EXHIBIT 10.31
FORM
SEVERANCE PROTECTION AGREEMENT
This agreement ("Agreement") is made as of the 25th day of March 2001 by and
between Nuevo Energy Company (the "Company") and the Executive.
WHEREAS, the Board of Directors of the Company (the "Board") recognizes the
possibility of a Change in Control (as hereinafter defined) exists and that the
threat or the occurrence of a Change in Control can result in significant
distractions of its key executive personnel because of the uncertainties
inherent in such situations;
WHEREAS, the Board has determined that it is in the best interest of the Company
and its stockholders to ensure the fair treatment of its executives in the event
of a Change in Control and that it is essential to retain the services of the
Executive in the event of a threat or occurrence of a Change in Control and to
ensure the Executive's continued dedication and effort without undue concern for
his personal financial and employment security; and
WHEREAS, in order to induce the Executive to remain in the employ of the
Company, particularly in the event of a threat or the occurrence of a Change in
Control, the Company desires to enter into this Agreement with the Executive to
provide the Executive with certain benefits in the event his employment is
terminated as a result of or in connection with a Change in Control.
NOW THEREFORE, in consideration of the respective agreements of the parties
contained herein, it is agreed as follows:
1. Definitions. Unless otherwise specifically stated in this Agreement, the
terms specified below shall have the following meanings:
a. "Change in Control" shall mean (i) the Company sells or otherwise
disposes of substantially all of its assets to another corporation or
other entity (other than to a corporation or entity in which the persons
that are holders of shares of the Company's common stock immediately
prior to the transaction receive 50% or more of the common stock of such
corporation or entity), (ii) the Company merges with another company and
the persons who are holders of shares of the Company's common stock
immediately prior to the merger receive less than a majority of the
shares of common stock of the surviving company with respect to such
shares of Company common stock in the merger, (iii) the Company merges
with another company and a majority of the members of the board of
directors immediately following such merger were not members of the
Company's board of directors immediately prior to such merger, or (iv)
any other merger, transfer of stock or other transaction wherein the
Company
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combines its business, assets or operations with another entity which has
approximately the same market capitalization, total assets or similar
measure of size and which the compensation committee of the board of
directors determines is a Change in Control.
b. "Constructive Discharge" shall mean:
(i) the Executive's office, title, responsibilities, or the conditions
of employment are substantially reduced by the Company or an
acquiror from those specified in a written employment agreement
with the Executive ("Employment Agreement") or if none are
specified in the Employment Agreement, from those that exist
immediately prior to a Change in Control; or
(ii) the Company fails to continue in effect any compensation or
benefit plan in which the Executive participates that is material
to the Executive's total compensation, unless an equitable
arrangement has been made with respect to such compensation or
plan (including the substitution of a comparable plan); or,
(iii) the Company takes any action materially and adversely affecting the
Executive's participation in or materially reducing his rights or
benefits under or pursuant to any compensation or benefit plan or
the Company fails to increase or improve such rights or benefits on
a basis consistent with the increases or improvements granted to
the senior executives of the Company generally.
(iv) the relocation of the Company's principal executive offices
outside the greater Houston, Texas metropolitan area; or,
(v) requiring the Executive to relocate anywhere other than the
location of the Company's principal executive or the principal
executive offices of the acquiror; or
(vi) the failure of the Company to obtain a satisfactory agreement from
any successor to assume and agree to perform this Agreement;
(vii) the breach by the Company of any material provision of this
Agreement.
c. "just cause" shall mean
(i) the willful failure or refusal of the Executive to render services
to the Company in accordance with his obligations under his
Employment Agreement (or in accordance with his obligations
immediately prior to the change in control, if the Executive does
not have an
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Employment Agreement), and such failure or refusal continues,
uncured, for a period of not less than 15 days after written notice
specifically identifying the manner in which the Executive has not
performed his duties;
(ii) the commission by the Executive of an act of fraud or embezzlement
against the Company or the commission by the Executive of any other
action with the intent to injure the Company; or
(iii) the Executive having been convicted of, or pleading guilty or nolo
contendere to, a felony.
d. "Base Salary" shall mean the Executive's highest annualized base rate of
pay with the Company during the 12-month period immediately preceding
Executive's date of termination.
2. Effect of Agreement. This Agreement is effective as of the date first
written above ("Effective Date"). To the extent that the Executive is
entitled to severance benefits under this Agreement and the Executive's
Employment Agreement with the Company, this Agreement shall take precedence
and any cash severance amount due or payable to the Executive under this
Agreement shall be in lieu of any payment or obligation of the Company
pursuant to the Executive's Employment Agreement or any Company maintained
severance plan or policy for employees in general. In all other respects,
the Employment Agreement remains in full force and effect.
3. Term. This Agreement shall remain in effect for an initial term of two years
from the Effective Date. On the second anniversary of the Effective Date and
each anniversary thereafter the term shall automatically extend for an
additional one year unless terminated by written notice ninety days prior to
such anniversary of the Effective Date. Notwithstanding the foregoing, this
Agreement shall remain in effect for two years following a Change in Control
if a Change in Control occurred during the term or any extension thereof.
This Agreement shall terminate automatically if (i) the Executive
voluntarily terminates his employment with the Company under circumstances
in which the Executive is entitled to no severance or termination benefits,
(ii) the Executive is terminated for just cause, or (iii) the Company fully
satisfies its obligations to the Executive under this Agreement.
4. Severance Pay. In the event that the Company terminates the Executive's
employment for other than just cause or disability within two years of a
Change in Control or the Executive terminates his employment due to a
Constructive Discharge within two years of a Change in Control, the Company
agrees to pay the Executive in one lump sum payment within 10 days of the
termination of employment, the sum of three years Base Salary and three
years annual bonus (calculated based on the average of the last three year's
bonus award, but using
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only years in which the Executive was actually employed by the Company). For
the purpose of this calculation, the annual bonus used in the calculation
shall be the entire bonus award accrued for the Executive and attributable
to a particular calendar year, whether the bonus is paid in whole or in part
or during or after that calendar year.
In the event of a Change in Control, all outstanding and unvested options
shall be deemed vested and shall be exercisable in whole or in part
immediately prior to the consummation of the Change in Control transaction.
In the event that the Company is obligated to pay the Executive under this
Section 4 after a Change in Control, all outstanding options previously
awarded to the Executive will, to the extent not already vested, vest
immediately and the Executive shall have the lesser of (i) 365 days or (ii)
the remaining Option Term to exercise any or all of his vested options.
Notwithstanding the foregoing, unless otherwise agreed to a separate written
agreement, if the vesting of options pursuant to this paragraph would
prevent the use of the pooling of interests method of accounting in
connection with a Change in Control, the vesting shall be cancelled.
In addition to the payments required to be made hereunder, the salary
otherwise payable to and earned by the Executive to the date of termination
shall be prorated to the date of termination. The prorated salary, together
with an incentive bonus calculated as if the Executive had fully met his
annual performance target for the year in which the date of termination
occurs, prorated to the date of termination and the then outstanding balance
in the Executive's EVA bonus bank, if any, shall become due and payable
within ten days after the date of termination. As expeditiously as possible
after the termination, the Company shall pay or reimburse the Executive for
all reasonable business expenses incurred prior to the termination. In
addition, the Company shall continue to provide the Executive with medical,
dental and health benefits (but not life or disability insurance) during the
eighteen month period from the date of termination at the Company's expense,
provided that the Executive continues to pay all employee contributions for
such health coverage.
5. Mitigation. Employee shall not be required to mitigate the amount of any
payment or benefit provided in this Agreement by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in
this Agreement be reduced by any compensation or benefit earned by the
employee as a result of employment by another employer, self-employment
earnings, by retirement benefits, by offset against any amount claimed to be
owing by the Executive to the Company, or otherwise; provided, however, any
severance amount due or payable to the Executive under this Agreement as a
result of a Change in Control is in lieu of payment under any Company
maintained severance plan or policy for employees in general or under an
Employment Agreement.
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6. Gross-up of Parachute Payment. Any payment made, including without
limitation any imputed income, or benefit provided to or on behalf of the
Executive, including any accelerated vesting or any deferred compensation or
other award, in connection with a Change in Control of the Company, whether
or not made or provided pursuant to this Agreement, results in the Executive
being subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code, as amended, (or any successor or similar provision), then the
Company shall pay the Executive an additional amount of cash (the
"Additional Amount") such that the net amount of all payments and benefits
received by the Executive after paying all applicable taxes thereon,
including on such Additional Amount, shall be equal to the net after tax
amount of payments and benefits that the Executive would have received if
Sections 280G and 4999 were not applicable.
7. Successor. The Company will require any successor including any corporation
which becomes the ultimate parent corporation of the Company ("Successor")
to expressly assume and agree in writing satisfactory to the Executive to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken
place. Failure of the Company to obtain such written agreement from a
Successor prior to the effectiveness of any such succession or creation of
the parent company relationship shall be deemed a Constructive Discharge and
shall entitle the Executive to compensation and benefits from the Company as
set out in Section 4.
8. Waivers and Modifications. This Agreement may be modified, and the rights
and remedies of any provision hereof may be waived, only in accordance with
this Section 8. No waiver by either party of any breach by the other of any
provision hereof shall be deemed to be a waiver of any later or other breach
thereof or as a waiver of any other provision of this Agreement. This
Agreement sets forth all of the terms of the understanding between the
parties with reference to the subject matter set forth herein and may not be
waived, changed, discharged or terminated orally or by any course of dealing
between the parties, but only by an instrument in writing signed by the
party against whom any waiver, change, discharge or termination is sought.
9. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Texas.
10. Severability. In case any one or more of the provisions contained in this
Agreement for any reason shall be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or
unenforceable provisions had never been contained herein.
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IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
this the 25th day of March 2001.
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