CONFIDENTIAL AND LEGALLY PRIVILEGED
SEVERANCE AGREEMENT
between
AMERICAN EXPLORATION COMPANY
and
XXXXXXX XXX
XXXXXXXXX AGREEMENT
THIS SEVERANCE AGREEMENT, effective as of the ____ day of April,
1997 (the "Effective Date"), by and between AMERICAN EXPLORATION COMPANY, a
Delaware corporation having its principal place of business at 0000 Xxxxx, Xxxxx
000, Xxxxxxx, Xxxxx 00000 (the "Corporation") and Xxxxxxx Xxx, an individual
residing at 0 Xxxxxxxxxx Xxxx, Xxxxxx, Xxxxx 00000 (the "Executive"),
WITNESSETH THAT:
WHEREAS, the Executive has been employed by the Corporation
continuously since October, 1992;
WHEREAS, the Executive currently is the Senior Vice
President-Exploration of the Corporation;
WHEREAS, certain terms and conditions of the Executive's rights upon
termination of employment by the Corporation are set forth in that certain
Severance Agreement, dated as of November 30, 1995 (the "Prior Severance
Agreement");
WHEREAS, the terms of this Agreement were duly approved and
authorized for and on behalf of the Corporation by the Board of Directors of the
Corporation and the Compensation Committee thereof at meetings held on March 25,
1997, at which meetings quorum was present and voted;
NOW, THEREFORE, in consideration of the mutual promises and
covenants herein contained, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree, effective upon the Effective Date, to
substitute the provisions of this Agreement
for the provisions of the Prior Severance Agreement;
ARTICLE . Termination of Employment
Section . Events of Termination
() Death. The Executive's employment shall terminate automatically
upon the Executive's death.
() Disability. If the Corporation determines in good faith that the
Executive is unable to perform the Executive's duties because of a Disability
(as defined below) that has occurred while the Executive is employed by the
Corporation, it may give the Executive written notice in accordance with Section
2.6 of this Agreement of its intention to terminate the Executive's employment.
In such event, the Executive's employment with the Corporation shall terminate
effective on the 30th day after receipt of such notice by the Executive,
provided that, within thirty (30) days after such receipt, the Executive shall
not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall mean the absence of the Executive
from the Executive's duties with the Corporation as a result of incapacity due
to mental or physical illness which is determined to be total and permanent by a
physician selected by the Corporation or its insurers and acceptable to the
Executive or the Executive's legal representative.
() Without Cause. Notwithstanding any other provision hereunder, the
Corporation shall have the right to terminate the Executive's employment
hereunder without "Cause" (as defined in Section 1.1(d)) at any time for any
reason in the sole discretion of the Corporation upon not less than thirty (30)
days' prior written notice to the Executive.
() Cause. The Corporation may terminate the Executive's employment
for Cause. For purposes of this Agreement, "Cause" shall mean:
() The willful and continued failure of the Executive to
perform substantially the Executive's duties with the Corporation (other than
any such failure resulting from incapacity due to physical or mental illness),
after a written demand for substantial performance is delivered to the
Executive, which demand shall specifically identify the manner in which the
Corporation believes that the Executive has not substantially performed the
Executive's duties, or
() The willful engaging by the Executive in illegal conduct or
gross misconduct in connection with the performance of his duties hereunder
which is materially injurious to the Corporation.
For purposes of this provision, no act or failure to act, on the
part of the Executive, shall be considered "willful" unless it is done, or
omitted to be done, by the Executive in bad faith or without reasonable belief
that the Executive's action or omission was in the best interests of the
Corporation. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board or upon the instructions of any senior
officer of the Corporation or based upon the advice of counsel for the
Corporation shall be conclusively presumed to be done, or omitted to be done, by
the Executive in good faith and in the best interests of the Corporation.
() Good Reason. The Executive may terminate his employment by the
Corporation for Good Reason at any time within two (2) years after a Change of
Control (as hereinafter defined). For purposes of this Agreement, "Good Reason"
shall mean the occurrence, without the Executive's express written consent, of
any one or more of the following events:
() The assignment to the Executive of any duties inconsistent
with
the Executive's positions, duties, responsibilities and status with the
Corporation as of the time immediately prior to the Change of Control or a
change in the Executive's reporting responsibilities, titles or offices in
effect as of the time immediately prior to the Change of Control or any removal
of the Executive from or any failure to re-elect the Executive to any of such
positions, except with the Executive's written consent.
() A reduction in the Executive's Basic Compensation or the
failure by the Corporation to increase such compensation each year by an amount
which at least equals, on a percentage basis, the mean average percentage
increase in base salary for all officers of the Corporation (other than the
Executive) during such year or the failure by the Corporation to continue to
provide prompt payment (or reimbursement to the Executive) of all reasonable
expenses incurred by the Executive in connection with the Executive's
professional and business activities;
() A failure by the Corporation to waive any and all
restrictions that might exist on the exercise of any stock options or with
respect to any awards of restricted stock or other benefits held by the
Executive under the Stock Compensation Plans (as defined below) as of the date
of a Change of Control;
() The Corporation requiring the Executive to be based
anywhere other than Houston, Texas ("Office"), except for travel on business to
an extent reasonably required in the performance of the Executive's duties
hereunder or, in the event the Executive consents to any relocation of his
Office, the failure by the Corporation to pay (or reimburse the Executive for)
all reasonable moving expenses (including all costs, fees and transfer taxes
incurred in selling his principal residence) incurred by the Executive relating
to a change of the Executive's principal residence in connection with such
relocation and to indemnify the
Executive against, and reimburse him for, any loss (defined as the difference
between the actual sales price of such residence and the higher of (a) the
Executive's aggregate investment in such residence or (b) the fair market value
of such residence as determined, at the Corporation's expense, by an independent
real estate appraiser designated by the Executive (and reasonably satisfactory
to the Corporation)), together with an amount equal to the federal, state and
local taxes payable by the Executive in respect of all of the amounts payable to
the Executive as contemplated under this paragraph.
() The failure by the Corporation to include the Executive as
a participant in any benefit or compensation plan or arrangement generally
available to executives of comparable level or the failure by the Corporation to
provide the Executive with the number of paid vacation days, holidays and
personal days to which the Executive is entitled in accordance with the
Corporation's normal leave policy in effect as of the time immediately prior to
the Change of Control;
() The failure of the Corporation to obtain the assumption of
this Agreement, without limitation or reduction, by any successor to the
Corporation;
() The failure of the Corporation to maintain for the benefit
and use by the Executive of an office and support staff as of the time
immediately prior to the Change of Control, except with consent of the
Executive;
() The failure of the Corporation to pay or reimburse the
Executive for any expenses incurred by the Executive as provided by the
Corporation's reimbursement of business expense policy in effect as of the time
immediately prior to the Change of Control; or
() The filing of a voluntary or involuntary petition of
bankruptcy
by or against the Corporation or the insolvency of the Corporation.
For purposes of this Section 1.1(e), any good faith determination of "Good
Reason" made by the Executive shall be conclusive.
() Retirement The Executive may terminate his employment by reason
of "Retirement" at the end of the fiscal year of the Corporation in which the
Executive attains the age of 65 or such later date as the Board shall set with
the consent of the Executive.
() Voluntary Termination. The Executive shall have the right at any
time to voluntarily terminate his employment by the Corporation (a "Voluntary
Termination") for any reason in the sole discretion of the Executive by not less
than thirty (30) days' prior written notice to the Corporation; provided
however, a termination without Cause, by reason of Death, Disability or
Retirement, or Good Reason shall not be treated for any purpose hereunder as a
Voluntary Termination.
Section . Certain Definitions
() Change of Control. A "Change of Control" shall have occurred if:
() twenty percent (20%) or more of the outstanding common
stock of the Corporation has been acquired by any person (as defined by Section
3(a)(9) of the Securities Exchange Act of 1934) other than directly from the
Corporation;
() there has been a merger or equivalent combination involving
the Corporation after which 49% or more of the voting stock of the surviving
corporation is held by persons other than former shareholders of the
Corporation; or
() twenty percent (20%) or more of the members of the Board
elected by shareholders are persons who were not nominated in the then most
recent annual meeting proxy statement of the Corporation, except as a condition
of, or a contractual obligation
assumed in connection with, the hiring by the Corporation, or the election as a
director of the Corporation, of Xxxx X. Xxxxxxx.
() Basic Compensation, Target Bonus and Total Compensation.
() "Basic Compensation" means the Executive's annual base
salary, as adjusted from time to time, including amounts the Executive has
electively deferred under an arrangement qualified under Section 401(k) of the
Internal Revenue Code of 1986, as amended (the "Code"), to any cafeteria plan
under Section 125 of the Code or otherwise. Basic Compensation does not include
bonuses, grants under the American Exploration Company Stock Compensation Plan
and the 1994 American Exploration Company Stock Compensation Plan, or any
successor plans thereto, or any other stock compensation or employee benefit
plan of the Corporation (collectively, all such plans are herein referred to as
the "Stock Compensation Plans"), the value of amounts payable under the
Corporation's incentive, savings and retirement plans or welfare benefit plans
or the value of any fringe benefits or perquisites the Executive may receive.
() "Target Bonus" means an amount equal to the aggregate cash
amount paid to the Executive in respect of bonuses over the three most recent
fiscal years of the Corporation divided by three.
() "Total Compensation" means the total of the Executive's
Basic Compensation plus Target Bonus.
Section . Obligations of the Corporation on Termination
() Termination Upon Death or Disability, Without Cause or for Good
Reason.
If the Executive's employment is terminated upon his death or
Disability, without Cause or for Good Reason:
() In general.
The Corporation shall immediately pay the Executive in
cash the amount of Basic Compensation previously earned but not yet paid.
() Severance benefits
() All of the Executive's stock options, awards of
restricted common stock and other awards under the Stock Compensation Plans,
which have not already vested, shall immediately vest and all performance shares
and other awards under the Stock Compensation Plans and other compensatory
plans, programs or arrangements, if any, shall vest and be paid in full,
computed on the assumption that 100% (or, if greater, the maximum percentage) of
the targeted level of the Corporation's or the Executive's performance has been
met, using the Executive's date of termination as the valuation date;
() Except as otherwise determined by the Executive, the
period during which any stock options granted to the Executive under the Stock
Compensation Plans may be exercised shall be extended for an additional six
months following the end of the exercise period otherwise applicable to such
options; and
() The Executive shall continue to participate in all
executive welfare benefit plans, including health and medical plans, for six
months after termination and shall be entitled to (a) reimbursement of COBRA
payments to maintain medical and dental insurance up to 18 additional months for
said coverage and (b) the use of one or more executive out-placement services,
designated by the Executive and paid for by the Corporation.
() If the Executive's employment is terminated prior to
a
Change of Control or more than two years after the last Change of Control, the
Corporation shall pay the Executive in a lump sum a "Severance Benefit" in cash
equal to two (2) times the Executive's Total Compensation as of the time of such
termination. If the Executive's employment is terminated during the period
ending two years after the last Change of Control, the Corporation shall pay the
Executive in a lump sum a Severance Benefit in cash equal to three (3) times the
Executive's Total Compensation. Such payment shall be made within thirty (30)
days following said termination. In the event of the Executive's death, any
amounts payable under this Agreement shall be paid to the beneficiary (or
beneficiaries) designated by the Executive and in such amounts or proportions as
the Executive shall so designate. If no beneficiary is designated by the
Executive or if none shall survive the Executive, then any amounts payable under
this Agreement shall be paid to the Executive's surviving spouse, if any, or, if
no such surviving spouse exists, to the Executive's estate.
() Disability.
() If, following a termination on account of Disability,
the Executive becomes entitled to and receives disability benefits under any
disability payment plan sponsored and maintained by the Corporation, the amount
otherwise payable by the Corporation to the Executive pursuant to Section 1.3(a)
shall be reduced, on a dollar-for-dollar basis, but not below zero, by the
amount of any such disability benefits received by him, but only to the extent
such benefits are attributable to payments made by the Corporation.
() The Executive shall have the right in his sole
discretion after a termination on account of Disability to engage in regular
employment (whether as an employee of another entity or as a self-employed
person) and shall have no obligation to
perform further services for the Corporation.
() Voluntary Termination or Termination for Cause
In case of a Voluntary Termination or a termination for Cause,
the Executive shall be entitled to (i) his Basic Compensation accrued to the
date of termination and (ii) any benefits or awards vested prior to such date,
including, without limitation, his right to exercise any vested stock options.
Except as otherwise provided in this Agreement or under any employee benefit
plan maintained by the Corporation, the Corporation shall have no further
obligations to the Executive.
() Retirement.
() Upon the Retirement of the Executive, the Executive shall
receive all of the payments and benefits set forth in Sections 1.3(a)(i) and
1.3(a)(ii)(1), (2) and (3). In addition, the Executive shall receive all
retirement benefits he is eligible to receive under the Corporation's employee
benefit plans, subject to the terms and conditions of such plans.
() The Executive shall have the right in his sole discretion
after his Retirement to engage in regular employment (whether as an employee of
another entity or as a self-employed person) and shall have no obligation to
perform further services for the Corporation.
() Adjustments for Certain Payments. For purposes of this Section,
(i) "Payment" shall mean any payment or distribution in the nature of
compensation to or for the benefit of the Executive, whether paid or payable
pursuant to this Agreement or otherwise; (ii) Agreement Payment shall mean a
Payment paid or payable pursuant to this Agreement (disregarding this Section);
(iii) Net After Tax Receipt shall mean the Present Value of a
Payment net of all federal, state and local taxes imposed on the Executive with
respect thereto, including the tax imposed under Section 4999 of the Code,
determined by applying the highest applicable marginal rates which apply to the
Executive's taxable income; (iv) "Present Value" shall mean such value
determined in accordance with Section 280G(d)(4) of the Code; and (v) "Reduced
Amount" shall mean the largest aggregate amount of Agreement Payments which (a)
is less than the sum of all Agreement Payments and (b) results in aggregate Net
After Tax Receipts which are equal to or greater than the Net After Tax Receipts
which would result if the aggregate Agreement Payments were made.
Anything in this Agreement to the contrary notwithstanding, in the
event a certified public accounting firm designated by the Executive (the
"Accounting Firm") shall determine that receipt of all Payments would subject
the Executive to tax under Section 4999 of the Code, it shall determine whether
some amount of Agreement Payments would meet the definition of a "Reduced
Amount." If said firm determines that there is a Reduced Amount, the aggregate
Agreement Payments shall be reduced to such Reduced Amount.
If the Accounting Firm determines that aggregate Agreement Payments
should be reduced to the Reduced Amount, the Corporation shall promptly give the
Executive notice to that effect and a copy of the detailed calculation thereof,
and the Executive may then elect, in his sole discretion, which and how much of
the Agreement Payments shall be eliminated or reduced (as long as after such
election the Present Value of the
aggregate Agreement Payments equals the Reduced Amount), and shall advise the
Corporation in writing of his election within ten days of his receipt of notice.
If no such election is made by the Executive within such ten-day period, the
Corporation may elect which of such Agreement Payments shall be eliminated or
reduced (as long as after such election the Present Value of the aggregate
Agreement Payments equals the Reduced Amount) and shall notify the Executive
promptly of such election. All determinations made by the Accounting Firm under
this Section shall be binding upon the Corporation and the Executive and shall
be made within 30 days of a termination of employment of the Executive. As
promptly as practicable following such determination, the Corporation shall pay
to, or distribute for the benefit of, the Executive such Agreement Payments as
are then due to the Executive under this Agreement and shall promptly pay to or
distribute for the benefit of the Executive in the future such Agreement
Payments as become due to the Executive under this Agreement.
While it is the intention of the Corporation and the Executive to
reduce the amounts payable or distributable to the Executive hereunder only if
the aggregate Net After Tax Receipts to the Executive would thereby be
increased, as a result of the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that amounts will have been paid or distributed by the
Corporation to or for the benefit of the Executive pursuant to this Agreement
which should not have been so paid or distributed ("Overpayment") or that
additional amounts which will have not been paid or distributed by the
Corporation to or for the benefit of the Executive pursuant to this Agreement
could have been so paid or distributed ("Underpayment"), in each case,
consistent with the calculation of the Reduced Amount hereunder. In the event
that the Accounting Firm, based either upon the assertion of a deficiency by the
Internal Revenue Service against the Corporation or the Executive which the
Accounting Firm believes has a high probability of success or otherwise,
determines that an Overpayment has been made, any such overpayment paid or
distributed by the Corporation to or for the benefit of the Executive shall be
treated for all purposes as a loan to the Executive
which the Executive shall repay to the Corporation together with interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code;
provided, however, that no such loan shall be deemed to have been made and no
amount shall be payable by the Executive to the Corporation if and to the extent
such deemed loan and payment would not either reduce the amount on which the
Executive is subject to tax under Section 1 and Section 4999 of the Code or
generate a refund of such taxes. In the event that the Accounting Firm
determines that an Underpayment has occurred, any such underpayment shall be
promptly paid by the Corporation to or for the benefit of the Executive together
with interest at the applicable federal rate provided for in Section 7872(f)(2)
of the Code.
ARTICLE . Miscellaneous
Section . Enforceability.
If the scope of any restriction set forth above is too broad to
permit enforcement of such restriction to its full extent, then such restriction
shall be enforced to the maximum extent permitted by applicable law, and, if
necessary, the scope of any such restriction may be judicially modified (to the
extent necessary in any proceeding brought to enforce such restriction) and
thereafter fully enforced.
Section . Remedies
The parties acknowledge that the remedy at law for any breach of any
of a party's obligations hereunder would be inadequate and consent to the
granting of temporary and permanent injunctive relief in any proceeding brought
to enforce any of such provisions without the necessity of proof of actual
damages; provided, however, that the foregoing shall not be construed to limit
any other right or remedy available to the Corporation or the
Executive at law or in equity, and all such rights and remedies shall be
cumulative to the extent permitted by applicable law, and the exercise of any
one or more of such rights or remedies shall be without prejudice to the
exercise of any other such right or remedy.
Section . No Offset; Enforcement of Agreement
The Corporation's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Corporation may have against the Executive or others, except
as provided in Section 1.3(a)(iii). In no event shall the Executive be obligated
to seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement
and such amounts shall not be reduced whether or not the Executive obtains other
employment. The Corporation agrees to pay as incurred, to the full extent
permitted by law, all legal fees and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome thereof) by the
Corporation, the Executive or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Executive about the amount
of any payment pursuant to this Agreement), plus in each case interest on any
delayed payment at the applicable federal rate provided for in Section
7872(f)(2) of the Code and amounts sufficient to reimburse the Executive for all
tax liabilities due in respect of such payments of legal fees and expenses,
provided however, if an action brought by the Executive, or if the Executive's
defense of an action brought by the Corporation, is finally determined to be
without merit by a court of competent jurisdiction, the Executive shall refund
amounts paid by the Corporation for legal fees, taxes and interest
pursuant to this Section 2.3.
Section . Assignment by the Executive; Successors
() This Agreement is personal to the Executive and without the prior
written consent of the Corporation shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
() Except as is otherwise herein expressly provided, this Agreement
shall inure to the benefit of and be binding upon the Corporation, its
successors and assigns, and upon the Executive, his spouse, heirs, executors and
administrators, provided, however, that the obligations of the Executive
hereunder shall not be delegated.
() The Corporation will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform it if no such
succession had taken place. As used in this Agreement, "Corporation" shall mean
Corporation as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
Section . Waiver
Failure of either party hereto to insist upon strict compliance by
the other party with any term, covenant or condition hereof shall not be deemed
a waiver of such term, covenant or condition, nor shall any waiver or
relinquishment or failure to insist upon strict compliance of any right or power
hereunder at any one time or more times be deemed a
waiver or relinquishment of such right or power at any other time or times.
Section . Notice
Any notice required or desired to be given pursuant to this
Agreement shall be sufficient if in writing sent by registered or certified mail
to the addresses hereinafter set forth above or to such other address as any
party hereto may designate in writing, transmitted by hand delivery or by
registered or certified mail to the other.
Section . Applicable Law
This Agreement shall be governed by the laws of the State of Texas.
Section . Taxes
The Corporation may deduct from all amounts paid under this
Agreement all federal, state, local and other taxes required by law to be
withheld with respect to such payments.
Section . Entire Agreement
The parties hereto agree that this Agreement (together with, to the
extent benefits or rights are otherwise affected by this Agreement, any employee
benefit plan maintained or sponsored by the Corporation) contains the entire
understanding and agreement between them and supersedes all previous agreements
and arrangements, if any, relating to the employment of the Executive. This
Agreement shall not be amended, modified or supplemented in any respect except
by an agreement in writing signed by the Executive and the Corporation.
Section . Term
This Agreement shall remain in full force and effect as long as the
Executive is employed by the Corporation. Notwithstanding the foregoing, the
terms of this Agreement
may be changed by the Corporation with the consent of the Executive. In
addition, the Executive may enforce the terms of this Agreement following the
termination of the Executive's employment.
IN WITNESS WHEREOF, the Corporation and the Executive have duly
executed this Agreement as of the day and the year first above written.
Attest: AMERICAN EXPLORATION COMPANY
__________________ By:___________________________________
Name: Xxxx Xxxxxxx
Title: Chairman of the Board
Witness: EXECUTIVE
__________________ ______________________________________
Name: Xxxxxxx Xxx
TABLE OF CONTENTS
Page
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ARTICLE I. Termination of Employment -2-
Section 1.1 Events of Termination -2-
Section 1.2 Certain Definitions -7-
Section 1.3 Obligations of the Corporation on Termination -8-
ARTICLE II. Miscellaneous -14-
Section 2.1 Enforceability. -14-
Section 2.2 Remedies -14-
Section 2.3 No Offset; Enforcement of Agreement -15-
Section 2.4 Assignment by the Executive; Successors -16-
Section 2.5 Waiver -16-
Section 2.6 Notice -17-
Section 2.7 Applicable Law -17-
Section 2.8 Taxes -17-
Section 2.9 Entire Agreement -17-
Section 2.10 Term -17-
