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Exhibit 10.7
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (hereinafter called
this "Agreement") is entered into effective as of June 27, 1996 (the "Effective
Date"), by and between MARINER ENERGY, INC., a Delaware corporation
(hereinafter called "Company"), and Thomas E. Young (hereinafter called
"Employee").
WHEREAS, (i) Company and Employee entered into that certain Employment
Agreement effective as of June 27, 1996 (the "Original Employment Agreement"),
and (ii) the Original Employment Agreement was amended pursuant to that certain
First Amendment to Employment Agreement effective as of January 1, 1997 (the
"Employment Agreement First Amendment"), by and between Company and Employee
(the Original Employment Agreement as amended by the Employment Agreement First
Amendment is referred to herein as the "Employment Agreement"); and
WHEREAS, Company and Employee also entered into that certain letter
agreement (including Exhibit A thereto) dated June 27, 1996 (the "Letter
Agreement"), concerning Employee's participation in Company's Employee
Overriding Royalty Interest Pool Program; and
WHEREAS, Company and Employee desire to amend and restate the
Employment Agreement and the Letter Agreement, and in connection therewith, to
incorporate the provisions of the Letter Agreement, as amended and restated,
into the Employment Agreement, as amended and restated, all as hereinafter
provided;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
1. Employment.
For the period June 27, 1996 through October 31, 1998,
Company hereby employs Employee as an employee of Company to
perform such duties and responsibilities and act in such
capacity as may from time to time be determined by Company.
On and after November 1, 1998, Company hereby employs
Employee to serve as Vice President - Land of Company. The
permanent place of Employee's employment shall be at a
location within a 50-mile radius of the central business
district of the City of Houston, Texas; provided, however,
Employee shall be required to undertake such ordinary and
usual travel as is necessary to properly discharge his duties
and responsibilities hereunder. Employee hereby accepts such
employment, and agrees to serve Company faithfully,
diligently and in a good and workmanlike manner.
2. Term.
The term of employment shall begin on the Effective Date and
end on September 30, 2000, subject, however, to the
provisions of paragraph 3.
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3. Extension and Termination.
3.1 If either Employee or Company elects to terminate
this Agreement at the end of the term stated in
paragraph 2, or at the end of any extended term
hereof as hereinafter provided, notice of the
election to terminate shall be given to the other
party no later than six (6) months before the end of
this Agreement. If no notice is given by either
party, the term, or extended term, of this Agreement
shall be deemed to have been extended for an
additional three (3) months.
3.2 In the event Company elects to terminate this
Agreement as provided in paragraph 3.1 above:
3.2.1 Company shall pay to Employee his salary
and other benefits provided elsewhere in
this Agreement for Employee's services
rendered to Company hereunder through the
end of such term or extended term.
3.2.2 Company shall pay to Employee, on or before
the last day of his employment hereunder, a
lump sum cash payment equal to six (6)
months' salary at Employee's monthly rate
for the month immediately preceding the
month in which Company elects to terminate
this Agreement.
3.2.3 Company shall pay to Employee, on or before
the last day of his employment hereunder, a
lump sum cash payment for all (a) vacation
time carried forward from a previous year
in accordance with paragraph 8, and (b) all
earned and unused vacation time for the
then current year. Earned vacation time
shall, for the purpose of this paragraph,
be calculated by dividing the number of
days in the calendar year which have
transpired by 365, and then multiplying the
result by the number of vacation days to
which Employee is entitled for that year
pursuant to paragraph 8.
3.2.4 If Employee has a leased automobile, the
lease payments on which are guaranteed by
Company, Employee shall have the option, to
be exercised on or before the last day of
his employment hereunder, of assuming the
remaining lease payments and retaining the
automobile, or assigning the lease
agreement to Company in return for
Company's agreement to assume the remaining
lease payments.
3.2.5 Interests vested in Employee under
paragraph 9 of this Agreement shall be
assigned in due course in compliance with
paragraph 9.4. Company and Employee agree
that the promises, covenants and
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undertakings of paragraph 9 shall survive
the termination of employment of Employee
and shall be binding on all assigns of
Company.
3.3 In the event Employee elects to terminate this
Agreement as provided in paragraph 3.1 above:
3.3.1 Employee agrees to serve to the end of the
term, or extended term hereof, unless
waived by Company.
3.3.2 The provisions of paragraphs 3.2.1, 3.2.3,
3.2.4, and 3.2.5 shall be applicable, but
Employee shall not be entitled to the
payment provided for in paragraph 3.2.2.
3.4 Company may at its option consent to a request by
Employee to terminate this Agreement at a time other
than that stated in paragraph 2, as extended, in
which case the date requested by Employee and agreed
to by Company will be the end of the term of this
Agreement and the provisions of paragraph 3.3 shall
be applicable.
3.5 Company may terminate this Agreement for "Cause" (as
hereinafter defined in this paragraph 3.5) upon
written notice of such termination to Employee by
Company. Any termination of this Agreement by
Company for Cause shall be effective thirty (30)
days after written notice of termination for Cause
is given by Company to Employee. If Company
terminates this Agreement for Cause, Company shall
have no liability or obligation to Employee
thereafter under this Agreement except (i) for the
payment of his salary and other benefits through the
month of discharge, prorated in the case of salary
for the month of discharge on a daily basis to the
date of termination, and (ii) that the provisions of
paragraph 3.2.5 shall be applicable. As used in this
Agreement, the term "Cause" means (a) Employee is
found guilty of, admits in writing facts amounting
to, or is held civilly liable for fraud,
embezzlement or dishonesty, (b) Employee is
convicted of a felony involving a crime of moral
turpitude or any other felony if the Board of
Directors of Company in good faith determines that
the continued employment of Employee would be
materially detrimental to Company (in any case which
felony through lapse of time or otherwise is not
subject to appeal), (c) Employee knowingly discloses
trade secrets or confidential Company matters to
unauthorized persons, (d) Employee willfully
breaches or habitually neglects any duties he is
required to perform under the terms of this
Agreement and any such breach or neglect is not
cured within thirty (30) days after Company has
provided Employee with written notice of such breach
or neglect, (e) Employee materially breaches any of
the other material terms of this Agreement and any
such breach is not cured within thirty (30) days
after Company has provided Employee with written
notice of such breach, and (f) the occurrence of an
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action or finding described in paragraph 17, except
as otherwise provided in paragraph 17. The waiver by
Company of a breach of any provision of this
Agreement by Employee shall not operate or be
construed as a waiver of any subsequent breach by
Employee.
3.6 In the event Company terminates this Agreement or
discharges Employee other than as provided in
paragraphs 3.1, 3.4 or 3.5 above, Employee shall be
entitled to receive on the date of such termination
or discharge:
3.6.1 A lump sum cash payment equal to Employee's
salary, at Employee's monthly rate for the
month immediately preceding the month in
which such termination or discharge occurs,
for the unexpired portion of the term or
extended term hereof then in effect.
3.6.2 The payments and other benefits provided
for in paragraphs 3.2.2, 3.2.3, 3.2.4 and
3.2.5 hereof.
3.7 In the event Employee terminates this Agreement for
"Good Reason" (as defined in paragraph 3.9), and
prior to such termination Employee has not
terminated this Agreement under paragraph 3.1
hereof, Employee shall be entitled to receive from
Company on the date of such termination:
3.7.1 A lump sum cash payment equal to Employee's
salary, at Employee's monthly rate in
effect at the effective time of such
termination (but prior to giving effect to
any reduction therein which precipitated
such termination), for the unexpired
portion of the term or extended term hereof
then in effect.
3.7.2 A lump sum cash payment equal to six (6)
months' salary, at Employee's rate in
effect at the time of such termination (but
prior to giving effect to any reduction
therein which precipitated such
termination).
3.7.3 The payments and other benefits provided
for in paragraphs 3.2.3, 3.2.4 and 3.2.5.
3.8 Any termination of this Agreement by Employee for
Good Reason shall be effective thirty (30) days
after written notice of termination for Good Reason
is given by Employee to Company
3.9 As used in this Agreement, the term "Good Reason"
means any one or more of the following events has
occurred:
3.9.1 The assignment to Employee of any duties
materially inconsistent with Employee's
position (including office, title and
reporting
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requirements), authority, duties or
responsibilities with Company or any other
action that results in a material
diminution in, or interference with, such
position, authority, duties or
responsibilities, and any such assignment
or action is not cured within thirty (30)
days after Employee has provided Company
with written notice of such assignment or
action;
3.9.2 The failure to continue to provide Employee
with office space, related facilities and
support personnel (including, but not
limited to, administrative and secretarial
assistance) (a) that are both commensurate
with Employee's responsibilities to and
position with Company and not materially
dissimilar to the office space, related
facilities and support personnel provided
to other employees of Company having
comparable responsibility to that of
Employee or (b) that are physically located
at Company's principal executive offices,
and any such failure is not cured within
thirty (30) days after Employee has
provided Company with written notice of
such failure;
3.9.3 Any (a) reduction in Employee's monthly
salary as established in paragraph 5
(including subsequent increases), (b)
reduction in, discontinuance of, or failure
to allow or continue to allow Employee's
participation in, the incentive
compensation program provided under
paragraph 9 hereof, or (c) reduction in, or
failure to allow or continue Employee's
participation in, any employee benefit plan
or program (except when such benefit plan
or program is replaced with another benefit
plan, program or arrangement that provides
Employee, in the aggregate, with reasonably
comparable benefits) in which Employee is
participating or is eligible to participate
prior to such reduction or failure (other
than as a result of the expiration of such
plan or program), and any such reduction,
discontinuance or failure is not cured
within thirty (30) days after Employee has
provided Company with written notice of
such reduction or failure;
3.9.4 The relocation of Employee's or Company's
principal office and principal place of
Employee's performance of his duties and
responsibilities to a location more than 50
miles outside of the central business
district of the City of Houston, Texas; or
3.9.5 A breach of any material provision of this
Agreement by Company (other than any breach
described in paragraphs 3.9.1, 3.9.2,
3.9.3, and 3.9.4) which is not cured within
thirty (30) days after Employee has
provided Company with written notice of
such breach.
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4. Confidential Information.
4.1 Employee agrees that he will, during the term of
this Agreement, and for a period of four (4) years
from the date of termination of his employment
hereunder, keep secret and confidential and not
disclose to any party not a party to this Agreement,
land or lease data, geological or geophysical data,
well data or any other information which he may
receive as a result of the performance of his duties
hereunder, except when disclosure is necessary for
the performance of his duties to Company hereunder.
This paragraph shall not apply to information that
is in the public domain through no action of
Employee.
4.2 Upon termination of his employment hereunder,
Employee shall promptly deliver to Company all
written information and documents (whether
confidential or not), and all copies thereof,
relating to Company's business and activities and
which are in the possession of or under the control
of Employee.
5. Salary.
5.1 As compensation for his services rendered to Company
hereunder for the period June 27, 1996 -- December
31, 1996, Company shall pay to Employee a salary at
the rate of $7,916.67 per month.
5.2 As compensation for his services rendered to Company
hereunder for the period January 1, 1997 -- December
31, 1997, Company shall pay to Employee a salary at
the rate of $8,166.66 per month.
5.3 As compensation for his services rendered to Company
hereunder for the period January 1, 1998 - October
31, 1998, Company shall pay to Employee a salary at
the rate of $8,750.00 per month.
5.4 As compensation for his services rendered to Company
hereunder on and after November 1, 1998, Company
shall pay to Employee a salary at the rate of
$10,000.00 per month.
5.5 Employee's salary may be reviewed at such times as
may be determined by Company, and Company may at its
discretion increase this salary. Employee's salary
shall be paid in two equal monthly installments,
payable on the fifteenth and last days of each month
(or on the first business day of Company thereafter
if any such payment date is not a business day of
Company), subject to any and all necessary
withholdings and deductions.
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6. Automobile Allowance.
For the period June 27, 1996 through October 31, 1998,
Company agrees to pay an automobile allowance of $175.00 per
month to Employee. On and after November 1, 1998, Company
agrees to pay an automobile allowance of $250.00 per month to
Employee. In addition to such monthly allowance, Company
shall pay, in accordance with Company policy, for all
gasoline, insurance and maintenance required for use of the
automobile.
7. Business Expenses.
Employee is authorized to incur reasonable business expenses
in accordance with Company's policies as may be established
from time to time for promoting the business of Company,
including expenditures for entertainment and travel. Company
shall reimburse Employee from time to time for all such
business expenses in accordance with those policies adopted
by Company which include, but are not limited to, the
requirement that Employee timely present to Company:
7.1 The amount of the expenditure;
7.2 The time, place and description of the expense;
7.3 The business reason for the expenditure and business
benefit derived or expected to be derived therefrom;
and
7.4 The name and occupation of the person or persons
entertained to establish the business relationship
with Company.
With respect to any reimbursable business expense
contemplated above exceeding twenty-five dollars ($25.00),
Employee will furnish documentary evidence of such expense to
Company.
8. Vacation.
Employee shall be entitled to an annual vacation leave of
twenty (20) days per calendar year at full pay. The timing
and use of such vacation days shall be requested by Employee
and approved by Company in accordance with its policy. Up to
five (5) days of vacation leave may be carried over from one
calendar year to the next calendar year. Employee shall not
be entitled to receive payment in lieu of unused vacation
time except as otherwise provided herein. With prior
approval, vacation may be deferred if business matters keep
Employee from taking his normal vacation.
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9. Incentive Compensation.
9.1 Definitions.
An "AFFILIATE" of a specified person is any person that,
directly or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with
that specified person.
"BENEFICIAL OWNERSHIP" of a security shall be determined in
accordance with Rule 13d-3 promulgated under the Securities
Exchange Act of 1934.
A "CHANGE IN CONTROL" shall have occurred if, after the
Effective Date:
(i) Any person or group of affiliated
persons (other than Joint Energy Development
Investments Limited Partnership ("JEDI") or an
affiliate of Enron Corp.) shall become the
beneficial owner, directly or indirectly, of 66-2/3
percent or more of the outstanding Voting Stock of
Newco unless Newco becomes a subsidiary of an entity
which does not have a beneficial owner, directly or
indirectly, of 66-2/3 percent or more of the
outstanding Voting Stock of such entity (other than
JEDI or an affiliate of Enron Corp.); or
(ii) Newco shall approve (x) a merger or
consolidation of Newco with or into any other
person, if as a result any person (other than JEDI
or an affiliate of Enron Corp.) shall become the
beneficial owner, directly or indirectly, of 66-2/3
percent or more of the outstanding Voting Stock of
Newco unless Newco becomes a subsidiary of an entity
which does not have a beneficial owner, directly or
indirectly, of 66-2/3 percent or more of the
outstanding Voting Stock of such entity (other than
JEDI or an affiliate of Enron Corp.), (y) any sale,
lease, exchange or other transfer of two-thirds or
more of the consolidated assets of Newco and its
subsidiaries taken as a whole in one transaction or
a series of related transactions whether by direct
sale of assets, sale of stock of a subsidiary or a
merger involving any subsidiary, or (z) the
dissolution of Newco; or
(iii) Recognizing that the events described
in this clause and the events described in clause
(ii) above may not necessarily be mutually
exclusive, any sale, exchange or other transfer of
two-thirds or more of the outstanding Voting Stock
of Company or any sale, lease, exchange or other
transfer of two-thirds or more of the consolidated
assets of Company and its subsidiaries (if any)
taken as a whole in one transaction or a series of
related transactions.
"COMPANY" means Mariner Energy, Inc., a Delaware corporation.
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"COMPANY GROUP" means any or all of Company or any of its
affiliates, Hardy Oil & Gas plc or any of its affiliates,
Joint Energy Development Investments Limited Partnership or
any of its affiliates, Enron Capital & Trade Resources Corp.
or any of its affiliates, and any and all other persons
paying introduction/placement fees to Joint Energy
Development Investments Limited Partnership or any of its
affiliates or Enron Capital & Trade Resources Corp. or any of
its affiliates for access to one or more Working Interests of
Company.
"COMPANY'S WORKING INTEREST" and "WORKING INTEREST OF
COMPANY" mean, with respect to any Prospect, the Working
Interest in such Prospect acquired by Company and, for
purposes of this paragraph 9, shall include each portion
thereof that Company may subsequently transfer to another
member of Company Group or to any other person.
"CONTROL" means (a) holding, directly or indirectly, more
than 50 percent of the outstanding voting securities of a
non-individual person, (b) having the right, directly or
indirectly, to more than 50 percent of the profits of a
non-individual person, (c) having the right, directly or
indirectly, to more than 50 percent of the assets of a
non-individual person if it is dissolved or (d) having the
contractual power to designate more than 50 percent of the
directors (or individuals exercising similar functions) of a
non-individual person.
"DEVELOPMENT ACREAGE" means the acreage within a Prospect
covering a known or inferred geologic structure upon which
Company and/or its joint working interest owners or a farmee
of Company's Working Interest in a Prospect have drilled a
well capable of commercial oil and/or gas production. Such
acreage shall be deemed to be Development Acreage from the
surface of the earth down through the deepest known
productive horizon. The committee described in paragraph
9.5.1(a), below, shall designate acreage within a Prospect as
Development Acreage based upon the most current
interpretation available at the time of designation.
"EFFECTIVE DATE" means the effective date of this amended and
restated Employment Agreement.
"EXPLORATION AND DEVELOPMENT COSTS" means, with respect to
any Prospect or Prospects, and without duplication, all
direct, capital costs actually incurred by Company Group in
connection with exploration and development of such Prospect
or Prospects, including, without limitation, all costs
incurred in preparing for drilling, drilling, testing,
completing, equipping (including, without limitation,
installation of platforms, facilities and pipelines and dry
hole costs) and recompleting wells, all geological and
geophysical costs, and all leasehold costs (including bonus,
delay rentals and all other costs of acquiring and
maintaining in force the leases, or portions thereof or
undivided interests therein, included in such Prospects).
Exploration and Development Costs shall not include lease
operating expenses or general and administrative expenses of
the Company Group.
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"EXPLORATORY ACREAGE" means the acreage comprising a Prospect
which has not been designated by the committee described in
paragraph 9.5.1(a), below, as either Development Acreage or a
Producing Property Acquisition. Exploratory Acreage shall not
be limited as to depth (except to the extent, if any, to
which Company's Working Interest therein is limited as to
depth).
"FPF/TLP EXPLOITATION PROSPECT" means any Prospect containing
a hydrocarbon reservoir which (a) exhibits a sufficient
likelihood of such hydrocarbon reservoir being economic,
based on commercially producible shows of hydrocarbons in a
well drilled within such reservoir, together with other
geological and geophysical data and interpretations, such
that Company in its reasonable judgment plans to develop such
reservoir, and (b) is reasonably expected by Company to be
exploited and/or developed by utilizing a floating production
facility and/or a tension leg platform.
"FPF/TLP EXPLORATION PROSPECT" means any Prospect (other than
an FPF/TLP Exploitation Prospect) with respect to which
Company reasonably expects to utilize a floating production
facility and/or a tension leg platform in connection with
operations to be conducted on such Prospect.
"INITIAL WELL" means, with respect to a Prospect, the first
well drilled on such Prospect in which Company participates
as a Working Interest owner or with respect to which Company
retains an overriding royalty or other interest in oil and
gas production from such well.
"MAJOR PROSPECT" means any FPF/TLP Exploration Prospect,
FPF/TLP Exploitation Prospect, Subsea Tieback Exploration
Prospect or Subsea Tieback Exploitation Prospect with respect
to which the total amount estimated by Company for
Exploration and Development Costs to be incurred by Company
Group (i.e., net to Company Group's interest) through the end
of the primary development period for the field comprising
such Prospect exceeds $30 million.
"NET PROFIT SHARE LEASE" means an oil and gas lease which
provides for sharing between lessor and lessee of the net
profits or net proceeds, as defined in said lease, from the
sale of oil and/or gas produced therefrom.
"NEWCO" means Mariner Holdings, Inc., a Delaware corporation,
or its successors.
"OVERRIDING ROYALTY INTEREST" means an interest in gross
production of oil and gas under each oil and gas lease (or
portion thereof) included within a Prospect, which interest
(except as herein otherwise provided) shall be free of all
costs of acquisition, exploration, drilling, completing,
equipping, operating and developing any oil and gas produced
from such lease.
A "PARENT" of a specified person is another person that
controls such specified person directly or indirectly through
one or more intermediaries.
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"PAYOUT" means, for each Initial Well and each subsequent
well drilled on a Prospect, the point in time at which the
revenue to Company or its assigns from its interest in oil
and gas production from such well (after deduction of
Company's or its assigns' prorata part of the burden of (i)
all landowners' royalties, overriding royalties, net profits
interests, production payments or other burdens upon,
measured by or payable out of such production and (ii) all
applicable ad valorem, production, severance, sales,
gathering, windfall profits excise and similar taxes) equals
the sum incurred by or for the account of Company or its
assigns (x) in preparing for drilling, drilling, testing,
completing, equipping (including, without limitation,
installation of platforms, facilities and pipelines),
operating, reworking and recompleting the well, and marketing
the production therefrom, and (y) for such well's allocable
share of geological and geophysical costs, leasehold costs
and other common costs. "Leasehold costs" shall mean payments
for bonus, delay rentals, and all other costs of acquiring
from the landowners (or, in the case of an acquisition by
Company (but not any assignee of Company), from predecessors
in title to such leases) and maintaining in force the leases
allocated to the well. Leases "allocated" to a well shall
mean the leases or portions thereof or undivided interests
therein to which production from a well is attributed,
whether on a lease or unit basis. With respect to each such
well, "common costs" shall mean capital costs that are
attributable to (a) such Prospect as a whole or (b) such well
and one or more other wells (but not all wells) on such
Prospect and shall include, without limitation, costs of
drilling, plugging and abandoning non-productive wells on
such Prospect. Each such well's allocable share of common
costs shall be determined by Company in any manner it deems
appropriate from time to time.
The expression "2.5 TIMES PAYOUT" means, for each Initial
Well and each subsequent well drilled on a Prospect, the
point in time at which such revenue to Company or its assigns
from its interest in oil and gas production from such well,
after such deductions mentioned above, equals the product of
2.5 times the sum incurred by or for the account of Company
or its assigns (x) in preparing for drilling, drilling,
testing, completing, equipping, operating, reworking and
recompleting the well, and marketing the production
therefrom, and (y) for such well's allocable share of
geological and geophysical costs, leasehold costs and other
common costs as mentioned above.
A "PERSON" is an individual, a corporation, a trust, a
partnership, a limited liability company, an association or
any other entity.
"PRODUCING PROPERTY ACQUISITION" means a lease or leases, or
portions thereof or undivided interests therein, acquired by
Company during the term or extended term of this Agreement
principally for the value of existing oil and gas production
thereon and further development of oil and gas reserves
considered proved under such lease or leases at the time of
acquisition. A Producing Property Acquisition shall include
acquisition of such leasehold interests even though Company
may have previously acquired interests in some or all of the
same leases as a Prospect acquisition (i.e.,
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prior to the time such leases were considered to contain
proved oil and gas reserves). Company may in its sole
discretion designate a Producing Property Acquisition in
whole or in part as a Prospect.
"PROSPECT" means the lease or leases, or portions thereof or
undivided interests therein, acquired by Company within the
United States and its coastal waters while Employee is
employed by Company and during the term or extended term of
this Agreement covering lands which in the sole opinion of
Company may contain one or more hydrocarbon accumulations
capable of being commercially produced. For purposes of this
definition of Prospect, the acquisition of a lease or leases
shall mean the acquisition by Company of legal or beneficial
rights or interests in a lease or leases, including (without
limitation) contractual rights to acquire or earn a lease or
leases (whether by farmout agreement or otherwise, and
whether such contractual rights are subject to certain
conditions such as the drilling or completion of a commercial
well, and without regard to the results of the drilling or
completion of any such well under such contract). A Prospect
shall not include a prospect acquired by Company by merger or
consolidation of Company with or into another entity unless
such prospect is so designated by Company. A Prospect shall
not include a Producing Property Acquisition unless such
Prospect is so designated by Company, and shall not include
leases included in a Prospect under previous Employee
Incentive Compensation Plans. All Prospects shall be deemed
to be without depth limitation unless Company designates
specified depths only at the time said Prospect is initially
acquired by Company. Notwithstanding the date or dates on
which leases in a Prospect are actually acquired by Company,
solely for purposes of determining the employees of Company
who are entitled to receive an Overriding Royalty Interest
therein, such leases, or portions thereof or undivided
interests therein, shall be deemed to have been acquired by
Company as of the date on which Company's management approved
such Prospect acquisition. In furtherance of the foregoing,
if any lease or leases, or portions thereof or undivided
interests therein, acquired by Company on or after April 18,
1996, but prior to the commencement of the term of this
Agreement, would constitute a "Prospect" under the foregoing
definition but for the fact that such lease or leases, or
portions thereof or undivided interests therein, were not
acquired by Company during the term of this Agreement, the
same shall, nevertheless, be deemed to have been acquired by
Company as of the commencement of the term of this Agreement
and shall constitute a Prospect for purposes of this
paragraph 9.
"SUBSEA TIEBACK EXPLOITATION PROSPECT" means any Prospect
containing a hydrocarbon reservoir which (a) exhibits a
sufficient likelihood of such hydrocarbon reservoir being
economic, based on commercially producible shows of
hydrocarbons in a well drilled within such reservoir,
together with other geological and geophysical data and
interpretations, such that Company in its reasonable judgment
plans to develop such reservoir, and (b) is reasonably
expected by Company to be exploited and/or developed by
utilizing a subsea tieback system.
AMENDED AND RESTATED EMPLOYMENT
AGREEMENT--THOMAS E. YOUNG
-12-
13
"SUBSEA TIEBACK EXPLORATION PROSPECT" means any Prospect
(other than a Subsea Tieback Exploitation Prospect) with
respect to which Company reasonably expects to utilize a
subsea tieback system in connection with operations to be
conducted on such Prospect.
A "SUBSIDIARY" of a specified person is an entity controlled
by such person directly or indirectly through one or more
intermediaries.
"VOTING STOCK" means shares of capital stock of the specified
entity the holders of which are entitled to vote for election
of directors thereof.
"WORKING INTEREST" means the leasehold working interest, or
undivided interest therein, under an oil and gas lease which
obligates the owner thereof to bear his percentage of the
costs and expenses relating to the maintenance and
development of, and operations relating to, such lease and
the well or wells associated therewith.
9.2 Employee's Property Interest.
9.2.1 Subject to the other provisions of this paragraph 9,
Employee shall own, be immediately vested with, and
be entitled to receive the benefits of an Overriding
Royalty Interest equal to an undivided percentage of
Company's Working Interest, more specifically
described below, in each well on a Prospect and the
lease or leases allocated thereto, as follows:
EMPLOYEE: Thomas E. Young
OVERRIDING ROYALTY INTEREST
IN
FPF/TLP EXPLORATION PROSPECTS,
FPF/TLP EXPLOITATION PROSPECTS,
SUBSEA TIEBACK EXPLORATION PROSPECTS
AND
SUBSEA TIEBACK EXPLOITATION PROSPECTS
Group Time Period Before Payout After Payout
----- ----------- ------------- ------------
Groups XIV-XXII 4/18/96-12/31/98 0.051562 0.206249
Group XXIII 1/1/99 and Thereafter 0.063020 0.252083
OVERRIDING ROYALTY INTEREST
IN
ALL OTHER PROSPECTS
Group Time Period Before Payout After Payout
----- ----------- ------------- ------------
Groups XIV-XXII 4/18/96-12/31/98 0.05625 0.22500
Group XXIII 1/1/99 and Thereafter 0.06875 0.27500
AMENDED AND RESTATED EMPLOYMENT
AGREEMENT--THOMAS E. YOUNG
-13-
14
At 7:00 a.m. on the first day of the month following the
month in which Payout of such well occurs, the Overriding
Royalty Interest shall increase from the applicable
before-Payout percentage to the applicable after-Payout
percentage. Except as herein otherwise expressly provided,
references in this paragraph 9 to Employee's "Overriding
Royalty Interest" with respect to any Prospect shall mean the
applicable before-Payout and after-Payout percentages of
Company's Working Interest in such Prospect as set forth
above.
9.2.2 Under previous Employee Incentive Compensation Plans,
Employee has received or is entitled to receive overriding
royalty interests ("Existing ORIs") in certain prospects (the
"Existing Prospects"). The Existing ORIs are equal to an
undivided percentage of Company's Working Interest, more
specifically described below by Group and Time Period during
which Company acquired such Existing Prospects, in each well
on an Existing Prospect and the lease or leases allocated
thereto, as follows:
EMPLOYEE: Thomas E. Young
EXISTING ORI
------------
GROUP DATES BEFORE PAYOUT AFTER PAYOUT
- --------- ---------------- ------------- ------------
GROUP I 4/1/87-9/3/87 -- --
GROUP II 9/4/87-10/31/87 -- --
GROUP III 11/1/87-7/16/88 -- --
GROUP IV 7/17/88-12/15/88 -- --
GROUP V 12/16/88-3/31/89 -- --
GROUP VI 4/1/89-9/24/90 -- --
GROUP VII 9/25/90-6/30/91 -- --
GROUP VIII 7/1/91-9/30/91 0.03750% 0.1500%
GROUP IX 10/1/91-2/14/93 0.05000% 0.2000%
GROUP X 2/15/93-6/30/93 0.05000% 0.2000%
GROUP XI 7/1/93-4/29/94 0.05000% 0.2000%
GROUP XII 4/30/94-3/31/95 0.05000% 0.2000%
GROUP XIII 4/1/95-4/17/96 0.05000% 0.2000%
The provisions of paragraphs 9.4, 9.5, 9.6 and 9.7 shall
apply to the Existing ORIs in the Existing Prospects as fully
as such provisions apply to any Overriding Royalty Interest
in a Prospect to which Employee is entitled under this
Agreement.
AMENDED AND RESTATED EMPLOYMENT
AGREEMENT--THOMAS E. YOUNG
-14-
15
Mention is made that, effective June 1, 1996, Company
repurchased certain of the Existing ORIs from Employee as
contemplated by the Stockholders' Agreement referred to in
paragraph 9.5.1(a).
9.3 Governmental Filings.
Company will assist Employee in Filing an 83b Election with
the Internal Revenue Service on each Prospect, on a prospect
by prospect or lease by lease basis, as the case may be,
denoting the transfer to Employee of the Overriding Royalty
Interest and stating the value of such interest for the
purposes at the time the interest is acquired.
9.4 Assignment of Overriding Royalty Interest.
Except as otherwise expressly provided in paragraphs 9.4.8
and 9.4.9, Employee shall not be entitled to obtain
recordable assignments of his interest under this paragraph 9
until his completion of three years of employment by Company
and, except as otherwise expressly provided herein, Employee
shall forfeit ownership of such interest if Employee's
employment is terminated by Company pursuant to paragraph 3.5
or by Employee without Good Reason as defined in paragraph
3.9, prior to the completion of such three years of
employment. Upon completion of three years of employment of
Employee by Company, Employee's ownership of interests
theretofore or thereafter transferred to him pursuant to this
Agreement will no longer be subject to forfeiture, and
assignments will be made in accordance with this paragraph
9.4. Subject to the other provisions of this paragraph 9,
Employee shall be entitled to the revenue arising from his
Overriding Royalty Interest whether or not he is entitled to
a recordable assignment. Subject to the foregoing provisions
of this paragraph 9.4 and to the provisions of paragraph 9.5,
as soon as practicable after the end of each calendar quarter
during the term or extended term of this Agreement, Employee
shall be entitled to receive recordable assignments of his
Overriding Royalty Interest in a lease or leases (or portions
thereof) acquired by Company in a Prospect during such
calendar quarter. If Employee's employment is terminated by
Company pursuant to paragraph 3.5 or by Employee without Good
Reason as defined in paragraph 3.9, during any such calendar
quarter, Employee shall not be entitled to receive recordable
assignments that would otherwise have been due under this
paragraph in respect of any lease or leases (or portions
thereof) acquired by Company in a Prospect during such
calendar quarter or thereafter (and Employee shall not own,
be vested with or be entitled to receive the benefits of any
Overriding Royalty Interest that would have been granted by
such recordable assignments) unless the termination is at the
end of the term or extended term of this Agreement. As soon
as practicable after the end of each such calendar quarter,
Company shall provide Employee with the following:
AMENDED AND RESTATED EMPLOYMENT
AGREEMENT--THOMAS E. YOUNG
-15-
16
(a) A recordable assignment of his Overriding
Royalty Interest in the leases (or portions
thereof) acquired by Company in each
Prospect during such calendar quarter.
(b) A plat outlining the geographical limits of
each such Prospect. Company shall review
each Prospect plat each calendar quarter in
light of drilling activity on or near the
Prospect, and expand the plat boundary if
new leases are acquired which Company
believes to contain a prospective
hydrocarbon accumulation that is located on
the same geological feature as such
Prospect. Employee shall be entitled to his
Overriding Royalty Interest in any lease
acquired by Company within the Prospect
plat boundary (and, to the extent provided
in paragraph 9.7.2, in any renewal,
extension or new lease within the Prospect
plat boundary) for as long as such lease
within the boundary remains in effect.
9.4.1 Upon execution and delivery of such recordable
assignment to Employee, Company shall record the
assignment.
9.4.2 If, prior to the drilling of the Initial Well on a
Prospect or thereafter, Company believes in good
faith that there is a substantial likelihood that it
may be necessary to exercise its discretion under
paragraph 9.5 with respect to adjustment of
Employee's Overriding Royalty Interest in leases
included within such Prospect, Company may defer
delivery of a recordable assignment of Employee's
Overriding Royalty Interest pending a determination
under paragraph 9.5.
9.4.3 Upon request by Company, Employee agrees to execute
and deliver any and all transfer orders, division
orders and other documents as may be necessary or
appropriate to cause all revenue attributable to his
interest in a well to be paid to Company on his
behalf until delivery by Company to Employee of a
recordable assignment of his interest in such well
pursuant to this paragraph 9. In such event, Company
agrees promptly to process such funds and pay all
funds due Employee at the same time third parties
are paid revenue distributions from such well by
Company. After an assignment is delivered to
Employee, Company shall promptly give appropriate
notice to the disbursing entities in order to
facilitate direct payment to Employee of all revenue
attributable to his interest in such well.
9.4.4. Subject to the last sentence of this paragraph
9.4.4, Company or its assigns shall quarterly
perform Payout calculations on each well which has
not reached Payout in every Prospect so that
payments to Employee may be made on a proper before
payout/after payout basis on each well in every
Prospect. Company or its assigns shall prepare a
quarterly Payout statement for each well within each
Prospect and shall provide Employee a copy of said
AMENDED AND RESTATED EMPLOYMENT
AGREEMENT--THOMAS E. YOUNG
-16-
17
quarterly Payout statements within ninety (90) days
following the end of the quarter. If Company or its
assigns fails to provide said quarterly Payout
statements for any such well(s) to at least five (5)
employees (whether or not such employees include
Employee) who are entitled to receive an Overriding
Royalty Interest in such well(s) pursuant to this
Agreement and/or other employment agreements with
Company for a period of four (4) consecutive
quarters, any such employee (including without
limitation, Employee) may give Company written
notice of said failure. If Company or its assigns
does not provide the overdue quarterly Payout
statements to each employee entitled to same within
thirty (30) days following receipt of such notice,
all wells within such Prospect which had previously
been considered before Payout pursuant to paragraph
9.2 shall be deemed to be after Payout pursuant to
paragraph 9.2 as of the first day of the month
following the month in which the earliest delinquent
quarterly Payout statement should have been
provided. When Payout status is reached on a well,
Company or its assigns shall deliver notice of such
event to Employee, the operator of such well and
each purchaser of production from such well and
Company or its assigns shall direct such operator or
purchaser of production (as appropriate) to disburse
future revenues attributable to Employee's and
Company's respective interests in such well on an
after-Payout basis. Notwithstanding the foregoing,
if Employee's Overriding Royalty Interest in any
such well is adjusted pursuant to any provisions of
this paragraph 9 so as to be the same percentage
before and after Payout of such well, then the
provisions of this paragraph 9.4.4 shall no longer
apply from and after the date of such adjustment.
9.4.5 Should Employee be married or divorced at such time
as Employee earns the right to have an Overriding
Royalty Interest assigned to him hereunder, Company
shall have no obligation to make assignments to
Employee's spouse/or former spouse. Any division of
community property shall be the responsibility of
Employee.
9.4.6 All interests assigned by Company to Employee shall
be subject to the terms, conditions and provisions
of (a) any joint operating agreement at any time
theretofore or thereafter entered into by Company or
its assigns with other Working Interest owners
covering any of the leases affected by the
Overriding Royalty Interest herein provided for, and
(b) any farm-out or other agreements under which
Company acquires or may acquire its interest in the
leases; including, particularly, by way of
illustration and not by way of limitation, (i) any
provision of an applicable farm-out agreement
requiring reduction of Company's interest in the
leases after "payout" of an earning well or wells
thereunder, in which event Employee's Overriding
Royalty in such leases shall be proportionately
reduced, and (ii) any provision requiring forfeiture
of interest for nonparticipation, recoupment of
multiple recovery costs and the like to the extent
that Company would forfeit its Working
AMENDED AND RESTATED EMPLOYMENT
AGREEMENT--THOMAS E. YOUNG
-17-
18
Interest for nonparticipation either forever or
until recoupment of drilling and/or operating costs
by the third parties electing to participate, or
such other like reason; and in the event any such
provisions come into effect, Employee's Overriding
Royalty in such leases shall be suspended until such
time, if ever, as such multiple recovery of costs by
the participating leasehold owners has been
recovered or such other cause for suspension is
removed and such Working Interest of Company is
reinstated, at which time Employee's Overriding
Royalty shall be so reinstated.
All interests assigned by Company to Employee shall
be subject to the terms, conditions and provisions
of the leases, any assignments and/or subleases
thereof theretofore made or agreed to be made by
Company, and any amendments or modifications of the
leases, theretofore or thereafter made, and Employee
agrees that any such amendments or modifications may
be made without the consent or joinder of Employee.
9.4.7 Company or its assigns shall not have the right to
sell, assign, farmout, convey or otherwise encumber
Employee's Overriding Royalty Interest, except as
otherwise provided in this paragraph 9.
9.4.8(a) Except as otherwise provided in the fifth
sentence of paragraph 9.4, and
notwithstanding anything (other than such
fifth sentence of paragraph 9.4) contained
herein to the contrary, if, after the
Effective Date and during the term or
extended term hereof, there shall have been
a Change in Control, then Employee shall be
entitled to receive recordable assignments
of his Overriding Royalty Interest,
adjusted in the manner described
hereinbelow, in any lease or leases (or
portions thereof or undivided interests
therein) theretofore acquired by Company
and not yet assigned during the term or
extended term hereof and, upon subsequent
acquisition by Company, in any lease or
leases (or portions thereof or undivided
interests therein) thereafter acquired by
Company, in all Prospects acquired by
Company prior to such Change in Control
(without regard to whether or not Employee
has then completed three years of
employment by Company). Said Overriding
Royalty Interest shall be assigned in the
following manner:
Employee's after-Payout interest shall be
reduced to one-half of Employee's
after-Payout interest stated in paragraph
9.2 (as such after-Payout interest stated
in paragraph 9.2 may have previously been
reduced pursuant to other provisions of
this paragraph 9) and Employee's
before-Payout interest shall be increased
AMENDED AND RESTATED EMPLOYMENT
AGREEMENT--THOMAS E. YOUNG
-18-
19
to twice Employee's before-Payout interest
stated in paragraph 9.2 (as such
before-Payout interest stated in paragraph
9.2 may have previously been reduced
pursuant to other provisions of this
paragraph 9) with the result that
Employee's interests before and after
Payout shall be equal.
9.4.8(b) Except as otherwise provided in the fifth
sentence of paragraph 9.4, and
notwithstanding anything (other than such
fifth sentence of paragraph 9.4) contained
herein to the contrary, if, after the
Effective Date and during the term or
extended term hereof, Company's Working
Interest in any Prospect is sold,
transferred or conveyed to the holder of
any indebtedness of Company or of Newco or
of any parent or subsidiary of Company or
Newco, or to any unaffiliated third party,
by or pursuant to a foreclosure of any
mortgage or other security interest therein
securing such indebtedness or any part
thereof or by transfer or conveyance in
lieu of such foreclosure, then Employee
shall be entitled to receive, prior to the
consummation of such sale, transfer or
conveyance, a recordable assignment of his
Overriding Royalty Interest, adjusted in
the manner described in paragraph 9.4.8(a),
in any lease or leases (or portions thereof
or undivided interests therein) theretofore
acquired by Company and not yet assigned
during the term or extended term hereof
and, upon subsequent acquisition by
Company, in any lease or leases (or
portions thereof or undivided interests
therein) thereafter acquired by Company, in
all Prospects acquired by Company prior to
such sale, transfer or conveyance (without
regard to whether or not Employee has then
completed three years of employment by
Company).
9.4.9 Except as otherwise provided in the fifth sentence
of paragraph 9.4, and notwithstanding anything
(other than such fifth sentence of paragraph 9.4)
contained herein to the contrary, if, during the
term or extended term hereof, all or substantially
all of Company's Working Interests in all or
substantially all Exploratory Acreage then owned by
Company are sold, transferred or conveyed to an
unaffiliated third party, then Employee shall be
entitled to receive, prior to the consummation of
such sale, transfer or conveyance, recordable
assignments of his Overriding Royalty Interest,
adjusted in the manner described in paragraph
9.4.8(a), in all leases (or portions thereof or
undivided interests therein) that cover and include
such Exploratory Acreage not yet assigned during the
term or extended term hereof (without regard to
whether or not Employee has then completed three
years of employment by Company).
AMENDED AND RESTATED EMPLOYMENT
AGREEMENT--THOMAS E. YOUNG
-19-
20
9.5 Retained Company Discretion
9.5.1 Employee and Company recognize that in instances
where all or a portion of Company's Working Interest
in a lease or leases will be sold or farmed out to
unaffiliated third parties, Employee's Overriding
Royalty Interest might in some circumstances have a
negative effect on the marketability of Company's
Working Interest to third parties. In such cases,
Company will in good faith attempt to transfer
Company's Working Interest subject to Employee's
Overriding Royalty Interest provided for in this
paragraph 9; provided, however, if, in Company's
good faith judgment, Company's Working Interest
cannot be sold or farmed out subject to Employee's
Overriding Royalty Interest, Company may elect to
adjust Employee's Overriding Royalty Interest as
hereinafter provided.
9.5.1(a) The Board of Directors of Company shall
designate a committee of not less than
three individual persons employed by
Company, at least half of whom has been
granted an employee Overriding Royalty
Interest by Company, to exercise discretion
on behalf of Company in reducing or
modifying, pursuant to this paragraph 9.5.1
only, the Overriding Royalty Interests
provided for in this paragraph 9; provided,
however, that the Board of Directors of
Company shall have the right to designate a
non-voting member of such committee, who
may be a director of Company or otherwise,
and such member shall have the right to
participate in all meetings of such
committee (and shall receive reasonable
advance notice of any such meetings) and
shall be entitled to the same information
as is available to the other members of the
committee. Such committee shall make all
decisions under this paragraph 9.5.1
subject to obtaining the approval of the
Board of Directors of Company where such
approval is required under the provisions
of this paragraph 9.5.1. Any decision made
by the committee shall require the approval
of a majority of the members of the
committee. Any change to this paragraph
9.5.1(a) shall require the approval of the
Board of Directors of Company and a
majority of the Management Directors (as
that term is defined in the Stockholders'
Agreement dated April 2, 1996, between
Enron Capital & Trade Resources Corp.,
Newco and certain employees of and
consultants to Company, as it may be
amended and/or restated from time to time)
who became stockholders pursuant to Section
B.1 of that agreement.
AMENDED AND RESTATED EMPLOYMENT
AGREEMENT--THOMAS E. YOUNG
-20-
21
9.5.1(b) With respect to any Prospect on which no
initial Well has been drilled and no
assignments of Overriding Royalty Interests
have been made to Employee, the committee
may modify or reduce the Overriding Royalty
Interest of Employee in leases included
within such Prospect in any manner
necessary in the good faith judgment of the
committee to make an interest in such
Prospect saleable to any person not in
Company Group; provided, however, in
connection with any sale by Company of an
interest in such Prospect to any such
person, Employee's Overriding Royalty
Interest shall be reduced to zero unless
the committee recommends a lesser reduction
and such recommendation is approved by the
Board of Directors of Company. Such
modification or reduction shall apply only
to the interest sold to such a person, and
shall not affect the interest retained by
Company. Any reduction or exercise of
discretion by Company under this paragraph
shall be applied proportionately to all
participants who are entitled to receive
from Company an Overriding Royalty Interest
in leases included within such Prospect.
9.5.1(c) With respect to any Prospect on which the
Initial Well has been drilled and which
Prospect has not been determined by Company
to be capable of producing oil and/or gas,
should Company desire to sell all or any
portion of its Working Interest in such
Prospect to unaffiliated third parties, the
committee may adjust the Overriding Royalty
Interest of Employee in leases included
within such Prospect in the following
manner:
Employee's after-Payout interest shall be
reduced to one-half of Employee's
after-Payout interest stated in paragraph
9.2 (as such after-Payout interest stated
in paragraph 9.2 may have previously been
reduced pursuant to other provisions of
this paragraph 9) and Employee's
before-Payout interest shall be increased
to twice Employee's before-Payout interest
stated in paragraph 9.2 (as such
before-Payout interest stated in paragraph
9.2 may have previously been reduced
pursuant to other provisions of this
paragraph 9), with the result that
Employee's interests before and after
Payout shall be equal.
Such adjustment shall apply only to the
interest sold to unaffiliated third
parties, and shall not affect the interest
retained by Company. Any exercise of
discretion by
AMENDED AND RESTATED EMPLOYMENT
AGREEMENT--THOMAS E. YOUNG
-21-
22
Company under this paragraph shall be
applied in like manner to all participants
who are entitled to receive from Company an
Overriding Royalty Interest in leases
included within such Prospect.
Notwithstanding anything contained herein
to the contrary, if, after the Effective
Date and during the term or extended term
hereof, there shall have been a Change in
Control, then neither Company nor the
person acquiring the control shall have any
right to make the adjustment described
above in this paragraph 9.5.1(c).
Notwithstanding anything contained herein
to the contrary, if, after the Effective
Date and during the term or extended term
hereof, Company's Working Interest in any
Prospect is sold, transferred or conveyed
to the holder of any indebtedness of
Company or of Newco or of any parent or
subsidiary of Company or Newco, or to any
unaffiliated third party, by or pursuant to
a foreclosure of any mortgage or other
security interest therein securing such
indebtedness or any part thereof or by
transfer or conveyance in lieu of such
foreclosure, then such holder or other
third party shall not have any right to
make the adjustment described above in this
paragraph 9.5.1.(c).
9.5.1(d) With respect to any Prospect which has not
been determined by Company to be capable of
producing oil and/or gas, and regardless of
whether or not the Initial Well has been
drilled thereon, should Company desire to
farmout all or any portion of its Working
Interest in such Prospect to unaffiliated
third parties, the committee shall (unless
the committee recommends otherwise and the
Board of Directors approves such
recommendation) adjust the Overriding
Royalty Interest of Employee in leases
included within such Prospect in the
following manner:
Employee's Overriding Royalty Interest
shall be calculated by multiplying
Employee's percentage interests stated in
paragraph 9.2 above (as such interests may
have previously been reduced pursuant to
other provisions of this paragraph 9) by
Company's overriding royalty interest set
forth in the particular farmout agreement
for said Prospect, for and during the
period of time in which Company receives
such overriding royalty interest.
AMENDED AND RESTATED EMPLOYMENT
AGREEMENT--THOMAS E. YOUNG
-22-
23
To the extent, if any, that Company's
overriding royalty interest set forth in
such farmout agreement converts to a
Working Interest in such Prospect (whether
by election of Company or otherwise), then,
from and after such conversion, Employee's
Overriding Royalty Interest shall be based
upon such Working Interest of Company
pursuant to paragraph 9.2 above; provided,
however, if pursuant to such farmout
agreement, only a portion of Company's
overriding royalty interest converts to a
Working Interest and Company retains,
following such conversion, some overriding
royalty interest in addition to such
Working Interest, Employee shall be
entitled to receive, as part of Employee's
Overriding Royalty Interest based upon
Company's Working Interest, an interest
equal to the percentage stated in paragraph
9.2 above (as such interest may have
previously been reduced pursuant to other
provisions of this paragraph 9) multiplied
by Company's retained overriding royalty
interest.
Such adjustment shall apply only to the
interest farmed out to unaffiliated third
parties, and shall not affect the interest
retained by Company. Any exercise of
discretion by Company under this paragraph
shall be applied in like manner to all
participants who are entitled to receive
from Company an Overriding Royalty Interest
in leases included within such Prospect.
With respect to each well drilled on the
Prospect by a farmee of Company's Working
Interest and solely for the purpose of this
paragraph 9.5.1 (d), Payout shall be
defined as the point in time at which the
revenue to Company from its interest in oil
and gas production from such well (after
deduction of Company's prorata part of the
burden of (i) all landowners' royalties,
overriding royalties, net profits
interests, production payments or other
burdens upon, measured by or payable out of
such production and (ii) all applicable ad
valorem, production, severance, sales,
gathering, windfall profits excise and
similar taxes) equals the sum incurred by
or for the account of Company (x) in
preparing for drilling, drilling, testing,
completing, equipping (including, without
limitation, installation of platforms,
facilities and pipelines), operating,
reworking and recompleting the well, and
marketing the production therefrom, and (y)
for such well's allocable share of
geological and geophysical costs, leasehold
costs, all other costs of acquiring and
maintaining in force the leases allocated
to the well and other common costs. Leases
AMENDED AND RESTATED EMPLOYMENT
AGREEMENT--THOMAS E. YOUNG
-23-
24
"allocated" to a well and "common costs"
shall have the respective meanings ascribed
thereto in the definition of "Payout" set
forth in paragraph 9.1.
Notwithstanding anything contained herein
to the contrary, if, after the Effective
Date and during the term or extended term
hereof, there has been a Change in Control,
then neither Company nor the person
acquiring the control shall have any right
to make the adjustment described above in
this paragraph 9.5.1(d).
Notwithstanding anything contained herein
to the contrary, if, after the Effective
Date and during the term or extended term
hereof, Company's Working Interest in any
Prospect is sold, transferred or conveyed
to the holder of any indebtedness of
Company or of Newco or of any parent or
subsidiary of Company or Newco, or to any
unaffiliated third party, by or pursuant to
a foreclosure of any mortgage or other
security interest therein securing such
indebtedness or any part thereof or by
transfer or conveyance in lieu of such
foreclosure, then such holder or other
third party shall not have any right to
make the adjustment described above in this
paragraph 9.5.1.(d).
9.5.1(e) With respect to any Prospect on which the
Initial Well has been drilled and which
Prospect has been determined by Company to
be capable of producing oil and/or gas,
should Company desire to sell or farmout
all or any portion of its Working Interest
in such Prospect to unaffiliated third
parties, the committee shall categorize
geographical areas of the leases comprising
the Prospect into Development Acreage and
Exploratory Acreage.
Any sale or farmout of Company's Working
Interest in any such Development Acreage
will be made subject to Employee's
Overriding Royalty Interest provided for in
paragraph 9.2 hereinabove (as such interest
may have previously been adjusted pursuant
to other provisions of this paragraph 9);
provided, however, with respect to each
well drilled on the Prospect by a purchaser
or farmee or their assigns of Company's
Working Interest, and solely for the
purpose of this paragraph 9.5.1(e), Payout
shall be defined as the point in time at
which the revenue to purchaser or farmee or
their assigns from its or their interest
purchased or farmed in from Company in oil
and/or gas production from such well
AMENDED AND RESTATED EMPLOYMENT
AGREEMENT--THOMAS E. YOUNG
-24-
25
(after deduction of purchaser's or farmee's
prorata part of the burden of (i) all
landowners' royalties, overriding
royalties, net profits interests,
production payments or other burdens upon,
measured by or payable out of such
production and (ii) all applicable ad
valorem, production, severance, sales,
gathering, windfall profits excise and
similar taxes) equals the sum incurred by
or for the account of purchaser or farmee
or their assigns in preparing for drilling,
drilling, testing, completing, equipping,
operating, reworking and recompleting the
well, and marketing the production
therefrom.
With respect to Company's Working Interest
in Exploratory Acreage to be sold by
Company, the committee may adjust the
Overriding Royalty Interest of Employee in
the following manner:
Employee's after-Payout interest shall be
reduced to one-half of Employee's
after-Payout interest stated in paragraph
9.2 (as such after-Payout interest stated
in paragraph 9.2 may have previously been
reduced pursuant to other provisions of
this paragraph 9) and Employee's
before-Payout interest shall be increased
to twice Employee's before-Payout interest
stated in paragraph 9.2 (as such
before-Payout interest stated in paragraph
9.2 may have previously been reduced
pursuant to other provisions of this
paragraph 9), with the result that
Employee's interests before and after
Payout shall be equal.
With respect to Company's Working Interest
in Exploratory Acreage to be farmed out by
Company, the committee shall (unless the
committee recommends otherwise and the
Board of Directors approves such
recommendation) adjust the Overriding
Royalty Interest of Employee in the
following manner:
Employee's Overriding Royalty Interest
shall be calculated by multiplying
Employee's percentage interests stated in
paragraph 9.2 above (as such interests
stated in paragraph 9.2 may have previously
been reduced pursuant to other provisions
of this paragraph 9) by Company's
overriding royalty interest set forth in
the particular farmout agreement for said
AMENDED AND RESTATED EMPLOYMENT
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Prospect, for and during the period of time
in which Company receives such overriding
royalty interest.
To the extent, if any, that Company's
overriding royalty interest set forth in
such farmout agreement converts to a
Working Interest in such Prospect (whether
by election of Company or otherwise), then,
from and after such conversion, Employee's
Overriding Royalty Interest shall be based
upon such Working Interest of Company
pursuant to paragraph 9.2 above; provided,
however, if pursuant to such farmout
agreement, only a portion of Company's
overriding royalty interest converts to a
Working Interest and Company retains,
following such conversion, some overriding
royalty interest in addition to such
Working Interest, Employee shall be
entitled to receive, as part of Employee's
Overriding Royalty Interest and in addition
to such Overriding Royalty Interest based
upon Company's Working Interest, an
interest equal to the percentage stated in
paragraph 9.2 above (as such interest may
have previously been reduced pursuant to
other provisions of this paragraph 9)
multiplied by Company's retained overriding
royalty interest.
Such adjustment shall apply only to the
interest sold or farmed out to unaffiliated
third parties, and shall not affect the
interest retained by Company. Any exercise
of discretion by Company under this
paragraph shall be applied in like manner
to all participants who are entitled to
receive from Company an Overriding Royalty
Interest in leases included within such
Prospect.
Notwithstanding anything contained herein
to the contrary, if, after the Effective
Date and during the term or extended term
hereof, there shall have been a Change in
Control, then neither Company nor the
person acquiring the control shall have any
right to make the adjustment described
above in this paragraph 9.5.1(e).
Notwithstanding anything contained herein
to the contrary, if, after the Effective
Date and during the term or extended term
hereof, Company's Working Interest in any
Prospect is sold, transferred or conveyed
to the holder of any indebtedness of
Company or of Newco or of any parent or
subsidiary of Company or Newco, or to any
unaffiliated third party, by or pursuant to
a foreclosure of any mortgage or other
security interest therein securing such
indebtedness or any part thereof
AMENDED AND RESTATED EMPLOYMENT
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or by transfer or conveyance in lieu of
such foreclosure, then such holder or other
third party shall not have any right to
make the adjustment described above in this
paragraph 9.5.1.(e).
If any of the events set forth in the two
immediately preceding sentences hereof
should occur, such that the adjustment
described above in this paragraph 9.5.1(e)
with respect to the Overriding Royalty
Interest of Employee in leases in such
Exploratory Acreage is precluded from
occurring as provided above, then, with
respect to each well drilled on such
Exploratory Acreage by a purchaser or
farmee or their assigns of Company's
Working Interest, and solely for purposes
of this paragraph 9.5.1(e), Payout shall be
defined as set forth above in this
paragraph 9.5.1(e).
9.5.2 Within sixty (60) days after the end of each fiscal
year of Company, Company may in its sole discretion
elect to reduce the Overriding Royalty Interest set
forth in paragraph 9.2 with respect to Prospects
subject to this Agreement that were acquired by
Company during such fiscal year (which election, if
timely made as above provided, shall be effective as
of the beginning of such fiscal year) based on
actual Exploration and Development Costs incurred by
Company Group during such fiscal year in respect of
all Prospects subject to this Agreement, as follows
(with linear interpolation between indicated levels
of costs):
Total E & D
Costs Level Permitted Reduction
----------- -------------------
under $35 million no reduction
$70 million 25.00%
$105 million 33.33%
$140 million 38.33%
$175 million 41.67%
over $175 million **
**Permitted Reduction shall be determined in the
sole discretion of Company.
The total Exploration and Development Costs levels
and resultant ranges and escalation increments
provided for above are "Base Year" figures for
fiscal year 1996-1997, and shall be adjusted
annually on a compound basis beginning with the
fiscal year commencing April 1, 1997, according to
the
AMENDED AND RESTATED EMPLOYMENT
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then current Council of Petroleum Accountants
Societies' (COPAS) adjustment rate (based upon the
percentage increase or decrease in the average
weekly earnings of Crude Petroleum and Gas
Production Workers as of April 1 as published by the
United States Department of Labor, Bureau of Labor
Statistics).
The "Permitted Reduction" shall mean the percentage
by which Employee's Overriding Royalty Interest
(both before and after Payout) may be adjusted
downward. Each such adjustment shall determine
Employee's Overriding Royalty Interest for the
fiscal year in question, and shall be uniform on
Prospects acquired during that period (subject to
paragraphs 9.5.1 and 9.5.3). Without limiting the
foregoing, a Permitted Reduction shall apply to any
Major Prospect subject to this Agreement that was
acquired by Company during such fiscal year, whether
or not an adjustment of Employee's Overriding
Royalty Interest in such Major Prospect shall have
been made pursuant to paragraph 9.5.3.
All leases acquired in those Prospects, whether
during the same fiscal year or thereafter, shall be
subject to the same Employee's Overriding Royalty
Interest established at the time the Prospect was
acquired, subject, however, to adjustment as
provided for in this paragraph 9. A Permitted
Reduction in Employee's Overriding Royalty Interest
for a particular fiscal year, however, shall not
operate to reduce Employee's Overriding Royalty
Interest stated in paragraph 9.2 in respect of any
Prospects acquired by Company in any subsequent
fiscal year during the term or extended term hereof.
9.5.2(a) Notwithstanding the foregoing provisions of
this paragraph 9.5.2, with respect to any
FPF/TLP Exploitation Prospects acquired by
Company during a fiscal year of Company for
which Company's estimate of Exploration and
Development Costs incurred or to be
incurred by Company Group in respect of all
FPF/TLP Exploitation Prospects acquired in
such fiscal year exceeds $30 million
through the end of the respective primary
development periods for the fields
comprising such FPF/TLP Exploitation
Prospects (which periods, solely for
purposes of the adjustment provided for in
this paragraph, shall not exceed five (5)
years), an alternative calculation will be
made prior to determining the applicable
"Permitted Reduction" of Employee's
Overriding Royalty Interest with respect to
such FPF/TLP Exploitation Prospects. Such
alternative calculation shall be based upon
the assumptions that the total Exploration
and Development Costs to be incurred by
Company Group in respect of all such
FPF/TLP Exploitation Prospects will be
incurred over a two (2) year period and
that such Exploration and Development Costs
will
AMENDED AND RESTATED EMPLOYMENT
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be in addition to a "base level" of $70
million in Exploration and Development
Costs to be incurred by Company Group
exclusive of the identified FPF/TLP
Exploitation Prospects. Such alternative
Exploration and Development Costs level
(the "alternative E & D Costs level") shall
be determined as follows:
The alternative E & D Costs level shall be
the sum of:
(i) One-half of Company's estimate of
Exploration and Development Costs
incurred or to be incurred by
Company Group through the end of
the respective primary development
periods in respect of all FPF/TLP
Exploitation Prospects acquired in
such fiscal year, plus
(ii) $70 million.
The Overriding Royalty Interest set forth
in paragraph 9.2 with respect to such
FPF/TLP Exploitation Prospects (both before
and after Payout) may, in Company's sole
discretion, be reduced by the greater of
(x) the "Permitted Reduction" percentage
set forth in the table above in this
paragraph for the actual "Total E & D Costs
Level" for such fiscal year and (y) the
"Permitted Reduction" percentage set forth
in the table above that would be applicable
if the "Total E & D Costs Level" for such
fiscal year were equal to such "alternative
E & D Costs level".
If the Overriding Royalty Interest set
forth in paragraph 9.2 with respect to such
FPF/TLP Exploitation Prospects, when
reduced pursuant to the foregoing
provisions of this paragraph, exceeds
two-thirds of the Overriding Royalty
Interest set forth in paragraph 9.2,
Company may, in its sole discretion,
further reduce such Overriding Royalty
Interest to an interest equal to two-thirds
(before and after Payout, respectively) of
such Overriding Royalty Interest set forth
in paragraph 9.2. Further, if the
Overriding Royalty Interest set forth in
paragraph 9.2 with respect to any such
FPF/TLP Exploitation Prospect, when reduced
to such two-thirds level pursuant to the
foregoing provisions of this paragraph,
exceeds the Overriding Royalty Interest in
such Prospect that would result from
multiplying the Overriding Royalty Interest
percentage set forth in paragraph 9.2 times
a Working Interest percentage of 50% of
8/8ths, Company may, in its sole
AMENDED AND RESTATED EMPLOYMENT
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discretion, further reduce such Overriding
Royalty Interest set forth in paragraph 9.2
with respect to such FPF/TLP Exploitation
Prospect to a percentage (before and after
Payout, respectively) that, when multiplied
times Company's Working Interest in such
FPF/TLP Exploitation Prospect, would equal
the Overriding Royalty Interest percentage
(before and after Payout, respectively) set
forth in paragraph 9.2 times a Working
Interest percentage of 50% of 8/8ths.
9.5.2(b) Notwithstanding the foregoing provisions of
this paragraph 9.5.2, with respect to any
Subsea Tieback Exploitation Prospects
acquired by Company during such fiscal
year, if the Overriding Royalty Interest
set forth in paragraph 9.2 with respect to
such Subsea Tieback Exploitation Prospects,
when reduced pursuant to the foregoing
provisions of this paragraph, exceeds the
Overriding Royalty Interest in such
Prospect that would result from multiplying
the Overriding Royalty Interest percentage
set forth in paragraph 9.2 times a Working
Interest percentage of 50% of 8/8ths,
Company may, in its sole discretion,
further reduce such Overriding Royalty
Interest set forth in paragraph 9.2 with
respect to such Subsea Tieback Exploitation
Prospect to a percentage (before and after
Payout, respectively) that, when multiplied
times Company's Working Interest in such
Subsea Tieback Exploitation Prospect, would
equal the Overriding Royalty Interest
percentage (before and after Payout,
respectively) set forth in paragraph 9.2
times a Working Interest percentage of 50%
of 8/8ths.
9.5.2(c) Notwithstanding the foregoing provisions of
this paragraph 9.5.2, with respect to any
FPF/TLP Exploration Prospects acquired by
Company during such fiscal year, if the
Overriding Royalty Interest set forth in
paragraph 9.2 with respect to any such
FPF/TLP Exploration Prospects, when reduced
pursuant to the foregoing provisions of
this paragraph, exceeds two-thirds of the
Overriding Royalty Interest set forth in
paragraph 9.2, Company may, in its sole
discretion, further reduce such Overriding
Royalty Interest to an interest equal to
two-thirds (before and after Payout,
respectively) of such Overriding Royalty
Interest set forth in paragraph 9.2.
Further, if the Overriding Royalty Interest
set forth in paragraph 9.2 with respect to
any such FPF/TLP Exploration Prospect, when
reduced to such two-thirds level pursuant
to the foregoing provisions of this
paragraph, exceeds the Overriding Royalty
Interest in such Prospect that
AMENDED AND RESTATED EMPLOYMENT
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would result from multiplying the
Overriding Royalty Interest percentage set
forth in paragraph 9.2 times a Working
Interest percentage of 50% of 8/8ths,
Company may, in its sole discretion,
further reduce such Overriding Royalty
Interest set forth in paragraph 9.2 with
respect to such FPF/TLP Exploration
Prospect to a percentage (before and after
Payout, respectively) that, when multiplied
times Company's Working Interest in such
FPF/TLP Exploration Prospect, would equal
the Overriding Royalty Interest percentage
(before and after Payout, respectively) set
forth in paragraph 9.2 times a Working
Interest percentage of 50% of 8/8ths.
9.5.2(d) Notwithstanding the foregoing provisions of
this paragraph 9.5.2, with respect to any
Subsea Tieback Exploration Prospects
acquired by Company during such fiscal
year, if the Overriding Royalty Interest
set forth in paragraph 9.2 with respect to
any such Subsea Tieback Exploration
Prospects, when reduced pursuant to the
foregoing provisions of this paragraph,
exceeds the Overriding Royalty Interest in
such Prospect that would result from
multiplying the Overriding Royalty Interest
percentage set forth in paragraph 9.2 times
a Working Interest percentage of 50% of
8/8ths, Company may, in its sole
discretion, further reduce such Overriding
Royalty Interest set forth in paragraph 9.2
with respect to such Subsea Tieback
Exploration Prospect to a percentage
(before and after Payout, respectively)
that, when multiplied times Company's
Working Interest in such Subsea Tieback
Exploration Prospect, would equal the
Overriding Royalty Interest percentage
(before and after Payout, respectively) set
forth in paragraph 9.2 times a Working
Interest percentage of 50% of 8/8ths.
9.5.3 With respect to any Major Prospect, Company may in
its sole discretion elect to adjust the Overriding
Royalty Interest set forth in paragraph 9.2,
effective as of the date of Company's acquisition of
such Major Prospect, as follows:
Employee's before-Payout interest shall be reduced
by the following formula:
{{original~before-Payout~interest}
---------------------------------- = {reduced~before-Payout~interest}
X
---
Y
AMENDED AND RESTATED EMPLOYMENT
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where "X" equals the total amount estimated by
Company for Exploration and Development Costs to be
incurred by Company Group in respect of such Major
Prospect through the end of the primary development
period for the field comprising such Major Prospect
(which period, solely for purposes of such
adjustment calculation, shall not exceed five (5)
years), and where "Y" equals $30 million.
Employee's after-Payout interest shall be increased
by adding thereto the full amount of the percentage
interest so deducted from Employee's before-Payout
interest until 2.5 times Payout is reached, at which
time Employee's after-Payout interest shall be
reduced by subtracting therefrom the same percentage
interest that was previously added thereto pursuant
to this sentence.
Such election may be made by Company whether or not
Employee's Overriding Royalty Interest in such Major
Prospect shall have been reduced pursuant to
paragraph 9.5.2. In the case of any such prior
reduction pursuant to paragraph 9.5.2, the term
"original before-Payout interest" as used above in
this paragraph shall refer to Employee's
before-Payout interest as previously reduced
pursuant to paragraph 9.5.2.
9.5.4 Notwithstanding anything contained herein to the
contrary, after an assignment is delivered to
Employee with respect to a Prospect pursuant to
paragraph 9.4, Company or its assigns may no longer
reduce or modify Employee's Overriding Royalty
Interest on any well in such Prospect without
written consent of Employee, except pursuant to
paragraphs 9.5.1(c), 9.5.1(d), 9.5.1(e), 9.5.2 and
9.5.3 in the case only of assignments other than
those delivered pursuant to paragraphs 9.4.8(a),
9.4.8(b) and 9.4.9.
9.5.5 In no event may any party other than Company reduce
or modify Employee's Overriding Royalty Interest
without written consent of Employee.
9.5.6 Company shall give Employee written notice of any
adjustment made to Employee's Overriding Royalty
Interest pursuant to the provisions of paragraphs
9.5.1(b), 9.5.1(c), 9.5.1(d), 9.5.1(e), 9.5.2 and
9.5.3 within one hundred twenty (120) days following
such adjustment.
9.5.7 Upon request by Company, Employee shall execute and
deliver to Company such reassignments, transfer
orders, division orders, releases and other
documents deemed by Company to be necessary or
appropriate to evidence any modification, reduction
or other adjustment pursuant to this paragraph 9.5.
AMENDED AND RESTATED EMPLOYMENT
AGREEMENT--THOMAS E. YOUNG
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9.6 Company's Preferential Right to Purchase.
If at any time during the term or extended term of this
Agreement, or if within one (1) year from the expiration of
this Agreement, Employee receives and desires to accept an
offer for the purchase of a part or all of Employee's
Overriding Royalty Interest assigned pursuant to this
paragraph 9 (the portion or all of such Overriding Royalty
Interest covered by such offer to purchase being herein
sometimes called the "Offered Interest"), from a prospective
third party purchaser who is ready, willing and able to
purchase the same, then Employee shall have the right to sell
such Offered Interest, but only after complying with the
following terms and provisions:
9.6.1 The offer shall first be reduced to writing and
signed by Employee and the offeror. Employee shall
give Company written notice of his receipt of, and
his desire to accept, such written offer, together
with a copy of such written offer signed by the
prospective third party purchaser and containing all
of the terms and conditions of such offer. The date
such written notice is given to Company is herein
sometimes called the "Original Date."
9.6.2 Company shall thereafter have an option to purchase
the Offered Interest upon the same terms set forth
in said offer, which option may be exercised by
written notice thereof given to Employee within ten
(10) days after the Original Date.
9.6.3 If the Offered Interest is not purchased by Company
pursuant to the foregoing provisions of this
paragraph, then Employee shall have the right to
sell the Offered Interest to the prospective third
party purchaser named in such offer, provided that
such sale is consummated within thirty (30) days
from the expiration date of the option of Company
created hereby and provided that such sale is made
in strict conformity with the terms of such offer.
9.6.4 If, however, such sale of the Offered Interest does
not occur within such thirty-day period for the
price and upon the terms set forth in such offer,
then any sale of part or all of such Offered
Interest thereafter shall again be subject to the
option to purchase granted to Company under this
paragraph 9.6.
9.6.5 If Employee elects to take title to an Overriding
Royalty Interest in a legal entity other than
himself (which he may do only with Company's
consent), such entity shall take title subject to
all of the terms and conditions of this Agreement.
9.7 Additional Provisions Affecting Overriding Royalty
Interest.
In addition to the other provisions of this paragraph 9,
Employee's Overriding Royalty Interest shall be subject to
the following:
AMENDED AND RESTATED EMPLOYMENT
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9.7.1 Notwithstanding anything to the contrary contained
herein, Employee shall not have the right to take in
kind or separately dispose of the production of oil
and gas attributable to his Overriding Royalty
Interest.
9.7.2 Employee's Overriding Royalty Interest shall also
apply to the production of oil and gas under the
terms and provisions of any renewal, extension or
new lease, to the extent such renewal, extension or
new lease covers all or any portion of any lands
covered by the expired lease which was subject to
Employee's Overriding Royalty Interest or is within
the Prospect plat, and provided, however, that any
such renewal, extension or new lease shall have been
acquired by or for the benefit of Company, either
prior to or within one (1) year after the expiration
of the expired lease.
9.7.3 Except as otherwise provided in this paragraph 9, in
no event shall Employee ever be liable or
responsible in any way for payment of any part of
any exploration, drilling or production costs or
liabilities incurred by Company or its assigns or
other lessees attributable to the lease or leases in
a Prospect or to the production therefrom, it being
the intent of the parties that Employee's Overriding
Royalty Interest shall constitute a
non-participating royalty interest for all purposes.
9.7.4 Company will conduct and carry on the development,
maintenance and operation of any lease subject to
Employee's Overriding Royalty Interest in a manner
which it deems in its sole judgment to be reasonable
and prudent and in accordance with good oil and gas
field practices, and it will drill such wells as it
deems proper in its sole judgment from time to time
in order to protect such lease from drainage;
provided, however, (a) nothing herein contained
shall obligate Company to conduct any drilling
operations whatsoever upon such lease, or to
continue to operate any well or to operate or
maintain in force or attempt to maintain in force
such lease by payment of delay rentals, compensatory
royalties or other payments or by the drilling of
any wells upon said lease, or in any other manner,
and the extent and duration of all operations, as
well as the preservation of each of such leases by
delay rental payments or otherwise, shall be solely
at the will of Company, and (b) Company shall have
the right at any time to surrender, abandon or
otherwise terminate any such lease in whole or in
part without liability to Employee.
9.7.5 Company shall have the right to sell all production
attributable to Employee's Overriding Royalty
Interest on the same basis upon which the production
attributable to Company's interest in the same
production is sold, and shall account to Employee on
that basis. In no event shall Employee be entitled
to receive payments for production attributable to
his Overriding Royalty Interest calculated on a
basis higher than that upon which Company's interest
in the same production is calculated or computed on
a higher price than that payable to Company on
account of production attributable to its interest,
and
AMENDED AND RESTATED EMPLOYMENT
AGREEMENT--THOMAS E. YOUNG
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in no event shall Employee be entitled to receive
payments on amounts suspended by purchasers of the
production pending determination of the authorized
price by governmental entities. However, if Company
sells any such production to an affiliate of
Company, the price therefor shall not be less than
would have been reasonably obtainable in a sale to a
non-affiliated purchaser.
9.7.6 There shall be deducted from the production, before
Employee's Overriding Royalty Interest is computed,
any production lost in the production from the
leases, or any lands pooled therewith, or used for
drilling, operating, development or production or in
plant operations (including gas injection, secondary
recovery, pressure maintenance, repressuring,
cycling operations, plant fuel or shrinkage)
conducted for the purpose of producing or processing
production from lands covered by the leases or from
any lands pooled with the leases.
9.7.7 Company shall have the right and option, but not the
obligation, to process gas produced and saved from
the leases. If Company elects to process or have
processed, such gas in a gas processing plant or
other facility, whether or not owned by Company,
then in such event Employee shall be paid his
percentage share provided for herein of the proceeds
of sale of all gasoline or other liquid hydrocarbons
or other products manufactured or extracted from
such gas as a result of such processing
(collectively, the "Products"), less the costs of
extraction or manufacture (which may consist of a
portion of the Products). Company shall also pay to
Employee the same percentage share of the proceeds
of sale of all residue gas sold by Company, less
expenses incurred by Company in transporting any
such gas to point of delivery and for dehydration
and/or compression of gas at or prior to such
delivery and other expenses and fees typically borne
by royalty owners (excluding expenses or fees for
capital projects funded by Company to the extent
such expenses or fees have been included in the
Payout calculation for the well from which such gas
is produced).
9.7.8 Employee's Overriding Royalty Interest shall bear
its proportionate share of all other costs of
marketing and transporting production from the
leases or from any lands pooled therewith which are
typically borne by royalty owners (excluding
expenses or fees for capital projects funded by
Company to the extent such expenses or fees have
been included in the Payout calculation for the well
from which such production is produced).
9.7.9 Employee's Overriding Royalty Interest shall also
bear its share of all ad valorem, production,
severance, sales, gathering and other taxes
typically borne by royalty owners (whether state,
federal or otherwise) assessed or levied on or in
connection with the Overriding Royalty Interest or
the production from the leases.
AMENDED AND RESTATED EMPLOYMENT
AGREEMENT--THOMAS E. YOUNG
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9.7.10 Company or its assigns shall have the right and
power, without any approval by Employee, to pool or
unitize any lease which is subject to Employee's
Overriding Royalty Interest, and to alter, change,
amend or terminate any pooling or unitization
agreements heretofore or hereafter entered into, as
to all or any part of a Prospect, as to any one or
more of the formations or horizons thereunder, upon
such terms and provisions as Company shall in its
sole discretion determine. If and whenever through
the exercise of such right and power, or pursuant to
any law now existing or hereafter enacted, or any
rule, regulation or order of any governmental body
now or hereafter promulgated, any of the leases of
Company are pooled or unitized in any manner,
Employee's Overriding Royalty Interest shall also be
pooled and unitized, and in such event Employee's
Overriding Royalty shall only be paid on that
portion of the production from the unit or units so
pooled, which is attributable to said leases under
and by virtue of the pooling and unitization.
9.7.11 Company may withhold payment to Employee of any
funds attributable to Employee's Overriding Royalty
Interest which Company, in its sole discretion,
deems to be subject to a risk of refund or
recoupment pursuant to any rule, regulation or order
of any governmental authority or any adverse claims
by third parties. During such suspense period,
Employee shall not be entitled to interest on sums
so withheld.
9.7.12 In the event Company's Working Interest in any lease
in which Employee is entitled to an Overriding
Royalty Interest covers less than all of the full
and entire undivided interest in and to the land
described therein, and in and to all the oil and gas
rights relating thereto, then in that event the
Overriding Royalty Interest as to that portion of
the leased premises in which Company's Working
Interest in such lease does not cover such full and
entire undivided interest shall be reduced
proportionately (i.e., in the proportion that the
undivided interest in and to said land and oil and
gas rights covered by such lease bears to such full
and entire undivided interest).
9.7.13 Notwithstanding anything contained in this paragraph
9 to the contrary, Employee's Overriding Royalty
Interest in any Net Profit Share Lease ("NPSL")
shall be reduced at the same time and in the same
percentage as Company's net revenue interest in said
NPSL is reduced pursuant to the provisions of said
NPSL.
9.7.14 Company and Employee further undertake and agree
promptly to execute and deliver, upon request of
either party, all assignments, reassignments,
transfer orders, division orders, releases and any
other documents as may be necessary to implement
this paragraph 9 or otherwise to more fully assure
to each party the rights and interests of such party
provided for in this paragraph 9.
AMENDED AND RESTATED EMPLOYMENT
AGREEMENT--THOMAS E. YOUNG
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9.8 Substitution of Other Incentive Compensation.
9.8.1 Notwithstanding anything contained herein to the
contrary, but subject to the provisions of this
paragraph 9.8, if:
(a) the Board of Directors of Company approves
an incentive compensation program providing
for annual incentive compensation and
long-term, equity-based incentive
compensation (through, for example and not
for purposes of limitation, the use of
stock options) (the "New Program"), and
(b) a majority of the "Executives" (as defined
in paragraph 9.8.3) have each entered into
one or more written agreements with Company
(including, but not limited to, a written
amendment to and/or restatement of an
existing written employment agreement)
(such agreements entered into by such
majority of the Executives being
collectively referred to herein as the
"Executive Amendments") providing for:
(i) such Executive's participation in
the New Program; and
(ii) termination of such Executive's
future participation in incentive
compensation in the form of
assignments of overriding oil and
gas royalty interests ("ORRI
Incentive Compensation"), and
(c) Company has offered Employee the
opportunity to participate in the New
Program on a basis at least as favorable as
the most favorable participation provided
to other participants in the New Program
who are or were in the same position within
the same grade level as Employee at any
time during the period beginning 90 days
before the "Triggering Date" (as
hereinafter defined) and ending on the date
Employee and Company enter into the
"Amendment" (as hereinafter defined)
(participation in the New Program that is
offered to Employee and satisfies the terms
of this clause (c) is referred to herein as
"Qualifying Participation");
then Employee and Company shall enter into a written
amendment to this Agreement (the "Amendment") which:
(x) shall provide for Employee's participation
in the New Program on a basis no less
favorable than the Qualifying
Participation;
(y) shall provide for the termination of
Employee's participation in the incentive
compensation program described in this
paragraph 9 for
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periods after a date (the "Termination
Date") that is no earlier than the latest
date (the "Triggering Date") on which any
of the Executives terminated his
participation in ORRI Incentive
Compensation under the Executive
Amendments; and
(z) except as otherwise provided in clauses (x)
and (y) of this sentence, shall otherwise
be in substantially the same form, and
contain substantially the same terms and
conditions, as the Executive Amendments.
9.8.2 For purposes of clause (y) of paragraph 9.8.1,
Company and Employee acknowledge and agree that
under the Amendment, (i) Employee will be entitled
under this paragraph 9 to receive an Overriding
Royalty Interest equal to an undivided percentage
(as specified in paragraph 9.2.1 of this Agreement)
of Company's Working Interest in each well on any
Prospect acquired, or deemed to have been acquired
under this paragraph 9, by Company on or before the
Termination Date, and the lease or leases allocated
thereto (collectively, the "Earned ORIs"), (ii)
Employee will not be entitled to receive any
Overriding Royalty Interest or other interest in or
benefits with respect to any Prospect or Prospects
acquired, or deemed to have been acquired under this
paragraph 9, by Company after the Termination Date,
or in the lease or leases allocated thereto, and
(iii) the provisions of this Agreement that state
they survive, by their terms survive, or are
otherwise designed to survive the Termination Date
and/or the termination of Employee's participation
in the incentive compensation program described in
this paragraph 9, and the respective rights and
obligations of Company and Employee under such
provisions with respect to the Existing ORIs in the
Existing Prospects and the Earned ORIs, shall
survive the Termination Date and/or such termination
of Employee's participation in the incentive
compensation program described in this paragraph 9
for the period or periods provided for in this
Agreement.
9.8.3 For purposes of this paragraph 9.8, the term
"Executives" means the following employees of
Company: Robert E. Henderson, Richard R. Clark,
Michael W. Strickler and Frank A. Pici; provided,
however, that the term -------- ------- "Executives"
shall not include any such individual to the extent
he is no longer an employee of Company at the time
Company has offered Qualifying Participation to
Employee; provided further, however, that if all of
such -------- ------- ------- individuals have
ceased to be an employee of Company prior to the
time Company has offered Qualifying Participation to
Employee, then Employee shall have no obligation
whatsoever (whether under this Paragraph 9.8 or
otherwise) to enter into the Amendment.
9.8.4 For purposes of clause (b) of paragraph 9.8.1, the
phrase "a majority of the Executives" shall have the
following meaning, as applicable:
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(a) if there are four (4) Executives employed
by Company at the time Company offers
Qualifying Participation to Employee, the
phrase "a majority of the Executives" shall
mean three (3) of the Executives;
(b) if there are three (3) Executives employed
by Company at the time Company offers
Qualifying Participation to Employee, the
phrase "a majority of the Executives" shall
mean two (2) of the Executives;
(c) if there are two (2) Executives employed by
Company at the time Company offers
Qualifying Participation to Employee, the
phrase "a majority of the Executives" shall
mean all of the Executives; and
(d) if there is one (1) Executive employed by
Company at the time Company offers
Qualifying Participation to Employee, the
phrase "a majority of the Executives" shall
mean such Executive.
10. Insurance.
Employee shall be eligible for participation in such
insurance programs as Company shall institute from time to
time covering medical and dental expenses and such life and
accidental death and dismemberment insurance programs as
Company shall institute from time to time. Payment of
premiums for such coverages shall be in accordance with
Company policy covering all employees as may be established
from time to time by Company. Employee shall also be eligible
for participation in such retirement, pension, deferred
compensation and other benefit programs Company shall
initiate from time to time.
11. Outside Activities.
During the term or extended term of this Agreement, Employee
shall devote all of his working time, energy and talents to
the due discharge and performance of his duties hereunder, at
the direction and subject to the control of Company, and
shall perform such services and duties as shall reasonably be
required from him from time to time by Company. Employee
agrees that he will not knowingly become involved in a
conflict of interest with Company or its subsidiaries, or
upon discovery thereof, allow such a conflict to continue.
Moreover, Employee agrees to provide Company a statement of
all other directorships Employee holds, with a brief
description of the business activities of each organization.
This statement shall be provided on or before December 31 of
each year. If, in the opinion of Company, a conflict of
interest exists between Company (and its affiliates) and the
organization in which Employee holds a directorship, Company
can require Employee to resign the outside directorship.
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12. Right to Invest.
Nothing in this Agreement is intended or shall be construed
to limit Employee's right (i) to engage in passive personal
investments, including, but not limited to, holding as an
investment not more than five percent (5%) of any class of
the issued and outstanding and publicly traded (on a
recognized national or regional securities exchange or in the
over-the-counter market) capital stock or other securities of
any corporation or other entity that conducts activities that
compete with the business of Company or any affiliate of
Company; or (ii) to invest, individually or with others, in
oil and gas prospects, subject, however, in the case of oil
and gas prospects to the following conditions:
12.1 Company must have first had the right and
opportunity to purchase all of the interest in any
prospect made available to Employee, even if this
would preclude Employee's participation.
12.2 Company must have made known its election either to
participate in less than the full interest made
available to Employee and have no desire to acquire
an additional interest, or declined to participate
at all in the prospect. If Company elects to
participate in less than the full interest made
available to Employee, Employee may invest in the
portion of such interest not acquired by Company.
12.3 Employee must purchase his interest in the oil and
gas prospect on terms which are no more favorable
than those made available to Company.
13. Disability During Employment.
If Employee shall become unable to perform his duties by
reason of disability, he shall be entitled to receive, in
addition to any insurance benefits he may receive, all of his
salary for the first one (1) month of his disability, and
one-half (1/2) of his salary for the next three (3) months of
disability. Periods of disability shall not be cumulative so
long as they are separated by at least ninety (90) days of
continuous service.
The term "disability" shall mean disability which, in the
opinion of a doctor satisfactory to Company, renders Employee
unable to perform his duties hereunder as evidenced by such
doctor's certificate. The date disability commences shall be
the date Employee first absents himself from work during a
continuous period of disability.
14. Merger or Acquisition.
In the event Company should be acquired by or merged into
another company, by signature of Company's authorized
representatives, Company hereby agrees that this
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Employment Agreement shall be binding upon Company, its
successors and assigns, and shall be disclosed to any party
considering merger with, or acquisition of, Company.
15. Arbitration.
15.1 If a dispute arises out of or related to this
Agreement and the dispute cannot be settled through
direct discussions, Company and Employee agree that
they shall first endeavor to settle the dispute in
an amicable fashion. If such efforts fail to resolve
the dispute, the dispute shall, except as otherwise
provided in paragraph 19, be resolved as follows:
15.1.1 Except as provided in paragraph 15.1.2
below, any and all claims, demands, cause
of action, disputes, controversies, and
other matters in question arising out of or
relating to this Agreement, any provision
hereof, the alleged breach thereof, or in
any way relating to the subject matter of
this Agreement, involving Company,
Employee, and/or their respective
representatives, even though some or all of
such claims allegedly are extracontractual
in nature, whether such claims sound in
contract, tort, or otherwise, at law or in
equity, under state or federal law, whether
provided by statute or the common law, for
damages or any other relief, shall be
resolved by binding arbitration pursuant to
the Federal Arbitration Act in accordance
with the Commercial Arbitration Rules then
in effect with the American Arbitration
Association (the "AAA"). The arbitration
proceeding shall be conducted in Houston,
Texas. The arbitration may be initiated by
either party by providing to the other a
written notice of arbitration specifying
the claims, and the parties shall
thereafter endeavor to agree on an
arbitrator. If within thirty (30) days of
the notice of initiation of the arbitration
procedure, the parties are unable to agree
on an arbitrator, the party requesting
arbitration shall file a request with the
AAA that the Houston, Texas office of the
AAA provide a list of potential arbitrators
to both parties. The parties shall
thereafter have sixty (60) days to select
an arbitrator from such list, with such
selection to be by mutual agreement. If the
parties fail to select an arbitrator within
such time by mutual agreement, then either
party may request that the Chief Judge of
the U.S. District Court for the Southern
District of Texas appoint an arbitrator,
and any such appointment shall be binding.
The arbitrator, utilizing the Commercial
Arbitration Rules of the American
Arbitration Association, shall within 120
days of his or her selection, resolve all
disputes between the parties. There shall
be no transcript of the hearings before the
arbitrator. The arbitrator's decision shall
be in writing, but shall be as brief as
possible. The arbitrator shall not assign
the reasons for his or her decision. The
arbitrator's decision
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shall be final and non-appealable to the
maximum extent permitted by law. Judgment
upon any award rendered in any such
arbitration proceeding may be entered by
any federal or state court having
jurisdiction. This agreement to arbitrate
shall be enforceable in either federal or
state court. The enforcement of this
agreement to arbitrate and all procedural
aspects of this agreement to arbitrate,
including but not limited to, the
construction and interpretation of this
agreement to arbitrate, the issues subject
to arbitration (i.e., arbitrability), the
scope of the arbitrable issues, allegations
of waiver, delay or defenses to
arbitrability, and the rules governing the
conduct of the arbitration, shall be
governed by and construed pursuant to the
Federal Arbitration Act and shall be
decided by the arbitrator. In deciding the
substance of any such claims, the
arbitrator shall apply the substantive laws
of the State of Texas (excluding Texas
choice-of-law principles that might call
for the application of some other State's
law); provided, however, it is expressly
agreed that the arbitrator shall have no
authority to award treble, exemplary, or
punitive damages under any circumstances
regardless of whether such damages may be
available under Texas law, the parties
hereby waiving their right, if any, to
recover treble, exemplary, or punitive
damages in connection with any such claims.
15.1.2 Notwithstanding the agreement to arbitrate
contained in paragraph 15.1.1 above, in the
event that either party wishes to seek a
temporary restraining order, a preliminary
or temporary injunction, or other
injunctive relief in connection with any or
all such claims, demands, cause of action,
disputes, controversies, and other matters
in question arising out of or relating to
this Agreement, any provision hereof, the
alleged breach thereof, or in any way
relating to the subject matter of this
Agreement, involving Company, Employee,
and/or their respective representatives,
including disputes arising out of a breach
or alleged breach of paragraph 4 or 16,
even though some or all of such claims
allegedly are extra-contractual in nature,
whether such claims sound in contract,
tort, or otherwise, at law or in equity,
under state or federal law, whether
provided by statute or the common law, for
damages or any other relief, each party
shall have the right to pursue such
injunctive relief in court, rather than by
arbitration. The parties agree that such
action for a temporary restraining order, a
preliminary or temporary injunction, or
other injunctive relief will be brought in
the State or federal courts residing in
Houston, Harris County, Texas.
15.2 Company shall pay all costs and expenses of Company
and Employee (including, but not limited to,
attorneys' fees, the fees of the arbitrator and the
AAA and any other related costs) for any arbitration
proceeding or legal
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action; provided, however, that if in any such
arbitration proceeding or legal action, the
arbitrator or court, respectively, determines that
Employee has prosecuted or defended any issue in
such proceeding or action in bad faith, the
arbitrator or court, respectively, may allocate the
portion of such costs and expenses relating to such
issue between the parties in any other manner deemed
fair, equitable and reasonable by the arbitrator or
court, respectively.
16. Noncompetition Obligations.
16.1 As part of the consideration for the compensation
and benefits to be paid to Employee hereunder, and
as an additional incentive for Company to enter into
this Agreement, Company and Employee agree to the
non-competition obligations hereunder. Employee will
not, directly or indirectly for Employee or for
others:
16.1.1 in any geographic area or market where
Company or any of its subsidiaries are
conducting any business as of the date of
termination of the employment relationship
or have during the previous twelve months
conducted such business, engage in any
business competitive with any such
business; or
16.1.2 in any geographic area or market where
Employee knew Company contemplated entering
any business as of the date of termination
of the employment relationship, but only if
Company had, as of such date, invested
significant resources toward entering into
such business in such geographic area or
market, engage in any business competitive
with any such business;
16.1.3 render advice or services to, or otherwise
assist, any other person, association, or
entity who is engaged, directly or
indirectly, in any business competitive
with Company's business within the
parameters described in paragraphs 16.1.1
and 16.1.2 above with respect to such
competitive business; or
16.1.4 induce any employee of Company or any of
its subsidiaries to terminate his or her
employment with Company or its
subsidiaries, or hire or assist in the
hiring of any such employee by any person,
association, or entity not affiliated with
Company.
These non-competition obligations shall commence
upon the date of execution of this Agreement and
extend until the earlier of (a) the expiration of
the term of this Agreement (or any extended term) or
(b) six (6) months after termination of the
employment relationship; provided, however, that
notwithstanding anything contained in this paragraph
16 to the contrary, such obligations shall only
apply after the termination of employment if the
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termination of employment results from termination
for Cause by Company under paragraph 3.5 or
voluntary termination without Good Reason by
Employee (it being understood and agreed that
termination of this Agreement by Employee under
paragraph 3.1 shall not, for purposes of this
paragraph 16, constitute voluntary termination
without Good Reason by Employee).
16.2 Employee understands that the foregoing restrictions
may limit Employee's ability to engage in certain
businesses anywhere in the world during the period
provided for above, but acknowledges that Employee
will receive sufficiently high renumeration and
other benefits under this Agreement to justify such
restriction. Employee acknowledges that money
damages would not be sufficient remedy for any
breach of this Article by Employee, and Company
shall be entitled to enforce the provisions of this
Agreement and/or to specific performances and
injunctive relief as remedies for such breach or any
threatened breach. Such remedies shall not be deemed
the exclusive remedies for a breach of this Article,
but shall be in addition to all remedies available
at law or in equity to Company, including, without
limitation, the recovery of damages from Employee
and Employee's agents involved in such breach and
remedies available to Company pursuant to other
agreements with Employee.
16.3 It is expressly understood and agreed that Company
and Employee consider the restrictions contained in
this paragraph 16 to be reasonable and necessary.
Nevertheless, if any of the aforesaid restrictions
are found by a court having jurisdiction to be
unreasonable, or overly broad as to geographic area
or time, or otherwise unenforceable, the parties
intend for the restrictions therein set forth to be
modified by such courts so as to be reasonable and
enforceable and, as so modified by the court, to be
fully enforced.
17. Foreign Corrupt Practices Act.
Employee shall at all times comply with the United States
Foreign Corrupt Practices Act, generally codified in 15 USC
78 (FCPA), as the FCPA may hereafter be amended, and/or its
successor statutes. If Employee pleads guilty to or nolo
contendere or admits civil or criminal liability under the
FCPA, or if a court finds that Employee committed an action
resulting in any Company entity having civil or criminal
liability or responsibility under the FCPA with knowledge of
the activities giving rise to such liability or knowledge of
facts from which Employee should have reasonably inferred the
activities giving rise to liability had occurred or were
likely to occur, such action or finding shall constitute
Cause for termination by Company under paragraph 3.5 of this
Agreement unless Company's Board of Directors determines that
the actions found to be in violation of the FCPA were taken
in good faith and in compliance with all applicable policies
of Company.
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18. Survival.
The provisions of paragraphs 4 and 16 shall survive any
termination of the employment relationship and/or of this
Agreement for the periods stated therein. The provisions of
paragraph 15 relating to arbitration shall survive any
termination of the employment relationship between Employee
and Company and the termination of this Agreement. Amounts,
compensation, rights and benefits which Employee is entitled
to receive or have accrued to Employee under this Agreement
or under any plan, program, arrangement, agreement or policy
of or with Company or any of its affiliates before, at or
subsequent to the termination of the employment relationship
between Employee and Company or the termination of this
Agreement shall not be superseded and shall survive any such
termination.
19. Certain Additional Payments by Company.
19.1 Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined
that any payment or distribution by Company or any
of its affiliates to or for the benefit of Employee,
whether paid or payable or distributed or
distributable pursuant to the terms of this
Agreement or otherwise (any such payments or
distributions being individually referred to herein
as a "Payment," and any two or more of such payments
or distributions being referred to herein as
"Payments"), would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code") (such excise tax,
together with any interest thereon, any penalties,
additions to tax, or additional amounts with respect
to such excise tax, and any interest in respect of
such penalties, additions to tax or additional
amounts, being collectively referred herein to as
the "Excise Tax"), then Employee shall be entitled
to receive an additional payment or payments
(individually referred to herein as a "Gross-Up
Payment" and any two or more of such additional
payments being referred to herein as "Gross-Up
Payments") in an amount such that after payment by
Employee of all taxes (as defined in paragraph
19.11) imposed upon the Gross-Up Payment, Employee
retains an amount of such Gross-Up Payment equal to
the Excise Tax imposed upon the Payments.
19.2 Subject to the provisions of paragraph 19.3 through
19.11, any determination (individually, a
"Determination") required to be made under this
paragraph 19, including whether a Gross-Up Payment
is required and the amount of such Gross-Up Payment,
shall initially be made, at Company's expense, by
nationally recognized tax counsel mutually
acceptable to Company and Employee ("Tax Counsel").
Tax Counsel shall provide detailed supporting legal
authorities, calculations, and documentation both to
Company and Employee within 15 business days of the
termination of Employee's employment, if applicable,
or such other time or times as is reasonably
requested by Company or Employee. If Tax Counsel
makes the initial
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Determination that no Excise Tax is payable by
Employee with respect to a Payment or Payments, it
shall furnish Employee with an opinion reasonably
acceptable to Employee that no Excise Tax will be
imposed with respect to any such Payment or
Payments. Employee shall have the right to dispute
any Determination (a "Dispute") within 15 business
days after delivery of Tax Counsel's opinion with
respect to such Determination. The Gross-Up Payment,
if any, as determined pursuant to such Determination
shall be paid by Company to Employee within five
business days of Employee's receipt of such
Determination. The existence of a Dispute shall not
in any way affect Employee's right to receive the
Gross-Up Payment in accordance with such
Determination. If there is no Dispute, such
Determination shall be binding, final and conclusive
upon Company and Employee, subject in all respects,
however, to the provisions of paragraph 19.3 through
19.11 below. As a result of the uncertainty in the
application of Sections 4999 and 280G of the Code,
it is possible that Gross-Up Payments (or portions
thereof) which will not have been made by Company
should have been made ("Underpayment"), and if upon
any reasonable written request from Employee or
Company to Tax Counsel, or upon Tax Counsel's own
initiative, Tax Counsel, at Company's expense,
thereafter determines that Employee is required to
make a payment of any Excise Tax or any additional
Excise Tax, as the case may be, Tax Counsel shall,
at Company's expense, determine the amount of the
Underpayment that has occurred and any such
Underpayment shall be promptly paid by Company to
Employee.
19.3 Company shall defend, hold harmless, and indemnify
Employee on a fully grossed-up after tax basis from
and against any and all claims, losses, liabilities,
obligations, damages, impositions, assessments,
demands, judgements, settlements, costs and expenses
(including reasonable attorneys', accountants', and
experts' fees and expenses) with respect to any tax
liability of Employee resulting from any Final
Determination (as defined in paragraph 19.10) that
any Payment is subject to the Excise Tax.
19.4 If a party hereto receives any written or oral
communication with respect to any question,
adjustment, assessment or pending or threatened
audit, examination, investigation or administrative,
court or other proceeding which, if pursued
successfully, could result in or give rise to a
claim by Employee against Company under this
paragraph 19 ("Claim"), including, but not limited
to, a claim for indemnification of Employee by
Company under paragraph 19.3, then such party shall
promptly notify the other party hereto in writing of
such Claim ("Tax Claim Notice").
19.5 If a Claim is asserted against Employee ("Employee
Claim"), Employee shall take or cause to be taken
such action in connection with contesting such
Employee Claim as Company shall reasonably request
in writing from time to time, including the
retention of counsel and experts as are reasonably
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designated by Company (it being understood and
agreed by the parties hereto that the terms of any
such retention shall expressly provide that Company
shall be solely responsible for the payment of any
and all fees and disbursements of such counsel and
any experts) and the execution of powers of
attorney, provided that:
19.5.1 within 30 calendar days after Company
receives or delivers, as the case may be,
the Tax Claim Notice relating to such
Employee Claim (or such earlier date that
any payment of the taxes claimed is due
from Employee, but in no event sooner than
five calendar days after Company receives
or delivers such Tax Claim Notice), Company
shall have notified Employee in writing
("Election Notice") that Company does not
dispute its obligations (including, but not
limited to, its indemnity obligations)
under this Agreement and that Company
elects to contest, and to control the
defense or prosecution of, such Employee
Claim at Company's sole risk and sole cost
and expense; and
19.5.2 Company shall have advanced to Employee on
an interest-free basis, the total amount of
the tax claimed in order for Employee, at
Company's request, to pay or cause to be
paid the tax claimed, file a claim for
refund of such tax and, subject to the
provisions of the last sentence of
paragraph 19.7, sue for a refund of such
tax if such claim for refund is disallowed
by the appropriate taxing authority (it
being understood and agreed by the parties
hereto that Company shall only be entitled
to sue for a refund and Company shall not
be entitled to initiate any proceeding in,
for example, United States Tax Court) and
shall indemnify and hold Employee harmless,
on a fully grossed-up after tax basis, from
any tax imposed with respect to such
advance or with respect to any imputed
income with respect to such advance; and
19.5.3 Company shall reimburse Employee for any
and all costs and expenses resulting from
any such request by Company and shall
indemnify and hold Employee harmless, on
fully grossed-up after-tax basis, from any
tax imposed as a result of such
reimbursement.
19.6 Subject to the provisions of paragraph 19.5 hereof,
Company shall have the right to defend or prosecute,
at the sole cost, expense and risk of Company, such
Employee Claim by all appropriate proceedings, which
proceedings shall be defended or prosecuted
diligently by Company to a Final Determination;
provided, however, that (i) Company shall not,
without Employee's prior written consent, enter into
any compromise or settlement of such Employee Claim
that would adversely affect Employee, (ii) any
request from Company to Employee regarding any
extension of the statute of limitations relating to
assessment, payment, or collection of taxes for the
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taxable year of Employee with respect to which the
contested issues involved in, and amount of,
Employee Claim relate is limited solely to such
contested issues and amount, and (iii) Company's
control of any contest or proceeding shall be
limited to issues with respect to Employee Claim and
Employee shall be entitled to settle or contest, in
his sole and absolute discretion, any other issue
raised by the Internal Revenue Service or any other
taxing authority. So long as Company is diligently
defending or prosecuting such Employee Claim,
Employee shall provide or cause to be provided to
Company any information reasonably requested by
Company that relates to such Employee Claim, and
shall otherwise cooperate with Company and its
representatives in good faith in order to contest
effectively such Employee Claim. Company shall keep
Employee informed of all developments and events
relating to any such Employee Claim (including,
without limitation, providing to Employee copies of
all written materials pertaining to any such
Employee Claim), and Employee or his authorized
representatives shall be entitled, at Employee's
expense, to participate in all conferences, meetings
and proceedings relating to any such Employee Claim.
19.7 If, after actual receipt by Employee of an amount of
a tax claimed (pursuant to an Employee Claim) that
has been advanced by Company pursuant to paragraph
19.5.2 hereof, the extent of the liability of
Company hereunder with respect to such tax claimed
has been established by a Final Determination,
Employee shall promptly pay or cause to be paid to
Company any refund actually received by, or actually
credited to, Employee with respect to such tax
(together with any interest paid or credited thereon
by the taxing authority and any recovery of legal
fees from such taxing authority related thereto),
except to the extent that any amounts are then due
and payable by Company to Employee, whether under
the provisions of this Agreement or otherwise. If,
after the receipt by Employee of an amount advanced
by Company pursuant to paragraph 19.5.2, a
determination is made by the Internal Revenue
Service or other appropriate taxing authority that
Employee shall not be entitled to any refund with
respect to such tax claimed and Company does not
notify Employee in writing of its intent to contest
such denial of refund prior to the expiration of 30
days after such determination, then such advance
shall be forgiven and shall not be required to be
repaid and the amount of such advance shall offset,
to the extent thereof, the amount of any Gross-Up
Payments and other payments required to be paid
hereunder.
19.8 With respect to any Employee Claim, if Company fails
to deliver an Election Notice to Employee within the
period provided in paragraph 19.5.1 hereof or, after
delivery of such Election Notice, Company fails to
comply with the provisions of paragraph 19.5.2,
19.5.3 or 19.6 hereof, then Employee shall at any
time thereafter have the right (but not the
obligation), at his election and in his sole and
absolute discretion, to defend or prosecute, at the
sole cost,
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expense and risk of Company, such Employee Claim.
Employee shall have full control of such defense or
prosecution and such proceedings, including any
settlement or compromise thereof. If requested by
Employee, Company shall cooperate, and shall cause
its affiliates to cooperate, in good faith with
Employee and his authorized representatives in order
to contest effectively such Employee Claim. Company
may attend, but not participate in or control, any
defense, prosecution, settlement or compromise of
any Employee Claim controlled by Employee pursuant
to this paragraph 19.8 and shall bear its own costs
and expenses with respect thereto. In the case of
any Employee Claim that is defended or prosecuted by
Employee, Employee shall, from time to time, be
entitled to current payment, on a fully grossed-up
after tax basis, from Company with respect to costs
and expenses incurred by Employee in connection with
such defense or prosecution.
19.9 In the case of any Employee Claim that is defended
or prosecuted to a Final Determination pursuant to
the terms of this paragraph 19.9, Company shall pay,
on a fully grossed-up after tax basis, to Employee
in immediately available funds the full amount of
any taxes arising or resulting from or incurred in
connection with such Employee Claim that have not
theretofore been paid by Company to Employee,
together with the costs and expenses, on a fully
grossed-up after tax basis, incurred in connection
therewith that have not theretofore been paid by
Company to Employee, within ten calendar days after
such Final Determination. In the case of any
Employee Claim not covered by the preceding
sentence, Company shall pay, on a fully grossed-up
after tax basis, to Employee in immediately
available funds the full amount of any taxes arising
or resulting from or incurred in connection with
such Employee Claim at least ten calendar days
before the date payment of such taxes is due from
Employee, except where payment of such taxes is
sooner required under the provisions of this
paragraph 19.9, in which case payment of such taxes
(and payment, on a fully grossed-up after tax basis,
of any costs and expenses required to be paid under
this paragraph 19.9 shall be made within the time
and in the manner otherwise provided in this
paragraph 19.9.
19.10 For purposes of this Agreement, the term "Final
Determination" shall mean (A) a decision, judgment,
decree or other order by a court or other tribunal
with appropriate jurisdiction, which has become
final and non-appealable; (B) a final and binding
settlement or compromise with an administrative
agency with appropriate jurisdiction, including, but
not limited to, a closing agreement under Section
7121 of the Code; (C) any disallowance of a claim
for refund or credit in respect to an overpayment of
tax unless a suit is filed on a timely basis; or (D)
any final disposition by reason of the expiration of
all applicable statutes of limitations.
19.11 For purposes of this Agreement, the terms "tax" and
"taxes" mean any and all taxes of any kind
whatsoever (including, but not limited to, any and
all
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Excise Taxes, income taxes, and employment taxes),
together with any interest thereon, any penalties,
additions to tax, or additional amounts with respect
to such taxes and any interest in respect of such
penalties, additions to tax, or additional amounts.
20. No Obligation to Mitigate.
Employee shall not be required to mitigate the amount of any
payment or other benefit required to be paid to Employee
pursuant to this Agreement, whether by seeking other
employment or otherwise; nor shall the amount of any such
payment or other benefit be reduced on account of any
compensation earned by Employee as a result of employment by
another person or entity.
21. Miscellaneous.
21.1 This Agreement shall not be modified or amended
except in writing and signed by Company and
Employee. This Agreement shall be binding upon the
heirs, administrators, or executors and the
successors and assigns of each party to this
Agreement.
21.2 The rights and benefits of Employee under the
Agreement are personal to him and shall not be
assigned or transferred without the prior written
consent of Company. Subject to the foregoing, this
Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective
heirs, personal representatives, successors and
assigns.
21.3 All titles or headings of sections or paragraphs or
other divisions of this Agreement are only for the
convenience of the parties and shall not be
construed to have any effect or meaning with respect
to the other content of such sections or paragraphs
or other divisions, such content being controlling
as to the agreement between the parties hereto.
21.4 This Agreement is made and will be performed under,
and shall be governed by and construed in accordance
with, the law of the State of Texas.
21.5 EMPLOYEE AFFIRMS AND ATTESTS BY HIS SIGNATURE TO
THIS AGREEMENT THAT HE HAS READ THIS AGREEMENT
BEFORE SIGNING IT AND THAT HE FULLY UNDERSTANDS ITS
PURPOSES, TERMS AND PROVISIONS, WHICH HE HEREBY
EXPRESSLY ACKNOWLEDGED TO BE REASONABLE IN ALL
RESPECTS. EMPLOYEE FURTHER ACKNOWLEDGES RECEIPT OF
ONE COPY OF THIS AGREEMENT.
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21.6 Notices contemplated under this Agreement shall be directed
to the following address:
If to Company:
Mariner Energy, Inc.
580 Westlake Boulevard, Suite 1300
Houston, Texas 77079
Attention: President and Chief Executive Officer
If to Employee:
Thomas E. Young
1515 Banks
Houston, Texas 77006
Company and Employee may change the above addresses for
notice purposes by notifying the other in writing.
21.7 Company may withhold from any amounts payable under
this Agreement such federal, state, or local taxes
as shall be required to be withheld pursuant to any
applicable law or regulation.
21.8 ON THE EFFECTIVE DATE, THAT CERTAIN CHANGE IN
CONTROL AGREEMENT DATED FEBRUARY 12, 1996, BETWEEN
COMPANY AND EMPLOYEE SHALL TERMINATE AND BE FROM THE
EFFECTIVE DATE NULL, VOID AND OF NO FURTHER FORCE OR
EFFECT WHATSOEVER.
21.9 This Agreement supersedes and replaces the
Employment Agreement and the Letter Agreement;
provided, however, that (i) the provisions of
paragraph 3 of the Employment Agreement shall apply,
and the provisions of paragraph 3 of this Agreement
shall not apply, with respect to any claim, demand,
cause of action, right, obligation and/or liability
of Company and/or Employee with respect to, relating
to, or arising from any termination or alleged
termination of the Employment Agreement, this
Agreement and/or Employee's employment with Company
that occurred or arose during or relates to, or that
occurred or arose as a result of or with respect to
any act, failure to act, event or other matter that
occurred or arose during or relates to, the period
from June 27, 1996 through October 31, 1998, and
(ii) except as otherwise expressly provided herein,
nothing contained in this Agreement shall limit or
otherwise affect any rights or benefits which are
vested in, accrued to, or earned by Employee, or for
which Employee is entitled to, prior to the
Effective Date.
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Executed as of the Effective Date in duplicate originals at Houston,
Texas.
COMPANY:
MARINER ENERGY, INC.
By: /s/ Robert E. Henderson
------------------------------------------------
Printed Name: Robert E. Henderson
Printed Title: President and Chief Executive Officer
EMPLOYEE:
/s/ Thomas E. Young
----------------------------------------------------
Thomas E. Young
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