EXHIBIT 99.3
August 13, 1999
Mr. Stephen D. Chesebro'
5473 Sugar Hill Drive
Houston, Texas 77056
Dear Steve:
In connection with your anticipated separation from PennzEnergy
Company (the "Company") and in consideration of your service to the Company, you
and Company have agreed to the terms and conditions as contained in this letter
agreement ("Agreement") and the attachment to this Agreement ("Attachment")
concerning your separation from employment which you and the Company believe
will occur on the close of business of the date occurring sixty (60) days after
the closing date ("Closing Date") of the transaction occurring pursuant to that
certain Amended and Restated Agreement and Plan of Merger by and among Devon
Energy Corporation, Devon Delaware Corporation, Devon Oklahoma Corporation and
PennzEnergy Company, dated as of May 19, 1999. You agree to remain employed by
the Company until the date occurring sixty (60) days after the Closing Date
(your "Separation Date") and the Company agrees to employ you under the terms
and conditions of your employment as currently in place.
In consideration of Company's agreement to provide the benefits,
payments, and other items described in the Attachment, a substantial portion of
which are in addition to anything to which you are already entitled and the
receipt and sufficiency of which are hereby acknowledged:
1. Release. Effective on the Separation Date, you agree to release
and forever discharge the Company, its officers, directors, agents,
servants, and employees, their successors, assigns, and insurers and their
parents, subsidiaries and affiliates, and any and all other persons, firms,
organizations, and corporations (except as provided in this Agreement and
the Attachment), from any and all damage, losses, causes of action,
expenses, demands, liabilities, and claims on behalf of yourself, your
heirs, executors, administrators, and assigns with respect to all matters
relating to the Company and you hereby accept the cash payments, benefits,
and other items described herein in full settlement of all such damages,
losses, causes of action, expenses, demands, liabilities, and claims you
now have or may have with respect to such matters.
This release includes, but is not limited to, claims arising
under the Age Discrimination in Employment Act, the Older Workers' Benefit
Protection Act, Title VII of the Civil Rights Act of 1964, the Americans
with Disabilities Act, the Family and Medical Leave Act, the Texas Labor
Code, any state or federal statute, regulation or common law pertaining to
"whistleblowers," claims for breach of contract, tort or personal injury of
any sort, and any claim under any other state or federal statute or
regulation, in equity or at common law. Further, by accepting the payments
described in the Attachment, you agree not to sue the Company or the
related persons and entities described above. You affirm and agree that
your employment relationship will end on your Separation Date, and you
withdraw unequivocally, completely, and finally from your employment, you
resign all positions, titles, responsibilities and authority as an officer
or employee of the Company and its affiliates and waive all rights in
connection with such relationship except to vested benefits and the
payments and benefits described in the Attachment. You agree that is
Agreement is valid, fair, adequate and reasonable, was entered into with
your full knowledge and consent, and was not procured through fraud, duress
or mistake. You shall have twenty-one (21) days to decide whether to sign
the Agreement and be bound by its terms. You shall have the right to
revoke or cancel it within seven (7) days after you have signed it. This
cancellation or revocation can be accomplished by delivery of a written
notification to me. In the event that this Agreement is canceled or
revoked, the Company shall have no obligation to furnish the payments and
benefits described herein and in the Attachment, except for vacation pay
described in paragraph 1 of the Attachment, office space and secretarial
assistance as described in paragraph 14 of the Attachment, and any rights
to the Company's Retirement Plan, Savings and Investment Plan, stock
options and conditional stock awards that are vested as of your Separation
Date. You acknowledge that you have been advised in writing to consult
with an attorney prior to signing this Agreement and have had an adequate
opportunity to seek advice of your own choosing. You acknowledge that you
have read this Agreement, have had an opportunity to ask questions and have
it explained to you and that you understand that the Agreement will have
the effect of knowingly and voluntarily waiving any action you might
pursue, including breach of contract, personal injury, retaliation,
discrimination on the basis of race, age, sex, national origin, or
disability and any other claims arising prior to the date of the Agreement.
2. Consulting Agreement. You hereby agree to provide consulting
services to the Company for the period commencing as of your Separation
Date and ending as of the second anniversary of your Separation Date. The
services you provide shall be as an independent contractor and shall be
with respect to those matters with which you are suitably experienced and
knowledgeable by reason of your education, training, and background and
your prior employment with the Company, including litigation matters. You
agree to cooperate and freely consult with the Company, its management,
board or directors, attorneys and other representatives upon request from
time to time and at any time respecting any matters relating to the
Company, its business or properties, including, without limitation, any
loss contingencies, disputes, investigations, litigation or other
proceedings or problems affecting the Company. The Company and you agree
to work out reasonable
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accommodations for the provision of such consulting services so that they
do not unreasonably interfere with any of your other personal affairs or
business endeavors. No services shall be requested of you except by the
Chairman of the Board of Directors or Chief Executive Officer of the
Company.
The Company will reimburse you for any reasonable travel or other
business expenses incurred in connection with providing such consulting
services, but you shall not be entitled to any other compensation for
consulting other than that described in this Agreement and the Attachment
thereto.
3. Noncompete Agreement. You hereby agree that, during the period
commencing as of your Separation Date and ending as of the second
anniversary of your Separation Date, in the areas of Azerbaijan, Kuwait,
the Raton Basin in Colorado and New Mexico, and for businesses related to
carbon dioxide (CO2) transportation, marketing, processing, and tertiary
recovery projects in the Permian Basin of West Texas and Southeast New
Mexico (the "Relevant Geographic Area") you will not (i) accept employment
or render service to any person that is engaged in a business directly
competitive with the business then engaged in by the Company or any of its
affiliates or (ii) enter into or take part in or lend your name as
principal, director, officer, executive, independent contractor, partner or
advisor, or accept employment for any purpose that would be competitive
with the business of the Company or any of its affiliates (all of the
foregoing activities are collectively referred to as the "Prohibited
Activity"); provided, however, you may serve as a director of a business
that is competitive with the Company in the Relevant Geographic Area, if
you and such business agree that you cannot and will not as a director act
or otherwise advise that business on any matter involving the Relevant
Geographic Area.
It shall not be considered a violation of this Agreement for you
to be a passive investor in any enterprise that might be viewed as a
competitor of the Company.
In addition to all other remedies at law or in equity which the
Company may have for breach of a provision of this paragraph 3, it is
agreed that in the event of any breach or attempted or threatened breach of
any such provision, the Company shall be entitled, upon application to any
court of proper jurisdiction, to a temporary restraining order or
preliminary injunction (without the necessity of (i) proving irreparable
harm, (ii) establishing that monetary damages are inadequate or (iii)
posting any bond with respect thereto) against you prohibiting such breach
or attempted or threatened breach by proving only the existence of such
breach or attempted or threatened breach. If the provisions of this
paragraph 3 should ever be deemed to exceed the time, geographic or
occupational limitations permitted by the applicable law, you and the
Company agree that such provisions shall be and are hereby reformed to the
maximum time, geographic or occupational limitations permitted by the
applicable law.
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You acknowledge, agree and stipulate that: (i) the terms and
provisions of this agreement are reasonable and constitute an otherwise
enforceable agreement to which the terms and provisions of this paragraph
are ancillary or a part of as contemplated by Tex. Bus. & Com. Code Ann.
(S)(S) 15.50-15.52, or any successor provisions; (ii) the consideration
provided by the Company under this agreement is not illusory; and (iii) the
consideration given by the Company under this agreement, gives rise to the
Company's interest in restraining and prohibiting you from engaging in the
Prohibited Activity within the Relevant Geographic Area as provided under
this paragraph 3, and your covenant not to engage in the Prohibited
Activity within the Relevant Geographic Area pursuant to this paragraph 3
is designed to enforce your consideration (or return promises). The
failure of the agreements in this paragraph shall not constitute a breach
of this Agreement.
If the Company initiates a judicial proceeding against you to
enforce this paragraph 3 and the Company does not prevail in whole or part,
the Company shall pay your reasonable attorney's fees.
4. Confidentiality Agreement. You agree to hold for the benefit of
the Company all secret or confidential information, knowledge or data
relating to the Company or any of its affiliates, and their respective
businesses, which shall have been obtained by you during your employment by
the Company or any of its affiliates and which shall not be or become
public knowledge (other than acts by you or representatives of you in
violation of this Agreement or the other terms and conditions of your
employment by the Company). You agree that you will not, without the prior
written consent of the Company or as may be otherwise required by law or
legal process, communicate or divulge any such secret or confidential
information, knowledge or data relating to the Company or any of its
affiliates and their respective businesses to anyone other than the Company
and those designated by it.
5. Benefits Under All Other Agreements, Arrangements, and Plans. You
hereby agree that the benefits, payments and other items described in this
Agreement and the Attachment supersede, replace, and are in lieu of any and
all benefits, payments or other items that may have been due to you under
any other agreements, arrangements or plans with, or of, the Company,
except as otherwise provided herein and in the Attachment.
You and the Company further agree that the benefits, payments and
other items described in this Agreement and the Attachment do not result in
an excess parachute payment within the meaning of Section 280G of the
Internal Revenue Code ("Code") and do not result in the imposition of the
excise tax under Code Section 4999. The failure of the agreements in the
prior sentence shall not constitute a breach of this Agreement.
Accordingly, you and the Company agree to reflect this treatment on the
appropriate federal income tax returns and you agree that your 1999 return
shall be prepared by Arthur Andersen LLP. The expenses incurred with
respect to your 1999 return insofar as they relate to Section 280G of the
Code shall be borne by the Company.
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6. Resignation Letter. You agree that a condition to the
effectiveness of this Agreement is your execution and prompt return to the
Company of the executed resignation letter attached to this Agreement as
Exhibit A to be effective as of your Separation Date concerning officer,
director and other positions held by you in the Company or its affiliates.
7. Indemnification and Insurance. In accordance with the laws of the
State of Delaware, and in compliance with and pursuant to the express terms
of Paragraph 1 of Article VII of the bylaws of the Company, the Company
agrees to indemnify you and to advance expenses incurred by you. The
Company also agrees that you will continue to receive liability insurance
for your services to the Company for so long as and to the maximum extent
that any other officer or director of the Company receives coverage.
8. Remedies. The Company shall have the right to sue in law or in
equity for injunctions, specific performance or damages, but shall have no
right of offset against amounts or benefits payable by the Company pursuant
to the Agreement or otherwise.
The purpose of the arrangements described in this Agreement and the
Attachment is to arrive at a mutually agreeable and amicable basis upon which to
separate your employment with the Company. You and the Company agree to refrain
from any criticisms or disparaging comments about each other or in any way
relating to your employment with or separation from the Company. Furthermore,
you agree that you have returned or will return immediately, and to maintain in
strictest confidence and not to use in any way, any proprietary, confidential,
or other non-public information or documents relating to the business and
affairs of the Company and its affiliates. You agree to refer all media,
shareholder and investment or financial community inquiries regarding the
Company to the Company without comment or other response to such inquiry.
You further agree that the existence and all terms of this Agreement,
including the terms and conditions contained in the Attachment, shall be kept
strictly confidential and that any disclosure to anyone for any purpose
whatsoever (save and except disclosure to your spouse, to financial institutions
as part of a financial statement, to immediate family members and/or heirs, to
financial, tax and legal advisors, or as required by law) by you or your agents,
representatives, heirs, children, spouse, employees or spokespersons shall be a
breach of this Agreement.
Nothing in this Agreement shall preclude you from providing
information if required by law or if mandated by subpoena or a court to do so.
The Agreement and its provisions shall not be disclosed by the Company to anyone
other than its Board of Directors, its legal counsel and its accountants,
without your prior written approval, unless otherwise required by law; provided,
however, that the Company may disclose the terms of the Agreement and the
Attachment to such of its employees or other advisors as may be reasonably
necessary.
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This Agreement has been approved by the Board of Directors of the
Company.
This Agreement shall be conditioned upon the occurrence of the Closing
Date and shall be null and void if the Closing Date does not occur by December
31, 1999.
Very truly yours,
James L. Pate
Chairman of the Board
AGREED TO AND ACCEPTED this
_____ day of ___________, 1999
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Stephen D. Chesebro'
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Attachment to the Agreement dated August 2, 1999
1. VACATION
You will be paid a lump sum cash payment, subject to applicable FICA
and income tax withholding obligations, as soon as is practicable after your
Separation Date, for all your 1999 earned vacation days, less any vacation days
taken in 1999, plus all of your accrued vacation days through your Separation
Date.
2. SALARY, RETENTION BONUS AND RETENTION PAYMENT
You will receive your regular base salary, paid in biweekly amounts
equal to $23,076.92, subject to applicable FICA and income tax withholding
obligations, until your Separation Date.
Upon your Separation Date, you will receive within 10 days thereafter
an amount equal to 150% of your 1999 target bonus, or $585,000, in a lump-sum
cash payment ("Retention Bonus"), subject to applicable FICA and income tax
withholding obligations. This Retention Bonus shall be in lieu of any other
bonus or similar type of payment you may have otherwise been or become eligible
to receive during 1999.
Upon your Separation Date, in addition to your regular base salary,
you will also receive within 10 days thereafter a lump-sum cash payment of
$300,000 ("Retention Payment"), subject to applicable FICA and income tax
withholding obligations.
3. NONCOMPETE AND CONSULTING AGREEMENTS
In return for your agreement to be bound by the noncompete and
consulting agreements in the Agreement, you will receive within 10 days after
your Separation Date separate and additional compensation a lump-sum cash
payment of $1,200,000, subject to applicable tax withholding obligations.
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4. DEFERRED COMPENSATION AGREEMENT
Commencing in the first month following your Separation Date, you will
receive benefits under your Deferred Compensation Agreement, dated as of April
2, 1999 ("DCA"), equal to a monthly amount of $28,500, reduced by (i) any
benefits provided to you under the Company's tax-qualified defined benefit plan
or related defined benefit portion of the Company's excess benefit plan, (ii)
your prior employer benefit of $5,063 per month and (iii) your social security
benefits, and subject to applicable FICA and income tax withholding obligations,
for your life, in accordance with the terms and conditions your DCA. Should you
predecease your spouse, your spouse will receive benefits under your DCA equal
to a monthly amount of $14,250, reduced by your prior employer surviving spouse
benefit of $2,513.50 per month and social security benefits and subject to
applicable income tax withholding obligations, for her life, subject to the
terms and conditions of your DCA. All benefits under your DCA will paid on a
monthly basis.
5. MEDICAL AND DENTAL COVERAGE
Subject to your payment of applicable premiums, in accordance with the
terms and conditions of your DCA and for so long as you and your spouse receive
benefits under your DCA, beginning as of your Separation Date, you and your
spouse will be entitled to reimbursement of medical and dental expenses under
the PennzEnergy Company Medical Expenses Reimbursement Plan, formerly the
Pennzoil Company Medical Expense Reimbursement Plan (copy attached hereto as
Exhibit B), to the same extent as if your coverage under such plan as of the
date hereof had continued in full force and effect.
6. LIFE INSURANCE AND AD&D
You will have a thirty-one (31) day period after the end of your
Separation Date to convert the balance of your employee life insurance,
according to the terms and conditions in effect at that time. In addition, AD&D
may be converted, according to the terms and conditions in effect at that time.
Application must be made to the insurance company. It will be your
responsibility to complete the conversion process if you so desire.
7. STD/LTD
Short-and long-term disability coverage are not in effect after your
Separation Date.
8. RETIREMENT PLAN
You will receive a letter from the Benefits Department at a later date
after your Separation Date outlining your retirement benefit and related
conditions.
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9. SAVINGS AND INVESTMENT PLAN AND RELATED PORTION OF EXCESS BENEFIT PLAN
ACCOUNT
Your employee accounts under the Company's Savings and Investment Plan
are 100% vested. Employer matching accounts under the Savings and Investment
Plan and the related portion of your Excess Benefit Agreement balance will be
vested as of the Closing Date and will be distributed according to provisions of
the plan and agreement. The forms that you must complete to receive a
distribution from the plan and agreement will be mailed to you at a later date.
10. STOCK OPTIONS
All of your stock options granted prior to 1999 are fully vested as a
result of the transaction occurring pursuant to that certain Agreement and Plan
of Merger, dated as of April 14, 1998, among Pennzoil Company, Pennzoil Products
Company, Downstream Merger Company and Quaker State Corporation
("Pennzoil/Quaker State Agreement"). All of your stock options granted in 1999
will be fully vested as of your Separation Date. Your vested stock options will
remain outstanding for the remainder of their ten-year term subject to the terms
of the applicable stock option agreement. Your stock options outstanding as of
the date of the Agreement are set forth in Schedule A attached hereto.
11. CONDITIONAL STOCK AWARD
All of your conditional stock units are "Matured Units" as a result of
the transaction occurring pursuant to the Pennzoil/Quaker State Agreement. All
of your Matured Units will continue to be payable under the normal payment
schedule provided under the applicable awards. Your conditional stock units
outstanding as of the date of the Agreement are set forth in Schedule A attached
hereto.
12. SALARY CONTINUATION PLAN
Your participation in the Salary Continuation Plan is terminated as of
your Separation Date.
13. DIRECTORS AND OFFICERS LIABILITY COVERAGE
You will continue to be covered under the Company's directors and
officers liability policy for events occurring prior to your Separation Date.
14. OFFICE SPACE
In accordance with Paragraph 20 of your Employment Agreement with the
Company, dated as of February 10, 1997, as amended July 1, 1997, the Company
will continue its obligation to provide to you reimbursement for the cost of
office space and secretarial assistance on the basis consistent with that
provided to you by your former employer through December 31, 2000; provided,
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however, that in no event shall the provisions of such office space and
secretarial assistance exceed $35,000 in during any 12-month period.
15. TAX PROTECTION AGREEMENT
Your Tax Protection Agreement with the Company will be preserved and
remain in force after your Separation Date.
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