EXHIBIT 10.22
PIONEER NATURAL RESOURCES COMPANY
SEVERANCE AGREEMENT
This Severance Agreement (this "Agreement") is entered into, effective
August 8, 1997, between Pioneer Natural Resources Company, a Delaware
corporation ("Parent"), and Larry N. Paulsen (the "Officer"). As used in this
Agreement, the term "Company" shall be deemed to include Parent and its direct
or indirect wholly-owned subsidiaries.
Recitals
A. Officer is currently serving as an officer of Parent. Parent and Officer
desire to enter into an agreement governing certain matters relating to
Officer's employment with the Company, including compensation arrangements and
restrictions on Officer's use of Company information.
B. Parent acknowledges that Officer is a significant employee of the
Company, possessing skills and knowledge instrumental to the successful conduct
of the Company's business. Parent is willing to enter into a severance
arrangement with Officer in order to better ensure itself of the continued
management services of Officer for itself and its subsidiaries and, in part, to
induce Officer to continue to provide those services and subject himself to
certain restrictions regarding the use of Company information.
C. Officer is willing to subject himself to the restrictions mentioned
above in part to induce Parent to enter into a compensation arrangement that
provides for, among other things, the payment of certain benefits upon the
termination of Officer's employment under certain circumstances.
Now, therefore, for and in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties to this
Agreement hereby agree as follows:
1. Position and Duties. Officer shall serve Parent as Vice President, and,
in so doing, shall report to Parent's Board of Directors (the "Board"), Parent's
Chief Executive Officer (the "Chief Executive Officer") or such officers of
Parent as is prescribed by Parent's bylaws, by resolutions of the Board or by
direction of the Chief Executive Officer. Officer shall have supervision and
control over, and responsibility for, such management and operational functions
of the Company currently assigned to such position, and shall have such other or
different powers and duties (including holding officer positions with one or
more subsidiaries of Parent), as may from time to time be prescribed by the
Board or the Chief Executive Officer, so long as such functions, powers and
duties are reasonable and customary for a Vice President serving an enterprise
comparable to Parent.
2. Devotion of Efforts. So long as Officer is serving the Company in the
capacities described in Section 1, he shall devote his full time, skill and
attention and his best efforts during normal business hours to the business and
affairs of the Company to the extent necessary to discharge faithfully and
efficiently his duties and responsibilities described in Section 1, except for
usual, ordinary and customary periods of vacation and absence due to illness or
other disability or such periods of leave as are approved in writing by the
Board or the Chief Executive Officer. The provisions of this Section shall not
be construed to prevent Officer from making investments in other businesses or
enterprises, so long as such investments do not violate the Company's conflict
of interest policies or require the provision of services by Officer to such
businesses or enterprises to an extent that would interfere in any material
respect with the performance of Officer's duties and responsibilities to the
Company.
3. Compensation.
(a) Base Salary. As compensation for Officer's services, the Company
shall pay Officer an annualized base salary of a specified amount per annum (the
"Base Salary"). The Base Salary shall be payable in substantially equal
semi-monthly installments. The Compensation Committee of the Board (the
"Compensation Committee") may review the Base Salary periodically and may grant
such increases, or effect such reductions, in the Base Salary as the
Compensation Committee considers appropriate in accordance with such
compensation guidelines and policies as it may establish from time to time. The
Base Salary applicable from time to time for any period of Officer's employment
with the Company, commencing on the effective date of this Agreement, shall be
identified on Schedule A attached hereto, which shall be amended periodically to
reflect any increases or reductions effected by the Compensation Committee.
(b) Bonuses. Officer shall be entitled to receive (in addition to the
Base Salary) such annual or other periodic bonus as the Compensation Committee
may award in accordance with such compensation guidelines and policies as it may
establish from time to time.
(c) Other Benefits. Officer shall be entitled to participate in, or
receive benefits under, any employee benefit plan or other arrangement made
available now or in the future by the Company to the officers of Parent (a
"Benefit Plan"), subject to the terms, conditions and overall administration of
such Benefit Plan. Officer's participation in, or receipt of benefits under, any
Benefit Plan shall be in addition to (and not in lieu of) the Base Salary.
(d) Vacations and Holidays. Officer shall be entitled to the number of
paid vacation days in each calendar year determined by Parent from time to time
for its officers and shall be entitled to all paid holidays given by the Company
to its employees in general.
4. Relocation. Officer shall be required to perform his duties and
responsibilities hereunder at Parent's offices located in Midland, Texas. If the
Company requires Officer to perform his duties and responsibilities at any
location that is more than 50 miles from the nearest border of Midland, Texas (a
"New Location") and, within 30 days after receiving notice thereof, Officer
accepts such relocation rather than terminating his employment with the Company
pursuant to Section 5(a), the Company shall pay to Officer, or shall reimburse
Officer for (upon submission of reasonably detailed evidence thereof), such sums
as are provided for under the Relocation Policy for Exempt Employees as
established by Parent.
5. Termination of Employment.
(a) Right to Terminate. Officer's employment with the Company
(including his officer position with Parent) shall be terminated upon the death,
Disability (as defined in subsection (f)(3) of this Section) or Normal
Retirement (as defined in subsection (f)(6) of this Section) of Officer. In
addition, Officer's employment with the Company (including his officer position
with Parent) may be terminated at any time and for any reason as a result of a
dismissal or other action by the Company or as a result of a voluntary action by
Officer. Any such termination of employment is referred to herein as a
"Termination of Employment."
(b) Notice of Termination.
(1) Any Termination of Employment that is the result of Officer's
Disability shall be communicated by the Company to Officer in a written
notice thereof. Such notice shall state that, in the opinion of the
Board, Officer is suffering from a Disability and such Disability is
the reason for the Termination of Employment.
(2) Any Termination of Employment that is the result of Officer's
Normal Retirement shall be communicated by Officer to Parent by a
written notice thereof. Such notice shall state that Officer is
retiring and shall specify the date of such Termination of Employment,
which shall be not less than 30 days following the date such notice is
received by Parent.
(3) Any Termination of Employment that is the result of a dismissal
or other action by the Company (but is not the result of Officer's
Disability) shall be communicated by the Company to Officer by a
written notice thereof. Such notice shall state whether or not (in the
Company's opinion) the Termination of Employment constitutes a
Termination for Cause (as defined in subsection (f)(7) of this Section)
and, if so, shall set forth in reasonable detail facts and
circumstances constituting a basis for such Termination for Cause.
(4) Any Termination of Employment that is the result of a voluntary
action by Officer (but is not the result of Officer's Normal
Retirement) shall be communicated by Officer to Parent by written
notice thereof. Such notice shall state whether or not (in Officer's
opinion) the Termination of Employment constitutes a Termination for
Good Reason (as defined in subsection (0(8) of this Section) and, if
so, shall set forth in reasonable detail the facts and circumstances
claimed as the basis for such Termination for Good Reason. Such notice
shall also specify the date of such Termination of Employment, which
(if the Termination of Employment does not constitute a Termination for
Good Reason) shall be not less than 30 days following the date such
notice is received by Parent.
(c) Date of Termination of Employment. For purposes of this Agreement,
the date of a Termination of Employment shall be (1) if the Termination of
Employment is the result of Officer's death, the date of such death, (2) if the
Termination of Employment is the result of Officer's Disability, the date on
which the notice described in subsection (b)(1) of this Section is received by
Officer, (3) if the Termination of Employment is the result of Officer's Normal
Retirement, the date specified in the notice described in subsection (b)(2) of
this Section, (4) if the Termination of Employment is the result of a dismissal
or other action by the Company (but is not the result of Officer's Disability),
the date on which the notice described in subsection (b)(3) of this Section is
received by the Officer, and (5) if the Termination of Employment is the result
of a voluntary action by Officer (but is not the result of Officer's Normal
Retirement), the date specified in the notice described in subsection (b)(4) of
this Section.
(d) Payments Due Upon Termination of Employment. The provisions of
subsections (d)(1) and (d)(3) of this Section shall apply to any
Termination of Employment, whether occurring prior to, at the time of
or at any time following a Change in Control (as defined in subsection
(f)(2) of this Section); and the provisions of subsection (d)(2) of
this Section shall apply only to any Termination of Employment prior to
a Change in Control.
(1) Death, Disability or Normal Retirement. If the
Termination of Employment is the result of Officer's death, Disability
or Normal Retirement, the Company shall pay the following amounts to
Officer (or his estate or personal representative):
(A) The Base Salary (at the rate in effect on the date of
such Termination of Employment, as identified on Schedule A)
through and including the date of such Termination of
Employment, to the extent not already paid, which amount shall
be paid in cash on the first normal semi-monthly Base Salary
payment date immediately succeeding the date of such
Termination of Employment;
(B) Any amounts arising from Officer's participation in,
or benefits under, any Benefit Plan through and including the
date of such Termination of Employment, which amounts shall be
payable in accordance with the terms and conditions of such
Benefit Plan; and
(C) An amount equal to one full year's Base Salary (at
the rate in effect on the date of such Termination of
Employment, as identified on Schedule A), which amount shall
be paid in cash within 30 days following the date of such
Termination of Employment.
(2) Termination for Good Reason or Not for Cause. If the
Termination of Employment (i) is the result of a dismissal or
other action by the Company (but is not the result of
Officer's Disability) and does not constitute a Termination
for Cause or (ii) is the result of a voluntary action by
Officer (but is not the result of Officer's Normal Retirement)
and constitutes a Termination for Good Reason, the Company
shall pay the following amounts, and provide the following
benefits to Officer:
(A) The Base Salary (at the rate in effect on the date of
such Termination of Employment, as identified on Schedule A)
through and including the date of such Termination of
Employment, which amount shall be paid in cash on the date of
such Termination of Employment;
(B) Any amount arising from Officer's participation in,
or benefits under, any Benefit Plan through and including the
date of such Termination of Employment, which amounts shall be
payable in accordance with the terms and conditions of such
Benefit Plan;
(C) An amount equal to one full year's Base Salary (at
the rate in effect on the date of such Termination of
Employment, as identified on Schedule A), which amount shall
be paid in cash on the date of such Termination of Employment;
(D) For a period of one year following the date of such
Termination of Employment, a continuation of all health
insurance coverage applicable at the time of such Termination
of Employment to Officer and his immediate family under any
Benefit Plan; and
(E) With respect to a Termination of Employment described
in Section 5(d)(2)(i), an amount equal to one-twelfth (1/12)
of the Officer's Base Salary, which amount shall be paid in
cash on the date of such Termination of Employment.
(3) Termination for Cause or Not for Good Reason. If the
Termination of Employment (i) is the result of a dismissal or other
action by the Company (but is not the result of Officer's Disability)
and constitutes a Terminaation for Cause or (ii) is the result of a
voluntary action by Officer (but is not the result of Officer's Normal
Retirement) and does not constitute a Termination for Good Reason,
the Company shall pay the following amounts to Officer:
(A) The Base Salary (at the rate in effect on the date of
such Termination of Employment, as identified on Schedule A)
through and including the date of such Termination of
Employment, which amount shall be paid in cash on the first
normal semi-monthly Base Salary payment date immediately
succeeding the date of such Termination of Employment; and
(B) Any amounts arising from Officer's participation in,
or benefits under, any Benefit Plan through and including the
date of such Termination of Employment, which amounts shall be
payable in accordance with the terms and conditions of such
Benefit Plan.
(4) Payment Contingent on Release. If Officer's
Termination of Employment is prior to a Change in Control (and only in
that event), and Officer is otherwise entitled to the payment provided
in subsection (d)(2) of this Section, then such payment shall be
subject to, and contingent upon, Officer's execution of a General
Release Agreement in favor of the Company in substantially the form and
substance as the one attached hereto as Schedule B.
(e) Additional Provisions Applicable Upon Termination of
Employment Concurrent with or Following Change in Control. The following
provisions shall apply to any Termination of Employment occurring at the time
of, or at any time within one year following, a Change in Control.
(1) Termination for Good Reason or Not for Cause. If
the Termination of Employment (i) is the result of a dismissal or other
action by the Company (but is not the result of Officer's Disability)
and does not constitute a Termination for Cause, or (ii) is the result
of a voluntary action by Officer (but is not the result of Officer's
Normal Retirement) and constitutes a Termination for Good Reason, the
Company shall pay the following amounts, and provide the following
benefits, to Officer:
(A) The Base Salary (at the rate in effect on the date of
such Termination of Employment, as identified on Schedule A)
through and including the date of such Termination of
Employment, which amount shall be paid in cash on the date of
such Termination of Employment;
(B) A lump sum in cash equal to 2.99 times the sum of (i)
Officer's Base Salary (at the rate in effect on the date of
such Termination of Employment, as identified on Schedule A),
plus (ii) the greater of the then current year's targeted
bonus or actual bonus award (if applicable) for Officer, which
amount shall be paid in cash on the date of such Termination
of Employment;
(C) Any amount arising from Officer's participation in,
or benefits under, any Benefit Plan through and including the
date of such Termination of Employment, which amounts shall be
payable in accordance with the terms and conditions of such
Benefit Plan;
(D) For a period of one year following the date of such
Termination of Employment, a continuation of all health
insurance coverage applicable at the time of such Termination
of Employment to Officer and his immediate family under any
Benefit Plan; and
(E) With respect to a Termination of Employment described
in Section 5(e)(1)(i), an amount equal to one-twelfth (1/12)
of the Officer's Base Salary, which amount shall be paid in
cash on the date of such Termination of Employment.
(2) Voluntary Termination Not for Good Reason. If the
Termination of Employment is the result of a voluntary action by
Officer, does not constitute a Termination for Good Reason and either
(A) occurs at least six months, but not more than one year, following a
Change in Control or (B) occurs at the time of, or at any time within
one year following, a Change in Control and following the Company's
requiring the Officer to perform his duties and responsibilities
hereunder at a New Location, which relocation is not accepted by
Officer within 30 days after receiving notice thereof, then the Company
shall pay to Officer all amounts that would be payable pursuant to
subsection (d)(2) of this Section had such Termination of Employment
occurred prior to the Change in Control and constituted a Termination
for Good Reason.
(3) Excise Tax and Gross-Up Payment.
(A) If any portion of such compensation
constitutes a parachute payment (a "Payment") and is subject
to the Excise Tax (hereinafter defined), then Company shall,
in addition to providing such compensation, pay the Gross-Up
Payment (hereinafter defined) to Officer in the manner
described below. For purposes of this Agreement, (i) "Excise
Tax" shall mean the tax imposed pursuant to section 4999 of
the Code and any interest or penalties incurred by the Officer
with respect to such Excise Tax, and (ii) "Gross-Up Payment"
shall mean, with respect to any compensation provided to the
Officer by Company (including without limitation the payments
provided for under this Agreement and any payments to the
Officer under any employee benefit plan, including without
limitation the Company's Long-term Incentive Plan, or other
arrangement) that is subject to the Excise Tax, an amount
that, after reduction of the amount of such Gross-Up Payment
for all federal, state, and local tax (including any interest
or penalties imposed with respect to such taxes) to which the
Gross-Up Payment is subject (including the Excise Tax to which
the Gross-Up Payment is subject), is equal to the amount of
the Excise Tax to which such compensation is subject. For
purposes of determining the amount of any Gross-Up Payment,
Officer shall be deemed to pay federal income taxes at the
highest marginal rate of taxation and state and local taxes,
if applicable, at the highest marginal rate of taxation in the
state and locality of residence of the Officer on the Date of
Termination, net of the maximum reduction in federal income
taxes that could be obtained from deduction of such state and
local taxes, if any.
(B) Subject to the provisions of subsection 5(e)(3)(C),
all determinations required to be made under this subsection
5(e)(3), including whether and when a Gross-Up Payment is
required, the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination,
shall be made by the accounting firm which performed the audit
of the Company for the year preceding the year in which the
Change in Control occurred (the "Accounting Firm") which
shall provide detailed supporting calculations both to the
Company and the Officer within 15 business days of the receipt
of notice from the Officer that there has been a Payment, or
such earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the
Change in Control, the Officer shall appoint another
nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm
shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be
borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this subsection 5(e)(3), shall be paid
by the Company to the Officer within five days of the receipt
of the Accounting Firm's determination. If the Accounting
Firm determines that no Excise Tax is payable by the Officer,
it shall furnish the Officer with a written opinion that
failure to report the Excise Tax on the Officer's applicable
federal income or excise tax return would not result in the
imposition of a negligence or similar penalty. Any
determination by the Accounting Firm shall be binding upon the
Company and the Officer.
(C) The Officer shall notify the Company in writing of
any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the
Gross-Up Payment. Such notification shall be given no later
than ten business days after the Officer is informed in
writing of such claim. The Officer shall not pay such claim
prior to the expiration of the 30-day period following the
date on which it gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies
the Officer in writing prior to the expiration of such period
that it desires to contest such claim, (i) the Officer shall
accept legal representation with respect to such claim by an
attorney reasonably selected by the Company, (ii) cooperate
with the Company in good faith in order to effectively contest
such claim, and (iii) permit the Company to participate in any
proceedings relating to such claim; provided, however, the
Company shall bear and pay directly all costs and expenses
(including legal and accounting fees and additional interest
and penalties) incurred in connection with such contest and
shall indemnify and hold the Officer harmless, on an after-tax
basis, for any Excise Tax or income tax (including interest
and penalties with respect thereto) imposed as a result of
such representation and payment of costs and expenses. The
Company shall control all proceedings taken in connection
with such contest to the extent relating to issues impacting
whether a Gross-Up Payment is payable hereunder. The Officer
shall be entitled to settle or contest, as the case may be,
any other issue raised by the Internal Revenue Service or any
other taxing authority in connection with such contest.
(D) If any such claim referred to in subsection
5(e)(3)(C) is made by the Internal Revenue Service and the
Company does not request the Officer to contest the claim
within the 30-day period following notice of the claim, the
Company shall pay to the Officer the amount of any Gross-Up
Payment owed to the Officer, but not previously paid pursuant
to subsection 5(e)(3)(B), immediately upon the expiration of
such 30-day period. If any such claim is made by the Internal
Revenue Service and the Company requests the Officer to
contest such claim, the Company shall pay to the Officer the
amount of any Gross-Up Payment owed to the Officer, but not
previously paid under the provisions of subsection
5(e)(3)(B), within five days of a Final Determination of the
liability of the Officer for such Excise Tax. For purposes of
this Agreement, a "Final Determination" shall be deemed to
occur with respect to a claim when (i) there is a decision,
judgment, decree or other order by any court of competent
jurisdiction, which decision, judgment, decree or other order
has become final, i.e., all allowable appeals have been
exhausted by either party to the action, (ii) there is a
closing agreement made under Section 7121 of the Code, or
(iii) the time for instituting a claim for refund has expired,
or if a claim was filed, the time for instituting suit with
respect thereto has expired.
(4) Letter of Credit. Following a Change in Control, Parent
(within 10 days following receipt of Officer's written request
therefor), at its sole cost and expense, shall post an irrevocable
letter of credit with a banking institution reasonably acceptable to
Officer in an amount equal to the maximum amount of the aggregate cash
payments that would be made to Officer pursuant to the provisions of
paragraph (1) of this subsection if the provisions of paragraph (1) of
this subsection were to become applicable. Such letter of credit shall
contain provisions making the funds available thereunder to Officer by
Officer's drafts drawn at sight at any time and from time to time. Such
provisions shall permit Officer to present drafts (including drafts for
partial draws) drawn at sight by presentation by Officer to the
applicable banking institution of a written statement to the effect
that the Company is in default on a payment to be made to Officer
pursuant to the terms of this Agreement (setting forth the amount of
such payment in default) and that Officer is not in default under, and
has not breached the terms of, this Agreement. Parent shall continue to
keep such letter of credit in place until the expiration of at least 60
days following the date of a Termination of Employment occurring after
the Change in Control.
(5) Retirement Benefits Funded. Upon a Change in Control, any
accrued but unfunded retirement benefit obligations to Officer under
any then existing retirement plan shall be fully funded to a Rabbi
Trust for the benefit of such Officer, which amount shall be paid in
cash on the date of such Change in Control.
(f) Certain Definitions. As used in the Section and elsewhere
in this Agreement, the following terms shall have the respective meanings
indicated:
(1) "Across-the-Board Salary Reduction" shall mean a reduction in
the Base Salary that is a part of, and is at a rate consistent with, a
reduction in the base salaries paid to substantially all officers of
Parent.
(2) "Change in Control" shall mean the occurrence of any of the
following events:
(A) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (x) the then outstanding shares of
common stock of Parent (the "Outstanding Parent Common Stock")
or (y) the combined voting power of the then outstanding
voting securities of Parent entitled to vote generally in the
election of directors (the "Outstanding Parent Voting
Securities"); provided, however, that for purposes of this
subsection (A), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly
from Parent, (ii) any acquisition by Parent, (iii) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by Parent or any corporation
controlled by Parent or (iv) any acquisition by any
corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of paragraph (C) below; or
(B) Members of the Incumbent Board cease for any reason
to constitute at least a majority of the Board; or
(C) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of Parent or an acquisition
of assets of another corporation (a "Business Combination"),
in each case, unless, following such Business Combination, (i)
all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding
Parent Common Stock and Outstanding Parent Voting Securities
immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 50% of, respectively,
the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a
corporation which as a result of such transaction owns Parent
or all or substantially all of Parent's assets either directly
or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Parent Common Stock
and Outstanding Parent Voting Securities, as the case may
be, (ii) no Person (excluding any employee benefit plan (or
related trust) of Parent or the corporation resulting from
such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership
results solely from ownership of Parent that existed prior to
the Business Combination and (iii) at least a majority of the
members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent
Board at the time of the execution of the initial agreement,
or of the action of the Board, providing for such Business
Combination; or
(D) Approval by the shareholders of Parent of a complete
liquidation or dissolution of Parent; or
(E) Consummation of a Business Combination not otherwise
constituting a Change of Control but, pursuant to which the
Person serving as Chief Executive Officer at the time of the
execution of the initial agreement is removed from, or
replaced in, such capacity with respect to the corporation
resulting from such Business Combination.
(3) "Disability" shall mean Officer's physical or mental impairment
or incapacity of sufficient severity that, in the opinion of the Board,
either (A) Officer is unable to continue to perform his duties and
responsibilities hereunder or (B) Officer's condition entitles him to
disability benefits under any Benefit Plan providing for the payment
thereof.
(4) "Excessive Salary Reduction" shall mean (A) a reduction in the
Base Salary that is not an Across-the-Board Salary Reduction (as
defined in paragraph (1) of this subsection) and that, when combined
with the net effect of all prior increases and reductions in the Base
Salary (other than prior reductions that were Across-the-Board Salary
Reductions), results in the Base Salary being less than 80% of the
highest Base Salary to which Officer has ever been subject pursuant to
this Agreement (as identified on Schedule A) or (B) a reduction in the
Base Salary (whether or nor an Across-the-Board Salary Reduction) that,
when combined with the net effect of all prior increases and reductions
in the Base Salary (whether or not Across-the-Board Salary Reductions),
results in the Base Salary being less than 65% of the highest Base
Salary to which Officer has ever been subject pursuant to this
Agreement (as identified on Schedule A).
(5) "Incumbent Board' means the individuals who, as of the date of
this Agreement, constitute the Board and any other individual who
becomes a director of Parent after that date and whose election or
nomination for election by Parent's shareholders was approved by a vote
of at least a majority of the directors then comprising the Incumbent
Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Incumbent Board.
(6) "Normal Retirement' shall have the meaning given to such term
in Section 1.27 of the Long-term Incentive Plan.
(7) "Termination for Cause" shall mean a Termination of Employment
as a result of a dismissal or other action by the Company following (A)
Officer's continued failure to substantially perform his duties and
responsibilities as described in Section 1 (other than any such failure
resulting from Officer's physical or mental impairment or incapacity)
after written demand for substantial performance is delivered by the
Board or the Chief Executive Officer specifically identifying the
manner in which the Board or the Chief Executive Officer, as the case
may be, believes Officer has not substantially performed such duties
and responsibilities, (B) Officer's engaging in misconduct that is
materially injurious to the Company, monetarily or otherwise, or (C) a
material violation by Officer of the provisions of Section 6. For
purposes of clause (B) of this paragraph, an act, or failure to act, on
Officer's part shall be considered "misconduct" if done, or omitted, by
Officer not in good faith and without reasonable belief that such act,
or failure to act, was in the best interest of the Company.
(8) "Termination for Good Reason" shall mean a Termination of
Employment as a result of voluntary action by Officer within 30 days
after receiving notice of (A) the demotion of the Officer to an officer
position junior to the officer position specified in Section 1 or to a
non-officer position, (B) an Excessive Salary Reduction (as defined in
paragraph (4) of this subsection), or (C) the failure by Parent to
obtain the assumption agreement described in Section 7(f) on or prior
to a succession described in Section 7(f).
6. Nonpublic Information.
(a) Officer hereby acknowledges that, in connection with his
employment with the Company, he has received, and will continue to receive,
various information regarding the Company and its business, operations and
affairs. All such information, to the extent not publicly available other than
as a result of a disclosure by Officer in violation of this Agreement, is
referred to herein as the "Nonpublic Information."
(b) Officer hereby agrees that, from and after the date hereof and
continuing until three (3) years following a Termination of Employment, he will
keep all Nonpublic Information confidential and will not, without the prior
written consent of the Board or the Chief Executive Officer, disclose any
Nonpublic Information in any manner whatsoever or use any Nonpublic Information
other than in connection with the performance of his services to the Company
hereunder; provided, however, that the provisions of this subsection shall not
prevent Officer from (1) disclosing any Nonpublic Information to any other
employee of the Company or to any representative or agent of the Company (such
as an independent accountant, engineer, attorney or financial advisor) when such
disclosure is reasonably necessary or appropriate (in Officer's judgment) in
connection with the performance by Officer of his duties and responsibilities
hereunder or (2) disclosing any Nonpublic Information as required by applicable
law, rule, regulation or legal process (but only after compliance with the
provisions of subsection (c) of this Section).
(c) If Officer is requested pursuant to, or required by, applicable
law, rule, regulation or legal process to disclose any Nonpublic Information,
Officer will notify Parent promptly so that the Company may seek a protective
order or other appropriate remedy or, in the Company's sole discretion, waive
compliance with the terms of this Section, and Officer will fully cooperate in
any attempt by the Company to obtain any such protective order or other remedy.
If no such protective order or other remedy is obtained, or the Company waives
compliance with the terms of this Section, Officer will furnish or disclose only
that portion of the Nonpublic Information as is legally required and will
exercise all reasonable efforts to obtain reliable assurance that confidential
treatment will be accorded the Nonpublic Information that is so disclosed.
7. Miscellaneous Provisions.
(a) Mitigation. Officer shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or otherwise, and the amount of any payment provided for in this Agreement shall
not be reduced by any compensation earned by Officer as the result of employment
by another employer after the date of any Termination of Employment or
otherwise.
(b) Interest. Until paid, all past due amounts required to be
paid by the Company to Officer under any provision of this Agreement shall bear
interest at the highest non-usurious rate permitted by applicable federal, state
or local law.
(c) Equitable Relief Available. Officer acknowledges that
remedies at law may be inadequate to protect the Company against any actual or
threatened breach of the provisions of Section 6 by Officer. Accordingly,
without prejudice to any other rights or remedies otherwise available to the
Company, Officer agrees that the Company shall have the right to equitable and
injunctive relief to prevent any breach of the provisions of Section 6, as well
as to such damages or other relief as may be available to the Company by reason
of any such breach as does occur.
(d) Breach Not a Defense. The representations and covenants on
the part of Officer contained in Section 6 shall be construed as ancillary to
and independent of any other provision of this Agreement, and the existence of
any claim or cause of action of Officer against the Company or any officer,
director, stockholder or representative of the Company, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by the Company of the covenants on the part of Officer contained in Section 6.
(e) Notices. Any notice or other communication called for by
the terms of this Agreement shall be in writing and either delivered personally
or by registered or certified mail (postage prepaid and return receipt
requested) and shall be deemed given when received at the following addresses
(or at such other address for a party as shall be specified by like notice):
(1) If to Parent or the Company, 1400 Williams Square West, 5205
North O'Connor Boulevard, Irving, Texas 75039, Attention: General
Counsel.
(2) If to Officer, the address of Officer set forth below Officer's
signature on the signature page of this Agreement, and marked
"Confidential."
(f) Assumption by Successor of Parent. Parent shall require
any successor (whether direct or indirect) to all or substantially all of the
business or assets of Parent (whether by purchase of securities, merger,
consolidation, sale of assets or otherwise), by a written agreement in form and
substance satisfactory to Officer, to expressly assume and agree to perform the
obligations to be performed by Parent or the Company under this Agreement in the
same manner and to the same extent that Parent or the Company would be required
to perform if no such succession had taken place.
(g) Assignment
(1) Except pursuant to an assumption by a successor
described in subsection (f) of this Section, the rights and
obligations of the Company pursuant to this Agreement may not be
assigned, in whole or in part, by the Company to any other person or
entity without the express written consent of Officer.
(2) The rights and obligations of Officer pursuant
to this Agreement may not be assigned, in whole or in part, by Officer
to any other person or entity without the express written consent of
the Board.
(h) Successors. This Agreement shall be binding on, and shall inure to
the benefit of, the Company, Officer and their respective successors, permitted
assigns, personal and legal representatives, executors, administrators, heirs,
distributees, devisees and legatees, as applicable.
(i) Amendment and Waivers. Except as hereinafter provided, no provision
of this Agreement may be amended or otherwise modified, and no right of any
party to this Agreement may be waived, unless such amendment, modification or
waiver is agreed to in a written instrument signed by Officer and Parent (and
any dated and signed Schedule A, as described in subsection (o) of this Section,
shall constitute such an instrument). Beginning on the fifth anniversary of the
date hereof, unless a Change of Control shall have occurred or be pending or
contemplated, Parent may amend, modify, or waive any provision of, or terminate,
this Agreement upon sixty (60) days notice without the consent of Officer;
provided that any such amendment, modification, waiver or termination shall be
made to all severance agreements of Parent covering all officers of Parent
similarly situated to Officer. No waiver by either party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
the other party hereto shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
(j) Complete Agreement. The provisions of this Agreement constitute the
complete understanding and agreement among the parties with respect to the
subject matter hereof, and no agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement.
(k) Governing Law. THIS AGREEMENT IS BEING MADE AND EXECUTED IN, AND IS
INTENDED TO BE PERFORMED IN, THE STATE OF TEXAS AND SHALL BE GOVERNED,
CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF
THE STATE OF TEXAS.
(l) Attorney Fees. All legal fees and other costs incurred by
Officer in connection with the resolution of any dispute or controversy under
or in connection with this Agreement shall be reimbursed by the Company to
Officer, if such dispute or controversy is resolved in favor of Officer. The
Company shall be responsible for, and shall pay, all legal fees and other costs
incurred by the Company in connection with the resolution of any dispute or
controversy under or in connection with this Agreement, regardless of whether
such dispute or controversy is resolved in favor of the Company or Officer.
(m) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same agreement.
(n) Construction. The captions of the Sections, subsections and
paragraphs of this Agreement have been inserted as a matter of convenience of
reference only and shall not affect the meaning or construction of any of the
terms or provisions of this Agreement. Unless otherwise specified, references in
this Agreement to a "Section," "subsection," "paragraph," "subparagraph" or
"Schedule" shall be considered to be references to the appropriate Section,
subsection, paragraph, subparagraph or Schedule, respectively, of this
Agreement. Unless the context otherwise requires, all words used in this
Agreement in any gender shall include the masculine, feminine and neuter gender,
all singular words shall include the plural and all plural words shall include
the singular. As used in this Agreement, the term "including' shall mean
"including, but not limited to."
(o) Schedule A. Schedule A may be replaced at any time and from time to
time to reflect a change in the Base Salary; provided, however, that no Schedule
A attached hereto shall be effective unless it contains a date and bears a
signature of approval on behalf of Officer and a signature of approval on behalf
of Parent; and provided further, however, that if at any time two or more dated
and signed copies of Schedule A conflict with each other, the later dated of
such copies shall control.
(p) Validity and Severability. If any term or provision of this
Agreement is held to be illegal, invalid or unenforceable under the present or
future laws effective during the term of this Agreement, (1) such term or
provision shall be fully severable, (2) this Agreement shall be construed and
enforced as if such term or provision had never comprised a part of this
Agreement and (3) the remaining terms and provisions of this Agreement shall
remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable term or provision or by its severance from this
Agreement. Furthermore, in lieu of such illegal, invalid or unenforceable term
or provision, there shall be added automatically as a part of this Agreement, a
term or provision as similar to such illegal, invalid or unenforceable term or
provision as may be possible and be legal, valid and enforceable.
(q) Execution by Parent. The execution of this Agreement by Parent
shall constitute an acceptance of, and an agreement to be bound by, the terms
and provisions of this Agreement by Parent and each of its direct and indirect
wholly-owned subsidiaries, and Parent hereby agrees to cause each of its direct
and indirect wholly-owned subsidiaries, now and in the future, to fully comply
with all obligations applicable to the Company pursuant to the terms of this
Agreement.
(r) Effect on Other Rights. Parker & Parsley Petroleum Company, a
Delaware corporation ("PPPC"), and Officer have previously entered into that
certain Severance Agreement effective January 1, 1996 (the "Original Severance
Agreement"). Effective as of the date hereof, PPPC has merged with and into MESA
Operating Co., a Delaware corporation and a direct wholly owned subsidiary of
Parent ("Merger Sub"), with Merger Sub being the surviving entity of such merger
(the "Merger"). Parent hereby expressly assumes and agrees to perform PPPC's
obligations under Section 5(e) of the Original Severance Agreement in the same
manner and to the same extent that PPPC would be required to perform such
obligations, and Officer hereby acknowledges that the form and substance of such
assumption is satisfactory to Officer. Each of Parent and Officer hereby
acknowledges, covenants and agrees that (i) the Merger constitutes a "Change in
Control" (as such term is defined in the Original Severance Agreement), (ii) the
terms and provisions of this Agreement are not intended to, shall not, and shall
not be deemed to, supersede, limit or in any way affect any of Officer's rights
under Section 5(e) of the Original Severance Agreement to receive certain
payments as a result of a termination of Officer's employment with PPPC
occurring within one year after consummation of the Merger (a "MESA Merger
Termination"), and (iii) other than as set forth in Section 5(e) of the Original
Severance Agreement, Officer shall not be entitled to receive any payment under
this Agreement as a result of a MESA Merger Termination. Parent and Officer
hereby agree that, except for the rights, duties and obligations of Parent and
Officer arising as a result of a MESA Merger Termination as set forth in Section
5(e) of the Original Severance Agreement, the Original Severance Agreement is
hereby completely and irrevocably terminated in all respects effective as of the
date hereof, and all terms and provisions of the Original Severance Agreement
other than Section 5(e) as such section relates to the MESA Merger Termination
are replaced and superseded in all respects by the terms and provisions of this
Agreement.
(SIGNATURE PAGE ATTACHED)
In witness whereof, the parties have executed this Agreement effective as
of the date first written above.
PIONEER NATURAL RESOURCES COMPANY
By: /s/ Mark L. Withrow
-----------------------------------
Name: Mark L. Withrow
Title: Executive Vice President
OFFICER:
/s/ Larry N. Paulsen
---------------------------------------
Larry N. Paulsen
Address:
---------------------------------------
---------------------------------------
CONSENT OF PIONEER NATURAL RESOURCES USA, INC.
Pioneer Natural Resources USA, Inc., a Delaware corporation formerly named
MESA Operating Co. into which Parker & Parsley Petroleum Company was merged,
hereby consents to the partial termination, replacement and supersession of the
Original Severance Agreement (as defined in Section 7(r) of the foregoing
Severance Agreement) to the extent provided in Section 7(r) of the foregoing
Severance Agreement.
PIONEER NATURAL RESOURCES USA, INC.
By: /s/ Mark L. Withrow
-------------------------------------
Name: Mark L. Withrow
Title: Executive Vice President
Schedule A
Attached to Severance Agreement between
Pioneer Natural Resources Company and
Larry N. Paulsen
BASE Salary:
Effective Date Amount
January 1, 2005 $241,000.00
Dated and Approved as of _______________:
PIONEER NATURAL RESOURCES COMPANY OFFICER:
By: /s/ Scott D. Sheffield /s/ Larry N. Paulsen
--------------------------------------- -----------------------------
Name: Scott D. Sheffield Larry N. Paulsen
Title: Chief Executive Officer and Chairman
Schedule B
GENERAL RELEASE AGREEMENT
NOTICE: Various state and federal laws and regulations prohibit employment
discrimination based on age, race, color, religion, sex, national origin,
disability, citizenship, and membership or application for membership in a
uniformed service. These laws are enforced through the Equal Employment
Opportunity Commission, U.S. Department of Labor, Texas Commission on Human
Rights, and other federal and state agencies. You are advised to discuss this
release with your attorney. In any event, you should thoroughly review and
understand the effect of this document before signing it. Therefore, please take
this General Release Agreement home and carefully consider it for at least five
days before signing it. In accordance with the requirements of the Older Workers
Benefit Protection Act, you are allowed at least 45 days from the date of your
receipt of this document and the accompanying explanatory letter to consider the
offer made to you and to return an executed copy of this form to the Vice
President Administration. Additionally, after you have executed this form, you
have seven days to reconsider and revoke your agreement.
GENERAL RELEASE: In consideration of my acceptance of the payments and benefits
offered to me under Section 5(d)(2)(c) of the Severance Agreement, I hereby
release and discharge Pioneer Natural Resources Company and its subsidiaries and
affiliates (the "Company"), and the officers, directors, employees, agents,
successors, and assigns of such entities (collectively the "Released Parties")
from any and all claims, liabilities, demands, and causes of action, known or
unknown, fixed or contingent, which I have or claim against them as a result of
the termination of my employment, including but not limited to claims arising
under federal, state, or local laws prohibiting employment discrimination,
including the Age Discrimination in Employment Act, or claims growing out of any
legal restrictions, contractual or otherwise, on the Company's right to
terminate the employment of its employees, and I do hereby agree not to file a
lawsuit to assert such claims. I further acknowledge and agree that by accepting
the Severance Agreement benefits, I have given up my right to file any
complaint, lawsuit, or other legal action against any of the Released Parties
growing out of, connected with, or relating in any way to my employment or the
termination of my employment with the Company. Further in consideration of the
payments and benefits offered to me under the Severance Agreement, I acknowledge
and agree that the Released Parties may recover from me any loss, including
attorney's fees and costs of defending against any claim brought by me, that
they may suffer arising out of my breach of this General Release Agreement
I understand that this General Release Agreement is final and binding, and
I agree not to challenge its enforceability. If I do challenge the
enforceability of this General Release Agreement, I agree initially to tender to
the Company all money received pursuant to the Severance Agreement, and invite
the Company to retain such money and agree with me to cancel this General
Release Agreement. In the event the Company accepts this offer, the Company
shall retain such money and this General Release Agreement will be void. In the
event the Company does not accept such offer, the Company shall so notify me,
and shall place such money in an interest-bearing escrow account pending the
resolution of any dispute as to whether this General Release Agreement shall be
set aside and/or otherwise be rendered unenforceable.
I acknowledge and agree that the Company has no legal obligation to provide
the payment under Section 5(d)(2)(c) of the Severance Agreement offered to me,
and my acceptance of the obligations and attendant additional payment as
described therein constitutes my agreement to all terms and conditions set forth
in this General Release Agreement, and are in consideration of the promises and
undertakings of the Company pursuant to the Severance Agreement. I further
acknowledge and agree that for unemployment compensation purposes, the payments
I receive under the Severance Agreement shall be considered additional wages in
lieu of notice; and that, accordingly, I may be ineligible to receive
unemployment compensation benefits for an equivalent period of time.
This General Release Agreement does not have any effect on any claim I may
have against the Released Parties unrelated to the termination of my employment
or with respect to any rights or claims that may arise after the date this
General Release Agreement is executed.
I have carefully read and fully understand all of the provisions of this
General Release. I further acknowledge that entering into this General Release
Agreement is knowing and voluntary on my part, that I have had a reasonable time
to deliberate regarding its terms, and that I have had the right to consult with
an attorney if I so desired.
I acknowledge that I initially executed a General Release Agreement,
containing the same terms and conditions as this General Release Agreement, more
than seven days prior to the date appearing below and placed the General Release
Agreement in the mail addressed to the Company. I further acknowledge that I
have had at least seven days since the date of execution of the originally
executed General Release Agreement in which to reconsider and revoke my
agreement to the terms and conditions set forth in this General Release
Agreement.
Date signed:
----------------- ------------------------------------
Signature of Officer
Date signed:
----------------- ------------------------------------
Signature of Officer