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EXHIBIT 10.R
EMPLOYMENT AGREEMENT
AGREEMENT, made and entered into the 31st day of July, 1992 (the "Effective
Date"), by and between EL PASO NATURAL GAS COMPANY, a Delaware corporation (the
"Company") and XXXXXXX X. XXXX of El Paso, Texas (the "Executive").
WHEREAS, the Company currently employs the Executive as President and
Chief Executive Officer, in connection with which the Executive also serves as
a member of the Board of Directors; and
WHEREAS, both the Company and the Executive (the "Parties") now desire to
set forth certain conditions of such employment during the "Term" as defined
below:
NOW THEREFORE; in consideration of the premises and mutual covenants
contained herein, and for other consideration mutually acknowledged, the
Parties agree as follows:
1. Term.
The Term shall commence on the Effective Date and shall continue
through July 31, 1995, provided that effective the first day of each calendar
month (commencing September 1, 1992), the Term shall automatically be extended
for one additional month (so as to establish a three year remaining Term),
unless prior thereto either Party shall have given written notice that the Term
shall not be so extended.
2. Position.
During the Term, the Executive shall serve as President and Chief
Executive Officer of the Company.
3. Compensation and Benefits.
(a) Except as provided in Section 3(b) below, the Executive's rights
to compensation and benefits shall be as determined under applicable plans,
programs or arrangements of the Company in effect from time to time, provided
that no material
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reduction in any compensation or benefits as in effect on the Effective Date
shall occur without the Executive's written consent.
(b) (i) The Executive's pension benefit under the Company's
Supplemental Benefits Plan as in effect on the Effective Date (the "SBP"), shall
be determined by taking into account under Section 4.1(1) of the SBP, the
following special adjustment: for each "Plan Year", as defined in the El Paso
Natural Gas Company Pension Plan as in effect on the Effective Date (the
"Pension Plan"), or partial Plan Year, occurring during the Term, the Executive
shall be deemed credited with two years of age and "Credited Service", as
defined in the Pension Plan, subject to Section 4, below. No additional years
of age or service shall be deemed credited once the Executive has been deemed
credited with 30 years of service.
(ii) To the extent the SBP benefit determined pursuant to the
adjustment described in Clause (i) above exceeds the Executive's benefit as
otherwise determined under the SBP (the "Basic SBP Benefit"), such excess (the
"SBP Excess Amount") shall be paid in a single lump-sum on the later of (A) the
earlier of the Executive's death or his attainment of age 56 (the "Payment
Date"), or as soon thereafter as any offset as provided below is determined, or
(B) the time for payment of the Basic SBP Benefit. Interest shall accrue on the
SBP Excess Amount from the date of termination of the Executive's employment to
the date of payment of the SBP Excess Amount, if later, at the rate applicable
to deferred compensation under the terms of the Company's Deferred Compensation
Plan as currently in effect. Such interest shall be paid at the time the SBP
Excess Amount is paid. The SBP Excess Amount shall be offset by the present
value of any benefit accrued by the Executive through the Payment Date, under
any defined benefit pension plan of any subsequent employer, such offset to be
independently determined as provided in Section 7
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below. Notwithstanding the above, if a Change in Control occurs at any time,
the SBP Excess Amount shall not be subject to offset under this Clause (ii),
and shall be paid on the later of (A) the date of the Change in Control, or (B)
at the date for payment of the Executive's Basic SBP Benefit.
(iii) The Executive's entire SBP benefit, including the SBP
Excess Amount, shall be subject to the provisions of the Company's Benefits
Protection Trust as a benefit payable under the SBP.
(c) No amendment of the SBP Shall reduce the Executives' SBP
entitlements under this Section 3(b).
4. Termination of Employment.
(a) As used herein, the terms "Cause", "Change in Control" and
"Good Reason" shall have the meanings provided in the Company's Key Executive
Severance Protection Plan (the "SPP") as in effect on the date hereof, except
that "Good Reason" shall also include (i) loss of the Executive's position as a
Director (or, if the Executive has become Chairman of the Board of Directors,
the subsequent loss of his position as Chairman) except as a result of a
termination of the Executive's employment for any of the reasons described in
Section 4(d) below, or (ii) any breach or attempted breach of this Agreement by
the Company.
(b) (i) The Company may terminate the Executive's employment at
any time, provided that if, during the Term, the Executive's employment is
terminated by the Company other than the Cause, or is terminated by the
Executive for Good Reason, the Executive shall receive the following through
the end of the Term:
(A) Salary, at the rate in effect on the date of termination of
employment.
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(B) Bonus, equal to fifty percent of the maximum bonus
opportunity as in effect on termination of employment, but not less
than fifty percent of annual salary, payable as otherwise provided in
the Company's annual bonus program as in effect on termination of
employment.
(C) Continued age and deemed Credited Service toward his pension
benefit as provided in Section 3(b), above provided that, if the Term
ends on other than the last day of a Plan Year, then, in applying the
benefit formula under the Pension Plan for purposes of determining
such benefit:
(x) in addition to receiving deemed Credited Service under
Section 3(b) for all completed Plan Years during the Term, the
Executive shall be deemed credited with up to two Years of
Credited Service under Section 1.12(c) of the Pension Plan with
respect to the partial Plan Year in which the Term ends (the
"Part Year"), the amount of such Service Credit to be determined
by multiplying all whole or partial calendar months of the Term
falling within the Part Year by 380, and dividing the number of
Hours of Service thus determined by 2,280, and
(y) the Executive shall be deemed credited with an
additional year of age for each three full calendar months of the
Term occurring during such Part Year.
(D) All other benefits as in effect on termination of
employment.
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In addition, the Company shall, if so requested, purchase the Executive's
residence under the terms of the Company's Domestic Relocation Program (the
"DRP") as in effect on the Effective Date, for a price equal to the greater of
"appraised value," as defined in the DRP, or the amount of the investment by
the Executive (and his spouse) therein (including the original equity
investment and the amount invested in improvements). To the extent the
Executive is subject to tax on any excess of the purchase price described above
over the appraised value (the "Excess"), the Company shall pay the Executive an
additional amount (the "Gross-up") such that, after payment of all income taxes
in respect of the Excess and the Gross-up, the Executive is in the same
position as if no income taxed were incurred on the Excess.
In addition, the Company shall offer to Executive the opportunity to
acquire by assignment his EPNG-owned automobile without cost, provided that
EPNG shall not be required to reimburse the Executive for any taxes, including
Federal income taxes, he must pay on account of, or because of such assignment.
(ii) The Executive shall have no obligation to seek or accept
subsequent employment. However, except as provided in Section 4(c) below, the
amounts provided in Clauses (A),(B), or (D), of Section 4(b)(i) above, shall be
reduced, but not below zero, by any corresponding amounts (i.e. salary, bonus
or benefits , not including defined pension plan benefits), received in
connection with any full-time employment with any other employer during the
Term. For this purpose, periodic payments for full-time services as an
independent contractor shall be considered as salary, any disproportionate
lump sum payments in connection with full-time services shall be treated as
bonus, amounts voluntarily deferred shall be taken into account as if paid
currently, and the value of any benefit which is not readily determinable shall
be independently determined as provided in Section 7 below.
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The Executive shall have an affirmative duty promptly to report any subsequent
employment, and any amounts earned in connection therewith.
(c) If a Change in Control occurs, and the Executive's Employment is
thereafter terminated during the Term as described in Section 4(b), above, his
rights shall be as set forth in such Section 4(b) provided that, any provisions
of Section 4(b) to the contrary notwithstanding, (i) the Executive shall be
entitled to no less than the full value of any benefits available to the
Executive under the SPP, (ii) his pension rights as provided in Section 3(b),
above shall not be reduced with respect to benefits under plans of subsequent
employers, and (iii) his rights under Clauses (A), (B), and (D) of Section
4(b)(i) shall not be reduced with respect to amounts received from subsequent
employment.
(d) If the Executive's employment is terminated during the Term on
account of death, involuntary termination for Cause or voluntary termination
other than for Good Reason, his right to salary shall terminate on the date
of termination of employment and his other rights shall be as determined under
the Company's applicable plans and programs, provided that he shall in all
events receive a pension benefit under the SBP as provided in Section 3(b)
above, but only as determined through the end of the full Plan Year Immediately
preceding his last day of employment.
(e) In the event the Company at any time gives written notice that
the Term in not to be extended, as provided in Section 1, above, then, in
addition to any other rights hereunder, the Executive may, during the period
commencing twelve months prior to the end of the Term and ending twelve months
following the end of the Term, request that the Company purchase his
residence. In such case, the Company shall purchase the Executive's residence
under the terms described in Section 4(c)(i) above.
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5. Non-Competition.
During the Term, whether or not the Executive is then employed by the
Company, the Executive shall not, directly or indirectly, acquire (other than
less than ten percent (10%) of the publicly traded shares or other publicly
traded interest of any corporation, partnership, trust or other business
organization), manage, control, participate in, consult with, render services
to, or in any manner engage in any business with any person, corporation,
partnership, trust, or other business organization which is
(a) a competitor of the Company in any business activity conducted
in the "Business Region," as defined below, that represented more than three
percent (3%) of the Company's consolidated operating income as determined in
the Company's then most recently completed fiscal year, or
(b) a customer or customers whose business transactions with the
Company in the Business Region gave rise, in the aggregate, to more than three
percent (3%) of the Company's consolidated gross revenues during its then most
recently completed fiscal year.
For this purpose, the "Business Region" means any State in the United
States of America in which Company, or any subsidiary, was materially engaged
in business at any time during the period of the Executive's active employment
by the Company during the Term.
The Executive acknowledges that monetary damages would not constitute an
adequate remedy for the Company in the event of a breach of this Section 5, and
he therefore agrees that the Company shall be entitled to injunctive or
equitable relief for the enforcement hereof. This Section 5 shall not,
however, apply subsequent to (i) a Change in Control, or (ii)
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the Exectutive's voluntary termination of employment other than for Good
Reason, if he shall have provided the Company with at least six months prior
written notice of such termination.
6. Relationship to SPP.
Nothwithstanding the provisions of Section 9.2 of the SPP all rights
of the Executive under the SPP are hereby incorporated herein by reference, and
made contractual rights of the Executive and obligations of the Company
hereunder, (including, without limitation, the provisions of Article VI of the
SPP, which shall apply to all of the Executive's compensation and benefits
provided hereunder) and, accordingly, no amendment or termination thereof shall
reduce or adversely affect the Executive's rights and benefits thereunder as
incorporated herein. Any amounts received by the Executive under the SPP shall
offset amounts of the same nature due hereunder. If the amount of such offset
is disputed, it shall be independently determined pursuant to Section 7,
below. Any lump sum amounts paid as cash compensation will offset any periodic
payments of the same nature in reverse chronological order. For this purpose,
amounts shall be treated as being of the same nature strictly as follows:
(a) The amount described in Section 4.2(a) of the SPP shall be
treated as of the same nature as both salary and bonus.
(b) Each of the specific benefits described in Section 4.2(b) of the
SPP shall be treated as of the same nature as, and shall be a
credit toward, only the specifically correlative benefit, e.g.,
"Basic Life Insurance" shall only offset life insurance coverage,
etc.
(c) Any amount received under Section 4.2(c) of the SPP shall be
treated as of the same nature as the pension provided in Section
3(b) hereof.
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(d) The transfer of automobile ownership described in Section
4.2(d) of the SPP and the amounts described in Article VI
shall not offset any amounts payable hereunder.
No provision of this Agreement shall limit any of the Executive's rights, or
reduce the value of any of the benefits due the Executive, under the SPP.
7. Independent Determinations.
Any independent determination of the comparative value of benefits,
as required in this Agreement, shall be made at the Company's expense by an
independent actuarial consulting firm of national reputation reasonably
acceptable to both Parties.
8. Arbitration and Enforcement.
The Parties agree that any controversy or claim arising out of or
relating to this Agreement, or the breach of any provision hereof, or the terms
or conditions of employment, including whether such controversy or claim is
arbitrable, will be settled by arbitrators in El Paso, in accordance with the
rules for commercial arbitration of the American Arbitration Association as in
effect at the time a demand for arbitration under the rules is made, and
judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof. The decision of the arbitrators, including
determination of the amount of any damages suffered, will be conclusive, final
and binding on both parties, their heirs, executors, administrators, successors
and assigns. The cost of arbitration and any other costs incurred by the
Executive in enforcing his rights hereunder (including without limitation
reasonable attorney's fees whether or not the Executive ultimately receives a
favorable award or judgment in such arbitration or other proceeding) shall be
borne by the Company. The Executive shall be entitled to submit written proof
reasonably satisfactory to the Company of the incurrence of such costs on a
monthly basis, and to receive
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reimbursement therefore within 30 days of such submission. Verified copies of
any statements submitted to the Executive shall constitute satisfactory written
proof for this purpose.
9. Assignability; Binding Nature.
This Agreement is binding upon, and will inure to the benefit of, the
Parties hereto and their respective successors, heirs, administrators,
executors and assigns. No rights or obligations of the Executive under this
Agreement may be assigned or transferred by the Executive except that his
rights to compensation and benefits hereunder, which rights will remain subject
to the limitations of this Agreement, may be transferred by will or operation
of law. No rights or obligations of the Company under this Agreement may be
assigned or transferred except that such rights or obligations may be assigned
or transferred by operation of law in the event of a merger or consolidation in
which the Company is not the continuing entity, or the sale or liquidation of
all or substantially all of the assets of the Company, provided that the
assignee or transferee is the successor to all or substantially all of the
assets of the Company and such assignee or transferee assumes the liabilities,
obligations and duties of the Company, as contained in this Agreement, either
contractually or as a matter of law.
10. Amendments and Waivers.
This Agreement may not be modified or amended except by a writing
signed by both Parties.
11. Notices.
Any notice given hereunder will be in writing and will be deemed
given when delivered personally or by courier, or five days after being
mailed, certified or registered mail, duly addressed to the Party concerned at
the address indicated below or at such other
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address as such Party may subsequently provide, in accordance with the notice
and delivery provisions of this Section 11, such notice and delivery:
To the Company:
Senior Vice President
Human Resources and Administration
El Paso Natural Gas Company
X.X. Xxx 0000
Xx Xxxx, Xxxxx 00000
With a copy to:
General Counsel
El Paso Natural Gas Company
X.X. Xxx 0000
Xx Xxxx, Xxxxx 00000
To the Executive:
Xxxxxxx X. Xxxx
0000 Xxxx Xxxx Xxxxx
Xx Xxxx, Xxxxx 00000
12. References.
In the event of the Executive's death or a judicial determination of
his incompetence, reference in this Agreement to the Executive will be deemed,
where appropriate, to refer to his legal representative or, where appropriate,
to his beneficiary or beneficiaries.
13. Invalid Provisions.
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under present or future law, this Agreement shall be construed
and enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof and the remaining portions hereof shall remain in full
force and effect.
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14. Governing Law.
This Agreement will be governed by and construed and interpreted in
accordance with the laws of the State of Texas without reference to the
principles of conflicts of law thereof.
15. Counterparts.
This Agreement may be executed in counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
date first written above.
EL PASO NATURAL GAS COMPANY
By: /s/ XXXXXXX X. XXXXXXXX
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XXXXXXX X. XXXXXXXX, CHAIRMAN
OF THE BOARD
/s/ XXXXXXX X. XXXX
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XXXXXXX X. XXXX
