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EXHIBIT 10.8
SEVERANCE AGREEMENT
THIS AGREEMENT, dated May 10, 1998, is made by and between
Conoco Inc., a Delaware corporation (the "Company"), and Xxxxxx X. Xxxxxx (the
"Executive").
WHEREAS, the Company considers it essential to its best
interests to xxxxxx the continued employment of the Executive; and
WHEREAS, the Board recognizes that the possibility of a Change
in Control exists and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of management personnel to the detriment of the Company and its stockholders;
and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including the Executive, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the Company and the Executive hereby agree
as follows:
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1. Defined Terms. The definitions of capitalized terms used
in this Agreement are provided in the last Section hereof.
2. Term of Agreement. The Term of this Agreement shall
commence on the date hereof and shall continue in effect through the third
anniversary thereof; provided, however, that if a Change in Control shall have
occurred during the Term, the Term shall be extended and shall expire no
earlier than twenty-four (24) months beyond the month in which such Change in
Control occurred; and provided, further, that if a Public Offering shall have
occurred during the Term, the Term shall be extended and shall expire no
earlier than twenty-four (24) months beyond the month in which such Public
Offering occurred.
3. Company's Covenants. In order to induce the Executive to
remain in the employ of the Company and in consideration of the Executive's
covenants set forth in Section 4 hereof, the Company agrees, under the
conditions described herein, to pay the Executive the Severance Payments and
the other payments and benefits described herein.
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4. The Executive's Covenants. The Executive agrees that,
subject to the terms and conditions of this Agreement, in the event of a
Potential Change in Control during the Term, the Executive will remain in the
employ of the Company until the earliest of (i) a date which is six (6) months
from the date of such Potential Change in Control, (ii) the date of a Change in
Control, (iii) the date of termination by the Executive of the Executive's
employment for Good Reason or by reason of death or Disability, or (iv) the
termination by the Company of the Executive's employment for any reason.
5. Compensation Other Than Severance Payments.
5.1 During the Term, during any period that the Executive
fails to perform the Executive's full-time duties with the Company as a result
of incapacity due to physical or mental illness, the Company shall pay the
Executive's full salary to the Executive at the rate in effect at the
commencement of any such period, together with all compensation and benefits
payable to the Executive under the terms of any compensation or benefit plan,
program or arrangement maintained by the Company during such period, until the
Executive's employment is terminated by the Company for Disability.
5.2 If the Executive's employment shall be terminated for any
reason during the Term, the Company shall pay the Executive's full salary to
the Executive
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through the Date of Termination at the rate in effect immediately prior to the
Date of Termination, together with all compensation and benefits payable to the
Executive or accrued by the Executive through the Date of Termination under the
terms of the Company's compensation and benefit plans, programs or arrangements
as in effect immediately prior to the Date of Termination.
6. Severance Payments.
6.1 If the Executive's employment is terminated during the
Term either (i) by the Executive following a Special Termination Event or with
Good Reason, or (ii) by the Company other than (a) for Cause, (b) by reason of
death or (c) by reason of Disability, then the Company shall pay the Executive
the amounts, and provide the Executive the benefits, described in this Section
6.1 ("Severance Payments") and Section 6.2, in addition to any payments and
benefits to which the Executive is entitled under Section 5 hereof. For
purposes of this Agreement, the Executive's employment shall be deemed to have
been terminated following a Change in Control by the Executive with Good
Reason, if the Executive terminates his employment for Good Reason following a
Potential Change in Control and prior to a Change in Control (whether or not a
Change in Control ever occurs) and the
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circumstance or event which constitutes Good Reason occurs at the request or
direction of a Person who has entered into a written agreement with the Company
or an Affiliate of the Company, or made a public announcement relating to a
transaction, the consummation of which would constitute a Change in Control.
(A) In lieu of any further salary payments
to the Executive for periods subsequent to the Date of Termination and
in lieu of any severance benefit otherwise payable to the Executive,
the Company shall pay to the Executive a lump sum severance payment,
in cash, equal to three (3) times the sum of (i) the Executive's base
salary as in effect immediately prior to the Date of Termination
(without regard to any reductions thereto which constitute Good
Reason), and (ii) the annual bonus earned by the Executive pursuant to
any annual bonus or incentive plan maintained by the Company in
respect of the fiscal year ending immediately prior to the fiscal year
in which occurs the Date of Termination.
(B) For the 36 month period immediately
following the Date of Termination, the Company shall arrange to
provide the Executive and his dependents life, disability, accident
and health
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insurance benefits substantially similar to those provided to the
Executive and his dependents immediately prior to the Date of
Termination, at no greater cost to the Executive than the cost to the
Executive immediately prior to such date. Benefits otherwise
receivable by the Executive pursuant to this Section 6.1 (B) shall be
reduced to the extent benefits of the same type are received by or
made available to the Executive during the 36 month period following
the Executive's termination of employment (and any such benefits
received by or made available to the Executive shall be reported to
the Company by the Executive); provided, however, that the Company
shall reimburse the Executive for the excess, if any, of the cost of
such benefits to the Executive over such cost immediately prior to the
Date of Termination.
(C) Notwithstanding any provision of the
Company's annual incentive plan to the contrary, the Company shall pay
to the Executive a lump sum amount, in cash, equal to a pro rata
portion to the Date of Termination of the aggregate value of the
annual incentive compensation award to the Executive for the then
uncompleted fiscal year,
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under such plan, calculated by multiplying the award earned by the
Executive during the most recent completed fiscal year, by the
fraction obtained by dividing the number of full months and any
fractional portion of a month during such fiscal year through the Date
of Termination by twelve.
(D) With respect to any of the Executive's
options or other equity based awards which relate to securities of the
Parent, the Executive shall be treated as having retired from the
Parent as of the Date of Termination for the purposes of all
applicable option and other equity based award plans and agreements.
With respect to any of the Executive's options or other equity based
awards which relate to securities of the Company, all such options and
other equity based awards shall become fully vested and, where
applicable, exercisable as of the Date of Termination and any option
shall remain exercisable for the remainder of its original term.
6.2 (A) If the Executive becomes entitled to the
Severance Payments, then if any of the payments or benefits received or
to be received by the Executive (whether pursuant to the terms of this
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Agreement or any other plan, arrangement or agreement with the
Company, any Person whose actions result in a Change in Control or any
Person affiliated with the Company or such Person) (such payments or
benefits, excluding the Gross-Up Payment, being hereinafter referred
to as the "Total Payments") will be subject to the Excise Tax, the
Company shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Executive, after
deduction of any Excise Tax on the Total Payments and any federal,
state and local income and employment taxes and Excise Tax upon the
Gross-Up Payment, shall be equal to the Total Payments.
(B) In the event that the Excise Tax is finally
determined to be less than the amount taken into account hereunder in
calculating the Gross-Up Payment, the Executive shall repay to the
Company, within five (5) business days following the time that the
amount of such reduction in the Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction, plus
interest on the amount of such repayment at 120% of the rate provided
in section 1274(b)(2)(B) of the Code.
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In the event that the Excise Tax is determined to exceed the amount
taken into account hereunder in calculating the Gross-Up Payment
(including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company
shall make an additional Gross-Up Payment in respect of such excess
(plus any interest, penalties or additions payable by the Executive
with respect to such excess) within five (5) business days following
the time that the amount of such excess is finally determined. The
Executive and the Company shall each reasonably cooperate with the
other in connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax with
respect to the Total Payments.
6.3 The payments provided in subsections (A) and (C) of
Section 6.1 hereof and in Section 6.2 hereof shall be made not later than the
tenth business day following immediately following the expiration of the
revocation period, if any, applicable to the Executive's release, described in
Section 6.5; provided, however, that if the amounts of such payments cannot be
finally determined on or before such day, the Company shall pay
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to the Executive on such day an estimate, as determined in good faith by the
Company of the minimum amount of such payments to which the Executive is
clearly entitled and shall pay the remainder of such payments (together with
interest on the unpaid remainder (or on all such payments to the extent the
Company fails to make such payments when due) at 120% of the rate provided in
section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined. In the event that the amount of the estimated payments exceeds the
amount subsequently determined to have been due, such excess shall constitute a
loan by the Company to the Executive, payable on the fifth (5th) business day
after demand by the Company (together with interest at 120% of the rate
provided in section 1274(b)(2)(B) of the Code).
6.4 The Company also shall pay to the Executive all legal
fees and expenses incurred by the Executive in successfully (whether such
success is full or partial) seeking to obtain or enforce any benefit or right
provided by this Agreement.
6.5 Notwithstanding anything in this Agreement to the
contrary, the Executive shall not be entitled to receive Severance Payments or
other benefits pursuant to this Agreement unless he shall have executed a
written release substantially in the form attached as Exhibit A hereto.
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7. Termination Procedures and Compensation During Dispute.
7.1 Notice of Termination. During the Term, any purported
termination of the Executive's employment (other than by reason of death) shall
be communicated by written Notice of Termination from one party hereto to the
other party hereto in accordance with Section 10 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated.
7.2 Date of Termination. "Date of Termination," with respect
to any purported termination of the Executive's employment during the Term,
shall mean the date specified in the Notice of Termination (which, in the case
of a termination by the Company, shall not be less than thirty (30) days
(except in the case of a termination for Cause) and, in the case of a
termination by the Executive, shall not be less than thirty (30) days nor more
than sixty (60) days, respectively, from the date such Notice of Termination is
given).
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8. No Mitigation. The Company agrees that, if the
Executive's employment with the Company terminates during the Term, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to Section
6 hereof. Further, the amount of any payment or benefit provided for in this
Agreement (other than Section 6.1(B) hereof) shall not be reduced by any
compensation earned by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to the Company, or otherwise.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon any
successor to the Company, the Company 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 Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to
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obtain such assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle the Executive
to terminate his employment within 30 days immediately following the date that
such succession becomes effective and receive compensation from the Company in
the same amount and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the Executive's employment for
Good Reason, except that, for purposes of implementing the foregoing, the date
on which any such succession becomes effective shall be deemed the Date of
Termination.
9.2 This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount would still be payable to the Executive
hereunder (other than amounts which, by their terms, terminate upon the death
of the Executive) if the Executive had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the executors, personal representatives or administrators of
the Executive's estate.
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10. Notices. For the purpose of this Agreement, notices and
all other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed,
if to the Executive, to the address inserted below the Executive's signature on
the final page hereof and, if to the Company, to the address set forth below,
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address shall
be effective only upon actual receipt:
To the Company:
Conoco Inc.
000 Xxxxx Xxxxx Xxxxxxx
Xxxxxxx, XX 00000
Attention: Corporate Secretary
11. 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 the Executive and the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
of any lack of 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
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at the same or at any prior or subsequent time. This Agreement supersedes any
other agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof which have been made by either party.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Delaware (without regard to the
conflicts of laws provisions thereof). All references to sections of the
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal, state or local law
and any additional withholding to which the Executive has agreed. The
obligations of the Company and the Executive under this Agreement which by
their nature may require either partial or total performance after the
expiration of the Term (including, without limitation, those under Sections 6
and 7 hereof) shall survive such expiration.
12. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
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13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Settlement of Disputes; Arbitration.
14.1 All claims by the Executive for benefits under this
Agreement shall be directed to and determined by the Board and shall be in
writing. Any denial by the Board of a claim for benefits under this Agreement
shall be delivered to the Executive in writing and shall set forth the specific
reasons for the denial and the specific provisions of this Agreement relied
upon.
14.2 Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Houston, Texas in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award
in any court having jurisdiction.
15. Definitions. For purposes of this Agreement, the
following terms shall have the meanings indicated below:
(A) "Affiliate" shall have the meaning set forth in Rule
12b-2 promulgated under Section 12 of the Exchange Act.
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(B) "Beneficial Owner" shall have the meaning set forth in
Rule 13d-3 under the Exchange Act.
(C) "Board" shall mean the Board of Directors of the Company.
(D) "Cause" for termination by the Company of the Executive's
employment shall mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company (other than any
such failure resulting from the Executive's incapacity due to physical or
mental illness or any such actual or anticipated failure after the issuance of
a Notice of Termination for Good Reason by the Executive pursuant to Section
7.1 hereof) or (ii) the willful engaging, not in good faith, by the Executive
in conduct which is materially injurious to the Company or its subsidiaries,
monetarily or otherwise.
(E) A "Change in Control" shall be deemed to have occurred if
the event set forth in any one of the following paragraphs shall have occurred:
(I) any Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company
(not including in the securities beneficially owned by such
Person any securities acquired directly from the Company)
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representing 30% or more of the combined voting power of the
Company's then outstanding securities, excluding any Person
who becomes such a Beneficial Owner in connection with a
transaction described in clause (i) of paragraph (III) below;
or
(II) the following individuals cease for any
reason to constitute a majority of the number of directors
then serving: individuals who, on the date hereof, constitute
the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
the Company) whose appointment or election by the Board or
nomination for election by the Company's stockholders was
approved or recommended by a vote of at least two-thirds (2/3)
of the directors then still in office who either were
directors on the date hereof or whose appointment, election or
nomination for election was previously so approved or
recommended; or
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(III) there is consummated a merger or
consolidation of the Company or any direct or indirect
subsidiary of the Company with any other corporation, other
than (i) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior
to such merger or consolidation continuing to represent
(either by remaining outstanding or by being converted into
voting securities of the surviving entity or any parent
thereof), in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit
plan of the Company or any Affiliate of the Company, at least
50% of the combined voting power of the securities of the
Company or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation, or
(ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no Person is or becomes the Beneficial Owner, directly
or indirectly, of securities of the Company representing 50%
or more of the combined voting power of the Company's then
outstanding securities; or
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(IV) the stockholders of the Company approve
a plan of complete liquidation or dissolution of the Company
or there is consummated an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets, other than a sale or disposition by the
Company of all or substantially all of the Company's assets to
an entity, at least 50% of the combined voting power of the
voting securities of which are owned by stockholders of the
Company in substantially the same proportions as their
ownership of the Company immediately prior to such sale.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
have occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions.
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(F) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(G) "Company" shall mean Conoco Inc. and, except in
determining whether or not any Change in Control of the Company has occurred,
shall include any successor to its business and/or assets which assumes and
agrees to perform this Agreement by operation of law, or otherwise.
(H) "Date of Termination" shall have the meaning set forth in
Section 7.2 hereof.
(I) "Disability" shall be deemed the reason for the
termination by the Company of the Executive's employment, if, as a result of
the Executive's incapacity due to physical or mental illness, the Executive
shall have been absent from the full-time performance of the Executive's duties
with the Company for a period of six (6) consecutive months, the Company shall
have given the Executive a Notice of Termination for Disability, and, within
thirty (30) days after such Notice of Termination is given, the Executive shall
not have returned to the full-time performance of the Executive's duties.
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(J) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(K) "Excise Tax" shall mean any excise tax imposed under
section 4999 of the Code.
(L) "Executive" shall mean Xxxxxx X. Xxxxxx.
(M) "Good Reason" means the occurrence, without the
Executive's written consent, of (i) the Executive involuntarily ceasing to
serve as the Chief Executive Officer and President of the Company; (ii) a
reduction by the Company in the Executive's annual base salary or any adverse
change in the Executive's aggregate annual and long term incentive compensation
opportunity from that in effect immediately prior to the date hereof, which
change is not pursuant to a program generally applicable to all senior
executives of the Company; (iii) the relocation of the Executive's principal
place of employment to a location more than thirty-five (35) miles from the
Executive's principal place of employment immediately prior to the date hereof
or (iv) the assignment (on or after the date of a Change in Control or prior to
a Change in Control under the circumstances described in the second sentence of
Section 6.1 hereof (treating all references in this paragraph (iv) to a "Change
in Control" as a reference to a "Potential Change in Control")), to the
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Executive of duties in the aggregate that are inconsistent with the Executive's
level of responsibility immediately prior to the date of the Change in Control
or any diminution in the nature or status of the Executive's responsibilities
from those in effect immediately prior to the date of the Change in Control;
provided, however, that in any case "Good Reason" shall not be deemed to have
occurred if the Company shall have cured such occurrence prior to the Date of
Termination.
(N) "Gross-Up Payment" shall have the meaning set forth in
Section 6.2 hereof.
(O) "Notice of Termination" shall have the meaning set forth
in Section 7.1 hereof.
(P) "Parent" shall mean E.I. du Pont de Nemours and Company.
(Q) "Person" shall have the meaning given in Section 3(a)(9)
of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (i) the Company or any of its
Affiliates (including, without limitation, the Parent), (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
any of its Affiliates, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or
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(iv) a corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of stock of
the Company.
(R) "Potential Change in Control" shall be deemed to have
occurred if the event set forth in any one of the following paragraphs shall
have occurred:
(I) the Parent or the Company enters into a
written agreement, the consummation of which would result in
the occurrence of a Change in Control; or
(II) the Company or any Person publicly
announces an intention to take or to consider taking actions
which, if consummated, would constitute a Change in Control.
(S) "Public Offering" shall mean the initial sale of common
equity securities of the Company pursuant to an effective registration
statement (other than a registration on Form S-4 or S-8 or any successor or
similar forms) filed under the Securities Act of 1933.
(T) "Severance Payments" shall have the meaning set forth in
Section 6.1 hereof.
(U) "Special Termination Event" shall mean the failure of the
Company, if, prior to a Change in Control and during the Term, either (a) a
Public Offering occurs
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or (b) the Company ceases to be, directly or indirectly, a wholly owned
subsidiary of the Parent in a transaction that does not constitute a Change in
Control, (the first to occur of these, a "Special Transaction"), to appoint the
Executive as Chairman of the Board not later than the earlier to occur of (i)
the second anniversary of such Special Transaction, or (ii) the date following
the Special Transaction on which the Parent ceases to beneficially own at least
fifty percent (50%) of the combined voting power of the Company's then
outstanding securities; unless, in either case, the Executive's employment with
the Company had terminated prior to such date by reason of death, Disability,
or for Cause.
(V) "Term" shall mean the period of time described in Section
2 hereof (including any extension, continuation or termination described
therein).
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(W) "Total Payments" shall mean those payments so described
in Section 6.2 hereof.
Conoco Inc.
By:
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Name:
Title:
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Xxxxxx X. Xxxxxx
Address:
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(Please print carefully)
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