SEVERANCE AGREEMENT
AGREEMENT between SEAGULL ENERGY CORPORATION, a Texas corporation
(the "Company"), and Xxxxx X. Xxxxxxx ("Executive"),
W I T N E S S E T H :
WHEREAS, the Company desires to retain certain key employee personnel
and, accordingly, the Board of Directors of the Company (the "Board") has
approved the Company entering into a severance agreement with Executive in order
to encourage his continued service to the Company; and
WHEREAS, Executive is prepared to commit such services in return for
specific arrangements with respect to severance compensation and other benefits;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the Company and Executive agree as follows:
1. Definitions.
(a) "Change in Duties" shall mean the occurrence, within two
years after the date upon which a Change of Control occurs, of any one or more
of the following:
(i) A significant reduction in the duties of
Executive from those applicable to him immediately prior to the date on
which a Change of Control occurs;
(ii) A reduction in Executive's annual salary or
target opportunity under any applicable bonus or incentive compensation
plan from that provided to him immediately prior to the date on which a
Change of Control occurs;
(iii) Receipt of employee benefits (including but not
limited to medical, dental, life insurance, accidental, death, and
dismemberment, and long-term disability plans) and perquisites by
Executive that are materially inconsistent with the employee benefits
and perquisites provided by the Company to executives with comparable
duties;
(iv) A change in the location of Executive's
principal place of employment by the Company by more than 50 miles from
the location where he was principally employed immediately prior to the
date on which a Change of Control occurs; or
(v) A termination encompassed by paragraph 2.3(i) of
the Employment Agreement dated August 25, 1998, between Executive and
the Company.
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(b) "Change of Control" means the occurrence of either of the
following events:
(i) The Company (A) shall not be the surviving entity
in any merger, consolidation or other reorganization (or survives only
as a subsidiary of an entity other than a previously wholly-owned
subsidiary of the Company) or (B) is to be dissolved and liquidated,
and as a result of or in connection such transaction, the persons who
were directors of the Company before such transaction shall cease to
constitute a majority of the Board;
(ii) Any person or entity, including a "group" as
contemplated by Section 13(d)(3) of the Securities Exchange Act of
1934, as amended, acquires or gains ownership or control (including,
without limitation, power to vote) of 20% or more of the outstanding
shares of the Company's voting stock (based upon voting power), and as
a result of or in connection with such transaction, the persons who
were directors of the Company before such transaction shall cease to
constitute a majority of the Board; or
(iii) The Company sells all or substantially all of
the assets of the Company to any other person or entity (other than a
wholly-owned subsidiary of the Company) in a transaction that requires
shareholder approval pursuant to the Texas Business Corporation Act.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Compensation" shall mean the greater of:
(i) Executive's annual salary plus his Targeted EIP
Award immediately prior to the date on which a Change of Control
occurs, or
(ii) Executive's annual salary plus his Targeted EIP
Award at the time of his Involuntary Termination.
(e) "EIP" shall mean the Seagull Energy Corporation Executive
Incentive Plan or any successor thereto.
(f) "Involuntary Termination" shall mean any termination of
Executive's employment with the Company which:
(i) does not result from a resignation by Executive
(other than a resignation pursuant to clause (ii) of this subparagraph
(f) or a resignation at the request of the Company); or
(ii) results from a resignation by Executive on or
before the date which is sixty days after the date upon which Executive
receives notice of a Change in Duties;
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provided, however, the term "Involuntary Termination" shall not include a
Termination for Cause or any termination as a result of death, disability under
circumstances entitling him to benefits under the Company's long-term disability
plan, or Retirement.
(g) "Retirement" shall mean Executive's voluntary resignation
on or after the date he reaches age sixty-five (other than a resignation within
sixty days after the date Executive receives notice of a Change in Duties or a
resignation at the request of the Company).
(h) "Severance Amount" shall mean an amount equal to 2.99
times Executive's Compensation, reduced by the present value of any salary
continuation or bonus amounts payable to Executive under the Employment
Agreement between the Company and the Executive dated August 25, 1998 or any
successor thereto. Such present value shall be determined using the rate of
interest referred to in Paragraph 4 hereof as of the last day of Executive's
employment with the Company.
(i) "Targeted EIP Award" shall mean Executive's Incentive
Target as set forth under the EIP in effect for the year with respect to which
such award is being determined, if any, or for the last preceding year in which
an EIP was in effect, expressed as a dollar amount based on such Executive's
annual salary for such year.
(j) "Termination for Cause" shall mean termination of
Executive's employment by the Company (or its subsidiaries) by reason of
Executive's gross negligence, gross neglect or willful misconduct in the
performance of his duties or Executive's final conviction of a felony or of a
misdemeanor involving moral turpitude, excluding misdemeanor convictions
relating to the operation of a motor vehicle.
(k) "Welfare Benefit Coverages" shall mean the medical,
dental, life insurance, accidental death and dismemberment and long-term
disability coverages provided by the Company to its active employees.
2. Services. Executive agrees that he will render services to the
Company (as well as any subsidiary thereof or successor thereto) during the
period of his employment to the best of his ability and in a prudent and
businesslike manner.
3. Severance Benefits. If Executive's employment by the Company or any
subsidiary thereof or successor thereto shall be subject to an Involuntary
Termination which occurs within two years after the date upon which a Change of
Control occurs, then Executive shall be entitled to receive, as additional
compensation for services rendered to the Company (including its subsidiaries),
the following severance benefits:
(a) A lump sum cash payment in an amount equal to Executive's
Severance Amount.
(b) A lump sum cash payment in an amount equal to the
remaining portion of any award to Executive under any prior years' EIP.
Further, if Executive's Involuntary Termination
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occurs on or after the date an award has been earned under the EIP, but prior to
the date such award is paid, Executive shall receive an additional lump sum cash
payment in an amount equal to his Targeted EIP Award.
(c) Executive shall be entitled to continue the Welfare
Benefit Coverages for himself and, where applicable, his eligible dependents
following his Involuntary Termination for up to thirty-six months, as long as
Executive continues either to pay the premiums paid by active employees of the
Company for such coverages or to pay the actual (nonsubsidized) cost of such
coverages for which the Company does not subsidize for active employees. Such
benefit rights shall apply only to those Welfare Benefit Coverages which the
Company has in effect from time to time for active employees, and the applicable
payments shall adjust as premiums for active employees of the Company or actual
costs, whichever is applicable, change. Welfare Benefit Coverage(s) shall
immediately end upon Executive's obtainment of new employment and eligibility
for similar Welfare Benefit Coverage(s) (with Executive being obligated
hereunder to promptly report such eligibility to the Company). Nothing herein
shall be deemed to adversely affect in any way the additional rights, after
consideration of this extension period, of Executive and his eligible dependents
to health care continuation coverage as required pursuant to Part 6 of Title I
of the Employee Retirement Income Security Act of 1974, as amended.
(d) Executive shall be entitled to receive out-placement
services in connection with obtaining new employment up to a maximum cost of
$6,000, or an equivalent cash payment, if Executive either has or is not seeking
new employment.
(e) The severance benefits payable under this Agreement shall
be paid to an Executive on or before the fifth day after the last day of
Executive's employment with the Company. Any severance benefits paid pursuant to
this Paragraph will be deemed to be a severance payment and not compensation for
purposes of determining benefits under the Company's qualified plans and shall
be subject to any required tax withholding.
4. Interest on Late Benefit Payments. If any payment provided for in
Paragraph 3(a) or 3(b) hereof is not made when due, the Company shall pay to
Executive interest on the amount payable from the date that such payment should
have been made under such paragraph until such payment is made, which interest
shall be calculated at a rate equal to two percentage points over the prime or
base rate of interest announced by Chase Bank of Texas, N.A. (or any successor
thereto) at its principal office in Houston, Texas and shall change when and as
any such change in such prime or base rate shall be announced by such bank.
5. Certain Additional Payments by the Company. Notwithstanding anything
to the contrary in this Agreement, in the event that any payment or distribution
by the Company to or for the benefit of Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties with respect to such excise tax
(such excise tax, together with any such interest or penalties, are hereinafter
collectively referred to as the "Excise Tax"), the Company shall pay to
Executive an additional payment (a "Gross-up Payment") in an amount such that
after payment by Executive of all taxes (including any interest or penalties
imposed
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with respect to such taxes), including any Excise Tax imposed on any Gross-up
Payment, Executive retains an amount of the Gross-up Payment equal to the Excise
Tax imposed upon the Payment. The Company and Executive shall make an initial
determination as to whether a Gross-up Payment is required and the amount of any
such Gross-up Payment. Executive shall notify the Company in writing of any
claim by the Internal Revenue Service which, if successful, would require the
Company to make a Gross-up Payment (or a Gross-up Payment in excess of that, if
any, initially determined by the Company and Executive) within ten days of the
receipt of such claim. The Company shall notify Executive in writing at least
ten days prior to the due date of any response required with respect to such
claim if it plans to contest the claim. If the Company decides to contest such
claim, Executive shall cooperate fully with the Company in such action;
provided, however, the Company shall bear and pay directly or indirectly all
costs and expenses (including additional interest and penalties) incurred in
connection with such action and shall indemnify and hold Executive harmless, on
an after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of the Company's action. If,
as a result of the Company's action with respect to a claim, Executive receives
a refund of any amount paid by the Company with respect to such claim, Executive
shall promptly pay such refund to the Company. If the Company fails to timely
notify Executive whether it will contest such claim or the Company determines
not to contest such claim, then the Company shall immediately pay to Executive
the portion of such claim, if any, which it has not previously paid to
Executive.
6. General.
(a) Term. The effective date of this Agreement is August 25,
1998. The initial term of this Agreement shall be the period beginning on said
effective date and ending on the two-year anniversary of said effective date.
Within sixty days after the expiration of this Agreement 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
before the end of 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-day time period shall
be considered as an extension of this Agreement for an additional two-year
period of time. Notwithstanding anything to the contrary contained in this
"sunset provision," it is agreed that if a Change of Control occurs while this
Agreement is in effect, then this Agreement shall not be subject to termination
or modification under this "sunset provision," and shall remain in force for a
period of two years after such Change of Control, and if within said two years
the contingency factors occur which would entitle Executive to the benefits as
provided herein, this Agreement shall remain in effect in accordance with its
terms. If, within such two years after a Change of Control, the contingency
factors that would entitle Executive to said benefits do not occur, thereupon
this two-year "sunset provision" shall again be applicable with the sixty-day
time period for Board action to thereafter commence at the expiration of said
two years after such Change of Control and on each two-year anniversary date
thereafter.
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(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 a rate equal to two percentage points over
the prime or base rate of interest announced by Chase Bank of Texas, N.A. (or
any successor thereto) at its principal office in Houston, Texas, and shall
change when and as any such change in such prime or base rate shall be announced
by such bank.
(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
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case of the Company, such notices or communications shall be effectively
delivered if sent by registered or certified mail to the Company at its
principal executive offices.
(h) Controlling Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas. Further, Executive
agrees that any legal proceeding to enforce the provisions of this Agreement
shall be brought in Houston, Xxxxxx County, Texas, and hereby waives his right
to any pleas regarding subject matter or personal jurisdiction and venue.
(i) Release. As a condition to the receipt of any benefit
under Paragraph 3 hereof, Executive shall first execute a release, in the form
established by the Company, releasing the Company, its shareholders, partners,
officers, directors, employees and agents from any and all claims and from any
and all causes of action of any kind or character, including but not limited to
all claims or causes of action arising out of Executive's employment with the
Company or, with the exception of rights provided in any other agreement between
the Company and Executive, 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, except such claims as may be asserted pursuant to any other
agreement between the Company and Executive.
(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, subject to the terms of any other agreement between the Company (or its
subsidiaries) and Executive, 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.
(n) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which together will constitute one and the same Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the 25th day of August, 1998.
"EXECUTIVE"
/s/Xxxxx X. Xxxxxxx
"COMPANY"
SEAGULL ENERGY CORPORATION
By: /s/Xxxxxxx X. Xxxxxxxx
Name: Xxxxxxx X. Xxxxxxxx
Title: Senior Vice President and
Chief Financial Officer
VEHOU02:117215.1
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