XXXXX XXXXXXX NATURAL GAS CORP.
DEFERRED STOCK TRUST AGREEMENT
(Non-Employee Directors Deferred Stock Compensation Program)
This Trust Agreement ("Trust Agreement") is made effective this 1st day of
December, 1998 by and between Xxxxx Xxxxxxx Natural Gas Corp. ("Company") and
Bank of Oklahoma, N.A. ("Trustee");
WHEREAS, the Board of Directors of the Company has authorized and approved
a compensation program for its non-employee directors pursuant to which such
non-employee directors shall receive in connection with their service as
directors of the Company deferred stock awards ("Awards") consisting of shares
of common stock, par value $.01 per share, of the Company ("Shares");
WHEREAS, the Company expects to incur liability under the terms of such
Awards with respect to the individuals participating in such Awards or their
beneficiaries ("Participants") and desires to establish a trust ("Trust") and to
contribute to the Trust the Shares to be held therein, subject to the claims of
the Company's creditors in the event of the Company's Insolvency (as herein
defined), until paid to Participants in such manner and at such times as
specified herein; and
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Awards
as an unfunded plan maintained for the purpose of providing deferred
compensation for non-employee directors of the Company.
NOW THEREFORE, the parties do hereby establish the terms of the Trust and
agree that the Trust shall be comprised, held and disposed of as follows:
ARTICLE I
ESTABLISHMENT OF TRUST
1.1 Deposits. The Trust is hereby established, and the Company has
deposited or will deposit from time to time Shares that are subject to Awards,
to be held, administered and disposed of by Trustee as provided in this Trust
Agreement.
1.2 Irrevocable Trust. The Trust hereby established shall be irrevocable.
1.3 Grantor Trust. The Trust is intended to be a grantor trust, of which
Company is the grantor, within the meaning of subpart E, part I, subchapter J,
chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended ("Code"),
and shall be construed accordingly.
1.4 Claims Against Trust. The principal of the Trust and any earnings
thereon shall be held separate and apart from other funds of Company and shall
be used exclusively for the uses and purposes of Participants and general
creditors as herein set forth. Participants shall have no preferred claim on, or
any beneficial ownership interest in, any assets of the Trust except for the
voting rights as described below. Any rights created under the Plan and this
Trust Agreement shall be mere unsecured contractual rights of Participants
against Company. Any assets held by the Trust shall be subject to the claims of
Company's general creditors under federal and state law in the event of
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Insolvency, as defined in Section 3.1.
1.5 Dividends; Adjustments. In the event that any cash or property dividend
is paid with respect to the Shares or in the event of any subdivision or
consolidation of the shares of stock of the Company or other capital adjustment
or the payment of a stock dividend or other increase or decrease in the number
of shares of Company stock outstanding effected without receipt of consideration
by the Company, the Company shall cause to be deposited in the Trust the cash,
property or securities that would be otherwise payable with respect to any of
the Shares that remain in the Trust as if such Shares were fully entitled to
participate in any such distribution. Such cash, property or securities shall be
held by the Trustee and invested in accordance with the provisions hereof and
the Oklahoma Uniform Prudent Investor Act until otherwise distributed at the
direction of the Company.
1.6 Sale or Conversion of Shares. In the event the Shares are sold or
converted into cash or any security other than an equity security of the Company
or a successor ("Proceeds") in the manner permitted by this Trust Agreement, the
Trust will cause such Proceeds to be paid and distributed directly to
Participants and such Proceeds will not be paid to the Trust.
ARTICLE II
PAYMENTS TO PLAN PARTICIPANTS AND BENEFICIARIES
2.1 Delivery of Shares. Certificates for Shares duly endorsed and ready for
transfer, together with any additional property or Proceeds previously deposited
with the Trustee as provided in Sections 1.5 and 1.6, shall be delivered by the
Trustee (i) to an individual Participant ("Terminating Participant") after such
Participant's termination of service as a director of the Company, (ii) to all
Participants immediately after a "Change in Control" of the Company, or (iii) to
any or all Participants if the Company otherwise determines. The Company shall
promptly direct the Trustee to make any payments that are payable hereunder. The
Trustee may rely on the accuracy of these directions. The Trustee shall make
provision for the reporting and withholding of any federal, state or local taxes
that may be required to be withheld with respect to the delivery of the Shares
and any additional property to a Participant and shall pay amounts withheld to
the appropriate taxing authorities or determine that such amounts have been
withheld and paid by the Company.
2.2 Change in Control. For purposes of this Trust Agreement the term
"Change in Control" of the Company shall mean the occurrence after the date
hereof of any of the following:
(i) An acquisition (other than directly from the Company) of any voting
securities of the Company (the "Voting Securities") by any "Person" (as the
term person is used for purposes of Section 13(d) or 14(d) of the Exchange
Act) immediately after which such Person has "Beneficial Ownership" (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of fifty
percent (50%) or more of the combined voting power of the Company's then
outstanding Voting Securities;
(ii) The individuals who, as of the date hereof, are members of the
Board (the "Incumbent Board"), cease for any reason to constitute at least
two-thirds of the members of the Board; provided, however, that if the
election, or nomination for election by the Company's common stockholders,
of any new director was approved by a vote of at least two-thirds of the
Incumbent Board, such new director shall, for purposes of this Plan, be
considered as a member of the Incumbent Board; provided further, however,
that no individual shall be considered a member of the Incumbent Board if
such individual initially assumed office as a result of either an actual or
threatened 'election contest' (as described in Rule 14A-11 promulgated
under the Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board (a
"Proxy Contest") including by reason of any agreement intended to avoid or
settle any Election Contest or Proxy Contest; or
(iii) Approval by stockholders of the Company of:
(A) A merger, consolidation or reorganization involving the
Company, unless
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(1) the stockholders of the Company, immediately before such
merger, consolidation or reorganization, own, directly or
indirectly immediately following such merger, consolidation or
reorganization, at least sixty percent (60%) of the combined
voting power of the outstanding voting securities of the
corporation resulting from such merger or consolidation or
reorganization (the "Surviving Corporation") in substantially the
same proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or reorganization,
(2) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for
such merger, consolidation or reorganization constitute at least
two-thirds of the members of the board of directors of the
Surviving Corporation, and
(3) no Person, other than (a) the Company, any Subsidiary, any
employee benefit plan (or any trust forming a part thereof)
maintained by the Company, the Surviving Corporation, or any
Subsidiary, (b) S.A. Xxxxx Xxxxxxx et Cie ("SALD") or a
corporation or other entity that is directly or indirectly more
than 50% owned by SALD, or (c) any Person who, immediately prior
to such merger, consolidation or reorganization had Beneficial
Ownership of fifty percent (50%) or more of the then outstanding
Voting Securities, has Beneficial Ownership of fifty percent (50%)
or more of the combined voting power of the Surviving
Corporation's then outstanding voting securities;
(B) A complete liquidation or dissolution of the Company; or
(C) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person (other
than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur:
(i) Solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the outstanding
Voting Securities as a result of the acquisition of Voting Securities by
the Company which, by reducing the number of Voting Securities outstanding,
increases the proportional number of shares Beneficially Owned by the
Subject Person, provided that if a Change in Control would occur (but for
the operation of this sentence) as a result of the acquisition of Voting
Securities by the Company, and after such share acquisition by the Company,
the Subject Person becomes the Beneficial Owner of any additional Voting
Securities which increases the percentage of the then outstanding Voting
Securities Beneficially Owned by the Subject Person, then a Change in
Control shall occur or
(ii) By reason of any acquisition of Voting Securities by a corporation
or entity that is directly or indirectly more than 50% owned by SALD.
ARTICLE III
TRUSTEE'S RESPONSIBILITY UPON COMPANY'S INSOLVENCY
3.1 Cessation of Payment. Trustee shall cease payment of benefits to
Participants if the Company is Insolvent. Company shall be considered
"Insolvent" for purposes of this Trust Agreement if (a) Company is unable to pay
its debts as they become due, or (b) Company is subject to a pending proceeding
as a debtor under the United States Bankruptcy Code.
3.2 Assets Subject to Claims. At all times during the continuance of this
Trust, the principal and income of the Trust shall be subject to claims of
general creditors of Company under federal and state law set forth below.
3.2.1 Notice of Insolvency. The Board of Directors and the Chief
Executive Officer of Company shall have the duty to inform Trustee in
writing of Company's Insolvency. If a person claiming to be a creditor of
Company alleges in writing to Trustee that Company has become Insolvent,
Trustee shall determine whether Company is Insolvent and, pending such
determination, Trustee shall discontinue payment of benefits to
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Participants.
3.2.2 Duty of Inquiry. Unless Trustee has actual knowledge of Company's
Insolvency, or has received notice from Company or a person claiming to be
a creditor alleging that Company is Insolvent, Trustee shall have no duty
to inquire whether Company is Insolvent. Trustee may in all events rely on
such evidence concerning Company's solvency as may be furnished to Trustee
and that provides Trustee with a reasonable basis for making a
determination concerning Company's solvency.
3.2.3 Discontinuance of Benefits. If at any time Trustee has determined
that Company is Insolvent, Trustee shall discontinue payments to
Participants and shall hold the assets of the Trust for the benefit of
Company's general creditors. Nothing in this Trust Agreement shall in any
way diminish any rights of Participants to pursue their rights as general
creditors of Company with respect to benefits due under the Awards or
otherwise.
3.2.4 Resumption of Benefits. Trustee shall resume the payment of
benefits to Participants in accordance with Article II of this Trust
Agreement only after Trustee has determined that Company is not Insolvent
or is no longer Insolvent.
3.3 Continuation of Payments. Provided that there are sufficient assets, if
Trustee discontinues the payment of benefits from the Trust pursuant to Section
3.2 hereof and subsequently resumes such payments, the first payment following
such discontinuance shall include the aggregate amount of all payments due to
Participants under the terms of the Awards for the period of such
discontinuance, less the aggregate amount of any payments made to Participants
by Company in lieu of the payments provided for hereunder during any such period
of discontinuance.
ARTICLE IV
INVESTMENT AUTHORITY
4.1 Reversion of Assets. Except as provided in Article III hereof, Company
shall have no right or power to direct Trustee to return to Company or to divert
to others any of the Trust assets before all payments of benefits have been made
to Participants pursuant to the terms of the Awards.
4.2 Securities and Voting Rights. The Trustee shall hold the Shares and any
additional property or Proceeds deposited with respect thereto as provided in
Sections 1.5 or 1.6. The Trustee shall not sell the Shares or any other
securities of the Company deposited hereunder and shall have no liability to the
Company or Participants with respect to any decline in value of the Shares or
other securities of the Company. Subject to the foregoing, all rights associated
with the Shares and any other assets of the Trust shall be exercised by Trustee
or the person designated by Trustee, and shall in no event be exercisable by or
vest with Participants; provided, however, that each Participant shall be
entitled to direct the Trustee (i) as to how the Shares allocated to such
Participant shall be voted and the Trustee shall not vote the Shares in the
absence of specific instructions from such Participant; and (ii) whether to sell
or not sell the Shares allocated to him if a tender offer or exchange offer is
made for the common stock of the Company, and, in the absence of such direction,
the Trustee shall not be required to take any action with respect to such offer
and shall not be liable to the Participant for any inaction.
4.3 Cash and Income Accumulation. Any cash dividends paid with respect to
the Shares shall be invested by the Trustee in money market funds or similar
short term interest bearing investments. During the term of this Trust, all
income received by the Trust, net of expenses and taxes, shall be accumulated
and reinvested.
4.4 Mutual Funds. The Trustee, at its own discretion where the Trustee has
discretion with respect to investments under this Trust Agreement or applicable
law or upon the direction of any person authorized to direct investments under
this Trust Agreement, including but not limited to, an investment manager,
employer, Participant or advisory committee, may invest in the securities of any
open-end or closed-end investment management trust or company registered under
the Investment Company Act of 1940, as amended from time to time, to the maximum
extent permitted by the laws of the State of Oklahoma and, if applicable, the
Employee Retirement Income Security
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Act of 1974, as amended. Such securities include but are not limited to
securities for which the Trustee or any of its subsidiaries or affiliated
companies serves as an investment advisor, sponsor, distributor, custodian,
transfer agent, administrator, registrar, or otherwise.
4.5 Accounting. Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions required to be
made, and shall provide a written account thereof to the Company or any
Participant upon request. All accounts, books and records relating to the Trust
shall be kept open to inspection and audit at all reasonable times by the
Company and Participants insofar as such records relate to such Participant's
account.
4.6 Participant Accounts. The Trustee shall maintain separate accounts for
the benefit of each Participant which shall be credited with the Shares
allocated to each such Participant and any additional property deposited and the
earnings attributable thereto.
ARTICLE V
RESPONSIBILITY OF TRUSTEE
5.1 Fiduciary Standard. Trustee shall act with the care, skill, prudence
and diligence under the circumstances then prevailing that a prudent person
acting in like capacity and familiar with such matters would use in the conduct
of an enterprise of a like character and with like aims, provided, however, that
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by Company or a Participant which is
contemplated by, and in conformity with, the terms of the Awards or this Trust
and is given in writing by Company or Participant. In the event of a dispute
between Company and a Participant, Trustee may apply to a court of competent
jurisdiction to resolve the dispute.
5.2 Indemnification. If Trustee undertakes or defends any litigation
arising in connection with this Trust, Company agrees to indemnify Trustee
against Trustee's costs, expenses and liabilities (including, without
limitation, attorneys' fees and expenses) relating thereto and to be liable for
such payments.
5.3 Consultation. Trustee may consult with legal counsel (who may also be
counsel for Company generally) with respect to any of its duties or obligations
hereunder.
5.4 Hiring of Professionals. Trustee may hire agents, accountants,
actuaries, investment advisors, financial consultants or other professionals to
assist it in performing any of its duties or obligations hereunder.
5.5 Powers. Trustee shall have, without exclusion, all powers conferred on
Trustees by applicable law, unless expressly provided otherwise herein.
5.6 Tax Returns. Trustee shall not be responsible for tax return
preparation or filing, nor any reporting to any governmental agency of income
earned, but not distributed.
5.7 Other Business. Notwithstanding any powers granted to Trustee pursuant
to this Trust Agreement or applicable law, Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of Section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Code.
5.8 Fees and Expenses. Company shall pay all administrative and Trustee's
fees and expenses.
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ARTICLE VI
RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE
6.1 Resignation. Trustee may resign at any time by written notice to
Company, which shall be effective 30 days after receipt of such notice unless
Company and Trustee agree otherwise.
6.2 Removal. Trustee may be removed by Company on 30 days notice or upon
shorter notice accepted by Trustee.
6.3 Appointment of Successor by Company. If Trustee resigns or is removed
in accordance with Section 6.1 or 6.2 hereof, Company may appoint a successor
trustee to replace Trustee upon resignation or removal. The appointment shall be
effective when accepted in writing by the new Trustee, who shall have all of the
rights and powers of the former Trustee, including ownership rights in the Trust
assets. The former Trustee shall execute any instrument necessary or reasonably
requested by Company or the successor Trustee to evidence the transfer.
6.4 Court Appointed Trustee. If Trustee resigns or is removed, a successor
shall be appointed, in accordance with Sections 6.3 hereof, by the effective
date of resignation or removal. If no such appointment has been made, Trustee
may apply to a court of competent jurisdiction for appointment of a successor or
for instructions. All expenses of Trustee in connection with the proceeding
shall be allowed as administrative expenses of the Trust.
6.5 Indemnification of Successor Trustee. The successor Trustee need not
examine the records and acts of any prior Trustee and may retain or dispose of
existing Trust assets. The successor Trustee shall not be responsible for and
Company shall indemnify and defend the successor Trustee from any claim or
liability resulting from any action or inaction of any prior Trustee or from any
other past event, or any condition existing at the time it becomes successor
Trustee.
ARTICLE VII
AMENDMENT OR TERMINATION
7.1 Amendment. This Trust Agreement may be amended by a written instrument
executed by Trustee and Company. Notwithstanding the foregoing, no such
amendment shall conflict with the terms of the Awards or shall make the Trust
revocable.
7.2 Termination. The Trust shall not terminate until the date on which
Participants are no longer entitled to benefits pursuant to the terms of any
Award. Upon termination of the Trust any assets remaining in the Trust shall be
returned to Company.
7.3 Termination with Approval of Participants. Upon written approval of any
Participant entitled to payment of benefits pursuant to the terms of an Award,
Company may terminate this Trust as to such Participant prior to the time all
benefit payments under the Award have been made. All assets in the Trust held
for the benefit of such Participant at termination shall be returned to Company
or distributed to such Participant as may be directed by the Company.
ARTICLE VIII
MISCELLANEOUS
8.1 Severability. Any provision of this Trust Agreement prohibited by law
shall be ineffective to the extent of any such prohibition, without invalidating
the remaining provisions hereof.
8.2 Assignment of Benefits. Benefits payable to Participants under this
Trust Agreement may not be
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anticipated, assigned, either at law or in equity, alienated, pledged,
encumbered or subjected to attachment, garnishment, levy, execution or other
legal or equitable process, except in the event of the death of a Participant
pursuant to the laws of descent and distribution or to the Participant's
designated beneficiary.
8.3 Governing Law. This Trust Agreement shall be governed by and construed
in accordance with the laws of Oklahoma.
8.4 No Relief of Company Obligation. The terms of this Trust Agreement
shall not be construed to relieve the Company from any obligation to
Participants under the Awards except to the extent the Company's obligations are
satisfied by delivery of the Shares and any other property as provided herein.
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IN WITNESS WHEREOF, the parties have executed this Trust Agreement as of
the date first above written.
"TRUSTEE"
BANK OF OKLAHOMA, N.A.
By:
----------------------------
Authorized Officer
"COMPANY"
XXXXX XXXXXXX NATURAL GAS CORP.
By:
----------------------------
Xxxx X. Xxxxxx, President and
Chief Executive Officer
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