EXECUTIVE SEVERANCE AGREEMENT
This agreement (this "Agreement") is made as of the __ day of ______, ____,
between Southwestern Energy Company, an Arkansas corporation with its principal
offices at 1083 Sain Street, P.O. Box 1408, Fayetteville, Arkansas 72702-1408
(hereinafter called the "Company"), and _______________ (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 compensation and 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:
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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 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, provided,
however, that any acquisition by (x) the Company or any of its subsidiaries, or
any employee benefit plan (or related trust) sponsored or maintained by the
Company or any of its subsidiaries or (y) any corporation with respect to which,
immediately following such acquisition, more than 60% of, respectively, the then
outstanding shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially owned, directly
or
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indirectly, in the aggregate by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the outstanding
Company common stock and Company voting securities immediately prior to such
acquisition in substantially the same proportion as their ownership, immediately
prior to such acquisition, of the outstanding Company common stock and Company
voting securities, as the case may be, shall not constitute a Change in Control;
(b) consummation by the Company of a
reorganization, merger or consolidation (a "Business Combination"), in each
case, with respect to which all or substantially all of the individuals and
entities who were the respective beneficial owners of the outstanding Company
common stock and Company voting securities immediately prior to such Business
Combination do not in the aggregate, immediately following such Business
Combination, beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination in substantially the same proportion as
their ownership immediately prior to such Business Combination of the
outstanding Company common stock and Company voting securities, as the case may
be;
(c) any individual who is nominated by the
Board for election to the Board on any date fails to be so elected as 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;
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(e) (i) a complete liquidation or dissolution
of the Company or (ii) a sale or other disposition of all or substantially all
of the assets of both the Exploration and Production and the Utility business
segments of the Company other than to a corporation with respect to which,
immediately following such sale or disposition, more than 80% of, respectively,
the then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, in the aggregate
by all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the outstanding Company common stock and
Company voting securities immediately prior to such sale or disposition in
substantially the same proportion as their ownership of the outstanding Company
common stock and Company voting securities, as the case may be, immediately
prior to such sale or disposition;
[(f) <F1> the sale or other disposition of all or
substantially all the assets of the [Utility business segment<F2>/Exploration
and Production business segment<F3>] other than to a corporation with respect to
which, immediately following such sale or disposition, more than 80% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, in the aggregate by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the outstanding
Company common stock and Company voting securities immediately prior to such
sale or disposition in substantially the same proportion as their ownership of
the
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outstanding Company common stock and Company voting securities, as the case
may be, immediately prior to such sale or disposition]; or
(g) 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 the foregoing, a Change in Control shall not
occur with respect to the Employee by reason of any event which would otherwise
constitute a Change in Control if, immediately after the occurrence of such
event, individuals including such Employee who were executive officers of the
Company immediately prior to the occurrence of such event, own, directly or
indirectly, on a fully diluted basis, (i) 15% or more of the then outstanding
shares of common stock of the Company or any acquiror or successor to
substantially all of the business of the Company [or, in the case of an event
described in Section 1(ii)(f) relating to a sale of a business segment, the
entity acquiring the business segment]<F4> or (ii) 15% or more of the combined
voting power of the then outstanding voting securities of the Company or any
acquiror or successor to substantially all of the business of the Company [or,
in the case of an event described in Section 1(ii)(f) relating to a sale of a
business segment, the entity acquiring the business segment]<F4> entitled to
vote generally in the election of directors.
(iii) "Committee" shall mean the Compensation Committee of
the Board.
(iv) "Compensation" shall mean the sum of the highest
annual base salary of the Employee in effect at any time during the year
preceding the Termination Date and the maximum
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cash bonus opportunity available to the Employee under the Company's Incentive
Compensation Plan(s) at any time during the year prior to the Termination Date.
(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 compensation and 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 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 the Employee's principal work
location immediately prior to a change
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in control, 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 and any
incentive or equity-based plans) in which the Employee was
participating immediately prior to a Change in Control (or substitute
plans, programs or arrangements providing the Employee with
substantially similar compensation and 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 portion of the
Employee's compensation deferred
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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 pursuant to Section 8(i) hereof; 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 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 apply shall
automatically be extended for one additional year, unless at least six months
before such anniversary the Company notifies the Employee that it elects not to
extend such period. If the Company elects not to extend such period, then such
period shall end two years after the next anniversary of the date hereof that
follows the date of such notice. Notwithstanding anything in this
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Agreement to the contrary, if, within six months prior to the date on which a
Change in Control occurs, the Employee's employment with the Company is
terminated by the Company other than by reason of the Employee's death,
Disability or circumstances that would constitute Cause or the terms and
conditions of the Employee's employment are adversely changed in a manner which
would constitute grounds for a termination of employment by the Employee for
Good Reason, and it is reasonably demonstrated that such termination of
employment or adverse change (i) was at the request of a third party who has
taken steps reasonably calculated to effect the Change in Control of (ii)
otherwise arose in connection with or in anticipation of the Change in Control,
then for all purposes of this Agreement such termination of employment shall be
deemed to have occurred during the Contract Period and shall be considered
either termination of the Employee's employment without Cause by the Company or
termination of the Employee's employment by the Employee for Good Reason, as the
case may be. 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.
(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 compensation and benefits
provided in Paragraph (i) (a) of Section 5 hereof). Upon a termination of the
Employee's employment without Cause or for Disability during the Contract
Period, the Employee shall be entitled to receive the compensation and benefits
provided in Section 5 hereof. Except as provided in Section 2, 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.
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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
compensation and benefits hereunder as follows:
(i) If the Employee terminates his employment with the Company
during the twelve-month period beginning immediately preceding the date of a
Change in Control other than for Good Reason, the Employee shall have no right
to receive any compensation or benefits hereunder (other than those provided in
Paragraph (i) (a) of Section 5 hereof).
(ii) If the Employee shall terminate his employment with the
Company at any time during the Contract Period for Good Reason, the Employee
shall be entitled to receive the benefits provided in Section 5 hereof.
(iii) 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 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. Except
as provided in Section 2, 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 Employee's death, whether or not during the Contract Period.
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5. Compensation and Benefits Upon Termination in Certain
Circumstances. (i) Upon the termination of the employment of the Employee by the
Company pursuant to Section 3(iv) (termination without Cause) hereto or by the
Employee as described in Section 4(ii) hereof, the Employee shall be entitled to
receive the compensation and benefits in Subparagraphs (a) and (b) of this
Paragraph (i). Upon the termination of the employment of the Employee by the
Company pursuant to Section 3(ii) (termination by reason of Disability) or
Section 3(iii) (termination for Cause) or by the Employee pursuant to Section
4(i), the Employee shall be entitled to the compensation and benefits in
Subparagraph (a) of this Paragraph (i).
(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.
(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 [2.99/2.00]<F5>.
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(ii) If the Employee's employment is terminated by the Company
pursuant to Section 3(ii) (termination by reason of Disability) or 3(iv)
(termination without Cause) hereof, or by the Employee pursuant to Section 4(ii)
hereof, the Employee shall be entitled to receive the following compensation 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 12 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 compensation and 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
arrange to provide the Employee with compensation and 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
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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, except as specifically
provided in Section 5(ii)(a)(III).
(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 ("Affiliated Group")
as such term is defined in Section 1504 of the Internal Revenue Code of 1986, as
amended (the "Code"), without regard to Section 1504(b) thereof) ("Change in
Control Payments") would result in the imposition of an excise tax ("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 "Payment Reduction").
(a) All determinations required to be made under this
Paragraph (v), including whether a Payment Reduction is required to
avoid the taxes described in the preceding paragraph, the amount of any
such Payment Reduction, and the assumptions to be used in determining
such conclusions, shall be made by the Company's certified public
accountants (the "Accountants") which shall provide detailed supporting
calculations both to the Company and the Employee within fifteen days
of the Termination Date, if applicable. All
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fees and expenses of the Accountants shall be borne solely by the
Company. Within five (5) days after receipt of such supporting detail,
the Employee may, by filing a written notice with the Company, elect a
Payment Reduction. The Payment Reduction, if any, shall then be made by
the Company within five days of the receipt of the Employee's election.
If the Accountants determine that no Excise Tax is payable by the
Employee, it shall furnish the Employee with a written representation
that failure to report the Excise Tax on Employee's applicable U.S.
Federal income tax return for the applicable year would not result in
the imposition of a negligence or similar penalty. Any determination by
the Accountants shall be binding on both the Employee and the Company.
(b) If it is determined that the Payment Reductions which were
not made by the Company should have been made ("Overpayment"), or, if
such Payment Reductions which were made should not have been made
("Underpayment"), (I) the Company shall, in the case of any such
Underpayment, make a further payment to Employee, within thirty days
notice of such Underpayment, in the amount of such Underpayment,
including interest accrued with respect thereto, provided however, such
further payment shall not include any such amounts (including such
interest) that would result, either alone, or in combination with any
Change in Control Payment in any Excise Tax after giving effect to such
payment by the Company to the Employee on account of such Underpayment,
or (II) in the case of an Overpayment, then Employee shall pay an
amount equal to such Overpayment, including any interest accrued with
respect thereto, such that the net effect, after such payment of such
Overpayment (including interest) from Employee to the Company would be
that no Excise Tax would be imposed on the Employee. For purposes of
this Paragraph (v), the Accountants shall determine the amount of such
Overpayment or Underpayment.
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(vi) 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 the Affiliated Group) would result in the
imposition of an excise tax ("Excise Tax") under Section 4999 of the Code, and
the Employee does not elect a Payment Reduction, as described in Paragraph 5(v)
above, the Company shall pay to the Employee an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Employee of all taxes
(including interest and penalties imposed with respect to such taxes), including
without limitation, any income taxes, employment taxes and Excise Tax imposed
upon the Gross-Up Payment, the Employee retains an amount of the Gross-Up
payment equal to the Excise Tax imposed upon the payments made.
(a) Subject to the provisions of Paragraph (vi)(c) hereof, all
determinations required to be made under this Paragraph (vi), including
whether a Gross-Up Payment is required, the amount of any such Gross-Up
Payment, and the assumptions to be used in determining such
conclusions, shall be made by the Company's Accountants which shall
provide detailed supporting calculations both to the Company and the
Employee within fifteen days of the Termination Date. All fees and
expenses of the Accountants shall be borne solely by the Company. The
Gross-Up Payment, if any, shall be made by the Company within five days
of the receipt of the Accountants' determination. If the Accountants
determine that no Excise Tax is payable by the Employee, it shall
furnish the Employee with a written representation that failure to
report the Excise Tax on Employee's applicable U.S. Federal income tax
return for the applicable year would not result in the imposition of a
negligence or similar penalty.
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(b) If it is determined that a Gross-Up Payment which was not
made by the Company should have been made ("Gross-Up Underpayment"),
or, if such Gross-Up Payments which were made should not have been made
("Gross-Up Overpayment"), Employee shall, in the case of any such
Gross-Up Overpayment, refund such Gross-Up Overpayment (together with
any interest paid or credited thereon after taxes applicable thereto)
promptly to the Company, or in the case of an Gross-Up Underpayment, in
the event that the Company exhausts its remedies under Paragraph
(vi)(c) hereof, and the Employee is required thereafter to make a
payment of any Excise Tax, any such Gross-Up Underpayment shall be
promptly paid by the Company to or for the benefit of the Employee. For
purposes of this Paragraph (vi), the Accountants shall determine the
amount of such Overpayment or Underpayment.
(c) Employee shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the
payment of an Excise Tax. Such notification shall be given as soon as
practicable but no later than ten business days after the Employee is
informed in writing of such claim and shall apprise the Company of the
nature of such claim and the date on which such claim is requested to
be paid. Employee shall not pay any such claim prior to the expiration
of a thirty day period following the date on which the Employee gives
such notice to the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If the
Company notifies the Employee in writing prior to the expiration of
such period that it desires to contest such claim, Employee shall (I)
give the Company any information reasonably requested by the Company
relating to such claim, (II) take such action in connection with
contesting such claim as the Company shall reasonably request, in
writing from time to time, including,
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without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company, and acceptable
to the Employee (which such acceptance shall not be unreasonably
withheld), (III) cooperate with the Company in good faith in order to
effectively contest such claim, and (IV) permit the Company to
participate in any proceedings relating to such claim, provided
however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold harmless the
Employee, on an after-tax basis, for any income taxes, employment taxes
and Excise Tax imposed, including interest and penalties imposed with
respect thereto, imposed as a result of such representation and payment
of costs and expenses. Without limitation on the foregoing provisions
of this Paragraph (vi)(c), the Company shall control all proceedings
taken in connection with such contest, and may, at its sole option,
pursue or forgo any and all administrative appeals, proceedings,
hearings and conferences with the applicable taxing authority in
respect of such claim and may, at its sole option, either direct the
Employee to pay the tax claimed and sue for a refund, or contest the
claim in a permissible manner, and the Employee agrees to prosecute
such contest to a determination before any administrative tribunal, any
court of initial jurisdiction and in one or more appellate courts, as
the Company shall determine, provided however, that if the Company
directs the Employee to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Employee, on an
interest-free basis and shall indemnify and hold the Employee harmless,
on an after-tax basis from any income taxes, employment taxes and
Excise Tax imposed, including interest or penalties with respect
thereto, imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further provided that
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any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Employee with respect to which such
contested amount is claimed is due is limited solely by such contested
amount. Furthermore, the Company's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Employee shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(d) If, after the receipt by the Employee of an amount
advanced by the Company pursuant to Paragraph (vi)(c), the Employee
receives a refund with respect to such claim, the Employee shall
(subject to the Company's complying with the requirements of Paragraph
(vi)(c)) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Employee of an amount
advanced by the Company pursuant to Paragraph (vi)(c), a determination
is made that the Employee shall not be entitled to any refund with
respect to such claim and the Company does not notify the Employee in
writing of its intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such advance shall
be forgiven and shall not be required to be repaid and the amount of
such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
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
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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 (termination without Cause) or by
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.
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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 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 constitute "Good
Reason." 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 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
21
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 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 compensation and benefits. The Company shall pay all of
the fees, if any, and expenses of such arbitrator.
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(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 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
23
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
1083 Sain Street
P.O. Box 1408
Fayetteville, Arkansas 72702-1408
Attention: Board of Directors and Secretary
If to the Employee, to:
_________________
_________________
_________________
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.
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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 federal, state, city or
other taxes that the Company may reasonably determine are required to be
withheld pursuant to any applicable law or regulation, provided however, that
the Company's determinations respecting matters described in Paragraph 5(v)
shall be based upon and shall be consistent with the determinations by the
Accountants.
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, including the agreement
dated, ______, between the Company and the Employee, 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 compensation and 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: ___________________________
Chairman of the Compensation Committee
Southwestern Energy Company
By:___________________________
Chairman of the Board of
Southwestern Energy Company
_______________________________
Employee
26
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<F1> Subsection (f) applies to Messrs. Harold Korell, Greg Kerley, Alan
Stevens, Richard Lane and Charles Stevens.
<F2> Applies to Mr. Charles Stevens
<F3> Applies to Messrs. Harold Korell, Greg Kerley, Alan Stevens and Richard
Lane.
<F4> Applies to Messrs. Harold Korell, Greg Kerley, Alan Stevens, Richard
Lane and Charles Stevens.
<F5> 2.99 for Messrs. Harold Korell, Greg Kerley, Alan Stevens and
Ms. Debbie Branch; 2.0 for Richard Lane and Charlie Stevens