EXECUTIVE SEVERANCE AGREEMENT
This agreement (this "Agreement") is made as of the 2nd day of
January, 1998, between Southwestern Energy Company, an Arkansas corporation with
its principal offices at 0000 Xxxx Xxxxxx, X.X. Xxx 0000, Xxxxxxxxxxxx, Xxxxxxxx
00000-0000 (hereinafter called the "Company"), and Xxxx X. Xxxxxxx (hereinafter
called the "Employee"), residing at
WITNESSETH THAT:
WHEREAS, should the Company or shareholders of the Company
receive any proposal from a third person concerning a possible business
combination with the Company or an acquisition of equity securities of the
Company, the Board of Directors of the Company (hereinafter called the "Board")
believes it imperative that the Company and the Board be able to rely upon the
Employee to continue in his position, and that the Company and the Board be able
to receive and rely upon his advice, if they request it, as to the best
interests of the Company and its shareholders, without concern that he might be
distracted or that his advice might be affected by the personal uncertainties
and risks created by such a proposal;
WHEREAS, the Company desires to provide the benefits provided
for herein in order to enable it to attract and retain qualified executives such
as the Employee, without a current expense to the Company;
NOW, THEREFORE, to assure the Company that it will have the
continued dedication of the Employee and the availability of his advice and
counsel notwithstanding the possibility, threat or occurrence of a bid to take
over control of the Company and to induce the Employee to remain in the employ
of the Company, and for other good and valuable consideration, the Company and
the Employee hereby agree as follows:
1. Definitions.
(i) "Cause," when used in connection with the termination of
the Employee's employment by the Company, shall mean (a) the willful and
continued failure by the Employee substantially to perform his duties and
obligations to the Company (other than any such failure resulting from his
Disability) which failure continues after the Company has given notice thereof
to the Employee or (b) the willful engaging by the Employee in misconduct which
is materially injurious to the Company. For purposes of this definition, no act,
or failure to act, on the Employee's part shall be considered "willful" unless
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done, or omitted to be done, by the Employee in bad faith and without reasonable
belief that his action or omission was in the best interests of the Company.
(ii) "Change in Control" shall mean the occurrence of any of
the following:
(a) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), an
"Acquiring Person") becomes the
"beneficial owner" (as such term is defined in Rule 13d-3 promulgated
under the Exchange Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the
Company's then outstanding securities, excluding any employee benefit
plan sponsored or maintained by the Company (or any trustee of such
plan acting as trustee);
(b) the Company's stockholders approve an agreement to merge
or consolidate the Company with another corporation (other than a
corporation 50% or more of which is controlled by, or is under common
control with, the Company);
(c) any individual who is nominated by the Board for election
to the Board on any date fails to be so elected as
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a direct or indirect result of any proxy fight or contested election
for positions on the Board;
(d) a "change in control" of the Company of a nature that
would be required to be reported in response to Item 6(e) of Schedule
14A of Regulation 14A promulgated under the Exchange Act occurs; or
(e) a majority of the Board determines in its sole and
absolute discretion that there has been a Change in Control of the
Company or that there will be a Change in Control of the Company upon
the occurrence of certain specified events and such events occur;
Notwithstanding Subparagraphs (a) through (d) of this
Paragraph (ii), a Change in Control shall not occur by reason of
any event which would otherwise constitute a Change in Control if, immediately
after the occurrence of such event, individuals who are Acquiring Persons and
who were employees of the Company immediately prior to the occurrence of such
event own, on a fully diluted basis, securities of the Company representing (A)
5% or more of the combined voting power of the Company's then outstanding
securities or (B) 5% or more of the value of the Company's then outstanding
equity securities.
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(iii) "Committee" shall mean the Compensation Committee of the
Board.
(iv) "Compensation" shall mean the "base amount" as such term
is defined in Section 280G of the Internal Revenue Code of 1986, as amended from
time to time (the "Code") and the regulations promulgated thereunder.
(v) "Contract Period" shall mean the period defined in Section
2 hereof.
(vi) "Disability" shall mean a physical or mental incapacity
of the Employee which entitles the Employee to benefits at least equal to
two-thirds of his base salary during the period of such incapacity under any
long term disability plan applicable to him and maintained by the Company as in
effect immediately prior to a Change in Control.
(vii) "Good Reason," when used with reference to a termination
by the Employee of his employment with the Company, shall mean:
(a) the assignment to the Employee of any duties inconsistent
with, or the reduction of powers or functions associated with, his
positions, duties, responsibilities and status with the Company
immediately prior to a Change in Control, or any removal of the
Employee from, or any failure
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to reelect the Employee to, any positions or offices the Employee held
immediately prior to a Change in Control, except in connection with the
termination of the Employee's employment by the Company for Cause or on
account of Disability pursuant to the requirements of this Agreement;
(b) a reduction by the Company of the Employee's base salary
as in effect immediately prior to a Change in Control, except in
connection with the termination of the Employee's employment by the
Company for Cause or on account of Disability pursuant to the
requirements of this Agreement;
(c) a change in the Employee's principal work location to a
location more than forty (40) miles from Houston, Texas, except for
required travel on the Company's business to an extent substantially
consistent with the Employee's business travel obligations immediately
prior to a Change in Control;
(d) (1) the failure by the Company to continue in effect any
employee benefit plan, program or arrangement (including, without
limitation, "employee benefit plans" within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974) in which the
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Employee was participating immediately prior to a Change in Control (or
substitute plans, programs or arrangements providing the Employee with
substantially similar benefits), (2) the taking of any action, or the
failure to take any action, by the Company which could (A) adversely
affect the Employee's participation in, or materially reduce the
Employee's benefits under, any of such plans, programs or arrangements,
(B) materially adversely affect the basis for computing benefits under
any of such plans, programs or arrangements or (C) deprive the Employee
of any material fringe benefit enjoyed by the Employee immediately
prior to a Change in Control or (3) the failure by the Company to
provide the Employee with the number of paid vacation days to which the
Employee was entitled immediately prior to a Change in Control in
accordance with the Company's vacation policy applicable to the
Employee then in effect, except, in each case, in connection with the
termination of the Employee's employment by the Company for Cause or on
account of Disability pursuant to the requirements of this Agreement;
(e) the failure by the Company to pay the Employee any portion
of the Employee's current compensation, or any
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portion of the Employee's compensation deferred under any
plan, agreement or arrangement of or with the Company, within seven
(7) days of the date such compensation is due;
(f) a material increase in the required working hours of the
Employee from that required prior to a Change in Control;
(g) the failure by the Company to obtain an assumption of the
obligations of the Company under this Agreement by any successor to the
Company; or
(h) any termination of the Employee's employment by the
Company during the Contract Period which is not effected pursuant to
the requirements of this Agreement.
(viii) "Termination Date" shall mean the effective date as
provided hereunder of the termination of the Employee's employment.
2. Application of Agreement. This Agreement shall apply only
to a termination of employment of the Employee during a period (the "Contract
Period") commencing on the date immediately preceding the date of a Change in
Control and terminating on the third anniversary of the date of the Change in
Control; provided, however, that such Change in Control occurs during the period
commencing as of the date hereof and
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terminating on the first anniversary of the date hereof or as further extended
pursuant to the following sentence. On the first anniversary of the date hereof,
and on each anniversary of the date hereof thereafter, the period during which
this Agreement shall automatically apply shall be extended for one additional
year, unless on or before such anniversary the Company notifies the Employee
that it elects not to extend such period. Any reference herein to the Employee's
employment or termination of employment by or with the Company shall include the
Employee's employment or termination of employment by or with any subsidiary or
affiliated company of the Company.
3. Termination of Employment of the Employee By the Company
During the Contract Period.
(i) During the Contract Period, the Company shall have the
right to terminate the Employee's employment hereunder for Cause, for Disability
or without Cause by following the procedures hereinafter specified.
(ii) Termination of the Employee's employment for Disability
shall become effective thirty (30) days after a notice of intent to terminate
the Employee's employment, specifying Disability as the basis for such
termination, is given to the Employee by the Committee.
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(iii) The Employee may not be terminated for Cause unless and
until a notice of intent to terminate the Employee's employment for Cause,
specifying the particulars of the conduct of the Employee forming the basis for
such termination, is given to the Employee by the Committee and, subsequently, a
majority of the Board finds, after reasonable notice to the Employee (but in no
event less than fifteen (15) days' prior notice) and an opportunity for the
Employee and his counsel to be heard by the Board, that termination of the
Employee's employment for Cause is justified. Termination of the Employee's
employment for Cause shall become effective after such finding has been made by
the Board and five (5) business days after the Board gives to the Employee
notice thereof, specifying in detail the particulars of the conduct of the
Employee found by the Board to justify such termination for Cause.
(iv) The Company shall have the absolute right to terminate
the Employee's employment without Cause at any time during the Contract Period
by vote of a majority of the Board. Termination of the Employee's employment
without Cause shall be effective five (5) business days after the Board gives to
the Employee notice thereof, specifying that such termination is without Cause.
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(v) Upon a termination of the Employee's employment for Cause
during the Contract Period, the Employee shall have no right to receive any
compensation or benefits hereunder other than those benefits provided in
Paragraph (i)(a) of Section 5 hereof. Upon a termination of the Employee's
employment without Cause during the Contract Period, the Employee shall be
entitled to receive the benefits provided in Section 5 hereof. This Agreement
shall not apply to, and the Employee shall have no right to receive any
compensation or benefits hereunder in connection with any termination of the
Employee's employment by the Company other than during the Contract Period.
4. Termination of Employment By the Employee During
the Contract Period. During the Contract Period, the Employee shall be entitled
to terminate his employment with the Company, and shall be entitled to the
benefits hereunder as follows. If the Employee terminates his employment with
the Company during the twelve-month period beginning immediately preceding the
date of a Change in Control, the Employee shall not be entitled to receive the
benefits provided for in Section 5 hereof (other than those provided for in
Paragraph (i)(a) thereof) unless the termination is for Good Reason. If the
Employee shall terminate his employment with the Company after the expiration of
such
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twelve-month period and during the Contract Period (or with respect to the
benefits provided for in Section 5(i)(a) hereof, at any time during the contract
period), the Employee shall be entitled to receive the benefits provided in
Section 5 hereof if such termination is for any reason or without reason. The
Employee shall give the Company notice of voluntary termination of employment
pursuant to this Section 4, which notice need specify only the Employee's desire
to terminate his employment and, if such termination is during the twelve-month
period beginning immediately following a Change in Control and is for Good
Reason, set-forth in reasonable detail the facts and circumstances claimed by
the Employee to constitute Good Reason. Termination of the Employee's employment
by the Employee pursuant to this Section 4 shall be effective five (5) business
days after the Employee gives notice thereof to the Company. This Agreement
shall not apply to, and the Employee shall have no right to receive, any
compensation or benefits hereunder in connection with any termination of the
Employee's employment by the Employee other than during the Contract Period.
This Agreement shall not apply to, and the Employee shall have no right to
receive, any compensation or benefits hereunder in connection with a termination
of the Employee's employment on account of the
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Employee's death, whether or not during the Contract Period.
5. Benefits Upon Termination in Certain Circumstances.
(i) Upon the termination of the employment of the
Employee by the Company pursuant to Section 3(iv) (or with respect to the
benefits in Subparagraph (a) of this Paragraph, Section 3(iv) or 3(v)) hereof
or, by the Employee pursuant to Section 4 hereof, the Employee shall be entitled
to receive the following payments and benefits:
(a) The Company shall pay to the Employee, not later than the
Termination Date, a lump sum cash amount equal to the sum of (I) the
full base salary earned by the Employee through the Termination Date
and unpaid at the Termination Date, calculated at the highest rate of
base salary in effect at any time during the twelve months immediately
preceding the Termination Date, (II) the amount of any base salary
attributable to vacation earned by the Employee but not taken before
the Termination Date, (III) any annualized bonus accrued to the
Employee through the Termination Date and unpaid at the Termination
Date, plus (IV) all other amounts earned by the Employee and unpaid at
the Termination Date.
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(b) The Company shall pay to the Employee, not later than the
Termination Date, a lump sum cash amount equal to the product of the
Employee's Compensation times 2.99.
(ii) If the Employee's employment is terminated by the Company
pursuant to Section 3(ii) or 3(iv) hereof, or by the Employee pursuant to
Section 4 hereof, the employee shall be entitled to receive the following
payments and benefits:
(a) The Company shall maintain in full force and effect for
the Employee's continued benefit all life, medical, dental,
prescription drug and long- and short-term disability plans, programs
or arrangements, whether group or individual, in which the Employee was
entitled to participate at any time during the twelve month-period
prior to the Termination Date, until the earliest to occur of (I) three
years after the Termination Date; (II) the Employee's death (provided
that benefits payable to his beneficiaries shall not terminate upon his
death); or (III) with respect to any particular plan, program or
arrangement, the date he is afforded a comparable benefit at a
comparable cost to the Employee by a subsequent employer. In the event
that the Employee's participation in any such plan, program or
arrangement of the Company is prohibited, the Company shall
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arrange to provide the Employee with benefits substantially similar to
those which the Employee is entitled to receive under such plan,
program or arrangement for such period.
(b) The Company shall pay to the Employee all legal fees and
expenses (including legal fees and expenses incurred in connection with
an arbitration proceeding engaged in pursuant to Section 10 hereof)
incurred by the Employee as a result of such termination of employment
(including all such fees and expenses, if any, incurred in contesting
or disputing any such termination or in seeking to obtain or enforce
any right or benefit provided to the Employee by this Agreement or
under any other plan, program or arrangement of the Company or
agreement with the Company), as and when such fees and expenses become
due.
(iii) The Employee shall not be required to mitigate the
amount of any payment or benefit provided for in this Section 5 by seeking other
employment or otherwise.
(iv) The amount of any payment or benefit provided for in this
Section 5 shall not be reduced by any compensation, benefits or other amounts
paid to or earned by the Employee as the result of employment with another
employer after the Termination Date or otherwise.
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(v) In the event that any payment hereunder, together with any
other payment or the value of any benefit received in connection with a Change
in Control or the termination or the Employee's employment pursuant to this
Agreement or any plan, agreement or other arrangement between the Company and
the Employee (or any member of Company's affiliated group as such term is
defined in Section 1504 of the Code, without regard to Section 1504(b) thereof)
would result in the imposition of an excise tax under Section 4999 of the Code,
the payment hereunder may, at the election of the Employee, be reduced by the
amount necessary to prevent the imposition of such excise tax. The Company shall
engage tax counsel selected by the Employee and reasonably acceptable to the
Company to advise the Employee regarding any potential excise tax liability
under Section 4999 of the Code and as to any benefit or detriment to the
Employee of making the reduction election provided for hereunder. In making the
determinations required in order to give the advice contemplated by this
Paragraph (v), tax counsel may rely on benefit consultants, accountants and
other experts. The Company agrees to pay all fees and expenses of such tax
counsel and other experts.
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6. Payment Obligations Absolute. The Company's obligation to
pay the Employee the amounts provided for hereunder shall be absolute and
unconditional and shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against him or anyone else and, including without
limitation, any defense or claim based on a breach by the Employee of the
covenants contained herein. All amounts payable by the Company hereunder shall
be paid without notice or demand. Except as expressly provided herein, the
Company waives all rights which it may now have or may hereafter have conferred
upon it, by statute or otherwise, to amend, terminate, cancel or rescind this
Agreement in whole or in part. Subject to the right of the Company to seek
arbitration under Section 10 hereof and recover any payment made hereunder, each
and every payment made hereunder by the Company shall be final, and the Company
shall not seek to recover all or any part of such payment from the Employee or
from whomsoever may be entitled thereto, for any reason whatsoever.
7. Covenant Not to Solicit.
(i) In the event the Employee's employment is terminated by
the Company pursuant to Section 3(iv) hereof or by
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the Employee pursuant to Section 4 hereof, the Employee agrees during the
three-year period following the Termination Date not to:
(a) offer employment to any officer or employee of the Company
or any subsidiary or affiliated company of the Company or attempt to
induce any such officer or employee to leave the employ of the Company
or any subsidiary or affiliated company of the Company; or
(b) attempt to persuade or induce, or persuade or induce, any
officer, director, agent, customer, client or supplier of the Company
or any subsidiary or affiliated company of the Company to discontinue
his or her relationship with the Company or any subsidiary or
affiliated company of the Company.
(ii) In the event of any breach of the foregoing covenant, the
Employee acknowledges that the Company's remedy at law is inadequate and that
the Company shall be entitled to seek injunctive relief.
8. Successors; Binding Agreement.
(i) This Agreement shall be binding upon any successor
(whether direct or indirect, by purchase, merger, consolidation, liquidation or
otherwise) to all or substantially all of the
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business and/or assets of the Company. Additionally, the Company shall require
any such successor expressly to agree to assume and to assume all of the
obligations of the Company under this Agreement upon or prior to such succession
taking place. A copy of such assumption and agreement shall be delivered to the
Employee promptly after its execution by the successor. Failure of the Company
to obtain such agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and, as a result of such breach, the Company shall
pay to the Employee the benefits as provided in Section 5 hereof as if the
Company had terminated the Employee's employment on the date on which such
succession becomes effective, without Cause, upon a Change in Control. As used
in this Agreement, "Company" shall mean the Company as hereinbefore defined and
any successor to its business and or assets as aforesaid, whether or not such
successor executes and delivers the agreement provided for in this Section 8(i).
(ii) This Agreement is personal to the Employee and the
Employee may not assign or transfer any part of his rights or duties hereunder,
or any compensation due to him hereunder, to any other person, except that this
Agreement shall inure to the benefit of and be enforceable by the Employee's
personal or legal
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representatives, executors, administrators, heirs, distributees, devises,
legatees or beneficiaries. No payment pursuant to any will or the laws of
descent and distribution shall be made hereunder unless the Company shall have
been furnished with a copy of such will and/or such other evidence as the Board
may deem necessary to establish the validity of the payment.
9. Modification; Waiver. No provisions of this Agreement may
be modified, waived or discharged unless such waiver, modification or discharge
is agreed to in a writing signed by the Employee and such director or officer as
may be specifically designated by the Board. Waiver by any party of any breach
of or failure to comply with any provision of this Agreement by the other party
shall not be construed as, or constitute, a continuing waiver of such provision,
or a waiver of any other breach of, or failure to comply with, any other
provision of this Agreement.
10. Arbitration of Disputes.
(i) Any disagreement, dispute, controversy or claim arising
out of or relating to this Agreement or the interpretation or validity hereof
shall be settled exclusively and finally by arbitration except that in the event
of the Employee's breach of the covenant contained in Section 7 hereof, the
Company
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shall be entitled to seek injunctive relief pursuant to Section 7(ii) hereof. It
is specifically understood and agreed that any disagreement, dispute or
controversy which cannot be resolved between the parties, including without
limitation any matter relating to the interpretation of this Agreement, may be
submitted to arbitration irrespective of the magnitude thereof, the amount in
controversy or whether such disagreement, dispute or controversy otherwise would
be considered justiciable or ripe for resolution by a court or arbitral
tribunal.
(ii) The arbitration shall be conducted in accordance with the
Commercial Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA").
(iii) The arbitral tribunal shall consist of one arbitrator.
The parties to the arbitration jointly shall directly appoint such arbitrator
within 30 days of initiation of the arbitration. If the parties shall fail to
appoint such arbitrator as provided above, such arbitrator shall be appointed by
the AAA as provided in the Arbitration Rules and shall be a person who (a)
maintains his principal place of business within 30 miles of the City of
Fayetteville, Arkansas, and (b) has had substantial experience (whether
practical or academic) in mergers and acquisitions or, if no such person is
available, in employee
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benefits. The Company shall pay all of the fees, if any, and expenses of such
arbitrator.
(iv) The arbitration shall be conducted within 30 miles of the
City of Fayetteville, Arkansas or in such other city in the United States of
America as the parties to the dispute may designate by mutual written consent.
(v) At any oral hearing of evidence in connection with the
arbitration, each party thereto or its legal counsel shall have the right to
examine its witnesses and to cross-examine the witnesses of any opposing party.
No evidence of any witness shall be presented unless the opposing party or
parties shall have the opportunity to cross-examine such witness, except as the
parties to the dispute otherwise agree in writing or except under extraordinary
circumstances where the interests of justice require a different procedure.
(vi) Any decision or award of the arbitral tribunal shall be
final and binding upon the parties to the arbitration proceeding. The parties
hereto hereby waive, to the extent permitted by law, any rights to appeal or to
seek review of such award by any court or tribunal. The parties hereto agree
that the arbitral award may be enforced against the parties to the arbitration
proceeding or their assets wherever they may be found
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and that a judgment upon the arbitral award may be entered in any court having
jurisdiction.
(vii) Nothing herein contained shall be deemed to give the
arbitral tribunal any authority, power, or right to alter, change, amend,
modify, add to, or subtract from any of the provisions of this Agreement.
11. Notice. All notices, requests, demands and other
communications required or permitted to be given by either party to the other
party by this Agreement (including, without limitation, any notice of
termination of employment and any notice under the Arbitration Rules of an
intention to arbitrate) shall be in writing and shall be deemed to have been
duly given when delivered personally or received by certified or registered
mail, return receipt requested, postage prepaid, at the address of the other
party, as follows:
If to the Company, to:
Southwestern Energy Company
0000 Xxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Board of Directors and Secretary
If to the Employee, to:
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Either party hereto may change its address for purposes of this Section 11 by
giving fifteen (15) days' prior notice to the other party hereto.
12. Severability. If any term or provision of this Agreement
or the application thereof to any person or circumstance shall to any extent be
invalid or unenforceable, the remainder of this Agreement or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable shall not be affected thereby, and each term
and provision of this Agreement shall be valid and enforceable to the fullest
extent permitted by law.
13. Headings. The headings in this Agreement are inserted for
convenience of reference only and shall not be a part of or control or affect
the meaning of this Agreement.
14. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original.
15. Governing Law. This Agreement has been executed and
delivered in the State of Arkansas and shall in all respects be governed by, and
construed and enforced in accordance with, the laws of the State of Arkansas.
16. Payroll and Withholding Taxes. The Company may withhold
from any amounts payable to the Employee hereunder all
00
xxxxxxx, xxxxx, xxxx or other taxes that the Company may reasonably determine
are required to be withheld pursuant to any applicable law or regulation.
17. Entire Agreement. Except as explicitly provided for
herein, this Agreement supersedes any and all other oral or written agreements
heretofore made relating to the subject matter hereof and constitutes the entire
agreement of the parties relating to the subject matter hereof; provided, that,
this Agreement shall not supersede or limit or in any way affect the amount of
compensation or benefits to which the Employee would be entitled under any other
agreement, plan, program or arrangement with the Company including any such
agreement, plan, program or arrangement providing for benefits in the nature of
severance pay.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Southwestern Energy Company
By: /s/ XXXXXXX X. XXXXXXXX
---------------------------
Chairman of the Board of
Southwestern Energy Company
By: /s/ XXXX X. XXXXXXX
---------------------------
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