SERVICE CONTINUATION AGREEMENT
AGREEMENT between PRODUCTION OPERATORS CORP, a Delaware corporation
(the "Company"), and ________________________________________
("Executive"),
W I T N E S S E T H :
WHEREAS, the Company highly desires to retain certain key employee
personnel and, accordingly, the Board of Directors of the Company (the
"Board") has approved the Company entering into this Agreement with
Executive in order to assure his continued service to the Company; and
WHEREAS, Executive is prepared to commit such services in return for
specific arrangements with respect to severance compensation and other
benefits;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the Company and Executive agree as follows:
1. Definitions.
(a) "Change in Duties" shall mean the occurrence, within
two years after the date upon which a Change of Control occurs, of any one
or more of the following:
(i) A significant reduction in the duties of
Executive from those applicable to him immediately prior to the date
on which a Change of Control occurs;
(ii) A reduction in Executive's annual salary or
bonus opportunity under any applicable bonus or incentive compensation
plan from that provided to him immediately prior to the date on
which a Change of Control occurs; or
(iii) Receipt of employee benefits (including but not
limited to medical, dental, life insurance, accidental, death, and
dismemberment, and long-term disability plans) and perquisites
by Executive that are materially inconsistent with the employee
benefits and perquisites provided by the Company to executives with
comparable duties.
(b) "Change of Control" means the occurrence of either of the
following events:
(i) The Company (A) shall not be the surviving
entity in any merger, consolidation or other reorganization (or
survives only as a subsidiary of an entity other than a
previously wholly-owned subsidiary of the Company) or (B) is
to be dissolved and liquidated; or
(ii) Any person or entity, including a "group" as
contemplated by Section 13(d)(3) of the Securities Exchange Act of
1934, as amended, acquires or gains ownership or control
(including, without limitation, power to vote) of 25% or more of
the outstanding shares of the Company's voting stock (based
upon voting power), and as a result of or in connection with such
transaction, the persons who were directors of the Company
before such transaction shall cease to constitute a majority of the
Board.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Compensation" shall mean the greater of (i) or (ii), where:
(i) equals the greater of Executive's annual salary
immediately prior to the date on which a Change of Control occurs or
the total cash remuneration paid to such Executive during the
twelve-month period preceding such date; and
(ii) equals the greater of Executive's annual salary
at the time of his Involuntary Termination or the total cash
remuneration paid to such Executive during the twelve-month period
preceding such time.
(e) "Involuntary Termination" shall mean any termination of
Executive's employment with the Company which:
(i) does not result from a resignation by Executive
(other than a resignation pursuant to clause (ii) of this
subparagraph (e)); or
(ii) results from a resignation by Executive on or before
the date which is sixty days after the date upon which Executive
receives notice of a Change in Duties; provided, however, the
term "Involuntary Termination" shall not include a Termination for
Cause or any termination as a result of death, disability
under circumstances entitling Executive to benefits under the
Company's long-term disability plan, or Retirement.
(f) "Retirement" shall mean Executive's resignation on or after
the date he reaches age sixty-five.
(g) "Severance Amount" shall mean an amount equal to 200% of
Executive's Compensation if Involuntary Termination occurs within one year
after a Change of Control and 100% of Executive s Compensation if
Involuntary Termination occurs after one year but within two years after a
Change of Control.
(h) "Termination for Cause" shall mean termination of
Executive's employment by the Company (or its subsidiaries) by reason of
Executive's (i) gross negligence in the performance of his duties, (ii)
willful and continued failure to perform his duties, (iii) willful engagement
in conduct which is materially injurious to the Company or its
subsidiaries (monetarily or otherwise) or (iv) conviction of a felony or
a misdemeanor involving moral turpitude.
(i) "Welfare Benefit Coverages" shall mean the medical,
dental, life insurance, and accidental death and dismemberment coverages
provided by the Company to its active employees.
2. Services. Executive agrees that he will render services to the
Company (as well as any subsidiary thereof or successor thereto) during
the period of his employment to the best of his ability and in a prudent and
businesslike manner and that he will devote substantially the same time,
efforts and dedication to his duties as heretofore devoted.
3. Severance Benefits. If Executive's employment by the Company or any
subsidiary thereof or successor thereto shall be subject to an Involuntary
Termination which occurs within two years after the date upon which a
Change of Control occurs, then, in addition to the severance benefits
Executive would otherwise be entitled to receive from the Company,
Executive shall be entitled to receive, as additional compensation for
services rendered to the Company (including its subsidiaries), the following
severance benefits:
(a) A lump sum cash payment in an amount equal to Executive's
Severance Amount.
(b) Executive shall be entitled to continue the Welfare
Benefit Coverages for himself and, where applicable, his eligible
dependents following his Involuntary Termination for up to twenty-four
months, as long as Executive continues either to pay the premiums paid by
active employees of the Company for such coverages or to pay the actual
(nonsubsidized) cost of such coverages which the Company does not
subsidize for active employees. Such benefit rights shall apply only to
those Welfare Benefit Coverages which the Company has in effect from
time to time for active employees, and the applicable payments shall
adjust as premiums for active employees of the Company or actual costs,
whichever is applicable, change. Welfare Benefit Coverage(s) shall
immediately end upon Executive's obtainment of new employment and
eligibility for similar Welfare Benefit Coverage(s) (with Executive being
obligated hereunder to promptly report such eligibility to the Company).
Nothing herein shall be deemed to adversely affect in any way the
additional rights, after consideration of this extension period, of
Executive and his eligible dependents to health care continuation coverage
as required pursuant to Part 6 of Title I of the Employee Retirement Income
Security Act of 1974, as amended.
(c) Executive shall be entitled to receive out-placement
services in connection with obtaining new employment up to a maximum cost of
$10,000.
(d) The severance benefits payable under this Agreement shall
be paid to the Executive on or before the fifth day after the last day
of Executive's employment with the Company. Any severance benefits paid
pursuant to this Paragraph will be deemed to be a severance payment and not
compensation for purposes of determining benefits under the Company's
qualified retirement plans and shall be subject to any required tax
withholding.
(e) Any non-compete agreements between the Executive and
the Company shall be automatically terminated.
4. Interest on Late Benefit Payments. If any payment provided for in
Paragraph 3(a) or 3(b) hereof is not made when due, the Company shall pay to
Executive interest on the amount payable from the date that such payment
should have been made under such paragraph until such payment is made, which
interest shall be calculated at the prime or base rate of interest announced
by Texas Commerce Bank National Association (or any successor thereto) at
its principal office in Houston, Texas and shall change when and as any such
change in such prime or base rate shall be announced by such bank.
5. Certain Additional Payments by the Company. Notwithstanding
anything in this Agreement to the contrary, if the severance benefits
provided for in Paragraph 3, together with any other payments which
Executive has the right to receive from the Company, would constitute a
"parachute payment " (as defined in Section 280G(b)(2) of the Code), the
severance benefits provided hereunder shall be either (a) reduced (but
not below zero) so that the present value of such total amounts received by
Executive from the Company will be one dollar ($1.00) less than three times
Executive's base amount (as defined in Section 280G of the Code) and so
that no portion of such amounts received by Executive shall be
subject to the excise tax imposed by Section 4999 of the Code or (b)
paid in full, whichever produces the better net after-tax position to
Executive (taking into account any applicable excise tax under Section 4999
of the Code and any applicable income tax). The Company and Executive
shall make an initial determination as to whether a reduction is
required and, if so required, the amount of any such reduction.
Executive shall notify the Company immediately in writing of any claim
by the Internal Revenue Service which, if successful, would require the
Company to make a reduction (or a further reduction in excess of that, if
any, initially determined by the Company and Executive) within five days
of the receipt of such claim. The Company shall notify Executive in
writing at least five days prior to the due date of any response required
with respect to such claim if it plans to contest the claim. If the
Company decides to contest such claim, Executive shall cooperate fully
with the Company in such action; provided, however, the Company shall
bear and pay directly or indirectly all costs and expenses (including
additional interest and penalties) incurred in connection with such
action. If, as a result of the Company's action with respect to a claim,
the amount of the reduction is found to have been in excess of the correct
reduction amount, the Company shall promptly pay to Executive the
difference between such amounts with respect to such claim.
6. General.
(a) Term. The effective date of this Agreement is
__________, 1996. Within sixty days from and after the expiration of
two years after said effective date and within sixty days after each
successive two-year period of time thereafter that this Agreement is in
effect, the Company shall have the right to review this Agreement, and
in its sole discretion either continue and extend this Agreement,
terminate this Agreement, and/or offer Executive a different agreement. The
Board (excluding any member of the Board who is covered by this Agreement
or by a similar agreement with the Company) will vote on whether
to so extend, terminate, and/or offer Executive a different agreement and
will notify Executive of such action within said sixty-day time period
mentioned above. This Agreement shall remain in effect until so
terminated and/or modified by the Company. Failure of the Board to take any
action within said sixty days shall be considered as an extension of this
Agreement for an additional two-year period of time. Notwith-standing
anything to the contrary contained in this "sunset provision," it
is agreed that if a Change of Control occurs while this Agreement is in
effect, then this Agreement shall not be subject to termination or
modification under this "sunset provision," and shall remain in force for a
period of two years after such Change of Control, and if within said two
years the contingency factors occur which would entitle Executive
to the benefits as provided herein, this Agreement shall remain in effect in
accordance with its terms. If, within such two years after a Change of
Control, the contingency factors that would entitle Executive to said
benefits do not occur, thereupon this two-year "sunset provision" shall again
be applicable with the sixty-day time period for Board action to thereafter
commence at the expiration of said two years after such Change of Control
and on each two-year anniversary date thereafter.
(b) Indemnification. If Executive shall obtain any money
judgment or otherwise prevail with respect to any litigation brought by
Executive or the Company to enforce or interpret any provision contained
herein, the Company, to the fullest extent permitted by applicable law,
hereby indemnifies Executive for his reasonable attorneys' fees and
disbursements incurred in such litigation and hereby agrees (i) to pay
in full all such fees and disbursements and (ii) to pay prejudgment
interest on any money judgment obtained by Executive from the earliest date
that payment to him should have been made under this Agreement until such
judgment shall have been paid in full, which interest shall be
calculated at the prime or base rate of interest announced by Texas
Commerce Bank National Association (or any successor thereto) at its
principal office in Houston, Texas, and shall change when and as any such
change in such prime or base rate shall be announced by such bank.
(c) Payment Obligations Absolute. The Company's obligation to
pay (or cause one of its subsidiaries to pay) Executive the amounts and to
make the arrangements provided herein shall be absolute and unconditional
and shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right
which the Company (including its subsidiaries) may have against him or
anyone else. All amounts payable by the Company (including its subsidiaries
hereunder) shall be paid without notice or demand. Executive shall not be
obligated to seek other employment in mitigation of the amounts payable or
arrangements made under any provision of this Agreement, and, except as
provided in Paragraph 3(c) hereof, the obtaining of any such other
employment shall in no event effect any reduction of the Company's
obligations to make (or cause to be made) the payments and arrangements
required to be made under this Agreement.
(d) Successors. This Agreement shall be binding upon and inure
to the benefit of the Company and any successor of the Company, by merger
or otherwise. This Agreement shall also be binding upon and inure to the
benefit of Executive and his estate. If Executive shall die prior to
full payment of amounts due pursuant to this Agreement, such amounts shall
be payable pursuant to the terms of this Agreement to his estate.
(e) Severability. Any provision in this Agreement which is
prohibited or unenforceable in any jurisdiction by reason of applicable
law shall, as to such jurisdiction, be ineffective only to the
extent of such prohibition or unenforceability without invalidating or
affecting the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(f) Non-Alienation. Executive shall not have any right
to pledge, hypothecate, anticipate or assign this Agreement or the rights
hereunder, except by will or the laws of descent and distribution.
(g) Notices. Any notices or other communications provided for
in this Agreement shall be sufficient if in writing. In the case of
Executive, such notices or communications shall be effectively delivered if
hand delivered to Executive at his principal place of employment or if sent
by registered or certified mail to Executive at the last address he has filed
with the Company. In the case of the Company, such notices or
communications shall be effectively delivered if sent by registered or
certified mail to the Company at its principal executive offices.
(h) Controlling Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas. Further,
Executive agrees that any legal proceeding to enforce the provisions of
this Agreement shall be brought in Houston, Xxxxxx County, Texas, and hereby
waives his right to any pleas regarding subject matter or personal
jurisdiction and venue.
(i) Release. As a condition to the receipt of any benefit
under Paragraph 3 hereof, unless such requirement is waived by the Board
in its sole discretion, Executive shall first execute a release, in the
form established by the Company, releasing the Company, its shareholders,
partners, officers, directors, employees and agents from any and all claims
and from any and all causes of action of any kind or character, including but
not limited to all claims or causes of action arising out of Executive's
employment with the Company or the termination of such employment.
(j) Full Settlement. If Executive is entitled to and
receives the benefits provided hereunder, performance of the obligations
of the Company hereunder will constitute full settlement of all
claims that Executive might otherwise assert against the Company on account of
his termination of employment.
(k) Unfunded Obligation. The obligation to pay amounts
under this Agreement is an unfunded obligation of the Company (including
its subsidiaries), and no such obligation shall create a trust or be
deemed to be secured by any pledge or encumbrance on any property
of the Company (including its subsidiaries).
(l) Not a Contract of Employment. This Agreement shall not be
deemed to constitute a contract of employment, nor shall any provision
hereof affect (i) the right of the Company (or its subsidiaries) to
discharge Executive at will or (ii) the terms and conditions of any other
agreement between the Company and Executive except as provided herein.
(m) Number and Gender. Wherever appropriate herein, words
used in the singular shall include the plural and the plural shall include
the singular. The masculine gender where appearing herein shall be deemed
to include the feminine gender.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the ______ day of __________________, 1996.
"COMPANY"
PRODUCTION OPERATORS CORP
By:
Name:
Title:
"EXECUTIVE"
__________________________________________
