EXHIBIT A CHIEF EXECUTIVE SEPARATION AND SEVERANCE AGREEMENT
Exhibit
10.2 ---Severance Agreement
EXHIBIT
A
THIS
SEPARATION AND SEVERANCE AGREEMENT (the "Severance Agreement") is made a
part of
that Employment Agreement (the "Employment Agreement"), entered into and
effective as of the 1st
day of
July, 2006, by and between XXXX X. XXXXX, an individual resident of the State
of
Texas ("Executive"), and HYPERDYNAMICS CORPORATION, a Delaware corporation
(the
"Company").
W
I T N E
S S E T H:
WHEREAS,
the Company desires to employ Executive and to provide for severance benefits
under the terms and conditions set forth herein; and
WHEREAS,
this Severance Agreement constitutes part of the Employment Agreement and
is
incorporated therein by reference and fully set forth therein.
COVENANTS
NOW,
THEREFORE, in consideration of the premises, mutual promises contained herein,
and other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
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1.
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Certain
Definitions. The following terms shall have the meanings set forth
herein.
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(a)
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"Administrator"
shall mean the Company. The Company shall also be the "named
fiduciary"
hereunder. The Company shall have the authority to designate
one or more
of its officers, employees or directors to act on its behalf
in
administering this Severance
Agreement.
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(b)
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"Base
Salary" shall mean Executive's regular pay at the time of termination.
Base Salary shall not include bonus or incentive plans, overtime
pay,
relocation allowances or the value of any other benefits for which
Executive may be eligible.
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(c)
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"Good
Reason" shall mean, without the express written consent of Executive,
the
occurrence of any of the following events unless such events are
fully
corrected within 30 days following written notification by Executive
to
the Company that he intends to terminate his employment hereunder
for one
of the reasons set forth below:
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(i)
a
material breach by the Company of any provision of this Agreement, including,
but not limited to, the assignment to Executive of any duties inconsistent
with
Executive's position in the Company or a material adverse alteration in the
nature or status of Executive's responsibilities;
(ii)
the
Company's requiring the Executive to be based anywhere other than the
metropolitan area where he currently works and resides; and
(iii)
the
occurrence of a "Change in Control" as defined below.
For
purposes of this Agreement a "Change in Control" shall mean an event as a
result
of which: (i) any "person" (as such term is used in Sections 13(d) and 14(d)
of
the Securities Exchange Act of 1934 (the "Exchange Act")), is or becomes
the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, except
that
a person shall be deemed to have "beneficial ownership" of all securities
that
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of
more
than 50% of the total voting power of the voting stock of the Company; (ii)
the
Company consolidates with, or merges with or into another corporation or
sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any person, or any corporation consolidates
with, or merges with or into, the Company, in any such event pursuant to
a
transaction in which the outstanding voting stock of the Company is changed
into
or exchanged for cash, securities or other property, other than any such
transaction where (A) the outstanding voting stock of the Company is changed
into or exchanged for (i) voting stock of the surviving or transferee
corporation or (ii) cash, securities (whether or not including voting stock)
or
other property, and (B) the holders of the voting stock of the Company
immediately prior to such transaction own, directly or indirectly, not less
than
50% of the voting power of the voting stock of the surviving corporation
immediately after such transaction; or (iii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of the Company (together with any new directors whose election
by such
Board or whose nomination for election by the stockholders of the Company
was
approved by a vote of 66-2/3% of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute
a
majority of the Board of the Company then in office; or (iv) the Company
is
liquidated or dissolved or adopts a plan of liquidation, provided, however,
that
a Change in Control shall not include any going private or leveraged buy-out
transaction which is sponsored by Executive or in which Executive acquires
an
equity interest materially in excess of his equity interest in the Company
immediately prior to such transaction (each of the events described in (i),
(ii), (iii) or (iv) above, except as provided otherwise by the preceding
clause
being referred to herein as a "Change in Control"). In the event of a sale
of
the assets or stock of the Company, the Executive shall have the option of
electing to terminate his employment due to a Change in Control and receive
such
severance benefits or electing to remain employed under the terms of this
Agreement, but not both. Executive's right to terminate his employment for
Good
Cause due to any "Change in Control" must be exercised within sixty (60)
days
after receiving written notice or his receiving actual knowledge of such
Good
Cause.
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(d)
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Cause
shall mean:
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(i)
fraud, misappropriation, embezzlement, or other act of material misconduct
against the Company or any of its affiliates;
(ii)
substantial and willful failure to perform specific and lawful directives
of the
Board;
(iii)
willful and knowing violation of any rules or regulations of any governmental
or
regulatory body, which is materially injurious to the financial condition
of the
Company; or
(iv)
conviction of or plea of guilty or nolo contendere to a
felony;
(v)
a
material breach of the terms and conditions of this Agreement: provided,
however, that with regard to subparagraphs (ii) and (v) above, Executive
may not
be terminated for Cause unless and until the Board has given him reasonable
written notice of its intended actions and specifically describing the alleged
events, activities or omissions giving rise thereto and with respect to those
events, activities or omissions for which a cure is possible, a reasonable
opportunity to cure such breach; and provided further, however, that for
purposes of determining whether any such Cause is present, no act or failure
to
act by Executive shall be considered "willful" if done or omitted to be done
by
Executive in good faith and in the reasonable belief that such act or omission
was in the best interest of the Company and/or required by applicable
law.
(e)
Disability
shall mean that as a result of Executive's incapacity due to physical or
mental
illness (as determined in good faith by a physician acceptable to the Company
and Executive), Executive shall have been absent from the full-time performance
of his duties with the Company for 120 consecutive days during any twelve
(12)
month period or if a physician acceptable to the Company and Executive advises
the Company that it is likely that Executive will be unable to return to
the
full-time performance of his duties for 120 consecutive days during the
succeeding twelve (12) month period.
2.
Responsibility for Benefits. The Company will pay the entire cost of all
benefits provided under this Severance Agreement, solely from its general
assets. The benefits made available by this Severance Agreement are "unfunded,"
and Executive is not required or permitted to make any contribution with
respect
to this Severance Agreement.
3.
Payment
of
Benefits. In the event Executive's employment is terminated (a) by the Company
other than for Cause, Disability or Death or (b) by Executive for Good Reason
(as defined herein), Executive shall receive the following severance benefits
upon his satisfaction of the condition in paragraph 4 hereof:
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(iii)
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his
Base Salary during the period commencing on the effective date
of such
termination and ending two (2) years later (the "Salary Continuation
Period"), as if Executive were still employed during the Salary
Continuation Period; and
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(iv)
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during
the Salary Continuation Period
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(A) Medical
Insurance. Upon termination from employment, the Executive and his spouse
and
dependents shall be entitled to continue to be covered by the Company's
group
medical, health and accident insurance plan (the “Then Current Company Benefit
Plan”) to the extent such coverage is available to non-employees under the Then
Current Company Benefit Plan and the Company shall pay all premiums therefore,
and if such coverage under the Current Company Benefit Plan is not available
to
non-employees, then the Executive shall on his own seek to obtain COBRA coverage
to the extent available and pay the COBRA premiums himself for the longest
possible COBRA benefit coverage for himself, his spouse and his children
under
age 25. Upon the expiration of COBRA coverage or its non-availability for
the
Executive, his spouse and children under the age of 25, the Executive shall
on
his own obtain individual medical benefit plans for himself, his spouse and
children under age 25. However, at any time after termination from employment,
or, during employment at the time the Company expresses a desire to terminate
the Executive, the Executive may seek to obtain individual benefit plans
for
himself, his spouse and children under age 25 (e.g. an early termination
of, or
not applying for coverage under COBRA; or, action taken by the Executive
to do
same if the Company expresses its desire to terminate the Executive. In
circumstances where the Executive, his spouse and his children under age
25 are
not covered under the then Current Company Benefit Plan, then the Company
shall
reimburse the Executive for his actual out of pocket premium cost for the
COBRA
benefit or the individual benefit plans for himself, his spouse and his children
under age 25, up to an aggregate amount not to exceed $20,000 per 12 month
period (the “Non-Company Benefit Plan Premium Reimbursement”). IT
IS THE EXECUTIVE’S OBLIGATION TO OBTAIN THE COBRA COVERAGE AND THE INDIVIDUAL
BENEFIT PLAN COVERAGE, NOT THE COMPANY’S.
The
Company’s obligations under the Non-Company Benefit Plan Premium Reimbursement
shall cease as follows:
(x) For
the
Executive, at such time as he reaches age 66, or is deceased, or is covered
under another employer’s group medical plan as an employee or a family
member.
(y) For
the
spouse (from time to time) of the Executive, at such time as she is age 66,
or
is deceased, or stops being the spouse of the Executive, or is covered under
another employer’s group medical plan as an employee or a family
member.
(z) For
the
children (natural or adopted) of the Executive, at such time as each reaches
age
25, or is deceased, or is covered under another employer’s group medical plan as
an employee or a family member.
(B)
Non-Company
Benefit Plan Premium Reimbursement Procedure. The Executive shall, within 10
days of receiving a premium payment notice or other indicia of an invoice
for
the premium, notify the Company in writing (the “Notice of Premium”) of the
exact amount of the premium along with a copy of the premium notice from
the
insurance carrier. Upon the Company’s receipt of the Notice of Premium, the
Company shall, within 10 days thereafter send the noticed premium amount
to
the Executive (and not to the insurance carrier) via
regular first class mail at the address provided by the Executive in the
Notice
of Premium. The Executive may select the premium mode (e.g., annual, quarterly
monthly premium billing, etc.) and the Executive may arrange for up to two
medical insurance policies each for himself, his spouse and his children
under
age 25.
(C) The
risk of
insurability is borne by the Executive, his spouse and his children under
age
25. The risk oaf insurance company failure is borne by the Executive, his
spouse
and his children under age 25. The risk of premium increases (beyond an
aggregate of $20,000 per 12 month period) is borne by the Executive, his
spouse
and his children under age 25
(D) The
Non-Company Benefit Plan Premium Reimbursement (i.e., an aggregate of $20,000
per 12 month period) shall be indexed so as to have a five percent increase
per
year beginning on the first anniversary of the Executive’s termination.
4.
Conditions
to Receipt of Benefits. Upon the occurrence of an event described in Section
3
above, Executive will be eligible for severance benefits to begin immediately.
5.
Termination
Events Not Covered. Notwithstanding anything to the contrary contained herein,
the Company shall not pay Executive severance benefits under this Severance
Agreement if:
(a)
Executive
terminates his employment with Company for a reason other than Good Reason
as
defined herein; or
(b)
Executive
revokes his agreement to release the Company from any and all claims related
to
his employment pursuant to the Settlement Agreement and Release
executed.
6.
How
Severance Benefits Are Paid. The Company will pay severance benefits in
installments through the Company's regular payroll procedure according to
Executive's pay schedule at the time of termination of employment; provided
however, the Administrator shall have the discretion to cause the Company
to pay
all severance benefits in a lump sum payment. Executive's severance benefits
shall be subject to mandatory withholding, including federal, state and local
income taxes, as well as FICA and withholding for applicable insurance
premiums.
7.
Benefit
Claims and Appeal Procedures. Executive has the right to make a written claim
for benefits under this Severance Agreement. If all or part of Executive's
claim
for benefits is denied, or if there is a dispute regarding Executive's rights
under this Severance Agreement, the Administrator will notify Executive in
writing of the reasons for the denial of Executive's claim. The notice will
refer to the appropriate provision of this Severance Agreement on which the
denial or decision is based. The notice will also describe how claims are
reviewed and outline the steps for an appeal. Usually, the Administrator
will
give Executive written notice of its decision within five (5) days of receipt
of
the claim. If Executive disagrees with the Administrator's decision, Executive
may appeal and request a review of the case by the Administrator. Executive
must
request a review of the claim in writing within sixty (60) days after the
Administrator notifies Executive of its decision. Executive's request must
state
why Executive disagrees with the decision, and Executive must include any
information, questions or comments to support his appeal. Executive or his
legal
representative may review any documents related to the claim. The Administrator
will review the appeal and notify Executive of its decision within five (5)
days
after receipt of the appeal.
9.
Additional
Information Regarding this Severance Agreement.
(a)
This
Severance Agreement shall not be amended except by a written agreement executed
by Executive and by an authorized officer of the Company (other than
Executive).
(b)
The
Employment Agreement and this Severance Agreement provides the sole and
exclusive agreement concerning severance benefits for Executive in the event
of
a termination and replaces any and all prior plans, policies and practices
relating to severance pay that may exist now or may have existed in the
past.
(c)
To
the extent not preempted by ERISA, the Employment Agreement and this Severance
Agreement shall be governed by and construed according to the laws of the
state
of Texas.
(d)
If a
provision of this Severance Agreement shall be held illegal or invalid, the
legality or invalidity shall not affect the remaining provisions of this
Severance Agreement, and this Severance Agreement shall be construed and
enforced as if the illegal or invalid provision had not been
included.
(e)
Executive acknowledges that no representation, promise or inducement has
been
made other than as set forth in the Employment Agreement and this Severance
Agreement, and that he does not enter into this Employment Agreement and
Severance Agreement in reliance upon any representation, promise or inducement
not set forth herein and the Employment Agreement. The Employment Agreement
and
this Severance Agreement supersedes all prior negotiations and understandings
of
any kind with respect to the subject matter and contains all of the terms
and
provisions of the agreement between Executive and the Company with respect
to
the subject matter hereof. Any representation, promise or condition, whether
written or oral, not specifically incorporated herein, shall be of no binding
effect.
10.
Executive's
Rights Under ERISA. As a participant under this Severance Agreement, Executive
is entitled to certain rights and protections under ERISA. Executive may
examine
all documents relating to the Severance Agreement without charge. These may
include annual financial reports, plan descriptions and all other official
documents filed with the United States Department of Labor (if any). Executive
may obtain copies of documents relating to this Severance Agreement and certain
other information by writing to the Administrator. In addition to creating
rights for the Executive as a participant under this Severance Agreement,
ERISA
imposes certain duties on the people who are responsible for operating this
Severance Agreement. These people are called "fiduciaries." The fiduciaries
have
a duty to operate the Severance Agreement prudently and in the interest of
the
Executive. The Company may not terminate Executive's employment or otherwise
discriminate against Executive in any way to prevent him from obtaining a
severance benefit or exercising rights under ERISA. Under ERISA, Executive
may
take the following steps to enforce his rights: (a) if Executive requests
certain materials from the administrator regarding this Severance Agreement
and
does not receive them within 10 days, Executive may file suit in a federal
court; in such a case, the court may require the Administrator to provide
the
materials and pay Executive up to $500 a day until Executive receives the
materials, unless the materials were not sent due to reasons beyond the control
of the Administrator; (b) if Executive's claim for benefits is denied or
ignored
in whole or in part, Executive may file suit in federal court; (c) if Executive
is discriminated against for pursuing a benefit or exercising ERISA rights,
Executive may seek help from the United States Department of Labor or file
suit
in a federal court. If Executive files a suit, the court will decide who
should
pay court costs and legal fees. If Executive has any questions about this
statement or about ERISA rights, Executive should contact the Administrator.
Executive may also contact the nearest area office of the Pension and Welfare
Benefit Administration, United States Department of Labor.
Agent
For
Service of Legal Process: HYPERDYNAMICS CORPORATION
Attention:
Secretary
IN
WITNESS WHEREOF, the parties hereto have executed this Severance Agreement
under
seal as of the date first set forth above (the individual party adopting
the
word "SEAL" as his seal).
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COMPANY:
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HYPERDYNAMICS
CORPORATION
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By:
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Xxxxx
X. Xxxxxx
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Executive
Vice President
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EXECUTIVE:
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Xxxx
X. Xxxxx
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Address:
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0000
Xxxx Xxxxxx Xxxxx
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Xxxxxxxx,
Xxxxx 00000
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