.5.2. In the case of any such prior
reduction pursuant to paragraph 9.5.2, the term
"original before-Payout interest" as used above in
this paragraph shall refer to Employee's
before-Payout interest as previously reduced pursuant
to paragraph 9.5.2.
9.5.4 Notwithstanding anything contained herein to the
contrary, after an assignment is delivered to
Employee with respect to a Prospect pursuant to
paragraph 9.4, Company or its assigns may no longer
reduce or modify Employee's Overriding Royalty
Interest on any well in such Prospect without written
consent of Employee, except pursuant to paragraphs
9.5.1(c), 9.5.1(d), 9.5.1(e), 9.5.2 and 9.5.3 in the
case only of assignments other than those delivered
pursuant to paragraphs 9.4.8(a), 9.4.8(b) and 9.4.9.
9.5.5 In no event may any party other than Company reduce
or modify Employee's Overriding Royalty Interest
without written consent of Employee.
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
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9.5.6 Company shall give Employee written notice of any
adjustment made to Employee's Overriding Royalty
Interest pursuant to the provisions of paragraphs
9.5.1(b), 9.5.1(c), 9.5.1(d), 9.5.1(e), 9.5.2 and
9.5.3 within one hundred twenty (120) days following
such adjustment.
9.5.7 Upon request by Company, Employee shall execute and
deliver to Company such reassignments, transfer
orders, division orders, releases and other documents
deemed by Company to be necessary or appropriate to
evidence any modification, reduction or other
adjustment pursuant to this paragraph 9.5.
9.6 Company's Preferential Right to Purchase.
If at any time during the term or extended term of this
Agreement, or if within one (1) year from the expiration of
this Agreement, Employee receives and desires to accept an
offer for the purchase of a part or all of Employee's
Overriding Royalty Interest assigned pursuant to this
paragraph 9 (the portion or all of such Overriding Royalty
Interest covered by such offer to purchase being herein
sometimes called the "Offered Interest"), from a prospective
third party purchaser who is ready, willing and able to
purchase the same, then Employee shall have the right to sell
such Offered Interest, but only after complying with the
following terms and provisions:
9.6.1 The offer shall first be reduced to writing and
signed by Employee and the offeror. Employee shall
give Company written notice of his receipt of, and
his desire to accept, such written offer, together
with a copy of such written offer signed by the
prospective third party purchaser and containing all
of the terms and conditions of such offer. The date
such written notice is given to Company is herein
sometimes called the "Original Date."
9.6.2 Company shall thereafter have an option to purchase
the Offered Interest upon the same terms set forth in
said offer, which option may be exercised by written
notice thereof given to Employee within ten (10) days
after the Original Date.
9.6.3 If the Offered Interest is not purchased by Company
pursuant to the foregoing provisions of this
paragraph, then Employee shall have the right to sell
the Offered Interest to the prospective third party
purchaser named in such offer, provided that such
sale is consummated within thirty (30) days from the
expiration date of the option of Company created
hereby and provided that such sale is made in strict
conformity with the terms of such offer.
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
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34
9.6.4 If, however, such sale of the Offered Interest does
not occur within such thirty-day period for the price
and upon the terms set forth in such offer, then any
sale of part or all of such Offered Interest
thereafter shall again be subject to the option to
purchase granted to Company under this paragraph 9.6.
9.6.5 If Employee elects to take title to an Overriding
Royalty Interest in a legal entity other than himself
(which he may do only with Company's consent), such
entity shall take title subject to all of the terms
and conditions of this Agreement.
9.7 Additional Provisions Affecting Overriding Royalty
Interest.
In addition to the other provisions of this paragraph 9,
Employee's Overriding Royalty Interest shall be subject to the
following:
9.7.1 Notwithstanding anything to the contrary contained
herein, Employee shall not have the right to take in
kind or separately dispose of the production of oil
and gas attributable to his Overriding Royalty
Interest.
9.7.2 Employee's Overriding Royalty Interest shall also
apply to the production of oil and gas under the
terms and provisions of any renewal, extension or new
lease, to the extent such renewal, extension or new
lease covers all or any portion of any lands covered
by the expired lease which was subject to Employee's
Overriding Royalty Interest or is within the Prospect
plat, and provided, however, that any such renewal,
extension or new lease shall have been acquired by or
for the benefit of Company, either prior to or within
one (1) year after the expiration of the expired
lease.
9.7.3 Except as otherwise provided in this paragraph 9, in
no event shall Employee ever be liable or responsible
in any way for payment of any part of any
exploration, drilling or production costs or
liabilities incurred by Company or its assigns or
other lessees attributable to the lease or leases in
a Prospect or to the production therefrom, it being
the intent of the parties that Employee's Overriding
Royalty Interest shall constitute a non-participating
royalty interest for all purposes.
9.7.4 Company will conduct and carry on the development,
maintenance and operation of any lease subject to
Employee's Overriding Royalty Interest in a manner
which it deems in its sole judgment to be reasonable
and prudent and in accordance with good oil and gas
field practices, and it will drill such xxxxx as it
deems proper in its sole judgment from time to time
in order to protect such lease from drainage;
provided, however, (a) nothing herein contained
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
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35
shall obligate Company to conduct any drilling
operations whatsoever upon such lease, or to continue
to operate any well or to operate or maintain in
force or attempt to maintain in force such lease by
payment of delay rentals, compensatory royalties or
other payments or by the drilling of any xxxxx upon
said lease, or in any other manner, and the extent
and duration of all operations, as well as the
preservation of each of such leases by delay rental
payments or otherwise, shall be solely at the will of
Company, and (b) Company shall have the right at any
time to surrender, abandon or otherwise terminate any
such lease in whole or in part without liability to
Employee.
9.7.5 Company shall have the right to sell all production
attributable to Employee's Overriding Royalty
Interest on the same basis upon which the production
attributable to Company's interest in the same
production is sold, and shall account to Employee on
that basis. In no event shall Employee be entitled
to receive payments for production attributable to
his Overriding Royalty Interest calculated on a basis
higher than that upon which Company's interest in the
same production is calculated or computed on a higher
price than that payable to Company on account of
production attributable to its interest, and in no
event shall Employee be entitled to receive payments
on amounts suspended by purchasers of the production
pending determination of the authorized price by
governmental entities. However, if Company sells any
such production to an affiliate of Company, the price
therefor shall not be less than would have been
reasonably obtainable in a sale to a non-affiliated
purchaser.
9.7.6 There shall be deducted from the production, before
Employee's Overriding Royalty Interest is computed,
any production lost in the production from the
leases, or any lands pooled therewith, or used for
drilling, operating, development or production or in
plant operations (including gas injection, secondary
recovery, pressure maintenance, repressuring, cycling
operations, plant fuel or shrinkage) conducted for
the purpose of producing or processing production
from lands covered by the leases or from any lands
pooled with the leases.
9.7.7 Company shall have the right and option, but not the
obligation, to process gas produced and saved from
the leases. If Company elects to process or have
processed, such gas in a gas processing plant or
other facility, whether or not owned by Company, then
in such event Employee shall be paid his percentage
share provided for herein of the proceeds of sale of
all gasoline or other liquid hydrocarbons or other
products manufactured or extracted from such gas as a
result of such processing (collectively, the
"Products"), less the costs of extraction or
manufacture (which may consist of
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
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a portion of the Products). Company shall also pay
to Employee the same percentage share of the proceeds
of sale of all residue gas sold by Company, less
expenses incurred by Company in transporting any such
gas to point of delivery and for dehydration and/or
compression of gas at or prior to such delivery and
other expenses and fees typically borne by royalty
owners (excluding expenses or fees for capital
projects funded by Company to the extent such
expenses or fees have been included in the Payout
calculation for the well from which such gas is
produced).
9.7.8 Employee's Overriding Royalty Interest shall bear its
proportionate share of all other costs of marketing
and transporting production from the leases or from
any lands pooled therewith which are typically borne
by royalty owners (excluding expenses or fees for
capital projects funded by Company to the extent such
expenses or fees have been included in the Payout
calculation for the well from which such production
is produced).
9.7.9 Employee's Overriding Royalty Interest shall also
bear its share of all ad valorem, production,
severance, sales, gathering and other taxes typically
borne by royalty owners (whether state, federal or
otherwise) assessed or levied on or in connection
with the Overriding Royalty Interest or the
production from the leases.
9.7.10 Company or its assigns shall have the right and
power, without any approval by Employee, to pool or
unitize any lease which is subject to Employee's
Overriding Royalty Interest, and to alter, change,
amend or terminate any pooling or unitization
agreements heretofore or hereafter entered into, as
to all or any part of a Prospect, as to any one or
more of the formations or horizons thereunder, upon
such terms and provisions as Company shall in its
sole discretion determine. If and whenever through
the exercise of such right and power, or pursuant to
any law now existing or hereafter enacted, or any
rule, regulation or order of any governmental body
now or hereafter promulgated, any of the leases of
Company are pooled or unitized in any manner,
Employee's Overriding Royalty Interest shall also be
pooled and unitized, and in such event Employee's
Overriding Royalty shall only be paid on that portion
of the production from the unit or units so pooled,
which is attributable to said leases under and by
virtue of the pooling and unitization.
9.7.11 Company may withhold payment to Employee of any funds
attributable to Employee's Overriding Royalty
Interest which Company, in its sole discretion, deems
to be subject to a risk of refund or recoupment
pursuant to any rule, regulation or order of any
governmental authority or any adverse claims by third
parties.
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
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During such suspense period, Employee shall
not be entitled to interest on sums so withheld.
9.7.12 In the event Company's Working Interest in any lease
in which Employee is entitled to an Overriding
Royalty Interest covers less than all of the full and
entire undivided interest in and to the land
described therein, and in and to all the oil and gas
rights relating thereto, then in that event the
Overriding Royalty Interest as to that portion of the
leased premises in which Company's Working Interest
in such lease does not cover such full and entire
undivided interest shall be reduced proportionately
(i.e., in the proportion that the undivided interest
in and to said land and oil and gas rights covered by
such lease bears to such full and entire undivided
interest).
9.7.13 Notwithstanding anything contained in this paragraph
9 to the contrary, Employee's Overriding Royalty
Interest in any Net Profit Share Lease ("NPSL") shall
be reduced at the same time and in the same
percentage as Company's net revenue interest in said
NPSL is reduced pursuant to the provisions of said
NPSL.
9.7.14 Company and Employee further undertake and agree
promptly to execute and deliver, upon request of
either party, all assignments, reassignments,
transfer orders, division orders, releases and any
other documents as may be necessary to implement this
paragraph 9 or otherwise to more fully assure to each
party the rights and interests of such party provided
for in this paragraph 9.
10. Insurance.
10.1 Employee shall be eligible for participation in such
insurance programs as Company shall institute from
time to time covering medical and dental expenses and
such life and accidental death and dismemberment
insurance programs as Company shall institute from
time to time. Payment of premiums for such coverages
shall be in accordance with Company policy covering
all employees as may be established from time to time
by Company. Employee shall also be eligible for
participation in such retirement, pension, deferred
compensation and other benefit programs the Company
shall initiate from time to time.
11. Outside Activities.
During the term or extended term of this Agreement, Employee
shall devote all of his working time, energy and talents to
the due discharge and performance of his duties hereunder, at
the direction and subject to the control of Company, and shall
perform such services and duties as shall reasonably be
required from him from time to time by Company.
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
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38
Employee agrees that he will not knowingly become involved in
a conflict of interest with Company or its subsidiaries, or
upon discovery thereof, allow such a conflict to continue.
Moreover, Employee agrees to provide Company a statement of
all other directorships Employee holds, with a brief
description of the business activities of each organization.
This statement shall be provided on or before December 31 of
each year. If, in the opinion of Company, a conflict of
interest exists between Company (and its affiliates) and the
organization in which the Employee holds a directorship,
Company can require Employee to resign the outside
directorship.
12. Right to Invest.
Nothing in this Agreement is intended or shall be construed to
limit Employee's right (i) to engage in passive personal
investments, including, but not limited to, holding as an
investment not more than five percent (5%) of any class of the
issued and outstanding and publicly traded (on a recognized
national or regional securities exchange or in the
over-the-counter market) capital stock or other securities of
any corporation or other entity that conducts activities that
compete with the business of Company or any affiliate of
Company; or (ii) to invest, individually or with others, in
oil and gas prospects, subject, however, in the case of oil
and gas prospects to the following conditions:
12.1 Company must have first had the right and opportunity
to purchase all of the interest in any prospect made
available to Employee, even if this would preclude
Employee's participation.
12.2 Company must have made known its election either to
participate in less than the full interest made
available to Employee and have no desire to acquire
an additional interest, or declined to participate at
all in the prospect. If Company elects to
participate in less than the full interest made
available to Employee, Employee may invest in the
portion of such interest not acquired by Company.
12.3 Employee must purchase his interest in the oil and
gas prospect on terms which are no more favorable
than those made available to Company.
13. Disability During Employment.
If Employee shall become unable to perform his duties by
reason of disability, he shall be entitled to receive, in
addition to any insurance benefits he may receive, all of his
salary for the first one (1) month of his disability, and
one-half (1/2) of his salary for the next three (3) months of
disability. Periods of disability shall not be cumulative so
long as they are separated by at least ninety (90) days of
continuous service.
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
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The term "disability" shall mean disability which, in the
opinion of a doctor satisfactory to Company, renders Employee
unable to perform his duties hereunder as evidenced by such
doctor's certificate. The date disability commences shall be
the date Employee first absents himself from work during a
continuous period of disability.
14. Merger or Acquisition.
In the event Company should be acquired by or merged into
another company, by signature of Company's authorized
representatives, Company hereby agrees that this Employment
Agreement shall be binding upon Company, its successors and
assigns, and shall be disclosed to any party considering
merger with, or acquisition of, Company.
15. Arbitration.
15.1 If a dispute arises out of or related to this
Agreement and the dispute cannot be settled through
direct discussions, Company and Employee agree that
they shall first endeavor to settle the dispute in an
amicable fashion. If such efforts fail to resolve
the dispute, the dispute shall, except as otherwise
provided in paragraph 19, be resolved as follows:
15.1.1 Except as provided in paragraph 15.1.2 below,
any and all claims, demands, cause of action,
disputes, controversies, and other matters in
question arising out of or relating to this
Agreement, any provision hereof, the alleged
breach thereof, or in any way relating to the
subject matter of this Agreement, involving
Company, Employee, and/or their respective
representatives, even though some or all of
such claims allegedly are extracontractual in
nature, whether such claims sound in
contract, tort, or otherwise, at law or in
equity, under state or federal law, whether
provided by statute or the common law, for
damages or any other relief, shall be
resolved by binding arbitration pursuant to
the Federal Arbitration Act in accordance
with the Commercial Arbitration Rules then in
effect with the American Arbitration
Association (the "AAA"). The arbitration
proceeding shall be conducted in Houston,
Texas. The arbitration may be initiated by
either party by providing to the other a
written notice of arbitration specifying the
claims, and the parties shall thereafter
endeavor to agree on an arbitrator. If
within thirty (30) days of the notice of
initiation of the arbitration procedure, the
parties are unable to agree on an arbitrator,
the party requesting arbitration shall file
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a request with the AAA that the Houston,
Texas office of the AAA provide a list of
potential arbitrators to both parties. The
parties shall thereafter have sixty (60) days
to select an arbitrator from such list, with
such selection to be by mutual agreement. If
the parties fail to select an arbitrator
within such time by mutual agreement, then
either party may request that the Chief Judge
of the U.S. District Court for the Southern
District of Texas appoint an arbitrator, and
any such appointment shall be binding. The
arbitrator, utilizing the Commercial
Arbitration Rules of the American Arbitration
Association, shall within 120 days of his or
her selection, resolve all disputes between
the parties. There shall be no transcript of
the hearings before the arbitrator. The
arbitrator's decision shall be in writing,
but shall be as brief as possible. The
arbitrator shall not assign the reasons for
his or her decision. The arbitrator's
decision shall be final and non-appealable to
the maximum extent permitted by law.
Judgment upon any award rendered in any such
arbitration proceeding may be entered by any
federal or state court having jurisdiction.
This agreement to arbitrate shall be
enforceable in either federal or state court.
The enforcement of this agreement to
arbitrate and all procedural aspects of this
agreement to arbitrate, including but not
limited to, the construction and
interpretation of this agreement to
arbitrate, the issues subject to arbitration
(i.e., arbitrability), the scope of the
arbitrable issues, allegations of waiver,
delay or defenses to arbitrability, and the
rules governing the conduct of the
arbitration, shall be governed by and
construed pursuant to the Federal Arbitration
Act and shall be decided by the arbitrator.
In deciding the substance of any such claims,
the arbitrator shall apply the substantive
laws of the State of Texas (excluding Texas
choice-of-law principles that might call for
the application of some other State's law);
provided, however, it is expressly agreed
that the arbitrator shall have no authority
to award treble, exemplary, or punitive
damages under any circumstances regardless of
whether such damages may be available under
Texas law, the parties hereby waiving their
right, if any, to recover treble, exemplary,
or punitive damages in connection with any
such claims.
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15.1.2 Notwithstanding the agreement to arbitrate
contained in paragraph 15.1.1 above, in the
event that either party wishes to seek a
temporary restraining order, a preliminary or
temporary injunction, or other injunctive
relief in connection with any or all such
claims, demands, cause of action, disputes,
controversies, and other matters in question
arising out of or relating to this Agreement,
any provision hereof, the alleged breach
thereof, or in any way relating to the
subject matter of this Agreement, involving
Company, Employee, and/or their respective
representatives, including disputes arising
out of a breach or alleged breach of
paragraph 4 or 16, even though some or all of
such claims allegedly are extra-contractual
in nature, whether such claims sound in
contract, tort, or otherwise, at law or in
equity, under state or federal law, whether
provided by statute or the common law, for
damages or any other relief, each party shall
have the right to pursue such injunctive
relief in court, rather than by arbitration.
The parties agree that such action for a
temporary restraining order, a preliminary or
temporary injunction, or other injunctive
relief will be brought in the State or
federal courts residing in Houston, Xxxxxx
County, Texas.
15.2 The Company shall pay all costs and expenses of
Company and Employee (including, but not limited to,
attorneys' fees, the fees of the arbitrator and the
AAA and any other related costs) for any arbitration
proceeding or legal action; provided, however, that
if in any such arbitration proceeding or legal
action, the arbitrator or court, respectively,
determines that Employee has prosecuted or defended
any issue in such proceeding or action in bad faith,
the arbitrator or court, respectively, may allocate
the portion of such costs and expenses relating to
such issue between the parties in any other manner
deemed fair, equitable and reasonable by the
arbitrator or court, respectively.
16. Noncompetition Obligations.
16.1 As part of the consideration for the compensation and
benefits to be paid to Employee hereunder, and as an
additional incentive for Company to enter into this
Agreement, Company and Employee agree to the
non-competition obligations hereunder. Employee will
not, directly or indirectly for Employee or for
others:
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16.1.1 in any geographic area or market where
Company or any of its subsidiaries are
conducting any business as of the date of
termination of the employment relationship or
have during the previous twelve months
conducted such business, engage in any
business competitive with any such business;
or
16.1.2 in any geographic area or market where
Employee knew Company contemplated entering
any business as of the date of termination of
the employment relationship, but only if
Company had, as of such date, invested
significant resources toward entering into
such business in such geographic area or
market, engage in any business competitive
with any such business;
16.1.3 render advice or services to, or otherwise
assist, any other person, association, or
entity who is engaged, directly or
indirectly, in any business competitive with
Company's business within the parameters
described in paragraphs 16.1.1 and 16.1.2
above with respect to such competitive
business; or
16.1.4 induce any employee of Company or any of its
subsidiaries to terminate his or her
employment with Company or its subsidiaries,
or hire or assist in the hiring of any such
employee by any person, association, or
entity not affiliated with Company.
These non-competition obligations shall commence upon
the date of execution of this Agreement and extend
until the earlier of (a) the expiration of the term
of this Agreement (or any extended term) or (b) six
(6) months after termination of the employment
relationship; provided, however, that notwithstanding
anything contained in this paragraph 16 to the
contrary, such obligations shall only apply after the
termination of employment if the termination of
employment results from termination for Cause by
Company under paragraph 3.5 or voluntary termination
without Good Reason by Employee (it being understood
and agreed that termination of this Agreement by
Employee under paragraph 3.1 shall not, for purposes
of this paragraph 16, constitute voluntary
termination without Good Reason by Employee).
16.2 Employee understands that the foregoing restrictions
may limit Employee's ability to engage in certain
businesses anywhere in the world during the period
provided for above, but acknowledges that Employee
will receive sufficiently high renumeration and other
benefits under this Agreement to justify such
restriction. Employee
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acknowledges that money damages would not be
sufficient remedy for any breach of this Article by
Employee, and Company shall be entitled to enforce
the provisions of this Agreement and/or to specific
performances and injunctive relief as remedies for
such breach or any threatened breach. Such remedies
shall not be deemed the exclusive remedies for a
breach of this Article, but shall be in addition to
all remedies available at law or in equity to
Company, including, without limitation, the recovery
of damages from Employee and Employee's agents
involved in such breach and remedies available to
Company pursuant to other agreements with Employee.
16.3 It is expressly understood and agreed that Company
and Employee consider the restrictions contained in
this paragraph 16 to be reasonable and necessary.
Nevertheless, if any of the aforesaid restrictions
are found by a court having jurisdiction to be
unreasonable, or overly broad as to geographic area
or time, or otherwise unenforceable, the parties
intend for the restrictions therein set forth to be
modified by such courts so as to be reasonable and
enforceable and, as so modified by the court, to be
fully enforced.
17. Foreign Corrupt Practices Act.
Employee shall at all times comply with the United States
Foreign Corrupt Practices Act, generally codified in 15 USC 78
(FCPA), as the FCPA may hereafter be amended, and/or its
successor statutes. If Employee pleads guilty to or nolo
contendere or admits civil or criminal liability under the
FCPA, or if a court finds that Employee committed an action
resulting in any Company entity having civil or criminal
liability or responsibility under the FCPA with knowledge of
the activities giving rise to such liability or knowledge of
facts from which Employee should have reasonably inferred the
activities giving rise to liability had occurred or were
likely to occur, such action or finding shall constitute Cause
for termination by Company under paragraph 3.5 of this
Agreement unless Company's Board of Directors determines that
the actions found to be in violation of the FCPA were taken in
good faith and in compliance with all applicable policies of
Company.
18. Survival.
The provisions of paragraphs 4 and 16 shall survive any
termination of the employment relationship and/or of this
Agreement for the periods stated therein. The provisions of
paragraph 15 relating to arbitration shall survive any
termination of the employment relationship between Employee
and Company and the termination of this Agreement. Amounts,
compensation, rights and benefits which Employee is entitled
to receive or have accrued to Employee under this Agreement or
under
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any plan, program, arrangement, agreement or policy of or with
Company or any of its affiliates before, at or subsequent to
the termination of the employment relationship between
Employee and Company or the termination of this Agreement
shall not be superseded and shall survive any such
termination.
19. Certain Additional Payments by Company.
19.1 Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined
that any payment or distribution by Company or any of
its affiliates to or for the benefit of Employee,
whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement
or otherwise (any such payments or distributions
being individually referred to herein as a "Payment,"
and any two or more of such payments or distributions
being referred to herein as "Payments"), would be
subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code of 1986, as amended (the
"Code") (such excise tax, together with any interest
thereon, any penalties, additions to tax, or
additional amounts with respect to such excise tax,
and any interest in respect of such penalties,
additions to tax or additional amounts, being
collectively referred herein to as the "Excise Tax"),
then Employee shall be entitled to receive an
additional payment or payments (individually referred
to herein as a "Gross-Up Payment" and any two or more
of such additional payments being referred to herein
as "Gross-Up Payments") in an amount such that after
payment by Employee of all taxes (as defined in
paragraph 19.11) imposed upon the Gross-Up Payment,
Employee retains an amount of such Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
19.2 Subject to the provisions of paragraph 19.3 through
19.11, any determination (individually, a
"Determination") required to be made under this
paragraph 19, including whether a Gross-Up Payment is
required and the amount of such Gross-Up Payment,
shall initially be made, at Company's expense, by
nationally recognized tax counsel mutually acceptable
to Company and Employee ("Tax Counsel"). Tax Counsel
shall provide detailed supporting legal authorities,
calculations, and documentation both to Company and
Employee within 15 business days of the termination
of Employee's employment, if applicable, or such
other time or times as is reasonably requested by
Company or Employee. If Tax Counsel makes the
initial Determination that no Excise Tax is payable
by Employee with respect to a Payment or Payments, it
shall furnish Employee with an opinion reasonably
acceptable to Employee that no Excise Tax will be
imposed with respect to any such Payment or Payments.
Employee shall have the right to dispute any
Determination (a "Dispute") within 15 business days
after delivery of Tax Counsel's opinion with respect
to such Determination. The
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Gross-Up Payment, if any, as determined pursuant to
such Determination shall be paid by Company to
Employee within five business days of Employee's
receipt of such Determination. The existence of a
Dispute shall not in any way affect Employee's right
to receive the Gross-Up Payment in accordance with
such Determination. If there is no Dispute, such
Determination shall be binding, final and conclusive
upon Company and Employee, subject in all respects,
however, to the provisions of paragraph 19.3 through
19.11 below. As a result of the uncertainty in the
application of Sections 4999 and 280G of the Code, it
is possible that Gross-Up Payments (or portions
thereof) which will not have been made by Company
should have been made ("Underpayment"), and if upon
any reasonable written request from Employee or
Company to Tax Counsel, or upon Tax Counsel's own
initiative, Tax Counsel, at Company's expense,
thereafter determines that Employee is required to
make a payment of any Excise Tax or any additional
Excise Tax, as the case may be, Tax Counsel shall, at
Company's expense, determine the amount of the
Underpayment that has occurred and any such
Underpayment shall be promptly paid by Company to
Employee.
19.3 Company shall defend, hold harmless, and indemnify
Employee on a fully grossed-up after tax basis from
and against any and all claims, losses, liabilities,
obligations, damages, impositions, assessments,
demands, judgements, settlements, costs and expenses
(including reasonable attorneys', accountants', and
experts' fees and expenses) with respect to any tax
liability of Employee resulting from any Final
Determination (as defined in paragraph 19.10) that
any Payment is subject to the Excise Tax.
19.4 If a party hereto receives any written or oral
communication with respect to any question,
adjustment, assessment or pending or threatened
audit, examination, investigation or administrative,
court or other proceeding which, if pursued
successfully, could result in or give rise to a claim
by Employee against Company under this paragraph 19
("Claim"), including, but not limited to, a claim for
indemnification of Employee by Company under
paragraph 19.3, then such party shall promptly notify
the other party hereto in writing of such Claim ("Tax
Claim Notice").
19.5 If a Claim is asserted against Employee ("Employee
Claim"), Employee shall take or cause to be taken
such action in connection with contesting such
Employee Claim as Company shall reasonably request in
writing from time to time, including the retention of
counsel and experts as are reasonably designated by
Company (it being understood and agreed by the
parties hereto that the terms of any such retention
shall expressly provide that Company shall be solely
responsible for the payment of any and all fees and
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
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disbursements of such counsel and any experts) and
the execution of powers of attorney, provided that:
19.5.1 within 30 calendar days after Company
receives or delivers, as the case may be, the
Tax Claim Notice relating to such Employee
Claim (or such earlier date that any payment
of the taxes claimed is due from Employee,
but in no event sooner than five calendar
days after Company receives or delivers such
Tax Claim Notice), Company shall have
notified Employee in writing ("Election
Notice") that Company does not dispute its
obligations (including, but not limited to,
its indemnity obligations) under this
Agreement and that Company elects to contest,
and to control the defense or prosecution of,
such Employee Claim at Company's sole risk
and sole cost and expense; and
19.5.2 Company shall have advanced to Employee on an
interest-free basis, the total amount of the
tax claimed in order for Employee, at
Company's request, to pay or cause to be paid
the tax claimed, file a claim for refund of
such tax and, subject to the provisions of
the last sentence of paragraph 19.7, xxx for
a refund of such tax if such claim for refund
is disallowed by the appropriate taxing
authority (it being understood and agreed by
the parties hereto that Company shall only be
entitled to xxx for a refund and Company
shall not be entitled to initiate any
proceeding in, for example, United States Tax
Court) and shall indemnify and hold Employee
harmless, on a fully grossed-up after tax
basis, from any tax imposed with respect to
such advance or with respect to any imputed
income with respect to such advance; and
19.5.3 Company shall reimburse Employee for any and
all costs and expenses resulting from any
such request by Company and shall indemnify
and hold Employee harmless, on fully
grossed-up after-tax basis, from any tax
imposed as a result of such reimbursement.
19.6 Subject to the provisions of paragraph 19.5 hereof,
Company shall have the right to defend or prosecute,
at the sole cost, expense and risk of Company, such
Employee Claim by all appropriate proceedings, which
proceedings shall be defended or prosecuted
diligently by Company to a Final Determination;
provided, however, that (i) Company shall not,
without Employee's prior written consent, enter into
any compromise or settlement of such
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Employee Claim that would adversely affect Employee,
(ii) any request from Company to Employee regarding
any extension of the statute of limitations relating
to assessment, payment, or collection of taxes for
the taxable year of Employee with respect to which
the contested issues involved in, and amount of, the
Employee Claim relate is limited solely to such
contested issues and amount, and (iii) Company's
control of any contest or proceeding shall be limited
to issues with respect to the Employee Claim and
Employee shall be entitled to settle or contest, in
his sole and absolute discretion, any other issue
raised by the Internal Revenue Service or any other
taxing authority. So long as Company is diligently
defending or prosecuting such Employee Claim,
Employee shall provide or cause to be provided to
Company any information reasonably requested by
Company that relates to such Employee Claim, and
shall otherwise cooperate with Company and its
representatives in good faith in order to contest
effectively such Employee Claim. Company shall keep
Employee informed of all developments and events
relating to any such Employee Claim (including,
without limitation, providing to Employee copies of
all written materials pertaining to any such Employee
Claim), and Employee or his authorized
representatives shall be entitled, at Employee's
expense, to participate in all conferences, meetings
and proceedings relating to any such Employee Claim.
19.7 If, after actual receipt by Employee of an amount of
a tax claimed (pursuant to an Employee Claim) that
has been advanced by Company pursuant to paragraph
19.5.2 hereof, the extent of the liability of Company
hereunder with respect to such tax claimed has been
established by a Final Determination, Employee shall
promptly pay or cause to be paid to Company any
refund actually received by, or actually credited to,
Employee with respect to such tax (together with any
interest paid or credited thereon by the taxing
authority and any recovery of legal fees from such
taxing authority related thereto), except to the
extent that any amounts are then due and payable by
Company to Employee, whether under the provisions of
this Agreement or otherwise. If, after the receipt
by Employee of an amount advanced by Company pursuant
to paragraph 19.5.2, a determination is made by the
Internal Revenue Service or other appropriate taxing
authority that Employee shall not be entitled to any
refund with respect to such tax claimed and Company
does not notify Employee in writing of its intent to
contest such denial of refund prior to the expiration
of 30 days after such determination, then such
advance shall be forgiven and shall not be required
to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of any
Gross-Up Payments and other payments required to be
paid hereunder.
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19.8 With respect to any Employee Claim, if Company fails
to deliver an Election Notice to Employee within the
period provided in paragraph 19.5.1 hereof or, after
delivery of such Election Notice, Company fails to
comply with the provisions of paragraph 19.5.2,
19.5.3 or 19.6 hereof, then Employee shall at any
time thereafter have the right (but not the
obligation), at his election and in his sole and
absolute discretion, to defend or prosecute, at the
sole cost, expense and risk of Company, such Employee
Claim. Employee shall have full control of such
defense or prosecution and such proceedings,
including any settlement or compromise thereof. If
requested by Employee, Company shall cooperate, and
shall cause its affiliates to cooperate, in good
faith with Employee and his authorized
representatives in order to contest effectively such
Employee Claim. Company may attend, but not
participate in or control, any defense, prosecution,
settlement or compromise of any Employee Claim
controlled by Employee pursuant to this paragraph
19.8 and shall bear its own costs and expenses with
respect thereto. In the case of any Employee Claim
that is defended or prosecuted by Employee, Employee
shall, from time to time, be entitled to current
payment, on a fully grossed-up after tax basis, from
Company with respect to costs and expenses incurred
by Employee in connection with such defense or
prosecution.
19.9 In the case of any Employee Claim that is defended or
prosecuted to a Final Determination pursuant to the
terms of this paragraph 19.9, Company shall pay, on a
fully grossed-up after tax basis, to Employee in
immediately available funds the full amount of any
taxes arising or resulting from or incurred in
connection with such Employee Claim that have not
theretofore been paid by Company to Employee,
together with the costs and expenses, on a fully
grossed-up after tax basis, incurred in connection
therewith that have not theretofore been paid by
Company to Employee, within ten calendar days after
such Final Determination. In the case of any
Employee Claim not covered by the preceding sentence,
Company shall pay, on a fully grossed-up after tax
basis, to Employee in immediately available funds the
full amount of any taxes arising or resulting from or
incurred in connection with such Employee Claim at
least ten calendar days before the date payment of
such taxes is due from Employee, except where payment
of such taxes is sooner required under the provisions
of this paragraph 19.9, in which case payment of such
taxes (and payment, on a fully grossed-up after tax
basis, of any costs and expenses required to be paid
under this paragraph 19.9 shall be made within the
time and in the manner otherwise provided in this
paragraph 19.9.
19.10 For purposes of this Agreement, the term "Final
Determination" shall mean (A) a decision, judgment,
decree or other order by a court or other tribunal
with appropriate jurisdiction, which has
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become final and non-appealable; (B) a final and
binding settlement or compromise with an
administrative agency with appropriate jurisdiction,
including, but not limited to, a closing agreement
under Section 7121 of the Code; (C) any disallowance
of a claim for refund or credit in respect to an
overpayment of tax unless a suit is filed on a timely
basis; or (D) any final disposition by reason of the
expiration of all applicable statutes of limitations.
19.11 For purposes of this Agreement, the terms "tax" and
"taxes" mean any and all taxes of any kind whatsoever
(including, but not limited to, any and all Excise
Taxes, income taxes, and employment taxes), together
with any interest thereon, any penalties, additions
to tax, or additional amounts with respect to such
taxes and any interest in respect of such penalties,
additions to tax, or additional amounts.
20. No Obligation to Mitigate.
Employee shall not be required to mitigate the amount of any
payment or other benefit required to be paid to Employee
pursuant to this Agreement, whether by seeking other
employment or otherwise; nor shall the amount of any such
payment or other benefit be reduced on account of any
compensation earned by Employee as a result of employment by
another person or entity.
21. Stock Purchase and Related Loan.
21.1 If (a) on or before June 2, 1997, no notice of an
election to terminate this Agreement under paragraph
3.1 has been given by either party, and (b) before
June 3, 1997, neither Company nor Employee has
otherwise terminated this Agreement or Employee's
employment with Company, then Company shall, or shall
cause Mariner Holdings, Inc. to, grant Employee the
opportunity to purchase from Mariner Holdings, Inc.
(the "stock purchase") no less than the number of
shares of the common stock of Mariner Holdings Inc.
("Parent Common Stock") specified in a written notice
delivered by Company to Employee on or before June
16, 1997 (the "Minimum Share Specification"), and no
more than 1,706 shares of Parent Common Stock (the
"Maximum Share Specification"), at a price of $100.00
per share which shall be paid in cash. Employee's
right to purchase such shares of Parent Common Stock
may be exercised any time after June 16, 1997, and
before June 30, 1997, by (x) the execution and
delivery by Employee to Company of written notice in
the form attached hereto as Exhibit A (the "Notice")
specifying the number of shares of Parent Common
Stock to be purchased by Employee, which number of
shares shall be no less than the Minimum Share
Specification and no more than the Maximum Share
Specification, (y) simultaneously with the execution
and delivery of the Notice,
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the execution and delivery by Employee and his
spouse, if any, to Company of an Addendum Agreement
in the form attached hereto as Exhibit B ("Addendum
Agreement"), and (z) the payment in cash within five
(5) days after such deliveries of the total purchase
price for such shares; provided, however, that
notwithstanding anything contained in this Agreement
to the contrary, in the event Employee does not, on
or before June 30, 1997, exercise his right to
purchase, and within five (5) days thereafter
purchase for cash, all in the manner provided in this
sentence, a number of shares of Parent Common Stock
equal to at least the Minimum Share Specification,
the initial term shall in no event be deemed to have
been extended for an additional one and one-half (1
1/2) years through June 1, 1999, and the initial term
and the term of Employee's employment under this
Agreement shall expire on December 1, 1997.
21.2 In connection with the stock purchase, Employee shall
be entitled to receive a loan from Company for the
purpose of funding all or a portion of the stock
purchase. The terms and conditions with regard to
such loan shall be evidenced by a Promissory Note and
a Security Agreement substantially in the forms
attached hereto as Exhibit C and Exhibit D,
respectively, which are incorporated herein by
reference and their terms and conditions shall be
considered a part of this Agreement.
22. Stock Options. As soon as practicable after Employee's
purchase, if any, of Parent Common Stock pursuant to paragraph
21, Company shall, or shall cause Mariner Holdings Inc. to,
grant to Employee stock options for shares of Parent Common
Stock pursuant to the Mariner Holdings Inc. 1996 Stock Option
Plan. The number of shares of Parent Common Stock that
Employee shall be entitled to purchase pursuant to such
options shall be the number of shares of Parent Common Stock
purchased by Employee pursuant to paragraph 21 multiplied by
3.57; any fractional number of shares shall be rounded to the
nearest whole number as follows: a fraction of .50 or more
shall be rounded upward to the next whole number, and a
fraction of less than .50 shall be rounded down to the next
whole number. To the fullest extent possible, the options
granted to Employee shall be incentive stock options, and
otherwise shall be non- qualified stock options. The terms,
conditions and restrictions with regard to such stock options
shall be evidenced by an Incentive Stock Option Agreement (as
to the qualified stock options) and a Nonstatutory Stock
Option Agreement (as to be nonqualified stock options),
substantially in the forms attached hereto as Exhibit E and
Exhibit F, respectively, which shall be incorporated by
reference and their terms, conditions and restrictions shall
be considered a part of this Agreement.
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23. Acceleration Upon the Occurrence of an Initial Public
Offering. The provisions of paragraphs 21 and 22
notwithstanding, Employee's right to purchase shares of Parent
Common Stock under paragraph 21 shall become immediately
exercisable in full in the manner provided in paragraph 21,
but without regard to the requirements relating to the Minimum
Share Specification, and upon the exercise of such right to
purchase Parent Common Stock, Employee shall immediately
become entitled to be granted options to purchase shares of
Parent Common Stock under and in accordance with paragraph 22,
upon the occurrence on or before June 2, 1997, of an "Initial
Public Offering" (as such term is defined in D.2(d) of the
Stockholders' Agreement, dated April 2, 1996, between Enron
Capital & Trade Resources Corp., Mystery Acquisition, Inc.
(now know as Mariner Holdings, Inc.) and certain other
parties).
24. Stockholders' Agreement to Apply to Shares. No transfer or
issuance to Employee of any shares of Parent Common Stock
shall be effected unless Employee shall have simultaneously
with or prior to such transfer or issuance entered into an
Addendum Agreement with Mariner Holdings, Inc.
25. Miscellaneous.
25.1 This Agreement shall not be modified or amended
except in writing and signed by Company and Employee.
This Agreement shall be binding upon the heirs,
administrators, or executors and the successors and
assigns of each party to this Agreement.
25.2 The rights and benefits of Employee under the
Agreement are personal to him and shall not be
assigned or transferred without the prior written
consent of Company. Subject to the foregoing, this
Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective
heirs, personal representatives, successors and
assigns.
25.3 All titles or headings of sections or paragraphs or
other divisions of this Agreement are only for the
convenience of the parties and shall not be construed
to have any effect or meaning with respect to the
other content of such sections or paragraphs or other
divisions, such content being controlling as to the
agreement between the parties hereto.
25.4 This Agreement is made and will be performed under,
and shall be governed by and construed in accordance
with, the law of the State of Texas.
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25.5 EMPLOYEE AFFIRMS AND ATTESTS BY HIS SIGNATURE TO THIS
AGREEMENT THAT HE HAS READ THIS AGREEMENT BEFORE
SIGNING IT AND THAT HE FULLY UNDERSTANDS ITS
PURPOSES, TERMS AND PROVISIONS, WHICH HE HEREBY
EXPRESSLY ACKNOWLEDGED TO BE REASONABLE IN ALL
RESPECTS. EMPLOYEE FURTHER ACKNOWLEDGES RECEIPT OF
ONE COPY OF THIS AGREEMENT.
25.6 Notices contemplated under this Agreement shall be
directed to the following address:
If to Company:
Mariner Energy, Inc.
000 Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: President and Chief Executive
Officer
If to Employee:
Xxxxx X. Xxxx
0000 Xxxxxx Xxx
Xxxxx Xxxx, Xxxxx 00000
Company and Employee may change the above addresses
for notice purposes by notifying the other in
writing.
25.7 The Company may withhold from any amounts payable
under this Agreement such federal, state, or local
taxes as shall be required to be withheld pursuant to
any applicable law or regulation.
25.8 Except as otherwise expressly provided herein,
nothing contained in this Agreement shall limit or
otherwise affect any rights or benefits which are
vested in, accrued to, or earned by Employee, or for
which Employee is entitled to, prior to the Effective
Date whether under the Employment Agreement or
otherwise.
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
-52-
53
Executed as of the Effective Date in duplicate originals at Houston,
Texas.
COMPANY:
MARINER ENERGY, INC.
By: /s/ XXXXXX X. XXXXXXXXX
--------------------------------
Printed Name: Xxxxxx X. Xxxxxxxxx
Printed Title: President and CEO
EMPLOYEE:
/s/ XXXXX X. XXXX
--------------------------------
Xxxxx X. Xxxx
EMPLOYMENT AGREEMENT -- XXXXX X. XXXX
-53-
