RETENTION AGREEMENT
BETWEEN
XXXXX XXXXXXX NATURAL GAS CORP.
AND
T. XXXXX XXXXXX
TABLE OF CONTENTS
ARTICLE I. CERTAIN DUTIES.................................................. 1
ARTICLE II. ADJUSTMENTS FOR CERTAIN PAYMENTS................................ 3
ARTICLE III. MISCELLANEOUS................................................. 4
SECTION 3.1 NO OFFSET; ENFORCEMENT OF AGREEMENT...................... 4
SECTION 3.2 ASSIGNMENT BY THE EXECUTIVE; SUCCESSORS.................. 5
SECTION 3.3 WAIVER................................................... 5
SECTION 3.4 NOTICE................................................... 6
SECTION 3.5 APPLICABLE LAW........................................... 6
SECTION 3.6 TAXES.................................................... 6
SECTION 3.7 ENTIRE AGREEMENT......................................... 6
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RETENTION AGREEMENT
RETENTION AGREEMENT, dated as of the 24th day of June, 1997 (the
"Agreement"), by and between XXXXX XXXXXXX NATURAL GAS CORP., an Oklahoma
corporation having its principal place of business at 00000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxx 000, Xxxxxxxx Xxxx, Xxxxxxxx (the "Corporation") and T. XXXXX
XXXXXX, an individual residing at 000 Xxxxx Xxxxxx, Xxxxxxx, Xxxxx 00000 (the
"Executive").
WITNESSETH THAT:
WHEREAS, the Executive is currently serving as Vice President -
Corporate Finance and Corporate Secretary of American Exploration Company, a
Delaware corporation ("American");
WHEREAS, pursuant to the Agreement and Plan of Reorganization, dated
as of June 24, 1997 (the "Merger Agreement"), by and among the Corporation, LDNG
Acquisition, Inc. and American, the parties thereto have agreed to a merger (the
"Merger") pursuant to the terms thereof;
WHEREAS, the Corporation has determined that it is essential to the
best interests of the Corporation, its subsidiaries and affiliates, as well as
to the success of the Merger, to xxxxxx the continued employment of certain key
officers of American pending consummation of the Merger and for a transition
period thereafter; and
WHEREAS, in connection with the Merger the parties hereto desire to
enter into this Agreement, to be effective upon the consummation of the Merger.
NOW, THEREFORE, in consideration of the mutual premises, covenants
and agreements herein contained, the parties hereto agree as follows:
ARTICLE I. CERTAIN DUTIES
This Agreement shall become effective as of the Effective Time of
the Merger (as defined in the Merger Agreement) (the "Effective Date").
Following the Effective Date, the Executive's duties shall include assisting the
Corporation in connection with the integration of the Corporation and American.
If the Corporation elects to terminate the Executive's employment other than for
"Cause" (as defined below) prior to the first anniversary of the Effective Date,
the Corporation shall engage the Executive as a consultant to the Corporation
for a period (the "Consulting Period") commencing on the date of termination
(the "Consulting Commencement Date") and ending on the first anniversary of the
Effective Date. The Executive's services hereunder during the Consulting Period
shall consist of, in addition to the services described in the first sentence of
this paragraph, such consulting and advisory services, and shall be provided at
such times and on such other terms and conditions, as may be agreed upon from
time to time between the Executive and the Corporation. As compensation for the
consulting services to be performed by the Executive hereunder during the
Consulting Period, the
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Executive shall be paid a fee (the "Consulting Fee") at an annual rate equal to
his annual base salary as of the time of termination of the Executive's
employment payable in monthly installments. In the event of the Executive's
death prior to the end of the Consulting Period, the Consulting Fee shall
continue to be paid to the beneficiaries designated by the Executive. If no
beneficiary is designated by the Executive or if none shall survive the
Executive, then the Consulting Fee shall be paid to the Executive's surviving
spouse, if any, or if no such surviving spouse exists, to the Executive's
estate.
If the Corporation elects to terminate the Executive's employment
other than for Cause or the Executive resigns, the Executive shall be entitled
to (a) reimbursement of COBRA payments to maintain medical and dental insurance
up to 18 additional months for said coverage and (b) the use of one or more
executive out-placement services, designated by the Executive and paid for by
the Corporation.
For purposes of this Agreement, "Cause" shall mean:
(i) The willful and continued failure of the Executive to perform
substantially the Executive's duties with the Corporation (other than any such
failure resulting from incapacity due to physical or mental illness), after a
written demand for substantial performance is delivered to the Executive by the
Board of Directors of the Corporation (the "Board"), which demand shall
specifically identify the manner in which the Board believes that the Executive
has not substantially performed the Executive's duties, or
(ii) The willful engaging by the Executive in illegal conduct or
gross misconduct in connection with the performance of his duties hereunder
which is materially injurious to the Corporation.
For purposes of this provision, no act or failure to act, on the
part of the Executive, shall be considered "willful" unless it is done, or
omitted to be done, by the Executive in bad faith or without reasonable belief
that the Executive's action or omission was in the best interests of the
Corporation. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board or upon the instructions of any senior
officer of the Corporation or based upon the advice of counsel for the
Corporation shall be conclusively presumed to be done, or omitted to be done, by
the Executive in good faith and in the best interests of the Corporation. The
cessation of employment of the Executive shall not be deemed to be for Cause
unless and until there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board at a meeting of the Board called and held
for such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above and specifying
the particulars thereof in detail.
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If within two years after the Effective Date the Corporation
terminates the Executive's employment other than for Cause or the Executive
resigns, and within one year thereafter the Executive sells his current
residence and moves away from Houston, Texas, then, the Corporation will pay the
Executive $25,000 for relocation costs and will reimburse the Executive for the
loss, if any, the Executive realizes as a result of the sale of his current
residence up to a maximum of $25,000.
ARTICLE II. ADJUSTMENTS FOR CERTAIN PAYMENTS
For purposes of this Article II, (i) "Payment" shall mean any
payment or distribution in the nature of compensation to or for the benefit of
the Executive, whether paid or payable pursuant to this Agreement or otherwise;
(ii) "Agreement Payment" shall mean a Payment paid or payable pursuant to this
Agreement (disregarding this Article II); (iii) "Net After Tax Receipt" shall
mean the Present Value (as defined below) of a Payment net of all federal, state
and local taxes imposed on the Executive with respect thereto, including the tax
imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), determined by applying the highest applicable marginal rates which
apply to the Executive's taxable income; (iv) "Present Value" shall mean such
value determined in accordance with Section 280G(d)(4) of the Code; and (v)
"Reduced Amount" shall mean the largest aggregate amount of Agreement Payments
which (a) is less than the sum of all Agreement Payments and (b) results in
aggregate Net After Tax Receipts which are equal to or greater than the Net
After Tax Receipts which would result if the aggregate Agreement Payments were
made.
Anything in this Agreement to the contrary notwithstanding, in the
event a national certified public accounting firm designated by the Executive
(the "Accounting Firm") shall determine that receipt of all Payments would
subject the Executive to tax under Section 4999 of the Code, it shall determine
whether some amount of Agreement Payments would meet the definition of a
"Reduced Amount." If said firm determines that there is a Reduced Amount, the
aggregate Agreement Payments shall be reduced to such Reduced Amount. The
aggregate amount by which the Agreement Payments are reduced to arrive at the
Reduced Amount shall be referred to as the "Foregone Amount."
If the Accounting Firm determines that aggregate Agreement Payments
should be reduced to the Reduced Amount, the Corporation shall promptly give the
Executive notice to that effect and a copy of the detailed calculation thereof,
and the Executive may then elect, in his sole discretion, which and how much of
the Agreement Payments shall be eliminated or reduced (as long as after such
election the Present Value of the aggregate Agreement Payments equals the
Reduced Amount), and shall advise the Corporation in writing of his election
within ten days of his receipt of notice. If no such election is made by the
Executive within such ten-day period, the Corporation may elect which of such
Agreement Payments shall be eliminated or reduced (as long as after such
election the Present Value of the aggregate Agreement Payments equals the
Reduced Amount) and shall notify the Executive promptly of such election. All
determinations made by the Accounting Firm under this Article II shall be
binding upon the Corporation and the
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Executive. As promptly as practicable following such determination, the
Corporation shall pay to, or distribute for the benefit of, the Executive such
Agreement Payments as are then due to the Executive under this Agreement and
shall promptly pay to or distribute for the benefit of the Executive in the
future such Agreement Payments as become due to the Executive under this
Agreement.
While it is the intention of the Corporation and the Executive to
reduce the amounts payable or distributable to the Executive hereunder only if
the aggregate Net After Tax Receipts to the Executive would thereby be
increased, as a result of the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that amounts will have been paid or distributed by the
Corporation to or for the benefit of the Executive pursuant to this Agreement
which should not have been so paid or distributed ("Overpayment") or that
additional amounts which will have not been paid or distributed by the
Corporation to or for the benefit of the Executive pursuant to this Agreement
could have been so paid or distributed ("Underpayment"), in each case,
consistent with the calculation of the Reduced Amount hereunder. In the event
that the Accounting Firm, based either upon the assertion of a deficiency by the
Internal Revenue Service against the Corporation or the Executive which the
Accounting Firm believes has a high probability of success or otherwise,
determines that an Overpayment has been made, any such overpayment paid or
distributed by the Corporation to or for the benefit of the Executive shall be
treated for all purposes as a loan to the Executive which the Executive shall
repay to the Corporation together with interest at the applicable federal rate
provided for in Section 7872(f)(2) of the Code; provided, however, that no such
loan shall be deemed to have been made and no amount shall be payable by the
Executive to the Corporation if and to the extent such deemed loan and payment
would not either reduce the amount on which the Executive is subject to tax
under Section 1 and Section 4999 of the Code or generate a refund of such taxes.
In the event that the Accounting Firm determines that an Underpayment has
occurred, any such Underpayment shall be promptly paid by the Corporation to or
for the benefit of the Executive together with interest at the applicable
federal rate provided for in Section 7872(f)(2) of the Code.
Notwithstanding the foregoing, at the election of the Executive, the
Reduced Amount shall be the largest amount of Agreement Payments which may be
made without causing any Payment to be subject to tax under Section 4999 of the
Code.
ARTICLE III. MISCELLANEOUS.
SECTION 3.1 NO OFFSET; ENFORCEMENT OF AGREEMENT.
The Corporation's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Corporation may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the
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Executive under any of the provisions of this Agreement and such amounts shall
not be reduced whether or not the Executive obtains other employment. The
Corporation agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Corporation, the
Executive or others of the validity or enforceability of, or liability under,
any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus in each case interest on any delayed
payment at the applicable federal rate provided for in Section 7872(f)(2) of the
Code and amounts sufficient to reimburse the Executive for all tax liabilities
due in respect of such payments of legal fees and expense, provided, however, if
an action brought by the Executive, or if the Executive's defense of an action
brought by the Corporation, is finally determined to be without merit by a court
of competent jurisdiction, the Executive shall refund amounts paid by the
Corporation for legal fees, taxes and interest pursuant to this Section 3.1.
SECTION 3.2 ASSIGNMENT BY THE EXECUTIVE; SUCCESSORS.
(a) This Agreement is personal to the Executive and without the
prior written consent of the Corporation shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) Except as is otherwise herein expressly provided, this Agreement
shall inure to the benefit of and be binding upon the Corporation, its
successors and assigns, and upon the Executive, his spouse, heirs, executors and
administrators, provided, however, that the obligations of the Executive
hereunder shall not be delegated.
(c) The Corporation will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform it if no such
succession had taken place. As used in this Agreement, "Corporation" shall mean
Corporation as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
SECTION 3.3 WAIVER.
Failure of either party hereto to insist upon strict compliance by
the other party with any term, covenant or condition hereof shall not be deemed
a waiver of such term, covenant or condition, nor shall any waiver or
relinquishment or failure to insist upon strict compliance of any right or power
hereunder at any one time or more times be deemed a waiver or relinquishment of
such right or power at any other time or times.
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SECTION 3.4 NOTICE.
Any notice required or desired to be given pursuant to this
Agreement shall be sufficient if in writing sent by registered or certified mail
to the addresses hereinafter set forth above or to such other address as any
party hereto may designate in writing, transmitted by hand delivery or by
registered or certified mail to the other.
SECTION 3.5 APPLICABLE LAW.
This Agreement shall be governed by the laws of the State of Texas,
without giving effect to the conflicts of laws principles thereof.
SECTION 3.6 TAXES.
The Corporation may deduct from all amounts paid under this
Agreement all federal, state, local and other taxes required by law to be
withheld with respect to such payments.
SECTION 3.7 ENTIRE AGREEMENT.
The parties hereto agree that this Agreement and the Merger
Agreement (and, to the extent benefits or rights are otherwise affected by this
Agreement, any employee benefit plan maintained or sponsored by American or the
Corporation, as the case may be) contains the entire understanding and agreement
between them and supersedes all previous agreements and arrangements, if any,
relating to the subject matter hereof. Notwithstanding the foregoing, in the
event that the Merger Agreement is terminated, then at the time of such
termination, this Agreement shall be deemed canceled and of no force or effect
and the Executive shall continue to be subject to such agreements and
arrangements that were in effect prior to the execution of the Merger Agreement.
This Agreement shall not be amended, modified or supplemented in any respect
except by an agreement in writing signed by the Executive and the Corporation.
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IN WITNESS WHEREOF, the Corporation and the Executive have duly
executed this Agreement as of the day and the year first above written.
XXXXX XXXXXXX NATURAL GAS CORP.
By:
-------------------------------------
Name:
Title:
EXECUTIVE
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T. Xxxxx Xxxxxx
