OCEAN ENERGY, INC.
1999 CHANGE OF CONTROL
SEVERANCE PLAN
The OCEAN ENERGY, INC. 1999 CHANGE OF CONTROL SEVERANCE PLAN (the "Plan")
is hereby adopted pursuant to the authorization of the Board of Directors of
OCEAN ENERGY, INC. (a Louisiana Corporation) (the "Company"). The Plan
supercedes and replaces in full any severance plan, practice or policy (written
or oral) of the Company existing with respect to Covered Employees prior to the
Effective Date.
I.
DEFINITIONS AND CONSTRUCTION
1.1 Definitions. Where the following words and phrases appear in the
Plan, they shall have the respective meanings set forth below, unless their
context clearly indicates to the contrary.
(a) "Board" shall mean the Board of Directors of the
Company.
(b) "Change in Duties" shall mean the occurrence, within
two years after the date upon which a Change of
Control occurs, of any one or more of the following:
(1) with respect to a Covered Employee of Severance
Level A, a significant reduction in the duties of such Covered
Employee from those applicable to him immediately prior to the
date on which a Change of Control occurs;
(2) a reduction in a Covered Employee's annual salary
from that provided to him immediately prior to the date on
which a Change of Control occurs;
(3) a change in the location of a Covered Employee's
principal place of employment by the Employer by more than 50
miles from the location where he was principally employed
immediately prior to the date on which a Change of Control
occurs.
(c) "Change of Control" shall mean consummation of the merger
contemplated by the Agreement & Plan of Merger between Seagull Energy
Corporation and Ocean Energy, Inc. dated as of November 24, 1998.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(e) "Committee" shall mean the Administration Committee
appointed by the Board to administer this Plan.
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(f) "Company" shall mean Ocean Energy, Inc. (a Louisiana
Corporation).
(g) "Compensation" shall mean the greater of (1) a Covered
Employee's annual salary plus his Severance Factor, if any, immediately
prior to the date on which a Change of Control occurs or (2) a Covered
Employee's annual salary plus his Severance Factor, if any, at the time
of his Involuntary Termination. "Three Months' Compensation" shall mean
Compensation divided by 4. "Semi-Monthly Compensation" shall mean
Compensation divided by 24.
(h) "Covered Employee" shall mean any individual who, on the
date upon which a Change of Control occurs, is a regular, full-time
salaried employee of the Employer or an hourly employee of the Employer
who is normally scheduled to work 550 or more hours per year, other
than (1) any individual whose terms of employment are governed by a
collective bargaining agreement between a collective bargaining unit
and the Employer unless such agreement provides for coverage of such
individual under the Plan, (2) any individual who is a party to a
written agreement with the Employer providing for severance payments or
benefits upon such individual's termination of employment with the
Employer, (3) an employee who is classified as a temporary, casual, or
an independent contractor under the Employer's employment policies, and
(4) an employee of a non-U.S. subsidiary unless said employee is a U.S.
expatriate or third country national.
(i) "Effective Date" shall mean the date the Board approves
the Plan.
(j) "Employer" shall mean the Company and Ocean Energy
Resources, Inc. and each eligible organization designated as an
Employer in accordance with the provisions of Section 4.4 of the Plan.
(k) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
(l) "Involuntary Termination" shall mean any termination of a
Covered Employee's employment with the Employer which:
(1) does not result from a voluntary resignation by
the Covered Employee (other than a resignation pursuant to
Clause (2) of this Section 1.1(l)); or
(2) results from a resignation by a Covered Employee
on or before the date which is sixty days after the date the
Covered Employee receives notice of a Change in Duties;
provided, however, that the term "Involuntary Termination" shall not
include a Termination for Cause or any termination as a result of a
Covered Employee's death, disability under circumstances entitling him
to benefits under the Employer's long-term disability plan or
Retirement.
(m) "Retirement" shall mean the Covered Employee's voluntary
resignation on or after the date he reaches age sixty-five (other than
a resignation within sixty days after the date the Covered Employee
receives notice of a Change in Duties or a resignation at the request
of the Employer).
(n) "Severance Factor" shall mean the percentage of annual
salary for a Covered Employee's Severance Level determined in
accordance with the following schedule and expressed as a dollar amount
which, when added to the annual salary, results in the Compensation to
be used in the severance benefit calculation.
Severance Level Severance Factor
A 38%
B 30%
C 25%
D 18%
E 0%
(o) "Severance Level" shall mean the following category into
which a Covered Employee is designated based on his annual salary
immediately prior to the date on which a Change of Control occurs or,
if greater, at the time of his Involuntary Termination for the purpose
of determining his severance benefit amount.
Severance Level Annual Salary
A $140,000 and above
B $114,900 - $139,999
C $ 99,600 - $114,899
D $ 68,000 - $ 99,599
E Less than $ 68,000
(p) "Termination for Cause" shall mean any termination of a
Covered Employee's employment with the Employer by reason of the
Covered Employee's (1) gross negligence in the performance of the
Covered Employee's duties and responsibilities, which negligence
results in material harm to the business, interests, or reputation of
the Employer, (2) violation of any material Employer policy, including,
without limitation, the theft, embezzlement or misappropriation or
material misuse of any Employer funds or property, (3) criminal or
civil conviction for a crime involving moral turpitude, (4) willfull
and continued failure to perform the Covered Employee's duties and
responsibilities, or (5) misconduct that, in the Employer's good faith
determination, is materially harmful to the business, interests, or
reputation of the Employer.
(q) "Welfare Benefit Coverages" shall mean the medical,
dental, life insurance, accidental death and dismemberment, and vision
coverages provided by the Employer to its active employees.
1.2 Number and Gender. Wherever appropriate herein, word used in the
singular shall be considered to include the plural and the plural to include the
singular. The masculine gender, where appearing in this Plan, shall be deemed to
include the feminine gender.
1.3 Headings. The headings of Articles and Sections herein are included
solely for convenience and if there is any conflict between such headings and
the text of the Plan, the text shall control.
II.
SEVERANCE BENEFITS
2.1 Severance Benefits. Subject to the provisions of Section 2.2
hereof, if a Covered Employee's employment by the Employer or successor thereto
shall be subject to an Involuntary Termination which occurs within two years
after the date upon which a Change of Control occurs, then the Covered Employee
shall be entitled to the following severance benefits:
(a) A lump sum cash payment in accordance with the
following schedule:
Severance Level Benefit Amount
A 2 x Compensation
B 1.5 x Compensation
C 1.25 x Compensation
D 1 x Compensation
E Lesser of:
(1) the sum of (A) Semi-Monthly
Compensation as of his Involuntary
Termination for each full year and
fraction thereof of continuous
employment with the Employer as a
Covered Employee from his most
recent date of hire, and (B)
Semi-Monthly Compensation for each
full $10,000 increment of such
Covered Employee's annual salary at
the time of his Involuntary
Termination; provided, however, that
in no event shall any Covered
Employee receive less than Three
Months' Compensation; or
(2) 1 x Compensation.
(b) A Covered Employee shall be entitled to continue the
Welfare Benefit Coverages for himself and, where applicable, his
eligible dependents following his Involuntary Termination for a number
of months determined in accordance with the following schedule:
Severance Level Number of Months
A 24
B 18
C 15
D 12
E The number of months
for which cash
payments are made
under Paragraph (a)
above (rounded to
the nearest whole
month if necessary);
provided however, the Covered Employee must continue either to pay the
premiums paid by active employees of the Employer for such coverages or
to pay the actual (nonsubsidized) cost of such coverages for which the
Employer does not subsidize for active employees. Such benefit rights
shall apply only to those Welfare Benefit Coverages which the Employer
has in effect from time to time for active employees, and the
applicable payments shall adjust as premiums for active employees of
the Employer or actual costs, whichever is applicable, change. Welfare
Benefit Coverage(s) shall immediately end upon the Covered Employee's
obtainment of new employment and eligibility for similar Welfare
Benefit Coverage(s) (with the Covered Employee being obligated
hereunder to promptly report such eligibility to the Employer). Nothing
herein shall be deemed to adversely affect in any way the additional
rights, after consideration of this extension period, of Covered
Employees and their eligible dependents to health care continuation
coverage as required pursuant to Part 6 of Title I of ERISA.
(c) A Covered Employee of Severance Level A shall be entitled
to receive out-placement services in connection with obtaining new
employment up to a maximum cost of $6,000.
(d) The severance benefits payable under this Plan shall be
paid to a Covered Employee at the time he receives his final
termination pay, or as soon as administratively practicable thereafter,
subject to the conditions set forth in Section 2.2 of the Plan. Any
severance benefits paid pursuant to this Section will be deemed to be a
severance payment and not "Compensation" for purposes of determining
benefits under the Employer's qualified plans and shall be subject to
any required tax withholding.
2.2 Release and Full Settlement. Anything to the contrary herein
notwithstanding, as a condition to the receipt of any severance payment
hereunder, a Covered Employee whose employment by the Employer has been subject
to an Involuntary Termination shall first execute a release, in the form
established by the Committee, releasing the Committee, the Employer, and the
Employer's shareholders, partners, officers, directors, employees and agents
from any and all claims and from any and all causes of action of any kind or
character, including but not limited to all claims or causes of action arising
out of such Covered Employee's employment with the Employer or the termination
of such employment, and the performance of the Employer's obligations hereunder
and the receipt of any benefits provided hereunder by such Covered Employee
shall constitute full settlement of all such claims and causes of action.
2.3 Mitigation. A Covered Employee shall not be required to mitigate
the amount of any payment provided for in this Article II by seeking other
employment or otherwise, nor shall the amount of any payment provided for in
this Article II be reduced by any compensation or benefit earned by the Covered
Employee as the result of employment by another employer or by retirement
benefits. The benefits under the Plan are in addition to any other benefits to
which a Covered Employee is otherwise entitled. Notwithstanding the foregoing,
in the event that salary continuation or severance payments are payable by the
Employer to a Covered Employee for any reason other than under this Plan ("Other
Severance Payments"), including, but not limited to, under any other Employer
plan, policy or agreement, other than a "plan" within the meaning of section
3(3) of the Employee Retirement Income Security Act of 1974, as amended, or as a
result of the application of the Worker Adjustment and Retraining Notification
Act, 29 U.S.C. Section 2101 et. seq. (the "WARN Act"), or an election by the
Employer to make payments in lieu of notice as if the WARN Act applied, whether
or not it does so apply, to any Involuntary Termination of a Covered Employee,
no severance payments shall be payable as provided in Section 2.1(a) to such
Covered Employee except to the extent such severance payments exceed the
aggregate amount of Other Severance Payments payable to such Covered Employee.
2.4 Severance Pay Plan Limitation. This Plan is intended to be an
employee welfare benefit plan within the meaning of section 3(1) of ERISA and
the Labor Department regulations promulgated thereunder. Therefore, anything to
the contrary herein notwithstanding, in no event shall any Covered Employee
receive total payments under the Plan that exceed the equivalent of twice such
Covered Employee's "annual compensation" (as such term is defined in 29 CFR
Section 2510.3-2(b)(2)) during the year immediately preceding his Involuntary
Termination. If total payments under the Plan to a Covered Employee would
otherwise exceed the limitation in the preceding sentence, the amount payable to
such Covered Employee pursuant to Section 2.1(a) shall be reduced in order to
satisfy such limitation.
2.5 Certain Additional Payments by the Employer. Notwithstanding
anything to the contrary in the Plan, in the event that any payment or
distribution by the Employer to or for the benefit of a Covered Employee,
whether paid or payable or distributed or distributable pursuant to the terms of
the Plan or otherwise (a "Payment"), would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties with respect to such
excise tax (such excise tax, together with any such interest or penalties, are
hereinafter collectively referred to as the "Excise Tax"), the Employer shall
pay to the Covered Employee an additional payment (a "Gross-up Payment") in an
amount such that after payment by the Covered Employee of all of taxes
(including any interest or penalties imposed with respect to such taxes),
including any Excise Tax imposed on any Gross-up Payment, the Covered Employee
retains an amount of the Gross-up Payment equal to the Excise Tax imposed upon
the Payment. The Employer and the Covered Employee shall make an initial
determination as to whether a Gross-up Payment is required and the amount of any
such Gross-up Payment. The Covered Employee shall notify the Employer in writing
of any claim by the Internal Revenue Service which, if successful, would require
the Employer to make a Gross-up Payment (or a Gross-up Payment in excess of
that, if any, initially determined by the Employer and the Covered Employee)
within ten days of the receipt of such claim. The Employer shall notify the
Covered Employee in writing at least ten days prior to the due date of any
response required with respect to such claim if it plans to contest the claim.
If the Employer decides to contest such claim, the Covered Employee shall
cooperate fully with the Employer in such action; provided, however, the
Employer shall bear and pay directly or indirectly all costs and expenses
(including additional interest and penalties) incurred in connection with such
action and shall indemnify and hold the Covered Employee harmless, on an
after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of the Employer's action.
If, as a result of the Employer's action with respect to a claim, the Covered
Employee receives a refund of any amount paid by the Employer with respect to
such claim, the Covered Employee shall promptly pay such refund to the Employer.
If the Employer fails to timely notify the Covered Employee whether it will
contest such claim or the Employer determines not to contest such claim, then
the Employer shall immediately pay to the Covered Employee the portion of such
claim, if any, which it has not previously paid to the Covered Employee.
III.
ADMINISTRATION OF PLAN
3.1 Committee's Powers and Duties. It shall be a principal duty of the
Committee to see that the Plan is carried out, in accordance with its terms, for
the exclusive benefit of persons entitled to participate in the Plan. The
Committee shall be the named fiduciary and shall have full power to administer
the Plan in all of its details, subject to applicable requirements of law. For
this purpose, the Committee's powers shall include, but not be limited to, the
following authority, in addition to all other powers provided by this Plan:
(a) to make and enforce such rules and regulations as it deems
necessary or proper for the efficient administration of the Plan;
(b) to interpret the Plan, its interpretation thereof to be
final and conclusive on all persons claiming benefits under the Plan;
(c) to decide all questions concerning the Plan and
the eligibility of any person to participate in the Plan;
(d) to make a determination as to the right of any person to a
benefit under the Plan (including, without limitation, to determine
whether and when there has been a termination of a Covered Employee's
employment and the cause of such termination);
(e) to appoint such agents, counsel, accountants, consultants,
claims administrator and other persons as may be required to assist in
administering the Plan;
(f) to allocate and delegate its responsibilities under the
Plan and to designate other persons to carry out any of its
responsibilities under the Plan, any such allocation, delegation or
designation to be in writing;
(g) to sue or cause suit to be brought in the name of the
Plan; and
(h) to obtain from the Employer and from Covered Employees
such information as is necessary for the proper administration of the
Plan.
3.2 Member's Own Participation. No Covered Employee or agent of the
Committee may act, vote, or otherwise influence a decision of the Committee
specifically relating to himself as a participant in the Plan.
3.3 Indemnification. The Company shall indemnify and hold harmless each
member of the Committee against any and all expenses and liabilities arising out
of his administrative functions or fiduciary responsibilities, including any
expenses and liabilities that are caused by or result from an act or omission
constituting the negligence of such member in the performance of such functions
or responsibilities, but excluding expenses and liabilities that are caused by
or result from such member's own gross negligence or willful misconduct.
Expenses against which such member shall be indemnified hereunder shall include,
without limitation, the amounts of any settlement or judgment, costs, counsel
fees, and related charges reasonably incurred in connection with a claim
asserted or a proceeding brought or settlement thereof.
3.4 Compensation, Bond and Expenses. The members of the Committee shall
not receive compensation with respect to their services for the Committee. To
the extent required by applicable law, but not otherwise, Committee members
shall furnish bond or security for the performance of their duties hereunder.
Any expenses properly incurred by the Committee incident to the administration,
termination or protection of the Plan, including the cost of furnishing bond,
shall be paid by the Company.
3.5 Claims Procedure. Any employee that the Committee determines is
entitled to a benefit under the Plan is not required to file a claim for
benefits. Any employee who is not paid a benefit and who believes that he is
entitled to a benefit or who has been paid a benefit and who believes that he is
entitled to a greater benefit may file a claim for benefits under the Plan in
writing with the Committee. In any case in which a claim for Plan benefits by a
Covered Employee is denied or modified, the Committee shall furnish written
notice to the claimant within ninety days (or within 180 days if additional
information requested by the Committee necessitates an extension of the
ninety-day period), which notice shall:
(a) state the specific reason or reasons for the denial or
modification;
(b) provide specific reference to pertinent Plan provisions on
which the denial or modification is based;
(c) provide a description of any additional material or
information necessary for the Covered Employee or his representative to
perfect the claim, and an explanation of why such material or
information is necessary; and
(d) explain the Plan's claim review procedure as contained
herein.
In the event a claim for Plan benefits is denied or modified, if the Covered
Employee or his representative desires to have such denial or modification
reviewed, he must, within sixty days following receipt of the notice of such
denial or modification, submit a written request for review by the Committee of
its initial decision. In connection with such request, the Covered Employee or
his representative may review any pertinent documents upon which such denial or
modification was based and may submit issues and comments in writing. Within
sixty days following such request for review the Committee shall, after
providing a full and fair review, render its final decision in writing to the
Covered Employee and his representative, if any, stating specific reasons for
such decision and making specific references to pertinent Plan provisions upon
which the decision is based. If special circumstances require an extension of
such sixty-day period, the Committee's decision shall be rendered as soon as
possible, but not later than 120 days after receipt of the request for review.
If an extension of time for review is required, written notice of the extension
shall be furnished to the Covered Employee and his representative, if any, prior
to the commencement of the extension period.
3.6 Mandatory Arbitration. If a Covered Employee or his representative
is not satisfied with the decision of the Committee pursuant to the Plan's
claims review procedure, such Covered Employee or his representative may, within
sixty days of receipt of the written decision of the Committee, request by
written notice to the Committee, that his claim be submitted to arbitration
pursuant to the employee benefit plan claims arbitration rules of the American
Arbitration Association. Such arbitration shall be the sole and exclusive
procedure available to a Covered Employee or his representative for review of a
decision of the Committee. In reviewing the decision of the Committee, the
arbitrator shall use the standard of review which would be used by a Federal
court in reviewing such decision under the provisions of ERISA. The Covered
Employee or his representative and the Plan shall share equally the cost of such
arbitration. The arbitrator's decision shall be final and legally binding on
both parties. This Section shall be governed by the provisions of the Federal
Arbitration Act.
IV.
GENERAL PROVISIONS
4.1 Funding. The benefits provided herein shall be unfunded and shall
be provided from the Employer's general assets.
4.2 Cost of Plan. The entire cost of the Plan shall be borne by the
Employer and no contributions shall be required of the Covered Employees.
4.3 Plan Year. The Plan shall operate on a plan year consisting of the
twelve consecutive month period commencing on January 1 of each year with a
short plan year commencing on the Effective Date and ending on December 31,
1999.
4.4 Other Participating Employers. The Committee may designate any
entity or organization eligible by law to participate in this Plan as an
Employer by written instrument delivered to the Secretary of the Company and the
designated Employer. Such written instrument shall specify the effective date of
such designated participation, may incorporate specific provisions relating to
the operation of the Plan which apply to the designated Employer only and shall
become, as to such designated Employer and its employees, a part of the Plan.
Each designated Employer shall be conclusively presumed to have consented to its
designation and to have agreed to be bound by the terms of the Plan and any and
all amendments thereto upon its submission of information to the Committee
required by the terms of or with respect to the Plan; provided, however, that
the terms of the Plan may be modified so as to increase the obligations of an
Employer only with the consent of such Employer, which consent shall be
conclusively presumed to have been given by such Employer upon its submission of
any information to the Committee required by the terms of or with respect to the
Plan. Except as modified by the Committee in its written instrument, the
provisions of this Plan shall be applicable with respect to each Employer
separately, and amounts payable hereunder shall be paid by the Employer which
employs the particular Covered Employee.
4.5 Amendment and Termination. The Plan may be amended from time to
time at the discretion of the Board. Notwithstanding the foregoing, this Plan
may not be amended to reduce benefits or rights to benefits within two years
following a Change of Control. For purposes of this Section, a change in the
designation by the Committee of Participating Employers pursuant to Section 4.4
shall be deemed to be an amendment to the Plan. The Plan shall terminate two
years after the date of the Change in Control except with respect to severance
benefits payable as a result of Involuntary Terminations occurring prior to such
date.
4.6 Not Contract of Employment. The adoption and maintenance of the
Plan shall not be deemed to be a contract of employment between the Employer and
any person or to be consideration for the employment of any person. Nothing
herein contained shall be deemed to give any person the right to be retained in
the employ of the Employer or to restrict the right of the Employer to discharge
any person at any time nor shall the Plan be deemed to give the Employer the
right to require any person to remain in the employ of the Employer or to
restrict any person's right to terminate his employment at any time.
4.7 Severability. Any provision in the Plan that is prohibited or
unenforceable in any jurisdiction by reason of applicable law shall, as to such
jurisdiction, be ineffective only to the extent of such prohibition or
unenforceability without invalidating or affecting the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
4.8 Nonalienation. Covered Employees shall not have any right to
pledge, hypothecate, anticipate or assign benefits or rights under the Plan,
except by will or the laws of descent and distribution.
4.9 Effect of Plan. This Plan is intended to supersede all prior oral
or written policies of the Employer and all prior oral or written communications
to Covered Employees with respect to the subject matter hereof, and all such
prior policies or communications are hereby null and void and of no further
force and effect. Further, this Plan shall be binding upon the Employer and any
successor of the Employer, by merger or otherwise, and shall inure to the
benefit of and be enforceable by the Employer's Covered Employees.
4.10 Governing Law. The Plan shall be interpreted and construed in
accordance with the laws of the State of Texas, except to the extent preempted
by federal law.
EXECUTED this 8th day of February, 1999.
OCEAN ENERGY, INC.
By:
Name: Robert K. Reeves
Title: Executive Vice President,
General Counsel & Secretary
FIRST AMENDMENT TO
OCEAN ENERGY, INC.
1999 CHANGE OF CONTROL SEVERANCE PLAN
WHEREAS, OCEAN ENERGY, INC., a Louisiana corporation (the "Company")has
heretofore adopted and currently maintains the OCEAN ENERGY, INC. 1999 CHANGE OF
CONTROL SEVERANCE PLAN (the "Plan"); and
WHEREAS, the Company desires to amend the Plan in certain respects;
NOW, THEREFORE, the Plan is hereby amended as follows, effective as of
March 29, 1999:
1. Section 1.1(l) of the Plan shall be deleted and the following shall
be substituted therefor:
"(l) 'Involuntary Termination' shall mean any termination
of a Covered Employee's employment with the Employer
which:
(1) does not result from a voluntary resignation by
the Covered Employee (other than a resignation pursuant to
Clause (2) of this Section 1.1(l)); or
(2) results from a resignation by a Covered Employee
on or before the date which is sixty days after the date the
Covered Employee receives notice of a Change in Duties;
provided, however, that the term 'Involuntary Termination' shall not
include a Termination for Cause, a termination of a Covered Employee's
employment occurring as a result of or in connection with the sale or
other divestiture by the Employer of a division, subsidiary, or other
business segment (including, without limitation, a divestiture by sale
of shares of stock or of assets) if such Covered Employee is offered
continued employment by the acquiror of such business segment
immediately upon such sale or divestiture, or any termination as a
result of a Covered Employee's death, disability under circumstances
entitling him to benefits under the Employer's long-term disability
plan or Retirement."
2. As amended hereby, the Plan is specifically ratified and reaffirmed.
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EXECUTED this _________ day of March, 1999.
OCEAN ENERGY, INC.
By:
Name:
Title:
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