EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made by and between SEAGULL
ENERGY CORPORATION, a Texas corporation ("Company"), and Xxxxx X. Xxxxxxx
("Executive").
W I T N E S S E T H:
WHEREAS, Company is desirous of employing Executive in an executive
capacity on the terms and conditions, and for the consideration, hereinafter set
forth and Executive is desirous of being employed by Company on such terms and
conditions and for such consideration;
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants and obligations contained herein, Company and Executive agree as
follows:
ARTICLE 1: EMPLOYMENT AND DUTIES
1.1 Employment; Effective Date. Company agrees to employ Executive and
Executive agrees to be employed by Company, beginning as of the Effective Date
(as hereinafter defined) and continuing for the period of time set forth in
Article 2 of this Agreement, subject to the terms and conditions of this
Agreement. For purposes of this Agreement, the "Effective Date" shall be the
first date that Executive reports for work at the offices of the Company, but no
later than October 15, 1998.
1.2 Positions. Effective as of the Effective Date, Company shall cause
Executive to be appointed President and Chief Executive Officer of Company and
to be elected a member of the Board of Directors of Company (the "Board of
Directors"). Effective as of January 1, 1999, Company shall cause Executive to
be elected as Chairman of the Board of Directors. Company shall maintain
Executive in such positions, or in such other positions as the parties mutually
may agree, for the full term of Executive's employment hereunder.
1.3 Duties and Services. Executive agrees to serve in the positions
referred to in paragraph 1.2 and to perform diligently and to the best of his
abilities the duties and services appertaining to such office, as well as such
additional duties and services appropriate to such office which the parties
mutually may agree upon from time to time. Executive's employment shall also be
subject to the policies maintained and established by Company, as the same may
be amended from time to time.
1.4 Other Interests. Executive agrees, during the period of his
employment by Company, to devote his primary business time, energy and best
efforts to the business and affairs of Company and its affiliates and not to
engage, directly or indirectly, in any other business or businesses, whether or
not similar to that of Company, except with the consent of the Board of
Directors. The foregoing notwithstanding, the parties recognize and agree that
Executive may engage in passive personal investments and other civic, charitable
and business activities that do not conflict with the business
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and affairs of Company or interfere with Executive's performance of his duties
hereunder without the necessity of obtaining the consent of the Board of
Directors.
1.5 Duty of Loyalty. Executive acknowledges and agrees that Executive
owes a fiduciary duty of loyalty, fidelity, and allegiance to act at all times
in the best interests of Company. In keeping with these duties, Executive shall
make full disclosure to Company of all business opportunities pertaining to
Company's business and shall not appropriate for Executive's own benefit
business opportunities concerning the subject matter of the fiduciary
relationship.
ARTICLE 2: TERM AND TERMINATION OF EMPLOYMENT
2.1 Term. Unless sooner terminated pursuant to other provisions hereof,
Company agrees to employ Executive for the period beginning on the Effective
Date and ending on the third anniversary of the Effective Date. Beginning with
the first anniversary of the Effective Date, said term of employment shall be
extended automatically for an additional successive one-year period as of each
anniversary date of the Effective Date that occurs while this Agreement is in
effect; provided, however, that if, at any time prior to any such anniversary
date of the Effective Date, either party shall give written notice to the other
that no such automatic extension shall occur, then Executive's employment shall
terminate on the last day of the two-year period beginning on the anniversary
date of the Effective Date that next occurs after such notice is given.
2.2 Company's Right to Terminate. Notwithstanding the provisions of
paragraph 2.1, Company shall have the right to terminate Executive's employment
under this Agreement at any time for any of the following reasons:
(i) upon Executive's death;
(ii) upon Executive's becoming incapacitated by accident,
sickness or other circumstance which renders him mentally or physically
incapable of performing the duties and services required of him
hereunder on a full-time basis with reasonable accommodation for a
period of at least 120 consecutive days or for a period of 180 business
days during any twelve-month period;
(iii) for cause, which for purposes of this Agreement shall
mean Executive's gross negligence, gross neglect or willful misconduct
in the performance of the duties required of him hereunder or
Executive's final conviction of a felony or of a misdemeanor involving
moral turpitude, excluding misdemeanor convictions relating to the
operation of a motor vehicle;
(iv) for Executive's material breach of any material provision
of this Agreement which, if correctable, remains uncorrected for 30
days following written notice to Executive by Company of such breach;
or
(v) for any other reason whatsoever, in the sole discretion of
the Board of Directors.
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2.3 Executive's Right to Terminate. Notwithstanding the provisions of
paragraph 2.1, Executive shall have the right to terminate his employment under
this Agreement at any time for any of the following reasons:
(i) for (A) Company's material breach of any material
provision of this Agreement, (B) Company's assignment to Executive of
duties and responsibilities that are materially inconsistent with the
positions referred to in paragraph 1.2, (C) Company's failure to
appoint or elect or reappoint or reelect Executive to the positions
referred to in paragraph 1.2 or (D) a change in the location of
Executive's principal place of employment by the Company by more than
50 miles from the location where he was principally employed
immediately prior to such change; provided, however, that, prior to
Executive's termination of employment under (A), (B) or (C) of this
paragraph 2.3(i), Executive must give written notice to Company of any
such breach, assignment or failure and such breach, assignment or
failure must remain uncorrected for 30 days following such written
notice; or
(ii) for any other reason whatsoever, in the sole discretion
of Executive.
2.4 Notice of Termination. If Company or Executive desires to terminate
Executive's employment hereunder at any time prior to expiration of the term of
employment as provided in paragraph 2.1, it or he shall do so by giving written
notice to the other party that it or he has elected to terminate Executive's
employment hereunder and stating the effective date and reason for such
termination, provided that no such action shall alter or amend any other
provisions hereof or rights arising hereunder, including, without limitation,
the provisions of Article 4 hereof. Such notice shall also, to the extent
material to any right or obligation hereunder, constitute notice under paragraph
2.1 of the discontinuance of any further automatic extensions of the term of
paragraph 2.1.
ARTICLE 3: COMPENSATION AND BENEFITS
3.1 Base Salary. During the period of this Agreement, Executive shall
receive a minimum annual base salary of $500,000. The Compensation Committee of
the Board of Directors (the "Compensation Committee") shall review Executive's
annual base salary on an annual basis and shall make a recommendation to the
Board of Directors regarding possible increases in such annual base salary, and
the Board of Directors, in its sole discretion, may increase, but not decrease,
Executive's annual base salary. Executive's annual base salary shall be paid in
equal installments in accordance with the Company's standard policy regarding
payment of compensation to executives but no less frequently than monthly.
Notwithstanding the foregoing, in lieu of annual base salary (other than the
amount necessary to provide certain Company benefits, which is not expected to
exceed $5,000 annually) for the period beginning on the Effective Date and
ending on December 31, 1999, on the Effective Date, Company shall grant to
Executive an option (the "Option") to purchase 200,000 shares of Company's
common stock ("Stock") under the Seagull Energy Corporation 1998 Omnibus Stock
Plan (the "1998 Plan"). The purchase price for each share of Stock subject to
the Option shall be equal to the Fair Market Value (as such term is defined in
the 1998 Plan) of a share of Stock as of the Effective Date. Subject to the
terms of the 1998 Plan and the agreement, in the form attached hereto as Exhibit
A1, to be executed by Company and Executive evidencing the
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Option, such Option shall (i) be a nonqualified stock option, (ii) have a
ten-year term, (iii) be fully exercisable on the date of grant thereof. The
grant of the Option shall be deemed to satisfy Company's obligation to pay
Executive's annual base salary under this Agreement including, without
limitation, pursuant to this paragraph 3.1 and the termination provisions of
Article 7, with respect to the period beginning on the Effective Date and ending
on December 31, 1999.
3.2 Signing Bonus. On the Effective Date, Executive shall be entitled
to a signing bonus in the amount of $580,000, which Company shall cause to be
credited to Executive's Deferred Compensation Account under the Seagull Energy
Corporation Supplemental Benefit Plan (the "SBP"), and which Executive agrees
shall be credited with Phantom Stock (as such term is defined in the SBP) for at
least one year following the Effective Date.
3.3 Annual Bonuses. For the 1999 performance year and subsequent
performance years ending during the period of this Agreement, Executive shall be
eligible to receive an annual bonus under the Seagull Energy Corporation
Executive Incentive Plan (or any successor thereto) (the "EIP") as established
from time to time by the Compensation Committee, based on an Incentive Target
(as such term is used in the EIP) of 60% of Executive's annual base salary (or
the annual base salary that Executive would have received if he had not received
an Option in lieu of such annual salary pursuant to paragraph 3.1), with a
Maximum Incentive (as such term is used in the EIP) of 120% of Executive's
annual base salary (or the annual base salary that Executive would have received
if he had not received an Option in lieu of such annual salary pursuant to
paragraph 3.1).
3.4 Initial Stock Option. On the Effective Date, Company shall grant to
Executive an option (the "Initial Option") to purchase 191,996 shares of Stock
pursuant to the Seagull Energy Corporation 1995 Omnibus Stock Plan (the "1995
Plan"). The purchase price for each share of Stock subject to the Initial Option
shall be equal to the Fair Market Value (as such term is defined in the 1995
Plan) of a share of Stock as of the Effective Date. Subject to the terms of the
1995 Plan and the agreement, in the forms attached hereto as Exhibits A2 and A3,
to be executed by Company and Executive evidencing the Initial Option, the
Initial Option shall (i) be an incentive stock option to the extent permitted
under applicable law and a nonqualified stock option to the extent of the
remainder of the grant, if any, (ii) have a ten-year term, (iii) become
exercisable in 25% increments on each of the first four anniversaries of the
Effective Date.
3.5 Initial Restricted Stock Awards. Company shall grant to Executive
300,000 restricted shares of Stock (the "Initial Restricted Stock Awards") as
follows:
(i) Effective as of the Effective Date, Company shall grant to
Executive 58,004 restricted shares of Stock pursuant to the 1995 Plan.
Subject to the terms of the Plan and the agreement, in the form
attached hereto as Exhibit B1, to be executed by Company and Executive
evidencing such award, such award shall contain forfeiture restrictions
that shall lapse with respect to (A) 25,000 of the shares subject
thereto on December 31, 1998, (B) the remainder of the shares subject
thereto, if any, in 331/3% increments on each of the first three
anniversaries of the Effective Date.
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(ii) Effective as of January 1, 1999, Company shall grant to
Executive 241,996 restricted shares of Stock pursuant to the 1998 Plan.
Subject to the terms of the Plan and the agreement, in the form
attached hereto as Exhibit B2, to be executed by Company and Executive
evidencing such award, such award shall contain forfeiture restrictions
that shall lapse with respect to (A) 1/3 of the shares subject thereto
on the first anniversary of the Effective Date, (B) an additional 1/3
of the shares subject thereto on the second anniversary of the
Effective Date, and (C) and an additional 1/3 of the shares subject
thereto on the third anniversary of the Effective Date.
3.6 Subsequent Stock Options. On each of the first, second and third
anniversaries of the Effective Date, Company shall grant to Executive options to
purchase a number of shares of Stock (the "Subsequent Options") pursuant to the
1998 Plan or any other appropriate Company stock plan (the "Company Stock Plan")
in accordance with the following schedule:
Anniversary of Effective Date Number of Shares
First Anniversary 75,000
Second Anniversary 50,000
Third Anniversary 25,000
The purchase price for each share of Stock subject to each Subsequent Option
shall be equal to the Fair Market Value (as such term is defined in the Company
Stock Plan) of a share of Stock as of the date of grant of such Subsequent
Option. Subject to the terms of the Company Stock Plan and the agreement to be
executed by Company and Executive evidencing each Subsequent Option, each
Subsequent Option shall (i) be an incentive stock option to the extent permitted
under applicable law and a nonqualified stock option to the extent of the
remainder of the grant, if any, (ii) have a ten-year term, (iii) become
exercisable in 25% increments on each of the first four anniversaries of the
date of grant of such Subsequent Option. To the extent the grant of a Subsequent
Stock Option would exceed the applicable limitations under any Company Stock
Plan, such grant or portion thereof shall be subject to the approval by the
shareholders of Company of an amendment to such Company Stock Plan that would
permit such grant or portion thereof. In the event of any such limitation,
Company shall (a) cause the 1998 Plan to be amended, (b) submit such amendment
to Company's shareholders at Company's 1999 Annual Meeting of Shareholders and
(c) use its reasonable best efforts to secure approval by the shareholders of
Company of such amendment.
3.7 Subsequent Restricted Stock Awards. On each of the first, second
and third anniversaries of the Effective Date, Company shall grant to Executive
a number of restricted shares of Stock (the "Subsequent Restricted Stock
Awards") in accordance with the following schedule:
Anniversary of Effective Date Number of Restricted Shares
First Anniversary 25,000
Second Anniversary 50,000
Third Anniversary 75,000
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Subject to the terms of the agreement to be executed by Company and Executive
evidencing each Subsequent Restricted Stock Award, each Subsequent Restricted
Stock Award shall contain forfeiture restrictions that shall lapse with respect
to (i) 1/3 of the shares subject thereto on the first anniversary of the grant
thereof, (ii) an additional 1/3 of the shares subject thereto on the second
anniversary of the grant thereof, and (iii) and an additional 1/3 of the shares
subject thereto on the third anniversary of the grant thereof. Company shall
file a registration statement on Form S-8 (or other applicable form) with the
Securities and Exchange Commission in connection with Executive's receipt of
shares pursuant to the Subsequent Restricted Stock Awards.
3.8 Life Insurance. Company will provide, or cause to be provided, to
Executive, at no cost to Executive, $1,0000,000 of term life insurance coverage
payable to a beneficiary to be designated in writing by Executive, together with
a tax gross-up payment in the amount necessary to offset any applicable taxes
imposed on Executive by reason of such coverage and such tax gross-up payment.
Notwithstanding the foregoing, however, if Executive fails to qualify medically
for such insurance coverage at standard rates for his age group, Company shall
not be required to provide such coverage unless Executive pays the cost of such
coverage that is in excess of the standard rate cost. Such insurance, including
replacement or substitute policies therefor, shall be maintained for the same
period as Executive's compensation hereunder is continued pursuant to Article 7
hereof.
3.9 Other Perquisites. During his employment hereunder, Executive
shall be afforded the following benefits as incidences of his employment:
(i) Business and Entertainment Expenses - Subject to Company's
standard policies and procedures with respect to expense reimbursement
as applied to its executive employees generally, Company shall
reimburse Executive for, or pay on behalf of Executive, reasonable and
appropriate expenses incurred by Executive for business related
purposes, including dues and fees to industry and professional
organizations and costs of entertainment and business development.
(ii) Club Memberships - In addition to the other business and
entertainment expenses reimbursable pursuant to subparagraph 3.9(i)
above, Company shall pay (A) 50% of the initiation fee for the Castle
Pines Golf Club and (B) the membership fees, dues and assessments for
(1) the Castle Pines Golf Club, (2) the River Oaks Country Club, (3)
the Merit Club in Chicago, Illinois, (4) a luncheon club located in
Houston, Texas, to be selected by Executive, and (5) such other
luncheon or country club memberships as the Compensation Committee may
deem to be justified by business usage. The foregoing notwithstanding,
Company shall not be obligated to buy from Executive, or to reimburse
Executive for the price of, his membership in any club of which
Executive is a member prior to the Effective Date, other than the
Castle Pines Golf Club.
(iii) Annual Physical Examination - Company shall pay for the
cost of an annual physical examination to be conducted by a doctor or
clinic of Executive's choosing in Houston, Texas.
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(iv) Parking - Company shall provide at no expense to
Executive a parking place convenient to Executive's office.
(v) Executive Supplemental Retirement Plan - Executive shall
be allowed to participate in the Company's Executive Supplemental
Retirement Plan (the "ESRP"). For purposes of the ESRP, Executive's
Applicable Percentage (as such term is defined in the ESRP) shall be
50% and Executive's Vested Interest (as such term is defined in the
ESRP) in his benefit under the ESRP shall be determined in accordance
with the following schedule:
Vested Interest
Prior to First Anniversary of Effective Date 50%
As of First Anniversary of Effective Date* 60%
As of Second Anniversary of Effective Date* 70%
As of Third Anniversary of Effective Date* 80%
As of Fourth Anniversary of Effective Date* 90%
As of Fifth Anniversary of Effective Date* 100%
*provided that Executive is employed by Company on such date and has
been so employed by Company on a full-time basis during the
twelve-month period immediately preceding such date.
Notwithstanding the foregoing, Executive's Vested Interest in his
benefit under the ESRP shall be 100% in the event of his Involuntary
Termination (as such term is defined in the Severance Agreement between
Company and Executive (the "Severance Agreement")) within two years
after the date upon which a Change of Control (as such term is defined
in the Severance Agreement) occurs. Further, Company shall cause the
ESRP to be amended (A) to expand the definition of the term
"Compensation" in Section 1.01(8) with respect to Executive to include
(1) "deemed salary" equal to the annual base salary that Executive
would have received if he had not received an Option in lieu of such
annual salary pursuant to paragraph 3.1 and (2) bonuses under the EIP,
(B) to remove Section 5.02, which provides for the forfeiture of a
Member's Accrued Benefit (as such term is defined in the ESRP) for
competition with the Company and (C) to expand Section 7.01 to provide
that no amendment to the ESRP shall deprive any Member of any Accrued
Benefit under the ESRP to the extent that such Member has a Vested
Interest in such Accrued Benefit at the time of such amendment.
(vi) Supplemental Benefit Plan - Executive shall be allowed to
participate in the SBP. Further, Executive shall receive the
Supplemental Thrift Benefit pursuant to Section 3.2(a) of the SBP.
Finally, Company shall cause the SBP to be amended (A) to remove
Section 6.4 thereof, which provides for reductions of benefits to avoid
imposition of the sanctions imposed under sections 280G and 4999 of the
Code and (B) to provide for the crediting of an additional benefit
thereunder which, with respect to Executive, shall not be less than the
Supplemental Thrift Benefit and the
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Supplemental ESOP Benefit under the SBP, the Employer Contributions
under the Seagull Thrift Plan and the Employer Contributions under the
Seagull Employee Stock Ownership Plan that Executive would have
received if he had made the maximum allowable contributions under such
plans, and based on the annual base salary that Executive would have
received if he had not received an Option in lieu of such annual base
salary pursuant to paragraph 3.1.
(vii) Other Company Benefits - Executive and, to the extent
applicable, Executive's spouse, dependents and beneficiaries, shall be
allowed to participate in all benefits, plans and programs, including
improvements or modifications of the same, which are now, or may
hereafter be, available to other executive employees of Company. Such
benefits, plans and programs shall include, without limitation, any
profit sharing plan, thrift plan, employee stock ownership plan, health
insurance or health care plan, life insurance, disability insurance,
pension plan, supplemental retirement plan, vacation and sick leave
plan, and the like which may be maintained by Company. Company shall
not, however, by reason of this paragraph be obligated to institute,
maintain, or refrain from changing, amending, or discontinuing, any
such benefit plan or program, so long as such changes are similarly
applicable to executive employees generally. In the event that
Executive (or his beneficiaries) are provided welfare benefits under
Company's benefit plans that are less than the welfare benefits that
would have been provided to Executive (or his beneficiaries) if
Executive had not received an Option in lieu of annual base salary
pursuant to paragraph 3.1, Company shall provide, or cause to be
provided, to Executive (or his beneficiaries) any such welfare benefits
lost as a result of Executive's receipt of the Option in lieu of annual
base salary.
(viii) Vacation - During each year of his employment,
Executive shall be entitled to five weeks of paid vacation in
accordance with Company's vacation policy.
(ix) Tax and Financial Planning - Company shall reimburse
Executive for reasonable expenses incurred by Executive for tax return
preparation and financial planning.
ARTICLE 4: PROTECTION OF INFORMATION
4.1 Disclosure to Executive. Company shall disclose to Executive, or
place Executive in a position to have access to or develop, trade secrets or
confidential information of Company or its affiliates; and/or shall entrust
Executive with business opportunities of Company or its affiliates; and/or shall
place Executive in a position to develop business good will on behalf of Company
or its affiliates.
4.2 Disclosure to and Property of Company. All information, ideas,
concepts, improvements, discoveries, and inventions, whether patentable or not,
which are conceived, made, developed, or acquired by Executive, individually or
in conjunction with others, during Executive's employment by Company (whether
during business hours or otherwise and whether on Company's
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premises or otherwise) which relate to Company's business, products, or services
(including, without limitation, all such information relating to corporate
opportunities, research, financial and sales data, pricing terms, evaluations,
opinions, interpretations, acquisitions prospects, the identity of customers or
their requirements, the identity of key contacts within the customer's
organizations or within the organization of acquisition prospects, or marketing
and merchandising techniques, prospective names, and marks) shall be disclosed
to Company and are and shall be the sole and exclusive property of Company.
Moreover, all documents, drawings, memoranda, notes, records, files,
correspondence, manuals, models, specifications, computer programs, E-mail,
voice mail, electronic databases, maps, and all other writings or materials of
any type embodying any of such information, ideas, concepts, improvements,
discoveries, and inventions are and shall be the sole and exclusive property of
Company. Upon termination of Executive's employment by Company, for any reason,
Executive promptly shall deliver the same, and all copies thereof, to Company.
4.3 No Unauthorized Use or Disclosure. Executive will not, at any time
during or after Executive's employment by Company, make any unauthorized
disclosure of any confidential business information or trade secrets of Company
or its affiliates, or make any use thereof, except in the carrying out of
Executive's employment responsibilities hereunder. Affiliates of the Company
shall be third party beneficiaries of Executive's obligations under this
paragraph. As a result of Executive's employment by Company, Executive may also
from time to time have access to, or knowledge of, confidential business
information or trade secrets of third parties, such as customers, suppliers,
partners, joint venturers, and the like, of Company and its affiliates.
Executive also agrees to preserve and protect the confidentiality of such third
party confidential information and trade secrets to the same extent, and on the
same basis, as Company's confidential business information and trade secrets.
4.4 Ownership by Company. If, during Executive's employment by Company,
Executive creates any work of authorship fixed in any tangible medium of
expression which is the subject matter of copyright (such as videotapes, written
presentations, or acquisitions, computer programs, E-mail, voice mail,
electronic databases, drawings, maps, architectural renditions, models, manuals,
brochures, or the like) relating to Company's business, products, or services,
whether such work is created solely by Executive or jointly with others (whether
during business hours or otherwise and whether on Company's premises or
otherwise), Company shall be deemed the author of such work if the work is
prepared by Executive in the scope of Executive's employment; or, if the work is
not prepared by Executive within the scope of Executive's employment but is
specially ordered by Company as a contribution to a collective work, as a part
of a motion picture or other audiovisual work, as a translation, as a
supplementary work, as a compilation, or as an instructional text, then the work
shall be considered to be work made for hire and Company shall be the author of
the work. If such work relates in any way to the business of Company but is
neither prepared by Executive within the scope of Executive's employment nor a
work specially ordered that is deemed to be a work made for hire, then Executive
hereby agrees to assign, and by these presents does assign, to Company all of
Executive's worldwide right, title, and interest in and to such work and all
rights of copyright therein.
4.5 Assistance by Executive. Both during the period of Executive's
employment by Company and thereafter, Executive shall assist Company and its
nominee, at any time, in the protection of Company's worldwide right, title, and
interest in and to information, ideas, concepts,
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improvements, discoveries, and inventions, and its copyrighted works, including
without limitation, the execution of all formal assignment documents requested
by Company or its nominee and the execution of all lawful oaths and applications
for patents and registration of copyright in the United States and foreign
countries.
4.6 Remedies. Executive acknowledges that money damages would not be
sufficient remedy for any breach of this Article by Executive, and Company shall
be entitled to enforce the provisions of this Article by terminating payments
then owing to Executive under this Agreement and/or to specific performance and
injunctive relief as remedies for such breach or any threatened breach;
provided, however, that payments then owing to Executive may not be terminated
unless the Board of Directors determines that such breach by Executive has
directly resulted or could reasonably be expected to result in a material
adverse economic impact on the Company's business. Such remedies shall not be
deemed the exclusive remedies for a breach of this Article, but shall be in
addition to all remedies available at law or in equity to Company, including the
recovery of damages from Executive and his agents involved in such breach and
remedies available to Company pursuant to this and other agreements with
Executive.
ARTICLE 5: NONCOMPETITION AND NONSOLICITATION
5.1 In General. As part of the consideration for the compensation and
benefits to be paid to Executive hereunder; to protect the trade secrets and
confidential information of Company and its affiliates that have been and will
in the future be disclosed or entrusted to Executive, the business good will of
Company and its affiliates that has been and will in the future be developed in
Executive, or the business opportunities that have been and will in the future
be disclosed or entrusted to Executive by Company and its affiliates; and as an
additional incentive for Company to enter into this Agreement, Company and
Executive agree to the noncompetition and the nonsolicitation obligations
hereunder.
5.2 Noncompetition. Executive shall not, directly or indirectly for
Executive or for others, in any geographic area or market where Company or any
of its affiliates are conducting any business or have during the previous twelve
months conducted such business:
(i) engage in any business competitive with the business
conducted by Company; or
(ii) render advice or services to, or otherwise assist, any
other person, association, or entity who is engaged, directly or
indirectly, in any business competitive with the business conducted by
Company with respect to such competitive business.
These noncompetition obligations shall apply (A) during the period that
Executive is employed by Company, (B) during any period after Executive's
termination of employment by Company for a reason encompassed by paragraph
2.2(ii) when Company is providing Executive with Termination Benefits pursuant
to Article 7, and (C) if Executive terminates his employment with Company for a
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reason encompassed by paragraph 2.3(ii) within two years after the Effective
Date, during the two-year period commencing on the date of Executive's
termination of employment.
5.3 Nonsolicitation. Executive shall not, directly or indirectly for
Executive or for others, in any geographic area or market where Company or any
of its affiliates are conducting any business or have during the previous twelve
months conducted such business, induce any employee of Company or any of its
affiliates to terminate his or her employment with Company or such affiliates,
or hire or assist in the hiring of any such employee by any person, association,
or entity not affiliated with Company. These nonsolicitation obligations shall
apply during the period that Executive is employed by Company and during the
one-year period commencing on the date of Executive's termination of employment
for any reason. Notwithstanding the foregoing, the provisions of this paragraph
5.3 shall not restrict the ability of Company to take actions with respect to
the employment or the termination of employment of any of its employees, or for
Executive to participate in any such actions in his capacity as an officer of
Company.
5.4 Enforcement and Remedies. Executive acknowledges that money damages
would not be sufficient remedy for any breach of this Article by Executive, and
Company shall be entitled to enforce the provisions of this Article by
terminating any payments then owing to Executive under this Agreement and/or to
specific performance and injunctive relief as remedies for such breach or any
threatened breach; provided, however, that payments then owing to Executive may
not be terminated unless the Board of Directors determines that such breach by
Executive has directly resulted or could reasonably be expected to result in a
material adverse economic impact on the Company's business. Such remedies shall
not be deemed the exclusive remedies for a breach of this Article, but shall be
in addition to all remedies available at law or in equity to Company, including
without limitation, the recovery of damages from Executive and Executive's
agents involved in such breach and remedies available to Company pursuant to
this and other agreements with Executive.
5.5 Reformation. It is expressly understood and agreed that Company and
Executive consider the restrictions contained in this Article to be reasonable
and necessary to protect the proprietary information of Company. Nevertheless,
if any of the aforesaid restrictions are found by a court having jurisdiction to
be unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such court so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.
ARTICLE 6: STATEMENTS CONCERNING COMPANY
6.1 In General. Executive shall refrain, both during the employment
relationship and after the employment relationship terminates, from publishing
any oral or written statements about Company, any of its affiliates, or any of
such entities' officers, employees, agents or representatives that are
slanderous, libelous, or defamatory; or that disclose private or confidential
information about Company, any of its affiliates, or any of such entities'
business affairs, officers, employees, agents, or representatives; or that
constitute an intrusion into the seclusion or private lives of any of such
entities' officers, employees, agents, or representatives; or that give rise to
unreasonable adverse publicity about the private lives of any of such entities'
officers, employees, agents, or representatives; or that place Company, any of
its affiliates, or any of such entities' officers, employees, agents, or
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representatives in a false light before the public; or that constitute a
misappropriation of the name or likeness of Company, any of its affiliates, or
any of such entities' officers, employees, agents, or representatives, except
where any of such actions are disclosures required by operation of law or
judicial process. A violation or threatened violation of this prohibition may be
enjoined by the courts. The rights afforded Company and its affiliates under
this provision are in addition to any and all rights and remedies otherwise
afforded by law.
ARTICLE 7: EFFECT OF TERMINATION ON COMPENSATION
7.1 By Expiration. If Executive's employment hereunder shall terminate
upon expiration of the term provided in paragraph 2.1 hereof, then all
compensation and all benefits to Executive hereunder shall terminate
contemporaneously with termination of his employment.
7.2 By Company. If Executive's employment hereunder shall be terminated
by Company prior to expiration of the term provided in paragraph 2.1, then, upon
such termination, regardless of the reason therefor, all compensation and
benefits to Executive hereunder shall terminate contemporaneously with the
termination of such employment; provided, however, that if such termination
shall be for any reason other than those encompassed by paragraphs 2.2 (iii) or
(iv), then Company shall provide Executive with the Termination Benefits. For
purposes of this Agreement, the term "Termination Benefits" shall mean the
following: (i) Company shall continue to pay to Executive his base salary then
in effect pursuant to paragraph 3.1 (but not less than $500,000 for the period
beginning on January 1, 2000) for the unexpired portion of the term set forth in
paragraph 2.1; (ii) all outstanding stock options granted by Company to
Executive shall become immediately exercisable in full upon Executive's
termination of employment and shall remain exercisable thereafter for the period
provided pursuant to the terms thereof, which period shall not be less than
twelve months (but in no event shall any such stock option be exercisable after
the expiration of the original term of such stock option); (iii) the forfeiture
restrictions with respect to all outstanding restricted stock issued to
Executive shall lapse upon Executive's termination of employment, (iv) within
five business days after the date of Executive's termination of employment,
Company shall pay to Executive a lump sum cash payment equal to the sum of (A)
the product of Executive's Incentive Target set forth in paragraph 3.3
multiplied by Executive's annual base salary at the time of such termination
(the "Target Bonus") and (B) the Target Bonus amount prorated for the number of
months in the performance year of Executive's termination of employment that
have elapsed prior to such termination, (v) the life insurance coverage and
annual tax gross-up pursuant to paragraph 3.8 shall continue to be provided to
Executive for the unexpired portion of the term set forth in paragraph 2.1, (vi)
Company shall continue to pay to Executive his club dues pursuant to paragraph
3.9(ii) for the unexpired portion of the term set forth in paragraph 2.1, (vii)
within five business days after the date of Executive's termination of
employment, Company shall pay to Executive a lump sum cash payment equal to the
amounts credited to his accounts under the Seagull Thrift Plan, the Seagull
Employee Stock Ownership Plan and the SBP that are forfeitable in accordance
with the terms of such plans and (viii) during the period, if any (but in no
event for more
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than 18 months after the date of Executive's termination of employment), that
Executive elects to continue coverage for himself and any of his eligible
dependents under Company's group health plans pursuant to the continuation of
coverage provisions contained in Sections 601 through 608 of the Employee
Retirement Income Security Act of 1974, as amended, Executive's premiums for
such coverage shall be no greater than that charged by Company generally to its
active executive employees for coverage under such plans. In the event the
Company does not fulfill its obligations under paragraph 1.1 to employ Executive
and appoint him to the positions set forth in paragraph 1.2, then Executive
shall be entitled to the Initial Option, which shall be fully exercisable, and
the Initial Restricted Stock Awards (or to the extent such Initial Restricted
Stock Awards cannot be granted to Executive, the economic value thereof), which
shall be fully nonforfeitable, and to Termination Benefits as if Executive's
employment terminated on the Effective Date.
7.3 By Executive. If Executive's employment hereunder shall be
terminated by Executive prior to expiration of the term provided in paragraph
2.1, then, upon such termination, regardless of the reason therefor, all
compensation and benefits to Executive hereunder shall terminate
contemporaneously with the termination of such employment; provided, however,
that if such termination shall occur for the reason encompassed by paragraph
2.3(i), then Company shall provide Executive with the Termination Benefits.
7.5 No Duty to Mitigate Losses. Executive shall have no duty to find
new employment following the termination of his employment under circumstances
which require Company to pay any amount to Executive pursuant to this Article 7.
Any salary or remuneration received by Executive from a third party for the
providing of personal services (whether by employment or by functioning as an
independent contractor) following the termination of his employment under
circumstances pursuant to which this Article 7 apply shall not reduce Company's
obligation to make a payment to Executive (or the amount of such payment)
pursuant to the terms of this Article 7. Notwithstanding the preceding sentence,
if, and to the extent that, following the termination of his employment under
circumstances pursuant to which this Article 7 apply, Executive becomes entitled
to receive benefits from a third party that are comparable to the Termination
Benefits set forth in paragraphs 7.2(v), (vi) and (viii), Company's obligation
to provide such Termination Benefits to Executive shall cease.
7.6 Liquidated Damages. In light of the difficulties in estimating the
damages for an early termination of this Agreement, Company and Executive hereby
agree that the payments, if any, to be received by Executive pursuant to this
Article 7 shall be received by Executive as liquidated damages.
7.7 Incentive and Deferred Compensation. This Agreement governs the
rights and obligations of Executive and Company with respect to Executive's base
salary and certain perquisites of employment. Except as expressly provided
herein, Executive's rights and obligations both during the term of his
employment and thereafter with respect to stock options, restricted stock,
incentive and deferred compensation, life insurance policies insuring the life
of Executive, and other benefits under the plans and programs maintained by
Company shall be governed by the separate agreements, plans and other documents
and instruments governing such matters. Without limiting the scope of the
preceding sentence, Executive acknowledges that he has no right to grants of
stock options or
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restricted stock either under the stock plans maintained by the Company or
otherwise other than (i) as provided in paragraphs 3.1, 3.4, 3.5, 3.6 or 3.7
hereof or (ii) in the discretion of the Compensation Committee or the Board of
Directors.
ARTICLE 8: MISCELLANEOUS
8.1 Notices. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to Company to: Seagull Energy Corporation
1700 First City Tower
0000 Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Chairman of the Board of Directors
If to Executive to: Xxxxx X. Xxxxxxx
0000 Xxx Xxxxx
Xxxxxxx, Xxxxx 00000
or to such other address as either party may furnish to the other in writing in
accordance herewith, except that notices or changes of address shall be
effective only upon receipt.
8.2 Applicable Law. This Agreement is entered into under, and
shall be governed for all purposes by, the laws of the State of Texas.
8.3 No Waiver. No failure by either party hereto at any time to give
notice of any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
8.4 Severability. If a court of competent jurisdiction determines that
any provision of this Agreement is invalid or unenforceable, then the invalidity
or unenforceability of that provision shall not affect the validity or
enforceability of any other provision of this Agreement, and all other
provisions shall remain in full force and effect.
8.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
8.6 Withholding of Taxes and Other Employee Deductions. Company may
withhold from any benefits and payments made pursuant to this Agreement all
federal, state, city and other taxes as may be required pursuant to any law or
governmental regulation or ruling and all other normal employee deductions made
with respect to Company's employees generally. Company shall
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cause the agreements evidencing the Initial Restricted Stock Awards and the
Subsequent Restricted Stock Awards to provide that, upon lapse of the forfeiture
restrictions contained therein, Company will withhold (a) at Executive's
election, shares of Stock subject to such Awards to satisfy Company's
withholding obligation under applicable tax laws or regulations and (b) such
additional shares of Stock subject to such Awards as may be requested in writing
by Executive.
8.7 Headings. The paragraph headings have been inserted for purposes of
convenience and shall not be used for interpretive purposes.
8.8 Gender and Plurals. Wherever the context so requires, the masculine
gender includes the feminine or neuter, and the singular number includes the
plural and conversely.
8.9 Affiliate. As used in this Agreement, the term "affiliate" shall
mean any entity which owns or controls, is owned or controlled by, or is under
common ownership or control with, Company.
8.10 Assignment. This Agreement shall be binding upon and inure to the
benefit of Company and any successor of Company, by merger or otherwise. Except
as provided in the preceding sentence, this Agreement, and the rights and
obligations of the parties hereunder, are personal and neither this Agreement,
nor any right, benefit, or obligation of either party hereto, shall be subject
to voluntary or involuntary assignment, alienation or transfer, whether by
operation of law or otherwise, without the prior written consent of the other
party.
8.11 Term. This Agreement has a term co-extensive with the term of
employment provided in paragraph 2.1. Termination shall not affect any right or
obligation of any party which is accrued or vested prior to such termination.
Without limiting the scope of the preceding sentence, the provisions of Articles
4, 5 and 6 shall survive any termination of the employment relationship and/or
of this Agreement.
8.12 Entire Agreement. Except as provided in (i) the written benefit
plans and programs and agreements referenced in Article 3, (ii) the Severance
Agreement between Company and Executive dated August 25, 1998 (the "Severance
Agreement"), and (iii) any signed written agreement contemporaneously or
hereafter executed by Company and Executive, this Agreement constitutes the
entire agreement of the parties with regard to the subject matter hereof, and
contains all the covenants, promises, representations, warranties and agreements
between the parties with respect to employment of Executive by Company. Without
limiting the scope of the preceding sentence, all prior understandings and
agreements among the parties hereto relating to the subject matter hereof are
hereby null and void and of no further force and effect. Further, without
limiting the scope of this paragraph, this Agreement supersedes and replaces the
Employment Agreement between Company and Executive dated August 25, 1998 (the
"Prior Agreement") in its entirety and the Prior Agreement shall be null and
void and of no further force and effect, and any references to the Prior
Agreement in any other agreement including, without limitation, the Severance
Agreement, shall be deemed to be references to this Agreement. Any modification
of this Agreement will be effective only if it is in writing and signed by the
party to be charged.
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8.13 Representation By Executive. Executive hereby represents and
warrants to Company that, as of August 25, 1998 and the date of execution of
this Agreement, he is not a party to any employment or other agreement with any
third party which would preclude him from accepting employment with Company and
performing his obligations under this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the 16th day of September, 1998 to be effective as of the Effective Date.
SEAGULL ENERGY CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
Name: Xxxxxxx X. Xxxxxxxx
Title: Executive Vice President and
Chief Financial Officer
"COMPANY"
/s/ Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxx
"EXECUTIVE"
VEHOU02:119869.1
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