Exhibit 10(b)
SEVERANCE COMPENSATION AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into
as of the day of , 199 , by and
between ENERGEN CORPORATION, an Alabama corporation ("Energen"),
and
, ("Executive").
W I T N E S S E T H:
WHEREAS, Executive is an effective and valuable
employee of Energen and/or one or more of its subsidiaries;
WHEREAS, Executive desires certain assurances with
respect to any change in control of Energen;
WHEREAS, Energen recognizes that the uncertainties
involved in a potential or actual change in control of Energen
could result in the distraction or departure of management
personnel such as Executive to the detriment of Energen and its
shareholders; and
WHEREAS, Energen desires to lessen the personal and
economic pressure which
a potential or actual change in control may impose on Executive
and thereby facilitate Executive's ability to bargain
successfully for the best interests of Energen's shareholders in
the event of such a change in control;
NOW, THEREFORE, in consideration of the premises and
the mutual agreements herein contained, Energen and Executive
hereby agree as follows:
Section 1. Definitions. As used in this
Agreement the following words and terms shall have the following
meanings:
(a) "Applicable Period" means the period commencing
with the earliest date that a Change in Control occurs and ending
on the last day of the thirty-sixth calendar month following the
calendar month during which such Change in Control occurred.
Anything in this Agreement to the contrary notwithstanding, if a
Change in Control occurs, and if the Date of
Termination with respect to Executive's employment with Energen
occurs prior to the date on which the Change in Control occurs,
and if it is reasonably demonstrated by Executive that such
termination of employment (i) was at the request of a third party
who has taken steps reasonably calculated to effect the Change in
Control or (ii) otherwise arose in connection with or in
anticipation of the Change in Control, then for all purposes of
this Agreement the "Applicable Period" shall be deemed to have
commenced on the date immediately preceding the Date of
Termination.
(b) "Cause". Termination of employment by Employer
for "Cause" shall mean termination based on any of the following:
(1) The willful and continued failure by the
Executive to substantially perform Executive's duties with
Employer (other than any such failure resulting from Executive's
incapacity due to physical or mental illness) after a written
demand for substantial performance is delivered to Executive
specifically identifying the manner in which Executive has not
substantially performed Executive's duties;
(2) The engaging by Executive in willful
misconduct which is demonstrably injurious to Employer monetarily
or otherwise; or
(3) The conviction of Executive of a felony.
(c) "Change in Control" means the occurrence of
any one or more of the following:
(1) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a "Person") of beneficial ownership (within the
meaning of Rule 13(d)-3 promulgated under the Exchange Act) of
25% or more of either (i) the then outstanding shares of common
stock of Energen (the "Outstanding Common Stock") or (ii) the
combined voting power of the then outstanding voting securities
of Energen entitled to vote generally in the election of
directors (the "Outstanding Voting Securities"); provided,
however, that for purposes of this subsection (1) any acquisition
by an employee benefit plan (or related trust) sponsored or
maintained by Energen or any corporation controlled by Energen
shall not constitute a Change in Control;
(2) Individuals who, as of June 1, 1996,
constitute the Board of Directors of Energen (the "Incumbent
Board") cease for any reason to constitute at least a majority of
the Board of Directors of Energen (the "Board of Directors");
provided, however that any individual becoming a director
subsequent to the date hereof whose election, or nomination for
election by Energen's shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member
of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board of Directors;
(3) Consummation of a reorganization, merger or
consolidation involving, or sale or other disposition of all or
substantially all of the assets of, Energen (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Common Stock and Outstanding Voting Securities
immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 75% 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
(including, without limitation, a corporation which as a result
of such transaction owns Energen or all or substantially all of
Energen's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination, of the
Outstanding Common Stock and Outstanding Voting Securities, as
the case may be, (ii) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit
plan (or related trust) of Energen or such corporation resulting
from such Business Combination) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then
outstanding voting securities of such corporation except to the
extent that such ownership existed prior to the Business
Combination and (iii) at least a majority
of the members of the board of directors of the corporation
resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board of Directors, providing
for such Business Combination;
(4) The occurrence of one transaction or a series
of transactions, which has the effect of a divestiture by Energen
of 25% or more of the combined voting power of Alabama Gas
Corporation's outstanding voting securities;
(5) The occurrence of any sale, lease or other
transfer, in one transaction or a series of transactions of all
or substantially all of the assets of Alabama Gas Corporation
(other than to Energen or an entity controlled by Energen); or
(6) Any transaction or series of transactions
which is expressly designated by resolution of the Board of
Directors to constitute a Change in Control for purposes of this
Agreement.
(d) "Code" means the Internal Revenue Code of 1986, as
the same may be from time to time amended.
(e) "Compensation" means an amount equal to the sum of
(A) plus (B), where (A) is the Executive's annualized base salary
in effect at the time of a Change in Control, and (B) is the
highest annual bonus awarded Executive by Employer pursuant to
the Energen Annual Incentive Compensation Plan (or any successor
annual cash incentive plan) with respect to the three (3) fiscal
years immediately preceding the fiscal year in which the Change
in Control occurs.
(f) "Date of Termination" means the date that a
termination of Executive's employment with Employer is first
effective.
(g) "Disability" means the total and permanent
disability which entitles Executive to a disability benefit under
a disability program sponsored and/or maintained by
Energen.
(h) "Employer" means Energen and its Subsidiaries.
(i) "Excess Parachute Payment" shall have the same
meaning as the term "excess parachute payment" defined in Section
280G(b)(1) of the Code.
(j) "Exchange Act" means the Securities Exchange Act
of 1934, as amended.
(k) "Good Reason" means the occurrence during an
Applicable Period of any of the following events without
Executive's prior written consent:
(1) The assignment to Executive by Employer of
duties inconsistent with Executive's position, authority, duties,
responsibilities and status with Employer immediately prior to a
Change in Control, or a change in Executive's titles or offices
as in effect immediately prior to a Change in Control, or any
removal of Executive from or any failure to reelect Executive
to any of such positions, if such assignment, change, or removal
results in a diminution in Executive's position, authority,
duties, responsibilities or status with Employer immediately
prior to a Change in Control or any other action by Employer
that results in such a diminution in Executive's position,
authority, duties, responsibilities or status;
(2) A reduction in Executive's aggregate rate of
monthly base pay from the Employer;
(3) The termination or material adverse
modification of the Energen Annual Incentive Compensation Plan or
the Energen Corporation 1996 Long-Range Performance Share Plan
(or any other short or long-term incentive compensation plan in
effect immediately prior to a Change in Control) without
substitution of new short or long-term incentives providing
comparable compensation opportunities for Executive.
(4) A failure by Employer to use its best efforts
to provide Executive with either the same fringe benefits
(including retirement benefits and paid vacations) as were
provided to Executive immediately prior to a Change in Control or
a package of fringe benefits that, though one or more of such
benefits may vary from those in effect immediately prior to the
Change in Control, is substantially comparable in all material
respects to the fringe benefits (taken as a whole) in effect
prior to a Change in Control;
(5) Executive's relocation by Employer to any
place more than 25 miles from the location at which Executive
performed the substantial portion of Executive's duties prior
to a Change in Control, except for required travel by Executive
on Employer's business to an extent substantially consistent with
Executive's business travel obligations immediately prior to such
Change in Control;
(6) Any material breach by Energen of any
provision of this Agreement
or any other agreement between Energen and Executive which breach
continues for a period of
thirty days following delivery by Executive to Energen of written
notice of such breach.
(l) "Independent Auditor" means the firm of certified
public accountants which
at the time of the Change in Control had been most recently
engaged by Energen to prepare
Energen's audited financial statements, or any other firm of
certified public accountants mutually
agreeable to Energen and Executive.
(m) "Notice of Termination" has the meaning set forth
in Section 2(a) of this
Agreement.
(n) ""Parachute Payment" shall have the same meaning
as the term "parachute
payment" defined in Section 280G(b)(2) of the Code.
(o) "Qualified Termination" shall mean
(1) during a Window Period, any termination
(including Retirement) of
Executive's employment, other than for Cause, death or
Disability, and
(2) during the Applicable Period but not during a
Window Period,
(i) any termination by Employer of
Executive's employment
other than for Cause,
(ii) a termination of Executive's employment
which Executive
and Energen agree in writing will constitute a Qualified
Termination for purposes of this
Agreement, and
(iii) a voluntary termination of
Executive's employment by
Executive for Good Reason.
(p) "Reasonable Compensation" shall have the same
meaning as provided for
the term "reasonable compensation" in Section 280G(b)(4) of the
Code.
(q) "Retirement" means termination of Executive's
employment (other than for
Good Reason) by the Executive on or after Executive's having
reached age 60.
(r) "Subsidiary" means any corporation, the majority
of the outstanding voting
stock of which is owned directly or indirectly, by Energen.
(s) "Window Period" shall mean the 30-day period
immediately following the
first anniversary of a Change in Control.
Section 2. Notice of Termination. During any Applicable
Period:
(a) Any termination (other than for Retirement, death
or Disability) of
Executive's employment, whether by Employer or Executive, shall
be communicated by the
terminating party transmitting or sending the other party a
written notice ("Notice of
Termination") referencing this Agreement and, if such termination
is for Cause or Good Reason,
indicating in reasonable detail the facts and circumstances
providing a basis for such termination.
The failure of Executive or Employer to set forth in the Notice
of Termination any fact or
circumstance which contributes to a showing of Good Reason or
Cause shall not waive any right
of Executive or Energen hereunder or preclude Executive or
Energen from asserting or relying
upon the omitted fact or circumstance in enforcing Executive's or
Energen's rights hereunder.
(b) Subject to (c) below, such termination of
Executive's employment shall be
effective upon delivery of a Notice of Termination or at such
later date as may be specified in the
Notice of Termination.
(c) In the event that each party delivers a Notice of
Termination, the Notice of
Termination first delivered shall establish the effective date of
such Notice of Termination.
Section 3. Severance Payment. In the event of a
Qualified Termination, then
Executive shall, subject to the provisions of Sections 5 and 8
hereof, receive as severance pay an
amount equal to his Compensation multiplied by a factor of [1.5
or 2 or 2.5]. Subject to Section 5
hereof, any severance payment to be made under this Section 3
shall be paid in one payment and
in full on or prior to the thirtieth day following the Date of
Termination.
Section 4. Other Benefits. Subject to Sections 5 and 8
hereof, in the event of a
Qualified Termination (other than Retirement), for a period of
twenty-four months commencing
with the Date of Termination, Executive and the Executive's
family shall continue to be covered
at the expense of Energen by the same or substantially equivalent
hospital, medical, dental, vision,
accident, disability and life insurance coverages as were
provided to Executive and the Executive's
family by Employer immediately prior to the Change in Control;
provided, however, that if
Executive becomes employed with another employer and is eligible
to receive benefits of the type
described above from such other employer, Energen's obligations
under this Section 4 and the
benefits described herein shall be secondary to those provided by
such other employer.
Section 5. Limitation on Benefits.
(a) Basic Rule. Except as otherwise provided in
paragraph (c) below, any
benefits payable or to be provided to the Executive by Employer,
whether pursuant to this
Agreement or otherwise (including, without limitation, Awards
under the Energen Corporation
1992 or 1996 Long-Range Performance Share Plans), which
constitute Parachute Payments shall
be modified or reduced as provided in paragraph (b) below to the
extent necessary so that the
benefits payable or to be provided to Executive under this
Agreement that constitute Parachute
Payments, as well as any payments or benefits provided outside of
this Agreement that constitute
Parachute Payments, shall not cause Employer to have paid an
Excess Parachute Payment. All
provisions of Section 280G of the Code, and the regulations
(proposed, interim, or final)
thereunder, shall be taken into account in computing such amount,
including making appropriate
adjustment to such calculation for amounts established to be
Reasonable Compensation.
(b) Reductions. In the event that the amount of any
Parachute Payment
otherwise payable to or for the benefit of the Executive must be
modified or reduced to comply
with paragraph (a) above, the Executive shall direct which
Parachute Payments are to be modified
or reduced; provided, however, that no increase in the amount of
any payment or any change in
the timing of payment shall be made without the consent of
Energen.
(c) Optimization. Prior to the first date any
Parachute Payment is due to be
made, Energen shall, at its own expense, cause the Independent
Auditor to determine whether X
exceeds Y, where
(i) X is the total amount of Parachute Payments
that would be made to
the Executive, whether pursuant to this Agreement or otherwise,
if the limitation provided for in
paragraph (a) above were not applied, reduced by the total amount
of applicable federal, state, and
local income, payroll and excise taxes that would be payable by
the Executive with respect to such
Parachute Payments, and
(ii) Y is the total amount of Parachute Payments
that would be payable
to the Executive, whether pursuant to this Agreement or
otherwise, if the limitation provided for
in paragraph (a) above were applied, reduced by the total amount
of applicable federal, state and
local income, payroll and excise taxes that would be payable by
the Executive with respect to such
Parachute Payments.
If X exceeds Y, then the limitation provided for in paragraph (a)
above shall not apply. For
purposes of making the determination provided for in this
paragraph (c), the Independent Auditor
shall assume that all Parachute Payments to be made to the
Executive will be subject to federal
income tax at the maximum rate in effect at the time the
determination is made unless the
Executive provides the Independent Auditor with evidence
satisfactory to the Independent Auditor
that it is more probable than not that one or more Parachute
Payments will be taxable at a lower
rate, or lower rates, in which case the Independent Auditor shall
assume that such Parachute
Payments will be taxed at the lower rate or rates.
(d) Subsequent Payments. As a result of various
incentive or other plans,
Executive may be entitled to receive various Parachute Payments
over a period of several years.
In such event, the Independent Auditor may need to update its
Section 5(c) calculations one or
more times. In the event that all or a portion of a Parachute
Payment is not made due to the
limitations of this Section 5, Energen shall not be relieved of
liability for such amount but such
Parachute Payment shall be deferred and included in calculations
with respect to subsequent
Parachute Payments.
(e) Overpayments and Underpayments. As a result of
uncertainty in the
application of section 280G of the Code at the time of
determinations by the Independent Auditor
hereunder, uncertainties in the valuation of future payments, and
deferrals pursuant to
Section 5(d), it is possible that Parachute Payments will have
been made by Energen which should
not have been made (an "Overpayment") or that additional
Parachute Payments which will not
have been made by Energen could have been made (an
"Underpayment"), consistent in each case
with the other provisions of this Section 5. In the event that
the Independent Auditor, based upon
the assertion of a deficiency by the Internal Revenue Service
against Energen or the Executive
which the Independent Auditor believes has a high probability of
success, determines that an
Overpayment has been made, such Overpayment shall be treated for
all purposes as a loan to the
Executive which the Executive shall repay to Energen, together
with interest at the applicable
federal rate provided for in section 7872(f)(2)(A) of the Code;
provided, however, that no amount
shall be payable by the Executive to Energen if and to the extent
that such payment would not
reduce the amount which is subject to taxation under section 4999
of the Code. In the event that
the Independent Auditor determines that an Underpayment has
occurred, such Underpayment shall
promptly be paid or transferred by Energen to or for the benefit
of the Executive, together with
interest at the applicable federal rate provided for in section
7872(f)(2)(A) of the Code.
Section 6. No Obligation To Seek Further Employment; No
Effect on Other Benefits.
(a) Executive shall not be required to seek other
employment, nor (except as
otherwise provided under Section 4 with respect to insurance
coverages) shall the amount of any
severance payment or other benefit to be made or provided under
this Agreement be reduced by
any compensation or benefit earned by Executive as the result of
employment by another employer
after the Date of Termination, or otherwise.
(b) Subject to Section 5 hereof, any severance payment
or benefit to be made
or provided under this Agreement is in addition to all other
benefits, if any, to which Executive
may be entitled under other agreements, plans or programs of
Energen.
Section 7. Continuing Obligations of Executive. As a
result of and in connection with
Executive's employment by Employer, Executive is involved in a
number of matters of strategic
importance and value to Employer including various projects,
proceedings, planning processes, and
negotiations. Any number of these matters may be ongoing and
continuing after the Date of
Termination. In addition Employee is privy to proprietary and
confidential information of
Employer including without limitation, financial information and
projections, business plans and
strategies, customer and vendor lists and information, and oil
and gas properties and prospects. The
Executive agrees as follows:
(a) Consulting Services. For a period of three years
following the Date
of Termination, Executive agrees to fully assist
and cooperate with
Employer and its representatives (including
outside auditors, counsel
and consultants) with respect to any matters with
which the Executive
was involved during the course of employment with
Employer,
including being available upon reasonable notice
for interviews,
consultation, and litigation preparation. Except
as otherwise agreed
by Executive, Executive's obligation under this
Section 7 (a) shall not
exceed 80 hours during the first year and 20 hours
during each of the
following two years. Such services shall be
provided upon request of
Employer but scheduled to accommodate Executive's
reasonable
scheduling requirements. Executive shall receive
no additional fee
for such services but shall be reimbursed all
reasonable out-of-pocket
expenses.
(b) Non-Compete. For a period of twelve months
following the Date of
Termination, the Executive shall not Compete, (as
defined below ) or
assist others in Competing with the Employer. For
purposes of this
Agreement, "Compete" means (i) solicit in
competition with Alabama
Gas Corporation ("Alagasco") any person or entity
which was a
customer of Alagasco at the Date of Termination,
(ii) offer to acquire
any local gas distribution system in the State of
Alabama; or
(iii) offer to acquire any coalbed methane
interest in the State of
Alabama. Employment by, or an investment of less
than one percent
of equity capital in, a person or entity which
Competes with
Employer does not constitute Competition by
Executive so long as
Executive does not directly participate in, assist
or advise with respect
to such Competition.
(c) Confidentiality. Executive agrees that at all
times following the Date
of Termination, Executive will not, without the
prior written consent
of Energen, disclose to any person, firm or
corporation any
confidential information of Employer which is now
known to
Executive or which hereafter may become known to
Executive as a
result of Executive's employment or association
with Employer,
unless such disclosure is required under the terms
of a valid and
effective subpoena or order issued by a court or
governmental body;
provided, however, that the foregoing shall not
apply to confidential
information which becomes publicly disseminated by
means other
than a breach of this Agreement.
Section 8. Board Resignation. Energen shall have no
obligation under Sections 3 and
4 hereof if Executive shall not, promptly after the Date of
Termination and upon receiving a
written request to do so, resign from each officer and/or
director position which Executive then
holds with Energen and any Subsidiary.
Section 9. Payment of Professional Fees and Expenses.
Energen agrees to pay
promptly as incurred, to the full extent permitted by law, all
legal, accounting and other
professional fees and expenses which Executive may reasonably
incur (i) as a result of any contest
(regardless of the outcome thereof) by Energen, Executive or
others of the validity or
enforceability of, or liability under, any provision of this
Agreement or any guarantee of
performance thereof (including as a result of any contest by
Executive about the amount of any
payment pursuant to this Agreement); plus in each case interest
on any delayed payment at the
applicable Federal rate provided for in Section 7872(f)(2)(A) of
the Code; or (ii) as a result of any
contest by a taxing authority of Executive's tax treatment of any
amounts received under this or
any other Employer agreement or plan to the extent such tax
treatment is consistent with the
determinations made by the Independent Auditor under Section 5.
Section 10. Term. This Agreement shall terminate (except
to the extent of any unpaid
or unfulfilled obligation with respect to a prior termination of
Executive's employment) on the
first to occur of (i) any termination of Executive's employment
with Employer which does not
constitute a Qualified Termination or (ii) expiration of the
Term. The initial "Term" of this
Agreement shall be for a period of three years from the date
hereof. On each anniversary of the
date hereof, the Term shall automatically extend by one year
unless at least thirty days prior to
such an anniversary Energen notifies Executive that there will be
no such extension, in which
event the term shall continue until the later to occur of (i) two
years from such anniversary or
(ii) three years from the date of the most recent Change in
Control, if any.
Section 11. Binding Effect; Successors.
(a) This Agreement shall be binding upon and inure to
the benefit of Executive
and Executive's personal representative and heirs, and Energen
and its successors and assigns
including any successor organization or organizations which shall
succeed to substantially all of
the business and property of Energen, whether by means of merger,
consolidation, acquisition of
assets or otherwise, including operation of law.
(b) Without the prior consent of Energen, Executive
may not assign the
Agreement, except by will or the laws of descent and
distribution.
Section 12. Notice. For purposes of this Agreement,
notices and all other
communications provided for in this Agreement shall be in writing
and shall be deemed to have
been duly given when delivered or mailed by United States
registered mail, return receipt
requested, postage prepaid, as follows:
If to Energen or Employer:
Energen Corporation
2101 Sixth Avenue North
Birmingham, Alabama 35203
Attention: Chairman
If to Executive:
_________________________
_________________________
_________________________
or such other address as either party may have furnished to the
other in writing in accordance
herewith, except that notices of change of address shall be
effective only upon receipt.
Section 13. Miscellaneous. No provisions of this
Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is
agreed to in writing signed by
Executive and Energen. No waiver by either party hereto at any
time of any breach by the other
party hereto of, or compliance with, any condition or provision
of this Agreement to be performed
by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise,
express or implied, with respect to the subject matter hereof
have been made by either party which
are not set forth expressly in this Agreement. This Agreement
shall be governed by and construed
in accordance with the laws of the State of Alabama.
Section 14. Validity. The invalidity or unenforceability
of any provisions of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement,
which shall remain in full force and effect.
Section 15. 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 instrument.
Section 16. Amendment and Restatement of Prior Agreement.
This agreement
constitutes a complete amendment and restatement and fully
supersedes that certain Severance
Compensation Agreement between the parties dated
, 19 .
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date
first above written.
ENERGEN CORPORATION
By
Its
EXECUTIVE