EXHIBIT (E)(7)
HALLWOOD ENERGY CORPORATION
SEPARATION AGREEMENT
THIS SEPARATION AGREEMENT ("Agreement") is entered into as of March 29,
2001, by and between Hallwood Energy Corporation ("HEC") and Xxxxxxxx X. Xxxxxx
("Executive").
WHEREAS, HEC has previously entered into a change of control agreement with
Executive effective as of June 9, 1999 (the "Change of Control Agreement"), and
HEC and Executive now wish to amend and restate the Change of Control Agreement
to remove the gross-up payment, provide more certainty as to timing of payments,
add a limitation on payments provision as well as noncompetition,
confidentiality and nonhiring provisions, and make certain other changes;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, HEC and Executive agree that the Change of Control
Agreement is hereby amended and restated in its entirety as the Hallwood Energy
Corporation Separation Agreement to read as follows:
1. DEFINITIONS.
(a) "Cause" shall mean (i) the continued failure by Executive to devote
time and effort to the performance of Executive's duties as an
employee consistent with his/her performance prior to the date of this
Agreement, after written demand for improved performance has been
delivered to Executive by HEC which specifically identifies how
Executive has not devoted such consistent time and effort to the
performance of his/her duties; or (ii) the willful engaging by
Executive in misconduct which is materially injurious to HEC,
monetarily or otherwise.
(b) "Change of Control" shall mean the occurrence after the effective date
of this Agreement of:
(i) An acquisition of any voting securities of HEC (the "Voting
Securities") by any "Person" (as the term person is used for
purposes of Section 13(d) or 14(d) of the Securities Exchange Act
of 1934 (the "Exchange Act")), other than The Hallwood Group
Incorporated and its affiliates immediately after which such
Person has "Beneficial Ownership" (within the meaning of Rule
l3d-3 promulgated under the Exchange Act) of thirty percent (30%)
or more of the combined voting power of HEC's then outstanding
Voting Securities;
(ii) The individuals who, as of the effective date of this Agreement,
are members of the Board of Directors of HEC (the "Incumbent
Board"), cease for any reason to constitute at least a majority
of the members of the Board of Directors of HEC (the "Board");
provided, however, that if the election, or nomination for
election by HEC's common stockholders, of any new director was
approved by a vote of at least a majority of the Incumbent Board,
such new director shall, for purposes of this Agreement, be
considered as a member of the Incumbent Board; provided further,
however, that no individual shall
be considered a member of the Incumbent Board if such individual
initially assumed office as a result of either an actual or
threatened "election contest" (as described in Rule 14A-11
promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board (a "Proxy Contest") including
by reason of any agreement intended to avoid or settle any
Election Contest or Proxy Contest; or
(iii) Approval by stockholders of HEC of:
(A) A merger, consolidation or reorganization involving HEC,
unless:
(1) the stockholders of HEC, immediately before such
merger, consolidation or reorganization, own directly
or indirectly immediately following such merger,
consolidation or reorganization, at least fifty percent
(50%) of the combined voting power of the outstanding
voting securities of the corporation resulting from
such merger or consolidation or reorganization (the
"Surviving Corporation") in substantially the same
proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or
reorganization, and
(2) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement
providing for such merger, consolidation or
reorganization constitute at least a majority of the
members of the board of directors of the Surviving
Corporation; or
(B) A complete liquidation or dissolution of HEC; or
(C) An agreement for the sale or other disposition of all or
substantially all of the assets of HEC to any Person (other
than a transfer to a wholly owned subsidiary).
(iv) Notwithstanding the foregoing, a Change of Control shall not be
deemed to occur solely because any Person (the "Subject Person")
acquired beneficial ownership of more than the permitted percent
of the outstanding Voting Securities as a result of the
acquisition of Voting Securities by HEC which, by reducing the
number of Voting Securities outstanding, increases the
proportional number of shares beneficially owned by the Subject
Person, provided that if a Change of Control would occur (but
for the operation of this sentence) as a result of the
acquisition of Voting Securities by HEC, and after such share
acquisition by HEC, the Subject Person becomes the beneficial
owner of any additional Voting Securities which increases the
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percentage of the then outstanding Voting Securities beneficially
owned by the Subject Person, then a Change of Control shall
occur; or
(v) Notwithstanding anything contained in this Agreement to the
contrary, if Executive's employment is terminated prior to a
Change of Control and Executive reasonably demonstrates that such
termination (i) was at the request of a third party who has
indicated an intention or taken steps reasonably calculated to
effect a Change of Control and who effectuates a Change of
Control (a "Third Party") or (ii) otherwise occurred in
connection with, or in anticipation of, a Change of Control which
actually occurs, then for all purposes of this Agreement, the
date of Change of Control with respect to Executive shall mean
the date immediately prior to the date of such termination of
Executive's employment.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "HEC" means Hallwood Energy Corporation or any successor thereto.
(e) "Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, a limited liability company, an
unincorporated organization and a government or any department or
agency thereof.
(f) "Severance Amount" shall mean $503,192.
(g) "Stock Options" shall mean options granted to Executive by HEC or its
successor to purchase stock of HEC or its successor.
2. SEVERANCE BENEFITS. If a Change of Control occurs and (i) Executive is an
employee of HEC or a subsidiary of HEC on the date of such Change of
Control or (ii) Executive's employment with HEC or a subsidiary of HEC is
involuntarily terminated other than for Cause prior to such Change of
Control, then Executive shall be entitled to receive, as additional
compensation for services rendered to HEC or its successor:
(a) A lump sum cash payment in an amount equal to Executive's Severance
Amount.
(b) Notwithstanding any provision to the contrary in any stock option
agreement, or other agreement relating to equity-type compensation
that may be outstanding between Executive and HEC, all stock options,
incentive stock options, performance shares, and stock appreciation
rights under the 1999 Long Term Incentive Plan or any other plan or
arrangement then held by Executive shall immediately become 100%
vested and exercisable, and Executive shall become 100% vested in all
shares of restricted stock held by or for the benefit of Executive;
provided, however, that to the extent HEC is unable to provide for
such acceleration of vesting, HEC shall provide in lieu thereof a
lump-sum cash payment equal to the difference between the total value
of such outstanding units, stock options, incentive stock options,
performance shares, stock appreciation rights and shares of restricted
stock (the "Stock Rights") as of the
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date of Executive's termination of employment and the total value of
the stock rights in which Executive is vested as of the date of his
termination of employment. The value of such accelerated vesting in
Executive stock rights shall be determined by the Board in good faith
based on a valuation performed by an independent consultant selected
by the Board. Notwithstanding any provision to the contrary in any
stock option agreement that may be outstanding between Executive and
HEC, Executive's right to exercise any previously unexercised options
under any such stock option agreement shall not terminate until the
latest date on which the option granted under such agreement would
expire under the terms of such agreement but for Executive's
termination of employment; provided, however, that to the extent HEC
is unable to provide for the extension of the expiration date of such
options, HEC shall provide in lieu thereof a lump-sum cash payment
equal to the value of such extension HEC is unable to provide. Such
values of such accelerated vesting and exercisability shall be
determined by the Board in good faith based on a valuation performed
by an independent consultant selected by the Board. Notwithstanding
the foregoing provisions of this paragraph, the provisions of any
option cancellation or similar agreement entered into between HEC and
Executive in connection with any negotiated merger agreement shall
apply to the transactions described in that agreement.
(c) For a period of eighteen (18) months subsequent to Executive's
termination of employment, HEC shall at its expense continue on behalf
of Executive and his dependents and beneficiaries, all medical,
dental, vision, and health benefits and insurance coverage which were
being provided to Executive at the time of termination of employment.
Executive acknowledges and agrees that this benefit and insurance
coverage continuation shall run concurrently with continuation
coverage under the Consolidated Omnibus Budget Reconciliation Act of
1985. The benefits provided in this Section 2(c) shall be no less
favorable to Executive, in terms of amounts and deductibles and costs
to him, than the coverage provided Executive under the plans providing
such benefits at the time Notice of Termination is given. HEC's
obligation hereunder to provide a benefit shall terminate if Executive
obtains comparable coverage under a subsequent employer's benefit
plan. For purposes of the preceding sentence, benefits will not be
comparable during any waiting period for eligibility for such benefits
or during any period during which there is a preexisting condition
limitation on such benefits. HEC also shall pay to Executive a lump
sum equal to the amount of any additional income tax payable by
Executive and attributable to the benefits provided under this Section
2(c) at the time such tax is imposed upon Executive. In the event that
Executive's participation in any such coverage is barred under the
general terms and provisions of the plans and programs under which
such coverage is provided, or any such coverage is discontinued or the
benefits thereunder are materially reduced, HEC shall provide or
arrange to provide Executive with benefits substantially similar to
those which Executive was entitled to receive under such coverage
immediately prior to the Notice of Termination. At the end of the
period of coverage set forth above, Executive shall have the option to
have assigned to him at no cost to Executive and with no apportionment
of prepaid premiums, any assignable insurance owned by HEC and
relating specifically to Executive.
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(d) Subject to the provisions of Sections 4 and 7(c) of this Agreement,
fifty percent of the amounts payable pursuant to Section 2(a) and
fifty percent of the consideration for the noncompetition,
confidentiality and nonsolicitation agreement in Section 5 shall be
due to the Executive as of the date on which a Change of Control
occurs. Subject to the provisions of Sections 4 and 7(c) of this
Agreement, the remaining fifty percent shall be due to Executive on
the 60th day following the date on which a Change of Control occurs
(the "Retention Date"), provided that Executive does not voluntarily
terminate employment with HEC or an affiliate prior to such date other
than by reason of death or permanent and total disability (within the
meaning of Section 22(e)(3) of the Code), or unless such voluntary
termination occurs within five days after an event giving rise to Just
Cause. For this purpose, "Just Cause" shall mean a reduction in
Executive's salary from the level in effect immediately prior to a
Change of Control or a change in the location of Executive's principal
place of employment by HEC or an affiliate by more than 25 miles from
the location where Executive was principally employed immediately
prior to the date on which a Change of Control occurs.
Any severance benefits paid pursuant to this Section will be deemed to be a
severance payment and not compensation for purposes of determining benefits
under HEC's qualified plans and shall be subject to any required tax
withholding.
3. NO MITIGATION. Executive shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment or
otherwise and no such payment shall be offset or reduced by the amount of
any compensation or benefits provided to Executive in any subsequent
employment.
4. LIMITATION ON PAYMENTS.
(a) Notwithstanding any provision in this Agreement to the contrary, if
the total amount of payments and benefits to be paid or provided to
Executive under this Agreement which are considered to be "parachute
payments" within the meaning of Section 280G of the Code, when added
to any other such "parachute payments" received by Executive from HEC
or from a member of HEC's affiliated group (as provided in Section
280G(d)(5) of the Code) or from HEC's successor or a member of such
successor's affiliated group, whether or not under this Agreement, are
in excess of the amount Executive can receive without causing HEC to
lose its deduction with respect to all or any portion of such total
amount on account of Section 280G of the Code, the amount of payments
and benefits to be paid or provided to Executive under this Agreement
which are parachute payments shall be reduced to the highest amount
which will not cause HEC to lose its deduction with respect to any
such payments and benefits on account of Section 280G of the Code.
(b) All determinations required to be made under this Section 4 shall be
made by Deloitte & Touche (the "Accounting Firm"), which shall provide
detailed supporting calculations both to HEC and Executive within 10
business days of the date of a Change of Control or such earlier time
as is requested by HEC. Any such determination by the Accounting Firm
shall be binding upon HEC and Executive.
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Within five business days after the determination by the Accounting
Firm (or, if later, the date specified in Section 7), HEC shall pay to
or distribute to or for the benefit of Executive such amounts as are
then due to Executive under this Agreement. All fees and expenses of
the Accounting Firm shall be borne solely by HEC.
(c) As a result of the uncertainty in the application of Section 280G of
the Code at the time of the initial determination by the Accounting
Firm under this Section 4, it is possible that payments will have been
made by HEC hereunder which should not have been made ("Overpayment")
or that additional payments hereunder which will not have been made by
HEC should have been made ("Underpayment"), in each case, consistent
with the calculations required to be made hereunder. In the event that
the Accounting Firm determines that an Overpayment has been made, any
such Overpayment shall be treated for all purposes as a loan to
Executive which he shall repay to HEC together with interest at the
applicable federal rate provided for in Section 7872(f)(2) of the
Code; provided, however, that no amount shall be payable by Executive
to HEC (or if paid by Executive to HEC shall be returned to Executive)
if and to the extent such payment would not reduce the amount which is
subject to taxation under Section 4999 of the Code. In the event that
the Accounting Firm determines that an Underpayment has occurred, any
such Underpayment shall be promptly paid by HEC to or for the benefit
of Executive together with interest at the applicable federal rate
provided for in Section 7872(f)(2) of the Code.
5. NONCOMPETITION, CONFIDENTIALITY, AND EMPLOYEE HIRING MORATORIUM. In
consideration of the payment by HEC to Executive of $325,000, which payment
shall be made at the time specified in Section 2(d) hereof, Executive
hereby covenants and agrees as follows:
(a) NONCOMPETITION AND CONFIDENTIALITY. Except with the prior written
consent of HEC duly authorized by its Board of Directors after the
date of a Change of Control, during the period commencing on the date
of this Agreement and ending on the date that is 12 months after the
date of Executive's termination of employment with HEC or an affiliate
(the "Restricted Period"), Executive agrees not to compete with HEC or
its affiliates for any acquisition, prospect or project that HEC, at
any time during the three-year period prior to Executive's
termination, was pursuing (other than any acquisition, prospect or
project pertaining to properties sold by HEC during the three-year
period prior to the date hereof), as evidenced by (i) HEC's or an
affiliate's expenditure of funds, (ii) a recommendation by HEC's or an
affiliate's personnel for an expenditure of funds (other than nominal
administrative expenditures), or (iii) inclusion or proposal for
inclusion in HEC's or an affiliate's capital expenditure budget, and
Executive shall hold in strict confidence and shall not, directly or
indirectly, disclose or reveal to any person, or use for his own
personal benefit or for the benefit of anyone else, any trade secrets,
confidential dealings, or other confidential or proprietary
information of any kind, nature, or description (whether or not
acquired, learned, obtained, or developed by Executive alone or in
conjunction with others) belonging to or concerning HEC or any of its
affiliates, except (i) with the prior written consent of HEC duly
authorized by its Board of
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Directors after the date of a Change of Control, (ii) for information
(x) that becomes generally available to the public other than as a
result of unauthorized disclosure by Executive or his affiliates or
(y) that becomes available to Executive on a nonconfidential basis
from a source other than HEC or its affiliates who is not bound by a
duty of confidentiality, or other contractual, legal, or fiduciary
obligation, to HEC, or (iii) as required by applicable law or legal
process. HEC agrees that after the date of Executive's termination of
employment with HEC or an affiliate, Executive may engage directly or
indirectly in the oil and gas business and may apply Executive's
knowledge, experience and opinions to those activities.
(b) EMPLOYEE HIRING MORATORIUM. During the period commencing on the date
hereof and ending on the date which is six months after the date on
which a Change of Control occurs, Executive shall not, either on
Executive's own account or for any corporation, limited liability
company, partnership or other entity or person (including, without
limitation, through any existing or future Affiliate), hire any person
who presently is an employee of HEC or any existing or future
Affiliate of HEC (whether or not he or she remains an employee of HEC
unless such employee has been involuntarily terminated by HEC).
"Affiliate," as used in this Section, means, with respect to any
person or entity, any person or entity directly or indirectly
controlling, controlled by or under direct or indirect common control
with such other person or entity, or any corporation, partnership or
other entity in which such person or entity owns an equity interest of
5% or greater.
(c) INJUNCTIVE RELIEF. Executive acknowledges that failure to comply with
this Section 5 will irreparably harm HEC's business and that the
remedy at law for any breach of this Agreement is and will be
inadequate. Therefore, in the event of a breach or threatened breach
by Executive of this Section 5, after giving Executive at least 30
days' notice of HEC's intention to seek an injunction, such notice to
include a specific description of the actions to which HEC objects and
a specific description of the actions that Executive may take to avoid
or cure such a breach, HEC shall be entitled to seek an injunction
restraining Executive from breaching or otherwise violating any
provision of this Section and/or specific performance without the
posting of bond or other security. Nothing herein contained shall be
construed as prohibiting HEC from pursuing any other remedies
available to it or them for such breach or threatened breach,
including, without limitation, the recovery of damages from Executive
if HEC has provided to Executive the notice contemplated by the
preceding sentence at least 30 days in advance of seeking such other
remedy.
(d) The parties expressly agree that the character, duration and
geographical scope of this Section are reasonable in light of the
circumstances as they exist on the date upon which this Agreement has
been executed. However, should a determination nonetheless be made by
a court of competent jurisdiction at a later date that the character,
duration or geographical scope of this Section is unreasonable in
light of the circumstances as they then exist, then it is the
intention and the agreement of HEC and Executive that this Agreement
shall be construed by the court in such a manner as to impose only
those restrictions on the conduct of HEC or Executive that are
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reasonable in light of the circumstances as they then exist and as are
necessary to assure HEC of the intended benefit of this Section.
6. TERM. This Agreement shall remain in effect until December 31, 2001. If a
Change of Control occurs while this Agreement is in effect, then after such
Change of Control, Executive shall have no obligations under this Agreement
after the expiration of the Restricted Period and HEC shall have no
obligations under this Agreement after it has made all payments required by
Section 2, and provided further that in no event shall this Agreement
require HEC to provide more than one payment of the severance and other
benefits provided for in this Agreement. Notwithstanding the foregoing,
Section 5 of this Agreement shall remain in effect for the time period(s)
specified therein and Section 7 shall survive the termination of this
Agreement. Notwithstanding any other provision of this Agreement, in the
event that the Agreement and Plan of Merger among Pure Resources, Inc.,
Pure Resources II, Inc. and HEC (the "Merger Agreement") is terminated in
accordance with its terms prior to the time that Pure Resources II, Inc.
accepts for payment and pays for, any shares of common and preferred stock
pursuant to the Merger Agreement, this Agreement shall terminate and be
deemed to be null and void, with the effect that the Change of Control
Agreement shall be deemed to have remained in effect.
7. RELEASE.
(a) GENERAL RELEASE. In consideration of the mutual promises and
undertakings in this Agreement, Executive and Executive's family
members, heirs, successors, and assigns (collectively the "Releasing
Parties") hereby release, acquit, and forever discharge any and all
claims and demands of whatever kind or character, whether vicarious,
derivative, or direct, that Executive and the other Releasing Parties,
individually, collectively, or otherwise, may now or hereafter have or
assert against: (i) HEC; (ii) any corporation, general or limited
partnership, or other entity affiliated with HEC through common
ownership; or (iii) any officer, director, partner, trustee,
fiduciary, agent, employee, representative, insurer, attorney, or any
successors and assigns of the persons or entities just named
(collectively the "Released Parties"). This General Release includes
but is not limited to any claim or demand based on any federal, state,
or local statutory or common law or constitutional provision that
applies or is asserted to apply, directly or indirectly, to the
formation, continuation, or termination of Executive's employment
relationship with HEC. Thus, Executive and the other Releasing Parties
agree to waive to the maximum extent permitted by law any claims or
demands against HEC or any of the other Released Parties such as for
wrongful discharge; unlawful employment discrimination on the basis of
age or any other form of unlawful employment discrimination;
retaliation; breach of contract (express or implied), breach of the
duty of good faith and fair dealing; violation of the public policy of
the United States, the State of Colorado, or any other state;
intentional or negligent infliction of emotional distress; tortious
interference with contract; promissory estoppel; detrimental reliance;
defamation of character; duress; negligent misrepresentation;
intentional
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misrepresentation or fraud; invasion of privacy; loss of consortium;
assault; battery; conspiracy; bad faith; negligent hiring, retention,
or supervision; any intentional or negligent act of personal injury;
any alleged act of harassment or intimidation; or any other
intentional or negligent tort; or any alleged violation of the Age
Discrimination in Employment Act; Title VII of the Civil Rights Act;
the Americans with Disabilities Act; the Family and Medical Leave Act;
the Employee Retirement Income Security Act; the Fair Labor Standards
Act; the Fair Credit Reporting Act; the Colorado Anti-Discrimination
in Employment Act; the Colorado Civil Rights Act; the Colorado Labor
Peace Act; or any other federal, state, or local statute, rule, order
or ordinance.
The effect of Executive's acceptance of this Agreement is to release,
acquit, and forever discharge any and all claims and demands of
whatever kind or character that Executive or any of the other
Releasing Parties may now have or hereafter have or assert against HEC
or any of the other Released Parties for any liability, whether
vicarious, derivative, or direct. This release includes any claims or
demands for damages (actual or punitive), back wages, future wages or
front pay, commissions, bonuses, severance benefits, medical expenses
and the costs of any counseling, reinstatement or priority placement,
promotion, accrued leave benefits, past and future medical or other
employment benefits (except as to which there is existing contractual
or vested entitlement) including contributions to any employee benefit
plans, retirement benefits (except as to which there is vested
entitlement), benefits under the 1999 Long Term Incentive Plan of
Hallwood Energy Corporation, benefits provided for under the Change of
Control Agreement, relocation expenses, compensatory damages,
injunctive relief, liquidated damages, penalties, equitable relief,
attorney's fees, costs of court, disbursements, interest, and any and
all other loss, expense, or detriment of whatever kind or character,
resulting from, growing out of, connected with, or related in any way
to the formation, continuation, or termination of Executive's
employment relationship with HEC. This General Release does not apply
to any rights or claims that arise under the Amended and Restated
Phantom Working Interest Incentive Plan of Hallwood Energy Corporation
or to any rights or claims that may arise after the date this
Agreement is executed (until such time as Executive has subsequently
renewed and ratified this Agreement by executing the Renewal and
Ratification Agreement attached hereto as Exhibit A, at which time
this General Release will not apply to any rights or claims that may
arise after the date Executive's Renewal and Ratification Agreement is
executed). Notwithstanding the foregoing, Executive does not release
any claims he or she might have for indemnification under the articles
of incorporation or bylaws of the HEC or its affiliates as of the date
of this Agreement.
(b) AUTHORITY TO EXECUTE AND INDEMNIFICATION FROM CLAIMS. Executive
represents and warrants that Executive has the authority to execute
this Agreement on behalf of all the Releasing Parties. Executive
further agrees to indemnify fully and hold harmless HEC and any of the
other Released Parties
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from any and all claims brought by the Releasing Parties or derivative
of Executive's own relating in any manner to Executive's employment or
termination of Executive's employment with Executive's on, including
the amount of any such claims HEC or any of the other Released Parties
are compelled to pay, and the costs and attorney's fees incurred in
defending against all such claims.
(c) RENEWAL AND RATIFICATION OF GENERAL RELEASE. In consideration of the
mutual promises and undertakings in this Agreement, Executive agrees
to execute the Renewal and Ratification Agreement, attached hereto as
Exhibit A, no sooner than the 60/th/ day following the date on which a
Change of Control occurs. The Renewal and Ratification Agreement shall
not become effective and enforceable until the expiration of seven
days after Executive's execution of such agreement (the "Ratification
Effective Date"). At any time before the expiration of the
Ratification Effective Date, Executive may revoke the Renewal and
Ratification Agreement by providing written notice to HEC; provided
however, that if Executive revokes the Renewal and Ratification
Agreement, Executive shall forfeit any and all rights to the amount
due to him or her on the Retention Date pursuant to Section 2(d) of
this Agreement, but this Agreement otherwise shall be valid and
enforceable. If Executive does not revoke the Renewal and Ratification
Agreement on or before the Ratification Effective Date, Executive
shall be entitled to receive the payment due to him or her under
Section 2(d) of this Agreement on the eighth day following the
execution of the Renewal and Ratification Agreement. Executive hereby
acknowledges that he or she has received and reviewed the Memorandum
For Consideration in Connection with the Renewal and Ratification
Agreement attached hereto as Exhibit B.
8. GENERAL.
(a) SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of HEC and any successor of HEC, by merger or otherwise. This
Agreement shall also be binding upon and inure to the benefit of
Executive and Executive's 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 Executive's
estate.
(b) 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.
(c) CONTROLLING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Colorado.
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(d) UNFUNDED OBLIGATION. The obligation to pay amounts under this Agreement is
an unfunded obligation of HEC and no such obligation shall create a trust
or be deemed to be secured by any pledge or encumbrance on any property of
HEC.
(e) NOT A CONTRACT OF EMPLOYMENT. This Agreement shall not be deemed to
constitute a contract of employment, nor shall any provision hereof effect
(i) the right to HEC of discharge Executive at will or (ii) the terms and
conditions of any other agreement between HEC and Executive except as
provided herein. No severance compensation shall be payable hereunder as a
result of any termination of employment before a Change of Control.
(f) NONALIENATION. No benefit payable hereunder may be assigned, pledged
or mortgaged and shall not be subject to legal process or attachment for
claims of creditors of Executive except to the extent required by
applicable law.
(g) OTHER SEVERANCE ARRANGEMENTS. If Executive is entitled to severance pay and
benefits pursuant to this Agreement following a Change of Control, the
following shall apply:
(i) The severance pay, benefits and other consideration provided for in
Sections 2 and 5 of this Agreement shall be reduced by the amount of
any other severance or termination pay to which Executive may be
entitled under any agreement with HEC or any of its Affiliates, and
(ii) Executive's entitlement to any other compensation or benefits or any
indemnification shall be determined in accordance with HEC's employee
benefit plans and other applicable programs, policies and practices or
any indemnification agreement then in effect.
(h) FEES AND EXPENSES. HEC shall pay all legal fees and related expenses
(including the costs of experts, evidence and counsel) reasonably incurred
by Executive as they become due as a result of Executive seeking to obtain
or enforce any right or benefit provided by this Agreement.
(i) NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly
given when personally delivered or sent by certified mail, return receipt
requested, postage prepaid, or overnight couriers or by facsimile,
addresses to the respective addresses and facsimile numbers last given by
each party to the other, provided that all notices to HEC shall be directed
to the attention of the Board with a copy to the Secretary of HEC. All
notices and communications shall be deemed to have been received on the
date of delivery thereof or on the third business day after the mailing
thereof, except that notice of change of address shall be effective only
upon receipt.
(j) NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit Executive's continuing or future participation in any benefit, bonus,
incentive or other
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plan or program provided by HEC (except for any severance or termination
policies, plans, programs or practices) and for which Executive may
qualify, nor shall anything herein limit or reduce such rights as Executive
may have under any other agreements with HEC (except for any severance or
termination agreements). Amounts which are vested benefits or which
Executive is otherwise entitled to receive under any plan or program of HEC
shall be payable in accordance with such plan or program, except as
explicitly modified by this Agreement.
(k) SETTLEMENT OF CLAIMS. HEC's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not
be affected by any circumstances, including, without limitations, any set-
off, counterclaim, recoupment, defense or other right which HEC may have
against Executive or others.
(l) MUTUAL NON-DISPARAGEMENT. HEC, its affiliates and subsidiaries agree
and HEC shall use its best efforts to cause their respective executive
officers and directors to agree, that they will not make or publish any
statement critical of Executive or in any way adversely affecting or
otherwise maligning Executive's reputation. Executive agrees that it will
not make or publish any statement critical of HEC, its affiliates and their
respective executive officers and directors, or in any way adversely
affecting or otherwise maligning the business reputation of any member of
HEC, its affiliates and subsidiaries and their respective officers,
directors and employees.
(m) MISCELLANEOUS. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing and signed by Executive and HEC. No waiver by either party hereto
at any time of any breach by the other party hereto of, or compliance with,
any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreement or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not
expressly set forth in this Agreement.
(n) CONSULTATION WITH AN ATTORNEY. Executive acknowledges that he or she has
been advised to and has had the opportunity to consult with an attorney
before executing this Agreement.
(o) VOLUNTARY AGREEMENT AND TIME FOR CONSIDERATION. Executive acknowledges that
he or she has read and fully understands all of the provisions of this
Agreement. Executive further acknowledges that his or her execution of this
Agreement is knowing and voluntary, and that he or she has had a reasonable
time to consider its terms.
(p) ENTIRE AGREEMENT. Executive acknowledges that none of the Released Parties
has made any promise or representation to Executive in consideration for
his or her execution of this Agreement that is not set out in this
Agreement, and that in
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executing this Agreement Executive is not relying on any such promise or
representation but instead is relying solely on his or her own judgment.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
29/th/ day of March, 2001.
"EXECUTIVE"
/s/
----------------------------------------
Xxxxxxxx X. Xxxxxx
"HEC"
HALLWOOD ENERGY CORPORATION
By: /s/
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Executive Vice President
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EXHIBIT A
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RENEWAL AND RATIFICATION AGREEMENT
----------------------------------
EXECUTIVE IS TO COMPLETE THIS RENEWAL AND RATIFICATION AGREEMENT NO SOONER THAN
THE 60/TH/ DAY FOLLOWING THE DATE ON WHICH A CHANGE OF CONTROL OCCURS.
THIS RENEWAL AND RATIFICATION AGREEMENT is entered into as of
________________, 2001, between Hallwood Energy Corporation ("HEC") and Xxxxxxxx
X. Xxxxxx ("Executive").
WHEREAS, HEC has previously entered into a separation agreement with
Executive effective as of March ___, 2001 (the "Separation Agreement"), which
provides that Executive is to execute this Renewal and Ratification Agreement as
a condition to receiving a portion of the payments due under the Separation
Agreement;
NOW, THEREFORE, HEC and the Executive hereby agree as follows:
1. General Release. In consideration of the mutual promises and undertakings
---------------
in the Separation Agreement and this Renewal and Ratification Agreement,
Executive and Executive's family members, heirs, successors, and assigns
(collectively the "Releasing Parties") hereby release, acquit, and forever
discharge any and all claims and demands of whatever kind or character,
whether vicarious, derivative, or direct, that Executive and the other
Releasing Parties, individually, collectively, or otherwise, may now or
hereafter have or assert against: (i) HEC; (ii) any corporation, general or
limited partnership, or other entity affiliated with HEC through common
ownership; or (iii) any officer, director, partner, trustee, fiduciary,
agent, employee, representative, insurer, attorney, or any successors and
assigns of the persons or entities just named (collectively the "Released
Parties"). This General Release includes but is not limited to any claim or
demand based on any federal, state, or local statutory or common law or
constitutional provision that applies or is asserted to apply, directly or
indirectly, to the formation, continuation, or termination of Executive's
employment relationship with HEC. Thus, Executive and the other Releasing
Parties agree to waive to the maximum extent permitted by law any claims or
demands against HEC or any of the other Released Parties such as for
wrongful discharge; unlawful employment discrimination on the basis of age
or any other form of unlawful employment discrimination; retaliation;
breach of contract (express or implied), breach of the duty of good faith
and fair dealing; violation of the public policy of the United States, the
State of Colorado, or any other state; intentional or negligent infliction
of emotional distress; tortious interference with contract; promissory
estoppel; detrimental reliance; defamation of character; duress; negligent
misrepresentation; intentional misrepresentation or fraud; invasion of
privacy; loss of consortium; assault; battery; conspiracy; bad faith;
negligent hiring, retention, or supervision; any intentional or negligent
act of personal injury; any alleged act of harassment or intimidation; or
any other intentional or negligent tort; or any alleged violation of the
Age Discrimination in Employment Act; Title VII of the Civil Rights Act;
the Americans with Disabilities Act; the Family and Medical Leave Act; the
Employee Retirement Income Security Act; the Fair Labor Standards Act; the
Fair Credit Reporting Act; the Colorado Anti-Discrimination in Employment
Act; the Colorado Civil Rights Act; the Colorado Labor Peace Act; or any
other federal, state or local statute, rule, order or ordinance.
The effect of Executive's acceptance of this Renewal and Ratification
Agreement is to release, acquit, and forever discharge any and all claims
and demands of whatever kind or character that Executive or any of the
other Releasing Parties may now have or hereafter have or assert against
HEC or any of the other Released Parties for any liability, whether
vicarious, derivative, or direct. This release includes any claims or
demands for damages (actual or punitive), back wages, future wages or front
pay, commissions, bonuses, severance benefits, medical expenses and the
costs of any counseling, reinstatement or priority placement, promotion,
accrued leave benefits, past and future medical or other employment
benefits (except as to which there is existing contractual or vested
entitlement) including contributions to any employee benefit plans,
retirement benefits (except as to which there is vested entitlement),
benefits under the 1999 Long Term Incentive Plan of Hallwood Energy
Corporation, benefits provided for under the Hallwood Energy Corporation
Change of Control Agreement between Executive and HEC dated June 9, 1999,
benefits provided for under the Separation Agreement (other than the second
payment to be made thereunder), relocation expenses, compensatory damages,
injunctive relief, liquidated damages, penalties, equitable relief,
attorney's fees, costs of court, disbursements, interest, and any and all
other loss, expense, or detriment of whatever kind or character, resulting
from, growing out of, connected with, or related in any way to the
formation, continuation, or termination of Executive's employment
relationship with HEC. This General Release does not apply to any rights or
claims that arise under the Amended and Restated Phantom Working Interest
Incentive Plan of Hallwood Energy Corporation or to any rights or claims
that may arise after the date this Renewal and Ratification Agreement is
executed. Notwithstanding the foregoing, Executive does not release any
claims he or she might have for indemnification under the articles of
incorporation or bylaws of the HEC or its affiliates as of the date of this
Renewal and Ratification Agreement.
2. Authority to Execute and Indemnification From Claims. Executive represents
----------------------------------------------------
and warrants that Executive has the authority to execute this Renewal and
Ratification Agreement on behalf of all the Releasing Parties. Executive
further agrees to indemnify fully and hold harmless HEC and any of the
other Released Parties from any and all claims brought by the Releasing
Parties or derivative of Executive's own relating in any manner to
Executive's employment or termination of Executive's employment with
Executive's on, including the amount of any such claims HEC or any of the
other Released Parties are compelled to pay, and the costs and attorney's
fees incurred in defending against all such claims.
3. Effective Date. This Renewal and Ratification Agreement shall not become
--------------
effective and enforceable until the expiration of seven days after its
execution (the "Ratification Effective Date"). At any time before the
expiration of the Ratification Effective Date, Executive may revoke this
Renewal and Ratification Agreement by providing written notice to HEC;
provided,
however, that if Executive revokes this Renewal and Ratification Agreement,
Executive shall forfeit any and all rights to the amount due to him or her
on the Retention Date pursuant to Section 2(d) of the Separation Agreement,
but the Separation Agreement otherwise shall be valid and enforceable. If
Executive does not revoke this Renewal and Ratification Agreement on or
before the Ratification Effective Date, Executive shall be entitled to
receive the payment due to him or her on the Retention Date under Section
2(d) of the Separation Agreement on the eighth day following the execution
of this Renewal and Ratification Agreement.
4. Consultation With an Attorney. Executive acknowledges that he or she has
-----------------------------
been advised to and has had the opportunity to consult with an attorney
before executing this Renewal and Ratification Agreement.
5. Voluntary Agreement and Time for Consideration. Executive acknowledges that
----------------------------------------------
he or she has read and fully understands all of the provisions of this
Renewal and Ratification Agreement. Executive further acknowledges that his
or her execution of this Renewal and Ratification Agreement is knowing and
voluntary, and that he or she has had at least 45 days to consider its
terms. Executive hereby acknowledges that he or she has received and
reviewed the Memorandum For Consideration in Connection with the Renewal
and Ratification Agreement attached as Exhibit B to the Separation
Agreement.
6. Entire Agreement. Executive acknowledges that none of the Released Parties
----------------
have made any promise or representation to Executive in consideration for
his or her execution of this Renewal and Ratification Agreement that is not
set out in this Renewal and Ratification Agreement, and that in executing
this Renewal and Ratification Agreement Executive is not relying on any
such promise or representation but instead is relying solely on his or her
own judgment.
IN WITNESS WHEREOF, the parties hereto have executed this Renewal and
Ratification Agreement as of _______________________, 2001.
HALLWOOD ENERGY CORPORATION
By_______________________________________
Name:____________________________
Title:___________________________
ACCEPTED AND AGREED TO:
______________________________
Signature of Executive
Date signed: ________________
EXHIBIT B
---------
MEMORANDUM FOR CONSIDERATION
IN CONNECTION WITH RENEWAL AND RATIFICATION AGREEMENT
For: Xxxxxxxx X. Xxxxxx
In connection with your consideration of the Renewal and Ratification
Agreement, this memorandum contains, as required by law, certain information
regarding (i) the individuals covered by Separation Agreements between Hallwood
Energy Corporation and its officers, any eligibility factors, and any time
limits; and (ii) the job titles and ages of all individuals eligible for the
benefits provided under the Separation Agreements.
All officers of Hallwood Energy Corporation are covered by and eligible for
the benefits provided under the Separation Agreements. To receive all of the
payments under the Separation Agreement, each officer is required to sign the
Separation Agreement; each officer (other than the Chairman and CEO and the
President and COO) may not voluntarily terminate their employment for a period
of 60 days following a Change of Control other than by reason of death or
disability or with Just Cause; sign the Renewal and Ratification Agreement no
sooner than the 60/th/ day following the date on which a Change of Control
occurs; and not revoke his execution of the Renewal and Ratification Agreement.
The payments for each individual are contingent on the Change of Control.
The following lists by job titles and ages all individuals who are covered
by and eligible for the benefits provided under the Separation Agreements:
----------------------------------------------------
Job Title Age
----------------------------------------------------
Chairman and CEO 55
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President and COO 56
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Executive Vice President 45
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Vice President, Secretary and General Counsel 47
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Vice President and COO 44
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Vice President of Exploration 58
----------------------------------------------------
Vice President of Business Development 48
----------------------------------------------------
If you do not understand this information or need additional information,
you should contact Xxxxxxxx Xxxxxxx at (000) 000-0000.
