EMPLOYMENT CONTINUATION AND NONCOMPETITION AGREEMENT
Exhibit 10.4
EMPLOYMENT CONTINUATION AND
NONCOMPETITION AGREEMENT
NONCOMPETITION AGREEMENT
THIS AGREEMENT among SENECA RESOURCES CORPORATION, a Pennsylvania corporation (the “Company”),
NATIONAL FUEL GAS COMPANY, a New Jersey corporation (“National”), and Xxxxxxx X. Xxxxxx (the
“Executive”), dated as of the 11th day of December, 2006.
WITNESSETH:
WHEREAS, the Company and National wish to attract and retain well-qualified executive and key
personnel and to assure continuity of management, which will be essential to its ability to
evaluate and respond to any actual or threatened Change in Control (as defined below) in the best
interests of shareholders;
WHEREAS, the Executive is a valuable employee of the Company, an integral part of its
management team and a key participant in the decision making process relative to short-term and
long-term planning and policy for the Company;
WHEREAS, the Company and National understand that any actual or threatened Change in Control
will present significant concerns for the Executive with respect to his financial and job security;
WHEREAS, the Company and National wish to encourage the Executive to continue his career and
services with the Company for the period during and after an actual or threatened Change in Control
and to assure to the Company the Executive’s services during the period in which such a Change in
Control is threatened, and to provide the Executive certain financial assurances to enable the
Executive to perform the responsibilities of his position without undue distraction and to exercise
his judgment without bias due to his personal
circumstances; and
WHEREAS, the Board of Directors of National has determined that it would be in the best
interests of National and its shareholders to assure continuity in the management of National in
the event of a Change in Control by entering into an employment continuation and noncompete
agreement with Executive;
WHEREAS, to achieve these objectives, the Company, National and the Executive desire to enter
into an agreement providing the Company and the Executive with certain rights and obligations upon
the occurrence of a Change in Control or Potential Change in Control (as defined in Section 2).
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, it is
hereby agreed by and between the Company, National and the Executive as follows:
1. Operation of Agreement. (a) Effective Date. The effective date of this Agreement shall be
the date on which a Change in Control occurs (the “Effective Date”), provided that, except as
provided in Section 1(b), if the Executive is not employed by the Company, National or any of their
subsidiaries on the Effective Date, this Agreement shall be void and without effect.
(b) Termination of Employment Following a Potential Change in Control. Notwithstanding Section
1(a), if (i) the Executive’s employment is terminated by the Company Without Cause (as defined in
Section 6(c)) after the occurrence of a Potential Change in Control and prior to the occurrence of
a Change in Control and (ii) a Change in Control occurs within two years of such termination, the
Executive shall be deemed, solely for purposes of determining his rights under this Agreement, to
have remained employed until the date such Change in Control occurs and to have been terminated by
the Company Without Cause immediately after this Agreement becomes effective.
2. Definitions. (a) Change in Control. For the purposes of this Agreement, a “Change in
Control” shall be deemed to have occurred if any of the following have occurred:
(i) either (a) the Company or National shall receive a report on Schedule 13D, or an
amendment to such a report, filed with the Securities and Exchange Commission pursuant to
Section 13(d) of the Securities Exchange Act of 1934 (the “1934 Act”) disclosing that any
person (as such term is used in Section 13(d) of the 1934 Act) (“Person”), is the
beneficial owner, directly or indirectly, of twenty (20) percent or more of the outstanding
stock of National or (b) the Company or National has actual knowledge of facts which would
require any Person to file such a report on Schedule 13D, or to make an amendment to such a
report, with the SEC (or would be required to file such a report or amendment upon the
lapse of the applicable period of time specified in Section 13(d) of the 0000 Xxx)
disclosing that such Person is the beneficial owner, directly or indirectly, of twenty (20)
percent or more of the outstanding stock of National;
(ii) purchase by any Person, other than National or a wholly-owned subsidiary of National
or an employee benefit plan sponsored or maintained by National or a wholly-owned
subsidiary of National, of shares pursuant to a tender or exchange offer to acquire any
stock of National (or securities convertible into stock) for cash, securities or any other
consideration provided that, after consummation of the offer, such Person is the beneficial
owner (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of twenty (20)
percent or more of the outstanding stock of National (calculated as provided in
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paragraph (d) of Rule 13d-3 under the 1934 Act in the case of rights to acquire stock);
(iii) approval by the shareholders of National of (a) any consolidation or merger of
National in which National is not the continuing or surviving corporation or pursuant to
which shares of stock of National would be converted into cash, securities or other
property, other than a consolidation or merger of National in which holders of its stock
immediately prior to the consolidation or merger have substantially the same proportionate
ownership of common stock of the surviving corporation immediately after the consolidation
or merger as immediately before, or (b) any consolidation or merger in which National is
the continuing or surviving corporation but in which the common shareholders of National
immediately prior to the consolidation or merger do not hold at least a majority of the
outstanding common stock of the continuing or surviving corporation (except where such
holders of common stock hold at least a majority of the common stock of the corporation
which owns all of the common stock of National), or (c) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all or substantially
all the assets of National;
(iv) a change in the majority of the members of the Board of Directors of National (the
“Board”) within a 24-month period unless the election or nomination for election by
National’s shareholders of each new director was approved by the vote of at least
two-thirds of the directors then still in office who were in office at the beginning of the
24-month period;
(v) National shall cease to own, directly or indirectly, through one or more subsidiaries,
securities of the Company that provide it with more than 50% of the voting power of all
outstanding classes of the Company’s securities entitled to vote in the election of
directors, and more than 50% of the value of all classes of the Company’s outstanding
equity securities.
(b) Potential Change in Control. For the purposes of this Agreement, a Potential Change in
Control shall be deemed to have occurred if:
(i) a Person commences a tender offer (with adequate financing) for securities representing
at least twenty (20) percent of the outstanding stock of National (calculated as provided
in paragraph (d) of Rule 13d-3 under the 1934 Act in the case of rights to acquire stock);
(ii) National enters into an agreement the consummation of which would constitute a Change
in Control;
(iii) proxies for the election of directors of National are solicited by anyone other than
National; or
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(iv) any other event occurs which is deemed to be a Potential Change in Control by the
Board.
3. Employment Period. Subject to Section 6 of this Agreement, the Company agrees to continue
the Executive in its employ, and the Executive agrees to remain in the employ of the Company, for
the period (the “Employment Period”) commencing on the Effective Date and ending on the earlier to
occur of (i) the third anniversary of the Effective Date and (ii) the date on which the Executive
attains age 65.
4. Position and Duties. During the Employment Period, the Executive’s position (including
titles), authority and responsibilities shall be at least commensurate with those held, exercised
and assigned immediately prior to the Effective Date. It is understood that, for purposes of this
Agreement, such position, authority and responsibilities shall not be regarded as not commensurate
merely by virtue of the fact that a successor shall have acquired all or substantially all of the
business and/or assets of the Company as contemplated by Section 12(b) of this Agreement. The
Executive’s services shall be performed in the United States and within 30 miles of the location
where the Executive was employed immediately preceding the Effective Date.
5. Compensation. (a) Base Salary. During the Employment Period, the Executive shall receive a
base salary at a monthly rate at least equal to the monthly salary paid to the Executive by the
Company and any of its affiliated companies immediately prior to the Effective Date. The base
salary shall be reviewed at least once each year after the Effective Date, and shall be increased
annually at a rate at least equal to the greater of (i) the average percentage increase for the
same period in the compensation of salaried employees of National and its subsidiaries who are not
executives and (ii) the percentage increase in the national Consumer Price Index for the last
completed calendar year. The Executive’s base salary, as it shall be increased from time to time,
shall hereafter be referred to as “Base Salary”. Neither the Base Salary nor any increase in Base
Salary after the Effective Date shall serve to limit or reduce any other obligation of the Company
hereunder.
(b) Annual Bonus. During the Employment Period, in addition to the Base Salary, for each
fiscal year of the Company ending during the Employment Period, the Executive shall be afforded the
opportunity to receive an annual bonus on terms and conditions no less favorable to the Executive
(taking into account reasonable changes in the Company’s goals and objectives) than the annual
bonus opportunity that had been made available to the Executive for the fiscal year ended
immediately prior to the Effective Date (the “Annual Bonus Opportunity”). Any amount payable in
respect of the Annual Bonus Opportunity shall be paid as soon as practicable following the year for
which the amount (or prorated portion) is earned or awarded, unless electively deferred by the
Executive pursuant to any deferral programs or arrangements that the Company may make available to
the Executive.
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(c) Long-term Incentive Compensation Programs. During the Employment Period, the Executive
shall participate in all long-term incentive compensation programs for key executives at a level
that is commensurate with the Executive’s participation in such plans immediately prior to the
Effective Date, or, if more favorable to the Executive, at the level made available to the
Executive or other similarly situated officers at any time thereafter.
(d) Benefit Plans. During the Employment Period, the Executive (and, to the extent applicable,
his dependents) shall be entitled to participate in or be covered under all retirement, deferred
compensation, savings, medical, dental, health, disability, group life, accidental death and travel
accident insurance plans and programs of the Company and its affiliated companies at a level that
is commensurate with the Executive’s participation in such plans immediately prior to the Effective
Date, or, if more favorable to the Executive, at the level made available to the Executive or other
similarly situated officers at any time thereafter.
(e) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Executive in accordance with the policies
and procedures of the Company as in effect immediately prior to the Effective Date. Notwithstanding
the foregoing, the Company may apply the policies and procedures in effect after the Effective Date
to the Executive, if such policies and procedures are not less favorable to the Executive than
those in effect immediately prior to the Effective Date.
(f) Vacation and Fringe Benefits. During the Employment Period, the Executive shall be
entitled to paid vacation and fringe benefits at a level that is commensurate with the paid
vacation and fringe benefits available to the Executive immediately prior to the Effective Date,
or, if more favorable to the Executive, at the level made available from time to time to the
Executive or other similarly situated officers at any time thereafter.
(g) Indemnification. During and after the Employment Period, National and the Company shall
indemnify the Executive and hold the Executive harmless from and against any claim, loss or cause
of action arising from or out of the Executive’s performance as an officer, director or employee
of National or the Company or any of their subsidiaries or in any other capacity, including any
fiduciary capacity, in which the Executive serves at the request of National or the Company to the
maximum extent permitted by applicable law and the Company’s Certificate of Incorporation and
By-Laws (the “Governing Documents”), provided that in no event shall the protection afforded to the
Executive hereunder be less than that afforded under the Governing Documents as in effect
immediately prior to the Effective Date.
6. Termination. (a) Death, Disability or Retirement. Subject to the provisions of Section 1
hereof, this Agreement shall terminate automatically upon the Executive’s death, termination due to
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“Disability” (as defined below) or voluntary retirement under any of the Company’s retirement plans
as in effect from time to time. For purposes of this Agreement, Disability shall mean the
Executive’s inability to perform the duties of his position, as determined in accordance with the
policies and procedures applicable with respect to the Company’s long-term disability plan, as in
effect immediately prior to the Effective Date.
(b) Voluntary Termination. Notwithstanding anything in this Agreement to the contrary,
following a Change in Control the Executive may, upon not less than 30 days’ written notice to the
Company, voluntarily terminate employment for any reason, provided that any termination by the
Executive pursuant to Section 6(d) on account of Good Reason (as defined therein) shall not be
treated as a voluntary termination under this Section 6(b).
(c) Cause. The Company may terminate the Executive’s employment for Cause. For purposes of
this Agreement, “Cause” means the Executive’s gross misconduct, fraud or dishonesty, which has
resulted or is likely to result in material economic damage to the Company or National, as
determined in good faith by a vote of at least two-thirds of the non-employee directors of National
at a meeting of the Board at which the Executive is provided an opportunity to be heard (with
representation by counsel of his choosing, should he so desire).
(d) Good Reason. Following the occurrence of a Change in Control, the Executive may terminate
his employment for Good Reason. For purposes of this Agreement, “Good Reason” means the occurrence
of any of the following, without the express written consent of the Executive, after the occurrence
of a Change in Control:
(i) (A) the assignment to the Executive of any duties inconsistent in any material adverse
respect with the Executive’s position, authority or responsibilities as contemplated by
Section 4 of this Agreement, or (B) any other material adverse change in such position,
including titles, authority or responsibilities;
(ii) any failure by the Company to comply with any of the provisions of Section 5 of this
Agreement, other than an insubstantial or inadvertent failure remedied by the Company
promptly after receipt of notice thereof given by the Executive;
(iii) the Company’s requiring the Executive to be based at any office or location outside
of the United States and/or more than 30 miles (or such other lesser distance as shall be
set forth in the Company’s relocation policy as in effect at the Effective Date) from that
location at which he performed his services specified under the provisions of Section 4
immediately prior to the Change in Control, except for travel reasonably required in the
performance of the Executive’s responsibilities; or
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(iv) any failure by the Company to obtain the assumption and agreement to perform this
Agreement by a successor as contemplated by Section 12(b).
In no event shall the mere occurrence of a Change in Control, absent any further impact on the
Executive, be deemed to constitute Good Reason. In the event that the Executive shall in good faith
give a Notice of Termination for Good Reason and it shall thereafter be determined that Good Reason
did not exist, the Executive shall, unless the Company and the Executive shall otherwise mutually
agree, return to employment with the Company within 5 business days of such decision, without any
impairment or other limitation of his rights hereunder, except that he shall not be paid his base
salary for any period he did not perform services and his annual bonus opportunity for such year
may be reduced to reflect his period of absence.
(e) Notice of Termination. Any termination by the Company for Cause or by the Executive for
Good Reason shall be communicated by Notice of Termination given in accordance with Section 13(e).
For purposes of this Agreement, a “Notice of Termination” means a written notice given, in the case
of a termination for Cause, within 30 business days of the Company’s having actual knowledge of the
events giving rise to such termination, and in the case of a termination for Good Reason, within
180 days of the Executive’s having actual knowledge of the events giving rise to such termination,
and which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets
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, and (iii) if the termination date
is other than the date of receipt of such notice, specifies the termination date of this Agreement
(which date shall be not more than 15 days after the giving of such notice). The failure by the
Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing his rights hereunder.
(f) Date of Termination. For the purpose of this Agreement, the term “Date of Termination”
means (i) in the case of a termination for which a Notice of Termination is required, the date of
receipt of such Notice of Termination or, if later, the date specified therein, as the case may
be, and (ii) in all other cases, the actual date on which the Executive’s employment terminates
during the Employment Period.
7. Obligations of the Company upon Termination. (a) Death or Disability. If the Executive’s
employment is terminated during the Employment Period by reason of the Executive’s death or
Disability, this Agreement shall terminate without further obligations to the Executive or the
Executive’s legal representatives under this Agreement other than those obligations accrued
hereunder at the Date of Termination, and the Company shall pay to the Executive (or his
beneficiary or estate) (i) the Executive’s full Base Salary through the Date of Termination (the
“Earned Salary”), (ii) any vested amounts or
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benefits owing to the Executive under the Company’s otherwise applicable employee benefit plans and
programs, including any compensation previously deferred by the Executive (together with any
accrued earnings thereon) and not yet paid by the Company (the “Accrued Obligations”), and (iii)
any other benefits payable due to the Executive’s death or Disability under the Company’s plans,
policies or programs (the “Additional Benefits”).
Any Earned Salary shall be paid in cash in a single lump sum as soon as practicable, but in no
event more than 15 days (or at such earlier date required by law), following the Date of
Termination. Accrued Obligations and Additional Benefits shall be paid in accordance with the terms
of the applicable plan, program or arrangement.
(b) Cause and Voluntary Termination. If, during the Employment Period, the Executive’s
employment shall be terminated for Cause or voluntarily terminated by the Executive (other than on
account of Good Reason following a Change in Control), the Company shall pay the Executive (i) the
Earned Salary in cash in a single lump sum as soon as practicable, but in no event more than 10
days, following the Date of Termination, and (ii) the Accrued Obligations in accordance with the
terms of the applicable plan, program or arrangement.
(c) Termination by the Company other than for Cause and Termination by the Executive for Good
Reason. Subject to Section 7(f) below, if, during the Employment Period, the Company terminates the
Executive’s employment other than for Cause, or the Executive terminates his employment for Good
Reason, the Company shall pay to the Executive the following amounts:
(i) Severance Benefits. The Executive shall be paid the following:
| (A) | the Executive’s Earned Salary; | ||
| (B) | a cash amount (the “Severance Amount”) equal to |
| (1) | 1.99; times | ||
| (2) | the sum of |
(i) the Executive’s annual Base Salary; and
(ii) the average of the annual at risk compensation incentive program bonuses
or other bonuses (excluding sign-on bonuses) payable to the Executive
(including, for the purposes of this calculation, any amount of such bonuses
paid in the form of restricted stock (in lieu of cash), to be valued at the
date of grant) for the two fiscal years of the Company ending immediately prior
to the Effective Date (the “Average Bonus”); and
| (C) | the Accrued Obligations. |
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Except as otherwise expressly provided in the next sentence, the Earned Salary and Severance
Amount shall be paid in cash in a single lump sum as soon as practicable, but in no event more
than 10 days (or at such earlier date required by law), following the Date of Termination;
provided however that
if the date payment would otherwise be due hereunder is after September
30, payment of the Severance Amount shall be paid on the first business day in the following
January. Notwithstanding the immediately preceding sentence, to the extent that the Severance
Amount is treated as deferred compensation subject to the provisions of Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”), rather than a short-term deferral not
subject to the provisions of such Section 409A, the Severance Amount shall be paid to the
Executive on the six month anniversary of the Date of Termination. Accrued Obligations shall
be paid in accordance with the terms of the applicable plan, program or arrangement.
(ii) Continuation of Medical Benefits. The Executive (and, to the extent applicable, his
dependents) shall be entitled, after the Date of Termination until the earlier of (1) the end
of the second calendar year following the Date of Termination (the “Medical End Date”) and (2)
the date the Executive becomes eligible for comparable benefits under a similar plan, policy
or program of a subsequent employer, to continue participation in all of the Company’s
medical, dental and health benefit plans (“Medical Plans”). To the extent any such benefits
cannot be provided under the terms of the applicable plan, policy or program, the Company
shall provide a comparable benefit under another plan or from the Company’s general assets.
The Executive’s participation in the Medical Plans will be on the same terms and conditions
that would have applied had the Executive continued to be employed by the Company through the
Medical End Date.
(iii) Continuation of Other Welfare Benefits. The Executive (and, to the extent applicable,
his dependents) shall be entitled, after the Date of Termination until the earlier of (1) the
third anniversary (or, with respect to Suspended Benefits (as defined below), the three year
and six month anniversary) of the Date of Termination (the “Benefits End Date”) and (2) the
date the Executive becomes eligible for comparable benefits under a similar plan, policy or
program of a subsequent employer, to continue participation in all employee and executive
welfare and fringe benefit plans, excluding the Medical Plans, any severance plans and further
vacation pay (the “Benefit Plans”); provided,
however, that, to the extent required to avoid
the imposition on the Executive of the additional tax imposed under Section 409A, any such
benefit or perquisite which would be treated as deferred compensation subject to the
provisions of Section 409A of the Code (each, a “Suspended Benefit”) shall not be provided to
or made available to the Executive until the six month anniversary of the Date of Termination.
To the extent any such benefit or perquisite cannot be provided under the terms of the
applicable plan, policy or program,
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the Company shall provide a comparable benefit under another plan or from the Company’s
general assets. The Executive’s participation in the Benefit Plans will be on the same terms
and conditions that would have applied had the Executive continued to be employed by the
Company through the Benefits End Date.
(iv) Vesting of Retirement Benefit Account. To the extent that, at the Date of
Termination, the Executive is not fully vested in any amounts credited to his retirement
accounts under the Company’s retirement plans (whether qualified or non-qualified) in which
the Executive was participating immediately prior to the Change of Control, then in addition
to any benefit otherwise payable to Executive under such plans, the Company shall make a
single lump sum payment to the Executive, within 10 days of the Date of Termination, equal to
the present value of the Executive’s unvested accrued benefit under such retirement plans.
Such lump sum value shall be determined in accordance with the provisions of the applicable
plans.
(d) Discharge of the Company’s Obligations. Except as expressly provided in the last sentence
of this Section 7(d), the amounts payable to the Executive pursuant to this Section 7 (whether or
not reduced pursuant to Section 7(e)) following termination of his employment shall be in full and
complete satisfaction of the Executive’s rights under this Agreement and any other claims he may
have in respect of his employment by the Company or any of its subsidiaries. Such amounts shall
constitute liquidated damages with respect to any and all such rights and claims and, upon the
Executive’s receipt of such amounts, the Company shall be released and discharged from any and all
liability to the Executive in connection with this Agreement or otherwise in connection with the
Executive’s employment with the Company and its subsidiaries. Nothing in this Section 7(d) shall
be construed to release the Company from its commitment to indemnify the Executive and hold the
Executive harmless from and against any claim, loss or cause of action arising from or out of the
Executive’s performance as an officer, director or employee of the Company or any of its
subsidiaries or in any other capacity, including any fiduciary capacity, in which the Executive
served at the request of the Company to the maximum extent permitted by applicable law and the
Governing Documents.
(e) Limit on Payments by the Company.
(i) Application of Section 7(e). In the event that any amount or benefit paid or
distributed to the Executive pursuant to this Agreement, taken together with any amounts or
benefits otherwise paid or distributed to the Executive by the Company or any affiliated
company (collectively, the “Covered Payments”), would be an “excess parachute payment” as
defined in Section 280G of the Code and would thereby subject the Executive to the tax (the
“Excise Tax”) imposed under Section 4999 of the Code (or any similar tax that may hereafter
be imposed), the provisions of this Section 7(e) shall apply to determine the amounts
payable to the Executive pursuant to this Agreement.
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(ii) Calculation of Benefits. Immediately following delivery of any Notice of Termination,
the Company shall notify the Executive of the aggregate present value of all termination
benefits to which he would be entitled under this Agreement and any other plan, program or
arrangement as of the projected Date of Termination, together with the projected maximum
payments, determined as of such projected Date of Termination that could be paid without
the Executive being subject to the Excise Tax.
(iii) Imposition of Payment Cap. If
(x) the aggregate value of all compensation payments or benefits to be paid or
provided to the Executive under this Agreement and any other plan, agreement or
arrangement with the Company exceeds the amount which can be paid to the Executive
without the Executive incurring an Excise Tax, and
(y) the net-after tax amount (taking into account all applicable taxes payable
by the Executive, including any Excise Tax) that the Executive would receive if the
limitation contained in this Section 7(e)(iii) were not imposed does not exceed the
net-after tax benefit the Executive would receive if such limitation were imposed
by more than $25,000, then the amounts payable to the Executive under this Section
7 shall be reduced (but not below zero) to the maximum amount which may be paid
hereunder without the Executive becoming subject to such an Excise Tax (such
reduced payments to be referred to as the “Payment Cap”). In the event that the
Executive receives reduced payments and benefits hereunder, the Executive shall
have the right to designate which of the payments and benefits otherwise provided
for in this Agreement that he will receive in connection with the application of
the Payment Cap.
(iv) Application of Section 280G. For purposes of determining whether any of the Covered
Payments will be subject to the Excise Tax and the amount of such Excise Tax,
(A) such Covered Payments will be treated as “parachute payments” within the
meaning of Section 280G of the Code, and all “parachute payments” in excess of the
“base amount” (as defined under Section 280G(b)(3) of the Code) shall be treated as
subject to the Excise Tax, unless, and except to the extent that, in the good faith
judgment of the Company’s independent certified public accountants appointed prior
to the Effective Date or tax counsel selected by such Accountants (the
“Accountants”), the Company as a reasonable basis to conclude that such Covered
Payments (in whole or in part) either do not constitute “parachute payments” or
represent reasonable compensation
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for personal services actually rendered (within the meaning of Section
280G(b)(4)(B) of the Code) in excess of the portion of the “base amount” allocable
to such Covered Payments, or such “parachute payments” are otherwise not subject
to such Excise Tax, and
(B) the value of any noncash benefits or any deferred payment or benefit shall
be determined by the Accountants in accordance with the principles of Section 280G
of the Code.
(v) Applicable Tax Rates. For purposes of determining whether the Executive would receive a
greater net after-tax benefit were the amounts payable under this Agreement reduced in
accordance with Paragraph 7(e)(iii), the Executive shall be deemed to pay:
(A) Federal income taxes at the highest applicable marginal rate of Federal income
taxation for the calendar year in which the first amounts are to be paid hereunder,
and
(B) any applicable state and local income taxes at the highest applicable marginal
rate of taxation for such calendar year, net of the maximum reduction in Federal
incomes taxes which could be obtained from the deduction of such state or local
taxes if paid in such year;
provided, however, that the Executive may request that such determination be made based on
his individual tax circumstances, which shall govern such determination so long as the
Executive provides to the Accountants such information and documents as the Accountants
shall reasonably request to determine such individual circumstances.
(vi) Adjustments in Respect of the Payment Cap. If the Executive receives reduced payments
and benefits under this Section 7(e) (or this Section 7(e) is determined not to be
applicable to the Executive because the Accountants conclude that the Executive is not
subject to any Excise Tax) and it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding (a “Final Determination”) that,
notwithstanding the good faith of the Executive and the Company in applying the terms of
this Agreement, the aggregate “parachute payments” within the meaning of Section 280G of
the Code paid to the Executive or for his benefit are in an amount that would result in the
Executive being subject an Excise Tax, then the amount equal to such excess parachute
payments shall be deemed for all purposes to be a loan to the Executive made on the date of
receipt of such excess payments, which the Executive shall have an obligation to repay to
the Company on demand, together with interest on such amount at the applicable Federal
rate (as defined in Section 1274(d) of the Code) from the date of the payment hereunder to
the date of repayment by the Executive. If this Section 7(e) is not applied to reduce the
Executive’s entitlement under this Section 7
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because the Accountants determine that the Executive would not receive a greater net-after
tax benefit by applying this Section 7(e) and it is established pursuant to a Final
Determination that, notwithstanding the good faith of the Executive and the Company in
applying the terms of this Agreement, the Executive would have received a greater net after
tax benefit by subjecting his payments and benefits hereunder to the Payment Cap, then the
aggregate “parachute payments” paid to the Executive or for his benefit in excess of the
Payment Cap shall be deemed for all purposes a loan to the Executive made on the date of
receipt of such excess payments, which the Executive shall have an obligation to repay to
the Company on demand, together with interest on such amount at the applicable Federal rate
(as defined in Section 1274(d) of the Code) from the date of the payment hereunder to the
date of repayment by the Executive. If the Executive receives reduced payments and benefits
by reason of this Section 7(e) and it is established pursuant to a Final Determination that
the Executive could have received a greater amount without exceeding the Payment Cap, then
the Company shall promptly thereafter pay the Executive the aggregate additional amount
which could have been paid without exceeding the Payment Cap, together with interest on
such amount at the applicable Federal rate (as defined in Section 1274(d) of the Code) from
the original payment due date to the date of actual payment by the Company.
(f) If Termination of Employment Occurs After the Executive Has Reached Age 62.
Notwithstanding anything else to the contrary contained in this Section 7, if the Executive’s
employment with the Company terminates at any time during the 3 year period ending on the first day
of the month following the Executive’s sixty-fifth birthday (the “Normal Retirement Date”), and the
Executive would be entitled to receive severance benefits under paragraphs 7(c), then (i) the
multiplier in paragraph 7(c)(i)(B) shall not be 1.99, but shall be a number equal to 1.99 times
(x/1095), where x equals the number of days remaining until the Executive’s Normal Retirement Date,
and (ii) if the Executive’s Normal Retirement Date shall occur earlier than either the Medical End
Date or the Benefits End Date described in Section 7(c)(ii) and 7(c)(iii), respectively, then
notwithstanding such Sections, such Medical End Date or Benefits End Date shall end on the
Executive’s Normal Retirement Date.
8. Non-exclusivity of Rights. Except as expressly provided herein, nothing in this Agreement
shall prevent or limit the Executive’s continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company or any of its affiliated companies and
for which the Executive may qualify, nor shall anything herein limit or otherwise prejudice such
rights as the Executive may have under any other agreements with the Company or any of its
affiliated companies, including employment agreements or stock option agreements. Amounts which are
vested benefits or which the Executive is otherwise entitled to receive under any plan or program
of the Company or any of its affiliated companies at or subsequent to the
13
Date of Termination shall be payable in accordance with such plan or program.
9. No Offset. The Company’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 limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Executive or others whether by reason of the subsequent employment
of the Executive or otherwise.
10. Non-Competition and Non-Solicitation. (a) Noncompete. Unless the Executive otherwise
elects by written notice to the Company prior to his Date of Termination (or in the case of a
Company initiated termination, within 5 business days of receipt of a Notice of Termination, if
such period extends beyond the Date of Termination) not to be bound by the provisions of this
Section 10(a), during the one year period following the Executive’s Date of Termination for any
reason (the “Restriction Period”), Executive shall not, directly or indirectly, engage in, become
employed by, serve as an agent or consultant to, or become a partner, principal or stockholder
(other than a holder of less than 1% of the outstanding voting shares of any publicly held company)
of any business or entity that is engaged in any activity which is competitive with the business of
the Company, National and their respective subsidiaries or affiliates in any geographic area in
which the Company, National and/or any of their respective subsidiaries or affiliates is engaged in
such competitive business.
(b) Non-Solicitation of Employees. Regardless of whether the Executive has elected to be bound
by Section 10(a), during the Restriction Period, the Executive shall not, directly or indirectly,
for his own account or for the account of any other person or entity with which he is or shall
become associated in any capacity, solicit for employment, employ or otherwise interfere with the
relationship of Employer with any person who at any time during the six months preceding such
solicitation, employment or interference is or was employed by or otherwise engaged to perform
services for Employer other than any such solicitation or employment during the Executive’s
employment with Employer on behalf of Employer.
(c) Confidential Information. Regardless of whether the Executive has elected to be bound by
Section 10(a), the Executive shall hold in a fiduciary capacity for the benefit of National and the
Company all secret or confidential information, knowledge or data relating to National, the
Company or any of their affiliated companies, and their respective businesses, (i) obtained by the
Executive during his employment by the Company or any of its affiliated companies and (ii) not
otherwise public knowledge (other than by reason of an unauthorized act by the Executive). After
termination of the Executive’s employment with the Company, the Executive shall not, without the
prior written consent of the Company, unless compelled pursuant to an order of a court or other
body having jurisdiction over
14
such matter, communicate or divulge any such information, knowledge or data to anyone other than
the Company and those designated by it.
(d) Non-disparagement. Regardless of whether the Executive has elected to be bound by Section
10(a), the Executive shall not publicly or privately disparage National or the Company, or any of
their subsidiaries or affiliates, including any aspect of their respective business, products,
employees, management or Board of Directors, in any manner which could adversely effect the
business of National, the Company or such subsidiaries or affiliates. Furthermore, the Executive
shall not, directly or indirectly, take any action or fail to take any action with the purpose of
interfering with, damaging or disrupting the assets or business operations or affairs of National
or the Company or any of their respective subsidiaries or affiliates.
National and the Company shall not publicly or privately disparage the Executive, either
personally or professionally. Nothing in this paragraph shall be construed to prevent any officer
of National or the Company from discussing the Executive’s performance internally in the ordinary
course of business.
(e) Company Property. Except as expressly provided herein, promptly following the Executive’s
termination of employment, the Executive shall return to the Company all property of National and
the Company and all copies thereof in the Executive’s possession or under his control.
(f) Additional Payment. Unless the Executive has elected not to be bound by Section 10(a), the
Company shall make an additional lump sum payment to the Executive within 30 days following the
Executive’s Date of Termination (or, if applicable, such later date as of which the Severance
Amount is payable under Section 7(c)(i)) equal to one times the sum of (i) the Executive’s annual
Base Salary and (ii) the Executive’s Average Bonus as compensation for the covenant contained in
Section 10(a).
11. Injunctive Relief and Other Remedies with Respect to Covenants. The Executive acknowledges
and agrees that the covenants and obligations of the Executive set forth in Section 10 relate to
special, unique and extraordinary matters and that a violation of any of the terms of such
covenants and obligations will cause the Company irreparable injury for which adequate remedies are
not available at law. Therefore, the Executive agrees that the Company shall be entitled to an
injunction, restraining order or such other equitable relief (without the requirement to post bond)
restraining the Executive from committing any violation of the covenants and obligations contained
in Section 10 These remedies are cumulative and are in addition to any other rights and remedies
the Company may have at law or in equity. In no event shall an asserted violation of the provisions
of Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement.
15
12. Successors. (a) This Agreement is personal to the Executive and, without the prior
written consent of the Company, 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) This Agreement shall inure to the benefit of and be binding upon the Company and its
successors. The Company shall require any successor to all or substantially all of the business
and/or assets of the Company, whether direct or indirect, by purchase, merger, consolidation,
acquisition of stock, or otherwise, by an agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in the same manner and to the
same extent as the Company would be required to perform if no such succession had taken place.
13. Miscellaneous. (a) Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, applied without reference to principles of
conflict of laws.
(b) Arbitration. Except to the extent provided in Section 11, in the event that any dispute,
controversy or claim arises between the Company or National and the Executive with respect to the
subject matter of this Agreement and the enforcement of rights hereunder, such dispute, controversy
or claim shall be resolved by binding arbitration before a panel of three arbitrators selected in
accordance with the American Arbitration Association (the “AAA”). The arbitration shall be
conducted in accordance with the Expedited Employment Arbitration Rules of the American Arbitration
Association then in effect at the time of the arbitration (or such other rules as the parties may
agree to in writing), and otherwise in accordance with principles which would be applied by a court
of law or equity. The determination reached in such arbitration shall be final and binding on both
parties without any right of appeal or further dispute. Execution of the determination by such
arbitration panel may be sought in any court of competent jurisdiction. The arbitrators shall not
be bound by judicial formalities and may abstain from following the strict rules of evidence and
shall interpret this Agreement as an honorable engagement and not merely as a legal obligation.
Unless otherwise agreed by the parties, any such arbitration shall take place in a location
selected by the Company which is a convenient forum for such arbitration (taking into account the
availability of a sufficient pool of experienced arbitrators) and not more than 100 miles from the
Executive’s principal place of employment at the Effective Date (or at such other location as may
be agreed upon by the parties), and shall be conducted in accordance with the Rules of the AAA. In
the event of the occurrence of any proceeding (including the appeal of an arbitration decision)
between the Company or National and the Executive with respect to the subject matter of this
Agreement and the enforcement of rights hereunder, the Company or National shall reimburse the
Executive for all reasonable costs and expenses relating to such proceeding, including reasonable
attorneys’ fees and expenses, regardless of the
16
final outcome, unless the arbitration panel determines that recovery by the Executive of all or a
part of such fees, costs and expenses would be unjust. In no event shall the Executive reimburse
the Company for any of the costs and expenses relating to such litigation or other proceeding.
(c) Amendments. This Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective successors and legal representatives.
(d) Entire Agreement. This Agreement constitutes the entire agreement between the parties
hereto with respect to the matters referred to herein; provided, however, that this Agreement is
not intended to impair any rights of the Executive under any prior written agreement, any employee
benefit plan of the Company or a Subsidiary or any written policy, program or procedure of the
Company or a Subsidiary unless and to the extent specifically provided herein. No other agreement
relating to the terms of the Executive’s employment by the Company, oral or otherwise, shall be
binding between the parties unless it is in writing and signed by the party against whom
enforcement is sought. There are no promises, representations, inducements or statements between
the parties other than those that are expressly contained herein. The Executive acknowledges that
he is entering into this Agreement of his own free will and accord, and with no duress, that he has
read this Agreement and that he understands it and its legal consequences.
(e) Notices. All notices and other communications hereunder shall be in writing and shall be
given by hand-delivery to the other party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
at the home address of the Executive noted
on the records of the Company
on the records of the Company
If to the Company:
Seneca Resources Corporation
0000 Xxxx Xxxxxx
Xxxxxxxxxxxxx, XX 00000
Attention: Corporate Secretary
0000 Xxxx Xxxxxx
Xxxxxxxxxxxxx, XX 00000
Attention: Corporate Secretary
If to National:
or to such other address as either party shall have furnished to the other in writing in accordance
herewith. Notice and communications shall be effective when actually received by the addressee.
17
(f) Source of Payments. All payments provided for in paragraph 3 above shall be paid in cash
from the general funds of the Company or National; provided, however, that such payments shall be
reduced by the amount of any payments made to the Executive or his dependents, beneficiaries or
estate from any trust or special or separate fund established by the Company or National to assure
such payments. The Company or National shall not be required to establish a special or separate
fund or other segregation of assets to assure such payments, and, if the Company or National shall
make any investments to aid it in meeting its obligations hereunder, the Executive shall have no
right, title or interest whatever in or to any such investments except as may otherwise be
expressly provided in a separate written instrument relating to such investments. Nothing
contained in this Agreement, and no action taken pursuant to its provisions, shall create or be
construed to create a trust of any kind or a fiduciary relationship, between the Company or
National and the Executive or any other person. To the extent that any person acquires a right to
receive payments from the Company or National such right shall be no greater than the right of an
unsecured creditor of the Company or National.
(g) Tax Withholding; Section 409A. The Company shall withhold from any amounts payable under
this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to
any applicable law or regulation. To the extent that any payments hereunder are subject to the
provisions of Section 409A of the Code, the Company intends that the amounts payable under this
Agreement shall be administered in compliance with the requirements of that Section.
(h) Severability; Reformation. In the event that one or more of the provisions of this
Agreement shall become invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be affected thereby. In
the event that any of the provisions of any of Section 10 are not enforceable in accordance with
its terms, the Executive and the Company agree that such Section shall be reformed to make such
Section enforceable in a manner which provides the Company the maximum rights permitted at law.
(i) Waiver. Waiver by any party hereto of any breach or default by the other party of any of
the terms of this Agreement shall not operate as a waiver of any other breach or default, whether
similar to or different from the breach or default waived. No waiver of any provision of this
Agreement shall be implied from any course of dealing between the parties hereto or from any
failure by either party hereto to assert its or the Executive’s rights hereunder on any occasion or
series of occasions.
18
(j) Counterparts. This Agreement may be executed in counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same instrument.
(k) Captions. The captions of this Agreement are not part of the provisions hereof and shall
have no force or effect.
IN WITNESS WHEREOF, the Executive has hereunto set his hand
and the Company has caused this Agreement to be executed in its name on its behalf, and its
corporate seal to be hereunto affixed and attested by its Secretary, all as of the day and year
first above written.
| SENECA RESOURCES CORPORATION | ||||||
Attest:
|
By: | |||||
/s/ Xxxxxx X. Xxxxxx
|
/s/ X. XxXxxxx
|
|||||
| NATIONAL FUEL GAS COMPANY | ||||||
Attest:
|
By: | |||||
/s/ A. M. Cellino
|
/s/ P. C. Xxxxxxxx | |||||
Secretary
|
Title: | |||||
| EXECUTIVE: | ||||||
| /s/ M. D. Xxxxxx | ||||||
19
NATIONAL FUEL GAS COMPANY
SENECA RESOURCES CORPORATION
SENECA RESOURCES CORPORATION
EMPLOYMENT CONTINUATION
AND
NONCOMPETITION AGREEMENT
TABLE OF CONTENTS
| Page | ||||||||
| 1. | Operation of Agreement | 2 | ||||||
| a. | Effective Date | 2 | ||||||
| b. | Termination of Employment Following a Potential Change in Control | 2 | ||||||
| 2. | Definitions | 2 | ||||||
| a. | Change in Control | 2 | ||||||
| b. | Potential Change in Control | 3 | ||||||
| 3. | Employment Period | 4 | ||||||
| 4. | Position and Duties | 4 | ||||||
| 5. | Compensation | 4 | ||||||
| a. | Base Salary | 4 | ||||||
| b. | Annual Bonus | 4 | ||||||
| c. | Long-term Incentive Compensation Programs | 5 | ||||||
| d. | Benefit Plans | 5 | ||||||
| e. | Expenses | 5 | ||||||
| f. | Vacation and Fringe Benefits | 5 | ||||||
| g. | Indemnification | 5 | ||||||
| 6. | Termination | 5 | ||||||
| a. | Death, Disability or Retirement | 5 | ||||||
| b. | Voluntary Termination | 6 | ||||||
| c. | Cause | 6 | ||||||
| d. | Good Reason | 6 | ||||||
| e. | Notice of Termination | 7 | ||||||
| f. | Date of Termination | 7 | ||||||
| 7. | Obligations of the Company upon Termination | 7 | ||||||
| a. | Death or Disability | 7 | ||||||
| b. | Cause and Voluntary Termination | 8 | ||||||
| c. | Termination by the Company other than for Cause | |||||||
| and Termination by the Executive for Good Reason | 8 | |||||||
| x. Xxxxxxxxx Benefits | 8 | |||||||
| ii. Continuation of Medical Benefits | 9 | |||||||
| iii. Continuation of Other Welfare Benefits | 9 | |||||||
20
| Page | ||||||||
| iv. Qualification for Early Retirement | 10 | |||||||
| d. | Discharge of the Company’s Obligations | 10 | ||||||
| e. | Limit on Payments by the Company | 10 | ||||||
| i. Application of Section 7(e) | 10 | |||||||
| ii. Calculation of Benefits | 11 | |||||||
| iii. Imposition of Payment Cap | 11 | |||||||
| iv. Application of Section 280G | 11 | |||||||
| v. Applicable Tax Rates | 12 | |||||||
| vi. Adjustments in Respect of the Payment Cap | 12 | |||||||
| f. | If Termination of Employment Occurs After the Executive Has Reached Age 62 | 13 | ||||||
| 8. | Non-exclusivity of Rights | 13 | ||||||
| 9. | No Offset | 14 | ||||||
| 10. | Non-Competition and Non-Solicitation | 14 | ||||||
| a. | Noncompete | 14 | ||||||
| b. | Non-Solicitation of Employees | 14 | ||||||
| c. | Confidential Information | 14 | ||||||
| d. | Non-disparagement | 15 | ||||||
| e. | Company Property | 15 | ||||||
| f. | Additional Payment | 15 | ||||||
| 11. | Injunctive Relief and Other Remedies with Respect to Covenants | 15 | ||||||
| 12. | Successors | 16 | ||||||
| 13. | Miscellaneous | 16 | ||||||
| a. | Applicable Law | 16 | ||||||
| b. | Arbitration | 16 | ||||||
| c. | Amendments | 17 | ||||||
| d. | Entire Agreement | 17 | ||||||
| e. | Notices | 17 | ||||||
| f. | Source of Payments | 18 | ||||||
| g. | Tax Withholding | 18 | ||||||
| h. | Severability; Reformation | 18 | ||||||
| i. | Waiver | 18 | ||||||
| j. | Counterparts | 19 | ||||||
| k. | Captions | 19 | ||||||
| Signature | ||||||||
| Page | 19 | |||||||
21
