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EXHIBIT 10.3
KEY EMPLOYEE SEVERANCE AGREEMENT
KEY EMPLOYEE SEVERANCE AGREEMENT (the "Agreement"), dated as of July
25, 1995 between PRESIDIO EXPLORATION, INC., a Colorado corporation (the
"Company"), and XXXXXX X. XXXXX, XX. ( "Executive").
WHEREAS, the Board of Directors (the "POC Board") of Presidio Oil
Company ("Presidio") has recommended that the Company enter into a severance
agreement in the form hereof with Executive;
WHEREAS, the Board of Directors (the "Board") has authorized the
Company to enter into a severance agreement in the form hereof with Executive;
WHEREAS, the POC Board has authorized the management of Presidio and
the Company to negotiate a recapitalization of Presidio with certain of the
holders of its securities which may involve a Change of Control (as defined in
Section 2(c) hereof) (the "Recapitalization");
WHEREAS, the POC Board and the Board have each determined that, pending
the consummation of the transactions involved in the Recapitalization, it is
imperative that the Company and the Board be able to rely upon Executive to
continue in Executive's position, and that the Company be able to receive and
rely upon Executive's advice, if requested, as to the best interests of the
Company and its shareholders without concern that Executive might be distracted
by the personal uncertainties and risks created by such proposed transactions;
WHEREAS, in the event that the transactions contemplated by the
Recapitalization are not consummated, it is possible that Presidio and the
Company may nevertheless seek to sell a significant amount of the operating
assets of the Company (an "Asset Acquisition" as defined in Section 2(c)
hereof) to another Person (as defined in Section 2(c) hereof) or Presidio and
the Company may enter into another transaction which would involve a Change in
Control or Presidio or the Company may become subject to a proposed or
threatened Change in Control; and
WHEREAS, in connection with the foregoing, Executive may, in addition
to Executive's regular duties, be called upon to assist in the assessment of
any such proposals, advise management, the POC Board and the Board as to
whether such proposals would be in the best interests of the Company, Presidio
and their respective shareholders, and to take such other actions as the POC
Board and the Board might determine to be appropriate.
NOW, THEREFORE, to assure the Company that it will have the continued
dedication of Executive and the availability of Executive's advice and counsel
notwithstanding the anticipated consummation of the transactions contemplated
by the Recapitalization, an
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Asset Acquisition or, if neither of such transactions are consummated, the
possibility, threat or occurrence of a similar transaction or other Change of
Control, and to induce Executive to remain in the employ of the Company, and
for other good and valuable consideration, the Company and Executive agree as
follows:
1. SERVICES DURING CERTAIN EVENTS.
(a) Executive agrees that Executive will not voluntarily
leave the employ of the Company, and will render the services
contemplated in the recitals to this Agreement, during the pendency of
the transactions contemplated by the Recapitalization and until such
transactions have been consummated or the discussions relating to the
Recapitalization are terminated.
(b) In the event an Asset Acquisition with a Person other
than the Company is proposed or a Person begins a tender or exchange
offer or takes other steps to effect a Change in Control, Executive
agrees that Executive will not voluntarily leave the employ of the
Company, and will render the services contemplated in the recitals to
this Agreement, until such Asset Acquisition is effected or terminated
or such Person has abandoned or terminated its efforts to effect a
Change in Control or until a Change in Control has occurred.
2. TERMINATION FOLLOWING CERTAIN EVENTS. Except as provided in
Section 4 hereof, the Company will provide or cause to be provided to Executive
the rights and benefits described in Section 3 hereof in the event that
Executive's employment by the Company is terminated within two (2) years
following the Recapitalization, an Asset Acquisition, or a Change in Control
(or, if prior to the Recapitalization, an Asset Acquisition or a Change in
Control, the Executive's employment by the Company is terminated and if it is
reasonably demonstrated by the Executive that such termination of employment
was at the request of a third party who has taken steps reasonably calculated
to effect the Recapitalization, an Asset Acquisition or a Change of Control or
otherwise arose in connection with or anticipation of the Recapitalization, an
Asset Acquisition or a Change in Control) and such termination is instituted:
(a) by the Company for reasons other than:
(i) cause (as defined in Section 4(a) hereof),
(ii) Executive's death or disability, or
(iii) Executive's retirement upon reaching age 65
("Normal Retirement Date"), or
(b) by Executive following the occurrence of any of the
following events without Executive's written consent (but in no event
upon termination for cause, as so defined, by the Company):
(i) the assignment of Executive to any duties or
responsibilities that
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are materially inconsistent with Executive's position and
status with the Company immediately prior to the
Recapitalization, an Asset Acquisition or Change in Control,
(ii) the reduction of Executive's Earnings (as
defined in Section 3(a)) (including any deferred portion
thereof),
(iii) a diminution in (A) Executive's eligibility
to participate in bonus, stock option, incentive award and
other compensation plans or (B) employee benefits (including
but not limited to medical, dental, life insurance, long term
disability and supplemental employee retirement plans) and
perquisites applicable to Executive which Executive were
participating immediately prior to the date of Termination, or
(iv) a change in the location of Executive's
principal place of employment by the Company from the location
where Executive was principally employed immediately prior to
the date of Termination.
(c) Certain Definitions. For purposes of this Agreement:
(i) an "Asset Acquisition" shall be deemed to
have occurred if any Person, a group or groups of related or
unrelated Persons acquires more than fifty-one percent (51%)
in value of the oil and gas properties of the Company pursuant
to one or more transactions with the Company during the term
of this Agreement.
(ii) a "Change in Control" shall be deemed to have
occurred if (A) any Person is or becomes the Beneficial Owner
(as defined in Section 2(c) hereof) of securities of Presidio
representing thirty percent (30%) or more of the Voting Power
(as defined in Section 2(c) hereof), (B) there shall occur a
change in the composition of a majority of the POC Board
within any period of four (4) consecutive years which change
shall not have been approved by a majority of the POC Board as
constituted immediately prior to such change in composition,
(C) at any meeting of the shareholders of Presidio called for
the purpose of electing directors, more than one of the
persons nominated by the POC Board for election as directors
shall fail to be elected, or (D) the consummation of a merger,
consolidation, sale of substantially all assets or other
reorganization of Presidio, other than a reincorporation, in
which Presidio does not survive.
(iii) (A) "Person" shall have the meaning set forth
in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange
Act of 1934, as in effect on May 1, 1995, (B) "Beneficial
Owner" shall have the meaning set forth in Rules 13d-3 and
13d-5 under the Securities Exchange Act of 1934, as in effect
on May 1, 1995, and (C) "Voting Power" shall mean the voting
power of the outstanding securities of Presidio having the
right under ordinary circumstances to vote at an election of
the POC Board.
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3. RIGHTS AND BENEFITS UPON TERMINATION. In the event Executive
is entitled pursuant to Section 2 hereof to receive the rights and benefits
described in this Section 3 as a result of the termination of Executive's
employment ("Termination"), the Company agrees to provide or cause to be
provided to Executive the following rights and benefits:
(a) Cash Payment. Executive shall be entitled to receive
not later than five (5) days following Termination a lump-sum payment
in cash in an amount equal to twenty (20) times one-twelfth (1/12) of
the Executive's Earnings (as such term is defined below). For
example, if such lump-sum payment were to be payable as of the date of
this Agreement, this lump-sum payment would be $637,500, and would be
calculated on the basis of multiplying 20 times 1/12 of $382,500,
which amount is equal to the sum of the Executive's base salary for
the twelve months period preceding July 31, 1995 ($360,000) and the
Company's contributions ($22,500) in respect of its 401 (K) Plan and
its Stock Ownership Plan for the Executive in respect of such twelve
month period. For purposes of this Agreement, "Earnings" shall mean
the total of (i) the base salary paid to Executive during the twelve
month period preceding Termination from the Company without giving
effect to any reduction thereof that may have been made without
Executive's consent; and (ii) the amount of Company contributions
consistent with the Company's past practices which would have been
made on Executive's behalf in respect of such base salary had he
continued to participate in the Company's 401(k) Plan and the
Company's Employee Stock Ownership Plan for one (1) full plan year.
(b) Insurance and Other Similar Benefits. To the extent
Executive is eligible thereunder, Executive shall continue to be
covered by the life insurance, medical and dental plans, and accident
and disability plans of the Company or any successor plan or program
in effect at Termination for employees in the same class or category
as Executive, subject to the terms of such plans and to Executive's
making any required contributions thereto, for a period of the
equivalent number of months of severance pay paid plus, following the
end of the last month of severance pay, all benefits required by the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") (or
until Executive's Normal Retirement Date, whichever is sooner). In
the event Executive is ineligible to continue to be so covered under
the terms of any such benefit plan or program, or, in the event
Executive is eligible but the benefits applicable to Executive are not
substantially equivalent to the benefits applicable to Executive
immediately prior to Termination, for a period of the equivalent
number of months of severance pay paid plus, following the end of the
last month of severance pay, all benefits required by COBRA (or until
Executive's Normal Retirement Date, whichever is sooner), the Company
shall provide to Executive through other sources such benefits,
including such additional benefits, as may be necessary to make the
benefits applicable to Executive substantially equivalent (on an
after-tax basis) to those in effect before Termination; provided,
however, that if during such period Executive should enter into the
employ of another company or firm which provides health benefits
(similar in scope to those currently provided by the Company) to its
executives in general, the Company's obligations to provide such
benefits shall cease. Nothing contained in this paragraph shall be
deemed to require or cause termination or restriction of
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any of Executive's coverages under any such benefit plan or program of
the Company or any of its subsidiaries or any successor plan or
program thereto to which Executive is entitled under the terms of such
plan or program, whether at the end of the aforementioned equivalent
number of months of severance pay paid or at any other time.
(c) Other Benefit Plans. The specific arrangements
referred to in this Section 3 are not intended to require or to
exclude Executive's continued participation in other benefit plans in
which Executive currently participates or which are available to
executive personnel generally in the class or category of Executive or
to preclude other compensation or benefits as may be authorized by the
Board from time to time.
(d) Duty to Mitigate. Executive's entitlement to
benefits hereunder shall not be governed by any duty to mitigate
Executive's damages by seeking further employment nor offset by any
compensation which Executive may receive from future employment.
4. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The Company
shall have no obligation to provide or cause to be provided to Executive the
rights and benefits described in Section 3 hereof if either of the following
events shall occur:
(a) the Company shall terminate Executive's employment
for (i) dishonesty, (ii) conviction of a felony, or (iii) the
continued failure by Executive to perform the material duties assigned
to Executive that are consistent with the position of Executive with
the Company and that would not permit Executive to terminate
employment pursuant to Section 2 after notice of such failure has been
given by the Company and a reasonable opportunity to cure is provided
to Executive (termination for "cause"); or
(b) Executive shall not, promptly after Termination and
upon receiving a written request to do so, resign as a director or
officer of Presidio, the Company and each subsidiary and affiliate of
Presidio or the Company of which Executive is then serving as a
director or officer.
5. CONFIDENTIALITY AND CONSULTANCY.
(a) Confidentiality. Executive agrees that at all times
following Termination, Executive will not, without the prior written
consent of the Company, disclose to any person, firm or corporation
any confidential information of Presidio, the Company or its
subsidiaries which is now known to Executive or which hereafter may
become known to Executive as a result of his employment or association
with the Company and which could be helpful to a competitor, unless
such disclosure is required under the terms of a valid and effective
subpoena or order issued by a court or governmental body; provided,
however, that the foregoing shall not apply to confidential
information which becomes publicly disseminated by means other than a
breach of this Agreement.
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(b) Consultation. Executive agrees that, for a period of
one (1) year following the date of Termination, Executive will use
reasonable efforts to be available to the Company for consultation
with the POC Board, the Board and senior officers of the Company;
provided, however, that Executive shall not be required to perform
consulting services (i) for more than three (3) days in any month or
(ii) for more than ten (10) hours in any month. It is expressly
agreed that Executive's consulting services will be required at such
time and such places as will result in the least inconvenience to
Executive, taking into consideration Executive's other business
commitments during such period which may obligate Executive to honor
such other commitments prior to Executive's rendering services
hereunder. It is further agreed that Executive's consulting services
shall be rendered by personal consultation at Executive's principal
residence or office, wherever maintained, or by correspondence through
mail, telephone or telegraph or other similar modes of communication
at times, including weekends and evenings, most convenient to
Executive. The Company and Executive agree that if, during such
period, Executive should enter into the full-time employ of another
company or firm, Executive shall not be required to consult at times
that will conflict with Executive's responsibilities with respect to
such employment.
(c) Remedies for Breach. It is recognized that damages
in the event of breach of this Section 5 by Executive would be
difficult, if not impossible, to ascertain, and it is therefore agreed
that the Company, in addition to and without limiting any other remedy
or right it may have, shall have the right to an injunction or other
equitable relief in any court of competent jurisdiction enjoining any
such breach, and Executive hereby waives any and all defenses
Executive may have on the ground of lack of jurisdiction or competence
of the court to grant such an injunction or other equitable relief.
The existence of this right shall not preclude the Company from
pursuing any other rights and remedies at law or in equity which the
Company may have.
6. REDUCTION IN PAYMENTS. Notwithstanding the provisions of
Section 3(a) hereof, in no event shall any payment to be made under Section
3(a) exceed $1.00 less than three times the Executive's "base amount" within
the meaning of Section 280 G of the Internal Revenue Code of 1986, as amended
(the "Code"). If any portion of the payments or benefits to be made available
to Executive pursuant to Section 3 would be considered an "excess parachute
payment" within the meaning of Section 280G of the Code, the amount of cash
otherwise payable to Executive pursuant to Section 3(a) hereof shall be reduced
to the extent (but only to the extent) necessary to cause no portion of the
payments or benefits made available to the Executive pursuant to Section 3
hereof to be considered an " excess parachute payment" within the meaning of
Section 280G of the Code. Deloitte & Touche LLP or such other accounting firm
that may be agreed upon by the Company and the Executive (the "Accounting
Firm") shall determine the Executive's "base amount" and the amount of any
"excess parachute payments" for purposes of this Section 6. All determinations
made by the Accounting Firm shall be made within 60 days of Termination and
shall be binding on the Company and the Executive. All fees and expenses of
the Accounting Firm shall be borne solely by the Company.
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7. TERM OF AGREEMENT. This Agreement shall remain in full force
and effect through December 31, 1999, and, beginning each January 1st
thereafter, this Agreement shall be automatically extended for additional one
(1) year periods, unless by September 30th of any year the Company gives notice
that this Agreement will not be so extended. Notwithstanding the foregoing,
the term of this Agreement is automatically extended for a minimum of
twenty-four (24) months following the Recapitalization, an Asset Acquisition or
a Change of Control.
8. MISCELLANEOUS.
(a) Assignment. No right, benefit or interest hereunder
shall be subject to assignment, anticipation, alienation, sale,
encumbrance, charge, pledge, hypothecation or set-off in respect of
any claim, debt or obligation, or to execution, attachment, levy or
similar process; provided, however, that Executive may assign any
right, benefit or interest hereunder if such assignment is permitted
under the terms of any plan or policy of insurance or annuity contract
governing such right, benefit or interest.
(b) Construction of Agreement. Except as expressly
provided herein, nothing in this Agreement shall be construed to amend
any provision of any plan or policy of the Company or Presidio. This
Agreement is not, and nothing herein shall be deemed to create, a
commitment of continued employment of Executive by the Company or
Presidio. The benefits provided under this Agreement shall be in
addition to any other compensation agreement or arrangement that the
Company or Presidio may have with Executive.
(c) Amendment. This Agreement may not be amended,
modified or cancelled except by written agreement of the parties.
(d) Waiver. No provision of this Agreement may be waived
except by a writing signed by the party to be bound thereby.
(e) Severability. In the event that any provision or
portion of this Agreement shall be determined to be invalid or
unenforceable for any reason, the remaining provisions of this
Agreement shall remain in full force and effect to the fullest extent
permitted by law.
(f) Successors.
(i) The Company will require any successor,
whether direct or indirect, by purchase, merger, consolidation
or otherwise, to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to
perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no
such succession had taken place.
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(ii) This Agreement shall inure to the benefit of,
and be enforceable by, Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legates. If the Executive dies
prior to the receipt of all benefits payable hereunder with
respect to events occurring prior to death, all such benefits
shall be paid pursuant to the last beneficiary designation
executed by the Executive and filed with the Company or
Presidio. If no beneficiary form has been filed with respect
to this Agreement, all such benefits shall be paid to the
Executive's estate.
(g) Taxes. Any payment or delivery required under this
Agreement shall be subject to all requirements of the law with regard
to withholding of taxes, filing, making of reports and the like, and
the Company shall use its best efforts to satisfy promptly all such
requirements.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO,
WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWS PRINCIPLES.
(i) Not Contract of Employment. Subject to the
provisions of Sections 1 (a) and (b), and Section 3, of this
Agreement, the entering into of this Agreement shall not be deemed to
be a contract of employment between the Company and the Executive, or
to be consideration for the employment of the Executive, and thus
nothing herein contained shall be deemed to give the Executive the
right to be retained in the employ of the Company or to restrict the
right of the Company to discharge the Executive at any time.
(j) Gender. Wherever in this instrument words are used
in the masculine or neuter gender, they shall be read and construed as
in the masculine, feminine or neuter gender wherever they would so
apply, and vice versa. Wherever words appear in the singular or
plural, they shall be read and construed as in the plural or singular,
respectively, wherever they would so apply.
(k) Headings. The headings of the Sections herein are
included solely for reference convenience, and shall not in any way
affect the meaning or interpretation of the Agreement.
(l) Entire Agreement. This Agreement sets forth the
entire agreement and understanding of the parties hereto with respect
to the matters covered hereby.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
PRESIDIO EXPLORATION, INC.
By: /s/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx
President
EXECUTIVE
By: /s/ Xxxxxx X. Xxxxx, Xx.
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Xxxxxx X. Xxxxx, Xx.
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PRESIDIO OIL COMPANY
SCHEDULE OF KEY EMPLOYEE SEVERANCE AGREEMENTS
Name/Number of Months
---------------------
Xxxxx, Xxxxxx X., Xx. (20)
Xxxxx, Xxxxxx X. (19)
Xxxxxxxxx, Xxxxxxx X. (12)
Xxxxx, Xxxxxxx X. (12)
Xxxxx, Xxxxxx X. (12)
XxXxxx, Xxxxx X. (12)
Xxxxxxxxx, Xxxxxxx X., Xx. (12)
Xxxxxxxx, Xxxxxx X., Xx. (12)
Xxxxxx, D. Xxxxxx (12)
Xxxxxxxx, Xxxx X. (12)
Xxxxxxxx, Xxxxxxx X. (12)
Xxxxxxxx, Xxxxxx (12)
Xxxx, Xxxxx X. (12)
Xxxxxxx, Xxxxxxxx X. (12)
Xxxxxx, Xxxx X. (12)
Xxxxxxxx, Xxxx X. (12)
