EXHIBIT 10.11
EXECUTIVE SEVERANCE AGREEMENT
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This agreement (this "Agreement") is made as of the 14th day of
December, 1994, between Southwestern Energy Company, an Arkansas corporation
with its principal offices at 1083 Sain Street, P.O. Box 1408, Fayetteville,
Arkansas 72702-1408 (hereinafter called the "Company"), and Gregory D. Kerley
(hereinafter called the "Employee"), residing at 3409 Fredricksburg Circle,
Fayetteville, Arkansas 72703.
WITNESSETH THAT:
WHEREAS, should the Company or shareholders of the Company receive any
proposal from a third person concerning a possible business combination with the
Company or an acquisition of equity securities of the Company, the Board of
Directors of the Company (hereinafter called the "Board") believes it imperative
that the Company and the Board be able to rely upon the Employee to continue in
his position, and that the Company and the Board be able to receive and rely
upon his advice, if they request it, as to the best interests of the Company and
its shareholders, without concern that he might be distracted or that his advice
might be affected by the personal uncertainties and risks created by such a
proposal;
WHEREAS, the Company desires to provide the benefits provided for
herein in order to enable it to attract and retain qualified executives such as
the Employee, without a current expense to the Company;
NOW, THEREFORE, to assure the Company that it will have the continued
dedication of the Employee and the availability of his advice and counsel
notwithstanding the possibility, threat or occurrence of a bid to take over
control of the Company and to induce the Employee to remain in the employ of the
Company, and for other good and valuable consideration, the Company and the
Employee hereby agree as follows:
1. Definitions.
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(i) "Cause," when used in connection with the termination of the
Employee's employment by the Company, shall mean (a) the willful and continued
failure by the Employee substantially to perform his duties and obligations to
the Company (other than any such failure resulting from his Disability) which
failure continues after the Company has given notice thereof to the Employee or
(b) the willful engaging by the Employee in misconduct which is materially
injurious to the Company. For purposes of this definition, no act, or failure
to act, on the Employee's part shall be considered "willful" unless done, or
omitted to be done, by the Employee in bad faith and without reasonable belief
that his action or omission was in the best interests of the Company.
(ii) "Change in Control" shall mean the occurrence of any of the
following:
(a) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934 (the "Exchange Act"), an "Acquiring
Person") becomes the
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"beneficial owner" (as such term is defined in Rule 13d-3 promulgated under
the Exchange Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities, excluding any employee benefit plan sponsored or
maintained by the Company (or any trustee of such plan acting as trustee);
(b) the Company's stockholders approve an agreement to merge or
consolidate the Company with another corporation (other than a corporation
50% or more of which is controlled by, or is under common control with, the
Company);
(c) any individual who is nominated by the Board for election to the
Board on any date fails to be so elected as a direct or indirect result of
any proxy fight or contested election for positions on the Board;
(d) a "change in control" of the Company of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act occurs; or
(e) a majority of the Board determines in its sole and absolute
discretion that there has been a Change in Control of the Company or that
there will be a Change in Control of the Company upon the occurrence of
certain specified events and such events occur;
Notwithstanding Subparagraphs (a) through (d) of this Paragraph (ii),
a Change in Control shall not occur by reason of
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any event which would otherwise constitute a Change in Control if, immediately
after the occurrence of such event, individuals who are Acquiring Persons and
who were employees of the Company immediately prior to the occurrence of such
event own, on a fully diluted basis, securities of the Company representing (A)
5% or more of the combined voting power of the Company's then outstanding
securities or (B) 5% or more of the value of the Company's then outstanding
equity securities.
(iii) "Committee" shall mean the Compensation Committee of the Board.
(iv) "Compensation" shall mean the "base amount" as such term is
defined in Section 280G of the Internal Revenue Code of 1986, as amended from
time to time (the "Code") and the regulations promulgated thereunder.
(v) "Contract Period" shall mean the period defined in Section 2
hereof.
(vi) "Disability" shall mean a physical or mental incapacity of the
Employee which entitles the Employee to benefits at least equal to two-thirds of
his base salary during the period of such incapacity under any long term
disability plan applicable to him and maintained by the Company as in effect
immediately prior to a Change in Control.
(vii) "Good Reason," when used with reference to a termination by the
Employee of his employment with the Company, shall mean:
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(a) the assignment to the Employee of any duties inconsistent with,
or the reduction of powers or functions associated with, his positions,
duties, responsibilities and status with the Company immediately prior to a
Change in Control, or any removal of the Employee from, or any failure to
reelect the Employee to, any positions or offices the Employee held
immediately prior to a Change in Control, except in connection with the
termination of the Employee's employment by the Company for Cause or on
account of Disability pursuant to the requirements of this Agreement;
(b) a reduction by the Company of the Employee's base salary as in
effect immediately prior to a Change in Control, except in connection with
the termination of the Employee's employment by the Company for Cause or on
account of Disability pursuant to the requirements of this Agreement;
(c) a change in the Employee's principal work location to a location
more than forty (40) miles from Fayetteville, Arkansas, except for required
travel on the Company's business to an extent substantially consistent with
the Employee's business travel obligations immediately prior to a Change in
Control;
(d) (1) the failure by the Company to continue in effect any
employee benefit plan, program or arrangement (including, without
limitation, "employee benefit plans" within the meaning of Section 3(3) of
the Employee
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Retirement Income Security Act of 1974) in which the Employee was
participating immediately prior to a Change in Control (or substitute
plans, programs or arrangements providing the Employee with substantially
similar benefits), (2) the taking of any action, or the failure to take any
action, by the Company which could (A) adversely affect the Employee's
participation in, or materially reduce the Employee's benefits under, any
of such plans, programs or arrangements, (B) materially adversely affect
the basis for computing benefits under any of such plans, programs or
arrangements or (C) deprive the Employee of any material fringe benefit
enjoyed by the Employee immediately prior to a Change in Control or (3) the
failure by the Company to provide the Employee with the number of paid
vacation days to which the Employee was entitled immediately prior to a
Change in Control in accordance with the Company's vacation policy
applicable to the Employee then in effect, except, in each case, in
connection with the termination of the Employee's employment by the Company
for Cause or on account of Disability pursuant to the requirements of this
Agreement;
(e) the failure by the Company to pay the Employee any portion of the
Employee's current compensation, or any portion of the Employee's
compensation deferred under any plan, agreement or arrangement of or with
the Company, within seven (7) days of the date such compensation is due;
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(f) a material increase in the required working hours of the Employee
from that required prior to a Change in Control;
(g) the failure by the Company to obtain an assumption of the
obligations of the Company under this Agreement by any successor to the
Company; or
(h) any termination of the Employee's employment by the Company
during the Contract Period which is not effected pursuant to the
requirements of this Agreement.
(viii) "Termination Date" shall mean the effective date as provided
hereunder of the termination of the Employee's employment.
2. Application of Agreement. This Agreement shall apply only to a
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termination of employment of the Employee during a period (the "Contract
Period") commencing on the date immediately preceding the date of a Change in
Control and terminating on the third anniversary of the date of the Change in
Control; provided, however, that such Change in Control occurs during the period
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commencing as of the date hereof and terminating on the first anniversary of the
date hereof or as further extended pursuant to the following sentence. On the
first anniversary of the date hereof, and on each anniversary of the date hereof
thereafter, the period during which this Agreement shall automatically apply
shall be extended for one additional year, unless on or before such anniversary
the Company notifies the Employee that it elects not to extend such period.
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Any reference herein to the Employee's employment or termination of employment
by or with the Company shall include the Employee's employment or termination of
employment by or with any subsidiary or affiliated company of the Company.
3. Termination of Employment of the Employee By the Company During
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the Contract Period.
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(i) During the Contract Period, the Company shall have the right to
terminate the Employee's employment hereunder for Cause, for Disability or
without Cause by following the procedures hereinafter specified.
(ii) Termination of the Employee's employment for Disability shall
become effective thirty (30) days after a notice of intent to terminate the
Employee's employment, specifying Disability as the basis for such termination,
is given to the Employee by the Committee.
(iii) The Employee may not be terminated for Cause unless and until a
notice of intent to terminate the Employee's employment for Cause, specifying
the particulars of the conduct of the Employee forming the basis for such
termination, is given to the Employee by the Committee and, subsequently, a
majority of the Board finds, after reasonable notice to the Employee (but in no
event less than fifteen (15) days' prior notice) and an opportunity for the
Employee and his counsel to be heard by the Board, that termination of the
Employee's employment for Cause is justified. Termination of the Employee's
employment for Cause shall become effective after such finding has been made by
the
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Board and five (5) business days after the Board gives to the Employee notice
thereof, specifying in detail the particulars of the conduct of the Employee
found by the Board to justify such termination for Cause.
(iv) The Company shall have the absolute right to terminate the
Employee's employment without Cause at any time during the Contract Period by
vote of a majority of the Board. Termination of the Employee's employment
without Cause shall be effective five (5) business days after the Board gives to
the Employee notice thereof, specifying that such termination is without Cause.
(v) Upon a termination of the Employee's employment for Cause during
the Contract Period, the Employee shall have no right to receive any
compensation or benefits hereunder other than those benefits provided in
Paragraph (i)(a) of Section 5 hereof. Upon a termination of the Employee's
employment without Cause during the Contract Period, the Employee shall be
entitled to receive the benefits provided in Section 5 hereof. This Agreement
shall not apply to, and the Employee shall have no right to receive any
compensation or benefits hereunder in connection with any termination of the
Employee's employment by the Company other than during the Contract Period.
4. Termination of Employment By the Employee During the Contract
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Period. During the Contract Period, the Employee shall be entitled to terminate
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his employment with the Company, and shall be entitled to the benefits hereunder
as follows. If
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the Employee terminates his employment with the Company during the twelve-month
period beginning immediately preceding the date of a Change in Control, the
Employee shall not be entitled to receive the benefits provided for in Section 5
hereof (other than those provided for in Paragraph (i)(a) thereof) unless the
termination is for Good Reason. If the Employee shall terminate his employment
with the Company after the expiration of such twelve-month period and during the
Contract Period (or with respect to the benefits provided for in Section 5(i)(a)
hereof, at any time during the contract period), the Employee shall be entitled
to receive the benefits provided in Section 5 hereof if such termination is for
any reason or without reason. The Employee shall give the Company notice of
voluntary termination of employment pursuant to this Section 4, which notice
need specify only the Employee's desire to terminate his employment and, if such
termination is during the twelve-month period beginning immediately following a
Change in Control and is for Good Reason, set-forth in reasonable detail the
facts and circumstances claimed by the Employee to constitute Good Reason.
Termination of the Employee's employment by the Employee pursuant to this
Section 4 shall be effective five (5) business days after the Employee gives
notice thereof to the Company. This Agreement shall not apply to, and the
Employee shall have no right to receive, any compensation or benefits hereunder
in connection with any termination of the Employee's employment by the Employee
other than during the Contract Period. This Agreement shall not
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apply to, and the Employee shall have no right to receive, any compensation or
benefits hereunder in connection with a termination of the Employee's employment
on account of the Employee's death, whether or not during the Contract Period.
5. Benefits Upon Termination in Certain Circumstances.
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(i) Upon the termination of the employment of the Employee by the
Company pursuant to Section 3(iv) (or with respect to the benefits in
Subparagraph (a) of this Paragraph, Section 3(iv) or 3(v)) hereof or, by the
Employee pursuant to Section 4 hereof, the Employee shall be entitled to receive
the following payments and benefits:
(a) The Company shall pay to the Employee, not later than the
Termination Date, a lump sum cash amount equal to the sum of (I) the full
base salary earned by the Employee through the Termination Date and unpaid
at the Termination Date, calculated at the highest rate of base salary in
effect at any time during the twelve months immediately preceding the
Termination Date, (II) the amount of any base salary attributable to
vacation earned by the Employee but not taken before the Termination Date,
(III) any annualized bonus accrued to the Employee through the Termination
Date and unpaid at the Termination Date, plus (IV) all other amounts earned
by the Employee and unpaid at the Termination Date.
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(b) The Company shall pay to the Employee, not later than the
Termination Date, a lump sum cash amount equal to the product of the
Employee's Compensation times 2.99.
(ii) If the Employee's employment is terminated by the Company
pursuant to Section 3(ii) or 3(iv) hereof, or by the Employee pursuant to
Section 4 hereof, the employee shall be entitled to receive the following
payments and benefits:
(a) The Company shall maintain in full force and effect for the
Employee's continued benefit all life, medical, dental, prescription drug
and long- and short-term disability plans, programs or arrangements,
whether group or individual, in which the Employee was entitled to
participate at any time during the twelve month-period prior to the
Termination Date, until the earliest to occur of (I) three years after the
Termination Date; (II) the Employee's death (provided that benefits payable
to his beneficiaries shall not terminate upon his death); or (III) with
respect to any particular plan, program or arrangement, the date he is
afforded a comparable benefit at a comparable cost to the Employee by a
subsequent employer. In the event that the Employee's participation in any
such plan, program or arrangement of the Company is prohibited, the Company
shall arrange to provide the Employee with benefits substantially similar
to those which the Employee is entitled to receive under such plan, program
or arrangement for such period.
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(b) The Company shall pay to the Employee all legal fees and expenses
(including legal fees and expenses incurred in connection with an
arbitration proceeding engaged in pursuant to Section 10 hereof) incurred
by the Employee as a result of such termination of employment (including
all such fees and expenses, if any, incurred in contesting or disputing any
such termination or in seeking to obtain or enforce any right or benefit
provided to the Employee by this Agreement or under any other plan, program
or arrangement of the Company or agreement with the Company), as and when
such fees and expenses become due.
(iii) The Employee shall not be required to mitigate the amount of
any payment or benefit provided for in this Section 5 by seeking other
employment or otherwise.
(iv) The amount of any payment or benefit provided for in this
Section 5 shall not be reduced by any compensation, benefits or other amounts
paid to or earned by the Employee as the result of employment with another
employer after the Termination Date or otherwise.
(v) In the event that any payment hereunder, together with any other
payment or the value of any benefit received in connection with a Change in
Control or the termination or the Employee's employment pursuant to this
Agreement or any plan, agreement or other arrangement between the Company and
the Employee (or any member of Company's affiliated group as such term is
defined in Section 1504 of the Code, without regard to
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Section 1504(b) thereof) would result in the imposition of an excise tax under
Section 4999 of the Code, the payment hereunder may, at the election of the
Employee, be reduced by the amount necessary to prevent the imposition of such
excise tax. The Company shall engage tax counsel selected by the Employee and
reasonably acceptable to the Company to advise the Employee regarding any
potential excise tax liability under Section 4999 of the Code and as to any
benefit or detriment to the Employee of making the reduction election provided
for hereunder. In making the determinations required in order to give the
advice contemplated by this Paragraph (v), tax counsel may rely on benefit
consultants, accountants and other experts. The Company agrees to pay all fees
and expenses of such tax counsel and other experts.
6. Payment Obligations Absolute. The Company's obligation to pay the
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Employee the amounts provided for hereunder shall be absolute and unconditional
and shall not be affected by any circumstances, including, without limitation,
any set-off, counterclaim, recoupment, defense or other right which the Company
may have against him or anyone else and, including without limitation, any
defense or claim based on a breach by the Employee of the covenants contained
herein. All amounts payable by the Company hereunder shall be paid without
notice or demand. Except as expressly provided herein, the Company waives all
rights which it may now have or may hereafter have conferred upon it, by statute
or otherwise, to amend, terminate, cancel or
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rescind this Agreement in whole or in part. Subject to the right of the Company
to seek arbitration under Section 10 hereof and recover any payment made
hereunder, each and every payment made hereunder by the Company shall be final,
and the Company shall not seek to recover all or any part of such payment from
the Employee or from whomsoever may be entitled thereto, for any reason
whatsoever.
7. Covenant Not to Solicit.
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(i) In the event the Employee's employment is terminated by the
Company pursuant to Section 3(iv) hereof or by the Employee pursuant to Section
4 hereof, the Employee agrees during the three-year period following the
Termination Date not to:
(a) offer employment to any officer or employee of the Company or any
subsidiary or affiliated company of the Company or attempt to induce any
such officer or employee to leave the employ of the Company or any
subsidiary or affiliated company of the Company; or
(b) attempt to persuade or induce, or persuade or induce, any
officer, director, agent, customer, client or supplier of the Company or
any subsidiary or affiliated company of the Company to discontinue his or
her relationship with the Company or any subsidiary or affiliated company
of the Company.
(ii) In the event of any breach of the foregoing covenant, the
Employee acknowledges that the Company's remedy at
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law is inadequate and that the Company shall be entitled to seek injunctive
relief.
8. Successors; Binding Agreement.
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(i) This Agreement shall be binding upon any successor (whether
direct or indirect, by purchase, merger, consolidation, liquidation or
otherwise) to all or substantially all of the business and/or assets of the
Company. Additionally, the Company shall require any such successor expressly
to agree to assume and to assume all of the obligations of the Company under
this Agreement upon or prior to such succession taking place. A copy of such
assumption and agreement shall be delivered to the Employee promptly after its
execution by the successor. Failure of the Company to obtain such agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and, as a result of such breach, the Company shall pay to the Employee
the benefits as provided in Section 5 hereof as if the Company had terminated
the Employee's employment on the date on which such succession becomes
effective, without Cause, upon a Change in Control. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any successor to
its business and or assets as aforesaid, whether or not such successor executes
and delivers the agreement provided for in this Section 8(i).
(ii) This Agreement is personal to the Employee and the Employee may
not assign or transfer any part of his rights or duties hereunder, or any
compensation due to him hereunder, to
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any other person, except that this Agreement shall inure to the benefit of and
be enforceable by the Employee's personal or legal representatives, executors,
administrators, heirs, distributees, devises, legatees or beneficiaries. No
payment pursuant to any will or the laws of descent and distribution shall be
made hereunder unless the Company shall have been furnished with a copy of such
will and/or such other evidence as the Board may deem necessary to establish the
validity of the payment.
9. Modification; Waiver. No provisions of this Agreement may be
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modified, waived or discharged unless such waiver, modification or discharge is
agreed to in a writing signed by the Employee and such director or officer as
may be specifically designated by the Board. Waiver by any party of any breach
of or failure to comply with any provision of this Agreement by the other party
shall not be construed as, or constitute, a continuing waiver of such provision,
or a waiver of any other breach of, or failure to comply with, any other
provision of this Agreement.
10. Arbitration of Disputes.
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(i) Any disagreement, dispute, controversy or claim arising out of or
relating to this Agreement or the interpretation or validity hereof shall be
settled exclusively and finally by arbitration except that in the event of the
Employee's breach of the covenant contained in Section 7 hereof, the Company
shall be entitled to seek injunctive relief pursuant to Section 7(ii) hereof.
It is specifically understood and agreed that any
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disagreement, dispute or controversy which cannot be resolved between the
parties, including without limitation any matter relating to the interpretation
of this Agreement, may be submitted to arbitration irrespective of the magnitude
thereof, the amount in controversy or whether such disagreement, dispute or
controversy otherwise would be considered justiciable or ripe for resolution by
a court or arbitral tribunal.
(ii) The arbitration shall be conducted in accordance with the
Commercial Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA").
(iii) The arbitral tribunal shall consist of one arbitrator. The
parties to the arbitration jointly shall directly appoint such arbitrator within
30 days of initiation of the arbitration. If the parties shall fail to appoint
such arbitrator as provided above, such arbitrator shall be appointed by the AAA
as provided in the Arbitration Rules and shall be a person who (a) maintains his
principal place of business within 30 miles of the City of Fayetteville,
Arkansas, and (b) has had substantial experience (whether practical or academic)
in mergers and acquisitions or, if no such person is available, in employee
benefits. The Company shall pay all of the fees, if any, and expenses of such
arbitrator.
(iv) The arbitration shall be conducted within 30 miles of the City
of Fayetteville, Arkansas or in such other city in the United States of America
as the parties to the dispute may designate by mutual written consent.
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(v) At any oral hearing of evidence in connection with the
arbitration, each party thereto or its legal counsel shall have the right to
examine its witnesses and to cross-examine the witnesses of any opposing party.
No evidence of any witness shall be presented unless the opposing party or
parties shall have the opportunity to cross-examine such witness, except as the
parties to the dispute otherwise agree in writing or except under extraordinary
circumstances where the interests of justice require a different procedure.
(vi) Any decision or award of the arbitral tribunal shall be final
and binding upon the parties to the arbitration proceeding. The parties hereto
hereby waive, to the extent permitted by law, any rights to appeal or to seek
review of such award by any court or tribunal. The parties hereto agree that
the arbitral award may be enforced against the parties to the arbitration
proceeding or their assets wherever they may be found and that a judgment upon
the arbitral award may be entered in any court having jurisdiction.
(vii) Nothing herein contained shall be deemed to give the arbitral
tribunal any authority, power, or right to alter, change, amend, modify, add to,
or subtract from any of the provisions of this Agreement.
11. Notice. All notices, requests, demands and other communications
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required or permitted to be given by either party to the other party by this
Agreement (including, without limitation, any notice of termination of
employment and any
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notice under the Arbitration Rules of an intention to arbitrate) shall be in
writing and shall be deemed to have been duly given when delivered personally or
received by certified or registered mail, return receipt requested, postage
prepaid, at the address of the other party, as follows:
If to the Company, to:
Southwestern Energy Company
1083 Sain Street
P.O. Box 1408
Fayetteville, Arkansas 72702-1408
Attention: Board of Directors and Secretary
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If to the Employee, to:
Mr. Gregory D. Kerley
3409 Fredricksburg Circle
Fayetteville, Arkansas 72703
Either party hereto may change its address for purposes of this Section 11 by
giving fifteen (15) days' prior notice to the other party hereto.
12. Severability. If any term or provision of this Agreement or the
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application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Agreement or the application of such
term or provision to persons or circumstances other than those as to which it is
held invalid or unenforceable shall not be affected thereby, and each term and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
13. Headings. The headings in this Agreement are inserted for
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convenience of reference only and shall not be a part of or control or affect
the meaning of this Agreement.
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14. Counterparts. This Agreement may be executed in several
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counterparts, each of which shall be deemed an original.
15. Governing Law. This Agreement has been executed and delivered in
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the State of Arkansas and shall in all respects be governed by, and construed
and enforced in accordance with, the laws of the State of Arkansas.
16. Payroll and Withholding Taxes. The Company may withhold from any
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amounts payable to the Employee hereunder all federal, state, city or other
taxes that the Company may reasonably determine are required to be withheld
pursuant to any applicable law or regulation.
17. Entire Agreement. Except as explicitly provided for herein, this
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Agreement supersedes any and all other oral or written agreements heretofore
made relating to the subject matter hereof and constitutes the entire agreement
of the parties relating to the subject matter hereof; provided, that, this
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Agreement shall not supersede or limit or in any way affect the amount of
compensation or benefits to which the Employee would be entitled under any other
agreement, plan, program or arrangement with the Company including any such
agreement, plan, program or arrangement providing for benefits in the nature of
severance pay.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Southwestern Energy Company
By:____________________________
Chairman of the Compensation
Committee
Southwestern Energy Company
By:____________________________
Chairman of the Board of
Southwestern Energy Company
By:____________________________
Gregory D. Kerley
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