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Severance Compensation Agreement - Philip S. Smith

This is an actual contract by Mitchell Energy & Development.

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Sectors: Energy
Governing Law: Texas, View Texas State Laws
Effective Date: August 31, 1991
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EXHIBIT 10(n)


EXECUTIVE CHANGE-IN-CONTROL
SEVERANCE AGREEMENT FOR
PHILLIP S. SMITH


Mitchell Energy & Development Corp.


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CONTENTS


==================================================================================================================== Article 1. Establishment, Term, and Purpose 1


Article 2. Definitions 2


Article 3. Severance Benefits 4


Article 4. Form and Timing of Severance Benefits 7


Article 5. Excise Tax Treatment 7


Article 6. Establishment of Trust 9


Article 7. The Company's Payment Obligation 9


Article 8. Legal Remedies 10


Article 9. Successors and Assignment 12


Article 10. Miscellaneous 12


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MITCHELL ENERGY & DEVELOPMENT CORP. EXECUTIVE CHANGE-IN-CONTROL SEVERANCE AGREEMENT


THIS AGREEMENT is made and entered into as of the ___ day of ________, 1998, by and between Mitchell Energy & Development Corp. (hereinafter referred to as the "Company") and Phillip S. Smith (hereinafter referred to as the "Executive").


WHEREAS, the Board of Directors of the Company has approved the Company entering into change-in-control severance agreements with certain key executives of the Company;


WHEREAS, the Executive is a key executive of the Company;


WHEREAS, should the possibility of a Change in Control arise, the Board believes it is imperative that the Company and the Board should be able to rely upon the Executive to continue in his position, and that the Company should be able to receive and rely upon the Executive's advice, if requested, as to the best interests of the Company and its shareholders without concern that the Executive might be distracted by the personal uncertainties and risks created by the possibility of a Change in Control;


WHEREAS, should the possibility of a Change in Control arise, in addition to his regular duties, the Executive may be called upon to assist in the assessment of such possible Change in Control, advise management and the Board as to whether such Change in Control would be in the best interests of the Company and its shareholders, and to take such other actions as the Board might determine to be appropriate; and


WHEREAS, the Executive and the Company desire that the terms of this Agreement shall completely replace and supersede the provisions set forth in the Severance Compensation Agreement, entered into by and between the Company and the Executive on August 31, 1991, setting forth the terms and provisions with respect to the Executive's entitlement to severance payments and benefits following a termination from the Company.


NOW THEREFORE, to assure the Company that it will have the continued dedication of the Executive and the availability of his advice and counsel notwithstanding the possibility, threat, or occurrence of a Change in Control, and to induce the Executive to remain in the employ of the Company, and for other good and valuable consideration, the Company and the Executive agree as follows:


ARTICLE 1. ESTABLISHMENT, TERM, AND PURPOSE


This Agreement will commence on the Effective Date and shall continue in effect for three (3) full years. However, at the end of such three (3) year period and, if extended, at the end of each additional year thereafter, the term of this Agreement shall be extended automatically for one (1) additional year, unless the Company delivers written notice six (6) months prior to the end of such term, or extended term, to the Executive, that the Agreement will not be extended. In such case, the Agreement will terminate at the end of the term, or extended term, then in progress.


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Notwithstanding the preceding, in the event a Change in Control occurs during the original or any extended term, this Agreement will remain in effect for a period of two (2) years after such Change in Control, and if within said two (2) years the contingency factors occur which would entitle the Executive to the Severance Benefits as provided herein, this Agreement shall remain in effect until all obligations of the Company hereunder have been fulfilled, and until all benefits required hereunder have been paid to the Executive.


ARTICLE 2. DEFINITIONS


Whenever used in this Agreement, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized.


2.1 "ANNUAL BONUS" means the average of the actual annual bonus amounts awarded to the Executive (regardless of when such award is paid or payable) under the Company's annual bonus plan then in effect for the three (3) fiscal years that have ended immediately prior to the fiscal year during which the Executive's termination of employment occurs.


2.2 "BASE SALARY" means the greater of (1) the Executive's annual base salary in effect immediately prior to the Change in Control, (2) the Executive's annual base salary in effect immediately prior to the Executive's termination of employment, or (3) the Executive's annual base salary in effect sixty (60) days prior to the Executive's termination of employment.


2.3 "BENEFICIARY" means the persons or entities designated or deemed designated by the Executive pursuant to Section 10.2 herein.


2.4 "BOARD" means the Board of Directors of the Company.


2.5 "CAUSE" means (a) the Executive's willful and continued failure to substantially perform his duties with the Company (other than any such failure resulting from Disability or occurring after issuance by the Executive of a Notice of Termination for Good Reason), after a written demand for substantial performance is delivered to the Executive that specifically identifies the manner in which the Company believes that the Executive has willfully failed to substantially perform his duties, and after the Executive has failed to resume substantial performance of his duties on a continuous basis within thirty (30) calendar days of receiving such demand; (b) the Executive's willfully engaging in conduct (other than conduct covered under (a) above) which is demonstrably and materially injurious to the Company, monetarily or otherwise; or (c) the Executive's having been convicted of a felony. For purposes of this subparagraph, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the action or omission was in the best interests of the Company.


2.6 "CHANGE IN CONTROL" means (i) the Company shall not be the surviving entity in any merger, consolidation, or other reorganization (or survives only as a subsidiary of an entity other than a previously wholly owned subsidiary of the Company); (ii) the Company sells, leases, or exchanges all or substantially all of its assets to any other person or entity (other than a wholly owned subsidiary of the Company); (iii) the Company is dissolved or liquidated; (iv) any person or entity, including a "group" as contemplated by Section 13(d)(3) of the Exchange Act, acquires or gains ownership or control (including, without limitation, power to vote) of more than fifty percent (50%) of the outstanding shares of the Company's voting stock (based upon voting power), other than as a result


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of the death or incapacity of George P. Mitchell; or (v) as a result of or in connection with a contested election of directors, the persons who were directors of the Company before such election shall cease to constitute a majority of the Board.


2.7 "CODE" means the United States Internal Revenue Code of 1986, as amended, and any successors thereto.


2.8 "COMPANY" means Mitchell Energy & Development Corp., a Texas corporation, or any successor thereto as provided in Article 9 herein.


2.9 "DISABILITY" means complete and permanent inability by reason of illness or accident to perform the duties of the occupation at which the Executive was employed when such disability commenced.


2.10 "EFFECTIVE DATE" means the date of this Agreement set forth above.


2.11 "EFFECTIVE DATE OF TERMINATION" means the date on which a Qualifying Termination occurs which triggers the payment of Severance Benefits hereunder.


2.12 "EXCHANGE ACT" means the United States Securities Exchange Act of 1934, as amended.


2.13 "GOOD REASON" shall mean, without the Executive's express written consent, the occurrence of any one or more of the following during the Retention Period:


(a) The assignment of the Executive to duties materially
inconsistent with the Executive's authorities, duties,
responsibilities, and status (including offices and
reporting requirements) as an employee of the Company, or a
reduction or alteration in the nature or status of the
Executive's authorities, duties, or responsibilities from
those in effect immediately preceding the Change in
Control;


(b) A reduction by the Company in the Executive's total
compensation (including base salary, target annual bonus
opportunity, qualified retirement benefits, nonqualified
retirement benefits, welfare benefits, any long-term
incentive compensation opportunities, and/or any other
employee benefits) as in effect immediately prior to the
date on which a Change in Control occurs;


(c) The Company requiring the Executive to be based more than
sixty (60) miles from the location of his principal office
immediately prior to the Change in Control; or


(d) The failure of the Company to provide directors and
officers liability insurance covering the Executive
comparable to that provided immediately prior to the
occurrence of a Change in Control.


The Executive's continued employment shall not constitute a waiver of the Executive's rights with respect to any circumstance constituting Good Reason.


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2.14 "NOTICE OF TERMINATION" shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated.


2.15 "QUALIFYING TERMINATION" means any of the events described in Section 3.2 herein, the occurrence of which triggers the payment of Severance Benefits hereunder.


2.16 "RETENTION PERIOD" means the period of time beginning on the date of a Change in Control and ending on the date two (2) years following the Change in Control.


2.17 "RETIREMENT" means a voluntary termination of employment by the Executive which qualifies the Executive to receive immediately payable retirement benefits under the Mitchell Energy & Development Corp. Retirement Plan or under the successor or replacement of such retirement plan if it is then no longer in effect. Notwithstanding the preceding, no Retirement will be deemed to exist under this Agreement unless and until the Executive specifically designates such termination a Retirement, and any such designation of Retirement will in no way void the Executive's right to severance benefits under this Agreement if the Executive is otherwise eligible for such severance benefits (for example, if Executive also had Good Reason for his termination of employment of if such termination occurs during the thirteenth (13th) calendar month following the month in which a Change in Control occurs).


2.18 "SEVERANCE BENEFITS" means the payments and benefits provided for in Section 3.3 herein.


2.19 "TRUST" means a grantor trust created pursuant to Article 6.


ARTICLE 3. SEVERANCE AND OTHER BENEFITS


3.1 RIGHT TO SEVERANCE AND OTHER BENEFITS. The Executive shall be entitled to receive from the Company Severance Benefits, as described in Section 3.3 herein, if there has been a Change in Control and if a Qualifying Termination has occurred. Unless otherwise provided under this Agreement or another compensation plan, program, or written agreement, the Executive shall not be entitled to receive Severance Benefits if he is terminated for Cause, or if his employment with the Company ends due to death or Disability, or due to a voluntary termination of employment by the Executive without Good Reason except during the thirteenth (13th) calendar month following the month in which a Change in Control occurs. Solely upon a Change in Control, the Executive shall be entitled to the benefits provided in Section 3.5 hereof.


3.2 QUALIFYING TERMINATION. The occurrence of any one or more of the following events shall trigger the payment of Severance Benefits to the Executive under this Agreement:


(a) An involuntary termination of the Executive's employment
for reasons other than by the Company for Cause or by
reason of the Executive's death or Disability (1) within
the Retention Period pursuant to a Notice of Termination
delivered to the Executive by the Company; (2) within six
(6) months prior to a Change in Control; or (3) prior to
the date of a Change in Control but the Executive
reasonably demonstrates that such termination (a) was at
the request of a third party who has indicated an intention
or taken steps reasonably calculated to effect a Change in


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Control and who effectuates such Change in Control; or (b)
otherwise
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