EXHIBIT 10(dd)
CONFIDENTIAL AND LEGALLY PRIVILEGED
EMPLOYMENT AGREEMENT
BETWEEN
AMERICAN EXPLORATION COMPANY
AND
MARK ANDREWS
TABLE OF CONTENTS
PAGE
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ARTICLE I. TERM AND DUTIES . . . . . . . . . . . . . . . . . . . . . . . . -2-
Section 1.1 TERM.. . . . . . . . . . . . . . . . . . . . . . . . . . -2-
Section 1.2 DUTIES.. . . . . . . . . . . . . . . . . . . . . . . . . -3-
ARTICLE II. COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . -4-
Section 2.1 BASIC COMPENSATION . . . . . . . . . . . . . . . . . . . -4-
Section 2.2 ANNUAL BONUS.. . . . . . . . . . . . . . . . . . . . . . -5-
Section 2.3 RIGHTS UNDER STOCK COMPENSATION
PLANS NOW IN EFFECT . . . . . . . . . . . . . . . . . . -6-
Section 2.4 INCENTIVE, SAVINGS AND RETIREMENT PLANS. . . . . . . . . -6-
Section 2.5 WELFARE BENEFIT PLANS. . . . . . . . . . . . . . . . . . -6-
Section 2.6 EXPENSES.. . . . . . . . . . . . . . . . . . . . . . . . -7-
Section 2.7 FRINGE BENEFITS. . . . . . . . . . . . . . . . . . . . . -7-
Section 2.8 OFFICE AND SUPPORT STAFF.. . . . . . . . . . . . . . . . -7-
Section 2.9 VACATION.. . . . . . . . . . . . . . . . . . . . . . . . -7-
Section 2.10 TOTAL COMPENSATION.. . . . . . . . . . . . . . . . . . . -8-
ARTICLE III. TERMINATION OF EMPLOYMENT . . . . . . . . . . . . . . . . . . . -8-
Section 3.1 EVENTS OF TERMINATION. . . . . . . . . . . . . . . . . . -8-
Section 3.2 TERMINATION PROCEDURES AND CERTAIN DEFINITIONS . . . . . -13-
Section 3.3 OBLIGATIONS OF THE CORPORATION ON TERMINATION. . . . . . -15-
ARTICLE IV. PURPOSE; NONCOMPETITION . . . . . . . . . . . . . . . . . . . . -21-
Section 4.1 PURPOSE. . . . . . . . . . . . . . . . . . . . . . . . . -21-
Section 4.2 CONFIDENTIAL INFORMATION.. . . . . . . . . . . . . . . . -21-
Section 4.3 NONCOMPETITION.. . . . . . . . . . . . . . . . . . . . . -22-
Section 4.4 OIL AND GAS INTEREST OWNERSHIP.. . . . . . . . . . . . . -22-
Section 4.5 CORPORATE OPPORTUNITY. . . . . . . . . . . . . . . . . . -23-
ARTICLE V. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . -24-
Section 5.1 ENFORCEABILITY . . . . . . . . . . . . . . . . . . . . . -24-
Section 5.2 REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . -24-
Section 5.3 RESIGNATION AS BOARD AND COMMITTEE MEMBER. . . . . . . . -24-
Section 5.4 NO OFFSET; ENFORCEMENT OF AGREEMENT. . . . . . . . . . . -25-
Section 5.5 ASSIGNMENT BY THE EXECUTIVE; SUCCESSORS. . . . . . . . . -26-
Section 5.6 WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . -27-
(i)
Section 5.7 NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . -27-
Section 5.8 POST-TERMINATION CONSULTING AND NONCOMPETITION . . . . . -27-
Section 5.9 APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . -28-
Section 5.10 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . -28-
Section 5.11 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . -28-
(ii)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, effective as of the 30th day of November,
1995, by and between AMERICAN EXPLORATION COMPANY, a Delaware corporation having
its principal place of business at 1331 Lamar, Suite 900, Houston, Texas 77010
(the "Corporation") and MARK ANDREWS, an individual residing at 2909 Inwood,
Houston, Texas 77019 (the "Executive"),
WITNESSETH THAT:
WHEREAS, the Executive has been employed by the Corporation
continuously since March 1, 1980;
WHEREAS, the Compensation Committee (the "Compensation Committee") of
the Corporation's Board of Directors (the "Board") has determined that it is in
the best interests of the Corporation and its shareholders to continue to employ
the Executive and the Executive desires to continue to be employed by the
Corporation;
WHEREAS, certain terms and conditions of the Executive's employment by
the Corporation are set forth in a letter agreement, dated as of September 1,
1994, as amended and supplemented to date (the "Severance Agreement");
WHEREAS, the parties desire to provide for a comprehensive employment
agreement pursuant to which the terms and conditions of the Executive's
employment would be set forth; and
WHEREAS, the terms of this Agreement were duly approved and authorized
for and on behalf of the Corporation by the Board at a meeting held on September
7, 1995, at which meeting a quorum was present and voted, were subsequently duly
approved by the Compensation Committee at a meeting held on September 14, 1995,
at which meeting a quorum was present and
voted and were subsequently duly approved and authorized for and on behalf of
the Corporation at a meeting of the Board held on November 30, 1995, at which
meeting a quorum was present and voted;
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree, effective upon the Effective Date (as defined in
Section 1.1), to substitute the provisions of this Agreement for the provisions
of the Severance Agreement and other employment agreements or arrangements
between the Corporation and the Executive in effect on the date hereof, except
as otherwise expressly provided herein:
ARTICLE I. TERM AND DUTIES
SECTION 1.1 TERM. The Corporation hereby agrees to employ the
Executive as Chairman of the Board of Directors and Chief Executive Officer
of the Corporation and each of the Corporation's subsidiaries and the
Executive hereby agrees to serve in such capacity, upon the terms and
conditions herein contained. The initial term of this Agreement is for a
period (the "Initial Term") commencing as of the date first above written
(the "Effective Date") and continuing until December 31, 2000. Thereafter,
this Agreement shall be renewed automatically for one additional year on each
December 31 (the Initial Term, as so extended, the "Active Employment
Period") unless (i) the Board gives written notice to the Executive at least
three months prior to any such renewal date or (ii) this Agreement otherwise
has been terminated in accordance with its provisions.
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SECTION 1.2 DUTIES. As Chairman of the Board of Directors and Chief
Executive Officer of the Corporation and its subsidiaries, the Executive
shall have and perform those duties on behalf of the Corporation which are
required by its By-Laws and the directives of the Board or committees thereof
and which are reasonable and customary for an individual holding such offices
to perform, such duties to include, without limitation, all of the following:
(a) Being responsible for establishing, subject to approval by the
Board, overall corporate strategy and planning;
(b) Developing the basic objectives, policies, and operating plans of
the business and submitting them to the Board for approval;
(c) Implementing business plans and policies adopted by the Board
through his personal efforts and through his delegation of the performance of
duties to subordinate employees of the Corporation and its subsidiaries and to
other persons or companies;
(d) Interpreting organizational policies and supervising the
administration thereof by subordinates and reviewing and approving proposed
internal policies of subordinate units;
(e) Supervising and directing the Corporation's relationships with,
and representing the Corporation with, its major shareholders, investors, joint
venture partners, bankers, investment bankers, members of the petroleum industry
and other members of the financial and investment banking industry;
(f) Determining and presenting operating and capital expenditure
budgets for review and approval by the Board;
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(g) Planning and directing all investigations and negotiations
pertaining to mergers, joint ventures, the acquisition of businesses, or the
sale of major assets;
(h) Analyzing operating results of the Corporation and its principal
components relative to established objectives and determining appropriate steps
to be taken to correct unsatisfactory conditions;
(i) Determining, subject to approval by the Board, the Corporation's
financial structure and reviewing projections of working capital requirements,
including negotiating and otherwise arranging for any outside financing;
(j) Prescribing specific limitations of the authority of all other
executives regarding policies, contractual commitments, expenditures, and
personnel actions;
(k) Reviewing and approving the appointment, employment, transfer or
termination of all other executives; and
(l) Resolving any conflicts arising between operating groups, staff
units and other operating areas.
The duties of the Executive may be changed from time-to-time by the mutual
consent of the Executive and the Corporation without terminating this Agreement
and, in such event, the employment of the Executive shall continue under this
Agreement as so modified.
ARTICLE II. COMPENSATION
SECTION 2.1 BASIC COMPENSATION
(a) During the Active Employment Period, the Corporation shall
continue to pay to the Executive an annual base salary (which shall accrue
proportionately from day to day) of
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$310,000 payable in equal semi-monthly installments on the same dates the
other officers of the Corporation are paid. The Executive's base annual
salary payable pursuant to this Section 2.1 (including any increases thereof
pursuant to Section 2.1(b)) is hereinafter referred to as the Executive's
"Basic Compensation."
(b) The Corporation and the Executive acknowledge that the
Compensation Committee shall, from time to time, but no less frequently than
annually, review the Executive's Basic Compensation and may increase (but in no
event decrease) such compensation by such amounts as the Compensation Committee
deems proper. The criteria which the Compensation Committee may take into
consideration in providing for any such increases are the basic compensation
payable to the individuals holding like offices of comparable oil and gas
companies, the Executive's ability and performance, the success achieved by the
Corporation, the total economic return to the Corporation's shareholders,
increases in the cost of living, and such other criteria as the Compensation
Committee may deem relevant.
SECTION 2.2 ANNUAL BONUS. In addition to Basic Compensation, the
Executive shall participate in each bonus program adopted by the Compensation
Committee or the Corporation, if any, to the fullest extent provided
generally at any time after the Effective Date to other executives of the
Corporation and shall be awarded, with respect to each fiscal year ending
during the Active Employment Period, the annual bonus (the "Annual Bonus") in
cash and other applicable consideration applicable to the Executive under the
bonus plan in effect for the then current year. Each such Annual Bonus shall
be paid within a reasonable time after the end of the fiscal year for which
the Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus.
SECTION 2.3 RIGHTS UNDER STOCK COMPENSATION
PLANS NOW IN EFFECT
(a) STOCK OPTIONS. All stock options heretofore granted to the
Executive under the American Exploration Company Stock Compensation Plan and the
1994 American Exploration Company Stock Compensation Plan, or any successor
plans thereto, or any other stock compensation or employee benefit plan of the
Corporation (collectively, all such plans are herein referred to as the "Stock
Compensation Plans") as of the Effective Date of this Agreement shall continue
in effect, vesting as therein or otherwise herein provided, and the Executive
shall have the right to exercise any vested stock option, whenever granted,
until it expires by its terms under the applicable option agreement, regardless
of whether the Executive is employed by the Corporation at the time of such
exercise.
(b) RESTRICTED STOCK. All shares of Restricted Common Stock granted
to the Executive under the Stock Compensation Plans as of the Effective Date
shall continue to vest as provided in the grants thereof or as otherwise
provided herein.
SECTION 2.4 INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Active
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other executives of the Corporation.
SECTION 2.5 WELFARE BENEFIT PLANS. During the Active Employment Period,
the Executive and/or the Executive's family, as the case may be, shall be
eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the Corporation
(including, without limitation, medical, prescription, dental,
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disability, salary continuance, employee life (including continuation
throughout the Active Employment Period of the $2.5 million life insurance
policy currently maintained on the Executive's life for the benefit of his
family), group life, accidental death and travel accident insurance plans and
programs) to the extent applicable generally to other executives of the
Corporation.
SECTION 2.6 EXPENSES. During the Active Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most favorable
policies, practices and procedures of the Corporation as in effect generally
with respect to other executives of the Corporation.
SECTION 2.7 FRINGE BENEFITS. During the Active Employment Period, the
Executive shall be entitled to fringe benefits, including, without limitation,
tax and financial planning services, payment of club dues, and, if applicable,
use of an automobile and payment of related expenses, in accordance with the
most favorable plans, practices, programs and policies of the Corporation as in
effect generally with respect to other executives of the Corporation.
SECTION 2.8 OFFICE AND SUPPORT STAFF. During the Active Employment
Period, the Executive shall be entitled to an office or offices of a size and
with furnishings and other appointments, and to exclusive secretarial and other
assistance, at least equal to the most favorable of the foregoing as provided at
the Effective Date with respect to any executive of the Corporation.
SECTION 2.9 VACATION. During the Active Employment Period, the
Executive shall be entitled to paid vacation in accordance with the most
favorable plans, policies, programs and
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practices of the Corporation as in effect generally with respect to other
executives of the Corporation.
SECTION 2.10 TOTAL COMPENSATION. The Executive's "Total Compensation"
means the total of (i) Basic Compensation, including amounts the Executive has
electively deferred under an arrangement qualified under Section 401(k) of the
Internal Revenue Code of 1986, as amended (the "Code"), to any cafeteria plan
under Section 125 of the Code or otherwise, plus (ii) an amount equal to the
aggregate cash amounts paid to the Executive in respect of bonuses over the
three most recent fiscal years of the Corporation divided by three.
ARTICLE III. TERMINATION OF EMPLOYMENT
SECTION 3.1 EVENTS OF TERMINATION
(a) DEATH. The Executives's employment shall terminate automatically
upon the Executive's death.
(b) DISABILITY. If the Corporation determines in good faith that the
Disability of the Executive has occurred during the Active Employment Period
(pursuant to the definition of Disability set forth below), it may give the
Executive written notice in accordance with Section 5.7 of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Corporation shall terminate effective on the
30th day after receipt of such notice by the Executive (the "Disability
Effective Date"), provided that, within the thirty (30) days after such receipt,
the Executive shall not have returned to full-time performance of the
Executive's duties. For purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the Executive's duties with the Corporation on a
full-time basis
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for 180 consecutive business days as a result of incapacity due to mental or
physical illness which is determined to be total and permanent by a physician
selected by the Corporation or its insurers and acceptable to the Executive
or the Executive's legal representative.
(c) WITHOUT CAUSE. Notwithstanding any other provision hereunder,
the Corporation shall have the right to terminate the Executive's employment
hereunder without "Cause" (as defined in Section 3.1(d)) at any time during the
Active Employment Period for any reason in the sole discretion of the
Corporation upon not less than ninety (90) days' prior written notice to the
Executive.
(d) CAUSE. The Corporation may terminate the Executive's employment
during the Active Employment Period for Cause. For purposes of this Agreement,
"Cause" shall mean:
(i) The willful and continued failure of the Executive to
perform substantially the Executive's duties with the Corporation (other than
any such failure resulting from incapacity due to physical or mental illness),
after a written demand for substantial performance is delivered to the Executive
by the Board, which demand shall specifically identify the manner in which the
Board believes that the Executive has not substantially performed the
Executive's duties, or
(ii) The willful engaging by the Executive in illegal conduct or
gross misconduct in connection with the performance of his duties hereunder
which is materially injurious to the Corporation.
For purposes of this provision, no act or failure to act, on the part
of the Executive, shall be considered "willful" unless it is done, or omitted to
be done, by the Executive
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in bad faith or without reasonable belief that the Executive's action or
omission was in the best interests of the Corporation. Any act, or failure to
act, based upon authority given pursuant to a resolution duly adopted by the
Board or upon the instructions of any senior officer of the Corporation or
based upon the advice of counsel for the Corporation shall be conclusively
presumed to be done, or omitted to be done, by the Executive in good faith
and in the best interests of the Corporation. The cessation of employment of
the Executive shall not be deemed to be for Cause unless and until there
shall have been delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held for such
purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before
the Board), finding that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in subparagraph (i) or (ii)
above and specifying the particulars thereof in detail.
(e) GOOD REASON. The Executive may terminate his employment during
the Active Employment Period for Good Reason at any time upon thirty (30) days'
notice to the Corporation. For purposes of this Agreement, "Good Reason" shall
mean the occurrence, without the Executive's express written consent, of any one
or more of the following events:
(i) A change in the Executive's duties described in Section 1.2,
or except for the election of John F. Bookout as Chairman of the Board, a change
in the titles or offices described in Section 1.2, or any removal of the
Executive from, or any failure to re-elect the Executive to, any of such
positions, except with the Executive's written consent.
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(ii) A reduction in the Executive's Basic Compensation or the
failure by the Corporation to increase such compensation each year by an amount
which at least equals, on a percentage basis, the mean average percentage
increase in base salary for all senior officers of the Corporation (other than
the Executive) during such year or the failure by the Corporation to continue to
provide prompt payment (or reimbursement to the Executive) of all reasonable
expenses incurred by the Executive in connection with the Executive's
professional and business activities;
(iii) A failure by the Corporation to waive any and all
restrictions that might exist on the exercise of any stock options or with
respect to any awards of restricted stock held by the Executive under the Stock
Compensation Plans as of the date of a Change of Control (as defined below);
(iv) The Corporation requiring the Executive to be based anywhere
other than Houston, Texas ("Office"), except for travel on business to an extent
reasonably required in the performance of the Executive's duties hereunder or,
in the event the Executive consents to any relocation of his Office, the failure
by the Corporation to pay (or reimburse the Executive for) all reasonable moving
expenses (including all costs, fees and transfer taxes incurred in selling his
principal residence) incurred by the Executive relating to a change of the
Executive's principal residence in connection with such relocation and to
indemnify the Executive against, and reimburse him for, any loss (defined as the
difference between the actual sales price of such residence and the higher of
(a) the Executive's aggregate investment in such residence or (b) the fair
market value of such residence as determined, at the Corporation's expense, by
an independent real estate appraiser designated by the Executive (and reasonably
satisfactory to the
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Corporation)), together with an amount equal to the federal, state and local
taxes payable by the Executive in respect of all of the amounts payable to
the Executive as contemplated under this paragraph;
(v) The failure by the Corporation to include the Executive as a
participant in any benefit or compensation plan or arrangement generally
available to executives of the Corporation or the failure by the Corporation to
provide the Executive with the number of paid vacation days, holidays and
personal days to which the Executive is entitled in accordance with the
Corporation's normal leave policy;
(vi) The failure of the Corporation to obtain the assumption of
this Agreement, without limitation or reduction, by any successor to the
Corporation;
(vii) Any purported termination of the Executive's employment
by the Corporation which is not effected pursuant to the express terms of this
Agreement, including the Notice of Termination requirements of Section 3.2(a);
(viii) The failure of the Corporation to maintain for the
benefit and use by the Executive of an office and support staff as contemplated
by Section 2.8;
(ix) The failure of the Corporation to pay or reimburse the
Executive for any expenses incurred by the Executive as provided in this
Agreement; or
(x) The filing of a voluntary or involuntary petition of
bankruptcy by or against the Corporation or the insolvency of the Corporation.
For purposes of this Section 3.1(e), any good faith determination of "Good
Reason" made by the Executive shall be conclusive.
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(f) RETIREMENT. The Executive may terminate his employment by
reasons of "Retirement" at the end of the fiscal year of the Corporation in
which the Executive attains the age of 65 or such later date as the Board shall
set with the consent of the Executive (the "Retirement Effective Date").
(g) VOLUNTARY TERMINATION. The Executive shall have the right at any
time after the Effective Date to voluntarily terminate his employment by the
Corporation (a "Voluntary Termination") for any reason in the sole discretion of
the Executive by not less than thirty (30) days' prior written notice to the
Corporation; provided however, a termination without Cause, by reason of Death,
Disability or Retirement, or Good Reason shall not be treated for any purpose
hereunder as a Voluntary Termination.
SECTION 3.2 TERMINATION PROCEDURES AND CERTAIN DEFINITIONS
(a) NOTICE OF TERMINATION. Any termination by the Corporation for
Cause, without Cause, by reason of Disability or by the Executive for Good
Reason or in a Voluntary Termination or Retirement, shall be communicated by
Notice of Termination to the other party hereto given in accordance with
Section 5.7 of this Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent applicable, sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated and (iii) if the Date of Termination (as defined below) is other than
the date of receipt of such notice, specifies the termination date. The failure
by the Executive or the Corporation 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
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of the Executive or the Corporation, respectively, hereunder or preclude the
Executive or the Corporation, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the Corporation's rights
hereunder. The Executive's continued employment with the Corporation after a
Notice of Termination is provided shall not constitute consent to, or a
waiver of any rights with respect to, any circumstance constituting Good
Reason hereunder.
(b) DATE OF TERMINATION. "Date of Termination" means (i) if the
Executive's employment is terminated by the Corporation for Cause, the date of
receipt of the Notice of Termination or any later date specified therein, as the
case may be, (ii) if the Executive's employment is terminated by the Corporation
other than for Cause or Disability, the Date of Termination shall be the date
not less than ninety (90) days after the date on which the Corporation notifies
the Executive of such termination, (iii) if the Executive terminates his
employment for Good Reason or in a Voluntary Termination, the Date of
Termination shall be the date, not less than thirty (30) days after the date on
which the Executive notifies the Corporation of such termination and (iv) if the
Executive's employment is terminated by reason of death, Disability or
Retirement, the Date of Termination shall be the date of death of the Executive,
the Disability Effective Date or the Retirement Effective Date, as the case may
be. In the case of a Voluntary Termination, the Corporation shall have the
option, exercisable by written notice to the Executive within ten (10) days
after the Executive's Notice of Termination is provided to the Corporation, to
designate any date prior to the expiration of the aforesaid notice as the date
on which the Executive shall cease to be an officer of the Corporation, and the
effective date of termination hereunder shall be any earlier date so designated
by the Corporation.
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(c) CHANGE OF CONTROL. A "Change of Control" shall have occurred if:
(i) twenty percent (20%) or more of the outstanding common stock
of the Corporation has been acquired by any person (as defined by Section
3(a)(9) of the Securities Exchange Act of 1934) other than directly from the
Corporation;
(ii) there has been a merger or equivalent combination involving
the Corporation after which 49% or more of the voting stock of the surviving
corporation is held by persons other than former shareholders of the
Corporation; or
(iii) twenty percent (20%) or more of the members of the Board
elected by shareholders are persons who were not nominated in the then most
recent proxy statement of the Corporation.
SECTION 3.3 OBLIGATIONS OF THE CORPORATION ON TERMINATION
(a) TERMINATION UPON DEATH OR DISABILITY, WITHOUT
CAUSE OR FOR GOOD REASON.
If the Executive's employment is terminated upon his death or
Disability, without Cause or for Good Reason:
(i) IN GENERAL.
The Corporation shall immediately pay the Executive in cash the
amount of Basic Compensation previously earned but not yet paid.
(ii) SEVERANCE BENEFITS.
(1) All stock options and awards of restricted common stock
of the Executive under the Stock Compensation Plans, which have not already
vested, shall immediately vest and all performance shares and other awards under
the Stock Compensation
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Plans and other compensatory plans, programs or arrangements, if any, shall
vest and be paid in full, computed on the assumption that 100% (or, if
greater, the maximum percentage) of the targeted level of Corporation's or
the Executive's performance has been met, using the Date of Termination as
the valuation date;
(2) Except as otherwise determined by the Executive, the
period during which any stock options granted to the Executive under the Stock
Compensation Plans may be exercised shall be extended for an additional six
months following the end of the exercise period otherwise applicable to such
options;
(3) The Executive shall continue to participate in all the
Executive welfare benefit plans, including health and medical plans, for six
months after termination and shall be entitled to (a) reimbursement of COBRA
payments to maintain medical and dental insurance up to 18 additional months for
said coverage and (b) the use of one or more executive out-placement services,
designated by the Executive and paid for by the Corporation; and
(4) The Corporation shall pay the Executive in a lump sum a
"Severance Benefit" in cash equal to three (3) times the Executive's Total
Compensation as of the time of such termination. Such payment shall be made
within thirty (30) days following said termination. In the event of the
Executive's death, any amounts payable under this Agreement shall be paid to the
beneficiary (or beneficiaries) designated by the Executive and in such amounts
or proportions as the Executive shall so designate. If no beneficiary is
designated by the Executive or if none shall survive the Executive, then any
amounts payable under this Agreement
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shall be paid to the Executive's surviving spouse, if any, or, if no such
surviving spouse exists, to the Executive's estate.
(iii) DISABILITY.
(1) If, following a Disability termination, the Executive
becomes entitled to and receives disability benefits under any disability
payment plan sponsored and maintained by the Corporation, the amount otherwise
payable by the Corporation to the Executive pursuant to Section 3.3(a) shall be
reduced, on a dollar-for-dollar basis, but not below zero, by the amount of any
such disability benefits received by him, but only to the extent such benefits
are attributable to payments made by the Corporation.
(2) The Executive shall have the right in his sole
discretion after the Disability Effective Date to engage in regular employment
(whether as an employee of another entity or as a self-employed person) and
shall have no obligation to perform further services for the Corporation.
(b) VOLUNTARY TERMINATION OR TERMINATION FOR CAUSE
In case of a Voluntary Termination or a termination for Cause,
the Executive shall be entitled to his Basic Compensation accrued to the Date of
Termination and any benefits or awards vested prior to such date, including,
without limitation, his right to exercise any vested stock options. Except as
otherwise provided in this Agreement or under any employee benefit plan
maintained by the Corporation, the Corporation shall have no further obligations
to the Executive.
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(c) RETIREMENT.
(i) Upon the Retirement of the Executive, the Executive shall
receive the payments set forth in Sections 3.3(a)(i), 3.3(a)(ii)(1), (2) and
(3). In addition, the Executive shall receive all retirement benefits he is
eligible to receive under the Corporation's employee benefit plans, subject to
the terms and conditions of such plans.
(ii) The Executive shall have the right in his sole discretion
after his Retirement to engage in regular employment (whether as an employee of
another entity or as a self-employed person) and shall have no obligation to
perform further services for the Corporation.
(d) ADJUSTMENTS FOR CERTAIN PAYMENTS. For purposes of this
Section, (i) "Payment" shall mean any payment or distribution in the nature of
compensation to or for the benefit of the Executive, whether paid or payable
pursuant to this Agreement or otherwise; (ii) Agreement Payment shall mean a
Payment paid or payable pursuant to this Agreement (disregarding this Section);
(iii) Net After Tax Receipt shall mean the Present Value of a Payment net of all
federal, state and local taxes imposed on the Executive with respect thereto,
including the tax imposed under Section 4999 of the Code, determined by applying
the highest applicable marginal rates which apply to the Executive's taxable
income; (iv) "Present Value" shall mean such value determined in accordance with
Section 280G(d)(4) of the Code; and (v) "Reduced Amount" shall mean the largest
aggregate amount of Agreement Payments which (a) is less than the sum of all
Agreement Payments and (b) results in aggregate Net After Tax Receipts which are
equal to or greater than the Net After Tax Receipts which would result if the
aggregate Agreement Payments were made.
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Anything in this Agreement to the contrary notwithstanding, in the
event a certified public accounting firm designated by the Executive (the
"Accounting Firm") shall determine that receipt of all Payments would subject
the Executive to tax under Section 4999 of the Code, it shall determine whether
some amount of Agreement Payments would meet the definition of a "Reduced
Amount." If said firm determines that there is a Reduced Amount, the aggregate
Agreement Payments shall be reduced to such Reduced Amount. The aggregate
amount by which the Agreement Payments are reduced to arrive at the Reduced
Amount shall be referred to as the "Foregone Amount."
If the Accounting Firm determines that aggregate Agreement Payments
should be reduced to the Reduced Amount, the Corporation shall promptly give the
Executive notice to that effect and a copy of the detailed calculation thereof,
and the Executive may then elect, in his sole discretion, which and how much of
the Agreement Payments shall be eliminated or reduced (as long as after such
election the Present Value of the aggregate Agreement Payments equals the
Reduced Amount), and shall advise the Corporation in writing of his election
within ten days of his receipt of notice. If no such election is made by the
Executive within such ten-day period, the Corporation may elect which of such
Agreement Payments shall be eliminated or reduced (as long as after such
election the Present Value of the aggregate Agreement Payments equals the
Reduced Amount) and shall notify the Executive promptly of such election. All
determinations made by the Accounting Firm under this Section shall be binding
upon the Corporation and the Executive and shall be made within thirty (30) days
of a termination of employment of the Executive. As promptly as practicable
following such determination, the Corporation shall pay to, or distribute for
the benefit of, the Executive such Agreement Payments as are then due to the
Executive under
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this Agreement and shall promptly pay to or distribute for the benefit of the
Executive in the future such Agreement Payments as become due to the
Executive under this Agreement.
While it is the intention of the Corporation and the Executive to
reduce the amounts payable or distributable to the Executive hereunder only if
the aggregate Net After Tax Receipts to the Executive would thereby be
increased, as a result of the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that amounts will have been paid or distributed by the
Corporation to or for the benefit of the Executive pursuant to this Agreement
which should not have been so paid or distributed ("Overpayment") or that
additional amounts which will have not been paid or distributed by the
Corporation to or for the benefit of the Executive pursuant to this Agreement
could have been so paid or distributed ("Underpayment"), in each case,
consistent with the calculation of the Reduced Amount hereunder. In the event
that the Accounting Firm, based either upon the assertion of a deficiency by the
Internal Revenue Service against the Corporation or the Executive which the
Accounting Firm believes has a high probability of success or otherwise,
determines that an Overpayment has been made, any such overpayment paid or
distributed by the Corporation to or for the benefit of the Executive shall be
treated for all purposes as a loan to the Executive which the Executive shall
repay to the Corporation together with interest at the applicable federal rate
provided for in Section 7872(f)(2) of the Code; provided, however, that no such
loan shall be deemed to have been made and no amount shall be payable by the
Executive to the Corporation if and to the extent such deemed loan and payment
would not either reduce the amount on which the Executive is subject to tax
under Section 1 and Section 4999 of the Code or generate a refund of such taxes.
In the event that the Accounting
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Firm determines that an Underpayment has occurred, any such underpayment
shall be promptly paid by the Corporation to or for the benefit of the
Executive together with interest at the applicable federal rate provided for
in Section 7872(f)(2) of the Code.
Notwithstanding the foregoing, at the election of the Executive, the
Reduced Amount shall be the largest amount of Agreement Payments which may be
made without causing any Payment to be subject to tax under Section 4999 of the
Code.
ARTICLE IV. PURPOSE; NONCOMPETITION
SECTION 4.1 PURPOSE. The Corporation recognizes that the Executive is a
key executive of the Corporation and is expected to be a factor in the growth
and success of the Corporation. The Corporation also recognizes that the
continued success of the Corporation depends, to a significant degree, upon the
effective performance of the Executive's duties as set forth in this Agreement.
Therefore, one of the primary purposes of this Agreement is to provide for the
long-term financial security of the Executive and his family so that he will be
better able to direct his undivided attention to the successful performance of
his duties on behalf of the Corporation.
SECTION 4.2 CONFIDENTIAL INFORMATION. In the Executive's position of
responsibility with the Corporation he has access to, and familiarity with, all
of the business methods and confidential information of the Corporation and its
affiliates, including, but not limited to, its exploration and development
techniques and information, its service and organizational techniques, its
expansion projects, its personnel training and development techniques, its
petroleum exploitation, exploration and development techniques, and its
petroleum exploration
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and development information. Therefore, in order to protect the business and
good will of the Corporation, the Executive shall be bound by the following
provisions for the periods prescribed below.
SECTION 4.3 NONCOMPETITION. Except with respect to the exploration for,
and the production and marketing of, oil and gas which shall be controlled by
Section 4.4, during the Active Employment Period, the Executive shall not,
without the prior written consent of the Corporation, directly or indirectly
engage in, or assist or have an active interest in (whether as proprietor,
partner, investor, shareholder, officer, director or any type of principal
whatsoever; provided that ownership of not more than 2% of the outstanding stock
of a corporation traded on a national securities exchange or quoted on NASDAQ
shall not of itself be viewed as assisting or having an active interest), or be
employed by, or act as an agent for, advisor or consultant to, any person, firm,
partnership, association, corporation or business organization, entity or
enterprise that is, or is about to become, directly or indirectly engaged in any
business that competes substantially with, or is substantially similar to, any
business or proposed business of the Corporation or any subsidiary or affiliate
of the Corporation, provided that the restrictions set forth in this Section 4.3
shall not apply to any geographical area in which the Corporation or a
subsidiary or affiliate of the Corporation has not conducted any business, or
has not had any business in the planning or development stage, within one year
prior to the date of the Executive's activities otherwise referred to in this
Section 4.3.
SECTION 4.4 OIL AND GAS INTEREST OWNERSHIP. For the same time periods
and with respect to the same capacities as set forth in Section 4.3, except as
required by the Corporation, the Executive shall not in any manner (whether
through employment by another corporation or
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otherwise) participate in, or own directly or indirectly any interest
(whether working, royalty, overriding royalty or other) in, any oil and gas
lease or prospect or any partnership or other entity engaged in oil and gas
exploration or production unless such proposed participation or interest
shall first have been approved in writing by a committee duly appointed for
such purpose by the Board in accordance with guidelines to be established by
the Board or such committee or shall have been acquired by the Executive
prior to the Effective Date, provided that in no event shall any proposed
participation or interest require time commitment by the Executive during his
active employment other than that involved in making the investment decision
relating thereto and in obtaining the Corporation's approval thereof.
SECTION 4.5 CORPORATE OPPORTUNITY. Except as to such actions within
the ordinary course of the Executive's employment by the Corporation which
the Executive in good faith believes to be in the best interests of the
Corporation, the Executive shall not at any time during his Active Employment
Period, without the prior written consent of the Corporation: (i) request or
advise any supplier, or other person, firm, partnership, association,
corporation or business organization, entity or enterprise having business
dealings with the Corporation or any subsidiary or affiliate of the
Corporation to withdraw, curtail or cancel such business dealings; or (ii)
disclose to any competitor or potential competitor of the Corporation or any
subsidiary or affiliate of the Corporation any trade secret, know-how or
knowledge relating to costs, products, equipment, merchandising and marketing
methods, oil and gas exploration and/or production, business plans, or
research results used by, or useful to, the Corporation or any subsidiary or
affiliate of the Corporation; or (iii) induce or attempt to influence any
executive of the Corporation or any
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subsidiary or affiliate of the Corporation to terminate, or in any way
violate the terms of, his or her employment.
ARTICLE V. MISCELLANEOUS
SECTION 5.1 ENFORCEABILITY.
If the scope of any provision of this Agreement is too broad to permit
enforcement of such provision to its fullest extent, then such provision shall
be enforced to the maximum extent permitted by applicable law, and, if
necessary, the scope of any such provision may be judicially modified (to the
extent necessary in any proceeding brought to enforce such provision) and
thereafter fully enforced.
SECTION 5.2 REMEDIES
The parties acknowledge that the remedy at law for any breach of any
of a party's obligations hereunder would be inadequate and consent to the
granting of temporary and permanent injunctive relief in any proceeding brought
to enforce any of such provisions without the necessity of proof of actual
damages; provided, however, that the foregoing shall not be construed to limit
any other right or remedy available to the Corporation or the Executive at law
or in equity, and all such rights and remedies shall be cumulative to the extent
permitted by applicable law, and the exercise of any one or more of such rights
or remedies shall be without prejudice to the exercise of any other such right
or remedy.
SECTION 5.3 RESIGNATION AS BOARD AND COMMITTEE MEMBER
Unless otherwise requested by the Board, upon the termination of his
employment for any reason, the Executive hereby agrees that he shall
simultaneously submit his resignation as
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a member of the Board, Boards of Directors of the Company's subsidiaries and
the NYLOG Investment Committee in writing on or before the date he ceases to
be an Executive of the Corporation. If the Executive fails or neglects to
submit such resignations in writing, the Corporation shall be permitted to
deem the Executive to have submitted his written resignation as such member
effective on the same date that the Executive ceases to be an executive of
the Corporation. If the Executive continues to serve as a member of the
Board at the request of the Board after his termination of employment, the
Executive shall be entitled to all benefits provided to other Board members
who are not employees of the Corporation.
SECTION 5.4 NO OFFSET; ENFORCEMENT OF AGREEMENT
The Corporation's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Corporation may have against the Executive or others, except
as provided in Section 3.3(a)(iii). In no event shall the Executive be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to the Executive under any of the provisions of this
Agreement and such amounts shall not be reduced whether or not the Executive
obtains other employment. The Corporation agrees to pay as incurred, to the
full extent permitted by law, all legal fees and expenses which the Executive
may reasonably incur as a result of any contest (regardless of the outcome
thereof) by the Corporation, the 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 the
Executive about the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the applicable federal
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rate provided for in Section 7872(f)(2) of the Code and amounts sufficient to
reimburse the Executive for all tax liabilities due in respect of such
payments of legal fees and expenses; provided however, if an action brought
by the Executive, or if the Executive's defense of an action brought by the
Corporation, is finally determined to be without merit by a court of
competent jurisdiction, the Executive shall refund amounts paid by the
Corporation for legal fees, taxes and interest pursuant to this Section 5.4.
SECTION 5.5 ASSIGNMENT BY THE EXECUTIVE; SUCCESSORS
(a) This Agreement is personal to the Executive and without the prior
written consent of the Corporation shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) Except as is otherwise herein expressly provided, this Agreement
shall inure to the benefit of and be binding upon the Corporation, its
successors and assigns, and upon the Executive, his spouse, heirs, executors and
administrators, provided, however, that the obligations of the Executive
hereunder shall not be delegated.
(c) The Corporation will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform it if no such
succession had taken place. As used in this Agreement, "Corporation" shall mean
Corporation as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
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SECTION 5.6 WAIVER
Failure of either party hereto to insist upon strict compliance by the
other party with any term, covenant or condition hereof shall not be deemed a
waiver of such term, covenant or condition, nor shall any waiver or
relinquishment or failure to insist upon strict compliance of any right or power
hereunder at any one time or more times be deemed a waiver or relinquishment of
such right or power at any other time or times.
SECTION 5.7 NOTICE
Any notice required or desired to be given pursuant to this Agreement
shall be sufficient if in writing sent by registered or certified mail to the
addresses hereinafter set forth above or to such other address as any party
hereto may designate in writing, transmitted by hand delivery or by registered
or certified mail to the other; provided, the failure by the Executive to
observe the notice provisions hereof shall not in any way limit, reduce or
effect the Executive's rights and benefits hereunder.
SECTION 5.8 POST-TERMINATION CONSULTING AND NONCOMPETITION
If the Executive receives a Reduced Amount pursuant to Section 3.3(b),
the Corporation shall, for a period of up to 3 years following his termination
of employment (i) retain the Executive as a consultant and (ii) cause the
Executive to be bound by the provisions of Article IV concerning noncompetition,
amended appropriately to take into account the fact the Executive is no longer
an employee of the Corporation. The Executive, as a consultant, shall consult
on such matters and under such terms and conditions as shall be mutually agreed
upon by the Corporation and the Executive. The Executive shall be paid for such
agreement not to compete and consulting services at an annual rate equal to his
Total Compensation, provided, however, the
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Corporation shall be under no obligation to retain the Executive as a
consultant, and, except as expressly agreed by the Executive, the Executive
shall have no obligation not to compete and to consult, for a period of time
greater than that time necessary for the Executive to earn and receive
consulting and noncompetition payments equal to the Foregone Amount.
SECTION 5.9 APPLICABLE LAW
This Agreement shall be governed by the laws of the State of Texas.
SECTION 5.10 TAXES
The Corporation may deduct from all amounts paid under this Agreement
all federal, state, local and other taxes required by law to be withheld with
respect to such payments.
SECTION 5.11 ENTIRE AGREEMENT
The parties hereto agree that this Agreement (together with, to the
extent benefits or rights are otherwise affected by this Agreement, any employee
benefit plan maintained or sponsored by the Corporation) contains the entire
understanding and agreement between them and supersedes all previous agreements
and arrangements, if any, relating to the employment of the Executive. This
Agreement shall not be amended, modified or supplemented in any respect except
by an agreement in writing signed by the Executive and the Corporation.
IN WITNESS WHEREOF, the Corporation and the Executive have duly
executed this Agreement as of the day and the year first above written.
Attest: AMERICAN EXPLORATION COMPANY
By:
- ----------------------------- -------------------------------
Name: John M. Hogan
Title: Senior Vice President and
Chief Financial Officer
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Witness: EXECUTIVE
- ----------------------------- ----------------------------------
Mark Andrews
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