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EXHIBIT (e)(3)
FIRST AMENDMENT
TO
PENNACO ENERGY, INC.
EMPLOYMENT AGREEMENT
WHEREAS, Pennaco Energy, Inc., a Delaware corporation (the "Company"),
and Xxxx X. Xxxx (the "Executive") have entered into an Employment Agreement
dated June 10, 1998 (the "Employment Agreement"); and
WHEREAS, the Company and the Executive desire to amend the Employment
Agreement as provided herein;
NOW, THEREFORE, in consideration of the premises and respective
covenants set forth herein, the parties hereby amend the Employment Agreement as
follows:
1. Section 1.4 is hereby deleted in its entirety.
2. Sections 5.2, 5.2.1, 5.2.2 and 5.2.3 are hereby deleted in
their entirety.
3. Section 5.5.1 is amended to read as follows:
If Executive's employment is terminated during the Term
pursuant to Section 4.2, 4.3 or 4.5 hereof, Executive shall be
entitled to (x) any earned but unpaid Annual Salary, earned
but unpaid bonus for a prior year, and vacation accrued but
unpaid or untaken through the date of such termination of
employment (collectively, the "Accrued Obligations"), payable
within five days of the date of termination, and (y) exercise
any vested stock options for a period of 90 days following the
termination of employment hereunder or as provided by the
terms of grant of the options, if longer, but in no event
beyond their remaining terms.
4. Section 5.5.2 is hereby amended to read as follows:
If Executive's employment is terminated during the Term
pursuant to Section 4.1, 4.4 prior to a change in control, 4.6
or 4.7 hereof, Executive (or in the event of Executive's
death, Executive's designated beneficiary with respect to this
Agreement as filed with the Company and, if no such
designation has been filed, Executive's surviving spouse or,
if none, Executive's estate) shall be entitled to (x) the
Accrued Obligations, payable within five days of the date of
termination, (y) $3 million in cash (or by wire transfer),
with such amount paid in four equal installments with the
first installment made within five days of such termination
and the remaining installments made on the 90th, 180th, and
270th day following such termination, and (z) exercise any
vested stock options for a period of 90 days
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following the termination of employment hereunder or as
provided by the terms of grant of the options, if longer, but
in no event beyond their remaining terms.
5. Section 5.5.3 is hereby amended to read as follows:
If, on or following a change in control, (i) Executive's
employment is terminated during the Term by the Company
pursuant to Section 4.4, or (ii) Executive has any adverse
change in his status, title, duties, responsibilities, or
authority, as determined in good faith by Executive, and
Executive terminates his employment at any time thereafter
during the Term pursuant to Section 4.5, Executive shall be
entitled to receive (w) the Accrued Obligations, payable
within five days of the date of such termination, (x) the
Noncompete Payment (as defined below), payable within five
days of the date of such termination, (y) exercise any vested
stock options for a period of 180 days following the
termination of employment hereunder or as provided by the
grant terms of the options, if longer, but not beyond their
remaining terms, and (z) for the 12-month COBRA period
following such termination, the Company shall provide
Executive and his eligible family members with continued
coverage under the Company's group health plan(s) at a monthly
premium rate equal to that charged by the Company to its
active employees for similar coverage. Notwithstanding
anything in this Agreement to the contrary, in no event shall
the Term of this Agreement end prior to the second anniversary
of the date of a change in control, subject to its earlier
termination as provided in Section 4. If Executive's
employment is terminated by the Company pursuant to Section
4.4 within 12 months prior to a change in control and it is
reasonably demonstrated by Executive that such termination was
in connection with or in anticipation of such change in
control, then for all purposes of this Agreement the change in
control shall be deemed to have occurred the day before
Executive's termination of employment, and Executive shall be
entitled to receive, within five days of such change in
control, the amounts provided in (x) and (y) above less any
payments already made to Executive pursuant to Section 5.5.2.
To the extent any stock options of Executive have already
lapsed or been forfeited as a result of or following his
termination of employment prior to a change in control, which
would not have lapsed or terminated had his employment
continued until after the change in control, Executive shall
have, effective as of the date of the change in control, a
vested cash stock appreciation right ("SAR") with respect to
Company stock (or successor stock) in lieu of each such
terminated or forfeited option which SAR can be exercised by
Executive at any time within 180 days following the change in
control with an exercise price equal to the exercise price of
the cancelled option that the SAR replaces.
6. Section 9.3 is amended as follows:
1. On the 7th line thereof, after the phrase "for 12 months
thereafter", the following is inserted "(for 24 months
thereafter if his termination of employment occurs on or
following a change in control)".
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2. The last sentence of Section 9.3 shall apply only with
respect to a termination of employment pursuant to Section 4.4
that occurs prior to a change in control.
7. A new Section 9.3A is added to read as follows:
9.3A Non-Competition. In consideration for the Company's
agreement to provide Executive access to Confidential
Information and the Noncompete Payment (as provided below),
which is also consideration for the changes to Section 9.3
made by the First Amendment, Executive agrees that while
employed by the Company and, if Executive's employment
terminates for any reason other than Cause, death or
disability on or within two years following a change in
control, for the two-year period after such termination of
employment (the "Restricted Period"), subject to Section
9.3A.3 below, Executive shall not, unless Executive receives
the prior written consent of the Board of Directors of the
Company, own an interest in, manage, operate, join, control,
lend money or render financial or other assistance to or
participate in or be connected with, as an officer, employee,
partner, stockholder, consultant or otherwise, any person that
competes with the Company or its subsidiaries in the oil and
gas exploration or production business (the "Business") within
the Powder River Basin in Wyoming (the "Noncompete Area").
Within five days of any such termination, the Company shall
pay Executive a lump sum Noncompete Payment in cash (or by
wire transfer) equal to $6 million.
9.3A.1 Executive has carefully read and considered the
provisions of this Section 9.3A and, having done so, agrees
that the restrictions set forth in this Section 9.3A
(including the Restricted Period, scope of activity to be
restrained and the geographical scope) are fair and reasonable
and are reasonably required for the protection of the
interests of the Company, its officers, directors, employees,
creditors and shareholders. Executive understands that the
restrictions contained in this Section 9.3A may limit his
ability to engage in a business similar to the Company's
Business, but acknowledges that he will receive sufficiently
high remuneration and other benefits from the Company
hereunder to justify such restrictions.
9.3A.2 It is specifically agreed that the period of two years
following termination of employment, during which the
agreements and covenants of Executive made in this Section
9.3A shall be effective, shall be computed by excluding from
such computation any time which Executive is in violation of
any provision of this Section 9.3A. In the event that any
provision of this Section 9.3A relating to the Restricted
Period and/or the areas of restriction shall be declared by a
court of competent jurisdiction to exceed the maximum time
period or areas such court deems reasonable and enforceable,
the Restricted Period and/or areas of restriction deemed
reasonable and enforceable by the court shall become and
thereafter be the maximum time period and/or areas.
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9.3A.3 Nothing in this Agreement shall prohibit Executive from
(1) acquiring or holding any issue of stock or securities of
any person that has any securities registered under Section 12
of the Exchange Act, listed on a national securities exchange
or quoted on the automated quotation system of the National
Association of Securities Dealers, Inc. so long as (i)
Executive is not deemed to be an "affiliate" of such person as
such term is used in paragraphs (c) and (d) of Rule 145 under
the Securities Act of 1933, as amended, and (ii) Executive and
members of his immediate family do not own or hold more than
3% of any voting securities of any such person or (2) becoming
an employee of or a consultant to a person that competes with
the Company or an affiliate in the Noncompete Area, provided
that for the Restricted Period Executive does not perform any
services for such person in or relating to the Noncompete
Area.
9.3A.4 Executive acknowledges that a breach of any of the
covenants contained in Section 9.3 or this Section 9.3A may
result in material irreparable injury to the Company for which
there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and
that, in the event of such a breach, the Company shall be
entitled, in addition to any other remedies at law, to obtain
a temporary restraining order and/or a preliminary or
permanent injunction restraining Executive from engaging in
activities prohibited by Section 9.3 or this Section 9.3A or
such other relief as may required to specifically enforce any
of the covenants contained in Section 9.3 or this Section
9.3A. Executive agrees to waive any requirement for the
Company's securing or posting of any bond in connection with
such remedies. Executive further agrees to and hereby does
submit to in personam jurisdiction before each and every such
court for that purpose.
8. Section 10.4 is amended to provide that any termination that
entitles Executive to benefits pursuant to Section 5.5.3, as
amended, is a "termination of Executive's employment pursuant
to a change in control".
All terms used herein and defined in the Employment Agreement shall be
given their meanings as provided in the Employment Agreement, unless the context
requires otherwise. Except as amended hereby, the Employment Agreement shall
continue in full force and effect.
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IN WITNESS WHEREOF, the parties have executed this First Amendment to
the Employment Agreement effective for all purposes this November 15, 2000.
PENNACO ENERGY, INC.
BY: /s/ XXXX X. XXXXXX, XX.
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NAME: XXXX X. XXXXXX, XX.
TITLE: EXECUTIVE VICE PRESIDENT &
CHIEF FINANCIAL OFFICER
EXECUTIVE
/s/ XXXX X. XXXX
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Xxxx X. Xxxx
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