EXHIBIT 10.52
--------------
AMENDED AND RESTATED AGREEMENT
RESPECTING CHANGE OF CONTROL AND
EXECUTIVE BENEFIT PLAN ENTITLEMENTS
This amended and restated agreement respecting change of control and executive
benefit plan entitlements made as of the 23rd day of September, 2008.
BETWEEN:
NEXEN INC., a corporation incorporated under the
laws of Canada
(hereinafter referred to as the "Corporation")
- and -
XXXXXXX X. XXXXXXX
(hereinafter referred to as the "Executive")
RECITALS:
1. The Executive, as President & Chief Executive Officer ("CEO") of the
Corporation, is considered by the Board to be an essential officer and
employee of the Corporation, who is both integral to the operation and
development of the Corporation, and has acquired outstanding skills,
unique experience and possesses an extensive background in, and
knowledge of, the Corporation's business, operations and the industry
in which it is engaged.
2. In the event of a Change of Control, there is a possibility that the
employment of the Executive would be terminated without just cause or
adversely modified and the Executive has expressed concern in that
regard to the Corporation.
3. The Board recognizes that it is essential and in the best interests of
the Corporation and its shareholders that the Corporation retain the
continued dedication of the Executive to the Executive's office and the
Executive's employment during the uncertain period prior to, during and
following a Change of Control.
4. The Board further believes that the past service of the Executive and
the Executive's integral role in the development and operation of the
Corporation requires that the Corporation ensure that in the event of a
Change of Control the Executive is treated in a manner that is fair,
reasonable, consistent with industry standards and in the best
interests of the Corporation.
5. The Corporation and the Executive entered into a Change of Control
Agreement on October 22, 1999, which was amended by an Amending
Agreement dated December 25, 2000 (collectively the "Original
Agreement") to agree on the terms and conditions which would govern the
termination or modification of the employment of the Executive
following a Change of Control.
-2-
6. The Original Agreement was replaced and superseded by an Amended and
Restated Change of Control Agreement on December 13, 2001, which was
amended by an Amending Agreement dated May 30, 2003 (collectively, the
"Current Agreement") which, among other matters, detailed the
Corporation's security and funding obligations in respect of the Change
of Control Obligations (as hereinafter defined), provided for the
securitization and funding of the Executive Benefit Plan Obligations
(as hereinafter defined) and provided for the cessation of the
Executive's coverage under the Statement of Company Procedure Regarding
the Securitization of Nexen Inc. Restated Executive Benefit Plan, as
amended or replaced from time to time (the "Securitization Procedure").
7. The Corporation and the Executive wish to amend the Current Agreement
as herein provided and, in doing so, wish to restate the Current
Agreement as herein amended (the "Restated Agreement").
NOW THEREFORE, in consideration of the mutual covenants and agreements set forth
in this Restated Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the Parties, the
Parties agree as follows:
ARTICLE 1
DEFINITIONS
-----------
1.1 In this Restated Agreement, the following terms shall mean as follows:
(a) "ACTING JOINTLY OR IN CONCERT" for the purposes of this
Restated Agreement, a Person is acting jointly or in concert
with another Person if such Person has any agreement,
arrangement or understanding (whether formal or informal and
whether or not in writing) with such other Person for the
purpose of acquiring, offering to acquire, or voting any
Common Shares of the Corporation (other than customary
agreements with and between underwriters and banking group or
selling group members with respect to a distribution of
securities by way of prospectus or private placement or
pursuant to a pledge of securities in the ordinary course of
business).
(b) "ACTUARY" has the meaning referred to in Section 11.2 of this
Restated Agreement.
(c) "AFFILIATE" and "ASSOCIATE" have the meaning ascribed to such
terms in National Instrument 45-106.
(d) "ANNIVERSARY DATE" has the meaning referred to in Section 11.3
of this Restated Agreement.
-3-
(e) "ANNUAL BASE SALARY" means the annual base salary of the
Executive payable by the Corporation at the end of the month
immediately preceding the Date of Termination.
(f) "ANNUAL TARGET BONUS" means the Executive's annual target
bonus as determined by the Board to be in effect for the
calendar year in which a Change of Control occurs.
(g) "BANK" has the meaning referred to in Section 11.2 of this
Restated Agreement.
(h) "BENEFICIAL OWNER" for the purposes of this Restated
Agreement, a Person shall be deemed to be the "BENEFICIAL
OWNER" and to have "BENEFICIAL OWNERSHIP" of and to
"BENEFICIALLY OWN":
(i) any securities as to which such Person or any of such
Person's Affiliates or Associates is the owner at law
or in equity;
(ii) any securities as to which such Person or any of such
Person's Affiliates or Associates has a right to
acquire (i) upon the exercise of any Convertible
Securities or (ii) pursuant to any agreement,
arrangement or understanding, whether such right is
exercisable immediately within a period of sixty (60)
days thereafter and whether or not on condition or
the happening of any contingency, (other than (a)
customary agreements with and between underwriters
and banking group and selling group members with
respect to the distribution to the public or pursuant
to a private placement of securities, or (b) pursuant
to a pledge of securities in the ordinary course of
business); and
(iii) any securities which are Beneficially Owned within
the meaning of clauses (a) or (b) above by any other
Person with which such Person is Acting Jointly or in
Concert,
provided, however, that a Person shall not be deemed the
"Beneficial Owner" or to have "Beneficial Ownership" of or to
"Beneficially Own" any security where such Person is the
registered holder of securities as a result of carrying on the
business of or acting as nominee for a securities depository.
For purposes of this Restated Agreement, the percentage of
Common Shares Beneficially Owned by any Person, shall be and
be deemed to be the product determined by the formula:
100 x A/B
Where:
A = the number of votes for the election of all directors
generally attaching to the Common Shares Beneficially
Owned by such Person; and
-4-
B = the number of votes for the election of all directors
generally attaching to all outstanding Common Shares.
For the purposes of the foregoing formula, where a Person
Beneficially Owns unissued Common Shares which may be acquired
pursuant to Convertible Securities, such Common Shares shall
be deemed to be outstanding for the purpose of calculating the
percentage of Common Shares Beneficially Owned by such Person
in both the numerator and the denominator, but no other
unissued Common Shares which may be acquired pursuant to any
other outstanding Convertible Securities shall, for the
purposes of that calculation, be deemed to be outstanding.
(i) "BOARD" means the Board of Directors of the Corporation as
constituted from time to time.
(j) "CBCA" means the CANADA BUSINESS CORPORATIONS ACT, as amended
from time to time, and any successor legislation thereto.
(k) "CALCULATION DATE" has the meaning referred to in Section 11.5
of this Restated Agreement.
(l) "CHANGE OF CONTROL" means the occurrence of any of:
(i) the purchase or acquisition of any Common Shares or
Convertible Securities by a Beneficial Owner which
results in the Beneficial Owner owning, or exercising
control or direction over, Common Shares or
Convertible Securities such that, assuming only the
conversion of Convertible Securities Beneficially
Owned or over which control or direction is exercised
by the Beneficial Owner, the Beneficial Owner would
own, or exercise control or direction over, Common
Shares carrying the right to cast more than
thirty-five percent (35%) of the votes attaching to
all Common Shares; or
(ii) the substantial completion of: (i) the liquidation,
dissolution or winding-up of the Corporation; or (ii)
the sale, lease or other disposition of all or
substantially all of the assets of the Corporation;
or
(iii) a situation in which individuals who were members of
the Board immediately prior to:
(A) a meeting of the shareholders of the
Corporation involving a contest for, or an
item of business relating to, the election
of directors; or
(B) an amalgamation, arrangement, merger or
other consolidation or combination of the
Corporation with another Person,
-5-
shall not constitute a majority of the Board
following such election or transaction; or
(iv) the completion of any transaction or the first of a
series of transactions which would have the same or
similar effect as any transaction or series of
transactions referred to in paragraphs (i), (ii) or
(iii) above; or
(v) a determination by the Board that, for the purposes
of this Restated Agreement, a Change of Control has
occurred or is imminent.
(m) "CHANGE OF CONTROL OBLIGATIONS" means the Company's
obligations to make the lump sum payments described in Section
8.1 of this Restated Agreement to the Executive.
(n) A "CHANGE OF CONTROL OBLIGATIONS - DESIGNATED EVENT" shall be
deemed to have occurred if:
(i) the Corporation fails to arrange for the extension or
replacement of a Letter of Credit in accordance with
the terms of this Restated Agreement; or
(ii) the Executive's employment is terminated in
accordance with Section 5.1, 6.1 or 7.1 of this
Restated Agreement.
(o) "COMMON SHARES" means the common shares of the Corporation.
(p) "CONVERTIBLE SECURITIES" means:
(i) any right (contractual or otherwise and regardless of
whether such right constitutes a security) to acquire
Common Shares from the Corporation; or
(ii) any security issued by the Corporation from time to
time (other than the rights issued pursuant to a
shareholders' rights protection plan, if any)
carrying any exercise, conversion or exchange right,
which is then exercisable or exercisable within a period of
sixty (60) days from that time pursuant to which the holder
thereof may acquire Common Shares or other securities which
are convertible into or exercisable or exchangeable for Common
Shares (in each case, whether such right is then exercisable
or exercisable within a period of sixty (60) days from that
time and whether or not on condition or the happening of any
contingency).
(q) "DATE OF TERMINATION" means the date upon which the
Executive's employment is terminated pursuant to Section 4.1,
5.1, 6.1 or 7.1 of this Restated Agreement. For greater
clarity, the Date of Termination means the date upon which the
Corporation provides the Executive with written, verbal or
other notice that the Executive's employment has been or will
be terminated pursuant to Section 4.1 or
-6-
6.1 of this Restated Agreement or the date upon which the
Executive provides the Corporation with written notice
terminating the Executive's employment pursuant to Section 4.1
or 5.1 or for Good Reason pursuant to Section 7.1.
(r) "DISABILITY" means, where due to a physical or mental
condition, the Executive is rendered totally and permanently
unable to perform the Executive's duties for a consecutive
period of two (2) years or more during which the Executive has
been in receipt of long term disability insurance benefits
from the insurance carrier normally utilized by the
Corporation.
(s) "DISPUTE" has the meaning referred to in Section 12.1 of this
Restated Agreement.
(t) "EFFECTIVE DATE" means the date upon which a Change of Control
occurs.
(u) "EMPLOYMENT BENEFITS" means the employment benefits to which
the Executive is entitled by virtue of any written, oral or
implied agreement with the Corporation. For the purposes of
this Restated Agreement, "Employment Benefits" shall include,
but is not limited to, the following:
(i) the Executive's entitlement to any dental or general
medical care;
(ii) the Executive's entitlement to receive long term
disability benefits from the insurance carrier
normally utilized by the Corporation;
(iii) the Executive's entitlement to pension benefits under
the terms of any pension plan with the Corporation;
(iv) the Executive's entitlement to a monthly car
allowance from the Corporation;
(v) the Executive's entitlement to contributions by the
Corporation to the Corporation's savings plan;
(vi) the Executive's entitlement to receive from the
Corporation financial counseling services, at a cost
of $3,500.00 per year (or as the same may be
increased from time to time by the Corporation); and
(vii) the Executive's entitlement to receive from the
Corporation security monitoring services at the
Executive's personal residence.
(v) "EXECUTIVE BENEFIT PLAN" has the meaning referred to in
Section 8.1(b) of this Restated Agreement.
(w) "EXECUTIVE BENEFIT PLAN OBLIGATIONS" means the Corporation's
outstanding obligations under the Executive Benefit Plan to
the Executive.
-7-
(x) An "EXECUTIVE BENEFIT PLAN OBLIGATIONS - DESIGNATED EVENT"
shall be deemed to have occurred if:
(i) a Change of Control occurs;
(ii) the Corporation makes an assignment for the benefit
of creditors or files a petition in bankruptcy or
becomes insolvent or bankrupt;
(iii) a receiver, trustee or liquidator of or for the
Corporation is appointed and is not discharged within
a period of sixty days;
(iv) the net worth of the Corporation, described as
shareholder equity in the consolidated financial
statements of the Corporation as disclosed in the
annual and quarterly consolidated financial
statements of the Corporation, is less than $400
million;
(v) the Corporation fails to arrange for the extension or
replacement of a Letter of Credit in accordance with
the terms of this Restated Agreement;
(vi) the Executive has provided written notification to
the Trustee and to the Corporation of the failure by
the Corporation to pay any amount owed to or in
respect of the Executive under the Executive Benefit
Plan within thirty days of the due date specified in
the Executive Benefit Plan (together with a statement
of the amount due and owing) either to the person
entitled thereto pursuant to the Executive Benefit
Plan or to the Trust in accordance with the
provisions of Section 11.6(h); or
(vii) at any time the Board adopts a resolution to the
effect that, for purposes of this Restated Agreement,
an Executive Benefit Plan Obligations - Designated
Event has occurred or is imminent.
(y) "GOOD REASON" means any of the following, unless the Executive
shall have given the Executive's express written consent
thereto:
(i) INCONSISTENT DUTIES. The assignment to the Executive
of any duties inconsistent with the Executive's
status as an executive officer of the Corporation or
a material alteration in the nature or status of the
Executive's responsibilities or duties or reporting
relationship from those in effect immediately prior
to a Change of Control;
(ii) REDUCED SALARY. A reduction by the Corporation in the
Executive's Annual Base Salary in effect on the
Effective Date or as the same may be increased
thereafter from time to time or the failure by the
Corporation to grant the Executive salary increases
at a rate commensurate with the increases accorded to
other executives of the Corporation;
-8-
(iii) RELOCATION. The Corporation requiring the Executive
to be based anywhere other than where the Executive
is based at the time a Change of Control occurs,
except for required travel on the Corporation's
business to an extent substantially consistent with
the Executive's business travel obligations in the
ordinary course of business immediately prior to a
Change of Control;
(iv) INCENTIVE COMPENSATION PLANS. The failure by the
Corporation to continue in effect any incentive
compensation plan in which the Executive
participates, including, but not limited to, the
Incentive Compensation Plan or the Stock Option Plan
or any other similar plans adopted prior to a Change
of Control, unless the Executive is eligible to
participate in, and is entitled to the opportunity to
receive a comparable level of benefits under, an
ongoing, substitute or alternative plan (it being
understood that the manner or method of payment and
the form of consideration need not be the same as
existed in the original plans); or the failure by the
Corporation to continue the Executive's participation
therein on at least as favourable a basis, both in
terms of the amount of benefits available to the
Executive and the level of the Executive's
participation relative to other participants, as
existed at the time a Change of Control occurs;
(v) EMPLOYMENT BENEFITS AND PERQUISITES. The failure by
the Corporation to continue to provide the Executive
with Employment Benefits at least as favourable as
those enjoyed by the Executive immediately prior to a
Change of Control, including any pension plan,
benefit plan or any retirement arrangement
established for the Executive, or any of the
Corporation's life insurance, medical, health and
accident, disability or savings plans in which the
Executive was participating at the time a Change of
Control occurs; the taking of any action by the
Corporation that would directly or indirectly
materially reduce any such benefits or deprive the
Executive of any material perquisite enjoyed by the
Executive at the time a Change of Control occurs,
including, without limitation and to the extent
applicable, the use of a car, aircraft, secretarial
services, office space, telephones, computer
facilities, expense reimbursement, financial
counselling, and professional fees and club dues
reimbursement; or the failure by the Corporation to
provide the Executive with the number of paid
vacation days to which the Executive is entitled in
accordance with the Corporation's normal vacation
practice in effect at the time a Change of Control
occurs;
(vi) NO ASSUMPTION BY SUCCESSOR. The failure of the
Corporation to obtain a satisfactory agreement from a
successor to assume and agree to perform this
Restated Agreement. Alternatively, if the business or
undertaking in connection with which the Executive's
services are principally performed is sold at any
time after a Change of Control occurs, and the
Executive's employment is transferred as a result,
-9-
the failure or refusal of the purchaser of such
business or undertaking to provide the Executive with
the same or a comparable position, duties,
compensation and benefits, as described in paragraphs
(iv) and (v) above, as provided to the Executive by
the Corporation immediately prior to a Change of
Control;
(vii) DISPOSITION OF "ALL OR SUBSTANTIALLY ALL". The
disposition by the Corporation of all or
substantially all of the assets of the Corporation,
as contemplated herein, notwithstanding that the
Executive's services were or were not principally
performed for such business.
(z) "HEARING" has the meaning referred to in Section 12.7 of this
Restated Agreement.
(aa) "HEARING DATE" has the meaning referred to in Section 12.7 of
this Restated Agreement.
(bb) "INCENTIVE COMPENSATION PLAN" means any bonus or incentive
compensation plan of the Corporation in which the Executive is
entitled to receive benefits in the month immediately
preceding a Change of Control.
(cc) "JUST CAUSE" means:
(i) the failure by the Executive to substantially perform
the Executive's duties according to the terms of the
Executive's employment in existence immediately prior
to a Change of Control after the Corporation has
given the Executive reasonable notice of such failure
and a reasonable opportunity to correct it; or
(ii) where the Executive engages in any criminal act or
dishonesty resulting or intended to result, directly
or indirectly, in the personal gain of the Executive
at the Corporation's expense.
(dd) "LETTER OF CREDIT" has the meaning referred to in Section 11.2
of this Restated Agreement.
(ee) "MONTHLY BASE SALARY" means the monthly salary payable to the
Executive by the Corporation in effect at the end of the month
immediately preceding the Effective Date.
(ff) "NOTICE OF DISPUTE" has the meaning referred to in Section
12.1 of this Restated Agreement.
(gg) "OBLIGATIONS" means, collectively, the Change of Control
Obligations and the Executive Benefit Plan Obligations.
-10-
(hh) "PARTIES" means the Corporation, and its successors and
permitted assigns, and the Executive and the Executive's
heirs, executors and administrators and "PARTY" means either
one of them.
(ii) "PERSON" includes an individual, partnership, association,
body corporate, trustee, executor, administrator, legal
representative and any national, provincial, state or
municipal government or any agency thereof.
(jj) "REFUNDABLE TAX ACCOUNT" means the refundable tax account
maintained in respect of the Trust by the Canada Revenue
Agency.
(kk) "REGISTERED PENSION PLAN" has the meaning referred to in
Section 8.1(b) of this Restated Agreement.
(ll) "RESTATED AGREEMENT" means this amended and restated agreement
respecting change of control and executive benefit plan
entitlements as it may be amended, restated or supplemented
from time to time, and the expressions "hereof", "herein",
"hereto", "hereunder", "hereby", and similar expressions refer
to this Restated Agreement and, unless otherwise indicated,
refer to Articles or Sections in this Restated Agreement only.
(mm) "SECURITIZATION PROCEDURE" has the meaning referred to in the
recitals of this Restated Agreement.
(nn) "SEVERANCE PERIOD" means the thirty-six (36) month period
immediately following the Date of Termination.
(oo) "STOCK OPTION PLAN" means any stock option plan or plans of
the Corporation pursuant to which the Executive is granted
options by the Corporation to acquire Common Shares.
(pp) "SUBSIDIARY" has the meaning ascribed to it in the CBCA.
(qq) "TAX ACT" means the Income Tax Act (Canada) and the
Regulations thereunder, both as amended from time to time.
(rr) "TERM" has the meaning referred to in Section 3.1 of this
Restated Agreement.
(ss) "TRUST" has the meaning referred to in Section 11.1 of this
Restated Agreement.
(tt) "TRUST AGREEMENT" has the meaning referred to in Section 11.1
of this Restated Agreement.
(uu) "TRUSTEE" means CIBC Mellon Trust Company or such other trust
company duly incorporated under the laws of Canada or any
province thereof whom the Company may designate as the trustee
in connection with the security and funding of the
Obligations.
-11-
(vv) "VALUATION DATE" has the meaning referred to in Section 11.3
of this Restated Agreement.
ARTICLE 2
SCOPE OF RESTATED AGREEMENT
---------------------------
2.1 The Parties intend that this Restated Agreement sets out (a) their
respective rights and obligations upon the occurrence of a Change of
Control and in connection with the securitization and funding of the
Change of Control Obligations; and (b) their respective rights and
obligations regarding the securitization and funding of the Executive
Benefit Plan Obligations. This Restated Agreement does not provide for
any other terms of the Executive's employment with the Corporation,
except as expressly provided for herein.
2.2 The Parties hereby confirm that except as otherwise expressly stated in
this Restated Agreement, insofar as the securitization and funding of
the Executive Benefit Plan Obligations is concerned, the terms of this
Restated Agreement shall govern and the terms of the Securitization
Procedure shall not be applicable.
2.3 This Restated Agreement shall automatically terminate upon the death of
the Executive or where due to the Disability of the Executive, the
Executive is materially incapacitated from performing the Executive's
duties. In the event of the death or Disability of the Executive, the
Executive (or the Executive's estate) shall be entitled to receive from
the Corporation all unpaid Annual Base Salary, Employment Benefits,
unpaid business expenses and vacation entitlement accrued to the date
of the death or Disability of the Executive. The Executive (or the
Executive's estate) shall also be entitled to receive any and all death
or Disability benefits in a manner consistent with, and at least equal
in amount to, those provided by the Corporation to senior executives
(or their estate) under such plans, programs and policies in effect at
the date of Disability or death of the Executive, and the Corporation
shall have no further obligations to the Executive or the Executive's
estate under this Restated Agreement. Any entitlements of the Executive
(or the Executive's estate) under the Executive Benefit Plan which
remain following the termination of this Restated Agreement pursuant to
this Section 2.3 shall then commence to be covered under the
Securitization Procedure.
2.4 If the Executive's employment is terminated by either Party, for any
reason, prior to a Change of Control in any manner, other than
expressly provided for in this Restated Agreement, this Restated
Agreement shall automatically terminate and the Corporation shall have
no further obligations to the Executive hereunder. Any remaining
entitlements of the Executive under the Executive Benefit Plan which
remain following the termination of this Restated Agreement pursuant to
this Section 2.4 shall then commence to be covered under the
Securitization Procedure.
-12-
ARTICLE 3
TERM OF RESTATED AGREEMENT
--------------------------
3.1 Subject to termination of this Restated Agreement prior to a Change of
Control, this Restated Agreement shall remain in effect for a period
concluding thirteen (13) months following the Effective Date (the
"Term"), at which time this Restated Agreement shall terminate;
provided however that the payment of compensation and benefits to the
Executive under this Restated Agreement shall continue beyond the end
of the Term in accordance with the applicable provisions of this
Restated Agreement. Any remaining entitlements of the Executive under
the Executive Benefit Plan which remain following the termination of
this Restated Agreement pursuant to this Section 3.1 shall then
commence to be covered under the Securitization Procedure.
ARTICLE 4
TERMINATION FOR JUST CAUSE OR FOR OTHER THAN GOOD REASON
--------------------------------------------------------
4.1 If the Executive's employment is terminated for Just Cause, or is
terminated by the Executive, other than pursuant to Section 5.1 of this
Restated Agreement or for other than Good Reason, following a Change of
Control, the Corporation shall pay to the Executive, if not already
paid, the fraction of the unpaid Annual Base Salary accrued during the
then current fiscal year of the Corporation, all accrued Employment
Benefits, all unpaid reasonable business expenses and all unpaid
vacation pay accrued up to and including the Date of Termination, and
thereafter, the Corporation shall have no further obligations to the
Executive under this Restated Agreement.
4.2 Nothing in this Restated Agreement shall serve to derogate from the
vested rights of the Executive to pension benefits, Stock Option Plans
or any other Employment Benefits to which the Executive is entitled up
to the Date of Termination.
ARTICLE 5
VOLUNTARY TERMINATION
---------------------
5.1 In the event of a Change of Control, the Executive shall have the
unfettered right, within thirty (30) days after the twelve (12) month
period following the Effective Date, to elect to provide the
Corporation with written notice terminating his employment. Upon being
provided such written notice, the Corporation shall pay to the
Executive the remuneration referred to in Article 8 of this Restated
Agreement.
5.2 Notwithstanding Section 5.1 of this Restated Agreement, and in the
event that a Change of Control occurs as a result of a hostile bid for
the takeover of the Corporation, there shall be no requirement for the
Executive to wait for the expiry of the twelve (12) month period
following the Effective Date of a Change of Control, in order for the
Executive to exercise the right granted to provide written notice
terminating his employment.
-13-
In the circumstances of a hostile bid resulting in a Change of Control,
the Executive shall have the unfettered right, within 30 days following
the Effective Date of a Change of Control, to elect to provide the
Corporation with written notice terminating his employment. Upon
providing such written notice to the Corporation, the Corporation shall
pay to the Executive the remuneration referred to in Article 8 of this
Restated Agreement. For the purposes of this section, "hostile bid"
means a take-over bid, exchange offer or tender offer to acquire more
than 35% of the Common Shares which has not been approved by the Board
of Directors prior to its public announcement or commencement.
5.3 Any reference to Section 5.1 of this Restated Agreement, within the
body of the Change of Control Agreement, shall be deemed to include a
reference to Section 5.2 of this Restated Agreement (with such Section
references to be used interchangeably).
ARTICLE 6
TERMINATION BY CORPORATION
--------------------------
6.1 If the Executive's employment is terminated by the Corporation within
the thirteen (13) month period following the Effective Date, for reason
other than Just Cause, death or Disability, the Corporation shall pay
to the Executive the remuneration referred to in Article 8 of this
Restated Agreement.
ARTICLE 7
TERMINATION FOR GOOD REASON
---------------------------
7.1 In the event of a Change of Control, the Executive may, within the
twelve (12) month period following the Effective Date and upon
providing the Corporation with ten (10) days written notice, terminate
the Executive's employment with the Corporation for Good Reason. Upon
being provided with such notice, the Corporation shall pay to the
Executive the remuneration referred to in Article 8 of this Restated
Agreement.
ARTICLE 8
COMPENSATION UPON TERMINATION
-----------------------------
8.1 If the Executive's employment is terminated in accordance with Section
5.1, 6.1 or 7.1 of this Restated Agreement:
(a) the Corporation shall forthwith, but in any event within ten
(10) days from receipt by the Corporation of a Release
executed by the Executive substantially in the form of
Schedule "A", pay to the Executive:
(i) if not previously paid, that portion of the
Executive's accrued but unpaid Monthly Base Salary,
any accrued but unpaid bonus to which the Executive
is entitled for the preceding calendar year under any
Incentive Compensation Plan, all unpaid reasonable
business expenses and all accrued but unused vacation
pay earned or payable to the Executive by the
Corporation for the period from the beginning of the
Corporation's then current fiscal year, up to and
including the Date of Termination;
-14-
(ii) a lump sum cash payment equal to the Executive's
Monthly Base Salary and one-twelfth (1/12) of the
Executive's Annual Target Bonus for each month of the
Severance Period;
(iii) a lump sum payment equal to thirteen percent (13%) of
the Executive's Annual Base Salary for the Severance
Period representing the value of the group health and
welfare benefits for the Severance Period;
(iv) a lump sum payment representing the value of the
Executive's monthly car allowance for the Severance
Period;
(v) a lump sum payment representing the value of the
Corporation's contributions to the Corporation's
savings plan (at a rate of six percent (6%) of the
Executive's Annual Base Salary) for the Severance
Period;
(vi) a lump sum payment representing the value of the
Executive's entitlement to receive from the
Corporation financial counseling services for the
Severance Period; and
(vii) a lump sum payment representing the value of the
Executive's entitlement to receive from the
Corporation security monitoring services at the
Executive's personal residence for the Severance
Period;
(b) with respect to the Executive's entitlement to pension
benefits under the Pension Plan for Employees of Nexen Inc.
(Defined Benefit Option) (the "Registered Pension Plan"), if
any, and the Executive's related entitlement under the Nexen
Inc. Restated Executive Benefit Plan (the "Executive Benefit
Plan"), if any:
(i) the Corporation shall recognize the Severance Period
for purposes of determining the Executive's
entitlement;
(ii) for calculation purposes, the Executive's entitlement
is the benefit which would have been determined
assuming that the Executive had been employed
throughout the Severance Period, including
recognition of:
(A) additional service that would have been
credited for the Severance Period;
(B) monthly salary equal to the Executive's
Monthly Base Salary throughout the Severance
Period;
(C) pensionable bonus for the year of the Date
of Termination, and for each subsequent year
or portion thereof during the Severance
Period, determined at the Annual Target
Bonus level. Average bonus will be
determined over the three years to the end
of the Severance Period, including any
partial calendar years; and
-15-
(D) the Executive shall be deemed to retire, and
the pension to commence, upon the later of
the completion of the Severance Period and
the attainment of age fifty-five (55),
without any applicable early retirement
reduction; and
(iii) the pension entitlements described in this Section
8.1(b) shall, to the extent legally permissible, be
provided through the Registered Pension Plan. To the
extent that it is not legally permissible to provide
such pension entitlements through the Registered
Pension Plan, the Corporation shall pay to the
Executive a lump sum payment representing the
settlement value of the additional Executive Benefit
Plan benefit determined in accordance with the
assumptions set forth in Schedule "B-1";
(iv) any entitlements of the Executive under the Executive
Benefit Plan which have previously been funded in
accordance with Article 11 but not previously settled
in accordance with Article 11 shall be settled by the
Corporation in accordance with the assumptions set
forth in Schedule "B-1";
(c) the Corporation shall provide the Executive with executive
outplacement counselling to be provided by a firm to be
selected by the Executive, at a cost to the Corporation not to
exceed $25,000.00;
(d) all of the Executive's outstanding unexercisable stock options
under any Stock Option Plan shall become exercisable; and
(e) where the Executive has been relocated, at the request of the
Corporation, within the two (2) year period immediately prior
to the Effective Date, if so requested by the Executive, the
Corporation shall relocate the Executive back to the
Executive's prior location.
8.2 The estimated value as of April 1, 2008 of Sections 8.l(a)(ii) to
8.1(c) are set out in Schedule "C". Schedule "C" provides estimated
values only and actual values shall be calculated in accordance with
this Restated Agreement at the time of entitlement or payment under
this Restated Agreement.
8.3 If the Executive's employment is terminated in the circumstances
described in Section 5.1, 6.1 or 7.1 of this Restated Agreement, the
remuneration and benefits payable under this Article 8 shall not be
reduced if the Executive obtains alternative employment.
8.4 Unless expressly provided otherwise in this Restated Agreement, all
payments to be made to the Executive under this Article 8 shall be
subject to required statutory deductions at source by the Corporation.
-16-
ARTICLE 9
CONFIDENTIAL INFORMATION
------------------------
9.1 If the Executive's employment is terminated in any manner whatsoever
due to or following a Change of Control, the Executive agrees to keep
confidential all information of a confidential or proprietary nature
concerning the Corporation, its Affiliates, Associates and Subsidiaries
and their respective operations, opportunities, areas of present, past
or future interests, assets, finances, technology, intellectual
property, business and affairs, and further agrees not to use such
information, data or technology for personal advantage, provided that
nothing herein shall prevent the disclosure of information which is
publicly available or which is required to be disclosed by the
Executive under appropriate statute, rules of law or legal process.
ARTICLE 10
RIGHTS AND OBLIGATIONS OF EXECUTIVE UPON TERMINATION
----------------------------------------------------
10.1 Subject to Section 9.1 of this Restated Agreement, the Executive shall
not be prohibited in any manner whatsoever from obtaining alternative
employment with or otherwise forming or participating in a business
competitive to the business of the Corporation after the termination of
the Executive's employment with the Corporation.
10.2 Upon the termination of the Executive's employment for any reason, the
Executive shall tender the Executive's resignation from any position
the Executive may hold as an officer or director of the Corporation or
any of its Affiliates, Associates or Subsidiaries.
10.3 If the Executive's employment is terminated in the circumstances
described in Section 5.1, 6.1 or 7.1 of this Restated Agreement, the
Corporation shall continue to purchase and maintain, to the extent
available in the marketplace at reasonable cost to the Corporation, on
behalf of the Executive, director and officer liability insurance for
the applicable limitation period following the date upon which the
Executive ceases to serve as a director or officer of the Corporation,
and the Executive's existing agreement to receive indemnity from the
Corporation for acts taken by the Executive in the Executive's capacity
as an officer of the Corporation shall remain in effect.
10.4 Upon termination of the Executive's employment pursuant to Section 5.1,
6.1 or 7.1 of this Restated Agreement, the Corporation shall reimburse
the Executive for ongoing legal fees and disbursements which the
Executive may reasonably incur in connection with this Restated
Agreement (but this Restated Agreement only), including any litigation
concerning the validity or enforceability of, or liability under, any
provision of this Restated Agreement or any action by the Executive.
The Corporation shall pay such fees and reimbursements to the Executive
promptly as such fees and disbursements become due.
-17-
ARTICLE 11
SECURITIZATION AND FUNDING PROCEDURE
------------------------------------
11.1 The Corporation has established and maintains a trust for the benefit
of the Executive and persons claiming through him (the "Trust")
pursuant to the terms and conditions of a trust agreement (the "Trust
Agreement") between the Corporation and the Trustee. The Trust shall be
funded in accordance with the provisions of this Restated Agreement and
the Trust Agreement.
11.2 To provide security against a failure by the Corporation to either fund
or settle the Obligations in accordance with the terms of this Article
11, the Trust Agreement provides for the funding of the Trust with the
proceeds of an irrevocable letter of credit which satisfies the
requirements of this Restated Agreement (a "Letter of Credit") in the
event that the Corporation does not provide funding or effect
settlement when required to do so hereunder and in accordance with the
terms hereof. The Corporation confirms that the Letter of Credit
currently held by the Trustee has been issued by a major Canadian
chartered bank (the "Bank") in an amount calculated by the
Corporation's consulting actuary (who at all times shall be a Fellow of
the Canadian Institute of Actuaries) (the "Actuary") in accordance with
the provisions of Section 11.5 of this Restated Agreement.
11.3 On each February 1st (the "Anniversary Date"), the Corporation shall
request a report from the Actuary as to the amount calculated, as at
the next succeeding April 1st (the "Valuation Date"), in accordance
with the provisions of Section 11.5 of this Restated Agreement. The
Corporation shall provide the Actuary with the data it requires to
prepare such report. Upon completion of each such report, the
Corporation shall arrange for the Actuary to provide a summary of same
to the Trustee.
Prior to the funding and/or settlement of all of the Obligations in
accordance with the terms of this Restated Agreement, the Corporation
shall, within forty-five days after the applicable Anniversary Date and
in accordance with the terms of the report received from the Actuary:
(a) either:
(i) arrange for a Letter of Credit to be provided by the
Bank to the Trustee to replace the Letter of Credit
then held by the Trustee. The replacement Letter of
Credit shall be:
(A) substantially in the form of the Letter of
Credit then held by the Trustee;
(B) in an amount calculated by the Actuary as at
the applicable Valuation Date in accordance
with the provisions of Section 11.5 of this
Restated Agreement; and
-18-
(C) for a term which commences on the date of
its issuance and expires one year following
the applicable Valuation Date; or
(ii) confirm to the Trustee in writing that the Letter of
Credit then held by the Trustee will be extended
automatically for a further one-year term. The
confirmation to the Trustee shall include evidence
from the Bank as to any amendment to the applicable
Letter of Credit, any such amendment to be consistent
with the report prepared by the Actuary as at the
applicable Valuation Date; and
(b) contribute to the Trust an amount equal to twice the fee
charged by the Bank in connection with the Letter of Credit
extension or replacement, as applicable. The Corporation shall
withhold one-half of such amount and shall remit the said
one-half of such amount to the Canada Revenue Agency on
account of the tax which is exigible pursuant to the Tax Act
in connection with such contribution to the Trust. The Trustee
shall remit the remaining one-half of such amount to the Bank
in consideration for the Letter of Credit extension or
replacement, as applicable.
When a replacement Letter of Credit has been provided in accordance
with the terms of this Section 11.3, an existing Letter of Credit shall
be surrendered and cancelled.
11.4 If, during the term of a Letter of Credit issued pursuant to this
Restated Agreement, the Corporation, acting reasonably, concludes that
there has been a significant change in the Obligations since the date
of the last report prepared by the Actuary pursuant to Section 11.3 of
this Restated Agreement, the Corporation shall request a report from
the Actuary as to the then current value of the Obligations, calculated
in accordance with the provisions of Section 11.5 of this Restated
Agreement. Upon receipt of the report, the Corporation shall provide a
summary of same to the Trustee and arrange, together with the Trustee,
for any required increase or decrease in the amount of the Letter of
Credit for the balance of the term of such Letter of Credit. In the
event that a replacement Letter of Credit is to be issued in the
circumstances described in this Section 11.4, the Corporation and the
Trustee shall arrange for such replacement Letter of Credit to be
provided by the Bank to the Trustee to replace the Letter of Credit
then held by the Trustee. Upon receipt of a replacement Letter of
Credit pursuant to this Section 11.4, the Trustee shall surrender for
cancellation the Letter of Credit then held by it pursuant to this
Restated Agreement and the Trust Agreement.
In the event that all or any portion of the fee referred to in Section
11.3 of this Restated Agreement, is refunded by the Bank as a result of
a decrease in the amount of a Letter of Credit pursuant to this Section
11.4, such amount (together with any resulting refundable Tax) shall be
received by the Trustee for deposit to the Trust. Upon receipt of an
Authorized Instruction (as defined in the Trust Agreement), the Trustee
shall pay and transfer such amounts (less any applicable tax which it
will remit as required by the Tax Act on behalf of the Corporation) to
the Corporation for its sole and exclusive use and benefit.
-19-
In the event that an additional fee is required to be paid to the Bank
as a result of an increase in the amount of a Letter of Credit pursuant
to this Section 11.4, the Corporation shall contribute to the Trust an
amount equal to twice the additional fee. The Corporation shall
withhold one-half of such amount and shall remit the said one-half of
such amount to the Canada Revenue Agency on account of the tax which is
exigible pursuant to the Tax Act in connection with such contribution
to the Trust. The Trustee shall remit the remaining one-half of such
amount to the Bank in payment of its additional fee.
11.5 A Letter of Credit issued pursuant to this Restated Agreement shall:
(i) be an irrevocable standby letter of credit;
(ii) obligate the Bank to satisfy demand for payment made
by the Trustee in accordance with the terms of this
Restated Agreement and the Trust Agreement;
(iii) permit partial drawings; and
(iv) provide that the Bank must notify the Trustee on or
before thirty days prior to the expiry of a Letter of
Credit of any notice of non-extension provided by the
Bank to the Corporation.
The amount of a Letter of Credit pursuant to this Restated Agreement
shall be calculated by the Actuary in accordance with the following
subparagraphs of this Section 11.5.
(a) Assuming the lump sum payments referred to in Section 8.1(a)
of this Restated Agreement are equal to the amount thereof
provided by the Corporation.
(b) Assuming the service of the Executive will terminate, in
accordance with Section 5.1, 6.1, or 7.1 of this Restated
Agreement, on the next succeeding March 31st after the
Valuation Date (the "Calculation Date").
(c) Using the Executive's demographic data, including base salary,
target bonus and current marital status as of the Valuation
Date, provided by the Corporation.
(d) Using the Yearly Maximum Pensionable Earnings (Y.M.P.E.) used
to determine the amount of the Canada Pension Plan Benefit and
Tax Act maximum defined benefit pension dollar limit as at the
Valuation Date.
(e) Assuming all Obligations are included.
(f) Using the actuarial methods, assumptions and calculation
methodology described in Schedule "B-2.
(g) Applying a load of 15% to the amount determined in accordance
with subparagraphs (b) through (f) of this Section 11.5 to
provide for fluctuations in the Interest Discount Rate,
-20-
Consumer Price Index and other plan experience during the term
of the Letter of Credit, as described in Schedule "B-2".
(h) Applying a load to one-half of the amount determined in
accordance with subparagraphs (a) through (g) of this Section
11.5 to provide for the cost associated with the borrowings
described in subparagraph (k) of this Section 11.5, as
described in Schedule "B-2".
(i) Including a settlement expense to the amount determined in
subparagraph (h), with the aggregate settlement expense
allowance for all obligations secured equal to $250,000, or
where the Valuation Date is after December 31, 2008, the
aggregate settlement expense allowance will be increased at
the rate equal to the increase in the Consumer Price Index, as
described in Schedule "B-2", plus 1% for each year after 2008.
(j) Assuming the Obligations will be promptly settled with the
Executive upon occurrence of a Designated Event described in
Section 1.1(n)(ii).
(k) Assuming a loan will be secured to permit settlement of the
Obligations prior to receipt of the Refundable Tax Account
from the Canada Revenue Agency. The assumed interest rate
payable on the loan shall be as described in Schedule "B-2".
The cost associated with the borrowings shall be assumed to be
paid from the Trust.
(l) The liabilities calculated in accordance with subparagraphs
(a) through (k) above shall be offset by:
(i) the Refundable Tax Account, if any; and
(ii) the assets contained in the Trust, if any.
11.6 (a) If an Executive Benefit Plan Obligations - Designated Event
shall occur, the Corporation shall be required to immediately
fund the Executive Benefit Plan Obligations in accordance with
the most recent report prepared by the Actuary pursuant to
Section 11.3 of this Restated Agreement. Notwithstanding the
foregoing, if an Executive Benefit Plan Obligations -
Designated Event described in Section 1.1(x)(i) and a Change
of Control Obligations - Designated Event described in Section
1.1(n)(ii) shall occur simultaneously, the Corporation shall
be required to settle the Executive Benefit Plan Obligations
forthwith in accordance with the provisions of Schedule "B-1".
(b) If:
(i) the employment of the Executive is terminated by the
Corporation for any reason other than as a result of
the death, disability or retirement of such
Executive; and
-21-
(ii) such Executive files with the Corporation a written
request that it fund the Executive Benefit Plan
Obligations,
the Corporation shall be required to immediately fund the
Executive Benefit Plan Obligations in accordance with the most
recent report prepared by the Actuary pursuant to Section 11.3
of this Restated Agreement.
(c) Upon the earlier of:
(i) learning of the occurrence of an Executive Benefit
Plan Obligations - Designated Event described in
Section 1.1(x)(v) or (vi) of this Restated Agreement;
or
(ii) receipt of a written notice of the occurrence of an
Executive Benefit Plan Obligations - Designated Event
described in any of the other subparagraphs of
Section 1.1(x) of this Restated Agreement, which
notice has been signed by two executives of the
Corporation, one of whom must be either the Chief
Financial Officer or the General Counsel of the
Corporation and which notice must, in the case of an
Executive Benefit Plan Obligations - Designated Event
described in Section 1.1(x)(i) of this Restated
Agreement, indicate which subparagraph of the
definition of "Change of Control" is applicable,
the Trustee shall promptly give notice to the Corporation in
writing that it intends to draw on that portion of the Letter
of Credit which is referable to the Executive Benefit Plan
Obligations and contribute the proceeds thereof (less any
applicable withholding tax which it will remit as required by
the Tax Act on behalf of the Corporation) to the Trust on
behalf of the Corporation in order to fund the Executive
Benefit Plan Obligations, unless it receives satisfactory
proof within nine days of such notice that the Corporation has
funded or settled, as applicable, the Executive Benefit Plan
Obligations itself in accordance with the terms of this
Restated Agreement.
Unless the Corporation advises the Trustee in writing that it
has funded or settled, as applicable, the Executive Benefit
Plan Obligations in accordance with the terms of this Restated
Agreement and has provided the Trustee with satisfactory proof
thereof within nine days of the date of the aforementioned
notice, the Trustee shall draw on that portion of the Letter
of Credit which is referable to the Executive Benefit Plan
Obligations on the tenth day following the date of such notice
(or the next following business day if such tenth day is not a
business day) and contribute the proceeds thereof (less any
applicable withholding tax which it will remit as required by
the Tax Act on behalf of the Corporation) to the Trust on
behalf of the Corporation.
Notwithstanding the foregoing, in the event an Executive
Benefit Plan Obligations - Designated Event described in
Section 1.1(x)(v) or (vi) of this Restated Agreement has
-22-
triggered the operation of this Section 11.6 and the failure
which gave rise to the occurrence of such Executive Benefit
Plan Obligations - Designated Event has been remedied prior to
the expiration of the notice period provided for in this
Section 11.6(c), the Trustee shall not take the action
described in the immediately preceding paragraph hereof and
all of the provisions of this Restated Agreement shall
continue to apply to the same extent and as fully as they
would have in the event that such Executive Benefit Plan
Obligations - Designated Event had not occurred.
(d) Upon receipt of a written notice of the occurrence of the
events described in both subparagraphs (i) and (ii) of Section
11.6(b) of this Restated Agreement (which notice has been
signed by the Executive and sworn before a notary public), the
Trustee shall promptly give notice to the Corporation in
writing that it intends to draw on that portion of the Letter
of Credit which is referable to the Executive Benefit Plan
Obligations and contribute the proceeds (less any applicable
withholding tax which it will remit as required by the Tax Act
on behalf of the Corporation) to the Trust on behalf of the
Corporation in order to fund the Executive Benefit Plan
Obligations unless it receives satisfactory proof within nine
days of the date of such notice that the Corporation has
funded the Executive Benefit Plan Obligations itself in
accordance with the terms of this Restated Agreement.
Unless the Corporation advises the Trustee in writing that it
has funded the Executive Benefit Plan Obligations in
accordance with the terms hereof and has provided the Trustee
with satisfactory proof thereof within nine days of the date
of the aforementioned notice, the Trustee shall draw upon that
portion of the Letter of Credit which is referable to the
Executive Benefit Plan Obligations on the tenth day following
the date of such notice (or the next following business day if
such tenth day is not a business day) and contribute the
proceeds (less any applicable withholding tax which it will
remit as required by the Tax Act on behalf of the Corporation)
to the Trust on behalf of the Corporation.
(e) For purposes of determining the required amount of funding or
the portion of the Letter of Credit to be drawn on for
purposes of this Section 11.6, the Trustee shall refer to the
most recent report prepared by the Actuary for purposes of
this Restated Agreement and, in particular, to the portion of
the report dealing with the Executive Benefit Plan
Obligations. In preparing the portion of its report respecting
Executive Benefit Plan Obligations, the Actuary shall adhere
to the following:
(i) Assuming that the Executive, if then in active
employment, will remain in active employment with the
Corporation as an officer until the Calculation Date
and that the Executive's employment with the
Corporation will terminate on the Calculation Date.
-23-
(ii) Using the Executive's demographic data, including
base salary, actual bonus history, target bonus and
current marital status as of the Valuation Date,
provided by the Corporation.
(iii) Using the Canada Pension Plan Benefit and Tax Act
maximum defined benefit pension dollar limit as at
the Valuation Date.
(iv) Assuming the Executive's target bonus percentage
remains at the level specified by the Corporation
pursuant to subparagraph (ii) above.
(v) Assuming only Executive Benefit Plan Obligations are
included.
(vi) Assuming the payments under the Executive Benefit
Plan would be made from the Trust.
(vii) Using the actuarial methods, assumptions and
calculation methodology described in Schedule "B-2.
(viii) Applying loads as described in Schedule "B-2" to the
amount determined in accordance with the preceding
subparagraphs of this Section 11.6(e) to provide for
future contingencies and expenses of the Trust.
(ix) Calculating the estimated amount required to settle
the Executive Benefit Plan Obligations based on the
actuarial methods, assumptions and calculation
methodology described in Schedule "B-2", increased by
the loads described in the following subparagraph.
(x) Applying loads as described in Schedule "B-2" to the
amount determined in accordance with subparagraph
(ix) to provide for:
(A) fluctuations in the Interest Discount Rate
and Consumer Price Index during the term of
the Letter of Credit; and
(B) the cost associated with the loan to be
secured as allowed under the Trust Agreement
to permit settlement of the Executive
Benefit Plan Obligations prior to receipt of
the Refundable Tax Account from the Canada
Revenue Agency. The assumed interest rate
payable on the loan shall be as described in
Schedule "B-2" and shall be applied to
one-half of the amount in subparagraph (ix).
The cost associated with the borrowings
shall be assumed to be paid from the Trust.
(xi) Taking the larger amount for the Executive of:
(A) the amount determined in accordance with
subparagraphs (i) through (viii), and
-24-
(B) the amount determined in accordance with
subparagraphs (ix) and (x).
(xii) The amount determined in accordance with subparagraph
(xi) above shall be offset by:
(A) the Refundable Tax Account, if any;
(B) the assets contained in the Trust, if any.
(f) In the event that the Executive Benefit Plan Obligations have
been funded in accordance with the terms hereof as a result
of:
(i) the Corporation making an assignment for the benefit
of creditors or filing a petition in bankruptcy or
becoming insolvent or bankrupt;
(ii) a receiver, trustee or liquidator of or for the
Corporation being appointed and not being discharged
within a period of sixty days;
(iii) a voluntary dissolution or wind-up of the
Corporation; or
(iv) a sale or disposition of all or substantially all of
the assets of the Corporation,
and the Executive Benefit Plan has been terminated in
connection therewith, the Executive Benefit Plan Obligations
shall be promptly settled by the Trustee with the Executive by
way of a lump sum payment from the Trust. For this purpose,
the benefit entitlements of each Executive shall be determined
by the Actuary in accordance with the terms of the Executive
Benefit Plan and the amount of the lump sum payment shall be
determined by the Actuary using the assumptions set forth in
Schedule "B-1". Notice of termination of the Executive Benefit
Plan shall be provided to the Trustee by the Corporation,
failing which by two executives of the Corporation, one of
whom must be either the Chief Financial Officer or the General
Counsel of the Corporation.
Any assets of the Trust remaining after full satisfaction of
(i) the Executive Benefit Plan Obligations pursuant to the
preceding paragraph and (ii) any further obligations pursuant
to the terms of the Trust Agreement, shall be returned to the
Corporation.
(g) In the event the Executive Benefit Plan shall be terminated at
any time either in whole or in part in relation to the
Executive subsequent to the funding of the Executive Benefit
Plan Obligations in accordance with the terms hereof, then,
provided Section 11.6(f) of this Restated Agreement is not
otherwise applicable, the Executive Benefit Plan Obligations
shall be promptly settled by the Trustee with the Executive by
way of a lump sum payment from the Trust.
-25-
For this purpose, the benefit entitlements of the Executive
shall be determined by the Actuary in accordance with the
terms of the Executive Benefit Plan and the amount of the lump
sum payment shall be determined by the Actuary using the
assumptions set forth in Schedule "B-1". Notice of the
termination of the Executive Benefit Plan shall be provided to
the Trustee by the Corporation, failing which by two
executives of the Corporation, one of whom must be either the
Chief Financial Officer or the General Counsel of the
Corporation.
Any assets of the Trust remaining after full satisfaction of
(i) the Executive Benefit Plan Obligations and (ii) any
further obligations pursuant to the terms of the Trust
Agreement, shall be returned to the Corporation.
(h) In the event:
(i) of a dispute as to whether a payment to or in respect
of the Executive is properly due and payable pursuant
to the Executive Benefit Plan; and
(ii) such dispute cannot be resolved by the parties
thereto within the time frame specified in Section
1.1(x)(vi) of this Restated Agreement,
the amount in dispute shall be remitted to the Trustee for
deposit to the Trust. Upon final settlement of the dispute,
the amount so deposited (together with any earnings, profits
and increments thereon and after deduction of any authorized
payments allocable thereto, both as determined in accordance
with the terms of the Trust Agreement), less any applicable
withholding tax which will be remitted as required by the Tax
Act, shall be paid to that party to the dispute which is found
to be entitled thereto. Prior to such amount being paid out of
the Trust in accordance with the terms hereof, the Corporation
shall instruct the Actuary to take such amount into account
when preparing its report for purposes of this Restated
Agreement.
(i) In the event that a Change of Control Obligations - Designated
Event described in Section 1.1(n)(ii) of this Restated
Agreement shall occur subsequent to the funding of the
Executive Benefit Plan Obligations in accordance with the
terms of this Restated Agreement, the Corporation shall be
required to settle the Executive Benefit Plan Obligations
forthwith in an amount determined by the Actuary in accordance
with the provisions of Schedule "B-1".
(j) Subject to Section 11.6(f), 11.6(g) and 11.6(i) of this
Restated Agreement, in the event that the Executive Benefit
Plan Obligations have been funded in accordance with the terms
hereof, all or a portion of such Executive Benefit Plan
Obligations may, at the discretion of the Corporation, be
promptly settled with the Executive.
For this purpose, the benefit entitlements of the Executive
shall be determined by the Actuary in accordance with the
terms of the Executive Benefit Plan. In such circumstances,
the Corporation reserves the right to settle the Executive
Benefit Plan Obligations by way of a lump sum payment to the
-26-
Executive provided that the amount of each such payment is
determined by the Actuary in accordance with the assumptions
set forth in Schedule "B-1".
11.7 (a) If a Change of Control Obligations - Designated Event
described in Section 1.1(n)(i) of this Restated Agreement
shall occur, the Corporation shall be required to immediately
fund the Change of Control Obligations in accordance with the
most recent report prepared by the Actuary pursuant to Section
11.3 of this Restated Agreement.
(b) If a Change of Control Obligations - Designated Event
described in Section 1.1(n)(ii) of this Restated Agreement
shall occur, the Corporation shall be required to settle the
Change of Control Obligations forthwith in accordance with the
provisions of Schedule "B-1", upon receipt by the Corporation
of a Release executed by the Executive in the form attached to
this Restated Agreement as Schedule "A".
(c) Upon the earlier of:
(i) learning of the occurrence of a Change of Control
Obligations - Designated Event described in Section
1.1(n)(i) of this Restated Agreement; or
(ii) receipt of a written notice of the occurrence of a
Change of Control Obligations - Designated Event
described in Section 1.1(n)(ii) of this Restated
Agreement, which notice has been signed by the
Executive and sworn before a notary public and has
annexed thereto a Release executed by the Executive
in the form attached to this Restated Agreement as
Schedule "A",
the Trustee shall promptly give notice to the Corporation in
writing that it intends to draw on that portion of the Letter
of Credit which is referable to the Change of Control
Obligations and contribute the proceeds thereof (less any
applicable withholding tax which it will remit as required by
the Tax Act on behalf of the Corporation) to the Trust on
behalf of the Corporation in order to fund the Change of
Control Obligations, unless it receives satisfactory proof
within nine days of such notice that the Corporation has
funded or settled, as applicable, the Change of Control
Obligations itself in accordance with the terms of this
Restated Agreement.
Unless the Corporation advises the Trustee in writing that it
has funded or settled, as applicable, the Change of Control
Obligations in accordance with the terms of this Restated
Agreement and has provided the Trustee with satisfactory proof
thereof within nine days of the date of the aforementioned
notice, the Trustee shall draw on that portion of the Letter
of Credit which is referable to the Change of Control
Obligations on the tenth day following the date of such notice
(or the next following business day if such tenth day is not a
-27-
business day) and contribute the proceeds (less any applicable
withholding tax which it will remit as required by the Tax Act
on behalf of the Corporation) to the Trust on behalf of the
Corporation.
Notwithstanding the foregoing, in the event a Change of
Control Obligations - Designated Event described in Section
1.1(n)(i) of this Restated Agreement has triggered the
operation of this Section 11.7 and the failure which gave rise
to the occurrence of such Change of Control Obligations -
Designated Event has been remedied prior to the expiration of
the notice period provided for in this Section 11.7(c), the
Trustee shall not take the action described in the immediately
preceding paragraph hereof and all of the provisions of this
Restated Agreement shall continue to apply to the same extent
and as fully as they would have in the event that such Change
of Control Obligations - Designated Event had not occurred.
(d) The required amount of funding or the portion of the Letter of
Credit to be drawn on for purposes of this Section 11.7 shall
be determined by the Actuary and shall be the amount
determined in accordance with Sections 11.5(a) through (l) of
this Restated Agreement offset by the amount determined in
accordance with subparagraphs 11.6(e)(i) through (xii) of this
Restated Agreement. The settlement amount for purposes of this
Section 11.7 shall be determined in accordance with the
provisions of Schedule "B-1".
(e) In the event that the Change of Control Obligations have been
funded in accordance with the terms hereof as a result of the
occurrence of a Change of Control Obligations - Designated
Event described in Section 1.1(n)(ii), the Change of Control
Obligations shall be promptly settled with the Executive in
accordance with the provisions of Schedule "B-1".
11.8 The actuarial methods and assumptions described in Schedule "B-1" and
Schedule "B-2" shall be reviewed from time to time. Any amendments to
Schedule "B-1" and/or Schedule "B-2" as a result of such review shall
be dealt with in accordance with Section 13.6.
11.9 The Trustee shall surrender the Letter of Credit to the Corporation for
cancellation upon the earliest of:
(a) receipt by the Trustee of a written direction signed by the
Corporation and the Executive directing surrender of the
Letter of Credit;
(b) receipt by the Trustee of a written direction signed by the
Corporation confirming that it has funded and/or settled the
Obligations in accordance with the terms hereof, together with
evidence which is satisfactory to the Trustee that such
funding and/or settlement has occurred; and
-28-
(c) receipt by the Trustee of a written direction signed by the
Corporation confirming that the Corporation has no remaining
Obligations to the Executive, together with evidence which is
satisfactory to the Trustee that the Corporation has no
remaining Obligations to the Executive and that a copy of such
written direction has been provided to the Executive.
11.10 The Trust shall be terminated by the Trustee upon the earliest of:
(a) receipt by the Trustee of a written direction signed by the
Corporation and the Executive confirming the termination of
the Trust;
(b) the entire depletion of the Trust Fund through payments
pursuant to the terms of the Trust Agreement, in the event
that such depletion occurs subsequent to the funding of the
Obligations in accordance with the terms of this Restated
Agreement; and
(c) receipt by the Trustee of a written direction signed by the
Corporation confirming that the Corporation has no remaining
Obligations to the Executive, together with evidence which is
satisfactory to the Trustee that a copy of such written
direction has been provided to the Executive.
Upon the termination of the Trust, any assets of the Trust which remain
after the satisfaction of any remaining Obligations of the Corporation
to the Executive shall be returned to the Corporation.
11.11 The Corporation and the Executive hereby acknowledge that the
Corporation is entering into agreements similar to this Restated
Agreement with certain of its other executives and that the Corporation
may, at its sole discretion, arrange for one or more Letters of Credit
to satisfy its responsibilities under this Restated Agreement and such
other agreements. In the event that one Letter of Credit is obtained to
satisfy the Corporation's responsibilities under this Restated
Agreement and some or all of such other agreements, references to a
"Letter of Credit" in this Restated Agreement shall be read as
references to that portion of such Letter of Credit which is referable
to the responsibilities of the Corporation to the Executive.
The Corporation and the Executive also acknowledge that the Corporation
may, at its sole discretion, enter into one or more Trust Agreements to
satisfy its responsibilities under this Restated Agreement and such
other agreements. In the event that one Trust Agreement is entered into
to satisfy the Corporation's responsibilities under this Restated
Agreement and some or all of such other agreements, references to
"Trust", "Trust Agreement", "Trustee" and "Refundable Tax Account" in
this Restated Agreement shall be read with such modifications as may be
necessary in the context.
11.12 At the discretion of the Corporation and subject to the provisions of
applicable law, in the event that all or a portion of the Obligations
are funded in accordance with Article 11 hereof and an actuarial
surplus (determined by actuarial valuation in accordance with the terms
-29-
of the report prepared as at the immediately preceding Valuation Date
in accordance with Section 11.3 of this Restated Agreement) arises as a
result thereof:
(a) all or a portion of such actuarial surplus may be used in the
determination of or to reduce the funding otherwise required
to be provided by the Corporation hereunder; or
(b) any surplus assets may, to the extent that they exceed 110% of
the amount required to fund that portion of the Obligations
which has been funded (as determined by the report prepared as
at the immediately preceding Valuation Date in accordance with
Section 11.3 of this Restated Agreement) be returned to the
Corporation.
ARTICLE 12
EXPEDITED ARBITRATION
---------------------
12.1 If, pursuant to Section 7.1 of this Restated Agreement, the Executive
provides written notice of the Executive's intention to terminate the
Executive's employment for Good Reason, and the Corporation believes
that there is no Good Reason, or, alternatively, if, pursuant to
Section 4.1 of this Restated Agreement, the Corporation provides
written notice of its intention to terminate the Executive's employment
for Just Cause and the Executive believes there is no Just Cause, the
Corporation or the Executive, as applicable, shall, within ten (10)
days of having been provided such notice, provide written notice
("Notice of Dispute") to the other Party of the dispute (the
"Dispute").
12.2 The Parties agree that any and all Disputes under Section 12.1 of this
Restated Agreement will be resolved by way of a single Arbitrator.
12.3 (a) Within fifteen (15) days of provision of the Notice of
Dispute, the Parties shall agree upon and appoint a neutral
Arbitrator from the then current roster maintained by the
Alberta Mediation and Arbitration Society to act as Arbitrator
of the Dispute; or
(b) If no person acceptable to both Parties has been agreed upon
and appointed within fifteen (15) days, then either Party may
make immediate application to the Court of Queen's Bench of
Alberta, Judicial District of Calgary, to have an Arbitrator
appointed.
12.4 The Parties acknowledge and agree that the purpose of this Article 12
is to avoid delays and facilitate resolution of the Dispute in a just,
speedy and cost-effective manner.
12.5 Consistent with the expedited nature of arbitration, the Arbitrator
will direct and control the scope and timing of the exchange of
information between the Parties and will take such steps as the
Arbitrator deems necessary to achieve a just, speedy and cost-effective
-30-
resolution of the Dispute. The Arbitrator has the exclusive right and
power to resolve all issues related to the exchange of information in
the arbitration process.
12.6 The Parties agree that the Arbitrator is only authorized to determine
whether the Executive had Good Reason for terminating the Executive's
employment, or alternatively, whether the Corporation had Just Cause to
terminate the Executive's employment.
12.7 A hearing will occur within forty-five (45) days of the appointment of
the Arbitrator (the "Hearing"). The time of the Hearing (the "Hearing
Date") will be scheduled by the Arbitrator after consultation with the
Parties. The Hearing will be governed by the rules set out in the
ARBITRATION ACT S.A. 1991, c.A-43, as modified by the Arbitrator in the
interests of achieving a just, speedy and cost-effective resolution of
the Dispute. The Arbitrator may require written submissions of fact in
the Dispute to be provided seven (7) days before the Hearing Date.
12.8 The Arbitrator will use best efforts to provide a written decision
within seven (7) days of the conclusion of the Hearing.
12.9 The Parties agree that the decision of the Arbitrator will be final and
binding upon the Parties.
ARTICLE 13
GENERAL
-------
13.1 The headings of the Articles and paragraphs in this Restated Agreement
are inserted for convenience only and shall not affect the meaning or
construction of this Restated Agreement.
13.2 This Restated Agreement shall be construed and interpreted in
accordance with the laws of the Province of Alberta and the federal
laws of Canada as applicable therein.
13.3 If any provision of this Restated Agreement is determined to be void or
unenforceable in whole or in part, it shall be and be deemed to be
severed from this Restated Agreement without affecting or impairing the
validity of any other provision herein.
13.4 Any notice required or permitted to be given under this Restated
Agreement shall be in writing and shall be properly given if delivered
by hand delivery or mail or other form of electronic communication
capable of transmission confirmation to the following address:
a. IN THE CASE OF THE CORPORATION TO:
----------------------------------
Nexen Inc.
000 - 0xx Xxxxxx X.X.
Xxxxxxx, XX X0X 0X0
Attention: General Manager, Compensation and Benefits
-31-
b. IN THE CASE OF THE EXECUTIVE TO:
--------------------------------
the last address of the Executive in the records of the
Corporation or to such other address as the Parties may from
time to time specify by notice given in accordance herewith.
13.5 This Restated Agreement shall enure to the benefit of and be binding
upon the Executive and the Executive's heirs, executors and
administrators and upon the Corporation and its successors and assigns.
13.6 This Restated Agreement constitutes the entire agreement relating to
the respective rights and obligations of the Parties upon the
occurrence of a Change of Control. No amendment or waiver of this
Restated Agreement shall be binding unless executed in writing by the
Parties.
Notwithstanding the foregoing,
(a) any amendment to Article 11 of this Restated Agreement,
Schedule "B-1" or Schedule "B-2" which is required to ensure
that the balance remaining in the Trust after the required tax
has been withheld and remitted to the Canada Revenue Agency is
sufficient to satisfy the fee levied by the Bank in connection
with the issuance of a Letter of Credit may be made by the
Corporation without the prior written approval of the
Executive; and
(b) the Corporation may amend, modify or waive Article 11 of this
Restated Agreement, Schedule "B-1" and Schedule "B-2" in whole
or in part, at such time and from time to time, and in such
manner and to such extent as it may deem advisable without
obtaining the approval of the Executive, provided that such
amendment, modification or waiver, as the case may be, does
not adversely affect the securitization in accordance with the
terms hereof of those Obligations which have accrued up to the
date of such amendment, modification or waiver, as the case
may be.
13.7 The Parties agree that the rights, entitlements and benefits set out in
this Restated Agreement to be paid to the Executive upon a Change of
Control shall be in full satisfaction of all rights of the Executive
under applicable law in effect from time to time as a result thereof.
13.8 Neither Party can waive or shall be deemed to have waived any right it
has under this Restated Agreement except to the extent that such waiver
is in writing.
13.9 Nothing contained in this Restated Agreement shall be construed as
limiting the ability of the Corporation to amend, modify or terminate
the Executive Benefit Plan in whole or in part, at such time and from
time to time, and in such manner and to such extent as it may deem
advisable.
-32-
The Parties have executed this Restated Agreement effective the date first
written above.
NEXEN INC.
Per: (signed)
--------------------------------
Per: (signed)
--------------------------------
SIGNED, SEALED & DELIVERED
in the presence of
(signed) (signed)
------------------------------- -------------------------------------
WITNESS XXXXXXX X. XXXXXXX
SCHEDULE "A"
------------
AMENDED AND RESTATED AGREEMENT
RESPECTING CHANGE OF CONTROL AND
EXECUTIVE BENEFIT PLAN ENTITLEMENTS
In order to receive the entitlements referred to in the Article 8 of this
Restated Agreement, the Executive shall execute the attached Release, fully
releasing the Corporation from all further claims in relation to the Executive's
employment or Employment Benefits and the termination thereof upon payment of
the remuneration and benefits referred to in Article 8 of this Restated
Agreement. The attached Release shall not, however, require that the Executive
relinquish or release any rights to indemnity which the Executive may, as an
officer or director of the Corporation or any of its Affiliates, Associates and
Subsidiaries, have as against the Corporation or any of its Affiliates,
Associates and Subsidiaries, for costs, charges and expenses reasonably incurred
by the Executive in respect of any civil, criminal or administrative action or
proceeding to which the Executive is made a party by reason of being or having
been a director or officer of the Corporation or any of its Affiliates,
Associates and Subsidiaries, where:
(a) the Executive has acted honestly and in good faith with a view
to the best interests of the Corporation or any of its
Affiliates, Associates and Subsidiaries; and
(b) in the case of a criminal or administrative action or
proceeding enforced by a monetary penalty, the Executive had
reasonable grounds for believing the Executive's conduct was
lawful.
FINAL RELEASE
-------------
KNOW ALL MEN BY THESE PRESENTS that I, XXXXXXX X. XXXXXXX, of the City of
Calgary, in the Province of Alberta, in consideration of the amounts provided in
that certain Amended and Restated Agreement Respecting Change of Control and
Executive Benefit Plan Entitlements (the "Restated Agreement") dated as of the
______ day of ____________, 2008 between myself and NEXEN INC. and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, do for myself, my executors and assigns hereby remise, release and
forever discharge the Corporation, and any associated, affiliated, predecessor
or parent corporation of the Corporation and their present and former directors,
officers, agents and employees (the "Releasees"), including each of their
respective successors, heirs, administrators and assigns, from all manner of
actions, causes of action, debts, obligations, covenants, claims or demands,
whatsoever which I may ever have had, now have, or can, shall or may hereafter
have against the Releasees or any of them, by reason of or arising out of any
cause, matter or thing whatsoever done, occurring or existing up to and
including the present date and, in particular, without in any way restricting
the generality of the foregoing, in respect of all claims of any nature
whatsoever, past, present or future, directly or indirectly related to or
arising out of or in connection with my relationship with the Releasees, as an
employee, officer or director, and the termination of my employment from the
Corporation including, but not limited to, any claims related to any entitlement
I may have or may have had to any payment or claim either at common law or under
the EMPLOYMENT STANDARDS CODE, HUMAN RIGHTS, CITIZENSHIP AND MULTICULTURALISM
ACT or any other applicable legislation governing or related to my employment
with the Releasees.
AND FOR THE SAID CONSIDERATION, I, XXXXXXX X. XXXXXXX, represent and warrant
that I have not assigned to any person, firm or corporation any of the actions,
causes of action, claims, suits, executions or demands which I release by this
Release, or with respect to which I agree not to make any claim or take any
proceeding herein.
IT IS FURTHER ACKNOWLEDGED that the payment to me includes full compensation and
consideration for the loss of my employment benefits, as provided by the
Releasees, and that all of my employment benefits and privileges shall cease on
the date of termination of my employment, except as otherwise expressly provided
in the Restated Agreement. I further acknowledge that I have received all
benefits due to me and have no further claim against the Releasees for such
benefits. I further accept sole responsibility to replace such benefits which I
-2-
wish to continue or to exercise conversion privileges where applicable with
respect to such benefits and, in particular any life insurance and long-term
disability benefits. In the event that I become disabled following termination
of my employment, I covenant not to xxx the Releasees for insurance or other
benefits or loss of same and hereby release the Releasees from any and all
further obligations or liabilities arising therefrom.
Notwithstanding anything contained herein, this Release shall not extend to or
affect, or constitute a release of, my right to xxx, claim against or recover
from the Releasees and shall not constitute an agreement to refrain from
bringing, taking or maintaining any action against the Releasees in respect of:
(a) any corporate indemnity existing by statute, contract
or pursuant to any of the constating documents of the
Corporation provided in my favour in respect of my
having acted at any time as a director, officer or
both of the Corporation;
(b) my entitlement to any insurance maintained for the
benefit or protection of the directors and/or
officers of the Corporation, including without
limitation, directors' and officers' liability
insurance; or
(c) my entitlement to any amounts or compensation due to
me under the terms of my employment pursuant to the
Restated Agreement.
IT IS HEREBY AGREED that the terms of the Restated Agreement and of this Release
will be kept confidential. No party hereto shall communicate any such terms to
any third party under any circumstances whatsoever, excepting any necessary
communication with my legal and financial advisors, as required, on the express
condition that they maintain the confidentiality thereof, and any disclosure
which is required by law, although either party shall be at liberty to disclose
to third parties that a mutually acceptable Release was agreed upon. The
invalidity and unenforceability of any provision of this Release shall not
affect the validity or enforceability of any other provision of this Release,
which shall remain in full force and effect.
-3-
I HEREBY DECLARE that I have read all of this Release, fully understand the
terms of this Release and voluntarily accept the consideration stated herein as
the sole consideration for this Release for the purpose of making a full and
final settlement with the Releasees. I further acknowledge and confirm that I
have been given an adequate period of time to obtain independent legal counsel
regarding the meaning and the significance of the terms herein and the covenants
mutually exchanged.
IT IS HEREBY AGREED THAT as a term of the termination of my employment from the
Corporation, and in consideration of the amount noted above, I hereby resign as
officer and director of the Corporation and its affiliates.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this _____ day of
______________ in the year _________.
-------------------------------------
XXXXXXX X. XXXXXXX
-------------------------------------
WITNESS (signature)
-------------------------------------
WITNESS (print name)
SCHEDULE "B-1"
--------------
AMENDED AND RESTATED AGREEMENT
RESPECTING CHANGE OF CONTROL AND
EXECUTIVE BENEFIT PLAN ENTITLEMENTS
METHODOLOGY AND ASSUMPTIONS FOR DETERMINING SETTLEMENT VALUE
PURPOSE
In accordance with the terms of the Restated Agreement, the purpose of this
Schedule "B-1" is to outline the calculation approach such that, after tax has
been paid on a lump sum settlement value, the remaining balance is intended to
be sufficient to provide after-tax monthly payments equivalent to the after-tax
monthly payments the Executive would have received under the terms of the
Executive Benefit Plan as provided for under this Restated Agreement.
OVERVIEW FOR DEFINED BENEFIT PENSION
The following outlines the actuarial methods, assumptions and calculation
process to be used in determining the lump sum settlement value of the defined
benefit pension entitlements under the Executive Benefit Plan when settlement
occurs in accordance with Section 11 of the Restated Agreement. Section 300 of
the Income Tax Regulations establishes the procedure applicable in using an
after-tax lump sum to purchase a prescribed annuity:
1. A prescribed annuity payment consists of two components: (a) the deemed
capital element of the annuity payment on which no tax is payable, and
(b) the deemed non-capital portion of the annuity payment which is
taxed at the marginal rate.
2. The capital portion of each future annuity payment is considered to be
a return of the original after-tax lump sum amount.
3. The non-capital portion of each annuity payment is assumed to be
provided by the investment return on the original after-tax lump sum
amount and has therefore not yet been taxed.
4. A constant percentage of each future payment is deemed to be a return
of the original lump sum capital.
CALCULATION METHODOLOGY
1. Equivalent after-tax payments:
a. Determine initial gross annual pension entitlement under the Executive
Benefit Plan.
b. Determine after-tax annual pension entitlement under the Executive
Benefit Plan based on Individual Tax Rate as defined in Schedule "B-1".
-2-
c. Determine the capital element based on the non-indexed present value of
the pension payments divided by life expectancy.
d. Determine the monthly payment which provides an after-tax pension equal
to the after-tax pension determined in 1.b. above in accordance with
the prescribed annuity methodology.
2. Present value of periodic payments from 1. above:
a. Determine the present value of the pension determined in 1.d. above
using the assumptions described below in this Schedule "B-1". For
greater certainty, the value of the post-retirement indexation is to be
reflected in determining the present value of the accrued pension
entitlement in respect of post-1992 service, and any accrued pension in
respect of service granted during the Severance Period.
3. Tax adjustment:
x. Xxxxx-up the present value determined in 2.a. above to reflect the tax
assumed to be required to be paid on the lump sum.
x. Xxxxx-up the amount determined in 3.a. above to reflect the tax assumed
to be required to be paid on investment earnings in respect of the lump
sum payment during the deferral period prior to assumed pension
commencement, if any.
4. Equivalent present value after tax as the after-tax monthly payments:
a. The amount determined in 3.b. above shall be the lump sum settlement
value of the Executive's pension entitlement.
ASSUMPTIONS
Interest Discount Rate:
-- during deferral period Yield on long-term Government of
Canada bonds as published in the Bank
of Canada Review, described in CANSIM
series V122544 (or a successor
series) for the last trading
Wednesday at the end of the month
immediately preceding the date of
calculation, rounded down to next
lower 0.5.
-- after assumed pension commencement Yield on long-term Government of
Canada bonds as published in the Bank
of Canada Review, described in CANSIM
series V122544 (or a successor
series) for the last trading
Wednesday at the end of the month
immediately preceding the date of
calculation, rounded down to next
lower 0.5,
less
-3-
assumed escalation of pensions after
retirement.
Increase in Consumer Price Index: Yield on long-term Government of
Canada bonds as published in the Bank
of Canada Review, described in CANSIM
series V122544 (or a successor
series) for the last trading
Wednesday at the end of the month
immediately preceding the date of
calculation,
less
Yield on long-term Government of
Canada Real Return bonds as published
in the Bank of Canada Review,
described in CANSIM series V122553
(or a successor series) for the last
trading Wednesday at the end of the
month immediately preceding the date
of calculation.
The result of the difference is then
rounded up to the next highest 0.5% .
Escalation of Pensions After Retirement: 75% of CPI, less 1% (minimum increase
25% of CPI). Applies only to benefits
accrued for service after December
31, 1992.
Mortality:
-- for life expectancy 1994 Uninsured Pensioner Mortality
Table with mortality improvements
projected to 15 years beyond the date
of termination.
-- for present values
o prior to assumed pension Nil.
commencement
o after assumed pension 1994 Uninsured Pensioner Mortality
commencement Table with mortality improvements
projected 15 years beyond the date of
termination.
Marital Status: Actual status at date of termination.
Age of Spouse: Based on actual date of birth.
Individual Tax Rate: Maximum individual marginal tax rate
for employee's province of employment
at the date of termination.
SCHEDULE "B-2"
--------------
AMENDED AND RESTATED AGREEMENT
RESPECTING CHANGE OF CONTROL AND
EXECUTIVE BENEFIT PLAN ENTITLEMENTS
METHODOLOGY AND ASSUMPTIONS FOR DETERMINING THE AMOUNT TO BE SECURED OR FUNDED
IN ACCORDANCE WITH SECTION 11 BASED ON THE METHODOLOGY DESCRIBED IN SCHEDULE
"B-1"
PURPOSE
The purpose of this Schedule "B-2" is to provide the actuarial methodology and
assumptions for determining the amount to be secured or funded in accordance
with Section 11 of the Restated Agreement.
METHODOLOGY
The settlement methodology is described in Schedule B-1.
The funding methodology applicable to the Executive Benefit Plan Obligations is
based on the following:
1. Estimate the accrued pension payable from the Executive Benefit Plan as
at the Valuation Date.
2. Assume that the assets of the plan are to be invested in long term
Government of Canada bonds and subject to the 50% refundable tax
applicable to retirement compensation arrangements.
3. Determine the present value of the amounts in 1 through 2 above.
4. Estimate the settlement value that could be paid in accordance with the
methodology and assumptions described in Schedule B-1.
5. The funding amount in respect of the Executive Benefit Plan Obligations
shall be the greater of the amount determined in accordance with 1
through 3 above and the amount in 4 above.
ASSUMPTIONS
Interest Discount Rate:
-- during deferral period Yield on long-term Government of
Canada bonds as published in the Bank
of Canada Review, described in CANSIM
series V122544 (or a successor
series) for the last trading
Wednesday at the end of the month
immediately preceding the Anniversary
Date, rounded down to next lower 0.5.
-2-
-- after assumed pension commencement Yield on long-term Government of
Canada bonds as published in the Bank
of Canada Review, described in CANSIM
series V122544 (or a successor
series) for the last trading
Wednesday at the end of the month
immediately preceding the Anniversary
Date, rounded down to next lower 0.5
, less assumed escalation of pensions
after retirement.
Increase in Consumer Price Index: Yield on long-term Government of
Canada bonds as published in the Bank
of Canada Review, described in CANSIM
series V122544 (or a successor
series) for the last trading
Wednesday at the end of the month
immediately preceding the Anniversary
Date,
less
Yield on long-term Government of
Canada Real Return bonds as published
in the Bank of Canada Review,
described in CANSIM series V122553
(or a successor series) for the last
trading Wednesday at the end of the
month immediately preceding the
Anniversary Date.
The result of the difference is then
rounded up to the next highest 0.5%.
Escalation of Pensions After Retirement: 75% of CPI, less 1% (minimum increase
25% of CPI). Applies only to benefits
accrued for service after December
31, 1992.
Mortality:
-- for life expectancy 1994 Uninsured Pensioner Mortality
Table with mortality improvements
projected to 15 years beyond the
Calculation Date.
-- for present values
o prior to assumed pension Nil.
commencement
o after assumed pension 1994 Uninsured Pensioner Mortality
Table with mortality improvements
projected 15 years beyond the
Calculation Date.
-3-
Marital Status: Actual status at the Anniversary.
Age of Spouse: Based on actual date of birth.
Individual Tax Rate: Maximum individual marginal tax rate
for employee's province of employment
at the Anniversary Date
Bonus: Target bonus % applied to the salary
rate at the Valuation Date
Investment return: Yield on long-term Government of
Canada bonds as published in the Bank
of Canada Review, described in CANSIM
series V122544 (or a successor
series) for the last trading
Wednesday at the end of the month
immediately preceding the Anniversary
Date rounded down to next lower 0.5%,
and then divided by 2
Decrements: None assumed prior to Calculation Date
Eligibility for Pensions: 100% vested
Pension Commencement Age:
-- eligible for subsidized early Payable at the completion of the
retirement on the Calculation Date Severance Period. Payable at the
(i.e., age 55 and 10 years of Calculation Date for purposes of
continuous service) determining the amount required under
Section 11.6(e).
-- not eligible for early retirement Deferred to age 60 or the end of the
on the Calculation Date Severance Period if later. Payable at
age 60 for purposes of determining
the amount required under Section
11.6(e).
Fluctuation reserve (1) 15% of the pension obligations
Cost of borrowing to settle Yield on one month Government of
the obligations: Canada Treasury Bills as published in
the Bank of Canada Review, described
in CANSIM series V122529 (or a
successor series) for the last
trading Wednesday at the end of the
month immediately preceding the
Anniversary Date, rounded up to the
next higher 0.25%, plus 1.50%
-4-
--------------------------------------------------------------------------------
NOTES:
(1) Referred to by Section 11.5(g), Section 11.6(e)(viii) and 11.6(e)(x). The
15% load is intended to provide a reserve for a potential decrease in the
Interest Discount Rate in combination with potential increases in the
Consumer Price Index for an aggregate change of 1.0%.
SCHEDULE "C"
------------
AMENDED AND RESTATED AGREEMENT RESPECTING CHANGE OF
CONTROL AND EXECUTIVE BENEFIT PLAN ENTITLEMENTS
ESTIMATED(1) ENTITLEMENT TO COMPENSATION
PURSUANT TO ARTICLE 8 OF THE RESTATED AGREEMENT
-------------------------------------------------------------------------------
EMPLOYEE - XXXXXXX X. XXXXXXX
-------------------------------------------------------------------------------
Base Salary $4,095,000
-------------------------------------------------------------------------------
Bonus Target Value $3,276,000
-------------------------------------------------------------------------------
Benefits Uplift $532,350
-------------------------------------------------------------------------------
Car Allowance $93,600
-------------------------------------------------------------------------------
Savings Plan $245,700
-------------------------------------------------------------------------------
Financial Counselling Services $10,500
-------------------------------------------------------------------------------
Security Monitoring Services $2,400
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
TOTAL VALUE $8,255,550
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
ADDITIONAL LUMP SUM SETTLEMENT VALUE OF PENSION(2) $11,225,692
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
TOTAL ESTIMATED ENTITLEMENT $19,481,242
-------------------------------------------------------------------------------
In addition to the above, Section 8.1(c) of the Restated Agreement provides for
Executive Outplacement counselling to be provided by a firm selected by the
Executive, at a cost to the Corporation not to exceed $25,000.
IN ADDITION to the above pension entitlement under the Agreement, the Executive
has the following pension entitlements under the Registered Pension Plan and
Executive Benefit Plan. As is the case with the figures shown above, these
values are estimated values (as of April 1, 2008) and are for illustrative
purposes only. Actual values will be calculated as of the date of the
entitlement or payment in accordance with the Registered Pension Plan and the
Executive Benefit Plan, respectively, and therefore may be subject to change.
o Accrued Annual Defined Benefit Pension Entitlement
(Registered Pension Plan)(3) $30,341
o Estimated Lump Sum Value of Executive Benefit Plan(4) $13,033,649
--------------------------
(1) As stated in Section 8.1 of the Restated Agreement, the above
calculations represent only the current estimated value (as of April 1,
2008) of the Executive's entitlement to compensation upon a Change of
Control. Accordingly, the above calculations are for illustrative
purposes only.
(2) Calculated in accordance with Section 8.1(b) of the Restated Agreement.
- Adjustment to EBP lump sum value to reflect settlement $5,163,010.
- Additional settlement value of pension accrued during the severance
period upon a change of control $6,062,682.
(3) Benefit payable immediately at April 1, 2008
(4) Based on the Standards of Practice for Determining Pension Commuted
Values approved by the Canadian Institute of Actuaries using rates
applicable for April 2008 terminations, as well as actual gender,
marital status, and spouse's date of birth.
AMENDED AND RESTATED AGREEMENT
RESPECTING CHANGE OF CONTROL AND
EXECUTIVE BENEFIT PLAN ENTITLEMENTS
This amended and restated agreement respecting change of control and executive
benefit plan entitlements made as of the 17th day of September, 2008.
BETWEEN:
NEXEN INC., a corporation incorporated under the
laws of Canada
(hereinafter referred to as the "Corporation")
- and -
XXXXXX X. XXXXXXX
(hereinafter referred to as the "Executive")
RECITALS:
1. The Executive, as Executive Vice President and Chief Financial Officer
("CFO") of the Corporation, is considered by the Board to be an essential
officer and employee of the Corporation, who is both integral to the
operation and development of the Corporation, and has acquired
outstanding skills, unique experience and possesses an extensive
background in, and knowledge of, the Corporation's business, operations
and the industry in which it is engaged.
2. In the event of a Change of Control, there is a possibility that the
employment of the Executive would be terminated without just cause or
adversely modified and the Executive has expressed concern in that regard
to the Corporation.
3. The Board recognizes that it is essential and in the best interests of
the Corporation and its shareholders that the Corporation retain the
continued dedication of the Executive to the Executive's office and the
Executive's employment during the uncertain period prior to, during and
following a Change of Control.
4. The Board further believes that the past service of the Executive and the
Executive's integral role in the development and operation of the
Corporation requires that the Corporation ensure that in the event of a
Change of Control the Executive is treated in a manner that is fair,
reasonable, consistent with industry standards and in the best interests
of the Corporation.
5. The Corporation and the Executive entered into a Change of Control
Agreement on October 22, 1999, which was amended by an Amending Agreement
dated December 25, 2000 (collectively the "Original Agreement") to agree
on the terms and conditions which would govern the termination or
modification of the employment of the Executive following a Change of
Control.
-2-
6. The Original Agreement was replaced and superseded by an Amended and
Restated Change of Control Agreement on January 9, 2002, which was
amended by an Amending Agreement dated May 30, 2003 (collectively, the
"Current Agreement") which, among other matters, detailed the
Corporation's security and funding obligations in respect of the Change
of Control Obligations (as hereinafter defined), provided for the
securitization and funding of the Executive Benefit Plan Obligations (as
hereinafter defined) and provided for the cessation of the Executive's
coverage under the Statement of Company Procedure Regarding the
Securitization of Nexen Inc. Restated Executive Benefit Plan, as amended
or replaced from time to time (the "Securitization Procedure").
7. The Corporation and the Executive wish to amend the Current Agreement as
herein provided and, in doing so, wish to restate the Current Agreement
as herein amended (the "Restated Agreement").
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Restated Agreement and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged by the Parties,
the Parties agree as follows:
ARTICLE 1
DEFINITIONS
-----------
1.1 In this Restated Agreement, the following terms shall mean as follows:
(a) "ACTING JOINTLY OR IN CONCERT" for the purposes of this Restated
Agreement, a Person is acting jointly or in concert with another
Person if such Person has any agreement, arrangement or
understanding (whether formal or informal and whether or not in
writing) with such other Person for the purpose of acquiring,
offering to acquire, or voting any Common Shares of the
Corporation (other than customary agreements with and between
underwriters and banking group or selling group members with
respect to a distribution of securities by way of prospectus or
private placement or pursuant to a pledge of securities in the
ordinary course of business).
(b) "ACTUARY" has the meaning referred to in Section 11.2 of this
Restated Agreement.
(c) "AFFILIATE" and "ASSOCIATE" have the meaning ascribed to such
terms in National Instrument 45-106.
(d) "ANNIVERSARY DATE" has the meaning referred to in Section 11.3 of
this Restated Agreement.
-3-
(e) "ANNUAL BASE SALARY" means the annual base salary of the Executive
payable by the Corporation at the end of the month immediately
preceding the Date of Termination.
(f) "ANNUAL TARGET BONUS" means the Executive's annual target bonus as
determined by the Board to be in effect for the calendar year in
which a Change of Control occurs.
(g) "BANK" has the meaning referred to in Section 11.2 of this
Restated Agreement.
(h) "BENEFICIAL OWNER" for the purposes of this Restated Agreement, a
Person shall be deemed to be the "BENEFICIAL OWNER" and to have
"BENEFICIAL OWNERSHIP" of and to "BENEFICIALLY OWN":
(i) any securities as to which such Person or any of such
Person's Affiliates or Associates is the owner at law or in
equity;
(ii) any securities as to which such Person or any of such
Person's Affiliates or Associates has a right to acquire
(i) upon the exercise of any Convertible Securities or (ii)
pursuant to any agreement, arrangement or understanding,
whether such right is exercisable immediately within a
period of sixty (60) days thereafter and whether or not on
condition or the happening of any contingency, (other than
(a) customary agreements with and between underwriters and
banking group and selling group members with respect to the
distribution to the public or pursuant to a private
placement of securities, or (b) pursuant to a pledge of
securities in the ordinary course of business); and
(iii) any securities which are Beneficially Owned within the
meaning of clauses (a) or (b) above by any other Person
with which such Person is Acting Jointly or in Concert,
provided, however, that a Person shall not be deemed the
"Beneficial Owner" or to have "Beneficial Ownership" of or to
"Beneficially Own" any security where such Person is the
registered holder of securities as a result of carrying on the
business of or acting as nominee for a securities depository.
For purposes of this Restated Agreement, the percentage of Common
Shares Beneficially Owned by any Person, shall be and be deemed to
be the product determined by the formula:
100 x A/B
Where:
A = the number of votes for the election of all directors
generally attaching to the Common Shares Beneficially Owned
by such Person; and
-4-
B = the number of votes for the election of all directors
generally attaching to all outstanding Common Shares.
For the purposes of the foregoing formula, where a Person
Beneficially Owns unissued Common Shares which may be acquired
pursuant to Convertible Securities, such Common Shares shall be
deemed to be outstanding for the purpose of calculating the
percentage of Common Shares Beneficially Owned by such Person in
both the numerator and the denominator, but no other unissued
Common Shares which may be acquired pursuant to any other
outstanding Convertible Securities shall, for the purposes of that
calculation, be deemed to be outstanding.
(i) "BOARD" means the Board of Directors of the Corporation as
constituted from time to time.
(j) "CBCA" means the Canada Business Corporations Act, as amended from
time to time, and any successor legislation thereto.
(k) "CALCULATION DATE" has the meaning referred to in Section 11.5 of
this Restated Agreement.
(l) "CHANGE OF CONTROL" means the occurrence of any of:
(i) the purchase or acquisition of any Common Shares or
Convertible Securities by a Beneficial Owner which results
in the Beneficial Owner owning, or exercising control or
direction over, Common Shares or Convertible Securities
such that, assuming only the conversion of Convertible
Securities Beneficially Owned or over which control or
direction is exercised by the Beneficial Owner, the
Beneficial Owner would own, or exercise control or
direction over, Common Shares carrying the right to cast
more than thirty-five percent (35%) of the votes attaching
to all Common Shares; or
(ii) the substantial completion of: (i) the liquidation,
dissolution or winding-up of the Corporation; or (ii) the
sale, lease or other disposition of all or substantially
all of the assets of the Corporation; or
(iii) a situation in which individuals who were members of the
Board immediately prior to:
(A) a meeting of the shareholders of the Corporation
involving a contest for, or an item of business
relating to, the election of directors; or
(B) an amalgamation, arrangement, merger or other
consolidation or combination of the Corporation with
another Person,
-5-
shall not constitute a majority of the Board following such
election or transaction; or
(iv) the completion of any transaction or the first of a series
of transactions which would have the same or similar effect
as any transaction or series of transactions referred to in
paragraphs (i), (ii) or (iii) above; or
(v) a determination by the Board that, for the purposes of this
Restated Agreement, a Change of Control has occurred or is
imminent.
(m) "CHANGE OF CONTROL OBLIGATIONS" means the Company's obligations to
make the lump sum payments described in Section 8.1 of this
Restated Agreement to the Executive.
(n) A "CHANGE OF CONTROL OBLIGATIONS - DESIGNATED EVENT" shall be
deemed to have occurred if:
(i) the Corporation fails to arrange for the extension or
replacement of a Letter of Credit in accordance with the
terms of this Restated Agreement; or
(ii) the Executive's employment is terminated in accordance with
Section 5.1, 6.1 or 7.1 of this Restated Agreement.
(o) "COMMON SHARES" means the common shares of the Corporation.
(p) "CONVERTIBLE SECURITIES" means:
(i) any right (contractual or otherwise and regardless of
whether such right constitutes a security) to acquire
Common Shares from the Corporation; or
(ii) any security issued by the Corporation from time to time
(other than the rights issued pursuant to a shareholders'
rights protection plan, if any) carrying any exercise,
conversion or exchange right,
which is then exercisable or exercisable within a period of sixty
(60) days from that time pursuant to which the holder thereof may
acquire Common Shares or other securities which are convertible
into or exercisable or exchangeable for Common Shares (in each
case, whether such right is then exercisable or exercisable within
a period of sixty (60) days from that time and whether or not on
condition or the happening of any contingency).
(q) "DATE OF TERMINATION" means the date upon which the Executive's
employment is terminated pursuant to Section 4.1, 5.1, 6.1 or 7.1
of this Restated Agreement. For greater clarity, the Date of
Termination means the date upon which the Corporation provides the
Executive with written, verbal or other notice that the
Executive's employment has been or will be terminated pursuant to
Section 4.1
-6-
or 6.1 of this Restated Agreement or the date upon which the
Executive provides the Corporation with written notice terminating
the Executive's employment pursuant to Section 4.1 or 5.1 or for
Good Reason pursuant to Section 7.1.
(r) "DISABILITY" means, where due to a physical or mental condition,
the Executive is rendered totally and permanently unable to
perform the Executive's duties for a consecutive period of two (2)
years or more during which the Executive has been in receipt of
long term disability insurance benefits from the insurance carrier
normally utilized by the Corporation.
(s) "DISPUTE" has the meaning referred to in Section 12.1 of this
Restated Agreement.
(t) "EFFECTIVE DATE" means the date upon which a Change of Control
occurs.
(u) "EMPLOYMENT BENEFITS" means the employment benefits to which the
Executive is entitled by virtue of any written, oral or implied
agreement with the Corporation. For the purposes of this Restated
Agreement, "Employment Benefits" shall include, but is not limited
to, the following:
(i) the Executive's entitlement to any dental or general
medical care;
(ii) the Executive's entitlement to receive long term disability
benefits from the insurance carrier normally utilized by
the Corporation;
(iii) the Executive's entitlement to pension benefits under the
terms of any pension plan with the Corporation;
(iv) the Executive's entitlement to a monthly car allowance from
the Corporation;
(v) the Executive's entitlement to contributions by the
Corporation to the Corporation's savings plan;
(vi) the Executive's entitlement to receive from the Corporation
financial counseling services, at a cost of $3,500.00 per
year (or as the same may be increased from time to time by
the Corporation); and
(vii) the Executive's entitlement to receive from the Corporation
security monitoring services at the Executive's personal
residence.
(v) "EXECUTIVE BENEFIT PLAN" has the meaning referred to in Section
8.1(b) of this Restated Agreement.
(w) "EXECUTIVE BENEFIT PLAN OBLIGATIONS" means the Corporation's
outstanding obligations under the Executive Benefit Plan to the
Executive.
-7-
(x) An "EXECUTIVE BENEFIT PLAN OBLIGATIONS - DESIGNATED EVENT" shall
be deemed to have occurred if:
(i) a Change of Control occurs;
(ii) the Corporation makes an assignment for the benefit of
creditors or files a petition in bankruptcy or becomes
insolvent or bankrupt;
(iii) a receiver, trustee or liquidator of or for the Corporation
is appointed and is not discharged within a period of sixty
days;
(iv) the net worth of the Corporation, described as shareholder
equity in the consolidated financial statements of the
Corporation as disclosed in the annual and quarterly
consolidated financial statements of the Corporation, is
less than $400 million;
(v) the Corporation fails to arrange for the extension or
replacement of a Letter of Credit in accordance with the
terms of this Restated Agreement;
(vi) the Executive has provided written notification to the
Trustee and to the Corporation of the failure by the
Corporation to pay any amount owed to or in respect of the
Executive under the Executive Benefit Plan within thirty
days of the due date specified in the Executive Benefit
Plan (together with a statement of the amount due and
owing) either to the person entitled thereto pursuant to
the Executive Benefit Plan or to the Trust in accordance
with the provisions of Section 11.6(h); or
(vii) at any time the Board adopts a resolution to the effect
that, for purposes of this Restated Agreement, an Executive
Benefit Plan Obligations - Designated Event has occurred or
is imminent.
(y) "GOOD REASON" means any of the following, unless the Executive
shall have given the Executive's express written consent thereto:
(i) INCONSISTENT DUTIES. The assignment to the Executive of any
duties inconsistent with the Executive's status as an
executive officer of the Corporation or a material
alteration in the nature or status of the Executive's
responsibilities or duties or reporting relationship from
those in effect immediately prior to a Change of Control;
(ii) REDUCED SALARY. A reduction by the Corporation in the
Executive's Annual Base Salary in effect on the Effective
Date or as the same may be increased thereafter from time
to time or the failure by the Corporation to grant the
Executive salary increases at a rate commensurate with the
increases accorded to other executives of the Corporation;
-8-
(iii) RELOCATION. The Corporation requiring the Executive to be
based anywhere other than where the Executive is based at
the time a Change of Control occurs, except for required
travel on the Corporation's business to an extent
substantially consistent with the Executive's business
travel obligations in the ordinary course of business
immediately prior to a Change of Control;
(iv) INCENTIVE COMPENSATION PLANS. The failure by the
Corporation to continue in effect any incentive
compensation plan in which the Executive participates,
including, but not limited to, the Incentive Compensation
Plan or the Stock Option Plan or any other similar plans
adopted prior to a Change of Control, unless the Executive
is eligible to participate in, and is entitled to the
opportunity to receive a comparable level of benefits
under, an ongoing, substitute or alternative plan (it being
understood that the manner or method of payment and the
form of consideration need not be the same as existed in
the original plans); or the failure by the Corporation to
continue the Executive's participation therein on at least
as favourable a basis, both in terms of the amount of
benefits available to the Executive and the level of the
Executive's participation relative to other participants,
as existed at the time a Change of Control occurs;
(v) EMPLOYMENT BENEFITS AND PERQUISITES. The failure by the
Corporation to continue to provide the Executive with
Employment Benefits at least as favourable as those enjoyed
by the Executive immediately prior to a Change of Control,
including any pension plan, benefit plan or any retirement
arrangement established for the Executive, or any of the
Corporation's life insurance, medical, health and accident,
disability or savings plans in which the Executive was
participating at the time a Change of Control occurs; the
taking of any action by the Corporation that would directly
or indirectly materially reduce any such benefits or
deprive the Executive of any material perquisite enjoyed by
the Executive at the time a Change of Control occurs,
including, without limitation and to the extent applicable,
the use of a car, aircraft, secretarial services, office
space, telephones, computer facilities, expense
reimbursement, financial counselling, and professional fees
and club dues reimbursement; or the failure by the
Corporation to provide the Executive with the number of
paid vacation days to which the Executive is entitled in
accordance with the Corporation's normal vacation practice
in effect at the time a Change of Control occurs;
(vi) NO ASSUMPTION BY SUCCESSOR. The failure of the Corporation
to obtain a satisfactory agreement from a successor to
assume and agree to perform this Restated Agreement.
Alternatively, if the business or undertaking in connection
with which the Executive's services are principally
performed is sold at any time after a Change of Control
occurs, and the Executive's
-9-
employment is transferred as a result, the failure or
refusal of the purchaser of such business or undertaking to
provide the Executive with the same or a comparable
position, duties, compensation and benefits, as described
in paragraphs (iv) and (v) above, as provided to the
Executive by the Corporation immediately prior to a Change
of Control;
(vii) DISPOSITION OF "ALL OR SUBSTANTIALLY ALL". The disposition
by the Corporation of all or substantially all of the
assets of the Corporation, as contemplated herein,
notwithstanding that the Executive's services were or were
not principally performed for such business.
(z) "HEARING" has the meaning referred to in Section 12.7 of this
Restated Agreement.
(aa) "HEARING DATE" has the meaning referred to in Section 12.7 of this
Restated Agreement.
(bb) "INCENTIVE COMPENSATION PLAN" means any bonus or incentive
compensation plan of the Corporation in which the Executive is
entitled to receive benefits in the month immediately preceding a
Change of Control.
(cc) "JUST CAUSE" means:
(i) the failure by the Executive to substantially perform the
Executive's duties according to the terms of the
Executive's employment in existence immediately prior to a
Change of Control after the Corporation has given the
Executive reasonable notice of such failure and a
reasonable opportunity to correct it; or
(ii) where the Executive engages in any criminal act or
dishonesty resulting or intended to result, directly or
indirectly, in the personal gain of the Executive at the
Corporation's expense.
(dd) "LETTER OF CREDIT" has the meaning referred to in Section 11.2 of
this Restated Agreement.
(ee) "MONTHLY BASE SALARY" means the monthly salary payable to the
Executive by the Corporation in effect at the end of the month
immediately preceding the Effective Date.
(ff) "NOTICE OF DISPUTE" has the meaning referred to in Section 12.1 of
this Restated Agreement.
(gg) "OBLIGATIONS" means, collectively, the Change of Control
Obligations and the Executive Benefit Plan Obligations.
-10-
(hh) "PARTIES" means the Corporation, and its successors and permitted
assigns, and the Executive and the Executive's heirs, executors
and administrators and "PARTY" means either one of them.
(ii) "PERSON" includes an individual, partnership, association, body
corporate, trustee, executor, administrator, legal representative
and any national, provincial, state or municipal government or any
agency thereof.
(jj) "REFUNDABLE TAX ACCOUNT" means the refundable tax account
maintained in respect of the Trust by the Canada Revenue Agency.
(kk) "REGISTERED PENSION PLAN" has the meaning referred to in Section
8.1(b) of this Restated Agreement.
(ll) "RESTATED AGREEMENT" means this amended and restated agreement
respecting change of control and executive benefit plan
entitlements as it may be amended, restated or supplemented from
time to time, and the expressions "hereof", "herein", "hereto",
"hereunder", "hereby", and similar expressions refer to this
Restated Agreement and, unless otherwise indicated, refer to
Articles or Sections in this Restated Agreement only.
(mm) "SECURITIZATION PROCEDURE" has the meaning referred to in the
recitals of this Restated Agreement.
(nn) "SEVERANCE PERIOD" means
(i) for the purposes of Section 6.1 and 7.1 herein (as referred
to in Article 8) the thirty-six (36) month period
immediately following the Date of Termination; and
(ii) for the purposes of Section 5.1 herein (as referred to in
Article 8) the thirty (30) month period immediately
following the Date of Termination.
(oo) "STOCK OPTION PLAN" means any stock option plan or plans of the
Corporation pursuant to which the Executive is granted options by
the Corporation to acquire Common Shares.
(pp) "SUBSIDIARY" has the meaning ascribed to it in the CBCA.
(qq) "TAX ACT" means the Income Tax Act (Canada) and the Regulations
thereunder, both as amended from time to time.
(rr) "TERM" has the meaning referred to in Section 3.1 of this Restated
Agreement.
-11-
(ss) "TRUST" has the meaning referred to in Section 11.1 of this
Restated Agreement.
(tt) "TRUST AGREEMENT" has the meaning referred to in Section 11.1 of
this Restated Agreement.
(uu) "TRUSTEE" means CIBC Mellon Trust Company or such other trust
company duly incorporated under the laws of Canada or any province
thereof whom the Company may designate as the trustee in
connection with the security and funding of the Obligations.
(vv) "VALUATION DATE" has the meaning referred to in Section 11.3 of
this Restated Agreement.
ARTICLE 2
SCOPE OF RESTATED AGREEMENT
---------------------------
2.1 The Parties intend that this Restated Agreement sets out (a) their
respective rights and obligations upon the occurrence of a Change of
Control and in connection with the securitization and funding of the
Change of Control Obligations; and (b) their respective rights and
obligations regarding the securitization and funding of the Executive
Benefit Plan Obligations. This Restated Agreement does not provide for
any other terms of the Executive's employment with the Corporation,
except as expressly provided for herein.
2.2 The Parties hereby confirm that except as otherwise expressly stated in
this Restated Agreement, insofar as the securitization and funding of the
Executive Benefit Plan Obligations is concerned, the terms of this
Restated Agreement shall govern and the terms of the Securitization
Procedure shall not be applicable.
2.3 This Restated Agreement shall automatically terminate upon the death of
the Executive or where due to the Disability of the Executive, the
Executive is materially incapacitated from performing the Executive's
duties. In the event of the death or Disability of the Executive, the
Executive (or the Executive's estate) shall be entitled to receive from
the Corporation all unpaid Annual Base Salary, Employment Benefits,
unpaid business expenses and vacation entitlement accrued to the date of
the death or Disability of the Executive. The Executive (or the
Executive's estate) shall also be entitled to receive any and all death
or Disability benefits in a manner consistent with, and at least equal in
amount to, those provided by the Corporation to senior executives (or
their estate) under such plans, programs and policies in effect at the
date of Disability or death of the Executive, and the Corporation shall
have no further obligations to the Executive or the Executive's estate
under this Restated Agreement. Any entitlements of the Executive (or the
Executive's estate) under the Executive Benefit Plan which remain
following the termination of this Restated Agreement pursuant to this
Section 2.3 shall then commence to be covered under the Securitization
Procedure.
2.4 If the Executive's employment is terminated by either Party, for any
reason, prior to a Change of Control in any manner, other than expressly
provided for in this Restated Agreement, this Restated Agreement shall
automatically terminate and the Corporation shall have no further
obligations to the Executive hereunder. Any remaining entitlements of the
-12-
Executive under the Executive Benefit Plan which remain following the
termination of this Restated Agreement pursuant to this Section 2.4 shall
then commence to be covered under the Securitization Procedure.
ARTICLE 3
TERM OF RESTATED AGREEMENT
--------------------------
3.1 Subject to termination of this Restated Agreement prior to a Change of
Control, this Restated Agreement shall remain in effect for a period
concluding thirteen (13) months following the Effective Date (the
"Term"), at which time this Restated Agreement shall terminate; provided
however that the payment of compensation and benefits to the Executive
under this Restated Agreement shall continue beyond the end of the Term
in accordance with the applicable provisions of this Restated Agreement.
Any remaining entitlements of the Executive under the Executive Benefit
Plan which remain following the termination of this Restated Agreement
pursuant to this Section 3.1 shall then commence to be covered under the
Securitization Procedure.
ARTICLE 4
TERMINATION FOR JUST CAUSE OR FOR OTHER THAN GOOD REASON
--------------------------------------------------------
4.1 If the Executive's employment is terminated for Just Cause, or is
terminated by the Executive, other than pursuant to Section 5.1 of this
Restated Agreement or for other than Good Reason, following a Change of
Control, the Corporation shall pay to the Executive, if not already paid,
the fraction of the unpaid Annual Base Salary accrued during the then
current fiscal year of the Corporation, all accrued Employment Benefits,
all unpaid reasonable business expenses and all unpaid vacation pay
accrued up to and including the Date of Termination, and thereafter, the
Corporation shall have no further obligations to the Executive under this
Restated Agreement.
4.2 Nothing in this Restated Agreement shall serve to derogate from the
vested rights of the Executive to pension benefits, Stock Option Plans or
any other Employment Benefits to which the Executive is entitled up to
the Date of Termination.
ARTICLE 5
VOLUNTARY TERMINATION
---------------------
5.1 In the event of a Change of Control, the Executive shall have the
unfettered right, within thirty (30) days after the twelve (12) month
period following the Effective Date, to elect to provide the Corporation
with written notice terminating his employment. Upon being provided such
written notice, the Corporation shall pay to the Executive the
remuneration referred to in Article 8 of this Restated Agreement.
-13-
ARTICLE 6
TERMINATION BY CORPORATION
--------------------------
6.1 If the Executive's employment is terminated by the Corporation within the
thirteen (13) month period following the Effective Date, for reason other
than Just Cause, death or Disability, the Corporation shall pay to the
Executive the remuneration referred to in Article 8 of this Restated
Agreement.
ARTICLE 7
TERMINATION FOR GOOD REASON
---------------------------
7.1 In the event of a Change of Control, the Executive may, within the twelve
(12) month period following the Effective Date and upon providing the
Corporation with ten (10) days written notice, terminate the Executive's
employment with the Corporation for Good Reason. Upon being provided with
such notice, the Corporation shall pay to the Executive the remuneration
referred to in Article 8 of this Restated Agreement.
ARTICLE 8
COMPENSATION UPON TERMINATION
-----------------------------
8.1 If the Executive's employment is terminated in accordance with Section
5.1, 6.1 or 7.1 of this Restated Agreement:
(a) the Corporation shall forthwith, but in any event within ten (10)
days from receipt by the Corporation of a Release executed by the
Executive substantially in the form of Schedule "A", pay to the
Executive:
(i) if not previously paid, that portion of the Executive's
accrued but unpaid Monthly Base Salary, any accrued but
unpaid bonus to which the Executive is entitled for the
preceding calendar year under any Incentive Compensation
Plan, all unpaid reasonable business expenses and all
accrued but unused vacation pay earned or payable to the
Executive by the Corporation for the period from the
beginning of the Corporation's then current fiscal year, up
to and including the Date of Termination;
(ii) a lump sum cash payment equal to the Executive's Monthly
Base Salary and one-twelfth (1/12) of the Executive's
Annual Target Bonus for each month of the Severance Period;
(iii) a lump sum payment equal to thirteen percent (13%) of the
Executive's Annual Base Salary for the Severance Period
representing the value of the group health and welfare
benefits for the Severance Period;
(iv) a lump sum payment representing the value of the
Executive's monthly car allowance for the Severance Period;
-14-
(v) a lump sum payment representing the value of the
Corporation's contributions to the Corporation's savings
plan (at a rate of six percent (6%) of the Executive's
Annual Base Salary) for the Severance Period;
(vi) a lump sum payment representing the value of the
Executive's entitlement to receive from the Corporation
financial counseling services for the Severance Period; and
(vii) a lump sum payment representing the value of the
Executive's entitlement to receive from the Corporation
security monitoring services at the Executive's personal
residence for the Severance Period;
(b) with respect to the Executive's entitlement to pension benefits
under the Pension Plan for Employees of Nexen Inc. (Defined
Benefit Option) (the "Registered Pension Plan"), if any, and the
Executive's related entitlement under the Nexen Inc. Restated
Executive Benefit Plan (the "Executive Benefit Plan"), if any:
(i) the Corporation shall recognize the Severance Period for
purposes of determining the Executive's entitlement;
(ii) for calculation purposes, the Executive's entitlement is
the benefit which would have been determined assuming that
the Executive had been employed throughout the Severance
Period, including recognition of:
(A) additional service that would have been credited for
the Severance Period;
(B) monthly salary equal to the Executive's Monthly Base
Salary throughout the Severance Period;
(C) pensionable bonus for the year of the Date of
Termination, and for each subsequent year or portion
thereof during the Severance Period, determined at
the Annual Target Bonus level. Average bonus will be
determined over the three years to the end of the
Severance Period, including any partial calendar
years; and
(D) if the Executive would have been eligible for
retirement at the end of the Severance Period, the
Executive shall be deemed to retire, and the pension
to commence, upon completion of the Severance
Period. In such case, the Executive's attained age
at the end of the Severance Period will be
recognized for purposes of calculating the early
retirement reduction factor, if applicable; and
(iii) the pension entitlements described in this Section 8.1(b)
shall, to the extent legally permissible, be provided
through the Registered Pension Plan. To the extent that it
is not legally permissible to provide such pension
entitlements
-15-
through the Registered Pension Plan, the Corporation shall
pay to the Executive a lump sum payment representing the
settlement value of the additional Executive Benefit Plan
benefit determined in accordance with the assumptions set
forth in Schedule "B-1";
(iv) any entitlements of the Executive under the Executive
Benefit Plan which have previously been funded in
accordance with Article 11 but not previously settled in
accordance with Article 11 shall be settled by the
Corporation in accordance with the assumptions set forth in
Schedule "B-1";
(c) with respect to the Executive's entitlement to pension benefits
under the Pension Plan for Employees of Nexen Inc. (Defined
Contribution Option) (the "Defined Contribution Pension Plan"), if
any, and the Executive's related entitlement under the Executive
Benefit Plan, if any:
(i) the Corporation shall make a contribution to the Defined
Contribution Pension Plan in an amount which is equal to
the additional contributions which would have been made by
both the Executive and the Corporation to the Defined
Contribution Pension Plan on the Executive's behalf during
the Severance Period had the Executive remained in the
employ of the Corporation during such period. Such
contribution shall be calculated at the rate in effect in
respect of the Executive immediately prior to the Date of
Termination. To the extent that it is not legally
permissible to make such contribution to the Defined
Contribution Pension Plan, the Corporation shall make a
notional allocation to the defined contribution provision
of the Executive Benefit Plan equal to such contribution;
(ii) the Corporation shall recognize the Severance Period for
purposes of determining the Executive's entitlement under
the Executive Benefit Plan;
(iii) the Corporation shall make a notional allocation to the
defined contribution provision of the Executive Benefit
Plan in an amount which is equal to the additional notional
allocations which would have been made by the Corporation
to the defined contribution provision of the Executive
Benefit Plan on the Executive's behalf during the Severance
Period had the Executive remained in the employ of the
Corporation during such period. Such contribution shall be
calculated at the rate in effect in respect of the
Executive immediately prior to the Date of Termination. The
Corporation shall make a lump sum payment to the Executive
in an amount equal to the balance, after reflection of the
aforementioned notional allocation, in the Executive's DC
Supplemental Company Account as defined in the Executive
Benefit Plan.
-16-
(d) the Corporation shall provide the Executive with executive
outplacement counselling to be provided by a firm to be selected
by the Executive, at a cost to the Corporation not to exceed
$25,000.00;
(e) all of the Executive's outstanding unexercisable stock options
under any Stock Option Plan shall become exercisable; and
(f) where the Executive has been relocated, at the request of the
Corporation, within the two (2) year period immediately prior to
the Effective Date, if so requested by the Executive, the
Corporation shall relocate the Executive back to the Executive's
prior location.
8.2 The estimated value as of April 1, 2008 of Sections 8.l(a)(ii) to 8.1(d)
are set out in Schedule "C". Schedule "C" provides estimated values only
and actual values shall be calculated in accordance with this Restated
Agreement at the time of entitlement or payment under this Restated
Agreement.
8.3 If the Executive's employment is terminated in the circumstances
described in Section 5.1, 6.1 or 7.1 of this Restated Agreement, the
remuneration and benefits payable under this Article 8 shall not be
reduced if the Executive obtains alternative employment.
8.4 Unless expressly provided otherwise in this Restated Agreement, all
payments to be made to the Executive under this Article 8 shall be
subject to required statutory deductions at source by the Corporation.
ARTICLE 9
CONFIDENTIAL INFORMATION
------------------------
9.1 If the Executive's employment is terminated in any manner whatsoever due
to or following a Change of Control, the Executive agrees to keep
confidential all information of a confidential or proprietary nature
concerning the Corporation, its Affiliates, Associates and Subsidiaries
and their respective operations, opportunities, areas of present, past or
future interests, assets, finances, technology, intellectual property,
business and affairs, and further agrees not to use such information,
data or technology for personal advantage, provided that nothing herein
shall prevent the disclosure of information which is publicly available
or which is required to be disclosed by the Executive under appropriate
statute, rules of law or legal process.
ARTICLE 10
RIGHTS AND OBLIGATIONS OF EXECUTIVE UPON TERMINATION
----------------------------------------------------
10.1 Subject to Section 9.1 of this Restated Agreement, the Executive shall
not be prohibited in any manner whatsoever from obtaining alternative
employment with or otherwise forming or participating in a business
competitive to the business of the Corporation after the termination of
the Executive's employment with the Corporation.
-17-
10.2 Upon the termination of the Executive's employment for any reason, the
Executive shall tender the Executive's resignation from any position the
Executive may hold as an officer or director of the Corporation or any of
its Affiliates, Associates or Subsidiaries.
10.3 If the Executive's employment is terminated in the circumstances
described in Section 5.1, 6.1 or 7.1 of this Restated Agreement, the
Corporation shall continue to purchase and maintain, to the extent
available in the marketplace at reasonable cost to the Corporation, on
behalf of the Executive, director and officer liability insurance for the
applicable limitation period following the date upon which the Executive
ceases to serve as a director or officer of the Corporation, and the
Executive's existing agreement to receive indemnity from the Corporation
for acts taken by the Executive in the Executive's capacity as an officer
of the Corporation shall remain in effect.
10.4 Upon termination of the Executive's employment pursuant to Section 5.1,
6.1 or 7.1 of this Restated Agreement, the Corporation shall reimburse
the Executive for ongoing legal fees and disbursements which the
Executive may reasonably incur in connection with this Restated Agreement
(but this Restated Agreement only), including any litigation concerning
the validity or enforceability of, or liability under, any provision of
this Restated Agreement or any action by the Executive. The Corporation
shall pay such fees and reimbursements to the Executive promptly as such
fees and disbursements become due.
ARTICLE 11
SECURITIZATION AND FUNDING PROCEDURE
------------------------------------
11.1 The Corporation has established and maintains a trust for the benefit of
the Executive and persons claiming through him (the "Trust") pursuant to
the terms and conditions of a trust agreement (the "Trust Agreement")
between the Corporation and the Trustee. The Trust shall be funded in
accordance with the provisions of this Restated Agreement and the Trust
Agreement.
11.2 To provide security against a failure by the Corporation to either fund
or settle the Obligations in accordance with the terms of this Article
11, the Trust Agreement provides for the funding of the Trust with the
proceeds of an irrevocable letter of credit which satisfies the
requirements of this Restated Agreement (a "Letter of Credit") in the
event that the Corporation does not provide funding or effect settlement
when required to do so hereunder and in accordance with the terms hereof.
The Corporation confirms that the Letter of Credit currently held by the
Trustee has been issued by a major Canadian chartered bank (the "Bank")
in an amount calculated by the Corporation's consulting actuary (who at
all times shall be a Fellow of the Canadian Institute of Actuaries) (the
"Actuary") in accordance with the provisions of Section 11.5 of this
Restated Agreement.
11.3 On each February 1st (the "Anniversary Date"), the Corporation shall
request a report from the Actuary as to the amount calculated, as at the
next succeeding April 1st (the "Valuation Date"), in accordance with the
provisions of Section 11.5 of this Restated Agreement. The Corporation
shall provide the Actuary with the data it requires to prepare such
report. Upon completion of each such report, the Corporation shall
arrange for the Actuary to provide a summary of same to the Trustee.
-18-
Prior to the funding and/or settlement of all of the Obligations in
accordance with the terms of this Restated Agreement, the Corporation
shall, within forty-five days after the applicable Anniversary Date and
in accordance with the terms of the report received from the Actuary:
(a) either:
(i) arrange for a Letter of Credit to be provided by the Bank
to the Trustee to replace the Letter of Credit then held by
the Trustee. The replacement Letter of Credit shall be:
(A) substantially in the form of the Letter of Credit
then held by the Trustee;
(B) in an amount calculated by the Actuary as at the
applicable Valuation Date in accordance with the
provisions of Section 11.5 of this Restated
Agreement; and
(C) for a term which commences on the date of its
issuance and expires one year following the
applicable Valuation Date; or
(ii) confirm to the Trustee in writing that the Letter of Credit
then held by the Trustee will be extended automatically for
a further one-year term. The confirmation to the Trustee
shall include evidence from the Bank as to any amendment to
the applicable Letter of Credit, any such amendment to be
consistent with the report prepared by the Actuary as at
the applicable Valuation Date; and
(b) contribute to the Trust an amount equal to twice the fee charged
by the Bank in connection with the Letter of Credit extension or
replacement, as applicable. The Corporation shall withhold
one-half of such amount and shall remit the said one-half of such
amount to the Canada Revenue Agency on account of the tax which is
exigible pursuant to the Tax Act in connection with such
contribution to the Trust. The Trustee shall remit the remaining
one-half of such amount to the Bank in consideration for the
Letter of Credit extension or replacement, as applicable.
When a replacement Letter of Credit has been provided in accordance with
the terms of this Section 11.3, an existing Letter of Credit shall be
surrendered and cancelled.
-19-
11.4 If, during the term of a Letter of Credit issued pursuant to this
Restated Agreement, the Corporation, acting reasonably, concludes that
there has been a significant change in the Obligations since the date of
the last report prepared by the Actuary pursuant to Section 11.3 of this
Restated Agreement, the Corporation shall request a report from the
Actuary as to the then current value of the Obligations, calculated in
accordance with the provisions of Section 11.5 of this Restated
Agreement. Upon receipt of the report, the Corporation shall provide a
summary of same to the Trustee and arrange, together with the Trustee,
for any required increase or decrease in the amount of the Letter of
Credit for the balance of the term of such Letter of Credit. In the event
that a replacement Letter of Credit is to be issued in the circumstances
described in this Section 11.4, the Corporation and the Trustee shall
arrange for such replacement Letter of Credit to be provided by the Bank
to the Trustee to replace the Letter of Credit then held by the Trustee.
Upon receipt of a replacement Letter of Credit pursuant to this Section
11.4, the Trustee shall surrender for cancellation the Letter of Credit
then held by it pursuant to this Restated Agreement and the Trust
Agreement.
In the event that all or any portion of the fee referred to in Section
11.3 of this Restated Agreement, is refunded by the Bank as a result of a
decrease in the amount of a Letter of Credit pursuant to this Section
11.4, such amount (together with any resulting refundable Tax) shall be
received by the Trustee for deposit to the Trust. Upon receipt of an
Authorized Instruction (as defined in the Trust Agreement), the Trustee
shall pay and transfer such amounts (less any applicable tax which it
will remit as required by the Tax Act on behalf of the Corporation) to
the Corporation for its sole and exclusive use and benefit.
In the event that an additional fee is required to be paid to the Bank as
a result of an increase in the amount of a Letter of Credit pursuant to
this Section 11.4, the Corporation shall contribute to the Trust an
amount equal to twice the additional fee. The Corporation shall withhold
one-half of such amount and shall remit the said one-half of such amount
to the Canada Revenue Agency on account of the tax which is exigible
pursuant to the Tax Act in connection with such contribution to the
Trust. The Trustee shall remit the remaining one-half of such amount to
the Bank in payment of its additional fee.
11.5 A Letter of Credit issued pursuant to this Restated Agreement shall:
(i) be an irrevocable standby letter of credit;
(ii) obligate the Bank to satisfy demand for payment made by the
Trustee in accordance with the terms of this Restated
Agreement and the Trust Agreement;
(iii) permit partial drawings; and
(iv) provide that the Bank must notify the Trustee on or before
thirty days prior to the expiry of a Letter of Credit of
any notice of non-extension provided by the Bank to the
Corporation.
The amount of a Letter of Credit pursuant to this Restated Agreement
shall be calculated by the Actuary in accordance with the following
subparagraphs of this Section 11.5.
-20-
(a) Assuming the lump sum payments referred to in Section 8.1(a) of
this Restated Agreement are equal to the amount thereof provided
by the Corporation.
(b) Assuming the service of the Executive will terminate, in
accordance with Section 5.1, 6.1, or 7.1 of this Restated
Agreement, on the next succeeding March 31st after the Valuation
Date (the "Calculation Date").
(c) Using the Executive's demographic data, including base salary,
target bonus and current marital status as of the Valuation Date,
provided by the Corporation.
(d) Using the Yearly Maximum Pensionable Earnings (Y.M.P.E.) used to
determine the amount of the Canada Pension Plan Benefit and Tax
Act maximum defined benefit pension dollar limit as at the
Valuation Date.
(e) Assuming all Obligations are included.
(f) Using the actuarial methods, assumptions and calculation
methodology described in Schedule "B-2.
(g) Applying a load of 15% to the amount determined in accordance with
subparagraphs (b) through (f) of this Section 11.5 to provide for
fluctuations in the Interest Discount Rate, Consumer Price Index
and other plan experience during the term of the Letter of Credit,
as described in Schedule "B-2".
(h) Applying a load to one-half of the amount determined in accordance
with subparagraphs (a) through (g) of this Section 11.5 to provide
for the cost associated with the borrowings described in
subparagraph (k) of this Section 11.5, as described in Schedule
"B-2".
(i) Including a settlement expense to the amount determined in
subparagraph (h), with the aggregate settlement expense allowance
for all obligations secured equal to $250,000, or where the
Valuation Date is after December 31, 2008, the aggregate
settlement expense allowance will be increased at the rate equal
to the increase in the Consumer Price Index, as described in
Schedule "B-2", plus 1% for each year after 2008.
(j) Assuming the Obligations will be promptly settled with the
Executive upon occurrence of a Designated Event described in
Section 1.1(n)(ii).
(k) Assuming a loan will be secured to permit settlement of the
Obligations prior to receipt of the Refundable Tax Account from
the Canada Revenue Agency. The assumed interest rate payable on
the loan shall be as described in Schedule "B-2". The cost
associated with the borrowings shall be assumed to be paid from
the Trust.
-21-
(l) The liabilities calculated in accordance with subparagraphs (a)
through (k) above shall be offset by:
(i) the Refundable Tax Account, if any; and
(ii) the assets contained in the Trust, if any.
11.6 (a) If an Executive Benefit Plan Obligations - Designated Event shall
occur, the Corporation shall be required to immediately fund the
Executive Benefit Plan Obligations in accordance with the most
recent report prepared by the Actuary pursuant to Section 11.3 of
this Restated Agreement. Notwithstanding the foregoing, if an
Executive Benefit Plan Obligations - Designated Event described in
Section 1.1(x)(i) and a Change of Control Obligations - Designated
Event described in Section 1.1(n)(ii) shall occur simultaneously,
the Corporation shall be required to settle the Executive Benefit
Plan Obligations forthwith in accordance with the provisions of
Schedule "B-1".
(b) If:
(i) the employment of the Executive is terminated by the
Corporation for any reason other than as a result of the
death, disability or retirement of such Executive; and
(ii) such Executive files with the Corporation a written request
that it fund the Executive Benefit Plan Obligations,
the Corporation shall be required to immediately fund the
Executive Benefit Plan Obligations in accordance with the most
recent report prepared by the Actuary pursuant to Section 11.3 of
this Restated Agreement.
(c) Upon the earlier of:
(i) learning of the occurrence of an Executive Benefit Plan
Obligations - Designated Event described in Section
1.1(x)(v) or (vi) of this Restated Agreement; or
(ii) receipt of a written notice of the occurrence of an
Executive Benefit Plan Obligations - Designated Event
described in any of the other subparagraphs of Section
1.1(x) of this Restated Agreement, which notice has been
signed by two executives of the Corporation, one of whom
must be either the Chief Financial Officer or the General
Counsel of the Corporation and which notice must, in the
case of an Executive Benefit Plan Obligations - Designated
Event described in Section 1.1(x)(i) of this Restated
Agreement, indicate which subparagraph of the definition of
"Change of Control" is applicable,
the Trustee shall promptly give notice to the Corporation in
writing that it intends to draw on that portion of the Letter of
Credit which is referable to the Executive Benefit Plan
Obligations and contribute the proceeds thereof (less any
applicable
-22-
withholding tax which it will remit as required by the Tax Act on
behalf of the Corporation) to the Trust on behalf of the
Corporation in order to fund the Executive Benefit Plan
Obligations, unless it receives satisfactory proof within nine
days of such notice that the Corporation has funded or settled, as
applicable, the Executive Benefit Plan Obligations itself in
accordance with the terms of this Restated Agreement.
Unless the Corporation advises the Trustee in writing that it has
funded or settled, as applicable, the Executive Benefit Plan
Obligations in accordance with the terms of this Restated
Agreement and has provided the Trustee with satisfactory proof
thereof within nine days of the date of the aforementioned notice,
the Trustee shall draw on that portion of the Letter of Credit
which is referable to the Executive Benefit Plan Obligations on
the tenth day following the date of such notice (or the next
following business day if such tenth day is not a business day)
and contribute the proceeds thereof (less any applicable
withholding tax which it will remit as required by the Tax Act on
behalf of the Corporation) to the Trust on behalf of the
Corporation.
Notwithstanding the foregoing, in the event an Executive Benefit
Plan Obligations - Designated Event described in Section 1.1(x)(v)
or (vi) of this Restated Agreement has triggered the operation of
this Section 11.6 and the failure which gave rise to the
occurrence of such Executive Benefit Plan Obligations - Designated
Event has been remedied prior to the expiration of the notice
period provided for in this Section 11.6(c), the Trustee shall not
take the action described in the immediately preceding paragraph
hereof and all of the provisions of this Restated Agreement shall
continue to apply to the same extent and as fully as they would
have in the event that such Executive Benefit Plan Obligations -
Designated Event had not occurred.
(d) Upon receipt of a written notice of the occurrence of the events
described in both subparagraphs (i) and (ii) of Section 11.6(b) of
this Restated Agreement (which notice has been signed by the
Executive and sworn before a notary public), the Trustee shall
promptly give notice to the Corporation in writing that it intends
to draw on that portion of the Letter of Credit which is referable
to the Executive Benefit Plan Obligations and contribute the
proceeds (less any applicable withholding tax which it will remit
as required by the Tax Act on behalf of the Corporation) to the
Trust on behalf of the Corporation in order to fund the Executive
Benefit Plan Obligations unless it receives satisfactory proof
within nine days of the date of such notice that the Corporation
has funded the Executive Benefit Plan Obligations itself in
accordance with the terms of this Restated Agreement.
Unless the Corporation advises the Trustee in writing that it has
funded the Executive Benefit Plan Obligations in accordance with
the terms hereof and has provided the Trustee with satisfactory
proof thereof within nine days of the date of the aforementioned
notice, the Trustee shall draw upon that portion of the Letter of
-23-
Credit which is referable to the Executive Benefit Plan
Obligations on the tenth day following the date of such notice (or
the next following business day if such tenth day is not a
business day) and contribute the proceeds (less any applicable
withholding tax which it will remit as required by the Tax Act on
behalf of the Corporation) to the Trust on behalf of the
Corporation.
(e) For purposes of determining the required amount of funding or the
portion of the Letter of Credit to be drawn on for purposes of
this Section 11.6, the Trustee shall refer to the most recent
report prepared by the Actuary for purposes of this Restated
Agreement and, in particular, to the portion of the report dealing
with the Executive Benefit Plan Obligations. In preparing the
portion of its report respecting Executive Benefit Plan
Obligations, the Actuary shall adhere to the following:
(i) Assuming that the Executive, if then in active employment,
will remain in active employment with the Corporation as an
officer until the Calculation Date and that the Executive's
employment with the Corporation will terminate on the
Calculation Date.
(ii) Using the Executive's demographic data, including base
salary, actual bonus history, target bonus and current
marital status as of the Valuation Date, provided by the
Corporation.
(iii) Using the Canada Pension Plan Benefit and Tax Act maximum
defined benefit pension dollar limit as at the Valuation
Date.
(iv) Assuming the Executive's target bonus percentage remains at
the level specified by the Corporation pursuant to
subparagraph (ii) above.
(v) Assuming only Executive Benefit Plan Obligations are
included.
(vi) Assuming the payments under the Executive Benefit Plan
would be made from the Trust.
(vii) Using the actuarial methods, assumptions and calculation
methodology described in Schedule "B-2.
(viii) Applying loads as described in Schedule "B-2" to the amount
determined in accordance with the preceding subparagraphs
of this Section 11.6(e) to provide for future contingencies
and expenses of the Trust.
(ix) Calculating the estimated amount required to settle the
Executive Benefit Plan Obligations based on the actuarial
methods, assumptions and calculation methodology described
in Schedule "B-2", increased by the loads described in the
following subparagraph.
-24-
(x) Applying loads as described in Schedule "B-2" to the amount
determined in accordance with subparagraph (ix) to provide
for:
(A) fluctuations in the Interest Discount Rate and
Consumer Price Index during the term of the Letter
of Credit; and
(B) the cost associated with the loan to be secured as
allowed under the Trust Agreement to permit
settlement of the Executive Benefit Plan Obligations
prior to receipt of the Refundable Tax Account from
the Canada Revenue Agency. The assumed interest rate
payable on the loan shall be as described in
Schedule "B-2" and shall be applied to one-half of
the amount in subparagraph (ix). The cost associated
with the borrowings shall be assumed to be paid from
the Trust.
(xi) Taking the larger amount for the Executive of:
(A) the amount determined in accordance with
subparagraphs (i) through (viii), and
(B) the amount determined in accordance with
subparagraphs (ix) and (x).
(xii) The amount determined in accordance with subparagraph (xi)
above shall be offset by:
(A) the Refundable Tax Account, if any;
(B) the assets contained in the Trust, if any.
(f) In the event that the Executive Benefit Plan Obligations have been
funded in accordance with the terms hereof as a result of:
(i) the Corporation making an assignment for the benefit of
creditors or filing a petition in bankruptcy or becoming
insolvent or bankrupt;
(ii) a receiver, trustee or liquidator of or for the Corporation
being appointed and not being discharged within a period of
sixty days;
(iii) a voluntary dissolution or wind-up of the Corporation; or
(iv) a sale or disposition of all or substantially all of the
assets of the Corporation,
and the Executive Benefit Plan has been terminated in connection
therewith, the Executive Benefit Plan Obligations shall be
promptly settled by the Trustee with the Executive by way of a
lump sum payment from the Trust. For this purpose, the benefit
entitlements
-25-
of each Executive shall be determined by the Actuary in accordance
with the terms of the Executive Benefit Plan and the amount of the
lump sum payment shall be determined by the Actuary using the
assumptions set forth in Schedule "B-1". Notice of termination of
the Executive Benefit Plan shall be provided to the Trustee by the
Corporation, failing which by two executives of the Corporation,
one of whom must be either the Chief Financial Officer or the
General Counsel of the Corporation.
Any assets of the Trust remaining after full satisfaction of (i)
the Executive Benefit Plan Obligations pursuant to the preceding
paragraph and (ii) any further obligations pursuant to the terms
of the Trust Agreement, shall be returned to the Corporation.
(g) In the event the Executive Benefit Plan shall be terminated at any
time either in whole or in part in relation to the Executive
subsequent to the funding of the Executive Benefit Plan
Obligations in accordance with the terms hereof, then, provided
Section 11.6(f) of this Restated Agreement is not otherwise
applicable, the Executive Benefit Plan Obligations shall be
promptly settled by the Trustee with the Executive by way of a
lump sum payment from the Trust.
For this purpose, the benefit entitlements of the Executive shall
be determined by the Actuary in accordance with the terms of the
Executive Benefit Plan and the amount of the lump sum payment
shall be determined by the Actuary using the assumptions set forth
in Schedule "B-1". Notice of the termination of the Executive
Benefit Plan shall be provided to the Trustee by the Corporation,
failing which by two executives of the Corporation, one of whom
must be either the Chief Financial Officer or the General Counsel
of the Corporation.
Any assets of the Trust remaining after full satisfaction of (i)
the Executive Benefit Plan Obligations and (ii) any further
obligations pursuant to the terms of the Trust Agreement, shall be
returned to the Corporation.
(h) In the event:
(i) of a dispute as to whether a payment to or in respect of
the Executive is properly due and payable pursuant to the
Executive Benefit Plan; and
(ii) such dispute cannot be resolved by the parties thereto
within the time frame specified in Section 1.1(x)(vi) of
this Restated Agreement,
the amount in dispute shall be remitted to the Trustee for deposit
to the Trust. Upon final settlement of the dispute, the amount so
deposited (together with any earnings, profits and increments
thereon and after deduction of any authorized payments allocable
thereto, both as determined in accordance with the terms of the
Trust Agreement), less any applicable withholding tax which will
-26-
be remitted as required by the Tax Act, shall be paid to that
party to the dispute which is found to be entitled thereto. Prior
to such amount being paid out of the Trust in accordance with the
terms hereof, the Corporation shall instruct the Actuary to take
such amount into account when preparing its report for purposes of
this Restated Agreement.
(i) In the event that a Change of Control Obligations - Designated
Event described in Section 1.1(n)(ii) of this Restated Agreement
shall occur subsequent to the funding of the Executive Benefit
Plan Obligations in accordance with the terms of this Restated
Agreement, the Corporation shall be required to settle the
Executive Benefit Plan Obligations forthwith in an amount
determined by the Actuary in accordance with the provisions of
Schedule "B-1".
(j) Subject to Section 11.6(f), 11.6(g) and 11.6(i) of this Restated
Agreement, in the event that the Executive Benefit Plan
Obligations have been funded in accordance with the terms hereof,
all or a portion of such Executive Benefit Plan Obligations may,
at the discretion of the Corporation, be promptly settled with the
Executive.
For this purpose, the benefit entitlements of the Executive shall
be determined by the Actuary in accordance with the terms of the
Executive Benefit Plan. In such circumstances, the Corporation
reserves the right to settle the Executive Benefit Plan
Obligations by way of a lump sum payment to the Executive provided
that the amount of each such payment is determined by the Actuary
in accordance with the assumptions set forth in Schedule "B-1".
11.7 (a) If a Change of Control Obligations - Designated Event described in
Section 1.1(n)(i) of this Restated Agreement shall occur, the
Corporation shall be required to immediately fund the Change of
Control Obligations in accordance with the most recent report
prepared by the Actuary pursuant to Section 11.3 of this Restated
Agreement.
(b) If a Change of Control Obligations - Designated Event described in
Section 1.1(n)(ii) of this Restated Agreement shall occur, the
Corporation shall be required to settle the Change of Control
Obligations forthwith in accordance with the provisions of
Schedule "B-1", upon receipt by the Corporation of a Release
executed by the Executive in the form attached to this Restated
Agreement as Schedule "A".
(c) Upon the earlier of:
(i) learning of the occurrence of a Change of Control
Obligations - Designated Event described in Section
1.1(n)(i) of this Restated Agreement; or
(ii) receipt of a written notice of the occurrence of a Change
of Control Obligations - Designated Event described in
Section 1.1(n)(ii) of this Restated Agreement, which notice
has been signed by the Executive and sworn before a notary
public and has annexed thereto a Release executed by the
Executive in the form attached to this Restated Agreement
as Schedule "A",
-27-
the Trustee shall promptly give notice to the Corporation in
writing that it intends to draw on that portion of the Letter of
Credit which is referable to the Change of Control Obligations and
contribute the proceeds thereof (less any applicable withholding
tax which it will remit as required by the Tax Act on behalf of
the Corporation) to the Trust on behalf of the Corporation in
order to fund the Change of Control Obligations, unless it
receives satisfactory proof within nine days of such notice that
the Corporation has funded or settled, as applicable, the Change
of Control Obligations itself in accordance with the terms of this
Restated Agreement.
Unless the Corporation advises the Trustee in writing that it has
funded or settled, as applicable, the Change of Control
Obligations in accordance with the terms of this Restated
Agreement and has provided the Trustee with satisfactory proof
thereof within nine days of the date of the aforementioned notice,
the Trustee shall draw on that portion of the Letter of Credit
which is referable to the Change of Control Obligations on the
tenth day following the date of such notice (or the next following
business day if such tenth day is not a business day) and
contribute the proceeds (less any applicable withholding tax which
it will remit as required by the Tax Act on behalf of the
Corporation) to the Trust on behalf of the Corporation.
Notwithstanding the foregoing, in the event a Change of Control
Obligations - Designated Event described in Section 1.1(n)(i) of
this Restated Agreement has triggered the operation of this
Section 11.7 and the failure which gave rise to the occurrence of
such Change of Control Obligations - Designated Event has been
remedied prior to the expiration of the notice period provided for
in this Section 11.7(c), the Trustee shall not take the action
described in the immediately preceding paragraph hereof and all of
the provisions of this Restated Agreement shall continue to apply
to the same extent and as fully as they would have in the event
that such Change of Control Obligations - Designated Event had not
occurred.
(d) The required amount of funding or the portion of the Letter of
Credit to be drawn on for purposes of this Section 11.7 shall be
determined by the Actuary and shall be the amount determined in
accordance with Sections 11.5(a) through (l) of this Restated
Agreement offset by the amount determined in accordance with
subparagraphs 11.6(e)(i) through (xii) of this Restated Agreement.
The settlement amount for purposes of this Section 11.7 shall be
determined in accordance with the provisions of Schedule "B-1".
(e) In the event that the Change of Control Obligations have been
funded in accordance with the terms hereof as a result of the
-28-
occurrence of a Change of Control Obligations - Designated Event
described in Section 1.1(n)(ii), the Change of Control Obligations
shall be promptly settled with the Executive in accordance with
the provisions of Schedule "B-1".
11.8 The actuarial methods and assumptions described in Schedule "B-1" and
Schedule "B-2" shall be reviewed from time to time. Any amendments to
Schedule "B-1" and/or Schedule "B-2" as a result of such review shall be
dealt with in accordance with Section 13.6.
11.9 The Trustee shall surrender the Letter of Credit to the Corporation for
cancellation upon the earliest of:
(a) receipt by the Trustee of a written direction signed by the
Corporation and the Executive directing surrender of the Letter of
Credit;
(b) receipt by the Trustee of a written direction signed by the
Corporation confirming that it has funded and/or settled the
Obligations in accordance with the terms hereof, together with
evidence which is satisfactory to the Trustee that such funding
and/or settlement has occurred; and
(c) receipt by the Trustee of a written direction signed by the
Corporation confirming that the Corporation has no remaining
Obligations to the Executive, together with evidence which is
satisfactory to the Trustee that the Corporation has no remaining
Obligations to the Executive and that a copy of such written
direction has been provided to the Executive.
11.10 The Trust shall be terminated by the Trustee upon the earliest of:
(a) receipt by the Trustee of a written direction signed by the
Corporation and the Executive confirming the termination of the
Trust;
(b) the entire depletion of the Trust Fund through payments pursuant
to the terms of the Trust Agreement, in the event that such
depletion occurs subsequent to the funding of the Obligations in
accordance with the terms of this Restated Agreement; and
(c) receipt by the Trustee of a written direction signed by the
Corporation confirming that the Corporation has no remaining
Obligations to the Executive, together with evidence which is
satisfactory to the Trustee that a copy of such written direction
has been provided to the Executive.
Upon the termination of the Trust, any assets of the Trust which remain
after the satisfaction of any remaining Obligations of the Corporation to
the Executive shall be returned to the Corporation.
11.11 The Corporation and the Executive hereby acknowledge that the Corporation
is entering into agreements similar to this Restated Agreement with
certain of its other executives and that the Corporation may, at its sole
-29-
discretion, arrange for one or more Letters of Credit to satisfy its
responsibilities under this Restated Agreement and such other agreements.
In the event that one Letter of Credit is obtained to satisfy the
Corporation's responsibilities under this Restated Agreement and some or
all of such other agreements, references to a "Letter of Credit" in this
Restated Agreement shall be read as references to that portion of such
Letter of Credit which is referable to the responsibilities of the
Corporation to the Executive.
The Corporation and the Executive also acknowledge that the Corporation
may, at its sole discretion, enter into one or more Trust Agreements to
satisfy its responsibilities under this Restated Agreement and such other
agreements. In the event that one Trust Agreement is entered into to
satisfy the Corporation's responsibilities under this Restated Agreement
and some or all of such other agreements, references to "Trust", "Trust
Agreement", "Trustee" and "Refundable Tax Account" in this Restated
Agreement shall be read with such modifications as may be necessary in
the context.
11.12 At the discretion of the Corporation and subject to the provisions of
applicable law, in the event that all or a portion of the Obligations are
funded in accordance with Article 11 hereof and an actuarial surplus
(determined by actuarial valuation in accordance with the terms of the
report prepared as at the immediately preceding Valuation Date in
accordance with Section 11.3 of this Restated Agreement) arises as a
result thereof:
(a) all or a portion of such actuarial surplus may be used in the
determination of or to reduce the funding otherwise required to be
provided by the Corporation hereunder; or
(b) any surplus assets may, to the extent that they exceed 110% of the
amount required to fund that portion of the Obligations which has
been funded (as determined by the report prepared as at the
immediately preceding Valuation Date in accordance with Section
11.3 of this Restated Agreement) be returned to the Corporation.
ARTICLE 12
EXPEDITED ARBITRATION
---------------------
12.1 If, pursuant to Section 7.1 of this Restated Agreement, the Executive
provides written notice of the Executive's intention to terminate the
Executive's employment for Good Reason, and the Corporation believes that
there is no Good Reason, or, alternatively, if, pursuant to Section 4.1
of this Restated Agreement, the Corporation provides written notice of
its intention to terminate the Executive's employment for Just Cause and
the Executive believes there is no Just Cause, the Corporation or the
Executive, as applicable, shall, within ten (10) days of having been
provided such notice, provide written notice ("Notice of Dispute") to the
other Party of the dispute (the "Dispute").
-30-
12.2 The Parties agree that any and all Disputes under Section 12.1 of this
Restated Agreement will be resolved by way of a single Arbitrator.
12.3 (a) Within fifteen (15) days of provision of the Notice of Dispute,
the Parties shall agree upon and appoint a neutral Arbitrator from
the then current roster maintained by the Alberta Mediation and
Arbitration Society to act as Arbitrator of the Dispute; or
(b) If no person acceptable to both Parties has been agreed upon and
appointed within fifteen (15) days, then either Party may make
immediate application to the Court of Queen's Bench of Alberta,
Judicial District of Calgary, to have an Arbitrator appointed.
12.4 The Parties acknowledge and agree that the purpose of this Article 12 is
to avoid delays and facilitate resolution of the Dispute in a just,
speedy and cost-effective manner.
12.5 Consistent with the expedited nature of arbitration, the Arbitrator will
direct and control the scope and timing of the exchange of information
between the Parties and will take such steps as the Arbitrator deems
necessary to achieve a just, speedy and cost-effective resolution of the
Dispute. The Arbitrator has the exclusive right and power to resolve all
issues related to the exchange of information in the arbitration process.
12.6 The Parties agree that the Arbitrator is only authorized to determine
whether the Executive had Good Reason for terminating the Executive's
employment, or alternatively, whether the Corporation had Just Cause to
terminate the Executive's employment.
12.7 A hearing will occur within forty-five (45) days of the appointment of
the Arbitrator (the "Hearing"). The time of the Hearing (the "Hearing
Date") will be scheduled by the Arbitrator after consultation with the
Parties. The Hearing will be governed by the rules set out in the
Arbitration Act S.A. 1991, c.A-43, as modified by the Arbitrator in the
interests of achieving a just, speedy and cost-effective resolution of
the Dispute. The Arbitrator may require written submissions of fact in
the Dispute to be provided seven (7) days before the Hearing Date.
12.8 The Arbitrator will use best efforts to provide a written decision within
seven (7) days of the conclusion of the Hearing.
12.9 The Parties agree that the decision of the Arbitrator will be final and
binding upon the Parties.
-31-
ARTICLE 13
GENERAL
-------
13.1 The headings of the Articles and paragraphs in this Restated Agreement
are inserted for convenience only and shall not affect the meaning or
construction of this Restated Agreement.
13.2 This Restated Agreement shall be construed and interpreted in accordance
with the laws of the Province of Alberta and the federal laws of Canada
as applicable therein.
13.3 If any provision of this Restated Agreement is determined to be void or
unenforceable in whole or in part, it shall be and be deemed to be
severed from this Restated Agreement without affecting or impairing the
validity of any other provision herein.
13.4 Any notice required or permitted to be given under this Restated
Agreement shall be in writing and shall be properly given if delivered by
hand delivery or mail or other form of electronic communication capable
of transmission confirmation to the following address:
a. IN THE CASE OF THE CORPORATION TO:
----------------------------------
Nexen Inc.
000 - 0xx Xxxxxx X.X.
Xxxxxxx, XX X0X 0X0
Attention: General Manager, Compensation and Benefits
B. IN THE CASE OF THE EXECUTIVE TO:
--------------------------------
the last address of the Executive in the records of the
Corporation or to such other address as the Parties may from time
to time specify by notice given in accordance herewith.
13.5 This Restated Agreement shall enure to the benefit of and be binding upon
the Executive and the Executive's heirs, executors and administrators and
upon the Corporation and its successors and assigns.
13.6 This Restated Agreement constitutes the entire agreement relating to the
respective rights and obligations of the Parties upon the occurrence of a
Change of Control. No amendment or waiver of this Restated Agreement
shall be binding unless executed in writing by the Parties.
Notwithstanding the foregoing,
(a) any amendment to Article 11 of this Restated Agreement, Schedule
"B-1" or Schedule "B-2" which is required to ensure that the
balance remaining in the Trust after the required tax has been
withheld and remitted to the Canada Revenue Agency is sufficient
-32-
to satisfy the fee levied by the Bank in connection with the
issuance of a Letter of Credit may be made by the Corporation
without the prior written approval of the Executive; and
(b) the Corporation may amend, modify or waive Article 11 of this
Restated Agreement, Schedule "B-1" and Schedule "B-2" in whole or
in part, at such time and from time to time, and in such manner
and to such extent as it may deem advisable without obtaining the
approval of the Executive, provided that such amendment,
modification or waiver, as the case may be, does not adversely
affect the securitization in accordance with the terms hereof of
those Obligations which have accrued up to the date of such
amendment, modification or waiver, as the case may be.
13.7 The Parties agree that the rights, entitlements and benefits set out in
this Restated Agreement to be paid to the Executive upon a Change of
Control shall be in full satisfaction of all rights of the Executive
under applicable law in effect from time to time as a result thereof.
13.8 Neither Party can waive or shall be deemed to have waived any right it
has under this Restated Agreement except to the extent that such waiver
is in writing.
13.9 Nothing contained in this Restated Agreement shall be construed as
limiting the ability of the Corporation to amend, modify or terminate the
Executive Benefit Plan in whole or in part, at such time and from time to
time, and in such manner and to such extent as it may deem advisable.
The Parties have executed this Restated Agreement effective the date first
written above.
NEXEN INC.
Per: (signed)
--------------------------------
Per: (signed)
--------------------------------
SIGNED, SEALED & DELIVERED
in the presence of
(signed) (signed)
-------------------------- -------------------------------
WITNESS XXXXXX X. XXXXXXX
SCHEDULE "A"
------------
AMENDED AND RESTATED AGREEMENT
RESPECTING CHANGE OF CONTROL AND
EXECUTIVE BENEFIT PLAN ENTITLEMENTS
In order to receive the entitlements referred to in the Article 8 of this
Restated Agreement, the Executive shall execute the attached Release, fully
releasing the Corporation from all further claims in relation to the
Executive's employment or Employment Benefits and the termination thereof upon
payment of the remuneration and benefits referred to in Article 8 of this
Restated Agreement. The attached Release shall not, however, require that the
Executive relinquish or release any rights to indemnity which the Executive
may, as an officer or director of the Corporation or any of its Affiliates,
Associates and Subsidiaries, have as against the Corporation or any of its
Affiliates, Associates and Subsidiaries, for costs, charges and expenses
reasonably incurred by the Executive in respect of any civil, criminal or
administrative action or proceeding to which the Executive is made a party by
reason of being or having been a director or officer of the Corporation or any
of its Affiliates, Associates and Subsidiaries, where:
(a) the Executive has acted honestly and in good faith with a view to
the best interests of the Corporation or any of its Affiliates,
Associates and Subsidiaries; and
(b) in the case of a criminal or administrative action or proceeding
enforced by a monetary penalty, the Executive had reasonable
grounds for believing the Executive's conduct was lawful.
FINAL RELEASE
-------------
KNOW ALL MEN BY THESE PRESENTS that I, XXXXXX X. XXXXXXX, of the City of
Calgary, in the Province of Alberta, in consideration of the amounts provided
in that certain Amended and Restated Agreement Respecting Change of Control and
Executive Benefit Plan Entitlements (the "Restated Agreement") dated as of the
______ day of ____________, 2008 between myself and NEXEN INC. and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, do for myself, my executors and assigns hereby remise, release
and forever discharge the Corporation, and any associated, affiliated,
predecessor or parent corporation of the Corporation and their present and
former directors, officers, agents and employees (the "Releasees"), including
each of their respective successors, heirs, administrators and assigns, from
all manner of actions, causes of action, debts, obligations, covenants, claims
or demands, whatsoever which I may ever have had, now have, or can, shall or
may hereafter have against the Releasees or any of them, by reason of or
arising out of any cause, matter or thing whatsoever done, occurring or
existing up to and including the present date and, in particular, without in
any way restricting the generality of the foregoing, in respect of all claims
of any nature whatsoever, past, present or future, directly or indirectly
related to or arising out of or in connection with my relationship with the
Releasees, as an employee, officer or director, and the termination of my
employment from the Corporation including, but not limited to, any claims
related to any entitlement I may have or may have had to any payment or claim
either at common law or under the Employment Standards Code, Human Rights,
Citizenship and Multiculturalism Act or any other applicable legislation
governing or related to my employment with the Releasees.
AND FOR THE SAID CONSIDERATION, I, XXXXXX X. XXXXXXX, represent and warrant
that I have not assigned to any person, firm or corporation any of the actions,
causes of action, claims, suits, executions or demands which I release by this
Release, or with respect to which I agree not to make any claim or take any
proceeding herein.
IT IS FURTHER ACKNOWLEDGED that the payment to me includes full compensation
and consideration for the loss of my employment benefits, as provided by the
Releasees, and that all of my employment benefits and privileges shall cease on
the date of termination of my employment, except as otherwise expressly
provided in the Restated Agreement. I further acknowledge that I have received
all benefits due to me and have no further claim against the Releasees for such
benefits. I further accept sole responsibility to replace such benefits which I
-2-
wish to continue or to exercise conversion privileges where applicable with
respect to such benefits and, in particular any life insurance and long-term
disability benefits. In the event that I become disabled following termination
of my employment, I covenant not to xxx the Releasees for insurance or other
benefits or loss of same and hereby release the Releasees from any and all
further obligations or liabilities arising therefrom.
Notwithstanding anything contained herein, this Release shall not extend to or
affect, or constitute a release of, my right to xxx, claim against or recover
from the Releasees and shall not constitute an agreement to refrain from
bringing, taking or maintaining any action against the Releasees in respect of:
(a) any corporate indemnity existing by statute, contract or pursuant
to any of the constating documents of the Corporation provided in
my favour in respect of my having acted at any time as a director,
officer or both of the Corporation;
(b) my entitlement to any insurance maintained for the benefit or
protection of the directors and/or officers of the Corporation,
including without limitation, directors' and officers' liability
insurance; or
(c) my entitlement to any amounts or compensation due to me under the
terms of my employment pursuant to the Restated Agreement.
IT IS HEREBY AGREED that the terms of the Restated Agreement and of this Release
will be kept confidential. No party hereto shall communicate any such terms to
any third party under any circumstances whatsoever, excepting any necessary
communication with my legal and financial advisors, as required, on the express
condition that they maintain the confidentiality thereof, and any disclosure
which is required by law, although either party shall be at liberty to disclose
to third parties that a mutually acceptable Release was agreed upon. The
invalidity and unenforceability of any provision of this Release shall not
affect the validity or enforceability of any other provision of this Release,
which shall remain in full force and effect.
- 3 -
I HEREBY DECLARE that I have read all of this Release, fully understand the
terms of this Release and voluntarily accept the consideration stated herein as
the sole consideration for this Release for the purpose of making a full and
final settlement with the Releasees. I further acknowledge and confirm that I
have been given an adequate period of time to obtain independent legal counsel
regarding the meaning and the significance of the terms herein and the covenants
mutually exchanged.
IT IS HEREBY AGREED THAT as a term of the termination of my employment from the
Corporation, and in consideration of the amount noted above, I hereby resign as
officer and director of the Corporation and its affiliates.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this _____ day of
______________ in the year _________.
--------------------------------
XXXXXX X. XXXXXXX
--------------------------------
WITNESS (signature)
--------------------------------
WITNESS (print name)
SCHEDULE "B-1"
--------------
AMENDED AND RESTATED AGREEMENT
RESPECTING CHANGE OF CONTROL AND
EXECUTIVE BENEFIT PLAN ENTITLEMENTS
METHODOLOGY AND ASSUMPTIONS FOR DETERMINING SETTLEMENT VALUE
PURPOSE
In accordance with the terms of the Restated Agreement, the purpose of this
Schedule "B-1" is to outline the calculation approach such that, after tax has
been paid on a lump sum settlement value, the remaining balance is intended to
be sufficient to provide after-tax monthly payments equivalent to the after-tax
monthly payments the Executive would have received under the terms of the
Executive Benefit Plan as provided for under this Restated Agreement.
OVERVIEW FOR DEFINED BENEFIT PENSION
The following outlines the actuarial methods, assumptions and calculation
process to be used in determining the lump sum settlement value of the defined
benefit pension entitlements under the Executive Benefit Plan when settlement
occurs in accordance with Section 11 of the Restated Agreement. Section 300 of
the Income Tax Regulations establishes the procedure applicable in using an
after-tax lump sum to purchase a prescribed annuity:
1. A prescribed annuity payment consists of two components: (a) the deemed
capital element of the annuity payment on which no tax is payable, and
(b) the deemed non-capital portion of the annuity payment which is taxed
at the marginal rate.
2. The capital portion of each future annuity payment is considered to be a
return of the original after-tax lump sum amount.
3. The non-capital portion of each annuity payment is assumed to be provided
by the investment return on the original after-tax lump sum amount and
has therefore not yet been taxed.
4. A constant percentage of each future payment is deemed to be a return of
the original lump sum capital.
CALCULATION METHODOLOGY
1. Equivalent after-tax payments:
a. Determine initial gross annual pension entitlement under the Executive
Benefit Plan.
b. Determine after-tax annual pension entitlement under the Executive
Benefit Plan based on Individual Tax Rate as defined in Schedule "B-1".
- 2 -
c. Determine the capital element based on the non-indexed present value of
the pension payments divided by life expectancy.
d. Determine the monthly payment which provides an after-tax pension equal
to the after-tax pension determined in 1.b. above in accordance with the
prescribed annuity methodology.
2. Present value of periodic payments from 1. above:
a. Determine the present value of the pension determined in 1.d. above using
the assumptions described below in this Schedule "B-1". For greater
certainty, the value of the post-retirement indexation is to be reflected
in determining the present value of the accrued pension entitlement in
respect of post-1992 service, and any accrued pension in respect of
service granted during the Severance Period.
3. Tax adjustment:
x. Xxxxx-up the present value determined in 2.a. above to reflect the tax
assumed to be required to be paid on the lump sum.
x. Xxxxx-up the amount determined in 3.a. above to reflect the tax assumed
to be required to be paid on investment earnings in respect of the lump
sum payment during the deferral period prior to assumed pension
commencement, if any.
4. Equivalent present value after tax as the after-tax monthly payments:
a. The amount determined in 3.b. above shall be the lump sum settlement
value of the Executive's pension entitlement.
ASSUMPTIONS
Interest Discount Rate:
-- during deferral period Yield on long-term Government of
Canada bonds as published in the Bank
of Canada Review, described in CANSIM
series V122544 (or a successor
series) for the last trading
Wednesday at the end of the month
immediately preceding the date of
calculation, rounded down to next
lower 0.5.
-- after assumed pension commencement Yield on long-term Government of
Canada bonds as published in the Bank
of Canada Review, described in CANSIM
series V122544 (or a successor
series) for the last trading
Wednesday at the end of the month
immediately preceding the date of
calculation, rounded down to next
lower 0.5,
less
- 3 -
assumed escalation of pensions after
retirement.
Increase in Consumer Price Index: Yield on long-term Government of
Canada bonds as published in the Bank
of Canada Review, described in CANSIM
series V122544 (or a successor
series) for the last trading
Wednesday at the end of the month
immediately preceding the date of
calculation,
less
Yield on long-term Government of
Canada Real Return bonds as published
in the Bank of Canada Review,
described in CANSIM series V122553
(or a successor series) for the last
trading Wednesday at the end of the
month immediately preceding the date
of calculation.
The result of the difference is then
rounded up to the next highest 0.5% .
Escalation of Pensions After Retirement: 75% of CPI, less 1% (minimum increase
25% of CPI). Applies only to benefits
accrued for service after December
31, 1992.
MORTALITY:
-- for life expectancy 1994 Uninsured Pensioner Mortality
Table with mortality improvements
projected to 15 years beyond the date
of termination.
-- for present values
o prior to assumed pension Nil.
commencement
o after assumed pension 1994 Uninsured Pensioner Mortality
commencement Table with mortality improvements
projected 15 years beyond the date of
termination.
Marital Status: Actual status at date of termination.
Age of Spouse: Based on actual date of birth.
- 4 -
Individual Tax Rate: Maximum individual marginal tax rate
for employee's province of employment
at the date of termination.
OVERVIEW FOR DEFINED CONTRIBUTION BENEFIT
The Settlement Value for any defined contribution benefits shall be equal to the
DC Supplemental Company Account the Executive would have received under the
terms of the Executive Benefit Plan as provided for under this Restated
Agreement. The Settlement Value will not be adjusted for tax.
ASSUMPTIONS
Investment return: As the Settlement Value is expected
to be payable at the calculation date
no investment return is assumed to
accrue on the DC Supplemental Company
Account as defined in the Executive
Benefit Plan.
SCHEDULE "B-2"
--------------
AMENDED AND RESTATED AGREEMENT
RESPECTING CHANGE OF CONTROL AND
EXECUTIVE BENEFIT PLAN ENTITLEMENTS
METHODOLOGY AND ASSUMPTIONS FOR DETERMINING THE AMOUNT TO BE SECURED OR FUNDED
IN ACCORDANCE WITH SECTION 11 BASED ON THE METHODOLOGY DESCRIBED IN SCHEDULE
"B-1"
PURPOSE
The purpose of this Schedule "B-2" is to provide the actuarial methodology and
assumptions for determining the amount to be secured or funded in accordance
with Section 11 of the Restated Agreement.
METHODOLOGY
The settlement methodology is described in Schedule B-1.
The funding methodology applicable to the Executive Benefit Plan Obligations is
based on the following:
1. Estimate the accrued pension and/or Supplemental Company Accounts payable
from the Executive Benefit Plan as at the Valuation Date.
2. Assume that the assets of the plan are to be invested in long term
Government of Canada bonds and subject to the 50% refundable tax
applicable to retirement compensation arrangements.
3. DC Supplemental Company Accounts are assumed to be paid as a lump sum as
at the Valuation Date with no adjustment for tax.
4. Determine the present value of the amounts in 1 through 3 above.
5. Estimate the settlement value that could be paid in accordance with the
methodology and assumptions described in Schedule B-1.
6. The funding amount in respect of the Executive Benefit Plan Obligations
shall be the greater of the amount determined in accordance with 1
through 4 above and the amount in 5 above.
ASSUMPTIONS
Interest Discount Rate:
-- during deferral period Yield on long-term Government of
Canada bonds as published in the Bank
of Canada Review, described in CANSIM
series V122544 (or a successor
series) for the last trading
Wednesday at the end of the month
immediately preceding the Anniversary
Date, rounded down to next lower 0.5.
-- after assumed pension commencement Yield on long-term Government of
Canada bonds as published in the Bank
of Canada Review, described in CANSIM
series V122544 (or a successor
series) for the last trading
- 2 -
Wednesday at the end of the month
immediately preceding the Anniversary
Date, rounded down to next lower 0.5,
less assumed escalation of pensions
after retirement.
Increase in Consumer Price Index: Yield on long-term Government of
Canada bonds as published in the Bank
of Canada Review, described in CANSIM
series V122544 (or a successor
series) for the last trading
Wednesday at the end of the month
immediately preceding the Anniversary
Date,
less
Yield on long-term Government of
Canada Real Return bonds as published
in the Bank of Canada Review,
described in CANSIM series V122553
(or a successor series) for the last
trading Wednesday at the end of the
month immediately preceding the
Anniversary Date.
The result of the difference is then
rounded up to the next highest 0.5%.
Escalation of Pensions After Retirement: 75% of CPI, less 1% (minimum increase
25% of CPI). Applies only to benefits
accrued for service after December
31, 1992.
MORTALITY:
-- for life expectancy 1994 Uninsured Pensioner Mortality
Table with mortality improvements
projected to 15 years beyond the
Calculation Date.
-- for present values
o prior to assumed pension Nil.
commencement
- 3 -
o after assumed pension 1994 Uninsured Pensioner Mortality
commencement Table with mortality improvements
projected 15 years beyond the
Calculation Date.
Marital Status: Actual status at the Anniversary.
Age of Spouse: Based on actual date of birth.
Individual Tax Rate: Maximum individual marginal tax rate
for employee's province of employment
at the Anniversary Date
Bonus: Target bonus % applied to the salary
rate at the Valuation Date
Investment return: Yield on long-term Government of
Canada bonds as published in the Bank
of Canada Review, described in CANSIM
series V122544 (or a successor
series) for the last trading
Wednesday at the end of the month
immediately preceding the Anniversary
Date rounded down to next lower 0.5%,
and then divided by 2
Assumed investment return on As published in the Bank of Canada
DC Supplemental Company Account Review, described in CANSIM series
as at the Valuation Date: V122544 (or a successor series) for
the last trading Wednesday at the end
of the month immediately preceding
the Anniversary Date rounded up to
next highest 0.5%, plus 3.0%
Decrements: None assumed prior to Calculation Date
Eligibility for Pensions: 100% vested
Pension Commencement Age:
-- eligible for subsidized early Payable at the completion of the
retirement on the Calculation Date Severance Period. Payable at the
(i.e., age 55 and 10 years of Calculation Date for purposes of
continuous service) determining the amount required under
Section 11.6(e).
-- not eligible for early retirement Deferred to age 60 or the end of the
on the Calculation Date Severance Period if later. Payable at
age 60 for purposes of determining
the amount required under Section
11.6(e).
Fluctuation reserve (1) 15% of the pension obligations
- 4 -
Cost of borrowing to settle the Yield on one month Government of
obligations: Canada Treasury Bills as published in
the Bank of Canada Review, described
in CANSIM series V122529 (or a
successor series) for the last
trading Wednesday at the end of the
month immediately preceding the
Anniversary Date, rounded up to the
next higher 0.25%, plus 1.50%
================================================================================
Notes:
(1) Referred to by Section 11.5(g), Section 11.6(e)(viii) and 11.6(e)(x). The
15% load is intended to provide a reserve for a potential decrease in the
Interest Discount Rate in combination with potential increases in the
Consumer Price Index for an aggregate change of 1.0%.
SCHEDULE "C"
------------
AMENDED AND RESTATED AGREEMENT RESPECTING CHANGE OF CONTROL
AND EXECUTIVE BENEFIT PLAN ENTITLEMENTS
ESTIMATED(1) ENTITLEMENT TO COMPENSATION
PURSUANT TO ARTICLE 8 OF THE RESTATED AGREEMENT
--------------------------------------------------------------------------------
Employee - Xxxxxx X. Xxxxxxx
--------------------------------------------------------------------------------
Base Salary (36 months) (2) $1,830,000
--------------------------------------------------------------------------------
Bonus Target Value $1,098,000
--------------------------------------------------------------------------------
Benefits Uplift $237,900
--------------------------------------------------------------------------------
Car Allowance $57,600
--------------------------------------------------------------------------------
Savings Plan $109,800
--------------------------------------------------------------------------------
Financial Counselling Services $10,500
--------------------------------------------------------------------------------
Security Monitoring Services $2,400
--------------------------------------------------------------------------------
TOTAL VALUE $3,346,200
--------------------------------------------------------------------------------
Additional Lump Sum Settlement Value of Pension(3) $4,650,031
--------------------------------------------------------------------------------
TOTAL ESTIMATED ENTITLEMENT $7,996,231
--------------------------------------------------------------------------------
In addition to the above, Section 8.1(d) of the Restated Agreement provides for
Executive Outplacement counselling to be provided by a firm selected by the
Executive, at a cost to the Corporation not to exceed $25,000.
IN ADDITION to the above pension entitlement under the Agreement, the Executive
has the following pension entitlements under the Defined Benefit Registered
Pension Plan and Executive Benefit Plan. As is the case with the figures shown
above, these values are estimated values (as of April 1, 2008) and are for
illustrative purposes only. Actual values will be calculated as of the date of
the entitlement or payment in accordance with the Defined Benefit Registered
Pension Plan and the Executive Benefit Plan, respectively, and therefore may be
subject to change. Pension entitlements in respect of the Defined Contribution
Registered Pension Plan and the Defined Contribution provision of the Executive
Benefit Plan are not included in the pension amounts presented below.
o Accrued Annual Defined Benefit Pension Entitlement $25,083
(Registered Pension Plan)(4)
o Estimated Lump Sum Transfer Value of Registered $305,710
Pension Plan(5)
o Estimated Lump Sum Value of Executive Benefit Plan(5) $3,882,442
---------------
(1) As stated in Section 8.1 of the Restated Agreement, the above calculations
represent only the current estimated value (as of April 1, 2008) of the
Executive's entitlement to compensation upon a Change of Control.
Accordingly, the above calculations are for illustrative purposes only.
(2) For purposes of Section 5.1 of the Restated Agreement, all calculations of
the Executive's entitlement to compensation upon a Change of Control will
be based on a Severance Period of 30 months.
(3) Calculated in accordance with Section 8.1(b) of the Restated Agreement.
- Adjustment to EBP lump sum value to reflect settlement $2,474,420.
- Additional settlement value of pension accrued during the severance
period upon a change of control $2,175,611.
(4) Deferred benefit payable from age 60.
(5) Based on the Standards of Practice for Determining Pension Commuted Values
approved by the Canadian Institute of Actuaries using rates applicable for
April 2008 terminations.
AMENDED AND RESTATED AGREEMENT
RESPECTING CHANGE OF CONTROL AND
EXECUTIVE BENEFIT PLAN ENTITLEMENTS
This amended and restated agreement respecting change of control and executive
benefit plan entitlements made as of the 18th day of August, 2008.
BETWEEN:
NEXEN INC., a corporation incorporated under the
laws of Canada
(hereinafter referred to as the "Corporation")
- and -
XXXXXXXX XXXXXX
(hereinafter referred to as the "Executive")
RECITALS:
1. The Executive, as Executive Vice President, International Oil and Gas of
the Corporation, is considered by the Board to be an essential officer
and employee of the Corporation, who is both integral to the operation
and development of the Corporation, and has acquired outstanding skills,
unique experience and possesses an extensive background in, and knowledge
of, the Corporation's business, operations and the industry in which it
is engaged.
2. In the event of a Change of Control, there is a possibility that the
employment of the Executive would be terminated without just cause or
adversely modified and the Executive has expressed concern in that regard
to the Corporation.
3. The Board recognizes that it is essential and in the best interests of
the Corporation and its shareholders that the Corporation retain the
continued dedication of the Executive to the Executive's office and the
Executive's employment during the uncertain period prior to, during and
following a Change of Control.
4. The Board further believes that the past service of the Executive and the
Executive's integral role in the development and operation of the
Corporation requires that the Corporation ensure that in the event of a
Change of Control the Executive is treated in a manner that is fair,
reasonable, consistent with industry standards and in the best interests
of the Corporation.
5. The Corporation and the Executive entered into a Change of Control
Agreement on October 22, 1999, which was amended by an Amending Agreement
dated December 25, 2000 (collectively the "Original Agreement") to agree
on the terms and conditions which would govern the termination or
modification of the employment of the Executive following a Change of
Control.
- 2 -
6. The Original Agreement was replaced and superseded by an Amended and
Restated Change of Control Agreement in December 2001, which was amended
by an Amending Agreement dated May 30, 2003 (collectively, the "Current
Agreement") which, among other matters, detailed the Corporation's
security and funding obligations in respect of the Change of Control
Obligations (as hereinafter defined), provided for the securitization and
funding of the Executive Benefit Plan Obligations (as hereinafter
defined) and provided for the cessation of the Executive's coverage under
the Statement of Company Procedure Regarding the Securitization of Nexen
Inc. Restated Executive Benefit Plan, as amended or replaced from time to
time (the "Securitization Procedure").
7. The Corporation and the Executive wish to amend the Current Agreement as
herein provided and, in doing so, wish to restate the Current Agreement
as herein amended (the "Restated Agreement").
NOW THEREFORE, in consideration of the mutual covenants and agreements set forth
in this Restated Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the Parties, the
Parties agree as follows:
ARTICLE 1
DEFINITIONS
-----------
1.1 In this Restated Agreement, the following terms shall mean as follows:
(a) "ACTING JOINTLY OR IN CONCERt" for the purposes of this Restated
Agreement, a Person is acting jointly or in concert with another
Person if such Person has any agreement, arrangement or
understanding (whether formal or informal and whether or not in
writing) with such other Person for the purpose of acquiring,
offering to acquire, or voting any Common Shares of the
Corporation (other than customary agreements with and between
underwriters and banking group or selling group members with
respect to a distribution of securities by way of prospectus or
private placement or pursuant to a pledge of securities in the
ordinary course of business).
(b) "ACTUARY" has the meaning referred to in Section 10.2 of this
Restated Agreement.
(c) "AFFILIATE" and "ASSOCIATE" have the meaning ascribed to such
terms in National Instrument 45-106.
(d) "ANNIVERSARY DATE" has the meaning referred to in Section 10.3 of
this Restated Agreement.
- 3 -
(e) "ANNUAL BASE SALARY" means the annual base salary of the Executive
payable by the Corporation at the end of the month immediately
preceding the Date of Termination.
(f) "ANNUAL TARGET BONUS" means the Executive's annual target bonus as
determined by the Board to be in effect for the calendar year in
which a Change of Control occurs.
(g) "Bank" has the meaning referred to in Section 10.2 of this
Restated Agreement.
(h) "BENEFICIAL OWNER" for the purposes of this Restated Agreement, a
Person shall be deemed to be the "BENEFICIAL OWNER" and to have
"BENEFICIAL OWNERSHIP" of and to "BENEFICIALLY OWN":
(i) any securities as to which such Person or any of such
Person's Affiliates or Associates is the owner at law or in
equity;
(ii) any securities as to which such Person or any of such
Person's Affiliates or Associates has a right to acquire
(i) upon the exercise of any Convertible Securities or (ii)
pursuant to any agreement, arrangement or understanding,
whether such right is exercisable immediately within a
period of sixty (60) days thereafter and whether or not on
condition or the happening of any contingency, (other than
(a) customary agreements with and between underwriters and
banking group and selling group members with respect to the
distribution to the public or pursuant to a private
placement of securities, or (b) pursuant to a pledge of
securities in the ordinary course of business); and
(iii) any securities which are Beneficially Owned within the
meaning of clauses (a) or (b) above by any other Person
with which such Person is Acting Jointly or in Concert,
provided, however, that a Person shall not be deemed the
"Beneficial Owner" or to have "Beneficial Ownership" of or to
"Beneficially Own" any security where such Person is the
registered holder of securities as a result of carrying on the
business of or acting as nominee for a securities depository.
For purposes of this Restated Agreement, the percentage of Common
Shares Beneficially Owned by any Person, shall be and be deemed to
be the product determined by the formula:
100 x A/B
Where:
A = the number of votes for the election of all directors
generally attaching to the Common Shares Beneficially Owned
by such Person; and
- 4 -
B = the number of votes for the election of all directors
generally attaching to all outstanding Common Shares.
For the purposes of the foregoing formula, where a Person
Beneficially Owns unissued Common Shares which may be acquired
pursuant to Convertible Securities, such Common Shares shall be
deemed to be outstanding for the purpose of calculating the
percentage of Common Shares Beneficially Owned by such Person in
both the numerator and the denominator, but no other unissued
Common Shares which may be acquired pursuant to any other
outstanding Convertible Securities shall, for the purposes of that
calculation, be deemed to be outstanding.
(i) "BOARD" means the Board of Directors of the Corporation as
constituted from time to time.
(j) "CBCA" means the Canada Business Corporations Act, as amended from
time to time, and any successor legislation thereto.
(k) "CALCULATION DATE" has the meaning referred to in Section 10.5 of
this Restated Agreement.
(l) "CHANGE OF CONTROL" means the occurrence of any of:
(i) the purchase or acquisition of any Common Shares or
Convertible Securities by a Beneficial Owner which results
in the Beneficial Owner owning, or exercising control or
direction over, Common Shares or Convertible Securities
such that, assuming only the conversion of Convertible
Securities Beneficially Owned or over which control or
direction is exercised by the Beneficial Owner, the
Beneficial Owner would own, or exercise control or
direction over, Common Shares carrying the right to cast
more than thirty-five percent (35%) of the votes attaching
to all Common Shares; or
(ii) the substantial completion of: (i) the liquidation,
dissolution or winding-up of the Corporation; or (ii) the
sale, lease or other disposition of all or substantially
all of the assets of the Corporation; or
(iii) a situation in which individuals who were members of the
Board immediately prior to:
(A) a meeting of the shareholders of the Corporation
involving a contest for, or an item of business
relating to, the election of directors; or
(B) an amalgamation, arrangement, merger or other
consolidation or combination of the Corporation with
another Person,
- 5 -
shall not constitute a majority of the Board following such
election or transaction; or
(iv) the completion of any transaction or the first of a series
of transactions which would have the same or similar effect
as any transaction or series of transactions referred to in
paragraphs (i), (ii) or (iii) above; or
(v) a determination by the Board that, for the purposes of this
Restated Agreement, a Change of Control has occurred or is
imminent.
(m) "CHANGE OF CONTROL OBLIGATIONS" means the Company's obligations to
make the lump sum payments described in Section 7.1 of this
Restated Agreement to the Executive.
(n) A "CHANGE OF CONTROL OBLIGATIONS - DESIGNATED EVENT" shall be
deemed to have occurred if:
(i) the Corporation fails to arrange for the extension or
replacement of a Letter of Credit in accordance with the
terms of this Restated Agreement; or
(ii) the Executive's employment is terminated in accordance with
Section 5.1 or 6.1 of this Restated Agreement.
(o) "COMMON SHARES" means the common shares of the Corporation.
(p) "CONVERTIBLE SECURITIES" means:
(i) any right (contractual or otherwise and regardless of
whether such right constitutes a security) to acquire
Common Shares from the Corporation; or
(ii) any security issued by the Corporation from time to time
(other than the rights issued pursuant to a shareholders'
rights protection plan, if any) carrying any exercise,
conversion or exchange right,
which is then exercisable or exercisable within a period of sixty
(60) days from that time pursuant to which the holder thereof may
acquire Common Shares or other securities which are convertible
into or exercisable or exchangeable for Common Shares (in each
case, whether such right is then exercisable or exercisable within
a period of sixty (60) days from that time and whether or not on
condition or the happening of any contingency).
(q) "DATE OF TERMINATION" means the date upon which the Executive's
employment is terminated pursuant to Section 4.1, 5.1 or 6.1 of
this Restated Agreement. For greater clarity, the Date of
Termination means the date upon which the Corporation provides the
Executive with written, verbal or other notice that the
Executive's employment has been or will be terminated pursuant to
- 6 -
Section 4.1 or 5.1 of this Restated Agreement or the date upon
which the Executive provides the Corporation with written notice
terminating the Executive's employment pursuant to Section 4.1 or
for Good Reason pursuant to Section 6.1.
(r) "DISABILITY" means, where due to a physical or mental condition,
the Executive is rendered totally and permanently unable to
perform the Executive's duties for a consecutive period of two (2)
years or more during which the Executive has been in receipt of
long term disability insurance benefits from the insurance carrier
normally utilized by the Corporation.
(s) "DISPUTE" has the meaning referred to in Section 11.1 of this
Restated Agreement.
(t) "EFFECTIVE DATE" means the date upon which a Change of Control
occurs.
(u) "EMPLOYMENT BENEFITS" means the employment benefits to which the
Executive is entitled by virtue of any written, oral or implied
agreement with the Corporation. For the purposes of this Restated
Agreement, "Employment Benefits" shall include, but is not limited
to, the following:
(i) the Executive's entitlement to any dental or general
medical care;
(ii) the Executive's entitlement to receive long term disability
benefits from the insurance carrier normally utilized by
the Corporation;
(iii) the Executive's entitlement to pension benefits under the
terms of any pension plan with the Corporation;
(iv) the Executive's entitlement to a monthly car allowance from
the Corporation;
(v) the Executive's entitlement to contributions by the
Corporation to the Corporation's savings plan;
(vi) the Executive's entitlement to receive from the Corporation
financial counseling services, at a cost of $3,500.00 per
year (or as the same may be increased from time to time by
the Corporation); and
(vii) the Executive's entitlement to receive from the Corporation
security monitoring services at the Executive's personal
residence.
(v) "EXECUTIVE BENEFIT PLAN" has the meaning referred to in Section
7.1(b) of this Restated Agreement.
(w) "EXECUTIVE BENEFIT PLAN OBLIGATIONS" means the Corporation's
outstanding obligations under the Executive Benefit Plan to the
Executive.
- 7 -
(x) An "EXECUTIVE BENEFIT PLAN OBLIGATIONS - DESIGNATED EVENT" shall
be deemed to have occurred if:
(i) a Change of Control occurs;
(ii) the Corporation makes an assignment for the benefit of
creditors or files a petition in bankruptcy or becomes
insolvent or bankrupt;
(iii) a receiver, trustee or liquidator of or for the Corporation
is appointed and is not discharged within a period of sixty
days;
(iv) the net worth of the Corporation, described as shareholder
equity in the consolidated financial statements of the
Corporation as disclosed in the annual and quarterly
consolidated financial statements of the Corporation, is
less than $400 million;
(v) the Corporation fails to arrange for the extension or
replacement of a Letter of Credit in accordance with the
terms of this Restated Agreement;
(vi) the Executive has provided written notification to the
Trustee and to the Corporation of the failure by the
Corporation to pay any amount owed to or in respect of the
Executive under the Executive Benefit Plan within thirty
days of the due date specified in the Executive Benefit
Plan (together with a statement of the amount due and
owing) either to the person entitled thereto pursuant to
the Executive Benefit Plan or to the Trust in accordance
with the provisions of Section 10.6(h); or
(vii) at any time the Board adopts a resolution to the effect
that, for purposes of this Restated Agreement, an Executive
Benefit Plan Obligations - Designated Event has occurred or
is imminent.
(y) "GOOD REASON" means any of the following, unless the Executive
shall have given the Executive's express written consent thereto:
(i) INCONSISTENT DUTIES. The assignment to the Executive of any
duties inconsistent with the Executive's status as an
executive officer of the Corporation or a material
alteration in the nature or status of the Executive's
responsibilities or duties or reporting relationship from
those in effect immediately prior to a Change of Control;
(ii) REDUCED SALARY. A reduction by the Corporation in the
Executive's Annual Base Salary in effect on the Effective
Date or as the same may be increased thereafter from time
to time or the failure by the Corporation to grant the
Executive salary increases at a rate commensurate with the
increases accorded to other executives of the Corporation;
- 8 -
(iii) RELOCATION. The Corporation requiring the Executive to be
based anywhere other than where the Executive is based at
the time a Change of Control occurs, except for required
travel on the Corporation's business to an extent
substantially consistent with the Executive's business
travel obligations in the ordinary course of business
immediately prior to a Change of Control;
(iv) INCENTIVE COMPENSATION PLANS. The failure by the
Corporation to continue in effect any incentive
compensation plan in which the Executive participates,
including, but not limited to, the Incentive Compensation
Plan or the Stock Option Plan or any other similar plans
adopted prior to a Change of Control, unless the Executive
is eligible to participate in, and is entitled to the
opportunity to receive a comparable level of benefits
under, an ongoing, substitute or alternative plan (it being
understood that the manner or method of payment and the
form of consideration need not be the same as existed in
the original plans); or the failure by the Corporation to
continue the Executive's participation therein on at least
as favourable a basis, both in terms of the amount of
benefits available to the Executive and the level of the
Executive's participation relative to other participants,
as existed at the time a Change of Control occurs;
(v) EMPLOYMENT BENEFITS AND PERQUISITES. The failure by the
Corporation to continue to provide the Executive with
Employment Benefits at least as favourable as those enjoyed
by the Executive immediately prior to a Change of Control,
including any pension plan, benefit plan or any retirement
arrangement established for the Executive, or any of the
Corporation's life insurance, medical, health and accident,
disability or savings plans in which the Executive was
participating at the time a Change of Control occurs; the
taking of any action by the Corporation that would directly
or indirectly materially reduce any such benefits or
deprive the Executive of any material perquisite enjoyed by
the Executive at the time a Change of Control occurs,
including, without limitation and to the extent applicable,
the use of a car, aircraft, secretarial services, office
space, telephones, computer facilities, expense
reimbursement, financial counselling, and professional fees
and club dues reimbursement; or the failure by the
Corporation to provide the Executive with the number of
paid vacation days to which the Executive is entitled in
accordance with the Corporation's normal vacation practice
in effect at the time a Change of Control occurs;
(vi) NO ASSUMPTION BY SUCCESSOR. The failure of the Corporation
to obtain a satisfactory agreement from a successor to
assume and agree to perform this Restated Agreement.
Alternatively, if the business or undertaking in connection
with which the Executive's services are principally
performed is sold at any time after a Change of Control
- 9 -
occurs, and the Executive's employment is transferred as a
result, the failure or refusal of the purchaser of such
business or undertaking to provide the Executive with the
same or a comparable position, duties, compensation and
benefits, as described in paragraphs (iv) and (v) above, as
provided to the Executive by the Corporation immediately
prior to a Change of Control;
(vii) DISPOSITION OF "ALL OR SUBSTANTIALLY ALL". The disposition
by the Corporation of all or substantially all of the
assets of the Corporation, as contemplated herein,
notwithstanding that the Executive's services were or were
not principally performed for such business.
(z) "HEARING" has the meaning referred to in Section 11.7 of this
Restated Agreement.
(aa) "HEARING DATE" has the meaning referred to in Section 11.7 of this
Restated Agreement.
(bb) "INCENTIVE COMPENSATION PLAN" means any bonus or incentive
compensation plan of the Corporation in which the Executive is
entitled to receive benefits in the month immediately preceding a
Change of Control.
(cc) "JUST CAUSE" means:
(i) the failure by the Executive to substantially perform the
Executive's duties according to the terms of the
Executive's employment in existence immediately prior to a
Change of Control after the Corporation has given the
Executive reasonable notice of such failure and a
reasonable opportunity to correct it; or
(ii) where the Executive engages in any criminal act or
dishonesty resulting or intended to result, directly or
indirectly, in the personal gain of the Executive at the
Corporation's expense.
(dd) "LETTER OF CREDIT" has the meaning referred to in Section 10.2 of
this Restated Agreement.
(ee) "MONTHLY BASE SALARY" means the monthly salary payable to the
Executive by the Corporation in effect at the end of the month
immediately preceding the Effective Date.
(ff) "NOTICE OF DISPUTE" has the meaning referred to in Section 11.1 of
this Restated Agreement.
(gg) "OBLIGATIONS" means, collectively, the Change of Control
Obligations and the Executive Benefit Plan Obligations.
- 10 -
(hh) "PARTIES" means the Corporation, and its successors and permitted
assigns, and the Executive and the Executive's heirs, executors
and administrators and "PARTY" means either one of them.
(ii) "PERSON" includes an individual, partnership, association, body
corporate, trustee, executor, administrator, legal representative
and any national, provincial, state or municipal government or any
agency thereof.
(jj) "REFUNDABLE TAX ACCOUNT" means the refundable tax account
maintained in respect of the Trust by the Canada Revenue Agency.
(kk) "REGISTERED PENSION PLAN" has the meaning referred to in Section
7.1(b) of this Restated Agreement.
(ll) "RESTATED AGREEMENT" means this amended and restated agreement
respecting change of control and executive benefit plan
entitlements as it may be amended, restated or supplemented from
time to time, and the expressions "hereof", "herein", "hereto",
"hereunder", "hereby", and similar expressions refer to this
Restated Agreement and, unless otherwise indicated, refer to
Articles or Sections in this Restated Agreement only.
(mm) "SECURITIZATION PROCEDURE" has the meaning referred to in the
recitals of this Restated Agreement.
(nn) "SEVERANCE PERIOD" means the thirty (30) month period immediately
following the Date of Termination.
(oo) "STOCK OPTION PLAN" means any stock option plan or plans of the
Corporation pursuant to which the Executive is granted options by
the Corporation to acquire Common Shares.
(pp) "SUBSIDIARY" has the meaning ascribed to it in the CBCA.
(qq) "TAX ACT" means the Income Tax Act (Canada) and the Regulations
thereunder, both as amended from time to time.
(rr) "TERM" has the meaning referred to in Section 3.1 of this Restated
Agreement.
(ss) "TRUST" has the meaning referred to in Section 10.1 of this
Restated Agreement.
(tt) "TRUST AGREEMENT" has the meaning referred to in Section 10.1 of
this Restated Agreement.
(uu) "TRUSTEE" means CIBC Mellon Trust Company or such other trust
company duly incorporated under the laws of Canada or any province
thereof whom the Company may designate as the trustee in
connection with the security and funding of the Obligations.
- 11 -
(vv) "VALUATION DATE" has the meaning referred to in Section 10.3 of
this Restated Agreement.
ARTICLE 2
SCOPE OF RESTATED AGREEMENT
---------------------------
2.1 The Parties intend that this Restated Agreement sets out (a) their
respective rights and obligations upon the occurrence of a Change of
Control and in connection with the securitization and funding of the
Change of Control Obligations; and (b) their respective rights and
obligations regarding the securitization and funding of the Executive
Benefit Plan Obligations. This Restated Agreement does not provide for
any other terms of the Executive's employment with the Corporation,
except as expressly provided for herein.
2.2 The Parties hereby confirm that except as otherwise expressly stated in
this Restated Agreement, insofar as the securitization and funding of the
Executive Benefit Plan Obligations is concerned, the terms of this
Restated Agreement shall govern and the terms of the Securitization
Procedure shall not be applicable.
2.3 This Restated Agreement shall automatically terminate upon the death of
the Executive or where due to the Disability of the Executive, the
Executive is materially incapacitated from performing the Executive's
duties. In the event of the death or Disability of the Executive, the
Executive (or the Executive's estate) shall be entitled to receive from
the Corporation all unpaid Annual Base Salary, Employment Benefits,
unpaid business expenses and vacation entitlement accrued to the date of
the death or Disability of the Executive. The Executive (or the
Executive's estate) shall also be entitled to receive any and all death
or Disability benefits in a manner consistent with, and at least equal in
amount to, those provided by the Corporation to senior executives (or
their estate) under such plans, programs and policies in effect at the
date of Disability or death of the Executive, and the Corporation shall
have no further obligations to the Executive or the Executive's estate
under this Restated Agreement. Any entitlements of the Executive (or the
Executive's estate) under the Executive Benefit Plan which remain
following the termination of this Restated Agreement pursuant to this
Section 2.3 shall then commence to be covered under the Securitization
Procedure.
2.4 If the Executive's employment is terminated by either Party, for any
reason, prior to a Change of Control in any manner, other than expressly
provided for in this Restated Agreement, this Restated Agreement shall
automatically terminate and the Corporation shall have no further
obligations to the Executive hereunder. Any remaining entitlements of the
Executive under the Executive Benefit Plan which remain following the
termination of this Restated Agreement pursuant to this Section 2.4 shall
then commence to be covered under the Securitization Procedure.
- 12 -
ARTICLE 3
TERM OF RESTATED AGREEMENT
--------------------------
3.1 Subject to termination of this Restated Agreement prior to a Change of
Control, this Restated Agreement shall remain in effect for a period
concluding twelve (12) months following the Effective Date (the "Term"),
at which time this Restated Agreement shall terminate; provided however
that the payment of compensation and benefits to the Executive under this
Restated Agreement shall continue beyond the end of the Term in
accordance with the applicable provisions of this Restated Agreement. Any
remaining entitlements of the Executive under the Executive Benefit Plan
which remain following the termination of this Restated Agreement
pursuant to this Section 3.1 shall then commence to be covered under the
Securitization Procedure.
ARTICLE 4
TERMINATION FOR JUST CAUSE OR FOR OTHER THAN GOOD REASON
--------------------------------------------------------
4.1 If the Executive's employment is terminated for Just Cause, or is
terminated by the Executive, other than for Good Reason, following a
Change of Control, the Corporation shall pay to the Executive, if not
already paid, the fraction of the unpaid Annual Base Salary accrued
during the then current fiscal year of the Corporation, all accrued
Employment Benefits, all unpaid reasonable business expenses and all
unpaid vacation pay accrued up to and including the Date of Termination,
and thereafter, the Corporation shall have no further obligations to the
Executive under this Restated Agreement.
4.2 Nothing in this Restated Agreement shall serve to derogate from the
vested rights of the Executive to pension benefits, Stock Option Plans or
any other Employment Benefits to which the Executive is entitled up to
the Date of Termination.
ARTICLE 5
TERMINATION BY CORPORATION
--------------------------
5.1 If the Executive's employment is terminated by the Corporation within the
twelve (12) month period following the Effective Date, for reason other
than Just Cause, death or Disability, the Corporation shall pay to the
Executive the remuneration referred to in Article 7 of this Restated
Agreement.
ARTICLE 6
TERMINATION FOR GOOD REASON
---------------------------
6.1 In the event of a Change of Control, the Executive may, within the twelve
(12) month period following the Effective Date and upon providing the
Corporation with ten (10) days written notice, terminate the Executive's
employment with the Corporation for Good Reason. Upon being provided with
such notice, the Corporation shall pay to the Executive the remuneration
referred to in Article 7 of this Restated Agreement.
- 13 -
ARTICLE 7
COMPENSATION UPON TERMINATION
-----------------------------
7.1 If the Executive's employment is terminated in accordance with Section
5.1 or 6.1 of this Restated Agreement:
(a) the Corporation shall forthwith, but in any event within ten (10)
days from receipt by the Corporation of a Release executed by the
Executive substantially in the form of Schedule "A", pay to the
Executive:
(i) if not previously paid, that portion of the Executive's
accrued but unpaid Monthly Base Salary, any accrued but
unpaid bonus to which the Executive is entitled for the
preceding calendar year under any Incentive Compensation
Plan, all unpaid reasonable business expenses and all
accrued but unused vacation pay earned or payable to the
Executive by the Corporation for the period from the
beginning of the Corporation's then current fiscal year, up
to and including the Date of Termination;
(ii) a lump sum cash payment equal to the Executive's Monthly
Base Salary and one-twelfth (1/12) of the Executive's
Annual Target Bonus for each month of the Severance Period;
(iii) a lump sum payment equal to thirteen percent (13%) of the
Executive's Annual Base Salary for the Severance Period
representing the value of the group health and welfare
benefits for the Severance Period;
(iv) a lump sum payment representing the value of the
Executive's monthly car allowance for the Severance Period;
(v) a lump sum payment representing the value of the
Corporation's contributions to the Corporation's savings
plan (at a rate of six percent (6%) of the Executive's
Annual Base Salary) for the Severance Period;
(vi) a lump sum payment representing the value of the
Executive's entitlement to receive from the Corporation
financial counseling services for the Severance Period; and
(vii) a lump sum payment representing the value of the
Executive's entitlement to receive from the Corporation
security monitoring services at the Executive's personal
residence for the Severance Period;
(b) with respect to the Executive's entitlement to pension benefits
under the Pension Plan for Employees of Nexen Inc. (Defined
Benefit Option) (the "Registered Pension Plan"), if any, and the
Executive's related entitlement under the Nexen Inc. Restated
Executive Benefit Plan (the "Executive Benefit Plan"), if any:
- 14 -
(i) the Corporation shall recognize the Severance Period for
purposes of determining the Executive's entitlement;
(ii) for calculation purposes, the Executive's entitlement is
the benefit which would have been determined assuming that
the Executive had been employed throughout the Severance
Period, including recognition of:
(A) additional service that would have been credited for
the Severance Period;
(B) monthly salary equal to the Executive's Monthly Base
Salary throughout the Severance Period;
(C) pensionable bonus for the year of the Date of
Termination, and for each subsequent year or portion
thereof during the Severance Period, determined at
the Annual Target Bonus level. Average bonus will be
determined over the three years to the end of the
Severance Period, including any partial calendar
years; and
(D) if the Executive would have been eligible for
retirement at the end of the Severance Period, the
Executive shall be deemed to retire, and the pension
to commence, upon completion of the Severance
Period. In such case, the Executive's attained age
at the end of the Severance Period will be
recognized for purposes of calculating the early
retirement reduction factor, if applicable; and
(iii) the pension entitlements described in this Section 7.1(b)
shall, to the extent legally permissible, be provided
through the Registered Pension Plan. To the extent that it
is not legally permissible to provide such pension
entitlements through the Registered Pension Plan, the
Corporation shall pay to the Executive a lump sum payment
representing the settlement value of the additional
Executive Benefit Plan benefit determined in accordance
with the assumptions set forth in Schedule "B-1";
(iv) any entitlements of the Executive under the Executive
Benefit Plan which have previously been funded in
accordance with Article 10 but not previously settled in
accordance with Article 10 shall be settled by the
Corporation in accordance with the assumptions set forth in
Schedule "B-1";
(c) the Corporation shall provide the Executive with executive
outplacement counselling to be provided by a firm to be selected
by the Executive, at a cost to the Corporation not to exceed
$25,000.00;
(d) all of the Executive's outstanding unexercisable stock options
under any Stock Option Plan shall become exercisable; and
- 15 -
(e) where the Executive has been relocated, at the request of the
Corporation, within the two (2) year period immediately prior to
the Effective Date, if so requested by the Executive, the
Corporation shall relocate the Executive back to the Executive's
prior location.
7.2 The estimated value as of April 1, 2008 of Sections 7.l(a)(ii) to 7.1(c)
are set out in Schedule "C". Schedule "C" provides estimated values only
and actual values shall be calculated in accordance with this Restated
Agreement at the time of entitlement or payment under this Restated
Agreement.
7.3 If the Executive's employment is terminated in the circumstances
described in Section 5.1 or 6.1 of this Restated Agreement, the
remuneration and benefits payable under this Article 7 shall not be
reduced if the Executive obtains alternative employment.
7.4 Unless expressly provided otherwise in this Restated Agreement, all
payments to be made to the Executive under this Article 7 shall be
subject to required statutory deductions at source by the Corporation.
ARTICLE 8
CONFIDENTIAL INFORMATION
------------------------
8.1 If the Executive's employment is terminated in any manner whatsoever due
to or following a Change of Control, the Executive agrees to keep
confidential all information of a confidential or proprietary nature
concerning the Corporation, its Affiliates, Associates and Subsidiaries
and their respective operations, opportunities, areas of present, past or
future interests, assets, finances, technology, intellectual property,
business and affairs, and further agrees not to use such information,
data or technology for personal advantage, provided that nothing herein
shall prevent the disclosure of information which is publicly available
or which is required to be disclosed by the Executive under appropriate
statute, rules of law or legal process.
ARTICLE 9
RIGHTS AND OBLIGATIONS OF EXECUTIVE UPON TERMINATION
----------------------------------------------------
9.1 Subject to Section 8.1 of this Restated Agreement, the Executive shall
not be prohibited in any manner whatsoever from obtaining alternative
employment with or otherwise forming or participating in a business
competitive to the business of the Corporation after the termination of
the Executive's employment with the Corporation.
9.2 Upon the termination of the Executive's employment for any reason, the
Executive shall tender the Executive's resignation from any position the
Executive may hold as an officer or director of the Corporation or any of
its Affiliates, Associates or Subsidiaries.
9.3 If the Executive's employment is terminated in the circumstances
described in Section 5.1 or 6.1 of this Restated Agreement, the
Corporation shall continue to purchase and maintain, to the extent
available in the marketplace at reasonable cost to the Corporation, on
- 16 -
behalf of the Executive, director and officer liability insurance for the
applicable limitation period following the date upon which the Executive
ceases to serve as a director or officer of the Corporation, and the
Executive's existing agreement to receive indemnity from the Corporation
for acts taken by the Executive in the Executive's capacity as an officer
of the Corporation shall remain in effect.
9.4 Upon termination of the Executive's employment pursuant to Section 5.1 or
6.1 of this Restated Agreement, the Corporation shall reimburse the
Executive for ongoing legal fees and disbursements which the Executive
may reasonably incur in connection with this Restated Agreement (but this
Restated Agreement only), including any litigation concerning the
validity or enforceability of, or liability under, any provision of this
Restated Agreement or any action by the Executive. The Corporation shall
pay such fees and reimbursements to the Executive promptly as such fees
and disbursements become due.
ARTICLE 10
SECURITIZATION AND FUNDING PROCEDURE
------------------------------------
10.1 The Corporation has established and maintains a trust for the benefit of
the Executive and persons claiming through him (the "Trust") pursuant to
the terms and conditions of a trust agreement (the "Trust Agreement")
between the Corporation and the Trustee. The Trust shall be funded in
accordance with the provisions of this Restated Agreement and the Trust
Agreement.
10.2 To provide security against a failure by the Corporation to either fund
or settle the Obligations in accordance with the terms of this Article
10, the Trust Agreement provides for the funding of the Trust with the
proceeds of an irrevocable letter of credit which satisfies the
requirements of this Restated Agreement (a "Letter of Credit") in the
event that the Corporation does not provide funding or effect settlement
when required to do so hereunder and in accordance with the terms hereof.
The Corporation confirms that the Letter of Credit currently held by the
Trustee has been issued by a major Canadian chartered bank (the "Bank")
in an amount calculated by the Corporation's consulting actuary (who at
all times shall be a Fellow of the Canadian Institute of Actuaries) (the
"Actuary") in accordance with the provisions of Section 10.5 of this
Restated Agreement.
10.3 On each February 1st (the "Anniversary Date"), the Corporation shall
request a report from the Actuary as to the amount calculated, as at the
next succeeding April 1st (the "Valuation Date"), in accordance with the
provisions of Section 10.5 of this Restated Agreement. The Corporation
shall provide the Actuary with the data it requires to prepare such
report. Upon completion of each such report, the Corporation shall
arrange for the Actuary to provide a summary of same to the Trustee.
Prior to the funding and/or settlement of all of the Obligations in
accordance with the terms of this Restated Agreement, the Corporation
shall, within forty-five days after the applicable Anniversary Date and
in accordance with the terms of the report received from the Actuary:
- 17 -
(a) either:
(i) arrange for a Letter of Credit to be provided by the Bank
to the Trustee to replace the Letter of Credit then held by
the Trustee. The replacement Letter of Credit shall be:
(A) substantially in the form of the Letter of Credit
then held by the Trustee;
(B) in an amount calculated by the Actuary as at the
applicable Valuation Date in accordance with the
provisions of Section 10.5 of this Restated
Agreement; and
(C) for a term which commences on the date of its
issuance and expires one year following the
applicable Valuation Date; or
(ii) confirm to the Trustee in writing that the Letter of Credit
then held by the Trustee will be extended automatically for
a further one-year term. The confirmation to the Trustee
shall include evidence from the Bank as to any amendment to
the applicable Letter of Credit, any such amendment to be
consistent with the report prepared by the Actuary as at
the applicable Valuation Date; and
(b) contribute to the Trust an amount equal to twice the fee charged
by the Bank in connection with the Letter of Credit extension or
replacement, as applicable. The Corporation shall withhold
one-half of such amount and shall remit the said one-half of such
amount to the Canada Revenue Agency on account of the tax which is
exigible pursuant to the Tax Act in connection with such
contribution to the Trust. The Trustee shall remit the remaining
one-half of such amount to the Bank in consideration for the
Letter of Credit extension or replacement, as applicable.
When a replacement Letter of Credit has been provided in accordance with
the terms of this Section 10.3, an existing Letter of Credit shall be
surrendered and cancelled.
10.4 If, during the term of a Letter of Credit issued pursuant to this
Restated Agreement, the Corporation, acting reasonably, concludes that
there has been a significant change in the Obligations since the date of
the last report prepared by the Actuary pursuant to Section 10.3 of this
Restated Agreement, the Corporation shall request a report from the
Actuary as to the then current value of the Obligations, calculated in
accordance with the provisions of Section 10.5 of this Restated
Agreement. Upon receipt of the report, the Corporation shall provide a
summary of same to the Trustee and arrange, together with the Trustee,
for any required increase or decrease in the amount of the Letter of
Credit for the balance of the term of such Letter of Credit. In the event
that a replacement Letter of Credit is to be issued in the circumstances
described in this Section 10.4, the Corporation and the Trustee shall
arrange for such replacement Letter of Credit to be provided by the Bank
to the Trustee to replace the Letter of Credit then held by the Trustee.
- 18 -
Upon receipt of a replacement Letter of Credit pursuant to this Section
10.4, the Trustee shall surrender for cancellation the Letter of Credit
then held by it pursuant to this Restated Agreement and the Trust
Agreement.
In the event that all or any portion of the fee referred to in Section
10.3 of this Restated Agreement, is refunded by the Bank as a result of a
decrease in the amount of a Letter of Credit pursuant to this Section
10.4, such amount (together with any resulting refundable Tax) shall be
received by the Trustee for deposit to the Trust. Upon receipt of an
Authorized Instruction (as defined in the Trust Agreement), the Trustee
shall pay and transfer such amounts (less any applicable tax which it
will remit as required by the Tax Act on behalf of the Corporation) to
the Corporation for its sole and exclusive use and benefit.
In the event that an additional fee is required to be paid to the Bank as
a result of an increase in the amount of a Letter of Credit pursuant to
this Section 10.4, the Corporation shall contribute to the Trust an
amount equal to twice the additional fee. The Corporation shall withhold
one-half of such amount and shall remit the said one-half of such amount
to the Canada Revenue Agency on account of the tax which is exigible
pursuant to the Tax Act in connection with such contribution to the
Trust. The Trustee shall remit the remaining one-half of such amount to
the Bank in payment of its additional fee.
10.5 A Letter of Credit issued pursuant to this Restated Agreement shall:
(i) be an irrevocable standby letter of credit;
(ii) obligate the Bank to satisfy demand for payment made by the
Trustee in accordance with the terms of this Restated
Agreement and the Trust Agreement;
(iii) permit partial drawings; and
(iv) provide that the Bank must notify the Trustee on or before
thirty days prior to the expiry of a Letter of Credit of
any notice of non-extension provided by the Bank to the
Corporation.
The amount of a Letter of Credit pursuant to this Restated Agreement
shall be calculated by the Actuary in accordance with the following
subparagraphs of this Section 10.5.
(a) Assuming the lump sum payments referred to in Section 7.1(a) of
this Restated Agreement are equal to the amount thereof provided
by the Corporation.
(b) Assuming the service of the Executive will terminate, in
accordance with Section 5.1 or 6.1 of this Restated Agreement, on
the next succeeding March 31st after the Valuation Date (the
"Calculation Date").
(c) Using the Executive's demographic data, including base salary,
target bonus and current marital status as of the Valuation Date,
provided by the Corporation.
- 19 -
(d) Using the Yearly Maximum Pensionable Earnings (Y.M.P.E.) used to
determine the amount of the Canada Pension Plan Benefit and Tax
Act maximum defined benefit pension dollar limit as at the
Valuation Date.
(e) Assuming all Obligations are included.
(f) Using the actuarial methods, assumptions and calculation
methodology described in Schedule "B-2.
(g) Applying a load of 15% to the amount determined in accordance with
subparagraphs (b) through (f) of this Section 10.5 to provide for
fluctuations in the Interest Discount Rate, Consumer Price Index
and other plan experience during the term of the Letter of Credit,
as described in Schedule "B-2".
(h) Applying a load to one-half of the amount determined in accordance
with subparagraphs (a) through (g) of this Section 10.5 to provide
for the cost associated with the borrowings described in
subparagraph (k) of this Section 10.5, as described in Schedule
"B-2".
(i) Including a settlement expense to the amount determined in
subparagraph (h), with the aggregate settlement expense allowance
for all obligations secured equal to $250,000, or where the
Valuation Date is after December 31, 2008, the aggregate
settlement expense allowance will be increased at the rate equal
to the increase in the Consumer Price Index, as described in
Schedule "B-2", plus 1% for each year after 2008.
(j) Assuming the Obligations will be promptly settled with the
Executive upon occurrence of a Designated Event described in
Section 1.1(n)(ii).
(k) Assuming a loan will be secured to permit settlement of the
Obligations prior to receipt of the Refundable Tax Account from
the Canada Revenue Agency. The assumed interest rate payable on
the loan shall be as described in Schedule "B-2". The cost
associated with the borrowings shall be assumed to be paid from
the Trust.
(l) The liabilities calculated in accordance with subparagraphs (a)
through (k) above shall be offset by:
(i) the Refundable Tax Account, if any; and
(ii) the assets contained in the Trust, if any.
10.6 (a) If an Executive Benefit Plan Obligations - Designated Event shall
occur, the Corporation shall be required to immediately fund the
Executive Benefit Plan Obligations in accordance with the most
recent report prepared by the Actuary pursuant to Section 10.3 of
this Restated Agreement. Notwithstanding the foregoing, if an
Executive Benefit Plan Obligations - Designated Event described in
- 20 -
Section 1.1(x)(i) and a Change of Control Obligations - Designated
Event described in Section 1.1(n)(ii) shall occur simultaneously,
the Corporation shall be required to settle the Executive Benefit
Plan Obligations forthwith in accordance with the provisions of
Schedule "B-1".
(b) If:
(i) the employment of the Executive is terminated by the
Corporation for any reason other than as a result of the
death, disability or retirement of such Executive; and
(ii) such Executive files with the Corporation a written request
that it fund the Executive Benefit Plan Obligations,
the Corporation shall be required to immediately fund the
Executive Benefit Plan Obligations in accordance with the most
recent report prepared by the Actuary pursuant to Section 10.3
of this Restated Agreement.
(c) Upon the earlier of:
(i) learning of the occurrence of an Executive Benefit Plan
Obligations - Designated Event described in Section
1.1(x)(v) or (vi) of this Restated Agreement; or
(ii) receipt of a written notice of the occurrence of an
Executive Benefit Plan Obligations - Designated Event
described in any of the other subparagraphs of Section
1.1(x) of this Restated Agreement, which notice has been
signed by two executives of the Corporation, one of whom
must be either the Chief Financial Officer or the General
Counsel of the Corporation and which notice must, in the
case of an Executive Benefit Plan Obligations - Designated
Event described in Section 1.1(x)(i) of this Restated
Agreement, indicate which subparagraph of the definition of
"Change of Control" is applicable,
the Trustee shall promptly give notice to the Corporation in
writing that it intends to draw on that portion of the Letter of
Credit which is referable to the Executive Benefit Plan
Obligations and contribute the proceeds thereof (less any
applicable withholding tax which it will remit as required by the
Tax Act on behalf of the Corporation) to the Trust on behalf of
the Corporation in order to fund the Executive Benefit Plan
Obligations, unless it receives satisfactory proof within nine
days of such notice that the Corporation has funded or settled, as
applicable, the Executive Benefit Plan Obligations itself in
accordance with the terms of this Restated Agreement.
Unless the Corporation advises the Trustee in writing that it has
funded or settled, as applicable, the Executive Benefit Plan
Obligations in accordance with the terms of this Restated
- 21 -
Agreement and has provided the Trustee with satisfactory proof
thereof within nine days of the date of the aforementioned notice,
the Trustee shall draw on that portion of the Letter of Credit
which is referable to the Executive Benefit Plan Obligations on
the tenth day following the date of such notice (or the next
following business day if such tenth day is not a business day)
and contribute the proceeds thereof (less any applicable
withholding tax which it will remit as required by the Tax Act on
behalf of the Corporation) to the Trust on behalf of the
Corporation.
Notwithstanding the foregoing, in the event an Executive Benefit
Plan Obligations - Designated Event described in Section 1.1(x)(v)
or (vi) of this Restated Agreement has triggered the operation of
this Section 10.6 and the failure which gave rise to the
occurrence of such Executive Benefit Plan Obligations - Designated
Event has been remedied prior to the expiration of the notice
period provided for in this Section 10.6(c), the Trustee shall not
take the action described in the immediately preceding paragraph
hereof and all of the provisions of this Restated Agreement shall
continue to apply to the same extent and as fully as they would
have in the event that such Executive Benefit Plan Obligations -
Designated Event had not occurred.
(d) Upon receipt of a written notice of the occurrence of the events
described in both subparagraphs (i) and (ii) of Section 10.6(b) of
this Restated Agreement (which notice has been signed by the
Executive and sworn before a notary public), the Trustee shall
promptly give notice to the Corporation in writing that it intends
to draw on that portion of the Letter of Credit which is referable
to the Executive Benefit Plan Obligations and contribute the
proceeds (less any applicable withholding tax which it will remit
as required by the Tax Act on behalf of the Corporation) to the
Trust on behalf of the Corporation in order to fund the Executive
Benefit Plan Obligations unless it receives satisfactory proof
within nine days of the date of such notice that the Corporation
has funded the Executive Benefit Plan Obligations itself in
accordance with the terms of this Restated Agreement.
Unless the Corporation advises the Trustee in writing that it has
funded the Executive Benefit Plan Obligations in accordance with
the terms hereof and has provided the Trustee with satisfactory
proof thereof within nine days of the date of the aforementioned
notice, the Trustee shall draw upon that portion of the Letter of
Credit which is referable to the Executive Benefit Plan
Obligations on the tenth day following the date of such notice (or
the next following business day if such tenth day is not a
business day) and contribute the proceeds (less any applicable
withholding tax which it will remit as required by the Tax Act on
behalf of the Corporation) to the Trust on behalf of the
Corporation.
(e) For purposes of determining the required amount of funding or the
portion of the Letter of Credit to be drawn on for purposes of
this Section 10.6, the Trustee shall refer to the most recent
report prepared by the Actuary for purposes of this Restated
- 22 -
Agreement and, in particular, to the portion of the report dealing
with the Executive Benefit Plan Obligations. In preparing the
portion of its report respecting Executive Benefit Plan
Obligations, the Actuary shall adhere to the following:
(i) Assuming that the Executive, if then in active employment,
will remain in active employment with the Corporation as an
officer until the Calculation Date and that the Executive's
employment with the Corporation will terminate on the
Calculation Date.
(ii) Using the Executive's demographic data, including base
salary, actual bonus history, target bonus and current
marital status as of the Valuation Date, provided by the
Corporation.
(iii) Using the Canada Pension Plan Benefit and Tax Act maximum
defined benefit pension dollar limit as at the Valuation
Date.
(iv) Assuming the Executive's target bonus percentage remains at
the level specified by the Corporation pursuant to
subparagraph (ii) above.
(v) Assuming only Executive Benefit Plan Obligations are
included.
(vi) Assuming the payments under the Executive Benefit Plan
would be made from the Trust.
(vii) Using the actuarial methods, assumptions and calculation
methodology described in Schedule "B-2.
(viii) Applying loads as described in Schedule "B-2" to the amount
determined in accordance with the preceding subparagraphs
of this Section 10.6(e) to provide for future contingencies
and expenses of the Trust.
(ix) Calculating the estimated amount required to settle the
Executive Benefit Plan Obligations based on the actuarial
methods, assumptions and calculation methodology described
in Schedule "B-2", increased by the loads described in the
following subparagraph.
(x) Applying loads as described in Schedule "B-2" to the amount
determined in accordance with subparagraph (ix) to provide
for:
(A) fluctuations in the Interest Discount Rate and
Consumer Price Index during the term of the Letter
of Credit; and
(B) the cost associated with the loan to be secured as
allowed under the Trust Agreement to permit
settlement of the Executive Benefit Plan Obligations
prior to receipt of the Refundable Tax Account from
the Canada Revenue Agency. The assumed interest rate
- 23 -
payable on the loan shall be as described in
Schedule "B-2" and shall be applied to one-half of
the amount in subparagraph (ix). The cost associated
with the borrowings shall be assumed to be paid from
the Trust.
(xi) Taking the larger amount for the Executive of:
(A) the amount determined in accordance with
subparagraphs (i) through (viii), and
(B) the amount determined in accordance with
subparagraphs (ix) and (x).
(xii) The amount determined in accordance with subparagraph (xi)
above shall be offset by:
(A) the Refundable Tax Account, if any;
(B) the assets contained in the Trust, if any.
(f) In the event that the Executive Benefit Plan Obligations have been
funded in accordance with the terms hereof as a result of:
(i) the Corporation making an assignment for the benefit of
creditors or filing a petition in bankruptcy or becoming
insolvent or bankrupt;
(ii) a receiver, trustee or liquidator of or for the Corporation
being appointed and not being discharged within a period of
sixty days;
(iii) a voluntary dissolution or wind-up of the Corporation; or
(iv) a sale or disposition of all or substantially all of the
assets of the Corporation,
and the Executive Benefit Plan has been terminated in connection
therewith, the Executive Benefit Plan Obligations shall be
promptly settled by the Trustee with the Executive by way of a
lump sum payment from the Trust. For this purpose, the benefit
entitlements of each Executive shall be determined by the Actuary
in accordance with the terms of the Executive Benefit Plan and the
amount of the lump sum payment shall be determined by the Actuary
using the assumptions set forth in Schedule "B-1". Notice of
termination of the Executive Benefit Plan shall be provided to the
Trustee by the Corporation, failing which by two executives of the
Corporation, one of whom must be either the Chief Financial
Officer or the General Counsel of the Corporation.
- 24 -
Any assets of the Trust remaining after full satisfaction of (i)
the Executive Benefit Plan Obligations pursuant to the preceding
paragraph and (ii) any further obligations pursuant to the terms
of the Trust Agreement, shall be returned to the Corporation.
(g) In the event the Executive Benefit Plan shall be terminated at any
time either in whole or in part in relation to the Executive
subsequent to the funding of the Executive Benefit Plan
Obligations in accordance with the terms hereof, then, provided
Section 10.6(f) of this Restated Agreement is not otherwise
applicable, the Executive Benefit Plan Obligations shall be
promptly settled by the Trustee with the Executive by way of a
lump sum payment from the Trust.
For this purpose, the benefit entitlements of the Executive shall
be determined by the Actuary in accordance with the terms of the
Executive Benefit Plan and the amount of the lump sum payment
shall be determined by the Actuary using the assumptions set forth
in Schedule "B-1". Notice of the termination of the Executive
Benefit Plan shall be provided to the Trustee by the Corporation,
failing which by two executives of the Corporation, one of whom
must be either the Chief Financial Officer or the General Counsel
of the Corporation.
Any assets of the Trust remaining after full satisfaction of (i)
the Executive Benefit Plan Obligations and (ii) any further
obligations pursuant to the terms of the Trust Agreement, shall be
returned to the Corporation.
(h) In the event:
(i) of a dispute as to whether a payment to or in respect of
the Executive is properly due and payable pursuant to the
Executive Benefit Plan; and
(ii) such dispute cannot be resolved by the parties thereto
within the time frame specified in Section 1.1(x)(vi) of
this Restated Agreement,
the amount in dispute shall be remitted to the Trustee for deposit
to the Trust. Upon final settlement of the dispute, the amount so
deposited (together with any earnings, profits and increments
thereon and after deduction of any authorized payments allocable
thereto, both as determined in accordance with the terms of the
Trust Agreement), less any applicable withholding tax which will
be remitted as required by the Tax Act, shall be paid to that
party to the dispute which is found to be entitled thereto. Prior
to such amount being paid out of the Trust in accordance with the
terms hereof, the Corporation shall instruct the Actuary to take
such amount into account when preparing its report for purposes of
this Restated Agreement.
(i) In the event that a Change of Control Obligations - Designated
Event described in Section 1.1(n)(ii) of this Restated Agreement
shall occur subsequent to the funding of the Executive Benefit
Plan Obligations in accordance with the terms of this Restated
Agreement, the Corporation shall be required to settle the
Executive Benefit Plan Obligations forthwith in an amount
determined by the Actuary in accordance with the provisions of
Schedule "B-1".
- 25 -
(j) Subject to Section 10.6(f), 10.6(g) and 10.6(i) of this Restated
Agreement, in the event that the Executive Benefit Plan
Obligations have been funded in accordance with the terms hereof,
all or a portion of such Executive Benefit Plan Obligations may,
at the discretion of the Corporation, be promptly settled with the
Executive.
For this purpose, the benefit entitlements of the Executive shall
be determined by the Actuary in accordance with the terms of the
Executive Benefit Plan. In such circumstances, the Corporation
reserves the right to settle the Executive Benefit Plan
Obligations by way of a lump sum payment to the Executive provided
that the amount of each such payment is determined by the Actuary
in accordance with the assumptions set forth in Schedule "B-1".
10.7 (a) If a Change of Control Obligations - Designated Event described in
Section 1.1(n)(i) of this Restated Agreement shall occur, the
Corporation shall be required to immediately fund the Change of
Control Obligations in accordance with the most recent report
prepared by the Actuary pursuant to Section 10.3 of this Restated
Agreement.
(b) If a Change of Control Obligations - Designated Event described in
Section 1.1(n)(ii) of this Restated Agreement shall occur, the
Corporation shall be required to settle the Change of Control
Obligations forthwith in accordance with the provisions of
Schedule "B-1", upon receipt by the Corporation of a Release
executed by the Executive in the form attached to this Restated
Agreement as Schedule "A".
(c) Upon the earlier of:
(i) learning of the occurrence of a Change of Control
Obligations - Designated Event described in Section
1.1(n)(i) of this Restated Agreement; or
(ii) receipt of a written notice of the occurrence of a Change
of Control Obligations - Designated Event described in
Section 1.1(n)(ii) of this Restated Agreement, which notice
has been signed by the Executive and sworn before a notary
public and has annexed thereto a Release executed by the
Executive in the form attached to this Restated Agreement
as Schedule "A",
the Trustee shall promptly give notice to the Corporation in
writing that it intends to draw on that portion of the Letter of
Credit which is referable to the Change of Control Obligations and
contribute the proceeds thereof (less any applicable withholding
tax which it will remit as required by the Tax Act on behalf of
the Corporation) to the Trust on behalf of the Corporation in
- 26 -
order to fund the Change of Control Obligations, unless it
receives satisfactory proof within nine days of such notice that
the Corporation has funded or settled, as applicable, the Change
of Control Obligations itself in accordance with the terms of this
Restated Agreement.
Unless the Corporation advises the Trustee in writing that it has
funded or settled, as applicable, the Change of Control
Obligations in accordance with the terms of this Restated
Agreement and has provided the Trustee with satisfactory proof
thereof within nine days of the date of the aforementioned notice,
the Trustee shall draw on that portion of the Letter of Credit
which is referable to the Change of Control Obligations on the
tenth day following the date of such notice (or the next following
business day if such tenth day is not a business day) and
contribute the proceeds (less any applicable withholding tax which
it will remit as required by the Tax Act on behalf of the
Corporation) to the Trust on behalf of the Corporation.
Notwithstanding the foregoing, in the event a Change of Control
Obligations - Designated Event described in Section 1.1(n)(i) of
this Restated Agreement has triggered the operation of this
Section 10.7 and the failure which gave rise to the occurrence of
such Change of Control Obligations - Designated Event has been
remedied prior to the expiration of the notice period provided for
in this Section 10.7(c), the Trustee shall not take the action
described in the immediately preceding paragraph hereof and all of
the provisions of this Restated Agreement shall continue to apply
to the same extent and as fully as they would have in the event
that such Change of Control Obligations - Designated Event had not
occurred.
(d) The required amount of funding or the portion of the Letter of
Credit to be drawn on for purposes of this Section 10.7 shall be
determined by the Actuary and shall be the amount determined in
accordance with Sections 10.5(a) through (l) of this Restated
Agreement offset by the amount determined in accordance with
subparagraphs 10.6(e)(i) through (xii) of this Restated Agreement.
The settlement amount for purposes of this Section 10.7 shall be
determined in accordance with the provisions of Schedule "B-1".
(e) In the event that the Change of Control Obligations have been
funded in accordance with the terms hereof as a result of the
occurrence of a Change of Control Obligations - Designated Event
described in Section 1.1(n)(ii), the Change of Control Obligations
shall be promptly settled with the Executive in accordance with
the provisions of Schedule "B-1".
10.8 The actuarial methods and assumptions described in Schedule "B-1" and
Schedule "B-2" shall be reviewed from time to time. Any amendments to
Schedule "B-1" and/or Schedule "B-2" as a result of such review shall be
dealt with in accordance with Section 12.6.
- 27 -
10.9 The Trustee shall surrender the Letter of Credit to the Corporation for
cancellation upon the earliest of:
(a) receipt by the Trustee of a written direction signed by the
Corporation and the Executive directing surrender of the Letter of
Credit;
(b) receipt by the Trustee of a written direction signed by the
Corporation confirming that it has funded and/or settled the
Obligations in accordance with the terms hereof, together with
evidence which is satisfactory to the Trustee that such funding
and/or settlement has occurred; and
(c) receipt by the Trustee of a written direction signed by the
Corporation confirming that the Corporation has no remaining
Obligations to the Executive, together with evidence which is
satisfactory to the Trustee that the Corporation has no remaining
Obligations to the Executive and that a copy of such written
direction has been provided to the Executive.
10.10 The Trust shall be terminated by the Trustee upon the earliest of:
(a) receipt by the Trustee of a written direction signed by the
Corporation and the Executive confirming the termination of the
Trust;
(b) the entire depletion of the Trust Fund through payments pursuant
to the terms of the Trust Agreement, in the event that such
depletion occurs subsequent to the funding of the Obligations in
accordance with the terms of this Restated Agreement; and
(c) receipt by the Trustee of a written direction signed by the
Corporation confirming that the Corporation has no remaining
Obligations to the Executive, together with evidence which is
satisfactory to the Trustee that a copy of such written direction
has been provided to the Executive.
Upon the termination of the Trust, any assets of the Trust which remain
after the satisfaction of any remaining Obligations of the Corporation to
the Executive shall be returned to the Corporation.
10.11 The Corporation and the Executive hereby acknowledge that the Corporation
is entering into agreements similar to this Restated Agreement with
certain of its other executives and that the Corporation may, at its sole
discretion, arrange for one or more Letters of Credit to satisfy its
responsibilities under this Restated Agreement and such other agreements.
In the event that one Letter of Credit is obtained to satisfy the
Corporation's responsibilities under this Restated Agreement and some or
all of such other agreements, references to a "Letter of Credit" in this
Restated Agreement shall be read as references to that portion of such
Letter of Credit which is referable to the responsibilities of the
Corporation to the Executive.
- 28 -
The Corporation and the Executive also acknowledge that the Corporation
may, at its sole discretion, enter into one or more Trust Agreements to
satisfy its responsibilities under this Restated Agreement and such other
agreements. In the event that one Trust Agreement is entered into to
satisfy the Corporation's responsibilities under this Restated Agreement
and some or all of such other agreements, references to "Trust", "Trust
Agreement", "Trustee" and "Refundable Tax Account" in this Restated
Agreement shall be read with such modifications as may be necessary in
the context.
10.12 At the discretion of the Corporation and subject to the provisions of
applicable law, in the event that all or a portion of the Obligations are
funded in accordance with Article 10 hereof and an actuarial surplus
(determined by actuarial valuation in accordance with the terms of the
report prepared as at the immediately preceding Valuation Date in
accordance with Section 10.3 of this Restated Agreement) arises as a
result thereof:
(a) all or a portion of such actuarial surplus may be used in the
determination of or to reduce the funding otherwise required to be
provided by the Corporation hereunder; or
(b) any surplus assets may, to the extent that they exceed 110% of the
amount required to fund that portion of the Obligations which has
been funded (as determined by the report prepared as at the
immediately preceding Valuation Date in accordance with Section
10.3 of this Restated Agreement) be returned to the Corporation.
ARTICLE 11
EXPEDITED ARBITRATION
---------------------
11.1 If, pursuant to Section 6.1 of this Restated Agreement, the Executive
provides written notice of the Executive's intention to terminate the
Executive's employment for Good Reason, and the Corporation believes that
there is no Good Reason, or, alternatively, if, pursuant to Section 4.1
of this Restated Agreement, the Corporation provides written notice of
its intention to terminate the Executive's employment for Just Cause and
the Executive believes there is no Just Cause, the Corporation or the
Executive, as applicable, shall, within ten (10) days of having been
provided such notice, provide written notice ("Notice of Dispute") to the
other Party of the dispute (the "Dispute").
11.2 The Parties agree that any and all Disputes under Section 11.1 of this
Restated Agreement will be resolved by way of a single Arbitrator.
11.3 (a) Within fifteen (15) days of provision of the Notice of Dispute,
the Parties shall agree upon and appoint a neutral Arbitrator from
the then current roster maintained by the Alberta Mediation and
Arbitration Society to act as Arbitrator of the Dispute; or
- 29 -
(b) If no person acceptable to both Parties has been agreed upon and
appointed within fifteen (15) days, then either Party may make
immediate application to the Court of Queen's Bench of Alberta,
Judicial District of Calgary, to have an Arbitrator appointed.
11.4 The Parties acknowledge and agree that the purpose of this Article 11 is
to avoid delays and facilitate resolution of the Dispute in a just,
speedy and cost-effective manner.
11.5 Consistent with the expedited nature of arbitration, the Arbitrator will
direct and control the scope and timing of the exchange of information
between the Parties and will take such steps as the Arbitrator deems
necessary to achieve a just, speedy and cost-effective resolution of the
Dispute. The Arbitrator has the exclusive right and power to resolve all
issues related to the exchange of information in the arbitration process.
11.6 The Parties agree that the Arbitrator is only authorized to determine
whether the Executive had Good Reason for terminating the Executive's
employment, or alternatively, whether the Corporation had Just Cause to
terminate the Executive's employment.
11.7 A hearing will occur within forty-five (45) days of the appointment of
the Arbitrator (the "Hearing"). The time of the Hearing (the "Hearing
Date") will be scheduled by the Arbitrator after consultation with the
Parties. The Hearing will be governed by the rules set out in the
Arbitration Act S.A. 1991, c.A-43, as modified by the Arbitrator in the
interests of achieving a just, speedy and cost-effective resolution of
the Dispute. The Arbitrator may require written submissions of fact in
the Dispute to be provided seven (7) days before the Hearing Date.
11.8 The Arbitrator will use best efforts to provide a written decision within
seven (7) days of the conclusion of the Hearing.
11.9 The Parties agree that the decision of the Arbitrator will be final and
binding upon the Parties.
ARTICLE 12
GENERAL
-------
12.1 The headings of the Articles and paragraphs in this Restated Agreement
are inserted for convenience only and shall not affect the meaning or
construction of this Restated Agreement.
12.2 This Restated Agreement shall be construed and interpreted in accordance
with the laws of the Province of Alberta and the federal laws of Canada
as applicable therein.
12.3 If any provision of this Restated Agreement is determined to be void or
unenforceable in whole or in part, it shall be and be deemed to be
severed from this Restated Agreement without affecting or impairing the
validity of any other provision herein.
- 30 -
12.4 Any notice required or permitted to be given under this Restated
Agreement shall be in writing and shall be properly given if delivered by
hand delivery or mail or other form of electronic communication capable
of transmission confirmation to the following address:
a. IN THE CASE OF THE CORPORATION TO:
----------------------------------
Nexen Inc.
000 - 0xx Xxxxxx X.X.
Xxxxxxx, XX X0X 0X0
Attention: General Manager, Compensation and Benefits
b. IN THE CASE OF THE EXECUTIVE TO:
--------------------------------
the last address of the Executive in the records of the
Corporation or to such other address as the Parties may from time
to time specify by notice given in accordance herewith.
12.5 This Restated Agreement shall enure to the benefit of and be binding upon
the Executive and the Executive's heirs, executors and administrators and
upon the Corporation and its successors and assigns.
12.6 This Restated Agreement constitutes the entire agreement relating to the
respective rights and obligations of the Parties upon the occurrence of a
Change of Control. No amendment or waiver of this Restated Agreement
shall be binding unless executed in writing by the Parties.
Notwithstanding the foregoing,
(a) any amendment to Article 10 of this Restated Agreement, Schedule
"B-1" or Schedule "B-2" which is required to ensure that the
balance remaining in the Trust after the required tax has been
withheld and remitted to the Canada Revenue Agency is sufficient
to satisfy the fee levied by the Bank in connection with the
issuance of a Letter of Credit may be made by the Corporation
without the prior written approval of the Executive; and
(b) the Corporation may amend, modify or waive Article 10 of this
Restated Agreement, Schedule "B-1" and Schedule "B-2" in whole or
in part, at such time and from time to time, and in such manner
and to such extent as it may deem advisable without obtaining the
approval of the Executive, provided that such amendment,
modification or waiver, as the case may be, does not adversely
affect the securitization in accordance with the terms hereof of
those Obligations which have accrued up to the date of such
amendment, modification or waiver, as the case may be.
- 31 -
12.7 The Parties agree that the rights, entitlements and benefits set out in
this Restated Agreement to be paid to the Executive upon a Change of
Control shall be in full satisfaction of all rights of the Executive
under applicable law in effect from time to time as a result thereof.
12.8 Neither Party can waive or shall be deemed to have waived any right it
has under this Restated Agreement except to the extent that such waiver
is in writing.
12.9 Nothing contained in this Restated Agreement shall be construed as
limiting the ability of the Corporation to amend, modify or terminate the
Executive Benefit Plan in whole or in part, at such time and from time to
time, and in such manner and to such extent as it may deem advisable.
The Parties have executed this Restated Agreement effective the date first
written above.
NEXEN INC.
Per: (signed)
---------------------------
Per: (signed)
---------------------------
SIGNED, SEALED & DELIVERED
in the presence of
(signed) (signed)
------------------------------ --------------------------------
WITNESS XXXXXXXX XXXXXX
SCHEDULE "A"
------------
AMENDED AND RESTATED AGREEMENT
RESPECTING CHANGE OF CONTROL AND
EXECUTIVE BENEFIT PLAN ENTITLEMENTS
In order to receive the entitlements referred to in the Article 7 of this
Restated Agreement, the Executive shall execute the attached Release, fully
releasing the Corporation from all further claims in relation to the Executive's
employment or Employment Benefits and the termination thereof upon payment of
the remuneration and benefits referred to in Article 7 of this Restated
Agreement. The attached Release shall not, however, require that the Executive
relinquish or release any rights to indemnity which the Executive may, as an
officer or director of the Corporation or any of its Affiliates, Associates and
Subsidiaries, have as against the Corporation or any of its Affiliates,
Associates and Subsidiaries, for costs, charges and expenses reasonably incurred
by the Executive in respect of any civil, criminal or administrative action or
proceeding to which the Executive is made a party by reason of being or having
been a director or officer of the Corporation or any of its Affiliates,
Associates and Subsidiaries, where:
(a) the Executive has acted honestly and in good faith with a view to
the best interests of the Corporation or any of its Affiliates,
Associates and Subsidiaries; and
(b) in the case of a criminal or administrative action or proceeding
enforced by a monetary penalty, the Executive had reasonable
grounds for believing the Executive's conduct was lawful.
FINAL RELEASE
-------------
KNOW ALL MEN BY THESE PRESENTS that I, XXXXXXXX XXXXXX, of the City of Calgary,
in the Province of Alberta, in consideration of the amounts provided in that
certain Amended and Restated Agreement Respecting Change of Control and
Executive Benefit Plan Entitlements (the "Restated Agreement") dated as of the
______ day of ____________, 2008 between myself and NEXEN INC. and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, do for myself, my executors and assigns hereby remise, release and
forever discharge the Corporation, and any associated, affiliated, predecessor
or parent corporation of the Corporation and their present and former directors,
officers, agents and employees (the "Releasees"), including each of their
respective successors, heirs, administrators and assigns, from all manner of
actions, causes of action, debts, obligations, covenants, claims or demands,
whatsoever which I may ever have had, now have, or can, shall or may hereafter
have against the Releasees or any of them, by reason of or arising out of any
cause, matter or thing whatsoever done, occurring or existing up to and
including the present date and, in particular, without in any way restricting
the generality of the foregoing, in respect of all claims of any nature
whatsoever, past, present or future, directly or indirectly related to or
arising out of or in connection with my relationship with the Releasees, as an
employee, officer or director, and the termination of my employment from the
Corporation including, but not limited to, any claims related to any entitlement
I may have or may have had to any payment or claim either at common law or under
the Employment Standards Code, Human Rights, Citizenship and Multiculturalism
Act or any other applicable legislation governing or related to my employment
with the Releasees.
AND FOR THE SAID CONSIDERATION, I, XXXXXXXX XXXXXX, represent and warrant that I
have not assigned to any person, firm or corporation any of the actions, causes
of action, claims, suits, executions or demands which I release by this Release,
or with respect to which I agree not to make any claim or take any proceeding
herein.
IT IS FURTHER ACKNOWLEDGED that the payment to me includes full compensation and
consideration for the loss of my employment benefits, as provided by the
Releasees, and that all of my employment benefits and privileges shall cease on
the date of termination of my employment, except as otherwise expressly provided
in the Restated Agreement. I further acknowledge that I have received all
benefits due to me and have no further claim against the Releasees for such
- 2 -
benefits. I further accept sole responsibility to replace such benefits which I
wish to continue or to exercise conversion privileges where applicable with
respect to such benefits and, in particular any life insurance and long-term
disability benefits. In the event that I become disabled following termination
of my employment, I covenant not to xxx the Releasees for insurance or other
benefits or loss of same and hereby release the Releasees from any and all
further obligations or liabilities arising therefrom.
Notwithstanding anything contained herein, this Release shall not extend to or
affect, or constitute a release of, my right to xxx, claim against or recover
from the Releasees and shall not constitute an agreement to refrain from
bringing, taking or maintaining any action against the Releasees in respect of:
(a) any corporate indemnity existing by statute, contract or pursuant
to any of the constating documents of the Corporation provided in
my favour in respect of my having acted at any time as a director,
officer or both of the Corporation;
(b) my entitlement to any insurance maintained for the benefit or
protection of the directors and/or officers of the Corporation,
including without limitation, directors' and officers' liability
insurance; or
(c) my entitlement to any amounts or compensation due to me under the
terms of my employment pursuant to the Restated Agreement.
IT IS HEREBY AGREED that the terms of the Restated Agreement and of this Release
will be kept confidential. No party hereto shall communicate any such terms to
any third party under any circumstances whatsoever, excepting any necessary
communication with my legal and financial advisors, as required, on the express
condition that they maintain the confidentiality thereof, and any disclosure
which is required by law, although either party shall be at liberty to disclose
to third parties that a mutually acceptable Release was agreed upon. The
invalidity and unenforceability of any provision of this Release shall not
affect the validity or enforceability of any other provision of this Release,
which shall remain in full force and effect.
- 3 -
I HEREBY DECLARE that I have read all of this Release, fully understand the
terms of this Release and voluntarily accept the consideration stated herein as
the sole consideration for this Release for the purpose of making a full and
final settlement with the Releasees. I further acknowledge and confirm that I
have been given an adequate period of time to obtain independent legal counsel
regarding the meaning and the significance of the terms herein and the covenants
mutually exchanged.
IT IS HEREBY AGREED THAT as a term of the termination of my employment from the
Corporation, and in consideration of the amount noted above, I hereby resign as
officer and director of the Corporation and its affiliates.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this _____ day of
______________ in the year _________.
-------------------------------
XXXXXXXX XXXXXX
-------------------------------
WITNESS (signature)
-------------------------------
WITNESS (print name)
SCHEDULE "B-1"
--------------
AMENDED AND RESTATED AGREEMENT
RESPECTING CHANGE OF CONTROL AND
EXECUTIVE BENEFIT PLAN ENTITLEMENTS
METHODOLOGY AND ASSUMPTIONS FOR DETERMINING SETTLEMENT VALUE
PURPOSE
In accordance with the terms of the Restated Agreement, the purpose of this
Schedule "B-1" is to outline the calculation approach such that, after tax has
been paid on a lump sum settlement value, the remaining balance is intended to
be sufficient to provide after-tax monthly payments equivalent to the after-tax
monthly payments the Executive would have received under the terms of the
Executive Benefit Plan as provided for under this Restated Agreement.
OVERVIEW FOR DEFINED BENEFIT PENSION
The following outlines the actuarial methods, assumptions and calculation
process to be used in determining the lump sum settlement value of the defined
benefit pension entitlements under the Executive Benefit Plan when settlement
occurs in accordance with Section 10 of the Restated Agreement. Section 300 of
the Income Tax Regulations establishes the procedure applicable in using an
after-tax lump sum to purchase a prescribed annuity:
1. A prescribed annuity payment consists of two components: (a) the deemed
capital element of the annuity payment on which no tax is payable, and
(b) the deemed non-capital portion of the annuity payment which is taxed
at the marginal rate.
2. The capital portion of each future annuity payment is considered to be a
return of the original after-tax lump sum amount.
3. The non-capital portion of each annuity payment is assumed to be provided
by the investment return on the original after-tax lump sum amount and
has therefore not yet been taxed.
4. A constant percentage of each future payment is deemed to be a return of
the original lump sum capital.
CALCULATION METHODOLOGY
1. Equivalent after-tax payments:
a. Determine initial gross annual pension entitlement under the Executive
Benefit Plan.
b. Determine after-tax annual pension entitlement under the Executive
Benefit Plan based on Individual Tax Rate as defined in Schedule "B-1".
- 2 -
c. Determine the capital element based on the non-indexed present value of
the pension payments divided by life expectancy.
d. Determine the monthly payment which provides an after-tax pension equal
to the after-tax pension determined in 1.b. above in accordance with the
prescribed annuity methodology.
2. Present value of periodic payments from 1. above:
a. Determine the present value of the pension determined in 1.d. above using
the assumptions described below in this Schedule "B-1". For greater
certainty, the value of the post-retirement indexation is to be reflected
in determining the present value of the accrued pension entitlement in
respect of post-1992 service, and any accrued pension in respect of
service granted during the Severance Period.
3. Tax adjustment:
x. Xxxxx-up the present value determined in 2.a. above to reflect the tax
assumed to be required to be paid on the lump sum.
x. Xxxxx-up the amount determined in 3.a. above to reflect the tax assumed
to be required to be paid on investment earnings in respect of the lump
sum payment during the deferral period prior to assumed pension
commencement, if any.
4. Equivalent present value after tax as the after-tax monthly payments:
a. The amount determined in 3.b. above shall be the lump sum settlement
value of the Executive's pension entitlement.
ASSUMPTIONS
Interest Discount Rate:
-- during deferral period Yield on long-term Government of
Canada bonds as published in the Bank
of Canada Review, described in CANSIM
series V122544 (or a successor
series) for the last trading
Wednesday at the end of the month
immediately preceding the date of
calculation, rounded down to next
lower 0.5.
-- after assumed pension commencement Yield on long-term Government of
Canada bonds as published in the Bank
of Canada Review, described in CANSIM
series V122544 (or a successor
series) for the last trading
Wednesday at the end of the month
immediately preceding the date of
calculation, rounded down to next
lower 0.5,
less
- 3 -
assumed escalation of pensions after
retirement.
Increase in Consumer Price Index: Yield on long-term Government of
Canada bonds as published in the Bank
of Canada Review, described in CANSIM
series V122544 (or a successor
series) for the last trading
Wednesday at the end of the month
immediately preceding the date of
calculation,
less
Yield on long-term Government of
Canada Real Return bonds as published
in the Bank of Canada Review,
described in CANSIM series V122553
(or a successor series) for the last
trading Wednesday at the end of the
month immediately preceding the date
of calculation.
The result of the difference is then
rounded up to the next highest 0.5% .
Escalation of Pensions After Retirement: 75% of CPI, less 1% (minimum increase
25% of CPI). Applies only to benefits
accrued for service after December
31, 1992.
MORTALITY:
-- for life expectancy 1994 Uninsured Pensioner Mortality
Table with mortality improvements
projected to 15 years beyond the date
of termination.
-- for present values
o prior to assumed pension Nil.
commencement
o after assumed pension 1994 Uninsured Pensioner Mortality
commencement Table with mortality improvements
projected 15 years beyond the date of
termination.
Marital Status: Actual status at date of termination.
Age of Spouse: Based on actual date of birth.
Individual Tax Rate: Maximum individual marginal tax rate
for employee's province of employment
at the date of termination.
SCHEDULE "B-2"
--------------
AMENDED AND RESTATED AGREEMENT
RESPECTING CHANGE OF CONTROL AND
EXECUTIVE BENEFIT PLAN ENTITLEMENTS
METHODOLOGY AND ASSUMPTIONS FOR DETERMINING THE AMOUNT TO BE SECURED OR FUNDED
IN ACCORDANCE WITH SECTION 10 BASED ON THE METHODOLOGY DESCRIBED IN SCHEDULE
"B-1"
PURPOSE
The purpose of this Schedule "B-2" is to provide the actuarial methodology and
assumptions for determining the amount to be secured or funded in accordance
with Section 10 of the Restated Agreement.
METHODOLOGY
The settlement methodology is described in Schedule B-1.
The funding methodology applicable to the Executive Benefit Plan Obligations is
based on the following:
1. Estimate the accrued pension payable from the Executive Benefit Plan as
at the Valuation Date.
2. Assume that the assets of the plan are to be invested in long term
Government of Canada bonds and subject to the 50% refundable tax
applicable to retirement compensation arrangements.
3. Determine the present value of the amounts in 1 through 2 above.
4. Estimate the settlement value that could be paid in accordance with the
methodology and assumptions described in Schedule B-1.
5. The funding amount in respect of the Executive Benefit Plan Obligations
shall be the greater of the amount determined in accordance with 1
through 3 above and the amount in 4 above.
ASSUMPTIONS
Interest Discount Rate:
-- during deferral period Yield on long-term Government of
Canada bonds as published in the Bank
of Canada Review, described in CANSIM
series V122544 (or a successor
series) for the last trading
Wednesday at the end of the month
immediately preceding the Anniversary
Date, rounded down to next lower 0.5.
- 2 -
-- after assumed pension commencement Yield on long-term Government of
Canada bonds as published in the Bank
of Canada Review, described in CANSIM
series V122544 (or a successor
series) for the last trading
Wednesday at the end of the month
immediately preceding the Anniversary
Date, rounded down to next lower 0.5,
less assumed escalation of pensions
after retirement.
Increase in Consumer Price Index: Yield on long-term Government of
Canada bonds as published in the Bank
of Canada Review, described in CANSIM
series V122544 (or a successor
series) for the last trading
Wednesday at the end of the month
immediately preceding the Anniversary
Date,
less
Yield on long-term Government of
Canada Real Return bonds as published
in the Bank of Canada Review,
described in CANSIM series V122553
(or a successor series) for the last
trading Wednesday at the end of the
month immediately preceding the
Anniversary Date.
The result of the difference is then
rounded up to the next highest 0.5%.
Escalation of Pensions After Retirement: 75% of CPI, less 1% (minimum increase
25% of CPI). Applies only to benefits
accrued for service after December
31, 1992.
MORTALITY:
-- for life expectancy 1994 Uninsured Pensioner Mortality
Table with mortality improvements
projected to 15 years beyond the
Calculation Date.
-- for present values
o prior to assumed pension Nil.
commencement
o after assumed pension 1994 Uninsured Pensioner Mortality
commencement Table with mortality improvements
projected 15 years beyond the
Calculation Date.
- 3 -
Marital Status: Actual status at the Anniversary.
Age of Spouse: Based on actual date of birth.
Individual Tax Rate: Maximum individual marginal tax rate
for employee's province of employment
at the Anniversary Date
Bonus: Target bonus % applied to the salary
rate at the Valuation Date
Investment return: Yield on long-term Government of
Canada bonds as published in the Bank
of Canada Review, described in CANSIM
series V122544 (or a successor
series) for the last trading
Wednesday at the end of the month
immediately preceding the Anniversary
Date rounded down to next lower 0.5%,
and then divided by 2
Decrements: None assumed prior to Calculation
Date
Eligibility for Pensions: 100% vested
Pension Commencement Age:
-- eligible for subsidized early Payable at the completion of the
retirement on the Calculation Date Severance Period. Payable at the
(i.e., age 55 and 10 years of Calculation Date for purposes of
continuous service) determining the amount required under
Section 10.6(e).
-- not eligible for early retirement Deferred to age 60 or the end of the
on the Calculation Date Severance Period if later. Payable at
age 60 for purposes of determining
the amount required under Section
10.6(e).
Fluctuation reserve (1) 15% of the pension obligations
Cost of borrowing to settle the Yield on one month Government of
obligations: Canada Treasury Bills as published in
the Bank of Canada Review, described
in CANSIM series V122529 (or a
successor series) for the last
trading Wednesday at the end of the
month immediately preceding the
Anniversary Date, rounded up to the
next higher 0.25%, plus 1.50%
- 4 -
--------------------------------------------------------------------------------
Notes:
(1) Referred to by Section 10.5(g), Section 10.6(e)(viii) and 10.6(e)(x). The
15% load is intended to provide a reserve for a potential decrease in the
Interest Discount Rate in combination with potential increases in the
Consumer Price Index for an aggregate change of 1.0%.
SCHEDULE "C"
------------
AMENDED AND RESTATED AGREEMENT RESPECTING CHANGE OF CONTROL
AND EXECUTIVE BENEFIT PLAN ENTITLEMENTS
ESTIMATED(1) ENTITLEMENT TO COMPENSATION
PURSUANT TO ARTICLE 7 OF THE RESTATED AGREEMENT
-------------------------------------------------------------------------------
Employee - Xxxxxxxx Xxxxxx
-------------------------------------------------------------------------------
Base Salary $1,387,500
-------------------------------------------------------------------------------
Bonus Target Value $832,500
-------------------------------------------------------------------------------
Benefits Uplift $180,375
-------------------------------------------------------------------------------
Car Allowance $48,000
-------------------------------------------------------------------------------
Savings Plan $83,250
-------------------------------------------------------------------------------
Financial Counselling Services $10,500
-------------------------------------------------------------------------------
Security Monitoring Services $2,400
-------------------------------------------------------------------------------
TOTAL VALUE $2,544,525
-------------------------------------------------------------------------------
Additional Lump Sum Settlement Value of Pension(2) $3,686,478
-------------------------------------------------------------------------------
TOTAL ESTIMATED ENTITLEMENT $6,231,003
-------------------------------------------------------------------------------
In addition to the above, Section 7.1(c) of the Restated Agreement provides for
Executive Outplacement counselling to be provided by a firm selected by the
Executive, at a cost to the Corporation not to exceed $25,000.
IN ADDITION to the above pension entitlement under the Agreement, the Executive
has the following pension entitlements under the Defined Benefit Registered
Pension Plan and Executive Benefit Plan. As is the case with the figures shown
above, these values are estimated values (as of April 1, 2008) and are for
illustrative purposes only. Actual values will be calculated as of the date of
the entitlement or payment in accordance with the Defined Benefit Registered
Pension Plan and the Executive Benefit Plan, respectively, and therefore may be
subject to change.
o Accrued Annual Defined Benefit Pension Entitlement $50,372
(Registered Pension Plan)(3)
o Estimated Lump Sum Value of Executive Benefit Plan(4) $3,354,861
----------------
(1) As stated in Section 7.1 of the Restated Agreement, the above calculations
represent only the current estimated value (as of April 1, 2008) of the
Executive's entitlement to compensation upon a Change of Control.
Accordingly, the above calculations are for illustrative purposes only.
(2) Calculated in accordance with Section 7.1(b) of the Restated Agreement.
- Adjustment to EBP lump sum value to reflect settlement $1,327,589.
- Additional settlement value of pension accrued during the severance
period upon a change of control $2,358,889.
(3) Benefit payable immediately at April 1, 2008.
(4) Based on the Standards of Practice for Determining Pension Commuted Values
approved by the Canadian Institute of Actuaries using rates applicable for
April 2008 terminations.
AMENDED AND RESTATED AGREEMENT
RESPECTING CHANGE OF CONTROL AND
EXECUTIVE BENEFIT PLAN ENTITLEMENTS
This amended and restated agreement respecting change of control and executive
benefit plan entitlements made as of the 19th day of September, 2008.
BETWEEN:
NEXEN INC., a corporation incorporated under the
laws of Canada
(hereinafter referred to as the "Corporation")
- and -
XXXXX XXXXXX
(hereinafter referred to as the "Executive")
RECITALS:
1. The Executive, as Executive Vice President, North America of the
Corporation, is considered by the Board to be an essential officer and
employee of the Corporation, who is both integral to the operation and
development of the Corporation, and has acquired outstanding skills,
unique experience and possesses an extensive background in, and knowledge
of, the Corporation's business, operations and the industry in which it
is engaged.
2. In the event of a Change of Control, there is a possibility that the
employment of the Executive would be terminated without just cause or
adversely modified and the Executive has expressed concern in that regard
to the Corporation.
3. The Board recognizes that it is essential and in the best interests of
the Corporation and its shareholders that the Corporation retain the
continued dedication of the Executive to the Executive's office and the
Executive's employment during the uncertain period prior to, during and
following a Change of Control.
4. The Board further believes that the past service of the Executive and the
Executive's integral role in the development and operation of the
Corporation requires that the Corporation ensure that in the event of a
Change of Control the Executive is treated in a manner that is fair,
reasonable, consistent with industry standards and in the best interests
of the Corporation.
5. The Corporation and the Executive entered into a Change of Control
Agreement on October 22, 1999, which was amended by an Amending Agreement
dated December 25, 2000 (collectively the "Original Agreement") to agree
on the terms and conditions which would govern the termination or
modification of the employment of the Executive following a Change of
Control.
- 2 -
6. The Original Agreement was replaced and superseded by an Amended and
Restated Change of Control Agreement on December 31, 2001, which was
amended by an Amending Agreement dated May 30, 2003 (collectively, the
"Current Agreement") which, among other matters, detailed the
Corporation's security and funding obligations in respect of the Change
of Control Obligations (as hereinafter defined), provided for the
securitization and funding of the Executive Benefit Plan Obligations (as
hereinafter defined) and provided for the cessation of the Executive's
coverage under the Statement of Company Procedure Regarding the
Securitization of Nexen Inc. Restated Executive Benefit Plan, as amended
or replaced from time to time (the "Securitization Procedure").
7. The Corporation and the Executive wish to amend the Current Agreement as
herein provided and, in doing so, wish to restate the Current Agreement
as herein amended (the "Restated Agreement").
NOW THEREFORE, in consideration of the mutual covenants and agreements set forth
in this Restated Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the Parties, the
Parties agree as follows:
ARTICLE 1
DEFINITIONS
-----------
1.1 In this Restated Agreement, the following terms shall mean as follows:
(a) "ACTING JOINTLY OR IN CONCERT" for the purposes of this Restated
Agreement, a Person is acting jointly or in concert with another
Person if such Person has any agreement, arrangement or
understanding (whether formal or informal and whether or not in
writing) with such other Person for the purpose of acquiring,
offering to acquire, or voting any Common Shares of the
Corporation (other than customary agreements with and between
underwriters and banking group or selling group members with
respect to a distribution of securities by way of prospectus or
private placement or pursuant to a pledge of securities in the
ordinary course of business).
(b) "ACTUARY" has the meaning referred to in Section 10.2 of this
Restated Agreement.
(c) "AFFILIATE" and "ASSOCIATE" have the meaning ascribed to such
terms in National Instrument 45-106.
(d) "ANNIVERSARY DATE" has the meaning referred to in Section 10.3 of
this Restated Agreement.
- 3 -
(e) "ANNUAL BASE SALARY" means the annual base salary of the Executive
payable by the Corporation at the end of the month immediately
preceding the Date of Termination.
(f) "ANNUAL TARGET BONUS" means the Executive's annual target bonus as
determined by the Board to be in effect for the calendar year in
which a Change of Control occurs.
(g) "BANK" has the meaning referred to in Section 10.2 of this
Restated Agreement.
(h) "BENEFICIAL OWNER" for the purposes of this Restated Agreement, a
Person shall be deemed to be the "BENEFICIAL OWNER" and to have
"BENEFICIAL OWNERSHIP" of and to "BENEFICIALLY OWN":
(i) any securities as to which such Person or any of such
Person's Affiliates or Associates is the owner at law or in
equity;
(ii) any securities as to which such Person or any of such
Person's Affiliates or Associates has a right to acquire
(i) upon the exercise of any Convertible Securities or (ii)
pursuant to any agreement, arrangement or understanding,
whether such right is exercisable immediately within a
period of sixty (60) days thereafter and whether or not on
condition or the happening of any contingency, (other than
(a) customary agreements with and between underwriters and
banking group and selling group members with respect to the
distribution to the public or pursuant to a private
placement of securities, or (b) pursuant to a pledge of
securities in the ordinary course of business); and
(iii) any securities which are Beneficially Owned within the
meaning of clauses (a) or (b) above by any other Person
with which such Person is Acting Jointly or in Concert,
provided, however, that a Person shall not be deemed the
"Beneficial Owner" or to have "Beneficial Ownership" of or to
"Beneficially Own" any security where such Person is the
registered holder of securities as a result of carrying on the
business of or acting as nominee for a securities depository.
For purposes of this Restated Agreement, the percentage of Common
Shares Beneficially Owned by any Person, shall be and be deemed to
be the product determined by the formula:
100 x A/B
Where:
A = the number of votes for the election of all directors
generally attaching to the Common Shares Beneficially Owned
by such Person; and
- 4 -
B = the number of votes for the election of all directors
generally attaching to all outstanding Common Shares.
For the purposes of the foregoing formula, where a Person
Beneficially Owns unissued Common Shares which may be acquired
pursuant to Convertible Securities, such Common Shares shall be
deemed to be outstanding for the purpose of calculating the
percentage of Common Shares Beneficially Owned by such Person in
both the numerator and the denominator, but no other unissued
Common Shares which may be acquired pursuant to any other
outstanding Convertible Securities shall, for the purposes of that
calculation, be deemed to be outstanding.
(i) "BOARD" means the Board of Directors of the Corporation as
constituted from time to time.
(j) "CBCA" means the Canada Business Corporations Act, as amended from
time to time, and any successor legislation thereto.
(k) "CALCULATION DATE" has the meaning referred to in Section 10.5 of
this Restated Agreement.
(l) "CHANGE OF CONTROL" means the occurrence of any of:
(i) the purchase or acquisition of any Common Shares or
Convertible Securities by a Beneficial Owner which results
in the Beneficial Owner owning, or exercising control or
direction over, Common Shares or Convertible Securities
such that, assuming only the conversion of Convertible
Securities Beneficially Owned or over which control or
direction is exercised by the Beneficial Owner, the
Beneficial Owner would own, or exercise control or
direction over, Common Shares carrying the right to cast
more than thirty-five percent (35%) of the votes attaching
to all Common Shares; or
(ii) the substantial completion of: (i) the liquidation,
dissolution or winding-up of the Corporation; or (ii) the
sale, lease or other disposition of all or substantially
all of the assets of the Corporation; or
(iii) a situation in which individuals who were members of the
Board immediately prior to:
(A) a meeting of the shareholders of the Corporation
involving a contest for, or an item of business
relating to, the election of directors; or
(B) an amalgamation, arrangement, merger or other
consolidation or combination of the Corporation with
another Person,
- 5 -
shall not constitute a majority of the Board following such
election or transaction; or
(iv) the completion of any transaction or the first of a series
of transactions which would have the same or similar effect
as any transaction or series of transactions referred to in
paragraphs (i), (ii) or (iii) above; or
(v) a determination by the Board that, for the purposes of this
Restated Agreement, a Change of Control has occurred or is
imminent.
(m) "CHANGE OF CONTROL OBLIGATIONS" means the Company's obligations to
make the lump sum payments described in Section 7.1 of this
Restated Agreement to the Executive.
(n) A "CHANGE OF CONTROL OBLIGATIONS - DESIGNATED EVENT" shall be
deemed to have occurred if:
(i) the Corporation fails to arrange for the extension or
replacement of a Letter of Credit in accordance with the
terms of this Restated Agreement; or
(ii) the Executive's employment is terminated in accordance with
Section 5.1 or 6.1 of this Restated Agreement.
(o) "COMMON SHARES" means the common shares of the Corporation.
(p) "CONVERTIBLE SECURITIES" means:
(i) any right (contractual or otherwise and regardless of
whether such right constitutes a security) to acquire
Common Shares from the Corporation; or
(ii) any security issued by the Corporation from time to time
(other than the rights issued pursuant to a shareholders'
rights protection plan, if any) carrying any exercise,
conversion or exchange right,
which is then exercisable or exercisable within a period of sixty
(60) days from that time pursuant to which the holder thereof may
acquire Common Shares or other securities which are convertible
into or exercisable or exchangeable for Common Shares (in each
case, whether such right is then exercisable or exercisable within
a period of sixty (60) days from that time and whether or not on
condition or the happening of any contingency).
(q) "DATE OF TERMINATION" means the date upon which the Executive's
employment is terminated pursuant to Section 4.1, 5.1 or 6.1 of
this Restated Agreement. For greater clarity, the Date of
Termination means the date upon which the Corporation provides the
Executive with written, verbal or other notice that the
Executive's employment has been or will be terminated pursuant to
- 6 -
Section 4.1 or 5.1 of this Restated Agreement or the date upon
which the Executive provides the Corporation with written notice
terminating the Executive's employment pursuant to Section 4.1 or
for Good Reason pursuant to Section 6.1.
(r) "DISABILITY" means, where due to a physical or mental condition,
the Executive is rendered totally and permanently unable to
perform the Executive's duties for a consecutive period of two (2)
years or more during which the Executive has been in receipt of
long term disability insurance benefits from the insurance carrier
normally utilized by the Corporation.
(s) "DISPUTE" has the meaning referred to in Section 11.1 of this
Restated Agreement.
(t) "EFFECTIVE DATE" means the date upon which a Change of Control
occurs.
(u) "EMPLOYMENT BENEFITS" means the employment benefits to which the
Executive is entitled by virtue of any written, oral or implied
agreement with the Corporation. For the purposes of this Restated
Agreement, "Employment Benefits" shall include, but is not limited
to, the following:
(i) the Executive's entitlement to any dental or general
medical care;
(ii) the Executive's entitlement to receive long term disability
benefits from the insurance carrier normally utilized by
the Corporation;
(iii) the Executive's entitlement to pension benefits under the
terms of any pension plan with the Corporation;
(iv) the Executive's entitlement to a monthly car allowance from
the Corporation;
(v) the Executive's entitlement to contributions by the
Corporation to the Corporation's savings plan;
(vi) the Executive's entitlement to receive from the Corporation
financial counseling services, at a cost of $3,500.00 per
year (or as the same may be increased from time to time by
the Corporation); and
(vii) the Executive's entitlement to receive from the Corporation
security monitoring services at the Executive's personal
residence.
(v) "EXECUTIVE BENEFIT PLAN" has the meaning referred to in Section
7.1(b) of this Restated Agreement.
(w) "EXECUTIVE BENEFIT PLAN OBLIGATIONS" means the Corporation's
outstanding obligations under the Executive Benefit Plan to the
Executive.
- 7 -
(x) An "EXECUTIVE BENEFIT PLAN OBLIGATIONS - DESIGNATED EVENT" shall
be deemed to have occurred if:
(i) a Change of Control occurs;
(ii) the Corporation makes an assignment for the benefit of
creditors or files a petition in bankruptcy or becomes
insolvent or bankrupt;
(iii) a receiver, trustee or liquidator of or for the Corporation
is appointed and is not discharged within a period of sixty
days;
(iv) the net worth of the Corporation, described as shareholder
equity in the consolidated financial statements of the
Corporation as disclosed in the annual and quarterly
consolidated financial statements of the Corporation, is
less than $400 million;
(v) the Corporation fails to arrange for the extension or
replacement of a Letter of Credit in accordance with the
terms of this Restated Agreement;
(vi) the Executive has provided written notification to the
Trustee and to the Corporation of the failure by the
Corporation to pay any amount owed to or in respect of the
Executive under the Executive Benefit Plan within thirty
days of the due date specified in the Executive Benefit
Plan (together with a statement of the amount due and
owing) either to the person entitled thereto pursuant to
the Executive Benefit Plan or to the Trust in accordance
with the provisions of Section 10.6(h); or
(vii) at any time the Board adopts a resolution to the effect
that, for purposes of this Restated Agreement, an Executive
Benefit Plan Obligations - Designated Event has occurred or
is imminent.
(y) "GOOD REASON" means any of the following, unless the Executive
shall have given the Executive's express written consent thereto:
(i) INCONSISTENT DUTIES. The assignment to the Executive of any
duties inconsistent with the Executive's status as an
executive officer of the Corporation or a material
alteration in the nature or status of the Executive's
responsibilities or duties or reporting relationship from
those in effect immediately prior to a Change of Control;
(ii) REDUCED SALARY. A reduction by the Corporation in the
Executive's Annual Base Salary in effect on the Effective
Date or as the same may be increased thereafter from time
to time or the failure by the Corporation to grant the
Executive salary increases at a rate commensurate with the
increases accorded to other executives of the Corporation;
- 8 -
(iii) RELOCATION. The Corporation requiring the Executive to be
based anywhere other than where the Executive is based at
the time a Change of Control occurs, except for required
travel on the Corporation's business to an extent
substantially consistent with the Executive's business
travel obligations in the ordinary course of business
immediately prior to a Change of Control;
(iv) INCENTIVE COMPENSATION PLANS. The failure by the
Corporation to continue in effect any incentive
compensation plan in which the Executive participates,
including, but not limited to, the Incentive Compensation
Plan or the Stock Option Plan or any other similar plans
adopted prior to a Change of Control, unless the Executive
is eligible to participate in, and is entitled to the
opportunity to receive a comparable level of benefits
under, an ongoing, substitute or alternative plan (it being
understood that the manner or method of payment and the
form of consideration need not be the same as existed in
the original plans); or the failure by the Corporation to
continue the Executive's participation therein on at least
as favourable a basis, both in terms of the amount of
benefits available to the Executive and the level of the
Executive's participation relative to other participants,
as existed at the time a Change of Control occurs;
(v) EMPLOYMENT BENEFITS AND PERQUISITES. The failure by the
Corporation to continue to provide the Executive with
Employment Benefits at least as favourable as those enjoyed
by the Executive immediately prior to a Change of Control,
including any pension plan, benefit plan or any retirement
arrangement established for the Executive, or any of the
Corporation's life insurance, medical, health and accident,
disability or savings plans in which the Executive was
participating at the time a Change of Control occurs; the
taking of any action by the Corporation that would directly
or indirectly materially reduce any such benefits or
deprive the Executive of any material perquisite enjoyed by
the Executive at the time a Change of Control occurs,
including, without limitation and to the extent applicable,
the use of a car, aircraft, secretarial services, office
space, telephones, computer facilities, expense
reimbursement, financial counselling, and professional fees
and club dues reimbursement; or the failure by the
Corporation to provide the Executive with the number of
paid vacation days to which the Executive is entitled in
accordance with the Corporation's normal vacation practice
in effect at the time a Change of Control occurs;
(vi) NO ASSUMPTION BY SUCCESSOR. The failure of the Corporation
to obtain a satisfactory agreement from a successor to
assume and agree to perform this Restated Agreement.
Alternatively, if the business or undertaking in connection
with which the Executive's services are principally
performed is sold at any time after a Change of Control
occurs, and the Executive's employment is transferred as a
- 9 -
result, the failure or refusal of the purchaser of such
business or undertaking to provide the Executive with the
same or a comparable position, duties, compensation and
benefits, as described in paragraphs (iv) and (v) above, as
provided to the Executive by the Corporation immediately
prior to a Change of Control;
(vii) DISPOSITION OF "ALL OR SUBSTANTIALLY ALL". The disposition
by the Corporation of all or substantially all of the
assets of the Corporation, as contemplated herein,
notwithstanding that the Executive's services were or were
not principally performed for such business.
(z) "HEARING" has the meaning referred to in Section 11.7 of this
Restated Agreement.
(aa) "HEARING DATE" has the meaning referred to in Section 11.7 of this
Restated Agreement.
(bb) "INCENTIVE COMPENSATION PLAN" means any bonus or incentive
compensation plan of the Corporation in which the Executive is
entitled to receive benefits in the month immediately preceding a
Change of Control.
(cc) "JUST CAUSE" means:
(i) the failure by the Executive to substantially perform the
Executive's duties according to the terms of the
Executive's employment in existence immediately prior to a
Change of Control after the Corporation has given the
Executive reasonable notice of such failure and a
reasonable opportunity to correct it; or
(ii) where the Executive engages in any criminal act or
dishonesty resulting or intended to result, directly or
indirectly, in the personal gain of the Executive at the
Corporation's expense.
(dd) "LETTER OF CREDIT" has the meaning referred to in Section 10.2 of
this Restated Agreement.
(ee) "MONTHLY BASE SALARY" means the monthly salary payable to the
Executive by the Corporation in effect at the end of the month
immediately preceding the Effective Date.
(ff) "NOTICE OF DISPUTE" has the meaning referred to in Section 11.1 of
this Restated Agreement.
- 10 -
(gg) "OBLIGATIONS" means, collectively, the Change of Control
Obligations and the Executive Benefit Plan Obligations.
(hh) "PARTIES" means the Corporation, and its successors and permitted
assigns, and the Executive and the Executive's heirs, executors
and administrators and "PARTY" means either one of them.
(ii) "PERSON" includes an individual, partnership, association, body
corporate, trustee, executor, administrator, legal representative
and any national, provincial, state or municipal government or any
agency thereof.
(jj) "REFUNDABLE TAX ACCOUNT" means the refundable tax account
maintained in respect of the Trust by the Canada Revenue Agency.
(kk) "REGISTERED PENSION PLAN" has the meaning referred to in Section
7.1(b) of this Restated Agreement.
(ll) "RESTATED AGREEMENT" means this amended and restated agreement
respecting change of control and executive benefit plan
entitlements as it may be amended, restated or supplemented from
time to time, and the expressions "hereof", "herein", "hereto",
"hereunder", "hereby", and similar expressions refer to this
Restated Agreement and, unless otherwise indicated, refer to
Articles or Sections in this Restated Agreement only.
(mm) "SECURITIZATION PROCEDURE" has the meaning referred to in the
recitals of this Restated Agreement.
(nn) "SEVERANCE PERIOD" means the thirty (30) month period immediately
following the Date of Termination.
(oo) "STOCK OPTION PLAN" means any stock option plan or plans of the
Corporation pursuant to which the Executive is granted options by
the Corporation to acquire Common Shares.
(pp) "SUBSIDIARY" has the meaning ascribed to it in the CBCA.
(qq) "TAX ACT" means the Income Tax Act (Canada) and the Regulations
thereunder, both as amended from time to time.
(rr) "TERM" has the meaning referred to in Section 3.1 of this Restated
Agreement.
(ss) "TRUST" has the meaning referred to in Section 10.1 of this
Restated Agreement.
(tt) "TRUST AGREEMENT" has the meaning referred to in Section 10.1 of
this Restated Agreement.
(uu) "TRUSTEE" means CIBC Mellon Trust Company or such other trust
company duly incorporated under the laws of Canada or any province
thereof whom the Company may designate as the trustee in
connection with the security and funding of the Obligations.
- 11 -
(vv) "VALUATION DATE" has the meaning referred to in Section 10.3 of
this Restated Agreement.
ARTICLE 2
SCOPE OF RESTATED AGREEMENT
---------------------------
2.1 The Parties intend that this Restated Agreement sets out (a) their
respective rights and obligations upon the occurrence of a Change of
Control and in connection with the securitization and funding of the
Change of Control Obligations; and (b) their respective rights and
obligations regarding the securitization and funding of the Executive
Benefit Plan Obligations. This Restated Agreement does not provide for
any other terms of the Executive's employment with the Corporation,
except as expressly provided for herein.
2.2 The Parties hereby confirm that except as otherwise expressly stated in
this Restated Agreement, insofar as the securitization and funding of the
Executive Benefit Plan Obligations is concerned, the terms of this
Restated Agreement shall govern and the terms of the Securitization
Procedure shall not be applicable.
2.3 This Restated Agreement shall automatically terminate upon the death of
the Executive or where due to the Disability of the Executive, the
Executive is materially incapacitated from performing the Executive's
duties. In the event of the death or Disability of the Executive, the
Executive (or the Executive's estate) shall be entitled to receive from
the Corporation all unpaid Annual Base Salary, Employment Benefits,
unpaid business expenses and vacation entitlement accrued to the date of
the death or Disability of the Executive. The Executive (or the
Executive's estate) shall also be entitled to receive any and all death
or Disability benefits in a manner consistent with, and at least equal in
amount to, those provided by the Corporation to senior executives (or
their estate) under such plans, programs and policies in effect at the
date of Disability or death of the Executive, and the Corporation shall
have no further obligations to the Executive or the Executive's estate
under this Restated Agreement. Any entitlements of the Executive (or the
Executive's estate) under the Executive Benefit Plan which remain
following the termination of this Restated Agreement pursuant to this
Section 2.3 shall then commence to be covered under the Securitization
Procedure.
2.4 If the Executive's employment is terminated by either Party, for any
reason, prior to a Change of Control in any manner, other than expressly
provided for in this Restated Agreement, this Restated Agreement shall
automatically terminate and the Corporation shall have no further
obligations to the Executive hereunder. Any remaining entitlements of the
Executive under the Executive Benefit Plan which remain following the
termination of this Restated Agreement pursuant to this Section 2.4 shall
then commence to be covered under the Securitization Procedure.
- 12 -
ARTICLE 3
TERM OF RESTATED AGREEMENT
--------------------------
3.1 Subject to termination of this Restated Agreement prior to a Change of
Control, this Restated Agreement shall remain in effect for a period
concluding twelve (12) months following the Effective Date (the "Term"),
at which time this Restated Agreement shall terminate; provided however
that the payment of compensation and benefits to the Executive under this
Restated Agreement shall continue beyond the end of the Term in
accordance with the applicable provisions of this Restated Agreement. Any
remaining entitlements of the Executive under the Executive Benefit Plan
which remain following the termination of this Restated Agreement
pursuant to this Section 3.1 shall then commence to be covered under the
Securitization Procedure.
ARTICLE 4
TERMINATION FOR JUST CAUSE OR FOR OTHER THAN GOOD REASON
--------------------------------------------------------
4.1 If the Executive's employment is terminated for Just Cause, or is
terminated by the Executive, other than for Good Reason, following a
Change of Control, the Corporation shall pay to the Executive, if not
already paid, the fraction of the unpaid Annual Base Salary accrued
during the then current fiscal year of the Corporation, all accrued
Employment Benefits, all unpaid reasonable business expenses and all
unpaid vacation pay accrued up to and including the Date of Termination,
and thereafter, the Corporation shall have no further obligations to the
Executive under this Restated Agreement.
4.2 Nothing in this Restated Agreement shall serve to derogate from the
vested rights of the Executive to pension benefits, Stock Option Plans or
any other Employment Benefits to which the Executive is entitled up to
the Date of Termination.
ARTICLE 5
TERMINATION BY CORPORATION
--------------------------
5.1 If the Executive's employment is terminated by the Corporation within the
twelve (12) month period following the Effective Date, for reason other
than Just Cause, death or Disability, the Corporation shall pay to the
Executive the remuneration referred to in Article 7 of this Restated
Agreement.
ARTICLE 6
TERMINATION FOR GOOD REASON
---------------------------
6.1 In the event of a Change of Control, the Executive may, within the twelve
(12) month period following the Effective Date and upon providing the
Corporation with ten (10) days written notice, terminate the Executive's
employment with the Corporation for Good Reason. Upon being provided with
such notice, the Corporation shall pay to the Executive the remuneration
referred to in Article 7 of this Restated Agreement.
- 13 -
ARTICLE 7
COMPENSATION UPON TERMINATION
-----------------------------
7.1 If the Executive's employment is terminated in accordance with Section
5.1 or 6.1 of this Restated Agreement:
(a) the Corporation shall forthwith, but in any event within ten (10)
days from receipt by the Corporation of a Release executed by the
Executive substantially in the form of Schedule "A", pay to the
Executive:
(i) if not previously paid, that portion of the Executive's
accrued but unpaid Monthly Base Salary, any accrued but
unpaid bonus to which the Executive is entitled for the
preceding calendar year under any Incentive Compensation
Plan, all unpaid reasonable business expenses and all
accrued but unused vacation pay earned or payable to the
Executive by the Corporation for the period from the
beginning of the Corporation's then current fiscal year, up
to and including the Date of Termination;
(ii) a lump sum cash payment equal to the Executive's Monthly
Base Salary and one-twelfth (1/12) of the Executive's
Annual Target Bonus for each month of the Severance Period;
(iii) a lump sum payment equal to thirteen percent (13%) of the
Executive's Annual Base Salary for the Severance Period
representing the value of the group health and welfare
benefits for the Severance Period;
(iv) a lump sum payment representing the value of the
Executive's monthly car allowance for the Severance Period;
(v) a lump sum payment representing the value of the
Corporation's contributions to the Corporation's savings
plan (at a rate of six percent (6%) of the Executive's
Annual Base Salary) for the Severance Period;
(vi) a lump sum payment representing the value of the
Executive's entitlement to receive from the Corporation
financial counseling services for the Severance Period; and
(vii) a lump sum payment representing the value of the
Executive's entitlement to receive from the Corporation
security monitoring services at the Executive's personal
residence for the Severance Period;
(b) with respect to the Executive's entitlement to pension benefits
under the Pension Plan for Employees of Nexen Inc. (Defined
Benefit Option) (the "Registered Pension Plan"), if any, and the
Executive's related entitlement under the Nexen Inc. Restated
Executive Benefit Plan (the "Executive Benefit Plan"), if any:
- 14 -
(i) the Corporation shall recognize the Severance Period for
purposes of determining the Executive's entitlement;
(ii) for calculation purposes, the Executive's entitlement is
the benefit which would have been determined assuming that
the Executive had been employed throughout the Severance
Period, including recognition of:
(A) additional service that would have been credited for
the Severance Period;
(B) monthly salary equal to the Executive's Monthly Base
Salary throughout the Severance Period;
(C) pensionable bonus for the year of the Date of
Termination, and for each subsequent year or portion
thereof during the Severance Period, determined at
the Annual Target Bonus level. Average bonus will be
determined over the three years to the end of the
Severance Period, including any partial calendar
years; and
(D) if the Executive would have been eligible for
retirement at the end of the Severance Period, the
Executive shall be deemed to retire, and the pension
to commence, upon completion of the Severance
Period. In such case, the Executive's attained age
at the end of the Severance Period will be
recognized for purposes of calculating the early
retirement reduction factor, if applicable; and
(iii) the pension entitlements described in this Section 7.1(b)
shall, to the extent legally permissible, be provided
through the Registered Pension Plan. To the extent that it
is not legally permissible to provide such pension
entitlements through the Registered Pension Plan, the
Corporation shall pay to the Executive a lump sum payment
representing the settlement value of the additional
Executive Benefit Plan benefit determined in accordance
with the assumptions set forth in Schedule "B-1";
(iv) any entitlements of the Executive under the Executive
Benefit Plan which have previously been funded in
accordance with Article 10 but not previously settled in
accordance with Article 10 shall be settled by the
Corporation in accordance with the assumptions set forth in
Schedule "B-1";
(c) the Corporation shall provide the Executive with executive
outplacement counselling to be provided by a firm to be selected
by the Executive, at a cost to the Corporation not to exceed
$25,000.00;
(d) all of the Executive's outstanding unexercisable stock options
under any Stock Option Plan shall become exercisable; and
- 15 -
(e) where the Executive has been relocated, at the request of the
Corporation, within the two (2) year period immediately prior to
the Effective Date, if so requested by the Executive, the
Corporation shall relocate the Executive back to the Executive's
prior location.
7.2 The estimated value as of April 1, 2008 of Sections 7.l(a)(ii) to 7.1(c)
are set out in Schedule "C". Schedule "C" provides estimated values only
and actual values shall be calculated in accordance with this Restated
Agreement at the time of entitlement or payment under this Restated
Agreement.
7.3 If the Executive's employment is terminated in the circumstances
described in Section 5.1 or 6.1 of this Restated Agreement, the
remuneration and benefits payable under this Article 7 shall not be
reduced if the Executive obtains alternative employment.
7.4 Unless expressly provided otherwise in this Restated Agreement, all
payments to be made to the Executive under this Article 7 shall be
subject to required statutory deductions at source by the Corporation.
ARTICLE 8
CONFIDENTIAL INFORMATION
------------------------
8.1 If the Executive's employment is terminated in any manner whatsoever due
to or following a Change of Control, the Executive agrees to keep
confidential all information of a confidential or proprietary nature
concerning the Corporation, its Affiliates, Associates and Subsidiaries
and their respective operations, opportunities, areas of present, past or
future interests, assets, finances, technology, intellectual property,
business and affairs, and further agrees not to use such information,
data or technology for personal advantage, provided that nothing herein
shall prevent the disclosure of information which is publicly available
or which is required to be disclosed by the Executive under appropriate
statute, rules of law or legal process.
ARTICLE 9
RIGHTS AND OBLIGATIONS OF EXECUTIVE UPON TERMINATION
----------------------------------------------------
9.1 Subject to Section 8.1 of this Restated Agreement, the Executive shall
not be prohibited in any manner whatsoever from obtaining alternative
employment with or otherwise forming or participating in a business
competitive to the business of the Corporation after the termination of
the Executive's employment with the Corporation.
9.2 Upon the termination of the Executive's employment for any reason, the
Executive shall tender the Executive's resignation from any position the
Executive may hold as an officer or director of the Corporation or any of
its Affiliates, Associates or Subsidiaries.
9.3 If the Executive's employment is terminated in the circumstances
described in Section 5.1 or 6.1 of this Restated Agreement, the
Corporation shall continue to purchase and maintain, to the extent
available in the marketplace at reasonable cost to the Corporation, on
- 16 -
behalf of the Executive, director and officer liability insurance for the
applicable limitation period following the date upon which the Executive
ceases to serve as a director or officer of the Corporation, and the
Executive's existing agreement to receive indemnity from the Corporation
for acts taken by the Executive in the Executive's capacity as an officer
of the Corporation shall remain in effect.
9.4 Upon termination of the Executive's employment pursuant to Section 5.1 or
6.1 of this Restated Agreement, the Corporation shall reimburse the
Executive for ongoing legal fees and disbursements which the Executive
may reasonably incur in connection with this Restated Agreement (but this
Restated Agreement only), including any litigation concerning the
validity or enforceability of, or liability under, any provision of this
Restated Agreement or any action by the Executive. The Corporation shall
pay such fees and reimbursements to the Executive promptly as such fees
and disbursements become due.
ARTICLE 10
SECURITIZATION AND FUNDING PROCEDURE
------------------------------------
10.1 The Corporation has established and maintains a trust for the benefit of
the Executive and persons claiming through him (the "Trust") pursuant to
the terms and conditions of a trust agreement (the "Trust Agreement")
between the Corporation and the Trustee. The Trust shall be funded in
accordance with the provisions of this Restated Agreement and the Trust
Agreement.
10.2 To provide security against a failure by the Corporation to either fund
or settle the Obligations in accordance with the terms of this Article
10, the Trust Agreement provides for the funding of the Trust with the
proceeds of an irrevocable letter of credit which satisfies the
requirements of this Restated Agreement (a "Letter of Credit") in the
event that the Corporation does not provide funding or effect settlement
when required to do so hereunder and in accordance with the terms hereof.
The Corporation confirms that the Letter of Credit currently held by the
Trustee has been issued by a major Canadian chartered bank (the "Bank")
in an amount calculated by the Corporation's consulting actuary (who at
all times shall be a Fellow of the Canadian Institute of Actuaries) (the
"Actuary") in accordance with the provisions of Section 10.5 of this
Restated Agreement.
10.3 On each February 1st (the "Anniversary Date"), the Corporation shall
request a report from the Actuary as to the amount calculated, as at the
next succeeding April 1st (the "Valuation Date"), in accordance with the
provisions of Section 10.5 of this Restated Agreement. The Corporation
shall provide the Actuary with the data it requires to prepare such
report. Upon completion of each such report, the Corporation shall
arrange for the Actuary to provide a summary of same to the Trustee.
Prior to the funding and/or settlement of all of the Obligations in
accordance with the terms of this Restated Agreement, the Corporation
shall, within forty-five days after the applicable Anniversary Date and
in accordance with the terms of the report received from the Actuary:
- 17 -
(a) either:
(i) arrange for a Letter of Credit to be provided by the Bank
to the Trustee to replace the Letter of Credit then held by
the Trustee. The replacement Letter of Credit shall be:
(A) substantially in the form of the Letter of Credit
then held by the Trustee;
(B) in an amount calculated by the Actuary as at the
applicable Valuation Date in accordance with the
provisions of Section 10.5 of this Restated
Agreement; and
(C) for a term which commences on the date of its
issuance and expires one year following the
applicable Valuation Date; or
(ii) confirm to the Trustee in writing that the Letter of Credit
then held by the Trustee will be extended automatically for
a further one-year term. The confirmation to the Trustee
shall include evidence from the Bank as to any amendment to
the applicable Letter of Credit, any such amendment to be
consistent with the report prepared by the Actuary as at
the applicable Valuation Date; and
(b) contribute to the Trust an amount equal to twice the fee charged
by the Bank in connection with the Letter of Credit extension or
replacement, as applicable. The Corporation shall withhold
one-half of such amount and shall remit the said one-half of such
amount to the Canada Revenue Agency on account of the tax which is
exigible pursuant to the Tax Act in connection with such
contribution to the Trust. The Trustee shall remit the remaining
one-half of such amount to the Bank in consideration for the
Letter of Credit extension or replacement, as applicable.
When a replacement Letter of Credit has been provided in accordance with
the terms of this Section 10.3, an existing Letter of Credit shall be
surrendered and cancelled.
10.4 If, during the term of a Letter of Credit issued pursuant to this
Restated Agreement, the Corporation, acting reasonably, concludes that
there has been a significant change in the Obligations since the date of
the last report prepared by the Actuary pursuant to Section 10.3 of this
Restated Agreement, the Corporation shall request a report from the
Actuary as to the then current value of the Obligations, calculated in
accordance with the provisions of Section 10.5 of this Restated
Agreement. Upon receipt of the report, the Corporation shall provide a
summary of same to the Trustee and arrange, together with the Trustee,
for any required increase or decrease in the amount of the Letter of
Credit for the balance of the term of such Letter of Credit. In the event
that a replacement Letter of Credit is to be issued in the circumstances
described in this Section 10.4, the Corporation and the Trustee shall
arrange for such replacement Letter of Credit to be provided by the Bank
to the Trustee to replace the Letter of Credit then held by the Trustee.
- 18 -
Upon receipt of a replacement Letter of Credit pursuant to this Section
10.4, the Trustee shall surrender for cancellation the Letter of Credit
then held by it pursuant to this Restated Agreement and the Trust
Agreement.
In the event that all or any portion of the fee referred to in Section
10.3 of this Restated Agreement, is refunded by the Bank as a result of a
decrease in the amount of a Letter of Credit pursuant to this Section
10.4, such amount (together with any resulting refundable Tax) shall be
received by the Trustee for deposit to the Trust. Upon receipt of an
Authorized Instruction (as defined in the Trust Agreement), the Trustee
shall pay and transfer such amounts (less any applicable tax which it
will remit as required by the Tax Act on behalf of the Corporation) to
the Corporation for its sole and exclusive use and benefit.
In the event that an additional fee is required to be paid to the Bank as
a result of an increase in the amount of a Letter of Credit pursuant to
this Section 10.4, the Corporation shall contribute to the Trust an
amount equal to twice the additional fee. The Corporation shall withhold
one-half of such amount and shall remit the said one-half of such amount
to the Canada Revenue Agency on account of the tax which is exigible
pursuant to the Tax Act in connection with such contribution to the
Trust. The Trustee shall remit the remaining one-half of such amount to
the Bank in payment of its additional fee.
10.5 A Letter of Credit issued pursuant to this Restated Agreement shall:
(i) be an irrevocable standby letter of credit;
(ii) obligate the Bank to satisfy demand for payment made by the
Trustee in accordance with the terms of this Restated
Agreement and the Trust Agreement;
(iii) permit partial drawings; and
(iv) provide that the Bank must notify the Trustee on or before
thirty days prior to the expiry of a Letter of Credit of
any notice of non-extension provided by the Bank to the
Corporation.
The amount of a Letter of Credit pursuant to this Restated Agreement
shall be calculated by the Actuary in accordance with the following
subparagraphs of this Section 10.5.
(a) Assuming the lump sum payments referred to in Section 7.1(a) of
this Restated Agreement are equal to the amount thereof provided
by the Corporation.
(b) Assuming the service of the Executive will terminate, in
accordance with Section 5.1 or 6.1 of this Restated Agreement, on
the next succeeding March 31st after the Valuation Date (the
"Calculation Date").
(c) Using the Executive's demographic data, including base salary,
target bonus and current marital status as of the Valuation Date,
provided by the Corporation.
- 19 -
(d) Using the Yearly Maximum Pensionable Earnings (Y.M.P.E.) used to
determine the amount of the Canada Pension Plan Benefit and Tax
Act maximum defined benefit pension dollar limit as at the
Valuation Date.
(e) Assuming all Obligations are included.
(f) Using the actuarial methods, assumptions and calculation
methodology described in Schedule "B-2.
(g) Applying a load of 15% to the amount determined in accordance with
subparagraphs (b) through (f) of this Section 10.5 to provide for
fluctuations in the Interest Discount Rate, Consumer Price Index
and other plan experience during the term of the Letter of Credit,
as described in Schedule "B-2".
(h) Applying a load to one-half of the amount determined in accordance
with subparagraphs (a) through (g) of this Section 10.5 to provide
for the cost associated with the borrowings described in
subparagraph (k) of this Section 10.5, as described in Schedule
"B-2".
(i) Including a settlement expense to the amount determined in
subparagraph (h), with the aggregate settlement expense allowance
for all obligations secured equal to $250,000, or where the
Valuation Date is after December 31, 2008, the aggregate
settlement expense allowance will be increased at the rate equal
to the increase in the Consumer Price Index, as described in
Schedule "B-2", plus 1% for each year after 2008.
(j) Assuming the Obligations will be promptly settled with the
Executive upon occurrence of a Designated Event described in
Section 1.1(n)(ii).
(k) Assuming a loan will be secured to permit settlement of the
Obligations prior to receipt of the Refundable Tax Account from
the Canada Revenue Agency. The assumed interest rate payable on
the loan shall be as described in Schedule "B-2". The cost
associated with the borrowings shall be assumed to be paid from
the Trust.
(l) The liabilities calculated in accordance with subparagraphs (a)
through (k) above shall be offset by:
(i) the Refundable Tax Account, if any; and
(ii) the assets contained in the Trust, if any.
10.6 (a) If an Executive Benefit Plan Obligations - Designated Event shall
occur, the Corporation shall be required to immediately fund the
Executive Benefit Plan Obligations in accordance with the most
recent report prepared by the Actuary pursuant to Section 10.3 of
this Restated Agreement. Notwithstanding the foregoing, if an
Executive Benefit Plan Obligations - Designated Event described in
- 20 -
Section 1.1(x)(i) and a Change of Control Obligations - Designated
Event described in Section 1.1(n)(ii) shall occur simultaneously,
the Corporation shall be required to settle the Executive Benefit
Plan Obligations forthwith in accordance with the provisions of
Schedule "B-1".
(b) If:
(i) the employment of the Executive is terminated by the
Corporation for any reason other than as a result of the
death, disability or retirement of such Executive; and
(ii) such Executive files with the Corporation a written request
that it fund the Executive Benefit Plan Obligations,
the Corporation shall be required to immediately fund the
Executive Benefit Plan Obligations in accordance with the most
recent report prepared by the Actuary pursuant to Section 10.3
of this Restated Agreement.
(c) Upon the earlier of:
(i) learning of the occurrence of an Executive Benefit Plan
Obligations - Designated Event described in Section
1.1(x)(v) or (vi) of this Restated Agreement; or
(ii) receipt of a written notice of the occurrence of an
Executive Benefit Plan Obligations - Designated Event
described in any of the other subparagraphs of Section
1.1(x) of this Restated Agreement, which notice has been
signed by two executives of the Corporation, one of whom
must be either the Chief Financial Officer or the General
Counsel of the Corporation and which notice must, in the
case of an Executive Benefit Plan Obligations - Designated
Event described in Section 1.1(x)(i) of this Restated
Agreement, indicate which subparagraph of the definition of
"Change of Control" is applicable,
the Trustee shall promptly give notice to the Corporation in
writing that it intends to draw on that portion of the Letter of
Credit which is referable to the Executive Benefit Plan
Obligations and contribute the proceeds thereof (less any
applicable withholding tax which it will remit as required by the
Tax Act on behalf of the Corporation) to the Trust on behalf of
the Corporation in order to fund the Executive Benefit Plan
Obligations, unless it receives satisfactory proof within nine
days of such notice that the Corporation has funded or settled, as
applicable, the Executive Benefit Plan Obligations itself in
accordance with the terms of this Restated Agreement.
- 21 -
Unless the Corporation advises the Trustee in writing that it has
funded or settled, as applicable, the Executive Benefit Plan
Obligations in accordance with the terms of this Restated
Agreement and has provided the Trustee with satisfactory proof
thereof within nine days of the date of the aforementioned notice,
the Trustee shall draw on that portion of the Letter of Credit
which is referable to the Executive Benefit Plan Obligations on
the tenth day following the date of such notice (or the next
following business day if such tenth day is not a business day)
and contribute the proceeds thereof (less any applicable
withholding tax which it will remit as required by the Tax Act on
behalf of the Corporation) to the Trust on behalf of the
Corporation.
Notwithstanding the foregoing, in the event an Executive Benefit
Plan Obligations - Designated Event described in Section 1.1(x)(v)
or (vi) of this Restated Agreement has triggered the operation of
this Section 10.6 and the failure which gave rise to the
occurrence of such Executive Benefit Plan Obligations - Designated
Event has been remedied prior to the expiration of the notice
period provided for in this Section 10.6(c), the Trustee shall not
take the action described in the immediately preceding paragraph
hereof and all of the provisions of this Restated Agreement shall
continue to apply to the same extent and as fully as they would
have in the event that such Executive Benefit Plan Obligations -
Designated Event had not occurred.
(d) Upon receipt of a written notice of the occurrence of the events
described in both subparagraphs (i) and (ii) of Section 10.6(b) of
this Restated Agreement (which notice has been signed by the
Executive and sworn before a notary public), the Trustee shall
promptly give notice to the Corporation in writing that it intends
to draw on that portion of the Letter of Credit which is referable
to the Executive Benefit Plan Obligations and contribute the
proceeds (less any applicable withholding tax which it will remit
as required by the Tax Act on behalf of the Corporation) to the
Trust on behalf of the Corporation in order to fund the Executive
Benefit Plan Obligations unless it receives satisfactory proof
within nine days of the date of such notice that the Corporation
has funded the Executive Benefit Plan Obligations itself in
accordance with the terms of this Restated Agreement.
Unless the Corporation advises the Trustee in writing that it has
funded the Executive Benefit Plan Obligations in accordance with
the terms hereof and has provided the Trustee with satisfactory
proof thereof within nine days of the date of the aforementioned
notice, the Trustee shall draw upon that portion of the Letter of
Credit which is referable to the Executive Benefit Plan
Obligations on the tenth day following the date of such notice (or
the next following business day if such tenth day is not a
business day) and contribute the proceeds (less any applicable
withholding tax which it will remit as required by the Tax Act on
behalf of the Corporation) to the Trust on behalf of the
Corporation.
(e) For purposes of determining the required amount of funding or the
portion of the Letter of Credit to be drawn on for purposes of
this Section 10.6, the Trustee shall refer to the most recent
report prepared by the Actuary for purposes of this Restated
- 22 -
Agreement and, in particular, to the portion of the report dealing
with the Executive Benefit Plan Obligations. In preparing the
portion of its report respecting Executive Benefit Plan
Obligations, the Actuary shall adhere to the following:
(i) Assuming that the Executive, if then in active employment,
will remain in active employment with the Corporation as an
officer until the Calculation Date and that the Executive's
employment with the Corporation will terminate on the
Calculation Date.
(ii) Using the Executive's demographic data, including base
salary, actual bonus history, target bonus and current
marital status as of the Valuation Date, provided by the
Corporation.
(iii) Using the Canada Pension Plan Benefit and Tax Act maximum
defined benefit pension dollar limit as at the Valuation
Date.
(iv) Assuming the Executive's target bonus percentage remains at
the level specified by the Corporation pursuant to
subparagraph (ii) above.
(v) Assuming only Executive Benefit Plan Obligations are
included.
(vi) Assuming the payments under the Executive Benefit Plan
would be made from the Trust.
(vii) Using the actuarial methods, assumptions and calculation
methodology described in Schedule "B-2.
(viii) Applying loads as described in Schedule "B-2" to the amount
determined in accordance with the preceding subparagraphs
of this Section 10.6(e) to provide for future contingencies
and expenses of the Trust.
(ix) Calculating the estimated amount required to settle the
Executive Benefit Plan Obligations based on the actuarial
methods, assumptions and calculation methodology described
in Schedule "B-2", increased by the loads described in the
following subparagraph.
(x) Applying loads as described in Schedule "B-2" to the amount
determined in accordance with subparagraph (ix) to provide
for:
(A) fluctuations in the Interest Discount Rate and
Consumer Price Index during the term of the Letter
of Credit; and
(B) the cost associated with the loan to be secured as
allowed under the Trust Agreement to permit
settlement of the Executive Benefit Plan Obligations
prior to receipt of the Refundable Tax Account from
the Canada Revenue Agency. The assumed interest rate
- 23 -
payable on the loan shall be as described in
Schedule "B-2" and shall be applied to one-half of
the amount in subparagraph (ix). The cost associated
with the borrowings shall be assumed to be paid from
the Trust.
(xi) Taking the larger amount for the Executive of:
(A) the amount determined in accordance with
subparagraphs (i) through (viii), and
(B) the amount determined in accordance with
subparagraphs (ix) and (x).
(xii) The amount determined in accordance with subparagraph (xi)
above shall be offset by:
(A) the Refundable Tax Account, if any;
(B) the assets contained in the Trust, if any.
(f) In the event that the Executive Benefit Plan Obligations have been
funded in accordance with the terms hereof as a result of:
(i) the Corporation making an assignment for the benefit of
creditors or filing a petition in bankruptcy or becoming
insolvent or bankrupt;
(ii) a receiver, trustee or liquidator of or for the Corporation
being appointed and not being discharged within a period of
sixty days;
(iii) a voluntary dissolution or wind-up of the Corporation; or
(iv) a sale or disposition of all or substantially all of the
assets of the Corporation,
and the Executive Benefit Plan has been terminated in connection
therewith, the Executive Benefit Plan Obligations shall be
promptly settled by the Trustee with the Executive by way of a
lump sum payment from the Trust. For this purpose, the benefit
entitlements of each Executive shall be determined by the Actuary
in accordance with the terms of the Executive Benefit Plan and the
amount of the lump sum payment shall be determined by the Actuary
using the assumptions set forth in Schedule "B-1". Notice of
termination of the Executive Benefit Plan shall be provided to the
Trustee by the Corporation, failing which by two executives of the
Corporation, one of whom must be either the Chief Financial
Officer or the General Counsel of the Corporation.
- 24 -
Any assets of the Trust remaining after full satisfaction of (i)
the Executive Benefit Plan Obligations pursuant to the preceding
paragraph and (ii) any further obligations pursuant to the terms
of the Trust Agreement, shall be returned to the Corporation.
(g) In the event the Executive Benefit Plan shall be terminated at any
time either in whole or in part in relation to the Executive
subsequent to the funding of the Executive Benefit Plan
Obligations in accordance with the terms hereof, then, provided
Section 10.6(f) of this Restated Agreement is not otherwise
applicable, the Executive Benefit Plan Obligations shall be
promptly settled by the Trustee with the Executive by way of a
lump sum payment from the Trust.
For this purpose, the benefit entitlements of the Executive shall
be determined by the Actuary in accordance with the terms of the
Executive Benefit Plan and the amount of the lump sum payment
shall be determined by the Actuary using the assumptions set forth
in Schedule "B-1". Notice of the termination of the Executive
Benefit Plan shall be provided to the Trustee by the Corporation,
failing which by two executives of the Corporation, one of whom
must be either the Chief Financial Officer or the General Counsel
of the Corporation.
Any assets of the Trust remaining after full satisfaction of (i)
the Executive Benefit Plan Obligations and (ii) any further
obligations pursuant to the terms of the Trust Agreement, shall be
returned to the Corporation.
(h) In the event:
(i) of a dispute as to whether a payment to or in respect of
the Executive is properly due and payable pursuant to the
Executive Benefit Plan; and
(ii) such dispute cannot be resolved by the parties thereto
within the time frame specified in Section 1.1(x)(vi) of
this Restated Agreement,
the amount in dispute shall be remitted to the Trustee for deposit
to the Trust. Upon final settlement of the dispute, the amount so
deposited (together with any earnings, profits and increments
thereon and after deduction of any authorized payments allocable
thereto, both as determined in accordance with the terms of the
Trust Agreement), less any applicable withholding tax which will
be remitted as required by the Tax Act, shall be paid to that
party to the dispute which is found to be entitled thereto. Prior
to such amount being paid out of the Trust in accordance with the
terms hereof, the Corporation shall instruct the Actuary to take
such amount into account when preparing its report for purposes of
this Restated Agreement.
(i) In the event that a Change of Control Obligations - Designated
Event described in Section 1.1(n)(ii) of this Restated Agreement
shall occur subsequent to the funding of the Executive Benefit
Plan Obligations in accordance with the terms of this Restated
Agreement, the Corporation shall be required to settle the
- 25 -
Executive Benefit Plan Obligations forthwith in an amount
determined by the Actuary in accordance with the provisions of
Schedule "B-1".
(j) Subject to Section 10.6(f), 10.6(g) and 10.6(i) of this Restated
Agreement, in the event that the Executive Benefit Plan
Obligations have been funded in accordance with the terms hereof,
all or a portion of such Executive Benefit Plan Obligations may,
at the discretion of the Corporation, be promptly settled with the
Executive.
For this purpose, the benefit entitlements of the Executive shall
be determined by the Actuary in accordance with the terms of the
Executive Benefit Plan. In such circumstances, the Corporation
reserves the right to settle the Executive Benefit Plan
Obligations by way of a lump sum payment to the Executive provided
that the amount of each such payment is determined by the Actuary
in accordance with the assumptions set forth in Schedule "B-1".
10.7 (a) If a Change of Control Obligations - Designated Event described in
Section 1.1(n)(i) of this Restated Agreement shall occur, the
Corporation shall be required to immediately fund the Change of
Control Obligations in accordance with the most recent report
prepared by the Actuary pursuant to Section 10.3 of this Restated
Agreement.
(b) If a Change of Control Obligations - Designated Event described in
Section 1.1(n)(ii) of this Restated Agreement shall occur, the
Corporation shall be required to settle the Change of Control
Obligations forthwith in accordance with the provisions of
Schedule "B-1", upon receipt by the Corporation of a Release
executed by the Executive in the form attached to this Restated
Agreement as Schedule "A".
(c) Upon the earlier of:
(i) learning of the occurrence of a Change of Control
Obligations - Designated Event described in Section
1.1(n)(i) of this Restated Agreement; or
(ii) receipt of a written notice of the occurrence of a Change
of Control Obligations - Designated Event described in
Section 1.1(n)(ii) of this Restated Agreement, which notice
has been signed by the Executive and sworn before a notary
public and has annexed thereto a Release executed by the
Executive in the form attached to this Restated Agreement
as Schedule "A",
the Trustee shall promptly give notice to the Corporation in
writing that it intends to draw on that portion of the Letter of
Credit which is referable to the Change of Control Obligations and
contribute the proceeds thereof (less any applicable withholding
tax which it will remit as required by the Tax Act on behalf of
the Corporation) to the Trust on behalf of the Corporation in
- 26 -
order to fund the Change of Control Obligations, unless it
receives satisfactory proof within nine days of such notice that
the Corporation has funded or settled, as applicable, the Change
of Control Obligations itself in accordance with the terms of this
Restated Agreement.
Unless the Corporation advises the Trustee in writing that it has
funded or settled, as applicable, the Change of Control
Obligations in accordance with the terms of this Restated
Agreement and has provided the Trustee with satisfactory proof
thereof within nine days of the date of the aforementioned notice,
the Trustee shall draw on that portion of the Letter of Credit
which is referable to the Change of Control Obligations on the
tenth day following the date of such notice (or the next following
business day if such tenth day is not a business day) and
contribute the proceeds (less any applicable withholding tax which
it will remit as required by the Tax Act on behalf of the
Corporation) to the Trust on behalf of the Corporation.
Notwithstanding the foregoing, in the event a Change of Control
Obligations - Designated Event described in Section 1.1(n)(i) of
this Restated Agreement has triggered the operation of this
Section 10.7 and the failure which gave rise to the occurrence of
such Change of Control Obligations - Designated Event has been
remedied prior to the expiration of the notice period provided for
in this Section 10.7(c), the Trustee shall not take the action
described in the immediately preceding paragraph hereof and all of
the provisions of this Restated Agreement shall continue to apply
to the same extent and as fully as they would have in the event
that such Change of Control Obligations - Designated Event had not
occurred.
(d) The required amount of funding or the portion of the Letter of
Credit to be drawn on for purposes of this Section 10.7 shall be
determined by the Actuary and shall be the amount determined in
accordance with Sections 10.5(a) through (l) of this Restated
Agreement offset by the amount determined in accordance with
subparagraphs 10.6(e)(i) through (xii) of this Restated Agreement.
The settlement amount for purposes of this Section 10.7 shall be
determined in accordance with the provisions of Schedule "B-1".
(e) In the event that the Change of Control Obligations have been
funded in accordance with the terms hereof as a result of the
occurrence of a Change of Control Obligations - Designated Event
described in Section 1.1(n)(ii), the Change of Control Obligations
shall be promptly settled with the Executive in accordance with
the provisions of Schedule "B-1".
10.8 The actuarial methods and assumptions described in Schedule "B-1" and
Schedule "B-2" shall be reviewed from time to time. Any amendments to
Schedule "B-1" and/or Schedule "B-2" as a result of such review shall be
dealt with in accordance with Section 12.6.
- 27 -
10.9 The Trustee shall surrender the Letter of Credit to the Corporation for
cancellation upon the earliest of:
(a) receipt by the Trustee of a written direction signed by the
Corporation and the Executive directing surrender of the Letter of
Credit;
(b) receipt by the Trustee of a written direction signed by the
Corporation confirming that it has funded and/or settled the
Obligations in accordance with the terms hereof, together with
evidence which is satisfactory to the Trustee that such funding
and/or settlement has occurred; and
(c) receipt by the Trustee of a written direction signed by the
Corporation confirming that the Corporation has no remaining
Obligations to the Executive, together with evidence which is
satisfactory to the Trustee that the Corporation has no remaining
Obligations to the Executive and that a copy of such written
direction has been provided to the Executive.
10.10 The Trust shall be terminated by the Trustee upon the earliest of:
(a) receipt by the Trustee of a written direction signed by the
Corporation and the Executive confirming the termination of the
Trust;
(b) the entire depletion of the Trust Fund through payments pursuant
to the terms of the Trust Agreement, in the event that such
depletion occurs subsequent to the funding of the Obligations in
accordance with the terms of this Restated Agreement; and
(c) receipt by the Trustee of a written direction signed by the
Corporation confirming that the Corporation has no remaining
Obligations to the Executive, together with evidence which is
satisfactory to the Trustee that a copy of such written direction
has been provided to the Executive.
Upon the termination of the Trust, any assets of the Trust which remain
after the satisfaction of any remaining Obligations of the Corporation to
the Executive shall be returned to the Corporation.
10.11 The Corporation and the Executive hereby acknowledge that the Corporation
is entering into agreements similar to this Restated Agreement with
certain of its other executives and that the Corporation may, at its sole
discretion, arrange for one or more Letters of Credit to satisfy its
responsibilities under this Restated Agreement and such other agreements.
In the event that one Letter of Credit is obtained to satisfy the
Corporation's responsibilities under this Restated Agreement and some or
all of such other agreements, references to a "Letter of Credit" in this
Restated Agreement shall be read as references to that portion of such
Letter of Credit which is referable to the responsibilities of the
Corporation to the Executive.
- 28 -
The Corporation and the Executive also acknowledge that the Corporation
may, at its sole discretion, enter into one or more Trust Agreements to
satisfy its responsibilities under this Restated Agreement and such other
agreements. In the event that one Trust Agreement is entered into to
satisfy the Corporation's responsibilities under this Restated Agreement
and some or all of such other agreements, references to "Trust", "Trust
Agreement", "Trustee" and "Refundable Tax Account" in this Restated
Agreement shall be read with such modifications as may be necessary in
the context.
10.12 At the discretion of the Corporation and subject to the provisions of
applicable law, in the event that all or a portion of the Obligations are
funded in accordance with Article 10 hereof and an actuarial surplus
(determined by actuarial valuation in accordance with the terms of the
report prepared as at the immediately preceding Valuation Date in
accordance with Section 10.3 of this Restated Agreement) arises as a
result thereof:
(a) all or a portion of such actuarial surplus may be used in the
determination of or to reduce the funding otherwise required to be
provided by the Corporation hereunder; or
(b) any surplus assets may, to the extent that they exceed 110% of the
amount required to fund that portion of the Obligations which has
been funded (as determined by the report prepared as at the
immediately preceding Valuation Date in accordance with Section
10.3 of this Restated Agreement) be returned to the Corporation.
ARTICLE 11
EXPEDITED ARBITRATION
---------------------
11.1 If, pursuant to Section 6.1 of this Restated Agreement, the Executive
provides written notice of the Executive's intention to terminate the
Executive's employment for Good Reason, and the Corporation believes that
there is no Good Reason, or, alternatively, if, pursuant to Section 4.1
of this Restated Agreement, the Corporation provides written notice of
its intention to terminate the Executive's employment for Just Cause and
the Executive believes there is no Just Cause, the Corporation or the
Executive, as applicable, shall, within ten (10) days of having been
provided such notice, provide written notice ("Notice of Dispute") to the
other Party of the dispute (the "Dispute").
11.2 The Parties agree that any and all Disputes under Section 11.1 of this
Restated Agreement will be resolved by way of a single Arbitrator.
11.3 (a) Within fifteen (15) days of provision of the Notice of Dispute,
the Parties shall agree upon and appoint a neutral Arbitrator from
the then current roster maintained by the Alberta Mediation and
Arbitration Society to act as Arbitrator of the Dispute; or
- 29 -
(b) If no person acceptable to both Parties has been agreed upon and
appointed within fifteen (15) days, then either Party may make
immediate application to the Court of Queen's Bench of Alberta,
Judicial District of Calgary, to have an Arbitrator appointed.
11.4 The Parties acknowledge and agree that the purpose of this Article 11 is
to avoid delays and facilitate resolution of the Dispute in a just,
speedy and cost-effective manner.
11.5 Consistent with the expedited nature of arbitration, the Arbitrator will
direct and control the scope and timing of the exchange of information
between the Parties and will take such steps as the Arbitrator deems
necessary to achieve a just, speedy and cost-effective resolution of the
Dispute. The Arbitrator has the exclusive right and power to resolve all
issues related to the exchange of information in the arbitration process.
11.6 The Parties agree that the Arbitrator is only authorized to determine
whether the Executive had Good Reason for terminating the Executive's
employment, or alternatively, whether the Corporation had Just Cause to
terminate the Executive's employment.
11.7 A hearing will occur within forty-five (45) days of the appointment of
the Arbitrator (the "Hearing"). The time of the Hearing (the "Hearing
Date") will be scheduled by the Arbitrator after consultation with the
Parties. The Hearing will be governed by the rules set out in the
Arbitration Act S.A. 1991, c.A-43, as modified by the Arbitrator in the
interests of achieving a just, speedy and cost-effective resolution of
the Dispute. The Arbitrator may require written submissions of fact in
the Dispute to be provided seven (7) days before the Hearing Date.
11.8 The Arbitrator will use best efforts to provide a written decision within
seven (7) days of the conclusion of the Hearing.
11.9 The Parties agree that the decision of the Arbitrator will be final and
binding upon the Parties.
ARTICLE 12
GENERAL
-------
12.1 The headings of the Articles and paragraphs in this Restated Agreement
are inserted for convenience only and shall not affect the meaning or
construction of this Restated Agreement.
12.2 This Restated Agreement shall be construed and interpreted in accordance
with the laws of the Province of Alberta and the federal laws of Canada
as applicable therein.
12.3 If any provision of this Restated Agreement is determined to be void or
unenforceable in whole or in part, it shall be and be deemed to be
severed from this Restated Agreement without affecting or impairing the
validity of any other provision herein.
- 30 -
12.4 Any notice required or permitted to be given under this Restated
Agreement shall be in writing and shall be properly given if delivered by
hand delivery or mail or other form of electronic communication capable
of transmission confirmation to the following address:
a. IN THE CASE OF THE CORPORATION TO:
----------------------------------
Nexen Inc.
000 - 0xx Xxxxxx X.X.
Xxxxxxx, XX X0X 0X0
Attention: General Manager, Compensation and Benefits
b. IN THE CASE OF THE EXECUTIVE TO:
--------------------------------
the last address of the Executive in the records of the
Corporation or to such other address as the Parties may from time
to time specify by notice given in accordance herewith.
12.5 This Restated Agreement shall enure to the benefit of and be binding upon
the Executive and the Executive's heirs, executors and administrators and
upon the Corporation and its successors and assigns.
12.6 This Restated Agreement constitutes the entire agreement relating to the
respective rights and obligations of the Parties upon the occurrence of a
Change of Control. No amendment or waiver of this Restated Agreement
shall be binding unless executed in writing by the Parties.
Notwithstanding the foregoing,
(a) any amendment to Article 10 of this Restated Agreement, Schedule
"B-1" or Schedule "B-2" which is required to ensure that the
balance remaining in the Trust after the required tax has been
withheld and remitted to the Canada Revenue Agency is sufficient
to satisfy the fee levied by the Bank in connection with the
issuance of a Letter of Credit may be made by the Corporation
without the prior written approval of the Executive; and
(b) the Corporation may amend, modify or waive Article 10 of this
Restated Agreement, Schedule "B-1" and Schedule "B-2" in whole or
in part, at such time and from time to time, and in such manner
and to such extent as it may deem advisable without obtaining the
approval of the Executive, provided that such amendment,
modification or waiver, as the case may be, does not adversely
affect the securitization in accordance with the terms hereof of
those Obligations which have accrued up to the date of such
amendment, modification or waiver, as the case may be.
- 31 -
12.7 The Parties agree that the rights, entitlements and benefits set out in
this Restated Agreement to be paid to the Executive upon a Change of
Control shall be in full satisfaction of all rights of the Executive
under applicable law in effect from time to time as a result thereof.
12.8 Neither Party can waive or shall be deemed to have waived any right it
has under this Restated Agreement except to the extent that such waiver
is in writing.
12.9 Nothing contained in this Restated Agreement shall be construed as
limiting the ability of the Corporation to amend, modify or terminate the
Executive Benefit Plan in whole or in part, at such time and from time to
time, and in such manner and to such extent as it may deem advisable.
The Parties have executed this Restated Agreement effective the date first
written above.
NEXEN INC.
Per: (signed)
---------------------------
Per: (signed)
---------------------------
SIGNED, SEALED & DELIVERED
in the presence of
(signed) (signed)
------------------------------- --------------------------------
WITNESS XXXXX XXXXXX
SCHEDULE "A"
------------
AMENDED AND RESTATED AGREEMENT
RESPECTING CHANGE OF CONTROL AND
EXECUTIVE BENEFIT PLAN ENTITLEMENTS
In order to receive the entitlements referred to in the Article 7 of this
Restated Agreement, the Executive shall execute the attached Release, fully
releasing the Corporation from all further claims in relation to the Executive's
employment or Employment Benefits and the termination thereof upon payment of
the remuneration and benefits referred to in Article 7 of this Restated
Agreement. The attached Release shall not, however, require that the Executive
relinquish or release any rights to indemnity which the Executive may, as an
officer or director of the Corporation or any of its Affiliates, Associates and
Subsidiaries, have as against the Corporation or any of its Affiliates,
Associates and Subsidiaries, for costs, charges and expenses reasonably incurred
by the Executive in respect of any civil, criminal or administrative action or
proceeding to which the Executive is made a party by reason of being or having
been a director or officer of the Corporation or any of its Affiliates,
Associates and Subsidiaries, where:
(a) the Executive has acted honestly and in good faith with a view to
the best interests of the Corporation or any of its Affiliates,
Associates and Subsidiaries; and
(b) in the case of a criminal or administrative action or proceeding
enforced by a monetary penalty, the Executive had reasonable
grounds for believing the Executive's conduct was lawful.
FINAL RELEASE
-------------
KNOW ALL MEN BY THESE PRESENTS that I, XXXXX XXXXXX, of the City of Calgary, in
the Province of Alberta, in consideration of the amounts provided in that
certain Amended and Restated Agreement Respecting Change of Control and
Executive Benefit Plan Entitlements (the "Restated Agreement") dated as of the
______ day of ____________, 2008 between myself and NEXEN INC. and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, do for myself, my executors and assigns hereby remise, release and
forever discharge the Corporation, and any associated, affiliated, predecessor
or parent corporation of the Corporation and their present and former directors,
officers, agents and employees (the "Releasees"), including each of their
respective successors, heirs, administrators and assigns, from all manner of
actions, causes of action, debts, obligations, covenants, claims or demands,
whatsoever which I may ever have had, now have, or can, shall or may hereafter
have against the Releasees or any of them, by reason of or arising out of any
cause, matter or thing whatsoever done, occurring or existing up to and
including the present date and, in particular, without in any way restricting
the generality of the foregoing, in respect of all claims of any nature
whatsoever, past, present or future, directly or indirectly related to or
arising out of or in connection with my relationship with the Releasees, as an
employee, officer or director, and the termination of my employment from the
Corporation including, but not limited to, any claims related to any entitlement
I may have or may have had to any payment or claim either at common law or under
the Employment Standards Code, Human Rights, Citizenship and Multiculturalism
Act or any other applicable legislation governing or related to my employment
with the Releasees.
AND FOR THE SAID CONSIDERATION, I, XXXXX XXXXXX, represent and warrant that I
have not assigned to any person, firm or corporation any of the actions, causes
of action, claims, suits, executions or demands which I release by this Release,
or with respect to which I agree not to make any claim or take any proceeding
herein.
IT IS FURTHER ACKNOWLEDGED that the payment to me includes full compensation and
consideration for the loss of my employment benefits, as provided by the
Releasees, and that all of my employment benefits and privileges shall cease on
the date of termination of my employment, except as otherwise expressly provided
in the Restated Agreement. I further acknowledge that I have received all
benefits due to me and have no further claim against the Releasees for such
benefits. I further accept sole responsibility to replace such benefits which I
wish to continue or to exercise conversion privileges where applicable with
respect to such benefits and, in particular any life insurance and long-term
disability benefits. In the event that I become disabled following termination
of my employment, I covenant not to xxx the Releasees for insurance or other
benefits or loss of same and hereby release the Releasees from any and all
further obligations or liabilities arising therefrom.
Notwithstanding anything contained herein, this Release shall not extend to or
affect, or constitute a release of, my right to xxx, claim against or recover
from the Releasees and shall not constitute an agreement to refrain from
bringing, taking or maintaining any action against the Releasees in respect of:
(a) any corporate indemnity existing by statute, contract or pursuant
to any of the constating documents of the Corporation provided in
my favour in respect of my having acted at any time as a director,
officer or both of the Corporation;
(b) my entitlement to any insurance maintained for the benefit or
protection of the directors and/or officers of the Corporation,
including without limitation, directors' and officers' liability
insurance; or
(c) my entitlement to any amounts or compensation due to me under the
terms of my employment pursuant to the Restated Agreement.
IT IS HEREBY AGREED that the terms of the Restated Agreement and of this Release
will be kept confidential. No party hereto shall communicate any such terms to
any third party under any circumstances whatsoever, excepting any necessary
communication with my legal and financial advisors, as required, on the express
condition that they maintain the confidentiality thereof, and any disclosure
which is required by law, although either party shall be at liberty to disclose
to third parties that a mutually acceptable Release was agreed upon. The
invalidity and unenforceability of any provision of this Release shall not
affect the validity or enforceability of any other provision of this Release,
which shall remain in full force and effect.
I HEREBY DECLARE that I have read all of this Release, fully understand the
terms of this Release and voluntarily accept the consideration stated herein as
the sole consideration for this Release for the purpose of making a full and
final settlement with the Releasees. I further acknowledge and confirm that I
have been given an adequate period of time to obtain independent legal counsel
regarding the meaning and the significance of the terms herein and the covenants
mutually exchanged.
IT IS HEREBY AGREED THAT as a term of the termination of my employment from the
Corporation, and in consideration of the amount noted above, I hereby resign as
officer and director of the Corporation and its affiliates.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this _____ day of
______________ in the year _________.
---------------------------------
XXXXX XXXXXX
---------------------------------
WITNESS (signature)
---------------------------------
WITNESS (print name)
SCHEDULE "B-1"
--------------
AMENDED AND RESTATED AGREEMENT
RESPECTING CHANGE OF CONTROL AND
EXECUTIVE BENEFIT PLAN ENTITLEMENTS
METHODOLOGY AND ASSUMPTIONS FOR DETERMINING SETTLEMENT VALUE
PURPOSE
In accordance with the terms of the Restated Agreement, the purpose of this
Schedule "B-1" is to outline the calculation approach such that, after tax has
been paid on a lump sum settlement value, the remaining balance is intended to
be sufficient to provide after-tax monthly payments equivalent to the after-tax
monthly payments the Executive would have received under the terms of the
Executive Benefit Plan as provided for under this Restated Agreement.
OVERVIEW FOR DEFINED BENEFIT PENSION
The following outlines the actuarial methods, assumptions and calculation
process to be used in determining the lump sum settlement value of the defined
benefit pension entitlements under the Executive Benefit Plan when settlement
occurs in accordance with Section 10 of the Restated Agreement. Section 300 of
the Income Tax Regulations establishes the procedure applicable in using an
after-tax lump sum to purchase a prescribed annuity:
1. A prescribed annuity payment consists of two components: (a) the deemed
capital element of the annuity payment on which no tax is payable, and
(b) the deemed non-capital portion of the annuity payment which is taxed
at the marginal rate.
2. The capital portion of each future annuity payment is considered to be a
return of the original after-tax lump sum amount.
3. The non-capital portion of each annuity payment is assumed to be provided
by the investment return on the original after-tax lump sum amount and
has therefore not yet been taxed.
4. A constant percentage of each future payment is deemed to be a return of
the original lump sum capital.
CALCULATION METHODOLOGY
1. Equivalent after-tax payments:
a. Determine initial gross annual pension entitlement under the Executive
Benefit Plan.
b. Determine after-tax annual pension entitlement under the Executive
Benefit Plan based on Individual Tax Rate as defined in Schedule "B-1".
- 2 -
c. Determine the capital element based on the non-indexed present value of
the pension payments divided by life expectancy.
d. Determine the monthly payment which provides an after-tax pension equal
to the after-tax pension determined in 1.b. above in accordance with the
prescribed annuity methodology.
2. Present value of periodic payments from 1. above:
a. Determine the present value of the pension determined in 1.d. above using
the assumptions described below in this Schedule "B-1". For greater
certainty, the value of the post-retirement indexation is to be reflected
in determining the present value of the accrued pension entitlement in
respect of post-1992 service, and any accrued pension in respect of
service granted during the Severance Period.
3. Tax adjustment:
x. Xxxxx-up the present value determined in 2.a. above to reflect the tax
assumed to be required to be paid on the lump sum.
x. Xxxxx-up the amount determined in 3.a. above to reflect the tax assumed
to be required to be paid on investment earnings in respect of the lump
sum payment during the deferral period prior to assumed pension
commencement, if any.
4. Equivalent present value after tax as the after-tax monthly payments:
a. The amount determined in 3.b. above shall be the lump sum settlement
value of the Executive's pension entitlement.
ASSUMPTIONS
Interest Discount Rate:
-- during deferral period Yield on long-term Government of Canada
bonds as published in the Bank of
Canada Review, described in CANSIM
series V122544 (or a successor series)
for the last trading Wednesday at the
end of the month immediately preceding
the date of calculation, rounded down
to next lower 0.5.
-- after assumed pension commencement Yield on long-term Government of Canada
bonds as published in the Bank of
Canada Review, described in CANSIM
series V122544 (or a successor series)
for the last trading Wednesday at the
end of the month immediately preceding
the date of calculation, rounded down
to next lower 0.5,
less
- 3 -
assumed escalation of pensions after
retirement.
Increase in Consumer Price Index: Yield on long-term Government of Canada
bonds as published in the Bank of
Canada Review, described in CANSIM
series V122544 (or a successor series)
for the last trading Wednesday at the
end of the month immediately preceding
the date of calculation,
less
Yield on long-term Government of Canada
Real Return bonds as published in the
Bank of Canada Review, described in
CANSIM series V122553 (or a successor
series) for the last trading Wednesday
at the end of the month immediately
preceding the date of calculation.
The result of the difference is then
rounded up to the next highest 0.5% .
Escalation of Pensions After 75% of CPI, less 1% (minimum increase
Retirement: 25% of CPI). Applies only to benefits
accrued for service after December 31,
1992.
Mortality:
-- for life expectancy 1994 Uninsured Pensioner Mortality
Table with mortality improvements
projected to 15 years beyond the date
of termination.
-- for present values
o prior to assumed pension Nil.
commencement
o after assumed pension 1994 Uninsured Pensioner Mortality
commencement Table with mortality improvements
projected 15 years beyond the date of
termination.
Marital Status: Actual status at date of termination.
Age of Spouse: Based on actual date of birth.
Individual Tax Rate: Maximum individual marginal tax rate
for employee's province of employment
at the date of termination.
SCHEDULE "B-2"
--------------
AMENDED AND RESTATED AGREEMENT
RESPECTING CHANGE OF CONTROL AND
EXECUTIVE BENEFIT PLAN ENTITLEMENTS
METHODOLOGY AND ASSUMPTIONS FOR DETERMINING THE AMOUNT TO BE SECURED OR FUNDED
IN ACCORDANCE WITH SECTION 10 BASED ON THE METHODOLOGY DESCRIBED IN SCHEDULE
"B-1"
PURPOSE
The purpose of this Schedule "B-2" is to provide the actuarial methodology and
assumptions for determining the amount to be secured or funded in accordance
with Section 10 of the Restated Agreement.
METHODOLOGY
The settlement methodology is described in Schedule B-1.
The funding methodology applicable to the Executive Benefit Plan Obligations is
based on the following:
1. Estimate the accrued pension payable from the Executive Benefit Plan as
at the Valuation Date.
2. Assume that the assets of the plan are to be invested in long term
Government of Canada bonds and subject to the 50% refundable tax
applicable to retirement compensation arrangements.
3. Determine the present value of the amounts in 1 through 2 above.
4. Estimate the settlement value that could be paid in accordance with the
methodology and assumptions described in Schedule B-1.
5. The funding amount in respect of the Executive Benefit Plan Obligations
shall be the greater of the amount determined in accordance with 1
through 3 above and the amount in 4 above.
ASSUMPTIONS
Interest Discount Rate:
-- during deferral period Yield on long-term Government of Canada
bonds as published in the Bank of
Canada Review, described in CANSIM
series V122544 (or a successor series)
for the last trading Wednesday at the
end of the month immediately preceding
the Anniversary Date, rounded down to
next lower 0.5.
- 2 -
-- after assumed pension commencement Yield on long-term Government of Canada
bonds as published in the Bank of
Canada Review, described in CANSIM
series V122544 (or a successor series)
for the last trading Wednesday at the
end of the month immediately preceding
the Anniversary Date, rounded down to
next lower 0.5 , less assumed
escalation of pensions after
retirement.
Increase in Consumer Price Index: Yield on long-term Government of Canada
bonds as published in the Bank of
Canada Review, described in CANSIM
series V122544 (or a successor series)
for the last trading Wednesday at the
end of the month immediately preceding
the Anniversary Date,
less
Yield on long-term Government of Canada
Real Return bonds as published in the
Bank of Canada Review, described in
CANSIM series V122553 (or a successor
series) for the last trading Wednesday
at the end of the month immediately
preceding the Anniversary Date.
The result of the difference is then
rounded up to the next highest 0.5%.
Escalation of Pensions After Retirement: 75% of CPI, less 1% (minimum increase
25% of CPI). Applies only to benefits
accrued for service after December 31,
1992.
Mortality:
-- for life expectancy 1994 Uninsured Pensioner Mortality
Table with mortality improvements
projected to 15 years beyond the
Calculation Date.
-- for present values
o prior to assumed pension Nil.
commencement
o after assumed pension 1994 Uninsured Pensioner Mortality
commencement Table with mortality improvements
projected 15 years beyond the
Calculation Date.
- 3 -
Marital Status: Actual status at the Anniversary.
Age of Spouse: Based on actual date of birth.
Individual Tax Rate: Maximum individual marginal tax rate
for employee's province of employment
at the Anniversary Date
Bonus: Target bonus % applied to the salary
rate at the Valuation Date
Investment return: Yield on long-term Government of Canada
bonds as published in the Bank of
Canada Review, described in CANSIM
series V122544 (or a successor series)
for the last trading Wednesday at the
end of the month immediately preceding
the Anniversary Date rounded down to
next lower 0.5%, and then divided by 2
Decrements: None assumed prior to Calculation Date
Eligibility for Pensions: 100% vested
PENSION COMMENCEMENT AGE:
-- eligible for subsidized early Payable at the completion of the
retirement on the Calculation Severance Period. Payable at the
Date (i.e., age 55 and 10 years Calculation Date for purposes of
of continuous service) determining the amount required under
Section 10.6(e).
-- not eligible for early retirement Deferred to age 60 or the end of the
on the Calculation Date Severance Period if later. Payable at
age 60 for purposes of determining the
amount required under Section 10.6(e).
Fluctuation reserve (1) 15% of the pension obligations
Cost of borrowing to settle the Yield on one month Government of Canada
obligations Treasury Bills as published in the Bank
of Canada Review, described in CANSIM
series V122529 (or a successor series)
for the last trading Wednesday at the
end of the month immediately preceding
the Anniversary Date, rounded up to the
next higher 0.25%, plus 1.50%
- 4 -
--------------------------------------------------------------------------------
Notes:
(1) Referred to by Section 10.5(g), Section 10.6(e)(viii) and 10.6(e)(x). The
15% load is intended to provide a reserve for a potential decrease in the
Interest Discount Rate in combination with potential increases in the
Consumer Price Index for an aggregate change of 1.0%.
SCHEDULE "C"
------------
AMENDED AND RESTATED AGREEMENT RESPECTING CHANGE OF
CONTROL AND EXECUTIVE BENEFIT PLAN ENTITLEMENTS
ESTIMATED(1) ENTITLEMENT TO COMPENSATION
PURSUANT TO ARTICLE 7 OF THE RESTATED AGREEMENT
-------------------------------------------------------------------------------
Employee - Xxxxx Xxxxxx
-------------------------------------------------------------------------------
Base Salary $1,375,000
-------------------------------------------------------------------------------
Bonus Target Value $825,000
-------------------------------------------------------------------------------
Benefits Uplift $178,750
-------------------------------------------------------------------------------
Car Allowance $48,000
-------------------------------------------------------------------------------
Savings Plan $82,500
-------------------------------------------------------------------------------
Financial Counselling Services $10,500
-------------------------------------------------------------------------------
Security Monitoring Services $2,400
-------------------------------------------------------------------------------
TOTAL VALUE $2,522,150
-------------------------------------------------------------------------------
Additional Lump Sum Settlement Value of Pension(2) $4,388,721
-------------------------------------------------------------------------------
TOTAL ESTIMATED ENTITLEMENT $6,910,871
-------------------------------------------------------------------------------
In addition to the above, Section 7.1(c) of the Restated Agreement provides for
Executive Outplacement counselling to be provided by a firm selected by the
Executive, at a cost to the Corporation not to exceed $25,000.
IN ADDITION to the above pension entitlement under the Agreement, the Executive
has the following pension entitlements under the Defined Benefit Registered
Pension Plan and Executive Benefit Plan. As is the case with the figures shown
above, these values are estimated values (as of April 1, 2008) and are for
illustrative purposes only. Actual values will be calculated as of the date of
the entitlement or payment in accordance with the Defined Benefit Registered
Pension Plan and the Executive Benefit Plan, respectively, and therefore may be
subject to change.
o Accrued Annual Defined Benefit Pension Entitlement $37,068
(Registered Pension Plan)(3)
o Estimated Lump Sum Value of Executive Benefit Plan(4) $4,253,576
--------------
(1) As stated in Section 7.1 of the Restated Agreement, the above calculations
represent only the current estimated value (as of April 1, 2008) of the
Executive's entitlement to compensation upon a Change of Control.
Accordingly, the above calculations are for illustrative purposes only.
- 2 -
(2) Calculated in accordance with Section 7.1(b) of the Restated Agreement.
- Adjustment to EBP lump sum value to reflect settlement $1,750,125.
- Additional settlement value of pension accrued during the severance
period upon a change of control $2,638,596.
(3) Benefit payable immediately at April 1, 2008.
(4) Based on the Standards of Practice for Determining Pension Commuted Values
approved by the Canadian Institute of Actuaries using rates applicable for
April 2008 terminations.
AMENDED AND RESTATED AGREEMENT
RESPECTING CHANGE OF CONTROL AND EXECUTIVE
BENEFIT PLAN ENTITLEMENTS
This amended and restated agreement respecting change of control and executive
benefit plan entitlements made as of the 5th day of September, 2008.
BETWEEN:
NEXEN INC., a corporation incorporated under the laws
of Canada
hereinafter referred to as the "Corporation")
- and -
XXXX NIEUWENBURG
(hereinafter referred to as the "Executive")
RECITALS:
1. The Executive, as Senior Vice President, Synthetic Crude of the
Corporation, is considered by the Board to be an essential officer and
employee of the Corporation, who is both integral to the operation and
development of the Corporation, and has acquired outstanding skills,
unique experience and possesses an extensive background in, and knowledge
of, the Corporation's business, operations and the industry in which it is
engaged.
2. In the event of a Change of Control, there is a possibility that the
employment of the Executive would be terminated without just cause or
adversely modified and the Executive has expressed concern in that regard
to the Corporation.
3. The Board recognizes that it is essential and in the best interests of the
Corporation and its shareholders that the Corporation retain the continued
dedication of the Executive to the Executive's office and the Executive's
employment during the uncertain period prior to, during and following a
Change of Control.
4. The Board further believes that the past service of the Executive and the
Executive's integral role in the development and operation of the
Corporation requires that the Corporation ensure that in the event of a
Change of Control the Executive is treated in a manner that is fair,
reasonable, consistent with industry standards and in the best interests
of the Corporation.
5. The Corporation and the Executive entered into a Change of Control
Agreement on January 4, 2002 (the "Original Agreement") to agree on the
terms and conditions which would govern the termination or modification of
the employment of the Executive following a Change of Control.
- 2 -
6. The Original Agreement was amended by an Amending Agreement dated May 30,
2003 (the "Amending Agreement") which, among other matters, detailed the
Corporation's security and funding obligations in respect of the Change of
Control Obligations (as hereinafter defined), provided for the
securitization and funding of the Executive Benefit Plan Obligations (as
hereinafter defined) and provided for the cessation of the Executive's
coverage under the Statement of Company Procedure Regarding the
Securitization of Nexen Inc. Restated Executive Benefit Plan, as amended
or replaced from time to time (the "Securitization Procedure").
7. The Corporation and the Executive wish to amend the Original Agreement and
the Amending Agreement as herein provided and, in doing so, wish to
restate those agreements as herein amended (the "Restated Agreement").
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Restated Agreement and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged by the Parties,
the Parties agree as follows:
ARTICLE 1
DEFINITIONS
-----------
1.1 In this Restated Agreement, the following terms shall mean as follows:
(a) "ACTING JOINTLY OR IN CONCERT" for the purposes of this
Restated Agreement, a Person is acting jointly or in concert
with another Person if such Person has any agreement,
arrangement or understanding (whether formal or informal and
whether or not in writing) with such other Person for the
purpose of acquiring, offering to acquire, or voting any Common
Shares of the Corporation (other than customary agreements with
and between underwriters and banking group or selling group
members with respect to a distribution of securities by way of
prospectus or private placement or pursuant to a pledge of
securities in the ordinary course of business).
(b) "ACTUARY" has the meaning referred to in Section 10.2 of this
Restated Agreement.
(c) "AFFILIATE" and "ASSOCIATE" have the meaning ascribed to such
terms in National Instrument 45-106.
(d) "ANNIVERSARY DATE" has the meaning referred to in Section 10.3
of this Restated Agreement.
(e) "ANNUAL BASE SALARY" means the annual base salary of the
Executive payable by the Corporation at the end of the month
immediately preceding the Date of Termination.
- 3 -
(f) "ANNUAL TARGET BONUS" means the Executive's annual target bonus
as determined by the Board to be in effect for the calendar
year in which a Change of Control occurs.
(g) "BANK" has the meaning referred to in Section 10.2 of this
Restated Agreement.
(h) "BENEFICIAL OWNER" for the purposes of this Restated Agreement,
a Person shall be deemed to be the "BENEFICIAL OWNER" and to
have "BENEFICIAL OWNERSHIP" of and to "BENEFICIALLY OWN":
(i) any securities as to which such Person or any of such
Person's Affiliates or Associates is the owner at law
or in equity;
(ii) any securities as to which such Person or any of such
Person's Affiliates or Associates has a right to
acquire (i) upon the exercise of any Convertible
Securities or (ii) pursuant to any agreement,
arrangement or understanding, whether such right is
exercisable immediately within a period of sixty (60)
days thereafter and whether or not on condition or the
happening of any contingency, (other than (a) customary
agreements with and between underwriters and banking
group and selling group members with respect to the
distribution to the public or pursuant to a private
placement of securities, or (b) pursuant to a pledge of
securities in the ordinary course of business); and
(iii) any securities which are Beneficially Owned within the
meaning of clauses (a) or (b) above by any other Person
with which such Person is Acting Jointly or in Concert,
provided, however, that a Person shall not be deemed the
"Beneficial Owner" or to have "Beneficial Ownership" of or to
"Beneficially Own" any security where such Person is the
registered holder of securities as a result of carrying on the
business of or acting as nominee for a securities depository.
For purposes of this Restated Agreement, the percentage of
Common Shares Beneficially Owned by any Person, shall be and be
deemed to be the product determined by the formula:
100 x A/B
Where:
A = the number of votes for the election of all directors
generally attaching to the Common Shares Beneficially
Owned by such Person; and
B = the number of votes for the election of all directors
generally attaching to all outstanding Common Shares.
- 4 -
For the purposes of the foregoing formula, where a Person
Beneficially Owns unissued Common Shares which may be acquired
pursuant to Convertible Securities, such Common Shares shall be
deemed to be outstanding for the purpose of calculating the
percentage of Common Shares Beneficially Owned by such Person
in both the numerator and the denominator, but no other
unissued Common Shares which may be acquired pursuant to any
other outstanding Convertible Securities shall, for the
purposes of that calculation, be deemed to be outstanding.
(i) "BOARD" means the Board of Directors of the Corporation as
constituted from time to time.
(j) "CBCA" means the Canada Business Corporations Act, as amended
from time to time, and any successor legislation thereto.
(k) "CALCULATION DATE" has the meaning referred to in Section 10.5
of this Restated Agreement.
(l) "CHANGE OF CONTROL" means the occurrence of any of:
(i) the purchase or acquisition of any Common Shares or
Convertible Securities by a Beneficial Owner which
results in the Beneficial Owner owning, or exercising
control or direction over, Common Shares or Convertible
Securities such that, assuming only the conversion of
Convertible Securities Beneficially Owned or over which
control or direction is exercised by the Beneficial
Owner, the Beneficial Owner would own, or exercise
control or direction over, Common Shares carrying the
right to cast more than thirty-five percent (35%) of
the votes attaching to all Common Shares; or
(ii) the substantial completion of: (i) the liquidation,
dissolution or winding-up of the Corporation; or (ii)
the sale, lease or other disposition of all or
substantially all of the assets of the Corporation; or
(iii) a situation in which individuals who were members of
the Board immediately prior to:
(A) a meeting of the shareholders of the
Corporation involving a contest for, or an item
of business relating to, the election of
directors; or
(B) an amalgamation, arrangement, merger or other
consolidation or combination of the Corporation
with another Person,
shall not constitute a majority of the Board following
such election or transaction; or
- 5 -
(iv) the completion of any transaction or the first of a
series of transactions which would have the same or
similar effect as any transaction or series of
transactions referred to in paragraphs (i), (ii) or
(iii) above; or
(v) a determination by the Board that, for the purposes of
this Restated Agreement, a Change of Control has
occurred or is imminent.
(m) "CHANGE OF CONTROL OBLIGATIONS" means the Company's obligations
to make the lump sum payments described in Section 7.1 of this
Restated Agreement to the Executive.
(n) A "CHANGE OF CONTROL OBLIGATIONS - DESIGNATED EVENT" shall be
deemed to have occurred if:
(i) the Corporation fails to arrange for the extension or
replacement of a Letter of Credit in accordance with
the terms of this Restated Agreement; or
(ii) the Executive's employment is terminated in accordance
with Section 5.1 or 6.1 of this Restated Agreement.
(o) "COMMON SHARES" means the common shares of the Corporation.
(p) "CONVERTIBLE SECURITIES" means:
(i) any right (contractual or otherwise and regardless of
whether such right constitutes a security) to acquire
Common Shares from the Corporation; or
(ii) any security issued by the Corporation from time to
time (other than the rights issued pursuant to a
shareholders' rights protection plan, if any) carrying
any exercise, conversion or exchange right,
which is then exercisable or exercisable within a period of
sixty (60) days from that time pursuant to which the holder
thereof may acquire Common Shares or other securities which are
convertible into or exercisable or exchangeable for Common
Shares (in each case, whether such right is then exercisable or
exercisable within a period of sixty (60) days from that time
and whether or not on condition or the happening of any
contingency).
(q) "DATE OF TERMINATION" means the date upon which the Executive's
employment is terminated pursuant to Section 4.1, 5.1 or 6.1 of
this Restated Agreement. For greater clarity, the Date of
Termination means the date upon which the Corporation provides
the Executive with written, verbal or other notice that the
Executive's employment has been or will be terminated pursuant
to Section 4.1 or 5.1 of this Restated Agreement or the date
upon which the Executive provides the Corporation with written
notice terminating the Executive's employment pursuant to
Section 4.1 or for Good Reason pursuant to Section 6.1.
- 6 -
(r) "DISABILITY" means, where due to a physical or mental
condition, the Executive is rendered totally and permanently
unable to perform the Executive's duties for a consecutive
period of two (2) years or more during which the Executive has
been in receipt of long term disability insurance benefits from
the insurance carrier normally utilized by the Corporation.
(s) "DISPUTE" has the meaning referred to in Section 11.1 of this
Restated Agreement.
(t) "EFFECTIVE DATE" means the date upon which a Change of Control
occurs.
(u) "EMPLOYMENT BENEFITS" means the employment benefits to which
the Executive is entitled by virtue of any written, oral or
implied agreement with the Corporation. For the purposes of
this Restated Agreement, "Employment Benefits" shall include,
but is not limited to, the following:
(i) the Executive's entitlement to any dental or general
medical care;
(ii) the Executive's entitlement to receive long term
disability benefits from the insurance carrier normally
utilized by the Corporation;
(iii) the Executive's entitlement to pension benefits under
the terms of any pension plan with the Corporation;
(iv) the Executive's entitlement to a monthly car allowance
from the Corporation;
(v) the Executive's entitlement to contributions by the
Corporation to the Corporation's savings plan;
(vi) the Executive's entitlement to receive from the
Corporation financial counseling services, at a cost of
$3,500.00 per year (or as the same may be increased
from time to time by the Corporation); and
(vii) the Executive's entitlement to receive from the
Corporation security monitoring services at the
Executive's personal residence.
(v) "EXECUTIVE BENEFIT PLAN" has the meaning referred to in Section
7.1(b) of this Restated Agreement.
(w) "EXECUTIVE BENEFIT PLAN OBLIGATIONS" means the Corporation's
outstanding obligations under the Executive Benefit Plan to the
Executive.
(x) An "EXECUTIVE BENEFIT PLAN OBLIGATIONS - DESIGNATED EVENT"
shall be deemed to have occurred if:
(i) a Change of Control occurs;
- 7 -
(ii) the Corporation makes an assignment for the benefit of
creditors or files a petition in bankruptcy or becomes
insolvent or bankrupt;
(iii) a receiver, trustee or liquidator of or for the
Corporation is appointed and is not discharged within a
period of sixty days;
(iv) the net worth of the Corporation, described as
shareholder equity in the consolidated financial
statements of the Corporation as disclosed in the
annual and quarterly consolidated financial statements
of the Corporation, is less than $400 million;
(v) the Corporation fails to arrange for the extension or
replacement of a Letter of Credit in accordance with
the terms of this Restated Agreement;
(vi) the Executive has provided written notification to the
Trustee and to the Corporation of the failure by the
Corporation to pay any amount owed to or in respect of
the Executive under the Executive Benefit Plan within
thirty days of the due date specified in the Executive
Benefit Plan (together with a statement of the amount
due and owing) either to the person entitled thereto
pursuant to the Executive Benefit Plan or to the Trust
in accordance with the provisions of Section 10.6(h);
or
(vii) at any time the Board adopts a resolution to the effect
that, for purposes of this Restated Agreement, an
Executive Benefit Plan Obligations - Designated Event
has occurred or is imminent.
(y) "GOOD REASON" means any of the following, unless the Executive
shall have given the Executive's express written consent
thereto:
(i) INCONSISTENT DUTIES. The assignment to the Executive of
any duties inconsistent with the Executive's status as
an executive officer of the Corporation or a material
alteration in the nature or status of the Executive's
responsibilities or duties or reporting relationship
from those in effect immediately prior to a Change of
Control;
(ii) REDUCED SALARY. A reduction by the Corporation in the
Executive's Annual Base Salary in effect on the
Effective Date or as the same may be increased
thereafter from time to time or the failure by the
Corporation to grant the Executive salary increases at
a rate commensurate with the increases accorded to
other executives of the Corporation;
(iii) RELOCATION. The Corporation requiring the Executive to
be based anywhere other than where the Executive is
based at the time a Change of Control occurs, except
for required travel on the Corporation's business to an
extent substantially consistent with the Executive's
business travel obligations in the ordinary course of
business immediately prior to a Change of Control;
- 8 -
(iv) INCENTIVE COMPENSATION PLANS. The failure by the
Corporation to continue in effect any incentive
compensation plan in which the Executive participates,
including, but not limited to, the Incentive
Compensation Plan or the Stock Option Plan or any other
similar plans adopted prior to a Change of Control,
unless the Executive is eligible to participate in, and
is entitled to the opportunity to receive a comparable
level of benefits under, an ongoing, substitute or
alternative plan (it being understood that the manner
or method of payment and the form of consideration need
not be the same as existed in the original plans); or
the failure by the Corporation to continue the
Executive's participation therein on at least as
favourable a basis, both in terms of the amount of
benefits available to the Executive and the level of
the Executive's participation relative to other
participants, as existed at the time a Change of
Control occurs;
(v) EMPLOYMENT BENEFITS AND PERQUISITES. The failure by the
Corporation to continue to provide the Executive with
Employment Benefits at least as favourable as those
enjoyed by the Executive immediately prior to a Change
of Control, including any pension plan, benefit plan or
any retirement arrangement established for the
Executive, or any of the Corporation's life insurance,
medical, health and accident, disability or savings
plans in which the Executive was participating at the
time a Change of Control occurs; the taking of any
action by the Corporation that would directly or
indirectly materially reduce any such benefits or
deprive the Executive of any material perquisite
enjoyed by the Executive at the time a Change of
Control occurs, including, without limitation and to
the extent applicable, the use of a car, aircraft,
secretarial services, office space, telephones,
computer facilities, expense reimbursement, financial
counselling, and professional fees and club dues
reimbursement; or the failure by the Corporation to
provide the Executive with the number of paid vacation
days to which the Executive is entitled in accordance
with the Corporation's normal vacation practice in
effect at the time a Change of Control occurs;
(vi) NO ASSUMPTION BY SUCCESSOR. The failure of the
Corporation to obtain a satisfactory agreement from a
successor to assume and agree to perform this Restated
Agreement. Alternatively, if the business or
undertaking in connection with which the Executive's
services are principally performed is sold at any time
after a Change of Control occurs, and the Executive's
employment is transferred as a result, the failure or
refusal of the purchaser of such business or
undertaking to provide the Executive with the same or a
comparable position, duties, compensation and benefits,
as described in paragraphs (iv) and (v) above, as
provided to the Executive by the Corporation
immediately prior to a Change of Control;
- 9 -
(vii) DISPOSITION OF "ALL OR SUBSTANTIALLY ALL". The
disposition by the Corporation of all or substantially
all of the assets of the Corporation, as contemplated
herein, notwithstanding that the Executive's services
were or were not principally performed for such
business.
(z) "HEARING" has the meaning referred to in Section 11.7 of this
Restated Agreement.
(aa) "HEARING DATE" has the meaning referred to in Section 11.7 of
this Restated Agreement.
(bb) "INCENTIVE COMPENSATION PLAN" means any bonus or incentive
compensation plan of the Corporation in which the Executive is
entitled to receive benefits in the month immediately preceding
a Change of Control.
(cc) "JUST CAUSE" means:
(i) the failure by the Executive to substantially perform
the Executive's duties according to the terms of the
Executive's employment in existence immediately prior
to a Change of Control after the Corporation has given
the Executive reasonable notice of such failure and a
reasonable opportunity to correct it; or
(ii) where the Executive engages in any criminal act or
dishonesty resulting or intended to result, directly or
indirectly, in the personal gain of the Executive at
the Corporation's expense.
(dd) "LETTER OF CREDIT" has the meaning referred to in Section 10.2
of this Restated Agreement.
(ee) "MONTHLY BASE SALARY" means the monthly salary payable to the
Executive by the Corporation in effect at the end of the month
immediately preceding the Effective Date.
(ff) "NOTICE OF DISPUTE" has the meaning referred to in Section 11.1
of this Restated Agreement.
(gg) "OBLIGATIONS" means, collectively, the Change of Control
Obligations and the Executive Benefit Plan Obligations.
(hh) "PARTIES" means the Corporation, and its successors and
permitted assigns, and the Executive and the Executive's heirs,
executors and administrators and "PARTY" means either one of
them.
- 10 -
(ii) "PERSON" includes an individual, partnership, association, body
corporate, trustee, executor, administrator, legal
representative and any national, provincial, state or municipal
government or any agency thereof.
(jj) "REFUNDABLE TAX ACCOUNT" means the refundable tax account
maintained in respect of the Trust by the Canada Revenue
Agency.
(kk) "REGISTERED PENSION PLAN" has the meaning referred to in
Section 7.1(b) of this Restated Agreement.
(ll) "RESTATED AGREEMENT" means this amended and restated agreement
respecting change of control and executive benefit plan
entitlements as it may be amended, restated or supplemented
from time to time, and the expressions "hereof", "herein",
"hereto", "hereunder", "hereby", and similar expressions refer
to this Restated Agreement and, unless otherwise indicated,
refer to Articles or Sections in this Restated Agreement only.
(mm) "SECURITIZATION PROCEDURE" has the meaning referred to in the
recitals of this Restated Agreement.
(nn) "SEVERANCE PERIOD" means the twenty-four (24) month period
immediately following the Date of Termination.
(oo) "STOCK OPTION PLAN" means any stock option plan or plans of the
Corporation pursuant to which the Executive is granted options
by the Corporation to acquire Common Shares.
(pp) "SUBSIDIARY" has the meaning ascribed to it in the CBCA.
(qq) "TAX ACT" means the Income Tax Act (Canada) and the Regulations
thereunder, both as amended from time to time.
(rr) "TERM" has the meaning referred to in Section 3.1 of this
Restated Agreement.
(ss) "TRUST" has the meaning referred to in Section 10.1 of this
Restated Agreement.
(tt) "TRUST AGREEMENT" has the meaning referred to in Section 10.1
of this Restated Agreement.
(uu) "TRUSTEE" means CIBC Mellon Trust Company or such other trust
company duly incorporated under the laws of Canada or any
province thereof whom the Company may designate as the trustee
in connection with the security and funding of the Obligations.
(vv) "VALUATION DATE" has the meaning referred to in Section 10.3 of
this Restated Agreement.
- 11 -
ARTICLE 2
SCOPE OF RESTATED AGREEMENT
---------------------------
2.1 The Parties intend that this Restated Agreement sets out (a) their
respective rights and obligations upon the occurrence of a Change of
Control and in connection with the securitization and funding of the
Change of Control Obligations; and (b) their respective rights and
obligations regarding the securitization and funding of the Executive
Benefit Plan Obligations. This Restated Agreement does not provide for
any other terms of the Executive's employment with the Corporation,
except as expressly provided for herein.
2.2 The Parties hereby confirm that except as otherwise expressly stated in
this Restated Agreement, insofar as the securitization and funding of
the Executive Benefit Plan Obligations is concerned, the terms of this
Restated Agreement shall govern and the terms of the Securitization
Procedure shall not be applicable.
2.3 This Restated Agreement shall automatically terminate upon the death of
the Executive or where due to the Disability of the Executive, the
Executive is materially incapacitated from performing the Executive's
duties. In the event of the death or Disability of the Executive, the
Executive (or the Executive's estate) shall be entitled to receive from
the Corporation all unpaid Annual Base Salary, Employment Benefits,
unpaid business expenses and vacation entitlement accrued to the date
of the death or Disability of the Executive. The Executive (or the
Executive's estate) shall also be entitled to receive any and all death
or Disability benefits in a manner consistent with, and at least equal
in amount to, those provided by the Corporation to senior executives
(or their estate) under such plans, programs and policies in effect at
the date of Disability or death of the Executive, and the Corporation
shall have no further obligations to the Executive or the Executive's
estate under this Restated Agreement. Any entitlements of the Executive
(or the Executive's estate) under the Executive Benefit Plan which
remain following the termination of this Restated Agreement pursuant to
this Section 2.3 shall then commence to be covered under the
Securitization Procedure.
2.4 If the Executive's employment is terminated by either Party, for any
reason, prior to a Change of Control in any manner, other than
expressly provided for in this Restated Agreement, this Restated
Agreement shall automatically terminate and the Corporation shall have
no further obligations to the Executive hereunder. Any remaining
entitlements of the Executive under the Executive Benefit Plan which
remain following the termination of this Restated Agreement pursuant to
this Section 2.4 shall then commence to be covered under the
Securitization Procedure.
ARTICLE 3
TERM OF RESTATED AGREEMENT
--------------------------
3.1 Subject to termination of this Restated Agreement prior to a Change of
Control, this Restated Agreement shall remain in effect for a period
concluding twelve (12) months following the Effective Date (the
"Term"), at which time this Restated Agreement shall terminate;
provided however that the payment of compensation and benefits to the
Executive under this Restated Agreement shall continue beyond the end
of the Term in accordance with the applicable provisions of this
Restated Agreement. Any remaining entitlements of the Executive under
the Executive Benefit Plan which remain following the termination of
this Restated Agreement pursuant to this Section 3.1 shall then
commence to be covered under the Securitization Procedure.
- 12 -
ARTICLE 4
TERMINATION FOR JUST CAUSE OR FOR OTHER THAN GOOD REASON
--------------------------------------------------------
4.1 If the Executive's employment is terminated for Just Cause, or is
terminated by the Executive, other than for Good Reason, following a
Change of Control, the Corporation shall pay to the Executive, if not
already paid, the fraction of the unpaid Annual Base Salary accrued
during the then current fiscal year of the Corporation, all accrued
Employment Benefits, all unpaid reasonable business expenses and all
unpaid vacation pay accrued up to and including the Date of
Termination, and thereafter, the Corporation shall have no further
obligations to the Executive under this Restated Agreement.
4.2 Nothing in this Restated Agreement shall serve to derogate from the
vested rights of the Executive to pension benefits, Stock Option Plans
or any other Employment Benefits to which the Executive is entitled up
to the Date of Termination.
ARTICLE 5
TERMINATION BY CORPORATION
--------------------------
5.1 If the Executive's employment is terminated by the Corporation within
the twelve (12) month period following the Effective Date, for reason
other than Just Cause, death or Disability, the Corporation shall pay
to the Executive the remuneration referred to in Article 7 of this
Restated Agreement.
ARTICLE 6
TERMINATION FOR GOOD REASON
---------------------------
6.1 In the event of a Change of Control, the Executive may, within the
twelve (12) month period following the Effective Date and upon
providing the Corporation with ten (10) days written notice, terminate
the Executive's employment with the Corporation for Good Reason. Upon
being provided with such notice, the Corporation shall pay to the
Executive the remuneration referred to in Article 7 of this Restated
Agreement.
ARTICLE 7
COMPENSATION UPON TERMINATION
-----------------------------
7.1 If the Executive's employment is terminated in accordance with Section
5.1 or 6.1 of this Restated Agreement:
- 13 -
(a) the Corporation shall forthwith, but in any event within ten
(10) days from receipt by the Corporation of a Release executed
by the Executive substantially in the form of Schedule "A", pay
to the Executive:
(i) if not previously paid, that portion of the Executive's
accrued but unpaid Monthly Base Salary, any accrued but
unpaid bonus to which the Executive is entitled for the
preceding calendar year under any Incentive
Compensation Plan, all unpaid reasonable business
expenses and all accrued but unused vacation pay earned
or payable to the Executive by the Corporation for the
period from the beginning of the Corporation's then
current fiscal year, up to and including the Date of
Termination;
(ii) a lump sum cash payment equal to the Executive's
Monthly Base Salary and one-twelfth (1/12) of the
Executive's Annual Target Bonus for each month of the
Severance Period;
(iii) a lump sum payment equal to thirteen percent (13%) of
the Executive's Annual Base Salary for the Severance
Period representing the value of the group health and
welfare benefits for the Severance Period;
(iv) a lump sum payment representing the value of the
Executive's monthly car allowance for the Severance
Period;
(v) a lump sum payment representing the value of the
Corporation's contributions to the Corporation's
savings plan (at a rate of six percent (6%) of the
Executive's Annual Base Salary) for the Severance
Period;
(vi) a lump sum payment representing the value of the
Executive's entitlement to receive from the Corporation
financial counseling services for the Severance Period;
and
(vii) a lump sum payment representing the value of the
Executive's entitlement to receive from the Corporation
security monitoring services at the Executive's
personal residence for the Severance Period;
(b) with respect to the Executive's entitlement to pension benefits
under the Pension Plan for Employees of Nexen Inc. (Defined
Benefit Option) (the "Registered Pension Plan"), if any, and
the Executive's related entitlement under the Nexen Inc.
Restated Executive Benefit Plan (the "Executive Benefit Plan"),
if any:
(i) the Corporation shall recognize the Severance Period
for purposes of determining the Executive's
entitlement;
(ii) for calculation purposes, the Executive's entitlement
is the benefit which would have been determined
assuming that the Executive had been employed
throughout the Severance Period, including recognition
of:
- 14 -
(A) additional service that would have been
credited for the Severance Period;
(B) monthly salary equal to the Executive's Monthly
Base Salary throughout the Severance Period;
(C) pensionable bonus for the year of the Date of
Termination, and for each subsequent year or
portion thereof during the Severance Period,
determined at the Annual Target Bonus level.
Average bonus will be determined over the three
years to the end of the Severance Period,
including any partial calendar years; and
(D) if the Executive would have been eligible for
early retirement at the end of the Severance
Period, the Executive shall be deemed to
retire, and the pension to commence, upon
completion of the Severance Period. In such
case, the Executive's attained age at the end
of the Severance Period will be recognized for
purposes of calculating the early retirement
reduction factor, if applicable; and
(iii) the pension entitlements described in this Section
7.1(b) shall, to the extent legally permissible, be
provided through the Registered Pension Plan. To the
extent that it is not legally permissible to provide
such pension entitlements through the Registered
Pension Plan, the Corporation shall pay to the
Executive a lump sum payment representing the
settlement value of the additional Executive Benefit
Plan benefit determined in accordance with the
assumptions set forth in Schedule "B-1";
(iv) any entitlements of the Executive under the Executive
Benefit Plan which have previously been funded in
accordance with Article 10 but not previously settled
in accordance with Article 10 shall be settled by the
Corporation in accordance with the assumptions set
forth in Schedule "B-1";
(c) with respect to the Executive's entitlement to pension benefits
under the Pension Plan for Employees of Nexen Inc. (Defined
Contribution Option) (the "Defined Contribution Pension Plan"),
if any, and the Executive's related entitlement under the
Executive Benefit Plan, if any:
(i) the Corporation shall make a contribution to the
Defined Contribution Pension Plan in an amount which is
equal to the additional contributions which would have
been made by both the Executive and the Corporation to
the Defined Contribution Pension Plan on the
Executive's behalf during the Severance Period had the
Executive remained in the employ of the Corporation
during such period. Such contribution shall be
calculated at the rate in effect in respect of the
Executive immediately prior to the Date of Termination.
To the extent that it is not legally permissible to
make such contribution to the Defined Contribution
Pension Plan, the Corporation shall make a notional
allocation to the defined contribution provision of the
Executive Benefit Plan equal to such contribution;
- 15 -
(ii) the Corporation shall recognize the Severance Period
for purposes of determining the Executive's entitlement
under the Executive Benefit Plan;
(iii) the Corporation shall make a notional allocation to the
defined contribution provision of the Executive Benefit
Plan in an amount which is equal to the additional
notional allocations which would have been made by the
Corporation to the defined contribution provision of
the Executive Benefit Plan on the Executive's behalf
during the Severance Period had the Executive remained
in the employ of the Corporation during such period.
Such contribution shall be calculated at the rate in
effect in respect of the Executive immediately prior to
the Date of Termination. The Corporation shall make a
lump sum payment to the Executive in an amount equal to
the balance, after reflection of the aforementioned
notional allocation, in the Executive's DC Supplemental
Company Account as defined in the Executive Benefit
Plan;
(d) the Corporation shall provide the Executive with executive
outplacement counselling to be provided by a firm to be
selected by the Executive, at a cost to the Corporation not to
exceed $25,000.00;
(e) all of the Executive's outstanding unexercisable stock options
under any Stock Option Plan shall become exercisable; and
(f) where the Executive has been relocated, at the request of the
Corporation, within the two (2) year period immediately prior
to the Effective Date, if so requested by the Executive, the
Corporation shall relocate the Executive back to the
Executive's prior location.
7.2 The estimated value as of April 1, 2008 of Sections 7.l(a)(ii) to
7.1(d) are set out in Schedule "C". Schedule "C" provides estimated
values only and actual values shall be calculated in accordance with
this Restated Agreement at the time of entitlement or payment under
this Restated Agreement.
7.3 If the Executive's employment is terminated in the circumstances
described in Section 5.1 or 6.1 of this Restated Agreement, the
remuneration and benefits payable under this Article 7 shall not be
reduced if the Executive obtains alternative employment.
7.4 Unless expressly provided otherwise in this Restated Agreement, all
payments to be made to the Executive under this Article 7 shall be
subject to required statutory deductions at source by the Corporation.
- 16 -
ARTICLE 8
CONFIDENTIAL INFORMATION
------------------------
8.1 If the Executive's employment is terminated in any manner whatsoever
due to or following a Change of Control, the Executive agrees to keep
confidential all information of a confidential or proprietary nature
concerning the Corporation, its Affiliates, Associates and Subsidiaries
and their respective operations, opportunities, areas of present, past
or future interests, assets, finances, technology, intellectual
property, business and affairs, and further agrees not to use such
information, data or technology for personal advantage, provided that
nothing herein shall prevent the disclosure of information which is
publicly available or which is required to be disclosed by the
Executive under appropriate statute, rules of law or legal process.
ARTICLE 9
RIGHTS AND OBLIGATIONS OF EXECUTIVE UPON TERMINATION
----------------------------------------------------
9.1 Subject to Section 8.1 of this Restated Agreement, the Executive shall
not be prohibited in any manner whatsoever from obtaining alternative
employment with or otherwise forming or participating in a business
competitive to the business of the Corporation after the termination of
the Executive's employment with the Corporation.
9.2 Upon the termination of the Executive's employment for any reason, the
Executive shall tender the Executive's resignation from any position
the Executive may hold as an officer or director of the Corporation or
any of its Affiliates, Associates or Subsidiaries.
9.3 If the Executive's employment is terminated in the circumstances
described in Section 5.1 or 6.1 of this Restated Agreement, the
Corporation shall continue to purchase and maintain, to the extent
available in the marketplace at reasonable cost to the Corporation, on
behalf of the Executive, director and officer liability insurance for
the applicable limitation period following the date upon which the
Executive ceases to serve as a director or officer of the Corporation,
and the Executive's existing agreement to receive indemnity from the
Corporation for acts taken by the Executive in the Executive's capacity
as an officer of the Corporation shall remain in effect.
9.4 Upon termination of the Executive's employment pursuant to Section 5.1
or 6.1 of this Restated Agreement, the Corporation shall reimburse the
Executive for ongoing legal fees and disbursements which the Executive
may reasonably incur in connection with this Restated Agreement (but
this Restated Agreement only), including any litigation concerning the
validity or enforceability of, or liability under, any provision of
this Restated Agreement or any action by the Executive. The Corporation
shall pay such fees and reimbursements to the Executive promptly as
such fees and disbursements become due.
- 17 -
ARTICLE 10
SECURITIZATION AND FUNDING PROCEDURE
------------------------------------
10.1 The Corporation has established and maintains a trust for the benefit
of the Executive and persons claiming through him (the "Trust")
pursuant to the terms and conditions of a trust agreement (the "Trust
Agreement") between the Corporation and the Trustee. The Trust shall be
funded in accordance with the provisions of this Restated Agreement and
the Trust Agreement.
10.2 To provide security against a failure by the Corporation to either fund
or settle the Obligations in accordance with the terms of this Article
10, the Trust Agreement provides for the funding of the Trust with the
proceeds of an irrevocable letter of credit which satisfies the
requirements of this Restated Agreement (a "Letter of Credit") in the
event that the Corporation does not provide funding or effect
settlement when required to do so hereunder and in accordance with the
terms hereof. The Corporation confirms that the Letter of Credit
currently held by the Trustee has been issued by a major Canadian
chartered bank (the "Bank") in an amount calculated by the
Corporation's consulting actuary (who at all times shall be a Fellow of
the Canadian Institute of Actuaries) (the "Actuary") in accordance with
the provisions of Section 10.5 of this Restated Agreement.
10.3 On each February 1st (the "Anniversary Date"), the Corporation shall
request a report from the Actuary as to the amount calculated, as at
the next succeeding April 1st (the "Valuation Date"), in accordance
with the provisions of Section 10.5 of this Restated Agreement. The
Corporation shall provide the Actuary with the data it requires to
prepare such report. Upon completion of each such report, the
Corporation shall arrange for the Actuary to provide a summary of same
to the Trustee.
Prior to the funding and/or settlement of all of the Obligations in
accordance with the terms of this Restated Agreement, the Corporation
shall, within forty-five days after the applicable Anniversary Date and
in accordance with the terms of the report received from the Actuary:
(a) either:
(i) arrange for a Letter of Credit to be provided by the
Bank to the Trustee to replace the Letter of Credit
then held by the Trustee. The replacement Letter of
Credit shall be:
(A) substantially in the form of the Letter of
Credit then held by the Trustee;
(B) in an amount calculated by the Actuary as at
the applicable Valuation Date in accordance
with the provisions of Section 10.5 of this
Restated Agreement; and
- 18 -
(C) for a term which commences on the date of its
issuance and expires one year following the
applicable Valuation Date; or
(ii) confirm to the Trustee in writing that the Letter of
Credit then held by the Trustee will be extended
automatically for a further one-year term. The
confirmation to the Trustee shall include evidence from
the Bank as to any amendment to the applicable Letter
of Credit, any such amendment to be consistent with the
report prepared by the Actuary as at the applicable
Valuation Date; and
(b) contribute to the Trust an amount equal to twice the fee
charged by the Bank in connection with the Letter of Credit
extension or replacement, as applicable. The Corporation shall
withhold one-half of such amount and shall remit the said
one-half of such amount to the Canada Revenue Agency on account
of the tax which is exigible pursuant to the Tax Act in
connection with such contribution to the Trust. The Trustee
shall remit the remaining one-half of such amount to the Bank
in consideration for the Letter of Credit extension or
replacement, as applicable.
When a replacement Letter of Credit has been provided in accordance
with the terms of this Section 10.3, an existing Letter of Credit shall
be surrendered and cancelled.
10.4 If, during the term of a Letter of Credit issued pursuant to this
Restated Agreement, the Corporation, acting reasonably, concludes that
there has been a significant change in the Obligations since the date
of the last report prepared by the Actuary pursuant to Section 10.3 of
this Restated Agreement, the Corporation shall request a report from
the Actuary as to the then current value of the Obligations, calculated
in accordance with the provisions of Section 10.5 of this Restated
Agreement. Upon receipt of the report, the Corporation shall provide a
summary of same to the Trustee and arrange, together with the Trustee,
for any required increase or decrease in the amount of the Letter of
Credit for the balance of the term of such Letter of Credit. In the
event that a replacement Letter of Credit is to be issued in the
circumstances described in this Section 10.4, the Corporation and the
Trustee shall arrange for such replacement Letter of Credit to be
provided by the Bank to the Trustee to replace the Letter of Credit
then held by the Trustee. Upon receipt of a replacement Letter of
Credit pursuant to this Section 10.4, the Trustee shall surrender for
cancellation the Letter of Credit then held by it pursuant to this
Restated Agreement and the Trust Agreement.
- 19 -
In the event that all or any portion of the fee referred to in Section
10.3 of this Restated Agreement, is refunded by the Bank as a result of
a decrease in the amount of a Letter of Credit pursuant to this Section
10.4, such amount (together with any resulting refundable Tax) shall be
received by the Trustee for deposit to the Trust. Upon receipt of an
Authorized Instruction (as defined in the Trust Agreement), the Trustee
shall pay and transfer such amounts (less any applicable tax which it
will remit as required by the Tax Act on behalf of the Corporation) to
the Corporation for its sole and exclusive use and benefit.
In the event that an additional fee is required to be paid to the Bank
as a result of an increase in the amount of a Letter of Credit pursuant
to this Section 10.4, the Corporation shall contribute to the Trust an
amount equal to twice the additional fee. The Corporation shall
withhold one-half of such amount and shall remit the said one-half of
such amount to the Canada Revenue Agency on account of the tax which is
exigible pursuant to the Tax Act in connection with such contribution
to the Trust. The Trustee shall remit the remaining one-half of such
amount to the Bank in payment of its additional fee.
10.5 A Letter of Credit issued pursuant to this Restated Agreement shall:
(i) be an irrevocable standby letter of credit;
(ii) obligate the Bank to satisfy demand for payment made by
the Trustee in accordance with the terms of this
Restated Agreement and the Trust Agreement;
(iii) permit partial drawings; and
(iv) provide that the Bank must notify the Trustee on or
before thirty days prior to the expiry of a Letter of
Credit of any notice of non-extension provided by the
Bank to the Corporation.
The amount of a Letter of Credit pursuant to this Restated Agreement
shall be calculated by the Actuary in accordance with the following
subparagraphs of this Section 10.5.
(a) Assuming the lump sum payments referred to in Section 7.1(a) of
this Restated Agreement are equal to the amount thereof
provided by the Corporation.
(b) Assuming the service of the Executive will terminate, in
accordance with Section 5.1 or 6.1 of this Restated Agreement,
on the next succeeding March 31st after the Valuation Date (the
"Calculation Date").
(c) Using the Executive's demographic data, including base salary,
target bonus and current marital status as of the Valuation
Date, provided by the Corporation.
(d) Using the Yearly Maximum Pensionable Earnings (Y.M.P.E.) used
to determine the amount of the Canada Pension Plan Benefit and
Tax Act maximum defined benefit pension dollar limit as at the
Valuation Date.
(e) Assuming all Obligations are included.
(f) Using the actuarial methods, assumptions and calculation
methodology described in Schedule "B-2.
(g) Applying a load of 15% to the amount determined in accordance
with subparagraphs (b) through (f) of this Section 10.5 to
provide for fluctuations in the Interest Discount Rate,
Consumer Price Index and other plan experience during the term
of the Letter of Credit, as described in Schedule "B-2".
- 20 -
(h) Applying a load to one-half of the amount determined in
accordance with subparagraphs (a) through (g) of this Section
10.5 to provide for the cost associated with the borrowings
described in subparagraph (k) of this Section 10.5, as
described in Schedule "B-2".
(i) Including a settlement expense to the amount determined in
subparagraph (h), with the aggregate settlement expense
allowance for all obligations secured equal to $250,000, or
where the Valuation Date is after December 31, 2008, the
aggregate settlement expense allowance will be increased at the
rate equal to the increase in the Consumer Price Index, as
described in Schedule "B-2", plus 1% for each year after 2008.
(j) Assuming the Obligations will be promptly settled with the
Executive upon occurrence of a Designated Event described in
Section 1.1(n)(ii).
(k) Assuming a loan will be secured to permit settlement of the
Obligations prior to receipt of the Refundable Tax Account from
the Canada Revenue Agency. The assumed interest rate payable on
the loan shall be as described in Schedule "B-2". The cost
associated with the borrowings shall be assumed to be paid from
the Trust.
(l) The liabilities calculated in accordance with subparagraphs (a)
through (k) above shall be offset by:
(i) the Refundable Tax Account, if any; and
(ii) the assets contained in the Trust, if any.
10.6 (a) If an Executive Benefit Plan Obligations - Designated Event
shall occur, the Corporation shall be required to immediately
fund the Executive Benefit Plan Obligations in accordance with
the most recent report prepared by the Actuary pursuant to
Section 10.3 of this Restated Agreement. Notwithstanding the
foregoing, if an Executive Benefit Plan Obligations -
Designated Event described in Section 1.1(x)(i) and a Change of
Control Obligations - Designated Event described in Section
1.1(n)(ii) shall occur simultaneously, the Corporation shall be
required to settle the Executive Benefit Plan Obligations
forthwith in accordance with the provisions of Schedule "B-1".
(b) If:
(i) the employment of the Executive is terminated by the
Corporation for any reason other than as a result of
the death, disability or retirement of such Executive;
and
- 21 -
(ii) such Executive files with the Corporation a written
request that it fund the Executive Benefit Plan
Obligations,
the Corporation shall be required to immediately fund the
Executive Benefit Plan Obligations in accordance with the most
recent report prepared by the Actuary pursuant to Section 10.3
of this Restated Agreement.
(c) Upon the earlier of:
(i) learning of the occurrence of an Executive Benefit Plan
Obligations - Designated Event described in Section
1.1(x)(v) or (vi) of this Restated Agreement; or
(ii) receipt of a written notice of the occurrence of an
Executive Benefit Plan Obligations - Designated Event
described in any of the other subparagraphs of Section
1.1(x) of this Restated Agreement, which notice has
been signed by two executives of the Corporation, one
of whom must be either the Chief Financial Officer or
the General Counsel of the Corporation and which notice
must, in the case of an Executive Benefit Plan
Obligations - Designated Event described in Section
1.1(x)(i) of this Restated Agreement, indicate which
subparagraph of the definition of "Change of Control"
is applicable,
the Trustee shall promptly give notice to the Corporation in
writing that it intends to draw on that portion of the Letter
of Credit which is referable to the Executive Benefit Plan
Obligations and contribute the proceeds thereof (less any
applicable withholding tax which it will remit as required by
the Tax Act on behalf of the Corporation) to the Trust on
behalf of the Corporation in order to fund the Executive
Benefit Plan Obligations, unless it receives satisfactory proof
within nine days of such notice that the Corporation has funded
or settled, as applicable, the Executive Benefit Plan
Obligations itself in accordance with the terms of this
Restated Agreement.
Unless the Corporation advises the Trustee in writing that it
has funded or settled, as applicable, the Executive Benefit
Plan Obligations in accordance with the terms of this Restated
Agreement and has provided the Trustee with satisfactory proof
thereof within nine days of the date of the aforementioned
notice, the Trustee shall draw on that portion of the Letter of
Credit which is referable to the Executive Benefit Plan
Obligations on the tenth day following the date of such notice
(or the next following business day if such tenth day is not a
business day) and contribute the proceeds thereof (less any
applicable withholding tax which it will remit as required by
the Tax Act on behalf of the Corporation) to the Trust on
behalf of the Corporation.
- 22 -
Notwithstanding the foregoing, in the event an Executive
Benefit Plan Obligations - Designated Event described in
Section 1.1(x)(v) or (vi) of this Restated Agreement has
triggered the operation of this Section 10.6 and the failure
which gave rise to the occurrence of such Executive Benefit
Plan Obligations - Designated Event has been remedied prior to
the expiration of the notice period provided for in this
Section 10.6(c), the Trustee shall not take the action
described in the immediately preceding paragraph hereof and all
of the provisions of this Restated Agreement shall continue to
apply to the same extent and as fully as they would have in the
event that such Executive Benefit Plan Obligations - Designated
Event had not occurred.
(d) Upon receipt of a written notice of the occurrence of the
events described in both subparagraphs (i) and (ii) of Section
10.6(b) of this Restated Agreement (which notice has been
signed by the Executive and sworn before a notary public), the
Trustee shall promptly give notice to the Corporation in
writing that it intends to draw on that portion of the Letter
of Credit which is referable to the Executive Benefit Plan
Obligations and contribute the proceeds (less any applicable
withholding tax which it will remit as required by the Tax Act
on behalf of the Corporation) to the Trust on behalf of the
Corporation in order to fund the Executive Benefit Plan
Obligations unless it receives satisfactory proof within nine
days of the date of such notice that the Corporation has funded
the Executive Benefit Plan Obligations itself in accordance
with the terms of this Restated Agreement.
Unless the Corporation advises the Trustee in writing that it
has funded the Executive Benefit Plan Obligations in accordance
with the terms hereof and has provided the Trustee with
satisfactory proof thereof within nine days of the date of the
aforementioned notice, the Trustee shall draw upon that portion
of the Letter of Credit which is referable to the Executive
Benefit Plan Obligations on the tenth day following the date of
such notice (or the next following business day if such tenth
day is not a business day) and contribute the proceeds (less
any applicable withholding tax which it will remit as required
by the Tax Act on behalf of the Corporation) to the Trust on
behalf of the Corporation.
(e) For purposes of determining the required amount of funding or
the portion of the Letter of Credit to be drawn on for purposes
of this Section 10.6, the Trustee shall refer to the most
recent report prepared by the Actuary for purposes of this
Restated Agreement and, in particular, to the portion of the
report dealing with the Executive Benefit Plan Obligations. In
preparing the portion of its report respecting Executive
Benefit Plan Obligations, the Actuary shall adhere to the
following:
(i) Assuming that the Executive, if then in active
employment, will remain in active employment with the
Corporation as an officer until the Calculation Date
and that the Executive's employment with the
Corporation will terminate on the Calculation Date.
- 23 -
(ii) Using the Executive's demographic data, including base
salary, actual bonus history, target bonus and current
marital status as of the Valuation Date, provided by
the Corporation.
(iii) Using the Canada Pension Plan Benefit and Tax Act
maximum defined benefit pension dollar limit as at the
Valuation Date.
(iv) Assuming the Executive's target bonus percentage
remains at the level specified by the Corporation
pursuant to subparagraph (ii) above.
(v) Assuming only Executive Benefit Plan Obligations are
included.
(vi) Assuming the payments under the Executive Benefit Plan
would be made from the Trust.
(vii) Using the actuarial methods, assumptions and
calculation methodology described in Schedule "B-2.
(viii) Applying loads as described in Schedule "B-2" to the
amount determined in accordance with the preceding
subparagraphs of this Section 10.6(e) to provide for
future contingencies and expenses of the Trust.
(ix) Calculating the estimated amount required to settle the
Executive Benefit Plan Obligations based on the
actuarial methods, assumptions and calculation
methodology described in Schedule "B-2", increased by
the loads described in the following subparagraph.
(x) Applying loads as described in Schedule "B-2" to the
amount determined in accordance with subparagraph (ix)
to provide for:
(A) fluctuations in the Interest Discount Rate and
Consumer Price Index during the term of the
Letter of Credit; and
(B) the cost associated with the loan to be secured
as allowed under the Trust Agreement to permit
settlement of the Executive Benefit Plan
Obligations prior to receipt of the Refundable
Tax Account from the Canada Revenue Agency. The
assumed interest rate payable on the loan shall
be as described in Schedule "B-2" and shall be
applied to one-half of the amount in
subparagraph (ix). The cost associated with the
borrowings shall be assumed to be paid from the
Trust.
(xi) Taking the larger amount for the Executive of:
(A) the amount determined in accordance with
subparagraphs (i) through (viii), and
- 24 -
(B) the amount determined in accordance with
subparagraphs (ix) and (x).
(xii) The amount determined in accordance with subparagraph
(xi) above shall be offset by:
(A) the Refundable Tax Account, if any;
(B) the assets contained in the Trust, if any.
(f) In the event that the Executive Benefit Plan Obligations have
been funded in accordance with the terms hereof as a result of:
(i) the Corporation making an assignment for the benefit of
creditors or filing a petition in bankruptcy or
becoming insolvent or bankrupt;
(ii) a receiver, trustee or liquidator of or for the
Corporation being appointed and not being discharged
within a period of sixty days;
(iii) a voluntary dissolution or wind-up of the Corporation;
or
(iv) a sale or disposition of all or substantially all of
the assets of the Corporation,
and the Executive Benefit Plan has been terminated in
connection therewith, the Executive Benefit Plan Obligations
shall be promptly settled by the Trustee with the Executive by
way of a lump sum payment from the Trust. For this purpose, the
benefit entitlements of each Executive shall be determined by
the Actuary in accordance with the terms of the Executive
Benefit Plan and the amount of the lump sum payment shall be
determined by the Actuary using the assumptions set forth in
Schedule "B-1". Notice of termination of the Executive Benefit
Plan shall be provided to the Trustee by the Corporation,
failing which by two executives of the Corporation, one of whom
must be either the Chief Financial Officer or the General
Counsel of the Corporation.
Any assets of the Trust remaining after full satisfaction of
(i) the Executive Benefit Plan Obligations pursuant to the
preceding paragraph and (ii) any further obligations pursuant
to the terms of the Trust Agreement, shall be returned to the
Corporation.
(g) In the event the Executive Benefit Plan shall be terminated at
any time either in whole or in part in relation to the
Executive subsequent to the funding of the Executive Benefit
Plan Obligations in accordance with the terms hereof, then,
provided Section 10.6(f) of this Restated Agreement is not
otherwise applicable, the Executive Benefit Plan Obligations
shall be promptly settled by the Trustee with the Executive by
way of a lump sum payment from the Trust.
- 25 -
For this purpose, the benefit entitlements of the Executive
shall be determined by the Actuary in accordance with the terms
of the Executive Benefit Plan and the amount of the lump sum
payment shall be determined by the Actuary using the
assumptions set forth in Schedule "B-1". Notice of the
termination of the Executive Benefit Plan shall be provided to
the Trustee by the Corporation, failing which by two executives
of the Corporation, one of whom must be either the Chief
Financial Officer or the General Counsel of the Corporation.
Any assets of the Trust remaining after full satisfaction of
(i) the Executive Benefit Plan Obligations and (ii) any further
obligations pursuant to the terms of the Trust Agreement, shall
be returned to the Corporation.
(h) In the event:
(i) of a dispute as to whether a payment to or in respect
of the Executive is properly due and payable pursuant
to the Executive Benefit Plan; and
(ii) such dispute cannot be resolved by the parties thereto
within the time frame specified in Section 1.1(x)(vi)
of this Restated Agreement,
the amount in dispute shall be remitted to the Trustee for
deposit to the Trust. Upon final settlement of the dispute, the
amount so deposited (together with any earnings, profits and
increments thereon and after deduction of any authorized
payments allocable thereto, both as determined in accordance
with the terms of the Trust Agreement), less any applicable
withholding tax which will be remitted as required by the Tax
Act, shall be paid to that party to the dispute which is found
to be entitled thereto. Prior to such amount being paid out of
the Trust in accordance with the terms hereof, the Corporation
shall instruct the Actuary to take such amount into account
when preparing its report for purposes of this Restated
Agreement.
(i) In the event that a Change of Control Obligations - Designated
Event described in Section 1.1(n)(ii) of this Restated
Agreement shall occur subsequent to the funding of the
Executive Benefit Plan Obligations in accordance with the terms
of this Restated Agreement, the Corporation shall be required
to settle the Executive Benefit Plan Obligations forthwith in
an amount determined by the Actuary in accordance with the
provisions of Schedule "B-1".
(j) Subject to Section 10.6(f), 10.6(g) and 10.6(i) of this
Restated Agreement, in the event that the Executive Benefit
Plan Obligations have been funded in accordance with the terms
hereof, all or a portion of such Executive Benefit Plan
Obligations may, at the discretion of the Corporation, be
promptly settled with the Executive.
- 26 -
For this purpose, the benefit entitlements of the Executive
shall be determined by the Actuary in accordance with the terms
of the Executive Benefit Plan. In such circumstances, the
Corporation reserves the right to settle the Executive Benefit
Plan Obligations by way of a lump sum payment to the Executive
provided that the amount of each such payment is determined by
the Actuary in accordance with the assumptions set forth in
Schedule "B-1".
10.7 (a) If a Change of Control Obligations - Designated Event described
in Section 1.1(n)(i) of this Restated Agreement shall occur,
the Corporation shall be required to immediately fund the
Change of Control Obligations in accordance with the most
recent report prepared by the Actuary pursuant to Section 10.3
of this Restated Agreement.
(b) If a Change of Control Obligations - Designated Event described
in Section 1.1(n)(ii) of this Restated Agreement shall occur,
the Corporation shall be required to settle the Change of
Control Obligations forthwith in accordance with the provisions
of Schedule "B-1", upon receipt by the Corporation of a Release
executed by the Executive in the form attached to this Restated
Agreement as Schedule "A".
(c) Upon the earlier of:
(i) learning of the occurrence of a Change of Control
Obligations - Designated Event described in Section
1.1(n)(i) of this Restated Agreement; or
(ii) receipt of a written notice of the occurrence of a
Change of Control Obligations - Designated Event
described in Section 1.1(n)(ii) of this Restated
Agreement, which notice has been signed by the
Executive and sworn before a notary public and has
annexed thereto a Release executed by the Executive in
the form attached to this Restated Agreement as
Schedule "A",
the Trustee shall promptly give notice to the Corporation in
writing that it intends to draw on that portion of the Letter
of Credit which is referable to the Change of Control
Obligations and contribute the proceeds thereof (less any
applicable withholding tax which it will remit as required by
the Tax Act on behalf of the Corporation) to the Trust on
behalf of the Corporation in order to fund the Change of
Control Obligations, unless it receives satisfactory proof
within nine days of such notice that the Corporation has funded
or settled, as applicable, the Change of Control Obligations
itself in accordance with the terms of this Restated Agreement.
Unless the Corporation advises the Trustee in writing that it
has funded or settled, as applicable, the Change of Control
Obligations in accordance with the terms of this Restated
Agreement and has provided the Trustee with satisfactory proof
thereof within nine days of the date of the aforementioned
notice, the Trustee shall draw on that portion of the Letter of
Credit which is referable to the Change of Control Obligations
on the tenth day following the date of such notice (or the next
following business day if such tenth day is not a business day)
and contribute the proceeds (less any applicable withholding
tax which it will remit as required by the Tax Act on behalf of
the Corporation) to the Trust on behalf of the Corporation.
- 27 -
Notwithstanding the foregoing, in the event a Change of Control
Obligations - Designated Event described in Section 1.1(n)(i)
of this Restated Agreement has triggered the operation of this
Section 10.7 and the failure which gave rise to the occurrence
of such Change of Control Obligations - Designated Event has
been remedied prior to the expiration of the notice period
provided for in this Section 10.7(c), the Trustee shall not
take the action described in the immediately preceding
paragraph hereof and all of the provisions of this Restated
Agreement shall continue to apply to the same extent and as
fully as they would have in the event that such Change of
Control Obligations - Designated Event had not occurred.
(d) The required amount of funding or the portion of the Letter of
Credit to be drawn on for purposes of this Section 10.7 shall
be determined by the Actuary and shall be the amount determined
in accordance with Sections 10.5(a) through (l) of this
Restated Agreement offset by the amount determined in
accordance with subparagraphs 10.6(e)(i) through (xii) of this
Restated Agreement. The settlement amount for purposes of this
Section 10.7 shall be determined in accordance with the
provisions of Schedule "B-1".
(e) In the event that the Change of Control Obligations have been
funded in accordance with the terms hereof as a result of the
occurrence of a Change of Control Obligations - Designated
Event described in Section 1.1(n)(ii), the Change of Control
Obligations shall be promptly settled with the Executive in
accordance with the provisions of Schedule "B-1".
10.8 The actuarial methods and assumptions described in Schedule "B-1" and
Schedule "B-2" shall be reviewed from time to time. Any amendments to
Schedule "B-1" and/or Schedule "B-2" as a result of such review shall
be dealt with in accordance with Section 12.6.
10.9 The Trustee shall surrender the Letter of Credit to the Corporation for
cancellation upon the earliest of:
(a) receipt by the Trustee of a written direction signed by the
Corporation and the Executive directing surrender of the Letter
of Credit;
(b) receipt by the Trustee of a written direction signed by the
Corporation confirming that it has funded and/or settled the
Obligations in accordance with the terms hereof, together with
evidence which is satisfactory to the Trustee that such funding
and/or settlement has occurred; and
- 28 -
(c) receipt by the Trustee of a written direction signed by the
Corporation confirming that the Corporation has no remaining
Obligations to the Executive, together with evidence which is
satisfactory to the Trustee that the Corporation has no
remaining Obligations to the Executive and that a copy of such
written direction has been provided to the Executive.
10.10 The Trust shall be terminated by the Trustee upon the earliest of:
(a) receipt by the Trustee of a written direction signed by the
Corporation and the Executive confirming the termination of the
Trust;
(b) the entire depletion of the Trust Fund through payments pursuant
to the terms of the Trust Agreement, in the event that such
depletion occurs subsequent to the funding of the Obligations in
accordance with the terms of this Restated Agreement; and
(c) receipt by the Trustee of a written direction signed by the
Corporation confirming that the Corporation has no remaining
Obligations to the Executive, together with evidence which is
satisfactory to the Trustee that a copy of such written
direction has been provided to the Executive.
Upon the termination of the Trust, any assets of the Trust which
remain after the satisfaction of any remaining Obligations of the
Corporation to the Executive shall be returned to the Corporation.
10.11 The Corporation and the Executive hereby acknowledge that the
Corporation is entering into agreements similar to this Restated
Agreement with certain of its other executives and that the Corporation
may, at its sole discretion, arrange for one or more Letters of Credit
to satisfy its responsibilities under this Restated Agreement and such
other agreements. In the event that one Letter of Credit is obtained to
satisfy the Corporation's responsibilities under this Restated
Agreement and some or all of such other agreements, references to a
"Letter of Credit" in this Restated Agreement shall be read as
references to that portion of such Letter of Credit which is referable
to the responsibilities of the Corporation to the Executive.
The Corporation and the Executive also acknowledge that the Corporation
may, at its sole discretion, enter into one or more Trust Agreements to
satisfy its responsibilities under this Restated Agreement and such
other agreements. In the event that one Trust Agreement is entered into
to satisfy the Corporation's responsibilities under this Restated
Agreement and some or all of such other agreements, references to
"Trust", "Trust Agreement", "Trustee" and "Refundable Tax Account" in
this Restated Agreement shall be read with such modifications as may be
necessary in the context.
10.12 At the discretion of the Corporation and subject to the provisions of
applicable law, in the event that all or a portion of the Obligations
are funded in accordance with Article 10 hereof and an actuarial
surplus (determined by actuarial valuation in accordance with the terms
of the report prepared as at the immediately preceding Valuation Date
in accordance with Section 10.3 of this Restated Agreement) arises as a
result thereof:
- 29 -
(a) all or a portion of such actuarial surplus may be used in the
determination of or to reduce the funding otherwise required to
be provided by the Corporation hereunder; or
(b) any surplus assets may, to the extent that they exceed 110% of
the amount required to fund that portion of the Obligations
which has been funded (as determined by the report prepared as
at the immediately preceding Valuation Date in accordance with
Section 10.3 of this Restated Agreement) be returned to the
Corporation.
ARTICLE 11
EXPEDITED ARBITRATION
---------------------
11.1 If, pursuant to Section 6.1 of this Restated Agreement, the Executive
provides written notice of the Executive's intention to terminate the
Executive's employment for Good Reason, and the Corporation believes
that there is no Good Reason, or, alternatively, if, pursuant to
Section 4.1 of this Restated Agreement, the Corporation provides
written notice of its intention to terminate the Executive's employment
for Just Cause and the Executive believes there is no Just Cause, the
Corporation or the Executive, as applicable, shall, within ten (10)
days of having been provided such notice, provide written notice
("Notice of Dispute") to the other Party of the dispute (the
"Dispute").
11.2 The Parties agree that any and all Disputes under Section 11.1 of this
Restated Agreement will be resolved by way of a single Arbitrator.
11.3 (a) Within fifteen (15) days of provision of the Notice of Dispute,
the Parties shall agree upon and appoint a neutral Arbitrator
from the then current roster maintained by the Alberta
Mediation and Arbitration Society to act as Arbitrator of the
Dispute; or
(b) If no person acceptable to both Parties has been agreed upon
and appointed within fifteen (15) days, then either Party may
make immediate application to the Court of Queen's Bench of
Alberta, Judicial District of Calgary, to have an Arbitrator
appointed.
11.4 The Parties acknowledge and agree that the purpose of this Article 11
is to avoid delays and facilitate resolution of the Dispute in a just,
speedy and cost-effective manner.
11.5 Consistent with the expedited nature of arbitration, the Arbitrator
will direct and control the scope and timing of the exchange of
information between the Parties and will take such steps as the
Arbitrator deems necessary to achieve a just, speedy and cost-effective
resolution of the Dispute. The Arbitrator has the exclusive right and
power to resolve all issues related to the exchange of information in
the arbitration process.
- 30 -
11.6 The Parties agree that the Arbitrator is only authorized to determine
whether the Executive had Good Reason for terminating the Executive's
employment, or alternatively, whether the Corporation had Just Cause to
terminate the Executive's employment.
11.7 A hearing will occur within forty-five (45) days of the appointment of
the Arbitrator (the "Hearing"). The time of the Hearing (the "Hearing
Date") will be scheduled by the Arbitrator after consultation with the
Parties. The Hearing will be governed by the rules set out in the
Arbitration Act S.A. 1991, c.A-43, as modified by the Arbitrator in the
interests of achieving a just, speedy and cost-effective resolution of
the Dispute. The Arbitrator may require written submissions of fact in
the Dispute to be provided seven (7) days before the Hearing Date.
11.8 The Arbitrator will use best efforts to provide a written decision
within seven (7) days of the conclusion of the Hearing.
11.9 The Parties agree that the decision of the Arbitrator will be final and
binding upon the Parties.
ARTICLE 12
GENERAL
-------
12.1 The headings of the Articles and paragraphs in this Restated Agreement
are inserted for convenience only and shall not affect the meaning or
construction of this Restated Agreement.
12.2 This Restated Agreement shall be construed and interpreted in
accordance with the laws of the Province of Alberta and the federal
laws of Canada as applicable therein.
12.3 If any provision of this Restated Agreement is determined to be void or
unenforceable in whole or in part, it shall be and be deemed to be
severed from this Restated Agreement without affecting or impairing the
validity of any other provision herein.
12.4 Any notice required or permitted to be given under this Restated
Agreement shall be in writing and shall be properly given if delivered
by hand delivery or mail or other form of electronic communication
capable of transmission confirmation to the following address:
a. IN THE CASE OF THE CORPORATION TO:
Nexen Inc.
000 - 0xx Xxxxxx X.X.
Xxxxxxx, XX X0X 0X0
Attention: General Manager, Compensation and Benefits
- 31 -
b. IN THE CASE OF THE EXECUTIVE TO:
the last address of the Executive in the records of the
Corporation or to such other address as the Parties may from time
to time specify by notice given in accordance herewith.
12.5 This Restated Agreement shall enure to the benefit of and be binding
upon the Executive and the Executive's heirs, executors and
administrators and upon the Corporation and its successors and assigns.
12.6 This Restated Agreement constitutes the entire agreement relating to
the respective rights and obligations of the Parties upon the
occurrence of a Change of Control. No amendment or waiver of this
Restated Agreement shall be binding unless executed in writing by the
Parties.
Notwithstanding the foregoing,
(a) any amendment to Article 10 of this Restated Agreement,
Schedule "B-1" or Schedule "B-2" which is required to ensure
that the balance remaining in the Trust after the required tax
has been withheld and remitted to the Canada Revenue Agency is
sufficient to satisfy the fee levied by the Bank in connection
with the issuance of a Letter of Credit may be made by the
Corporation without the prior written approval of the
Executive; and
(b) the Corporation may amend, modify or waive Article 10 of this
Restated Agreement, Schedule "B-1" and Schedule "B-2" in whole
or in part, at such time and from time to time, and in such
manner and to such extent as it may deem advisable without
obtaining the approval of the Executive, provided that such
amendment, modification or waiver, as the case may be, does not
adversely affect the securitization in accordance with the
terms hereof of those Obligations which have accrued up to the
date of such amendment, modification or waiver, as the case may
be.
12.7 The Parties agree that the rights, entitlements and benefits set out in
this Restated Agreement to be paid to the Executive upon a Change of
Control shall be in full satisfaction of all rights of the Executive
under applicable law in effect from time to time as a result thereof.
12.8 Neither Party can waive or shall be deemed to have waived any right it
has under this Restated Agreement except to the extent that such waiver
is in writing.
12.9 Nothing contained in this Restated Agreement shall be construed as
limiting the ability of the Corporation to amend, modify or terminate
the Executive Benefit Plan in whole or in part, at such time and from
time to time, and in such manner and to such extent as it may deem
advisable.
- 32 -
The Parties have executed this Restated Agreement effective the date first
written above.
NEXEN INC.
Per: (signed)
--------------------------------
Per: (signed)
--------------------------------
SIGNED, SEALED & DELIVERED
in the presence of
(signed) (signed)
----------------------------- ---------------------------------------
WITNESS XXXX NIEUWENBURG
SCHEDULE "A"
------------
AMENDED AND RESTATED AGREEMENT
RESPECTING CHANGE OF CONTROL AND
EXECUTIVE BENEFIT PLAN ENTITLEMENTS
In order to receive the entitlements referred to in the Article 7 of this
Restated Agreement, the Executive shall execute the attached Release, fully
releasing the Corporation from all further claims in relation to the
Executive's employment or Employment Benefits and the termination thereof upon
payment of the remuneration and benefits referred to in Article 7 of this
Restated Agreement. The attached Release shall not, however, require that the
Executive relinquish or release any rights to indemnity which the Executive
may, as an officer or director of the Corporation or any of its Affiliates,
Associates and Subsidiaries, have as against the Corporation or any of its
Affiliates, Associates and Subsidiaries, for costs, charges and expenses
reasonably incurred by the Executive in respect of any civil, criminal or
administrative action or proceeding to which the Executive is made a party by
reason of being or having been a director or officer of the Corporation or any
of its Affiliates, Associates and Subsidiaries, where:
(a) the Executive has acted honestly and in good faith with a view
to the best interests of the Corporation or any of its
Affiliates, Associates and Subsidiaries; and
(b) in the case of a criminal or administrative action or
proceeding enforced by a monetary penalty, the Executive had
reasonable grounds for believing the Executive's conduct was
lawful.
FINAL RELEASE
-------------
KNOW ALL MEN BY THESE PRESENTS that I, XXXX NIEUWENBURG, of the City of
Calgary, in the Province of Alberta, in consideration of the amounts provided
in that certain Amended and Restated Agreement Respecting Change of Control and
Executive Benefit Plan Entitlements (the "Restated Agreement") dated as of the
______ day of ____________, 2008 between myself and NEXEN INC. and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, do for myself, my executors and assigns hereby remise, release
and forever discharge the Corporation, and any associated, affiliated,
predecessor or parent corporation of the Corporation and their present and
former directors, officers, agents and employees (the "Releasees"), including
each of their respective successors, heirs, administrators and assigns, from
all manner of actions, causes of action, debts, obligations, covenants, claims
or demands, whatsoever which I may ever have had, now have, or can, shall or
may hereafter have against the Releasees or any of them, by reason of or
arising out of any cause, matter or thing whatsoever done, occurring or
existing up to and including the present date and, in particular, without in
any way restricting the generality of the foregoing, in respect of all claims
of any nature whatsoever, past, present or future, directly or indirectly
related to or arising out of or in connection with my relationship with the
Releasees, as an employee, officer or director, and the termination of my
employment from the Corporation including, but not limited to, any claims
related to any entitlement I may have or may have had to any payment or claim
either at common law or under the Employment Standards Code, Human Rights,
Citizenship and Multiculturalism Act or any other applicable legislation
governing or related to my employment with the Releasees.
AND FOR THE SAID CONSIDERATION, I, XXXX NIEUWENBURG, represent and warrant that
I have not assigned to any person, firm or corporation any of the actions,
causes of action, claims, suits, executions or demands which I release by this
Release, or with respect to which I agree not to make any claim or take any
proceeding herein.
- 2 -
IT IS FURTHER ACKNOWLEDGED that the payment to me includes full compensation
and consideration for the loss of my employment benefits, as provided by the
Releasees, and that all of my employment benefits and privileges shall cease on
the date of termination of my employment, except as otherwise expressly
provided in the Restated Agreement. I further acknowledge that I have received
all benefits due to me and have no further claim against the Releasees for such
benefits. I further accept sole responsibility to replace such benefits which I
wish to continue or to exercise conversion privileges where applicable with
respect to such benefits and, in particular any life insurance and long-term
disability benefits. In the event that I become disabled following termination
of my employment, I covenant not to xxx the Releasees for insurance or other
benefits or loss of same and hereby release the Releasees from any and all
further obligations or liabilities arising therefrom.
Notwithstanding anything contained herein, this Release shall not extend to or
affect, or constitute a release of, my right to xxx, claim against or recover
from the Releasees and shall not constitute an agreement to refrain from
bringing, taking or maintaining any action against the Releasees in respect of:
(a) any corporate indemnity existing by statute, contract or
pursuant to any of the constating documents of the Corporation
provided in my favour in respect of my having acted at any time
as a director, officer or both of the Corporation;
(b) my entitlement to any insurance maintained for the benefit or
protection of the directors and/or officers of the Corporation,
including without limitation, directors' and officers'
liability insurance; or
(c) my entitlement to any amounts or compensation due to me under
the terms of my employment pursuant to the Restated Agreement.
- 3 -
IT IS HEREBY AGREED that the terms of the Restated Agreement and of this
Release will be kept confidential. No party hereto shall communicate any such
terms to any third party under any circumstances whatsoever, excepting any
necessary communication with my legal and financial advisors, as required, on
the express condition that they maintain the confidentiality thereof, and any
disclosure which is required by law, although either party shall be at liberty
to disclose to third parties that a mutually acceptable Release was agreed
upon. The invalidity and unenforceability of any provision of this Release
shall not affect the validity or enforceability of any other provision of this
Release, which shall remain in full force and effect.
I HEREBY DECLARE that I have read all of this Release, fully understand the
terms of this Release and voluntarily accept the consideration stated herein as
the sole consideration for this Release for the purpose of making a full and
final settlement with the Releasees. I further acknowledge and confirm that I
have been given an adequate period of time to obtain independent legal counsel
regarding the meaning and the significance of the terms herein and the
covenants mutually exchanged.
IT IS HEREBY AGREED THAT as a term of the termination of my employment from the
Corporation, and in consideration of the amount noted above, I hereby resign as
officer and director of the Corporation and its affiliates.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this _____ day of
______________ in the year _________.
--------------------------------
XXXX NIEUWENBURG
--------------------------------
WITNESS (signature)
--------------------------------
WITNESS (print name)
SCHEDULE "B-1"
--------------
AMENDED AND RESTATED AGREEMENT
RESPECTING CHANGE OF CONTROL AND
EXECUTIVE BENEFIT PLAN ENTITLEMENTS
METHODOLOGY AND ASSUMPTIONS FOR DETERMINING SETTLEMENT VALUE
PURPOSE
In accordance with the terms of the Restated Agreement, the purpose of this
Schedule "B-1" is to outline the calculation approach such that, after tax has
been paid on a lump sum settlement value, the remaining balance is intended to
be sufficient to provide after-tax monthly payments equivalent to the after-tax
monthly payments the Executive would have received under the terms of the
Executive Benefit Plan as provided for under this Restated Agreement.
OVERVIEW FOR DEFINED BENEFIT PENSION
The following outlines the actuarial methods, assumptions and calculation
process to be used in determining the lump sum settlement value of the defined
benefit pension entitlements under the Executive Benefit Plan when settlement
occurs in accordance with Section 10 of the Restated Agreement. Section 300 of
the Income Tax Regulations establishes the procedure applicable in using an
after-tax lump sum to purchase a prescribed annuity:
1. A prescribed annuity payment consists of two components: (a) the deemed
capital element of the annuity payment on which no tax is payable, and (b)
the deemed non-capital portion of the annuity payment which is taxed at
the marginal rate.
2. The capital portion of each future annuity payment is considered to be a
return of the original after-tax lump sum amount.
3. The non-capital portion of each annuity payment is assumed to be provided
by the investment return on the original after-tax lump sum amount and has
therefore not yet been taxed.
4. A constant percentage of each future payment is deemed to be a return of
the original lump sum capital.
CALCULATION METHODOLOGY
1. Equivalent after-tax payments:
a. Determine initial gross annual pension entitlement under the Executive
Benefit Plan.
b. Determine after-tax annual pension entitlement under the Executive Benefit
Plan based on Individual Tax Rate as defined in Schedule "B-1".
- 2 -
c. Determine the capital element based on the non-indexed present value of
the pension payments divided by life expectancy.
d. Determine the monthly payment which provides an after-tax pension equal to
the after-tax pension determined in 1.b. above in accordance with the
prescribed annuity methodology.
2. Present value of periodic payments from 1. above:
a. Determine the present value of the pension determined in 1.d. above using
the assumptions described below in this Schedule "B-1". For greater
certainty, the value of the post-retirement indexation is to be reflected
in determining the present value of the accrued pension entitlement in
respect of post-1992 service, and any accrued pension in respect of
service granted during the Severance Period.
3. Tax adjustment:
x. Xxxxx-up the present value determined in 2.a. above to reflect the tax
assumed to be required to be paid on the lump sum.
x. Xxxxx-up the amount determined in 3.a. above to reflect the tax assumed to
be required to be paid on investment earnings in respect of the lump sum
payment during the deferral period prior to assumed pension commencement,
if any.
4. Equivalent present value after tax as the after-tax monthly payments:
a. The amount determined in 3.b. above shall be the lump sum settlement value
of the Executive's pension entitlement.
ASSUMPTIONS
Interest Discount Rate:
-- during deferral period Yield on long-term Government of
Canada bonds as published in the
Bank of Canada Review, described in
CANSIM series V122544 (or a
successor series) for the last
trading Wednesday at the end of the
month immediately preceding the date
of calculation, rounded down to next
lower 0.5.
-- after assumed pension commencement Yield on long-term Government of
Canada bonds as published in the
Bank of Canada Review, described in
CANSIM series V122544 (or a
successor series) for the last
trading Wednesday at the end of the
month immediately preceding the date
of calculation, rounded down to next
lower 0.5,
less
- 3 -
assumed escalation of pensions after
retirement.
Increase in Consumer Price Index: Yield on long-term Government of
Canada bonds as published in the
Bank of Canada Review, described in
CANSIM series V122544 (or a
successor series) for the last
trading Wednesday at the end of the
month immediately preceding the date
of calculation,
less
Yield on long-term Government of
Canada Real Return bonds as
published in the Bank of Canada
Review, described in CANSIM series
V122553 (or a successor series) for
the last trading Wednesday at the
end of the month immediately
preceding the date of calculation.
The result of the difference is then
rounded up to the next highest 0.5%.
Escalation of Pensions After Retirement: 75% of CPI, less 1% (minimum
increase 25% of CPI). Applies only
to benefits accrued for service
after December 31, 1992.
Mortality:
-- for life expectancy 1994 Uninsured Pensioner Mortality
Table with mortality improvements
projected to 15 years beyond the
date of termination.
-- for present values
o prior to assumed pension Nil.
commencement
o after assumed pension 1994 Uninsured Pensioner Mortality
commencement Table with mortality improvements
projected 15 years beyond the date
of termination.
Marital Status: Actual status at date of
termination.
Age of Spouse: Based on actual date of birth.
- 4 -
Individual Tax Rate: Maximum individual marginal tax rate
for employee's province of
employment at the date of
termination.
OVERVIEW FOR DEFINED CONTRIBUTION BENEFIT
The Settlement Value for any defined contribution benefits shall be equal to
the DC Supplemental Company Account the Executive would have received under the
terms of the Executive Benefit Plan as provided for under this Restated
Agreement. The Settlement Value will not be adjusted for tax.
ASSUMPTIONS
Investment return: As the Settlement Value is expected
to be payable at the calculation
date no investment return is assumed
to accrue on the DC Supplemental
Company Account as defined in the
Executive Benefit Plan.
SCHEDULE "B-2"
--------------
AMENDED AND RESTATED AGREEMENT
RESPECTING CHANGE OF CONTROL AND
EXECUTIVE BENEFIT PLAN ENTITLEMENTS
METHODOLOGY AND ASSUMPTIONS FOR DETERMINING THE AMOUNT TO BE SECURED OR FUNDED
IN ACCORDANCE WITH SECTION 10 BASED ON THE METHODOLOGY DESCRIBED IN SCHEDULE
"B-1"
PURPOSE
The purpose of this Schedule "B-2" is to provide the actuarial methodology and
assumptions for determining the amount to be secured or funded in accordance
with Section 10 of the Restated Agreement.
METHODOLOGY
The settlement methodology is described in Schedule B-1.
The funding methodology applicable to the Executive Benefit Plan Obligations is
based on the following:
1. Estimate the accrued pension and/or Supplemental Company Accounts payable
from the Executive Benefit Plan as at the Valuation Date.
2. Assume that the assets of the plan are to be invested in long term
Government of Canada bonds and subject to the 50% refundable tax
applicable to retirement compensation arrangements.
3. DC Supplemental Company Accounts are assumed to be paid as a lump sum as
at the Valuation Date with no adjustment for tax.
4. Determine the present value of the amounts in 1 through 3 above.
5. Estimate the settlement value that could be paid in accordance with the
methodology and assumptions described in Schedule B-1.
6. The funding amount in respect of the Executive Benefit Plan Obligations
shall be the greater of the amount determined in accordance with 1 through
4 above and the amount in 5 above.
ASSUMPTIONS
Interest Discount Rate:
-- during deferral period Yield on long-term Government of
Canada bonds as published in the
Bank of Canada Review, described in
CANSIM series V122544 (or a
successor series) for the last
trading Wednesday at the end of the
month immediately preceding the
Anniversary Date, rounded down to
next lower 0.5.
- 2 -
-- after assumed pension commencement Yield on long-term Government of
Canada bonds as published in the
Bank of Canada Review, described in
CANSIM series V122544 (or a
successor series) for the last
trading Wednesday at the end of the
month immediately preceding the
Anniversary Date, rounded down to
next lower 0.5 , less assumed
escalation of pensions after
retirement.
Increase in Consumer Price Index: Yield on long-term Government of
Canada bonds as published in the
Bank of Canada Review, described in
CANSIM series V122544 (or a
successor series) for the last
trading Wednesday at the end of the
month immediately preceding the
Anniversary Date,
less
Yield on long-term Government of
Canada Real Return bonds as
published in the Bank of Canada
Review, described in CANSIM series
V122553 (or a successor series) for
the last trading Wednesday at the
end of the month immediately
preceding the Anniversary Date.
The result of the difference is then
rounded up to the next highest 0.5%.
Escalation of Pensions After Retirement: 75% of CPI, less 1% (minimum
increase 25% of CPI). Applies only
to benefits accrued for service
after December 31, 1992.
Mortality:
-- for life expectancy 1994 Uninsured Pensioner Mortality
Table with mortality improvements
projected to 15 years beyond the
Calculation Date.
-- for present values
o prior to assumed pension Nil.
commencement
- 3 -
o after assumed pension 1994 Uninsured Pensioner Mortality
commencement Table with mortality improvements
projected 15 years beyond the
Calculation Date.
Marital Status: Actual status at the Anniversary.
Age of Spouse: Based on actual date of birth.
Individual Tax Rate: Maximum individual marginal tax rate
for employee's province of
employment at the Anniversary Date
Bonus: Target bonus % applied to the salary
rate at the Valuation Date
Investment return: Yield on long-term Government of
Canada bonds as published in the
Bank of Canada Review, described in
CANSIM series V122544 (or a
successor series) for the last
trading Wednesday at the end of the
month immediately preceding the
Anniversary Date rounded down to
next lower 0.5%, and then divided by
2
Assumed investment return on As published in the Bank of Canada
DC Supplemental Company Account Review, described in CANSIM series
as at the Valuation Date: V122544 (or a successor series) for
the last trading Wednesday at the
end of the month immediately
preceding the Anniversary Date
rounded up to next highest 0.5%,
plus 3.0%
Decrements: None assumed prior to Calculation
Date
Eligibility for Pensions: 100% vested
Pension Commencement Age:
-- eligible for subsidized early Payable at the completion of the
retirement on the Calculation Date Severance Period. Payable at the
(i.e., age 55 and 10 years of Calculation Date for purposes of
continuous service) determining the amount required
under Section 10.6(e).
-- not eligible for early retirement on Deferred to age 60 or the end of the
the Calculation Date Severance Period if later. Payable
at age 60 for purposes of
determining the amount required
under Section 10.6(e).
Fluctuation reserve (1) 15% of the pension obligations
- 4 -
Cost of borrowing to settle the Yield on one month Government of
obligations: Canada Treasury Bills as published
in the Bank of Canada Review,
described in CANSIM series V122529
(or a successor series) for the last
trading Wednesday at the end of the
month immediately preceding the
Anniversary Date, rounded up to the
next higher 0.25%, plus 1.50%
================================================================================
NOTES:
(1) Referred to by Section 10.5(g), Section 10.6(e)(viii) and 10.6(e)(x). The
15% load is intended to provide a reserve for a potential decrease in the
Interest Discount Rate in combination with potential increases in the
Consumer Price Index for an aggregate change of 1.0%.
SCHEDULE "C"
------------
AMENDED AND RESTATED AGREEMENT RESPECTING CHANGE OF CONTROL
AND EXECUTIVE BENEFIT PLAN ENTITLEMENTS
ESTIMATED(1) ENTITLEMENT TO COMPENSATION
PURSUANT TO ARTICLE 7 OF THE RESTATED AGREEMENT
--------------------------------------------------------------------------------
EMPLOYEE - XXXX NIEUWENBURG
--------------------------------------------------------------------------------
Base Salary $844,000
--------------------------------------------------------------------------------
Bonus Target Value $379,800
--------------------------------------------------------------------------------
Benefits Uplift $109,720
--------------------------------------------------------------------------------
Car Allowance $38,400
--------------------------------------------------------------------------------
Savings Plan $50,640
--------------------------------------------------------------------------------
Financial Counselling Services $10,500
--------------------------------------------------------------------------------
Security Monitoring Services $2,400
--------------------------------------------------------------------------------
TOTAL VALUE $1,435,460
--------------------------------------------------------------------------------
ADDITIONAL LUMP SUM SETTLEMENT VALUE OF PENSION(2) $1,480,303
--------------------------------------------------------------------------------
TOTAL ESTIMATED ENTITLEMENT $2,915,763
--------------------------------------------------------------------------------
In addition to the above, Section 7.1(d) of the Restated Agreement provides for
Executive Outplacement counselling to be provided by a firm selected by the
Executive, at a cost to the Corporation not to exceed $25,000.
IN ADDITION to the above pension entitlement under the Agreement, the Executive
has the following pension entitlements under the Defined Benefit Registered
Pension Plan and Executive Benefit Plan. As is the case with the figures shown
above, these values are estimated values (as of April 1, 2008) and are for
illustrative purposes only. Actual values will be calculated as of the date of
the entitlement or payment in accordance with the Defined Benefit Registered
Pension Plan and the Executive Benefit Plan, respectively, and therefore may be
subject to change. Pension entitlements in respect of the Defined Contribution
Registered Pension Plan and the Defined Contribution provision of the Executive
Benefit Plan are not included in the pension amounts presented below.
o Accrued Annual Defined Benefit Pension Entitlement
(Registered Pension Plan)(3) $7,583
o Estimated Lump Sum Transfer Value of Registered Pension Plan(4) $78,826
o Estimated Lump Sum Value of Executive Benefit Plan(4) $878,582
---------
(1) As stated in Section 7.1 of the Restated Agreement, the above calculations
represent only the current estimated value (as of April 1, 2008) of the
Executive's entitlement to compensation upon a Change of Control.
Accordingly, the above calculations are for illustrative purposes only.
(2) Calculated in accordance with Section 7.1(b) of the Restated Agreement.
- Adjustment to EBP lump sum value to reflect settlement $702,533.
- Additional settlement value of pension accrued during the severance
period upon a change of control $777,770.
(3) Deferred benefit payable from age 60.
(4) Based on the Standards of Practice for Determining Pension Commuted Values
approved by the Canadian Institute of Actuaries using rates applicable for
April 2008 terminations.
AMENDED AND RESTATED AGREEMENT
RESPECTING CHANGE OF CONTROL AND
EXECUTIVE BENEFIT PLAN ENTITLEMENTS
This amended and restated agreement respecting change of control and executive
benefit plan entitlements made as of the 4th day of September, 2008.
BETWEEN:
NEXEN INC., a corporation incorporated under the laws
of Canada
(hereinafter referred to as the "Corporation")
- and -
XXXXXXX XXXXXX
(hereinafter referred to as the "Executive")
RECITALS:
1. The Executive, as Senior Vice President, Canadian Oil and Gas of the
Corporation, is considered by the Board to be an essential officer and
employee of the Corporation, who is both integral to the operation and
development of the Corporation, and has acquired outstanding skills,
unique experience and possesses an extensive background in, and
knowledge of, the Corporation's business, operations and the industry
in which it is engaged.
2. In the event of a Change of Control, there is a possibility that the
employment of the Executive would be terminated without just cause or
adversely modified and the Executive has expressed concern in that
regard to the Corporation.
3. The Board recognizes that it is essential and in the best interests of
the Corporation and its shareholders that the Corporation retain the
continued dedication of the Executive to the Executive's office and
the Executive's employment during the uncertain period prior to,
during and following a Change of Control.
4. The Board further believes that the past service of the Executive and
the Executive's integral role in the development and operation of the
Corporation requires that the Corporation ensure that in the event of
a Change of Control the Executive is treated in a manner that is fair,
reasonable, consistent with industry standards and in the best
interests of the Corporation.
5. The Corporation and the Executive entered into a Change of Control
Agreement on November 1, 2007 (the "Original Agreement") to agree on
- 2 -
the terms and conditions which would govern the termination or
modification of the employment of the Executive following a Change of
Control.
6. The Original Agreement was amended by an Amending Agreement dated
November 27, 2007 (the "Amending Agreement") which, among other
matters, detailed the Corporation's security and funding obligations
in respect of the Change of Control Obligations (as hereinafter
defined), provided for the securitization and funding of the Executive
Benefit Plan Obligations (as hereinafter defined) and provided for the
cessation of the Executive's coverage under the Statement of Company
Procedure Regarding the Securitization of Nexen Inc. Restated
Executive Benefit Plan, as amended or replaced from time to time (the
"Securitization Procedure").
7. The Corporation and the Executive wish to amend the Original Agreement
and the Amending Agreement as herein provided and, in doing so, wish
to restate those agreements as herein amended (the "Restated
Agreement").
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Restated Agreement and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged by the Parties,
the Parties agree as follows:
ARTICLE 1
DEFINITIONS
-----------
1.1 In this Restated Agreement, the following terms shall mean as follows:
(a) "ACTING JOINTLY OR IN CONCERT" for the purposes of this
Restated Agreement, a Person is acting jointly or in concert
with another Person if such Person has any agreement,
arrangement or understanding (whether formal or informal and
whether or not in writing) with such other Person for the
purpose of acquiring, offering to acquire, or voting any Common
Shares of the Corporation (other than customary agreements with
and between underwriters and banking group or selling group
members with respect to a distribution of securities by way of
prospectus or private placement or pursuant to a pledge of
securities in the ordinary course of business).
(b) "ACTUARY" has the meaning referred to in Section 10.2 of this
Restated Agreement.
(c) "AFFILIATE" and "ASSOCIATE" have the meaning ascribed to such
terms in National Instrument 45-106.
(d) "ANNIVERSARY DATE" has the meaning referred to in Section 10.3
of this Restated Agreement.
(e) "ANNUAL BASE SALARY" means the annual base salary of the
Executive payable by the Corporation at the end of the month
immediately preceding the Date of Termination.
- 3 -
(f) "ANNUAL TARGET BONUS" means the Executive's annual target bonus
as determined by the Board to be in effect for the calendar
year in which a Change of Control occurs.
(g) "BANK" has the meaning referred to in Section 10.2 of this
Restated Agreement.
(h) "BENEFICIAL OWNER" for the purposes of this Restated Agreement,
a Person shall be deemed to be the "BENEFICIAL OWNER" and to
have "BENEFICIAL OWNERSHIP" of and to "BENEFICIALLY OWN":
(i) any securities as to which such Person or any of such
Person's Affiliates or Associates is the owner at law or
in equity;
(ii) any securities as to which such Person or any of such
Person's Affiliates or Associates has a right to acquire
(i) upon the exercise of any Convertible Securities or
(ii) pursuant to any agreement, arrangement or
understanding, whether such right is exercisable
immediately within a period of sixty (60) days thereafter
and whether or not on condition or the happening of any
contingency, (other than (a) customary agreements with
and between underwriters and banking group and selling
group members with respect to the distribution to the
public or pursuant to a private placement of securities,
or (b) pursuant to a pledge of securities in the ordinary
course of business); and
(iii) any securities which are Beneficially Owned within the
meaning of clauses (a) or (b) above by any other Person
with which such Person is Acting Jointly or in Concert,
provided, however, that a Person shall not be deemed the "Beneficial
Owner" or to have "Beneficial Ownership" of or to "Beneficially Own"
any security where such Person is the registered holder of securities
as a result of carrying on the business of or acting as nominee for a
securities depository.
For purposes of this Restated Agreement, the percentage of Common
Shares Beneficially Owned by any Person, shall be and be deemed to be
the product determined by the formula:
100 x A/B
Where:
A = the number of votes for the election of all
directors generally attaching to the Common Shares
Beneficially Owned by such Person; and
B = the number of votes for the election of all
directors generally attaching to all outstanding
Common Shares.
- 4 -
For the purposes of the foregoing formula, where a Person
Beneficially Owns unissued Common Shares which may be acquired
pursuant to Convertible Securities, such Common Shares shall be
deemed to be outstanding for the purpose of calculating the
percentage of Common Shares Beneficially Owned by such Person
in both the numerator and the denominator, but no other
unissued Common Shares which may be acquired pursuant to any
other outstanding Convertible Securities shall, for the
purposes of that calculation, be deemed to be outstanding.
(i) "BOARD" means the Board of Directors of the Corporation as
constituted from time to time.
(j) "CBCA" means the CANADA BUSINESS CORPORATIONS ACT, as amended
from time to time, and any successor legislation thereto.
(k) "CALCULATION DATE" has the meaning referred to in Section 10.5
of this Restated Agreement.
(l) "CHANGE OF CONTROL" means the occurrence of any of:
(i) the purchase or acquisition of any Common Shares or
Convertible Securities by a Beneficial Owner which
results in the Beneficial Owner owning, or exercising
control or direction over, Common Shares or Convertible
Securities such that, assuming only the conversion of
Convertible Securities Beneficially Owned or over which
control or direction is exercised by the Beneficial
Owner, the Beneficial Owner would own, or exercise
control or direction over, Common Shares carrying the
right to cast more than thirty-five percent (35%) of the
votes attaching to all Common Shares; or
(ii) the substantial completion of: (i) the liquidation,
dissolution or winding-up of the Corporation; or (ii)
the sale, lease or other disposition of all or
substantially all of the assets of the Corporation; or
(iii) a situation in which individuals who were members of the
Board immediately prior to:
(A) a meeting of the shareholders of the Corporation
involving a contest for, or an item of business
relating to, the election of directors; or
(B) an amalgamation, arrangement, merger or other
consolidation or combination of the Corporation
with another Person,
shall not constitute a majority of the Board following
such election or transaction; or
- 5 -
(iv) the completion of any transaction or the first of a
series of transactions which would have the same or
similar effect as any transaction or series of
transactions referred to in paragraphs (i), (ii) or
(iii) above; or
(v) a determination by the Board that, for the purposes of
this Restated Agreement, a Change of Control has
occurred or is imminent.
(m) "CHANGE OF CONTROL OBLIGATIONS" means the Company's obligations
to make the lump sum payments described in Section 7.1 of this
Restated Agreement to the Executive.
(n) A "CHANGE OF CONTROL OBLIGATIONS - DESIGNATED EVENT" shall be
deemed to have occurred if:
(i) the Corporation fails to arrange for the extension or
replacement of a Letter of Credit in accordance with the
terms of this Restated Agreement; or
(ii) the Executive's employment is terminated in accordance
with Section 5.1 or 6.1 of this Restated Agreement.
(o) "COMMON SHARES" means the common shares of the Corporation.
(p) "CONVERTIBLE SECURITIES" means:
(i) any right (contractual or otherwise and regardless of
whether such right constitutes a security) to acquire
Common Shares from the Corporation; or
(ii) any security issued by the Corporation from time to time
(other than the rights issued pursuant to a
shareholders' rights protection plan, if any) carrying
any exercise, conversion or exchange right,
which is then exercisable or exercisable within a period of
sixty (60) days from that time pursuant to which the holder
thereof may acquire Common Shares or other securities which are
convertible into or exercisable or exchangeable for Common
Shares (in each case, whether such right is then exercisable or
exercisable within a period of sixty (60) days from that time
and whether or not on condition or the happening of any
contingency).
(q) "DATE OF TERMINATION" means the date upon which the Executive's
employment is terminated pursuant to Section 4.1, 5.1 or 6.1 of
this Restated Agreement. For greater clarity, the Date of
Termination means the date upon which the Corporation provides
the Executive with written, verbal or other notice that the
Executive's employment has been or will be terminated pursuant
to Section 4.1 or 5.1 of this Restated Agreement or the date
upon which the Executive provides the Corporation with written
notice terminating the Executive's employment pursuant to
Section 4.1 or for Good Reason pursuant to Section 6.1.
- 6 -
(r) "DISABILITY" means, where due to a physical or mental
condition, the Executive is rendered totally and permanently
unable to perform the Executive's duties for a consecutive
period of two (2) years or more during which the Executive has
been in receipt of long term disability insurance benefits from
the insurance carrier normally utilized by the Corporation.
(s) "DISPUTE" has the meaning referred to in Section 11.1 of this
Restated Agreement.
(t) "EFFECTIVE DATE" means the date upon which a Change of Control
occurs.
(u) "EMPLOYMENT BENEFITS" means the employment benefits to which
the Executive is entitled by virtue of any written, oral or
implied agreement with the Corporation. For the purposes of
this Restated Agreement, "Employment Benefits" shall include,
but is not limited to, the following:
(i) the Executive's entitlement to any dental or general
medical care;
(ii) the Executive's entitlement to receive long term
disability benefits from the insurance carrier normally
utilized by the Corporation;
(iii) the Executive's entitlement to pension benefits under
the terms of any pension plan with the Corporation;
(iv) the Executive's entitlement to a monthly car allowance
from the Corporation;
(v) the Executive's entitlement to contributions by the
Corporation to the Corporation's savings plan;
(vi) the Executive's entitlement to receive from the
Corporation financial counseling services, at a cost of
$3,500.00 per year (or as the same may be increased from
time to time by the Corporation); and
(vii) the Executive's entitlement to receive from the
Corporation security monitoring services at the
Executive's personal residence.
(v) "EXECUTIVE BENEFIT PLAN" has the meaning referred to in Section
7.1(b) of this Restated Agreement.
(w) "EXECUTIVE BENEFIT PLAN OBLIGATIONS" means the Corporation's
outstanding obligations under the Executive Benefit Plan to the
Executive.
(x) An "EXECUTIVE BENEFIT PLAN OBLIGATIONS - DESIGNATED EVENT"
shall be deemed to have occurred if:
(i) a Change of Control occurs;
- 7 -
(ii) the Corporation makes an assignment for the benefit of
creditors or files a petition in bankruptcy or becomes
insolvent or bankrupt;
(iii) a receiver, trustee or liquidator of or for the
Corporation is appointed and is not discharged within a
period of sixty days;
(iv) the net worth of the Corporation, described as
shareholder equity in the consolidated financial
statements of the Corporation as disclosed in the annual
and quarterly consolidated financial statements of the
Corporation, is less than $400 million;
(v) the Corporation fails to arrange for the extension or
replacement of a Letter of Credit in accordance with the
terms of this Restated Agreement;
(vi) the Executive has provided written notification to the
Trustee and to the Corporation of the failure by the
Corporation to pay any amount owed to or in respect of
the Executive under the Executive Benefit Plan within
thirty days of the due date specified in the Executive
Benefit Plan (together with a statement of the amount
due and owing) either to the person entitled thereto
pursuant to the Executive Benefit Plan or to the Trust
in accordance with the provisions of Section 10.6(h); or
(vii) at any time the Board adopts a resolution to the effect
that, for purposes of this Restated Agreement, an
Executive Benefit Plan Obligations - Designated Event
has occurred or is imminent.
(y) "GOOD REASON" means any of the following, unless the Executive
shall have given the Executive's express written consent
thereto:
(i) INCONSISTENT DUTIES. The assignment to the Executive of
any duties inconsistent with the Executive's status as
an executive officer of the Corporation or a material
alteration in the nature or status of the Executive's
responsibilities or duties or reporting relationship
from those in effect immediately prior to a Change of
Control;
(ii) REDUCED SALARY. A reduction by the Corporation in the
Executive's Annual Base Salary in effect on the
Effective Date or as the same may be increased
thereafter from time to time or the failure by the
Corporation to grant the Executive salary increases at a
rate commensurate with the increases accorded to other
executives of the Corporation;
(iii) RELOCATION. The Corporation requiring the Executive to
be based anywhere other than where the Executive is
based at the time a Change of Control occurs, except for
required travel on the Corporation's business to an
extent substantially consistent with the Executive's
- 8 -
business travel obligations in the ordinary course of
business immediately prior to a Change of Control;
(iv) INCENTIVE COMPENSATION PLANS. The failure by the
Corporation to continue in effect any incentive
compensation plan in which the Executive participates,
including, but not limited to, the Incentive
Compensation Plan or the Stock Option Plan or any other
similar plans adopted prior to a Change of Control,
unless the Executive is eligible to participate in, and
is entitled to the opportunity to receive a comparable
level of benefits under, an ongoing, substitute or
alternative plan (it being understood that the manner or
method of payment and the form of consideration need not
be the same as existed in the original plans); or the
failure by the Corporation to continue the Executive's
participation therein on at least as favourable a basis,
both in terms of the amount of benefits available to the
Executive and the level of the Executive's participation
relative to other participants, as existed at the time a
Change of Control occurs;
(v) EMPLOYMENT BENEFITS AND PERQUISITES. The failure by the
Corporation to continue to provide the Executive with
Employment Benefits at least as favourable as those
enjoyed by the Executive immediately prior to a Change
of Control, including any pension plan, benefit plan or
any retirement arrangement established for the
Executive, or any of the Corporation's life insurance,
medical, health and accident, disability or savings
plans in which the Executive was participating at the
time a Change of Control occurs; the taking of any
action by the Corporation that would directly or
indirectly materially reduce any such benefits or
deprive the Executive of any material perquisite enjoyed
by the Executive at the time a Change of Control occurs,
including, without limitation and to the extent
applicable, the use of a car, aircraft, secretarial
services, office space, telephones, computer facilities,
expense reimbursement, financial counselling, and
professional fees and club dues reimbursement; or the
failure by the Corporation to provide the Executive with
the number of paid vacation days to which the Executive
is entitled in accordance with the Corporation's normal
vacation practice in effect at the time a Change of
Control occurs;
(vi) NO ASSUMPTION BY SUCCESSOR. The failure of the
Corporation to obtain a satisfactory agreement from a
successor to assume and agree to perform this Restated
Agreement. Alternatively, if the business or undertaking
in connection with which the Executive's services are
principally performed is sold at any time after a Change
of Control occurs, and the Executive's employment is
transferred as a result, the failure or refusal of the
purchaser of such business or undertaking to provide the
Executive with the same or a comparable position,
duties, compensation and benefits, as described in
paragraphs (iv) and (v) above, as provided to the
- 9 -
Executive by the Corporation immediately prior to a
Change of Control;
(vii) DISPOSITION OF "ALL OR SUBSTANTIALLY ALL". The
disposition by the Corporation of all or substantially
all of the assets of the Corporation, as contemplated
herein, notwithstanding that the Executive's services
were or were not principally performed for such
business.
(z) "HEARING" has the meaning referred to in Section 11.7 of this
Restated Agreement.
(aa) "HEARING DATE" has the meaning referred to in Section 11.7 of
this Restated Agreement.
(bb) "INCENTIVE COMPENSATION PLAN" means any bonus or incentive
compensation plan of the Corporation in which the Executive is
entitled to receive benefits in the month immediately preceding
a Change of Control.
(cc) "JUST CAUSE" means:
(i) the failure by the Executive to substantially perform
the Executive's duties according to the terms of the
Executive's employment in existence immediately prior to
a Change of Control after the Corporation has given the
Executive reasonable notice of such failure and a
reasonable opportunity to correct it; or
(ii) where the Executive engages in any criminal act or
dishonesty resulting or intended to result, directly or
indirectly, in the personal gain of the Executive at the
Corporation's expense.
(dd) "LETTER OF CREDIT" has the meaning referred to in Section 10.2
of this Restated Agreement.
(ee) "MONTHLY BASE SALARY" means the monthly salary payable to the
Executive by the Corporation in effect at the end of the month
immediately preceding the Effective Date.
(ff) "NOTICE OF DISPUTE" has the meaning referred to in Section 11.1
of this Restated Agreement.
(gg) "OBLIGATIONS" means, collectively, the Change of Control
Obligations and the Executive Benefit Plan Obligations.
(hh) "PARTIES" means the Corporation, and its successors and
permitted assigns, and the Executive and the Executive's heirs,
executors and administrators and "PARTY" means either one of
them.
- 10 -
(ii) "PERSON" includes an individual, partnership, association, body
corporate, trustee, executor, administrator, legal
representative and any national, provincial, state or municipal
government or any agency thereof.
(jj) "REFUNDABLE TAX ACCOUNT" means the refundable tax account
maintained in respect of the Trust by the Canada Revenue
Agency.
(kk) "REGISTERED PENSION PLAN" has the meaning referred to in
Section 7.1(b) of this Restated Agreement.
(ll) "RESTATED AGREEMENT" means this amended and restated agreement
respecting change of control and executive benefit plan
entitlements as it may be amended, restated or supplemented
from time to time, and the expressions "hereof", "herein",
"hereto", "hereunder", "hereby", and similar expressions refer
to this Restated Agreement and, unless otherwise indicated,
refer to Articles or Sections in this Restated Agreement only.
(mm) "SECURITIZATION PROCEDURE" has the meaning referred to in the
recitals of this Restated Agreement.
(nn) "SEVERANCE PERIOD" means the twenty-four (24) month period
immediately following the Date of Termination.
(oo) "STOCK OPTION PLAN" means any stock option plan or plans of the
Corporation pursuant to which the Executive is granted options
by the Corporation to acquire Common Shares.
(pp) "SUBSIDIARY" has the meaning ascribed to it in the CBCA.
(qq) "TAX ACT" means the Income Tax Act (Canada) and the Regulations
thereunder, both as amended from time to time.
(rr) "TERM" has the meaning referred to in Section 3.1 of this
Restated Agreement.
(ss) "TRUST" has the meaning referred to in Section 10.1 of this
Restated Agreement.
(tt) "TRUST AGREEMENT" has the meaning referred to in Section 10.1
of this Restated Agreement.
(uu) "TRUSTEE" means CIBC Mellon Trust Company or such other trust
company duly incorporated under the laws of Canada or any
province thereof whom the Company may designate as the trustee
in connection with the security and funding of the Obligations.
(vv) "VALUATION DATE" has the meaning referred to in Section 10.3 of
this Restated Agreement.
- 11 -
ARTICLE 2
SCOPE OF RESTATED AGREEMENT
---------------------------
2.1 The Parties intend that this Restated Agreement sets out (a) their
respective rights and obligations upon the occurrence of a Change of
Control and in connection with the securitization and funding of the
Change of Control Obligations; and (b) their respective rights and
obligations regarding the securitization and funding of the Executive
Benefit Plan Obligations. This Restated Agreement does not provide for
any other terms of the Executive's employment with the Corporation,
except as expressly provided for herein.
2.2 The Parties hereby confirm that except as otherwise expressly stated
in this Restated Agreement, insofar as the securitization and funding
of the Executive Benefit Plan Obligations is concerned, the terms of
this Restated Agreement shall govern and the terms of the
Securitization Procedure shall not be applicable.
2.3 This Restated Agreement shall automatically terminate upon the death
of the Executive or where due to the Disability of the Executive, the
Executive is materially incapacitated from performing the Executive's
duties. In the event of the death or Disability of the Executive, the
Executive (or the Executive's estate) shall be entitled to receive
from the Corporation all unpaid Annual Base Salary, Employment
Benefits, unpaid business expenses and vacation entitlement accrued to
the date of the death or Disability of the Executive. The Executive
(or the Executive's estate) shall also be entitled to receive any and
all death or Disability benefits in a manner consistent with, and at
least equal in amount to, those provided by the Corporation to senior
executives (or their estate) under such plans, programs and policies
in effect at the date of Disability or death of the Executive, and the
Corporation shall have no further obligations to the Executive or the
Executive's estate under this Restated Agreement. Any entitlements of
the Executive (or the Executive's estate) under the Executive Benefit
Plan which remain following the termination of this Restated Agreement
pursuant to this Section 2.3 shall then commence to be covered under
the Securitization Procedure.
2.4 If the Executive's employment is terminated by either Party, for any
reason, prior to a Change of Control in any manner, other than
expressly provided for in this Restated Agreement, this Restated
Agreement shall automatically terminate and the Corporation shall have
no further obligations to the Executive hereunder. Any remaining
entitlements of the Executive under the Executive Benefit Plan which
remain following the termination of this Restated Agreement pursuant
to this Section 2.4 shall then commence to be covered under the
Securitization Procedure.
ARTICLE 3
TERM OF RESTATED AGREEMENT
--------------------------
3.1 Subject to termination of this Restated Agreement prior to a Change of
Control, this Restated Agreement shall remain in effect for a period
concluding twelve (12) months following the Effective Date (the
"Term"), at which time this Restated Agreement shall terminate;
provided however that the payment of compensation and benefits to the
- 12 -
Executive under this Restated Agreement shall continue beyond the end
of the Term in accordance with the applicable provisions of this
Restated Agreement. Any remaining entitlements of the Executive under
the Executive Benefit Plan which remain following the termination of
this Restated Agreement pursuant to this Section 3.1 shall then
commence to be covered under the Securitization Procedure.
ARTICLE 4
TERMINATION FOR JUST CAUSE OR FOR OTHER THAN GOOD REASON
--------------------------------------------------------
4.1 If the Executive's employment is terminated for Just Cause, or is
terminated by the Executive, other than for Good Reason, following a
Change of Control, the Corporation shall pay to the Executive, if not
already paid, the fraction of the unpaid Annual Base Salary accrued
during the then current fiscal year of the Corporation, all accrued
Employment Benefits, all unpaid reasonable business expenses and all
unpaid vacation pay accrued up to and including the Date of
Termination, and thereafter, the Corporation shall have no further
obligations to the Executive under this Restated Agreement.
4.2 Nothing in this Restated Agreement shall serve to derogate from the
vested rights of the Executive to pension benefits, Stock Option Plans
or any other Employment Benefits to which the Executive is entitled up
to the Date of Termination.
ARTICLE 5
TERMINATION BY CORPORATION
--------------------------
5.1 If the Executive's employment is terminated by the Corporation within
the twelve (12) month period following the Effective Date, for reason
other than Just Cause, death or Disability, the Corporation shall pay
to the Executive the remuneration referred to in Article 7 of this
Restated Agreement.
ARTICLE 6
TERMINATION FOR GOOD REASON
---------------------------
6.1 In the event of a Change of Control, the Executive may, within the
twelve (12) month period following the Effective Date and upon
providing the Corporation with ten (10) days written notice, terminate
the Executive's employment with the Corporation for Good Reason. Upon
being provided with such notice, the Corporation shall pay to the
Executive the remuneration referred to in Article 7 of this Restated
Agreement.
ARTICLE 7
COMPENSATION UPON TERMINATION
7.1 If the Executive's employment is terminated in accordance with Section
5.1 or 6.1 of this Restated Agreement:
- 13 -
(a) the Corporation shall forthwith, but in any event within ten
(10) days from receipt by the Corporation of a Release executed
by the Executive substantially in the form of Schedule "A", pay
to the Executive:
(i) if not previously paid, that portion of the Executive's
accrued but unpaid Monthly Base Salary, any accrued but
unpaid bonus to which the Executive is entitled for the
preceding calendar year under any Incentive Compensation
Plan, all unpaid reasonable business expenses and all
accrued but unused vacation pay earned or payable to the
Executive by the Corporation for the period from the
beginning of the Corporation's then current fiscal year,
up to and including the Date of Termination;
(ii) a lump sum cash payment equal to the Executive's Monthly
Base Salary and one-twelfth (1/12) of the Executive's
Annual Target Bonus for each month of the Severance
Period;
(iii) a lump sum payment equal to thirteen percent (13%) of
the Executive's Annual Base Salary for the Severance
Period representing the value of the group health and
welfare benefits for the Severance Period;
(iv) a lump sum payment representing the value of the
Executive's monthly car allowance for the Severance
Period;
(v) a lump sum payment representing the value of the
Corporation's contributions to the Corporation's savings
plan (at a rate of six percent (6%) of the Executive's
Annual Base Salary) for the Severance Period;
(vi) a lump sum payment representing the value of the
Executive's entitlement to receive from the Corporation
financial counseling services for the Severance Period;
and
(vii) a lump sum payment representing the value of the
Executive's entitlement to receive from the Corporation
security monitoring services at the Executive's personal
residence for the Severance Period;
(b) with respect to the Executive's entitlement to pension benefits
under the Pension Plan for Employees of Nexen Inc. (Defined
Benefit Option) (the "Registered Pension Plan"), if any, and
the Executive's related entitlement under the Nexen Inc.
Restated Executive Benefit Plan (the "Executive Benefit Plan"),
if any:
(i) the Corporation shall recognize the Severance Period for
purposes of determining the Executive's entitlement;
(ii) for calculation purposes, the Executive's entitlement is
the benefit which would have been determined assuming
that the Executive had been employed throughout the
Severance Period, including recognition of:
- 14 -
(A) additional service that would have been credited
for the Severance Period;
(B) monthly salary equal to the Executive's Monthly
Base Salary throughout the Severance Period;
(C) pensionable bonus for the year of the Date of
Termination, and for each subsequent year or
portion thereof during the Severance Period,
determined at the Annual Target Bonus level.
Average bonus will be determined over the three
years to the end of the Severance Period,
including any partial calendar years; and
(D) if the Executive would have been eligible for
retirement at the end of the Severance Period, the
Executive shall be deemed to retire, and the
pension to commence, upon completion of the
Severance Period. In such case, the Executive's
attained age at the end of the Severance Period
will be recognized for purposes of calculating the
early retirement reduction factor, if applicable;
and
(iii) the pension entitlements described in this Section
7.1(b) shall, to the extent legally permissible, be
provided through the Registered Pension Plan. To the
extent that it is not legally permissible to provide
such pension entitlements through the Registered Pension
Plan, the Corporation shall pay to the Executive a lump
sum payment representing the settlement value of the
additional Executive Benefit Plan benefit determined in
accordance with the assumptions set forth in Schedule
"B-1";
(iv) any entitlements of the Executive under the Executive
Benefit Plan which have previously been funded in
accordance with Article 10 but not previously settled in
accordance with Article 10 shall be settled by the
Corporation in accordance with the assumptions set forth
in Schedule "B-1";
(c) the Corporation shall provide the Executive with executive
outplacement counselling to be provided by a firm to be
selected by the Executive, at a cost to the Corporation not to
exceed $25,000.00;
(d) all of the Executive's outstanding unexercisable stock options
under any Stock Option Plan shall become exercisable; and
(e) where the Executive has been relocated, at the request of the
Corporation, within the two (2) year period immediately prior
to the Effective Date, if so requested by the Executive, the
Corporation shall relocate the Executive back to the
Executive's prior location.
- 15 -
7.2 The estimated value as of April 1, 2008 of Sections 7.l(a)(ii) to
7.1(c) are set out in Schedule "C". Schedule "C" provides estimated
values only and actual values shall be calculated in accordance with
this Restated Agreement at the time of entitlement or payment under
this Restated Agreement.
7.3 If the Executive's employment is terminated in the circumstances
described in Section 5.1 or 6.1 of this Restated Agreement, the
remuneration and benefits payable under this Article 7 shall not be
reduced if the Executive obtains alternative employment.
7.4 Unless expressly provided otherwise in this Restated Agreement, all
payments to be made to the Executive under this Article 7 shall be
subject to required statutory deductions at source by the Corporation.
ARTICLE 8
CONFIDENTIAL INFORMATION
------------------------
8.1 If the Executive's employment is terminated in any manner whatsoever
due to or following a Change of Control, the Executive agrees to keep
confidential all information of a confidential or proprietary nature
concerning the Corporation, its Affiliates, Associates and
Subsidiaries and their respective operations, opportunities, areas of
present, past or future interests, assets, finances, technology,
intellectual property, business and affairs, and further agrees not to
use such information, data or technology for personal advantage,
provided that nothing herein shall prevent the disclosure of
information which is publicly available or which is required to be
disclosed by the Executive under appropriate statute, rules of law or
legal process.
ARTICLE 9
RIGHTS AND OBLIGATIONS OF EXECUTIVE UPON TERMINATION
----------------------------------------------------
9.1 Subject to Section 8.1 of this Restated Agreement, the Executive shall
not be prohibited in any manner whatsoever from obtaining alternative
employment with or otherwise forming or participating in a business
competitive to the business of the Corporation after the termination
of the Executive's employment with the Corporation.
9.2 Upon the termination of the Executive's employment for any reason, the
Executive shall tender the Executive's resignation from any position
the Executive may hold as an officer or director of the Corporation or
any of its Affiliates, Associates or Subsidiaries.
9.3 If the Executive's employment is terminated in the circumstances
described in Section 5.1 or 6.1 of this Restated Agreement, the
Corporation shall continue to purchase and maintain, to the extent
available in the marketplace at reasonable cost to the Corporation, on
behalf of the Executive, director and officer liability insurance for
the applicable limitation period following the date upon which the
Executive ceases to serve as a director or officer of the Corporation,
and the Executive's existing agreement to receive indemnity from the
Corporation for acts taken by the Executive in the Executive's
capacity as an officer of the Corporation shall remain in effect.
- 16 -
9.4 Upon termination of the Executive's employment pursuant to Section 5.1
or 6.1 of this Restated Agreement, the Corporation shall reimburse the
Executive for ongoing legal fees and disbursements which the Executive
may reasonably incur in connection with this Restated Agreement (but
this Restated Agreement only), including any litigation concerning the
validity or enforceability of, or liability under, any provision of
this Restated Agreement or any action by the Executive. The
Corporation shall pay such fees and reimbursements to the Executive
promptly as such fees and disbursements become due.
ARTICLE 10
SECURITIZATION AND FUNDING PROCEDURE
------------------------------------
10.1 The Corporation has established and maintains a trust for the benefit
of the Executive and persons claiming through him (the "Trust")
pursuant to the terms and conditions of a trust agreement (the "Trust
Agreement") between the Corporation and the Trustee. The Trust shall
be funded in accordance with the provisions of this Restated Agreement
and the Trust Agreement.
10.2 To provide security against a failure by the Corporation to either
fund or settle the Obligations in accordance with the terms of this
Article 10, the Trust Agreement provides for the funding of the Trust
with the proceeds of an irrevocable letter of credit which satisfies
the requirements of this Restated Agreement (a "Letter of Credit") in
the event that the Corporation does not provide funding or effect
settlement when required to do so hereunder and in accordance with the
terms hereof. The Corporation confirms that the Letter of Credit
currently held by the Trustee has been issued by a major Canadian
chartered bank (the "Bank") in an amount calculated by the
Corporation's consulting actuary (who at all times shall be a Fellow
of the Canadian Institute of Actuaries) (the "Actuary") in accordance
with the provisions of Section 10.5 of this Restated Agreement.
10.3 On each February 1st (the "Anniversary Date"), the Corporation shall
request a report from the Actuary as to the amount calculated, as at
the next succeeding April 1st (the "Valuation Date"), in accordance
with the provisions of Section 10.5 of this Restated Agreement. The
Corporation shall provide the Actuary with the data it requires to
prepare such report. Upon completion of each such report, the
Corporation shall arrange for the Actuary to provide a summary of same
to the Trustee.
Prior to the funding and/or settlement of all of the Obligations in
accordance with the terms of this Restated Agreement, the Corporation
shall, within forty-five days after the applicable Anniversary Date
and in accordance with the terms of the report received from the
Actuary:
(a) either:
(i) arrange for a Letter of Credit to be provided by the
Bank to the Trustee to replace the Letter of Credit then
held by the Trustee. The replacement Letter of Credit
shall be:
- 17 -
(A) substantially in the form of the Letter of Credit
then held by the Trustee;
(B) in an amount calculated by the Actuary as at the
applicable Valuation Date in accordance with the
provisions of Section 10.5 of this Restated
Agreement; and
(C) for a term which commences on the date of its
issuance and expires one year following the
applicable Valuation Date; or
(ii) confirm to the Trustee in writing that the Letter of
Credit then held by the Trustee will be extended
automatically for a further one-year term. The
confirmation to the Trustee shall include evidence from
the Bank as to any amendment to the applicable Letter of
Credit, any such amendment to be consistent with the
report prepared by the Actuary as at the applicable
Valuation Date; and
(b) contribute to the Trust an amount equal to twice the fee
charged by the Bank in connection with the Letter of Credit
extension or replacement, as applicable. The Corporation shall
withhold one-half of such amount and shall remit the said
one-half of such amount to the Canada Revenue Agency on account
of the tax which is exigible pursuant to the Tax Act in
connection with such contribution to the Trust. The Trustee
shall remit the remaining one-half of such amount to the Bank
in consideration for the Letter of Credit extension or
replacement, as applicable.
When a replacement Letter of Credit has been provided in accordance
with the terms of this Section 10.3, an existing Letter of Credit
shall be surrendered and cancelled.
10.4 If, during the term of a Letter of Credit issued pursuant to this
Restated Agreement, the Corporation, acting reasonably, concludes that
there has been a significant change in the Obligations since the date
of the last report prepared by the Actuary pursuant to Section 10.3 of
this Restated Agreement, the Corporation shall request a report from
the Actuary as to the then current value of the Obligations,
calculated in accordance with the provisions of Section 10.5 of this
Restated Agreement. Upon receipt of the report, the Corporation shall
provide a summary of same to the Trustee and arrange, together with
the Trustee, for any required increase or decrease in the amount of
the Letter of Credit for the balance of the term of such Letter of
Credit. In the event that a replacement Letter of Credit is to be
issued in the circumstances described in this Section 10.4, the
Corporation and the Trustee shall arrange for such replacement Letter
of Credit to be provided by the Bank to the Trustee to replace the
Letter of Credit then held by the Trustee. Upon receipt of a
replacement Letter of Credit pursuant to this Section 10.4, the
Trustee shall surrender for cancellation the Letter of Credit then
held by it pursuant to this Restated Agreement and the Trust
Agreement.
In the event that all or any portion of the fee referred to in Section
10.3 of this Restated Agreement, is refunded by the Bank as a result
of a decrease in the amount of a Letter of Credit pursuant to this
- 18 -
Section 10.4, such amount (together with any resulting refundable Tax)
shall be received by the Trustee for deposit to the Trust. Upon
receipt of an Authorized Instruction (as defined in the Trust
Agreement), the Trustee shall pay and transfer such amounts (less any
applicable tax which it will remit as required by the Tax Act on
behalf of the Corporation) to the Corporation for its sole and
exclusive use and benefit.
In the event that an additional fee is required to be paid to the Bank
as a result of an increase in the amount of a Letter of Credit
pursuant to this Section 10.4, the Corporation shall contribute to the
Trust an amount equal to twice the additional fee. The Corporation
shall withhold one-half of such amount and shall remit the said
one-half of such amount to the Canada Revenue Agency on account of the
tax which is exigible pursuant to the Tax Act in connection with such
contribution to the Trust. The Trustee shall remit the remaining
one-half of such amount to the Bank in payment of its additional fee.
10.5 A Letter of Credit issued pursuant to this Restated Agreement shall:
(i) be an irrevocable standby letter of credit;
(ii) obligate the Bank to satisfy demand for payment made by
the Trustee in accordance with the terms of this
Restated Agreement and the Trust Agreement;
(iii) permit partial drawings; and
(iv) provide that the Bank must notify the Trustee on or
before thirty days prior to the expiry of a Letter of
Credit of any notice of non-extension provided by the
Bank to the Corporation.
The amount of a Letter of Credit pursuant to this Restated Agreement
shall be calculated by the Actuary in accordance with the following
subparagraphs of this Section 10.5.
(a) Assuming the lump sum payments referred to in Section 7.1(a) of
this Restated Agreement are equal to the amount thereof
provided by the Corporation.
(b) Assuming the service of the Executive will terminate, in
accordance with Section 5.1 or 6.1 of this Restated Agreement,
on the next succeeding March 31st after the Valuation Date (the
"Calculation Date").
(c) Using the Executive's demographic data, including base salary,
target bonus and current marital status as of the Valuation
Date, provided by the Corporation.
(d) Using the Yearly Maximum Pensionable Earnings (Y.M.P.E.) used
to determine the amount of the Canada Pension Plan Benefit and
Tax Act maximum defined benefit pension dollar limit as at the
Valuation Date.
(e) Assuming all Obligations are included.
- 19 -
(f) Using the actuarial methods, assumptions and calculation
methodology described in Schedule "B-2.
(g) Applying a load of 15% to the amount determined in accordance
with subparagraphs (b) through (f) of this Section 10.5 to
provide for fluctuations in the Interest Discount Rate,
Consumer Price Index and other plan experience during the term
of the Letter of Credit, as described in Schedule "B-2".
(h) Applying a load to one-half of the amount determined in
accordance with subparagraphs (a) through (g) of this Section
10.5 to provide for the cost associated with the borrowings
described in subparagraph (k) of this Section 10.5, as
described in Schedule "B-2".
(i) Including a settlement expense to the amount determined in
subparagraph (h), with the aggregate settlement expense
allowance for all obligations secured equal to $250,000, or
where the Valuation Date is after December 31, 2008, the
aggregate settlement expense allowance will be increased at the
rate equal to the increase in the Consumer Price Index, as
described in Schedule "B-2", plus 1% for each year after 2008.
(j) Assuming the Obligations will be promptly settled with the
Executive upon occurrence of a Designated Event described in
Section 1.1(n)(ii).
(k) Assuming a loan will be secured to permit settlement of the
Obligations prior to receipt of the Refundable Tax Account from
the Canada Revenue Agency. The assumed interest rate payable on
the loan shall be as described in Schedule "B-2". The cost
associated with the borrowings shall be assumed to be paid from
the Trust.
(l) The liabilities calculated in accordance with subparagraphs (a)
through (k) above shall be offset by:
(i) the Refundable Tax Account, if any; and
(ii) the assets contained in the Trust, if any.
10.6 (a) If an Executive Benefit Plan Obligations - Designated Event
shall occur, the Corporation shall be required to immediately
fund the Executive Benefit Plan Obligations in accordance with
the most recent report prepared by the Actuary pursuant to
Section 10.3 of this Restated Agreement. Notwithstanding the
foregoing, if an Executive Benefit Plan Obligations -
Designated Event described in Section 1.1(x)(i) and a Change of
Control Obligations - Designated Event described in Section
1.1(n)(ii) shall occur simultaneously, the Corporation shall be
required to settle the Executive Benefit Plan Obligations
forthwith in accordance with the provisions of Schedule "B-1".
- 20 -
(b) If:
(i) the employment of the Executive is terminated by the
Corporation for any reason other than as a result of the
death, disability or retirement of such Executive; and
(ii) such Executive files with the Corporation a written
request that it fund the Executive Benefit Plan
Obligations,
the Corporation shall be required to immediately fund the
Executive Benefit Plan Obligations in accordance with the
most recent report prepared by the Actuary pursuant to
Section 10.3 of this Restated Agreement.
(c) Upon the earlier of:
(i) learning of the occurrence of an Executive Benefit Plan
Obligations - Designated Event described in Section
1.1(x)(v) or (vi) of this Restated Agreement; or
(ii) receipt of a written notice of the occurrence of an
Executive Benefit Plan Obligations - Designated Event
described in any of the other subparagraphs of Section
1.1(x) of this Restated Agreement, which notice has been
signed by two executives of the Corporation, one of whom
must be either the Chief Financial Officer or the
General Counsel of the Corporation and which notice
must, in the case of an Executive Benefit Plan
Obligations - Designated Event described in Section
1.1(x)(i) of this Restated Agreement, indicate which
subparagraph of the definition of "Change of Control" is
applicable,
the Trustee shall promptly give notice to the Corporation in
writing that it intends to draw on that portion of the Letter
of Credit which is referable to the Executive Benefit Plan
Obligations and contribute the proceeds thereof (less any
applicable withholding tax which it will remit as required by
the Tax Act on behalf of the Corporation) to the Trust on
behalf of the Corporation in order to fund the Executive
Benefit Plan Obligations, unless it receives satisfactory
proof within nine days of such notice that the Corporation
has funded or settled, as applicable, the Executive Benefit
Plan Obligations itself in accordance with the terms of this
Restated Agreement.
Unless the Corporation advises the Trustee in writing that it
has funded or settled, as applicable, the Executive Benefit
Plan Obligations in accordance with the terms of this
Restated Agreement and has provided the Trustee with
satisfactory proof thereof within nine days of the date of
the aforementioned notice, the Trustee shall draw on that
portion of the Letter of Credit which is referable to the
Executive Benefit Plan Obligations on the tenth day following
the date of such notice (or the next following business day
if such tenth day is not a business day) and contribute the
- 21 -
proceeds thereof (less any applicable withholding tax which
it will remit as required by the Tax Act on behalf of the
Corporation) to the Trust on behalf of the Corporation.
Notwithstanding the foregoing, in the event an Executive
Benefit Plan Obligations - Designated Event described in
Section 1.1(x)(v) or (vi) of this Restated Agreement has
triggered the operation of this Section 10.6 and the failure
which gave rise to the occurrence of such Executive Benefit
Plan Obligations - Designated Event has been remedied prior
to the expiration of the notice period provided for in this
Section 10.6(c), the Trustee shall not take the action
described in the immediately preceding paragraph hereof and
all of the provisions of this Restated Agreement shall
continue to apply to the same extent and as fully as they
would have in the event that such Executive Benefit Plan
Obligations - Designated Event had not occurred.
(d) Upon receipt of a written notice of the occurrence of the
events described in both subparagraphs (i) and (ii) of Section
10.6(b) of this Restated Agreement (which notice has been
signed by the Executive and sworn before a notary public), the
Trustee shall promptly give notice to the Corporation in
writing that it intends to draw on that portion of the Letter
of Credit which is referable to the Executive Benefit Plan
Obligations and contribute the proceeds (less any applicable
withholding tax which it will remit as required by the Tax Act
on behalf of the Corporation) to the Trust on behalf of the
Corporation in order to fund the Executive Benefit Plan
Obligations unless it receives satisfactory proof within nine
days of the date of such notice that the Corporation has funded
the Executive Benefit Plan Obligations itself in accordance
with the terms of this Restated Agreement.
Unless the Corporation advises the Trustee in writing that it
has funded the Executive Benefit Plan Obligations in
accordance with the terms hereof and has provided the Trustee
with satisfactory proof thereof within nine days of the date
of the aforementioned notice, the Trustee shall draw upon
that portion of the Letter of Credit which is referable to
the Executive Benefit Plan Obligations on the tenth day
following the date of such notice (or the next following
business day if such tenth day is not a business day) and
contribute the proceeds (less any applicable withholding tax
which it will remit as required by the Tax Act on behalf of
the Corporation) to the Trust on behalf of the Corporation.
(e) For purposes of determining the required amount of funding or
the portion of the Letter of Credit to be drawn on for purposes
of this Section 10.6, the Trustee shall refer to the most
recent report prepared by the Actuary for purposes of this
Restated Agreement and, in particular, to the portion of the
report dealing with the Executive Benefit Plan Obligations. In
preparing the portion of its report respecting Executive
Benefit Plan Obligations, the Actuary shall adhere to the
following:
- 22 -
(i) Assuming that the Executive, if then in active
employment, will remain in active employment with the
Corporation as an officer until the Calculation Date and
that the Executive's employment with the Corporation
will terminate on the Calculation Date.
(ii) Using the Executive's demographic data, including base
salary, actual bonus history, target bonus and current
marital status as of the Valuation Date, provided by the
Corporation.
(iii) Using the Canada Pension Plan Benefit and Tax Act
maximum defined benefit pension dollar limit as at the
Valuation Date.
(iv) Assuming the Executive's target bonus percentage remains
at the level specified by the Corporation pursuant to
subparagraph (ii) above.
(v) Assuming only Executive Benefit Plan Obligations are
included.
(vi) Assuming the payments under the Executive Benefit Plan
would be made from the Trust.
(vii) Using the actuarial methods, assumptions and calculation
methodology described in Schedule "B-2.
(viii) Applying loads as described in Schedule "B-2" to the
amount determined in accordance with the preceding
subparagraphs of this Section 10.6(e) to provide for
future contingencies and expenses of the Trust.
(ix) Calculating the estimated amount required to settle the
Executive Benefit Plan Obligations based on the
actuarial methods, assumptions and calculation
methodology described in Schedule "B-2", increased by
the loads described in the following subparagraph.
(x) Applying loads as described in Schedule "B-2" to the
amount determined in accordance with subparagraph (ix)
to provide for:
(A) fluctuations in the Interest Discount Rate and
Consumer Price Index during the term of the Letter
of Credit; and
(B) the cost associated with the loan to be secured as
allowed under the Trust Agreement to permit
settlement of the Executive Benefit Plan
Obligations prior to receipt of the Refundable Tax
Account from the Canada Revenue Agency. The
assumed interest rate payable on the loan shall be
as described in Schedule "B-2" and shall be
applied to one-half of the amount in subparagraph
(ix). The cost associated with the borrowings
shall be assumed to be paid from the Trust.
- 23 -
(xi) Taking the larger amount for the Executive of:
(A) the amount determined in accordance with
subparagraphs (i) through (viii), and
(B) the amount determined in accordance with
subparagraphs (ix) and (x).
(xii) The amount determined in accordance with subparagraph
(xi) above shall be offset by:
(A) the Refundable Tax Account, if any;
(B) the assets contained in the Trust, if any.
(f) In the event that the Executive Benefit Plan Obligations have
been funded in accordance with the terms hereof as a result of:
(i) the Corporation making an assignment for the benefit of
creditors or filing a petition in bankruptcy or becoming
insolvent or bankrupt;
(ii) a receiver, trustee or liquidator of or for the
Corporation being appointed and not being discharged
within a period of sixty days;
(iii) a voluntary dissolution or wind-up of the Corporation;
or
(iv) a sale or disposition of all or substantially all of the
assets of the Corporation,
and the Executive Benefit Plan has been terminated in
connection therewith, the Executive Benefit Plan Obligations
shall be promptly settled by the Trustee with the Executive
by way of a lump sum payment from the Trust. For this
purpose, the benefit entitlements of each Executive shall be
determined by the Actuary in accordance with the terms of the
Executive Benefit Plan and the amount of the lump sum payment
shall be determined by the Actuary using the assumptions set
forth in Schedule "B-1". Notice of termination of the
Executive Benefit Plan shall be provided to the Trustee by
the Corporation, failing which by two executives of the
Corporation, one of whom must be either the Chief Financial
Officer or the General Counsel of the Corporation.
Any assets of the Trust remaining after full satisfaction of
(i) the Executive Benefit Plan Obligations pursuant to the
preceding paragraph and (ii) any further obligations pursuant
to the terms of the Trust Agreement, shall be returned to the
Corporation.
(g) In the event the Executive Benefit Plan shall be terminated at
any time either in whole or in part in relation to the
- 24 -
Executive subsequent to the funding of the Executive Benefit
Plan Obligations in accordance with the terms hereof, then,
provided Section 10.6(f) of this Restated Agreement is not
otherwise applicable, the Executive Benefit Plan Obligations
shall be promptly settled by the Trustee with the Executive by
way of a lump sum payment from the Trust.
For this purpose, the benefit entitlements of the Executive
shall be determined by the Actuary in accordance with the
terms of the Executive Benefit Plan and the amount of the
lump sum payment shall be determined by the Actuary using the
assumptions set forth in Schedule "B-1". Notice of the
termination of the Executive Benefit Plan shall be provided
to the Trustee by the Corporation, failing which by two
executives of the Corporation, one of whom must be either the
Chief Financial Officer or the General Counsel of the
Corporation.
Any assets of the Trust remaining after full satisfaction of
(i) the Executive Benefit Plan Obligations and (ii) any
further obligations pursuant to the terms of the Trust
Agreement, shall be returned to the Corporation.
(h) In the event:
(i) of a dispute as to whether a payment to or in respect of
the Executive is properly due and payable pursuant to
the Executive Benefit Plan; and
(ii) such dispute cannot be resolved by the parties thereto
within the time frame specified in Section 1.1(x)(vi) of
this Restated Agreement,
the amount in dispute shall be remitted to the Trustee for
deposit to the Trust. Upon final settlement of the dispute,
the amount so deposited (together with any earnings, profits
and increments thereon and after deduction of any authorized
payments allocable thereto, both as determined in accordance
with the terms of the Trust Agreement), less any applicable
withholding tax which will be remitted as required by the Tax
Act, shall be paid to that party to the dispute which is
found to be entitled thereto. Prior to such amount being paid
out of the Trust in accordance with the terms hereof, the
Corporation shall instruct the Actuary to take such amount
into account when preparing its report for purposes of this
Restated Agreement.
(i) In the event that a Change of Control Obligations - Designated
Event described in Section 1.1(n)(ii) of this Restated
Agreement shall occur subsequent to the funding of the
Executive Benefit Plan Obligations in accordance with the terms
of this Restated Agreement, the Corporation shall be required
to settle the Executive Benefit Plan Obligations forthwith in
an amount determined by the Actuary in accordance with the
provisions of Schedule "B-1".
(j) Subject to Section 10.6(f), 10.6(g) and 10.6(i) of this
Restated Agreement, in the event that the Executive Benefit
- 25 -
Plan Obligations have been funded in accordance with the terms
hereof, all or a portion of such Executive Benefit Plan
Obligations may, at the discretion of the Corporation, be
promptly settled with the Executive.
For this purpose, the benefit entitlements of the Executive
shall be determined by the Actuary in accordance with the
terms of the Executive Benefit Plan. In such circumstances,
the Corporation reserves the right to settle the Executive
Benefit Plan Obligations by way of a lump sum payment to the
Executive provided that the amount of each such payment is
determined by the Actuary in accordance with the assumptions
set forth in Schedule "B-1".
10.7 (a) If a Change of Control Obligations - Designated Event described
in Section 1.1(n)(i) of this Restated Agreement shall occur,
the Corporation shall be required to immediately fund the
Change of Control Obligations in accordance with the most
recent report prepared by the Actuary pursuant to Section 10.3
of this Restated Agreement.
(b) If a Change of Control Obligations - Designated Event described
in Section 1.1(n)(ii) of this Restated Agreement shall occur,
the Corporation shall be required to settle the Change of
Control Obligations forthwith in accordance with the provisions
of Schedule "B-1", upon receipt by the Corporation of a Release
executed by the Executive in the form attached to this Restated
Agreement as Schedule "A".
(c) Upon the earlier of:
(i) learning of the occurrence of a Change of Control
Obligations - Designated Event described in Section
1.1(n)(i) of this Restated Agreement; or
(ii) receipt of a written notice of the occurrence of a
Change of Control Obligations - Designated Event
described in Section 1.1(n)(ii) of this Restated
Agreement, which notice has been signed by the Executive
and sworn before a notary public and has annexed thereto
a Release executed by the Executive in the form attached
to this Restated Agreement as Schedule "A",
the Trustee shall promptly give notice to the Corporation in
writing that it intends to draw on that portion of the Letter
of Credit which is referable to the Change of Control
Obligations and contribute the proceeds thereof (less any
applicable withholding tax which it will remit as required by
the Tax Act on behalf of the Corporation) to the Trust on
behalf of the Corporation in order to fund the Change of
Control Obligations, unless it receives satisfactory proof
within nine days of such notice that the Corporation has
funded or settled, as applicable, the Change of Control
Obligations itself in accordance with the terms of this
Restated Agreement.
- 26 -
Unless the Corporation advises the Trustee in writing that it
has funded or settled, as applicable, the Change of Control
Obligations in accordance with the terms of this Restated
Agreement and has provided the Trustee with satisfactory
proof thereof within nine days of the date of the
aforementioned notice, the Trustee shall draw on that portion
of the Letter of Credit which is referable to the Change of
Control Obligations on the tenth day following the date of
such notice (or the next following business day if such tenth
day is not a business day) and contribute the proceeds (less
any applicable withholding tax which it will remit as
required by the Tax Act on behalf of the Corporation) to the
Trust on behalf of the Corporation.
Notwithstanding the foregoing, in the event a Change of
Control Obligations - Designated Event described in Section
1.1(n)(i) of this Restated Agreement has triggered the
operation of this Section 10.7 and the failure which gave
rise to the occurrence of such Change of Control Obligations
- Designated Event has been remedied prior to the expiration
of the notice period provided for in this Section 10.7(c),
the Trustee shall not take the action described in the
immediately preceding paragraph hereof and all of the
provisions of this Restated Agreement shall continue to apply
to the same extent and as fully as they would have in the
event that such Change of Control Obligations - Designated
Event had not occurred.
(d) The required amount of funding or the portion of the Letter of
Credit to be drawn on for purposes of this Section 10.7 shall
be determined by the Actuary and shall be the amount determined
in accordance with Sections 10.5(a) through (l) of this
Restated Agreement offset by the amount determined in
accordance with subparagraphs 10.6(e)(i) through (xii) of this
Restated Agreement. The settlement amount for purposes of this
Section 10.7 shall be determined in accordance with the
provisions of Schedule "B-1".
(e) In the event that the Change of Control Obligations have been
funded in accordance with the terms hereof as a result of the
occurrence of a Change of Control Obligations - Designated
Event described in Section 1.1(n)(ii), the Change of Control
Obligations shall be promptly settled with the Executive in
accordance with the provisions of Schedule "B-1".
10.8 The actuarial methods and assumptions described in Schedule "B-1" and
Schedule "B-2" shall be reviewed from time to time. Any amendments to
Schedule "B-1" and/or Schedule "B-2" as a result of such review shall
be dealt with in accordance with Section 12.6.
10.9 The Trustee shall surrender the Letter of Credit to the Corporation
for cancellation upon the earliest of:
(a) receipt by the Trustee of a written direction signed by the
Corporation and the Executive directing surrender of the Letter
of Credit;
- 27 -
(b) receipt by the Trustee of a written direction signed by the
Corporation confirming that it has funded and/or settled the
Obligations in accordance with the terms hereof, together with
evidence which is satisfactory to the Trustee that such funding
and/or settlement has occurred; and
(c) receipt by the Trustee of a written direction signed by the
Corporation confirming that the Corporation has no remaining
Obligations to the Executive, together with evidence which is
satisfactory to the Trustee that the Corporation has no
remaining Obligations to the Executive and that a copy of such
written direction has been provided to the Executive.
10.10 The Trust shall be terminated by the Trustee upon the earliest of:
(a) receipt by the Trustee of a written direction signed by the
Corporation and the Executive confirming the termination of the
Trust;
(b) the entire depletion of the Trust Fund through payments
pursuant to the terms of the Trust Agreement, in the event that
such depletion occurs subsequent to the funding of the
Obligations in accordance with the terms of this Restated
Agreement; and
(c) receipt by the Trustee of a written direction signed by the
Corporation confirming that the Corporation has no remaining
Obligations to the Executive, together with evidence which is
satisfactory to the Trustee that a copy of such written
direction has been provided to the Executive.
Upon the termination of the Trust, any assets of the Trust which
remain after the satisfaction of any remaining Obligations of the
Corporation to the Executive shall be returned to the Corporation.
10.11 The Corporation and the Executive hereby acknowledge that the
Corporation is entering into agreements similar to this Restated
Agreement with certain of its other executives and that the
Corporation may, at its sole discretion, arrange for one or more
Letters of Credit to satisfy its responsibilities under this Restated
Agreement and such other agreements. In the event that one Letter of
Credit is obtained to satisfy the Corporation's responsibilities under
this Restated Agreement and some or all of such other agreements,
references to a "Letter of Credit" in this Restated Agreement shall be
read as references to that portion of such Letter of Credit which is
referable to the responsibilities of the Corporation to the Executive.
The Corporation and the Executive also acknowledge that the
Corporation may, at its sole discretion, enter into one or more Trust
Agreements to satisfy its responsibilities under this Restated
Agreement and such other agreements. In the event that one Trust
Agreement is entered into to satisfy the Corporation's
responsibilities under this Restated Agreement and some or all of such
other agreements, references to "Trust", "Trust Agreement", "Trustee"
- 28 -
and "Refundable Tax Account" in this Restated Agreement shall be read
with such modifications as may be necessary in the context.
10.12 At the discretion of the Corporation and subject to the provisions of
applicable law, in the event that all or a portion of the Obligations
are funded in accordance with Article 10 hereof and an actuarial
surplus (determined by actuarial valuation in accordance with the
terms of the report prepared as at the immediately preceding Valuation
Date in accordance with Section 10.3 of this Restated Agreement)
arises as a result thereof:
(a) all or a portion of such actuarial surplus may be used in the
determination of or to reduce the funding otherwise required to
be provided by the Corporation hereunder; or
(b) any surplus assets may, to the extent that they exceed 110% of
the amount required to fund that portion of the Obligations
which has been funded (as determined by the report prepared as
at the immediately preceding Valuation Date in accordance with
Section 10.3 of this Restated Agreement) be returned to the
Corporation.
ARTICLE 11
EXPEDITED ARBITRATION
---------------------
11.1 If, pursuant to Section 6.1 of this Restated Agreement, the Executive
provides written notice of the Executive's intention to terminate the
Executive's employment for Good Reason, and the Corporation believes
that there is no Good Reason, or, alternatively, if, pursuant to
Section 4.1 of this Restated Agreement, the Corporation provides
written notice of its intention to terminate the Executive's
employment for Just Cause and the Executive believes there is no Just
Cause, the Corporation or the Executive, as applicable, shall, within
ten (10) days of having been provided such notice, provide written
notice ("Notice of Dispute") to the other Party of the dispute (the
"Dispute").
11.2 The Parties agree that any and all Disputes under Section 11.1 of this
Restated Agreement will be resolved by way of a single Arbitrator.
11.3 (a) Within fifteen (15) days of provision of the Notice of Dispute,
the Parties shall agree upon and appoint a neutral Arbitrator
from the then current roster maintained by the Alberta
Mediation and Arbitration Society to act as Arbitrator of the
Dispute; or
(b) If no person acceptable to both Parties has been agreed upon
and appointed within fifteen (15) days, then either Party may
make immediate application to the Court of Queen's Bench of
Alberta, Judicial District of Calgary, to have an Arbitrator
appointed.
- 29 -
11.4 The Parties acknowledge and agree that the purpose of this Article 11
is to avoid delays and facilitate resolution of the Dispute in a just,
speedy and cost-effective manner.
11.5 Consistent with the expedited nature of arbitration, the Arbitrator
will direct and control the scope and timing of the exchange of
information between the Parties and will take such steps as the
Arbitrator deems necessary to achieve a just, speedy and
cost-effective resolution of the Dispute. The Arbitrator has the
exclusive right and power to resolve all issues related to the
exchange of information in the arbitration process.
11.6 The Parties agree that the Arbitrator is only authorized to determine
whether the Executive had Good Reason for terminating the Executive's
employment, or alternatively, whether the Corporation had Just Cause
to terminate the Executive's employment.
11.7 A hearing will occur within forty-five (45) days of the appointment of
the Arbitrator (the "Hearing"). The time of the Hearing (the "Hearing
Date") will be scheduled by the Arbitrator after consultation with the
Parties. The Hearing will be governed by the rules set out in the
ARBITRATION ACT S.A. 1991, c.A-43, as modified by the Arbitrator in
the interests of achieving a just, speedy and cost-effective
resolution of the Dispute. The Arbitrator may require written
submissions of fact in the Dispute to be provided seven (7) days
before the Hearing Date.
11.8 The Arbitrator will use best efforts to provide a written decision
within seven (7) days of the conclusion of the Hearing.
11.9 The Parties agree that the decision of the Arbitrator will be final
and binding upon the Parties.
ARTICLE 12
GENERAL
-------
12.1 The headings of the Articles and paragraphs in this Restated Agreement
are inserted for convenience only and shall not affect the meaning or
construction of this Restated Agreement.
12.2 This Restated Agreement shall be construed and interpreted in
accordance with the laws of the Province of Alberta and the federal
laws of Canada as applicable therein.
12.3 If any provision of this Restated Agreement is determined to be void
or unenforceable in whole or in part, it shall be and be deemed to be
severed from this Restated Agreement without affecting or impairing
the validity of any other provision herein.
12.4 Any notice required or permitted to be given under this Restated
Agreement shall be in writing and shall be properly given if delivered
by hand delivery or mail or other form of electronic communication
capable of transmission confirmation to the following address:
- 30 -
a. IN THE CASE OF THE CORPORATION TO:
----------------------------------
Nexen Inc.
000 - 0xx Xxxxxx X.X.
Xxxxxxx, XX X0X 0X0
Attention: General Manager, Compensation and Benefits
b. IN THE CASE OF THE EXECUTIVE TO:
--------------------------------
the last address of the Executive in the records of the
Corporation or to such other address as the Parties may from
time to time specify by notice given in accordance herewith.
12.5 This Restated Agreement shall enure to the benefit of and be binding
upon the Executive and the Executive's heirs, executors and
administrators and upon the Corporation and its successors and
assigns.
12.6 This Restated Agreement constitutes the entire agreement relating to
the respective rights and obligations of the Parties upon the
occurrence of a Change of Control. No amendment or waiver of this
Restated Agreement shall be binding unless executed in writing by the
Parties.
Notwithstanding the foregoing,
(a) any amendment to Article 10 of this Restated Agreement,
Schedule "B-1" or Schedule "B-2" which is required to ensure
that the balance remaining in the Trust after the required tax
has been withheld and remitted to the Canada Revenue Agency is
sufficient to satisfy the fee levied by the Bank in connection
with the issuance of a Letter of Credit may be made by the
Corporation without the prior written approval of the
Executive; and
(b) the Corporation may amend, modify or waive Article 10 of this
Restated Agreement, Schedule "B-1" and Schedule "B-2" in whole
or in part, at such time and from time to time, and in such
manner and to such extent as it may deem advisable without
obtaining the approval of the Executive, provided that such
amendment, modification or waiver, as the case may be, does not
adversely affect the securitization in accordance with the
terms hereof of those Obligations which have accrued up to the
date of such amendment, modification or waiver, as the case may
be.
12.7 The Parties agree that the rights, entitlements and benefits set out
in this Restated Agreement to be paid to the Executive upon a Change
of Control shall be in full satisfaction of all rights of the
Executive under applicable law in effect from time to time as a result
thereof.
12.8 Neither Party can waive or shall be deemed to have waived any right it
has under this Restated Agreement except to the extent that such
waiver is in writing.
- 31 -
12.9 Nothing contained in this Restated Agreement shall be construed as
limiting the ability of the Corporation to amend, modify or terminate
the Executive Benefit Plan in whole or in part, at such time and from
time to time, and in such manner and to such extent as it may deem
advisable.
The Parties have executed this Restated Agreement effective the date first
written above.
NEXEN INC.
Per: (signed)
----------------------------------
Per: (signed)
----------------------------------
SIGNED, SEALED & DELIVERED
in the presence of
(signed) (signed)
---------------------------------- -----------------------------------
WITNESS XXXXXXX XXXXXX
SCHEDULE "A"
------------
AMENDED AND RESTATED AGREEMENT
RESPECTING CHANGE OF CONTROL AND
EXECUTIVE BENEFIT PLAN ENTITLEMENTS
In order to receive the entitlements referred to in the Article 7 of this
Restated Agreement, the Executive shall execute the attached Release, fully
releasing the Corporation from all further claims in relation to the
Executive's employment or Employment Benefits and the termination thereof upon
payment of the remuneration and benefits referred to in Article 7 of this
Restated Agreement. The attached Release shall not, however, require that the
Executive relinquish or release any rights to indemnity which the Executive
may, as an officer or director of the Corporation or any of its Affiliates,
Associates and Subsidiaries, have as against the Corporation or any of its
Affiliates, Associates and Subsidiaries, for costs, charges and expenses
reasonably incurred by the Executive in respect of any civil, criminal or
administrative action or proceeding to which the Executive is made a party by
reason of being or having been a director or officer of the Corporation or any
of its Affiliates, Associates and Subsidiaries, where:
(a) the Executive has acted honestly and in good faith with a view
to the best interests of the Corporation or any of its
Affiliates, Associates and Subsidiaries; and
(b) in the case of a criminal or administrative action or
proceeding enforced by a monetary penalty, the Executive had
reasonable grounds for believing the Executive's conduct was
lawful.
FINAL RELEASE
-------------
KNOW ALL MEN BY THESE PRESENTS that I, XXXXXXX XXXXXX, of the City of Calgary,
in the Province of Alberta, in consideration of the amounts provided in that
certain Amended and Restated Agreement Respecting Change of Control and
Executive Benefit Plan Entitlements (the "Restated Agreement") dated as of the
______ day of ____________, 2008 between myself and NEXEN INC. and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, do for myself, my executors and assigns hereby remise, release
and forever discharge the Corporation, and any associated, affiliated,
predecessor or parent corporation of the Corporation and their present and
former directors, officers, agents and employees (the "Releasees"), including
each of their respective successors, heirs, administrators and assigns, from
all manner of actions, causes of action, debts, obligations, covenants, claims
or demands, whatsoever which I may ever have had, now have, or can, shall or
may hereafter have against the Releasees or any of them, by reason of or
arising out of any cause, matter or thing whatsoever done, occurring or
existing up to and including the present date and, in particular, without in
any way restricting the generality of the foregoing, in respect of all claims
of any nature whatsoever, past, present or future, directly or indirectly
related to or arising out of or in connection with my relationship with the
Releasees, as an employee, officer or director, and the termination of my
employment from the Corporation including, but not limited to, any claims
related to any entitlement I may have or may have had to any payment or claim
either at common law or under the EMPLOYMENT STANDARDS CODE, HUMAN RIGHTS,
CITIZENSHIP AND MULTICULTURALISM ACT or any other applicable legislation
governing or related to my employment with the Releasees.
AND FOR THE SAID CONSIDERATION, I, XXXXXXX XXXXXX, represent and warrant that I
have not assigned to any person, firm or corporation any of the actions, causes
of action, claims, suits, executions or demands which I release by this
Release, or with respect to which I agree not to make any claim or take any
proceeding herein.
IT IS FURTHER ACKNOWLEDGED that the payment to me includes full compensation
and consideration for the loss of my employment benefits, as provided by the
Releasees, and that all of my employment benefits and privileges shall cease on
the date of termination of my employment, except as otherwise expressly
provided in the Restated Agreement. I further acknowledge that I have received
all benefits due to me and have no further claim against the Releasees for such
benefits. I further accept sole responsibility to replace such benefits which I
- 2 -
wish to continue or to exercise conversion privileges where applicable with
respect to such benefits and, in particular any life insurance and long-term
disability benefits. In the event that I become disabled following termination
of my employment, I covenant not to xxx the Releasees for insurance or other
benefits or loss of same and hereby release the Releasees from any and all
further obligations or liabilities arising therefrom.
Notwithstanding anything contained herein, this Release shall not extend to or
affect, or constitute a release of, my right to xxx, claim against or recover
from the Releasees and shall not constitute an agreement to refrain from
bringing, taking or maintaining any action against the Releasees in respect of:
(a) any corporate indemnity existing by statute, contract or
pursuant to any of the constating documents of the Corporation
provided in my favour in respect of my having acted at any time
as a director, officer or both of the Corporation;
(b) my entitlement to any insurance maintained for the benefit or
protection of the directors and/or officers of the Corporation,
including without limitation, directors' and officers'
liability insurance; or
(c) my entitlement to any amounts or compensation due to me under
the terms of my employment pursuant to the Restated Agreement.
IT IS HEREBY AGREED that the terms of the Restated Agreement and of this
Release will be kept confidential. No party hereto shall communicate any such
terms to any third party under any circumstances whatsoever, excepting any
necessary communication with my legal and financial advisors, as required, on
the express condition that they maintain the confidentiality thereof, and any
disclosure which is required by law, although either party shall be at liberty
to disclose to third parties that a mutually acceptable Release was agreed
upon. The invalidity and unenforceability of any provision of this Release
shall not affect the validity or enforceability of any other provision of this
Release, which shall remain in full force and effect.
- 3 -
I HEREBY DECLARE that I have read all of this Release, fully understand the
terms of this Release and voluntarily accept the consideration stated herein as
the sole consideration for this Release for the purpose of making a full and
final settlement with the Releasees. I further acknowledge and confirm that I
have been given an adequate period of time to obtain independent legal counsel
regarding the meaning and the significance of the terms herein and the
covenants mutually exchanged.
IT IS HEREBY AGREED THAT as a term of the termination of my employment from the
Corporation, and in consideration of the amount noted above, I hereby resign as
officer and director of the Corporation and its affiliates.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this _____ day of
______________ in the year _________.
----------------------
XXXXXXX XXXXXX
----------------------
WITNESS (signature)
----------------------
WITNESS (print name)
SCHEDULE "B-1"
--------------
AMENDED AND RESTATED AGREEMENT
RESPECTING CHANGE OF CONTROL AND
EXECUTIVE BENEFIT PLAN ENTITLEMENTS
METHODOLOGY AND ASSUMPTIONS FOR DETERMINING SETTLEMENT VALUE
PURPOSE
In accordance with the terms of the Restated Agreement, the purpose of this
Schedule "B-1" is to outline the calculation approach such that, after tax has
been paid on a lump sum settlement value, the remaining balance is intended to
be sufficient to provide after-tax monthly payments equivalent to the after-tax
monthly payments the Executive would have received under the terms of the
Executive Benefit Plan as provided for under this Restated Agreement.
OVERVIEW FOR DEFINED BENEFIT PENSION
The following outlines the actuarial methods, assumptions and calculation
process to be used in determining the lump sum settlement value of the defined
benefit pension entitlements under the Executive Benefit Plan when settlement
occurs in accordance with Section 10 of the Restated Agreement. Section 300 of
the Income Tax Regulations establishes the procedure applicable in using an
after-tax lump sum to purchase a prescribed annuity:
1. A prescribed annuity payment consists of two components: (a) the
deemed capital element of the annuity payment on which no tax is
payable, and (b) the deemed non-capital portion of the annuity payment
which is taxed at the marginal rate.
2. The capital portion of each future annuity payment is considered to be
a return of the original after-tax lump sum amount.
3. The non-capital portion of each annuity payment is assumed to be
provided by the investment return on the original after-tax lump sum
amount and has therefore not yet been taxed.
4. A constant percentage of each future payment is deemed to be a return
of the original lump sum capital.
CALCULATION METHODOLOGY
1. Equivalent after-tax payments:
a. Determine initial gross annual pension entitlement under the Executive
Benefit Plan.
b. Determine after-tax annual pension entitlement under the Executive
Benefit Plan based on Individual Tax Rate as defined in Schedule
"B-1".
- 2 -
c. Determine the capital element based on the non-indexed present value
of the pension payments divided by life expectancy.
d. Determine the monthly payment which provides an after-tax pension
equal to the after-tax pension determined in 1.b. above in accordance
with the prescribed annuity methodology.
2. Present value of periodic payments from 1. above:
a. Determine the present value of the pension determined in 1.d. above
using the assumptions described below in this Schedule "B-1". For
greater certainty, the value of the post-retirement indexation is to
be reflected in determining the present value of the accrued pension
entitlement in respect of post-1992 service, and any accrued pension
in respect of service granted during the Severance Period.
3. Tax adjustment:
x. Xxxxx-up the present value determined in 2.a. above to reflect the tax
assumed to be required to be paid on the lump sum.
x. Xxxxx-up the amount determined in 3.a. above to reflect the tax
assumed to be required to be paid on investment earnings in respect of
the lump sum payment during the deferral period prior to assumed
pension commencement, if any.
4. Equivalent present value after tax as the after-tax monthly payments:
a. The amount determined in 3.b. above shall be the lump sum settlement
value of the Executive's pension entitlement.
ASSUMPTIONS
Interest Discount Rate:
-- during deferral period Yield on long-term Government of
Canada bonds as published in the
Bank of Canada Review, described in
CANSIM series V122544 (or a
successor series) for the last
trading Wednesday at the end of the
month immediately preceding the date
of calculation, rounded down to next
lower 0.5.
-- after assumed pension commencement Yield on long-term Government of
Canada bonds as published in the
Bank of Canada Review, described in
CANSIM series V122544 (or a
successor series) for the last
trading Wednesday at the end of the
month immediately preceding the date
of calculation, rounded down to next
lower 0.5,
less
- 3 -
assumed escalation of pensions after
retirement.
Increase in Consumer Price Index: Yield on long-term Government of
Canada bonds as published in the Bank
of Canada Review, described in CANSIM
series V122544 (or a successor
series) for the last trading
Wednesday at the end of the month
immediately preceding the date of
calculation,
less
Yield on long-term Government of
Canada Real Return bonds as
published in the Bank of Canada
Review, described in CANSIM series
V122553 (or a successor series) for
the last trading Wednesday at the
end of the month immediately
preceding the date of calculation.
The result of the difference is then
rounded up to the next highest 0.5%.
Escalation of Pensions After Retirement: 75% of CPI, less 1% (minimum
increase 25% of CPI). Applies only
to benefits accrued for service
after December 31, 1992.
Mortality:
-- for life expectancy 1994 Uninsured Pensioner Mortality
Table with mortality improvements
projected to 15 years beyond the
date of termination.
-- for present values
o prior to assumed pension Nil.
commencement
o after assumed pension 1994 Uninsured Pensioner Mortality
commencement Table with mortality improvements
projected 15 years beyond the date
of termination.
Marital Status: Actual status at date of terminaton.
Age of Spouse: Based on actual date of birth.
- 4 -
Individual Tax Rate: Maximum individual marginal tax rate
for employee's province of
employment at the date of
termination.
SCHEDULE "B-2"
--------------
AMENDED AND RESTATED AGREEMENT
RESPECTING CHANGE OF CONTROL AND
EXECUTIVE BENEFIT PLAN ENTITLEMENTS
METHODOLOGY AND ASSUMPTIONS FOR DETERMINING THE AMOUNT TO BE SECURED OR FUNDED
IN ACCORDANCE WITH SECTION 10 BASED ON THE METHODOLOGY DESCRIBED IN SCHEDULE
"B-1"
PURPOSE
The purpose of this Schedule "B-2" is to provide the actuarial methodology and
assumptions for determining the amount to be secured or funded in accordance
with Section 10 of the Restated Agreement.
METHODOLOGY
The settlement methodology is described in Schedule B-1.
The funding methodology applicable to the Executive Benefit Plan Obligations is
based on the following:
1. Estimate the accrued pension payable from the Executive Benefit Plan
as at the Valuation Date.
2. Assume that the assets of the plan are to be invested in long term
Government of Canada bonds and subject to the 50% refundable tax
applicable to retirement compensation arrangements.
3. Determine the present value of the amounts in 1 through 2 above.
4. Estimate the settlement value that could be paid in accordance with
the methodology and assumptions described in Schedule B-1.
5. The funding amount in respect of the Executive Benefit Plan
Obligations shall be the greater of the amount determined in
accordance with 1 through 3 above and the amount in 4 above.
ASSUMPTIONS
Interest Discount Rate:
-- during deferral period Yield on long-term Government of
Canada bonds as published in the
Bank of Canada Review, described in
CANSIM series V122544 (or a
successor series) for the last
trading Wednesday at the end of the
month immediately preceding the
Anniversary Date, rounded down to
next lower 0.5.
- 2 -
-- after assumed pension commencement Yield on long-term Government of
Canada bonds as published in the
Bank of Canada Review, described in
CANSIM series V122544 (or a
successor series) for the last
trading Wednesday at the end of the
month immediately preceding the
Anniversary Date, rounded down to
next lower 0.5 , less assumed
escalation of pensions after
retirement.
Increase in Consumer Price Index: Yield on long-term Government of
Canada bonds as published in the
Bank of Canada Review, described in
CANSIM series V122544 (or a
successor series) for the last
trading Wednesday at the end of the
month immediately preceding the
Anniversary Date,
less
Yield on long-term Government of
Canada Real Return bonds as
published in the Bank of Canada
Review, described in CANSIM series
V122553 (or a successor series) for
the last trading Wednesday at the
end of the month immediately
preceding the Anniversary Date.
The result of the difference is then
rounded up to the next highest 0.5%.
Escalation of Pensions After Retirement: 75% of CPI, less 1% (minimum
increase 25% of CPI). Applies only
to benefits accrued for service
after December 31, 1992.
Mortality:
-- for life expectancy 1994 Uninsured Pensioner Mortality
Table with mortality improvements
projected to 15 years beyond the
Calculation Date.
-- for present values
o prior to assumed pension
commencement Nil.
o after assumed pension commencement 1994 Uninsured Pensioner Mortality
Table with mortality improvements
projected 15 years beyond the
Calculation Date.
- 3 -
Marital Status: Actual status at the Anniversary.
Age of Spouse: Based on actual date of birth.
Individual Tax Rate: Maximum individual marginal tax rate
for employee's province of
employment at the Anniversary Date
Bonus: Target bonus % applied to the salary
rate at the Valuation Date
Investment return: Yield on long-term Government of
Canada bonds as published in the
Bank of Canada Review, described in
CANSIM series V122544 (or a
successor series) for the last
trading Wednesday at the end of the
month immediately preceding the
Anniversary Date rounded down to
next lower 0.5%, and then divided by
2
Decrements: None assumed prior to Calculation
Date
Eligibility for Pensions: 100% vested
Pension Commencement Age:
-- eligible for subsidized early Payable at the completion of the
retirement on the Calculation Date Severance Period. Payable at the
(i.e., age 55 and 10 years of Calculation Date for purposes of
continuous service) determining the amount required
under Section 10.6(e).
-- not eligible for early retirement Deferred to age 60 or the end of the
on the Calculation Date Severance Period if later. Payable
at age 60 for purposes of
determining the amount required
under Section 10.6(e).
Fluctuation reserve (1) 15% of the pension obligations
Cost of borrowing to settle the Yield on one month Government of
obligations: Canada Treasury Bills as published
in the Bank of Canada Review,
described in CANSIM series V122529
(or a successor series) for the last
trading Wednesday at the end of the
month immediately preceding the
Anniversary Date, rounded up to the
next higher 0.25%, plus 1.50%
- 4 -
--------------------------------------------------------------------------------
NOTES:
(1) Referred to by Section 10.5(g), Section 10.6(e)(viii) and 10.6(e)(x). The
15% load is intended to provide a reserve for a potential decrease in the
Interest Discount Rate in combination with potential increases in the
Consumer Price Index for an aggregate change of 1.0%.
SCHEDULE "C"
------------
AMENDED AND RESTATED AGREEMENT RESPECTING CHANGE OF CONTROL
AND EXECUTIVE BENEFIT PLAN ENTITLEMENTS
ESTIMATED(1) ENTITLEMENT TO COMPENSATION
PURSUANT TO ARTICLE 7 OF THE RESTATED AGREEMENT
--------------------------------------------------------------------------------
EMPLOYEE - XXXXXXX XXXXXX
--------------------------------------------------------------------------------
Base Salary $814,000
--------------------------------------------------------------------------------
Bonus Target Value $366,300
--------------------------------------------------------------------------------
Benefits Uplift $105,820
--------------------------------------------------------------------------------
Car Allowance $38,400
--------------------------------------------------------------------------------
Savings Plan $48,840
--------------------------------------------------------------------------------
Financial Counselling Services $10,500
--------------------------------------------------------------------------------
Security Monitoring Services $2,400
--------------------------------------------------------------------------------
TOTAL VALUE $1,386,260
--------------------------------------------------------------------------------
ADDITIONAL LUMP SUM SETTLEMENT VALUE OF PENSION(2) $1,571,410
--------------------------------------------------------------------------------
TOTAL ESTIMATED ENTITLEMENT $2,957,670
--------------------------------------------------------------------------------
In addition to the above, Section 7.1(c) of the Restated Agreeme Executive
Outplacement counselling to be provided by a firm selected by the Executive, at
a cost to the Corporation not to exceed $25,000.
IN ADDITION to the above pension entitlement under the Agreement, the Executive
has the following pension entitlements under the Defined Benefit Registered
Pension Plan and Executive Benefit Plan. As is the case with the figures shown
above, these values are estimated values (as of April 1, 2008) and are for
illustrative purposes only. Actual values will be calculated as of the date of
the entitlement or payment in accordance with the Defined Benefit Registered
Pension Plan and the Executive Benefit Plan, respectively, and therefore may be
subject to change.
o Accrued Annual Defined Benefit Pension Entitlement $24,889
(Registered Pension Plan)(3)
o Estimated Lump Sum Transfer Value of Registered $277,509
Pension Plan(4)
o Estimated Lump Sum Value of Executive $863,571
Benefit Plan(4)
(1) As stated in Section 7.1 of the Restated Agreement, the above calculations
represent only the current estimated value (as of April 1, 2008) of the
Executive's entitlement to compensation upon a Change of Control.
Accordingly, the above calculations are for illustrative purposes only.
(2) Calculated in accordance with Section 7.1(b) of the Restated Agreement.
- Adjustment to EBP lump sum value to reflect settlement $678,567.
- Additional settlement value of pension accrued during the severance
period upon a change of control $892,843.
(3) Deferred benefit payable from age 60.
(4) Based on the Standards of Practice for Determining Pension Commuted Values
approved by the Canadian Institute of Actuaries using rates applicable for
April 2008 terminations.
