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EXHIBIT 10.3
FORM OF
ZILKHA ENERGY COMPANY
LONG-TERM UNIT VALUE PLAN III
LONG-TERM UNIT VALUE PLAN III between Zilkha Energy Company, a
Delaware corporation (hereinafter called the "Corporation") and
___________________ (hereinafter called the "Executive").
I. PURPOSE
The purpose of the Zilkha Energy Company Long-Term Unit Value Plan III
("Plan III") is to assist the Corporation in attracting, motivating and
rewarding individuals in high level management positions for their individual
effort and participation in the Corporation's continued growth.
Such long-term incentive compensation shall be based upon the issuance
and award of Performance Units (defined hereinafter), the value of which shall
be related to the appreciation in the value ("Net Worth") of Zilkha Energy
Company and certain assets of the ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Trust (the "SKZ Trust").
II. EFFECTIVE DATE/TERM OF PLAN III
The initial effective date of Plan III shall be January 1, 1995, and
shall commence for a period not to exceed three (3) years, thereby terminating
December 31, 1997 (the "Plan Term").
III. ADMINISTRATION
Plan III shall be administered by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("SKZ"). In the
event of his death or Disability (as defined below), then ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ("MZ")
shall assume SKZ's role as the administrator of Plan III, notwithstanding any
conflict of interest as a Participant under Plan III, but bearing in mind the
same in his administration of Plan III. In such an event, all references to
SKZ shall be deemed to be to MZ.
Subject to the provisions of Plan III, SKZ shall, in his sole
discretion, have the authority to interpret and to make determinations pursuant
to any provision(s) contained herein, including, but not limited to, the
following:
A. The employee(s) eligible to participate in Plan III
(collectively, the "Participants");
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B. The Performance Unit(s) to be granted to the Executive;
C. The date(s) on which such Performance Unit(s) shall be
granted;
D. The terms and conditions on the exercise of such Performance
Unit(s); and
E. the vesting date(s) of Performance Unit(s) issued hereunder.
Determination by SKZ shall be final and binding on all Participants
included in Plan III, including their respective heirs, successors, assigns,
personal representatives and beneficiaries with respect to all matters relating
to Plan III.
IV. ISSUANCE OF PERFORMANCE UNITS
Notwithstanding the foregoing, and subject to the provisions of
Article VII hereof, for the purpose of Plan III, the Net Worth shall be divided
into 100,000 equal units ("Performance Units"). The issuance of Performance
Units to all Participants included in Plan III may not exceed an aggregate of
ten percent (10%) of the Performance Units, or ten thousand (10,000)
Performance Units. In the event that other employees are added as Participants
in Plan III, Executive's share of the Performance Units will be diluted as
determined by SKZ.
Pursuant to the above and subject to the aggregate limitation of
10,000 Performance Units to be included in Plan III, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice
President and Chief Financial Officer, shall be entitled to receive twenty-one
and twenty-five one hundredths percent (21.25%) of the Performance Units
credited to the Plan during the Plan Term, or 2,125 Performance Units.
V. ACCOUNTING FOR PERFORMANCE UNITS
Performance Units granted to Executive shall be credited to a
Performance Unit Account (the "Account"), which shall be established and
maintained for Executive.
The Account shall constitute merely an accounting record and shall not
require a segregation of the Corporation's assets except as necessary under the
Rabbi Trust (as hereinafter defined). Each Performance Unit shall be valued by
SKZ pursuant to the terms of Article VII, as of the date that such Performance
Units are granted to Executive.
VI. VESTING OF PERFORMANCE UNITS AND FORFEITURE OF PERFORMANCE UNITS AT
RETIREMENT, DEATH, TERMINATION WITHOUT "CAUSE" OR TERMINATION FOR
"CAUSE"
Performance Units granted to Executive shall vest according to the
following schedule:
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Vesting Schedule Vested Percentage
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Termination of Employment Prior to September 15, 1998 0%
Termination of Employment After September 15, 1998 50%
But Prior to September 15, 1999
Termination of Employment After September 15, 1999 80%
But Prior to September 15, 2000
Termination of Employment After September 15, 2000 100%
Notwithstanding the above:
A. In the event of death or Disability (as hereinafter defined) prior to
the end of the Plan Term, Executive will be deemed to be fully vested in Plan
III for all completed years of Plan III and will be entitled to a pro rata
vesting of Performance Units for the year in which Executive's death or
Disability occurs through the date of Executive's death or Disability.
Notwithstanding the terms of Article VIII below and except for the terms of the
Rabbi Trust, payment for all such vested Performance Units from all completed
years of Plan III shall be made within sixty (60) days of Executive's death or
Disability and for any pro rata vested Performance Units attributable to the
partial year shall be made within sixty (60) days of the completion of the
third party evaluation of Net Worth (described in Article VII below).
B. In the event of death or Disability (as hereinafter defined) after the
end of the Plan term, Executive will be deemed to be fully vested in all of
Plan III. Notwithstanding the terms of Article VIII below and except for the
terms of the Rabbi Trust, payment for all such vested Performance Units from
all of Plan III shall be made within sixty (60) days of Executive's death or
Disability and if the completion of the third party evaluation of Net Worth has
not occurred after the end of the last year of Plan III, then within sixty (60)
days of its completion.
C. In the event of Normal Retirement (as hereinafter defined) of
Executive from the Corporation or termination of Executive's employment without
cause prior to the end of the Plan Term, Executive will be deemed to be fully
vested in Plan III for all completed years of Plan III and Executive will be
entitled to a pro rata vesting of Performance Units for the year in which
Executive's Normal Retirement or termination of Executive's employment without
cause occurs, through the date of same. All payments shall be made as set
forth in Article VIII.
D. In the event of Normal Retirement of Executive from the Corporation or
termination of Executive's employment without cause after the end of the Plan
Term, Executive will be deemed to be fully vested in all of Plan III. All
payments shall be made as set forth in Article VIII.
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If any pro rata vesting is necessary in any year of the Plan other
than the last year, a third party valuation will be made in order to calculate
the pro rata vesting. All pro rata vesting shall be computed in accordance
with the following example:
Should Executive be terminated without cause six (6) months (to be
determined by reference to the last full calendar month of employment by
Executive) after the start of period of vesting referenced in the vesting
Schedule in Article VI above, Executive will receive one hundred percent (100%)
of the Performance Units vested in prior periods that Executive has completed,
but any Performance Units vested in the year of termination, e.g. 6 months out
of 12 months, would be reduced by fifty percent (50%) of the results of that
particular annual period when Executive is no longer employed by Corporation.
For purposes of this Article VI:
A. "Termination of employment for cause" shall mean Executive's discharge
from the employ of the Corporation due to any of the following:
(i) Executive engages in acts of dishonesty or fraud in connection
with his services rendered to or on behalf of the Corporation;
(ii) Executive performs acts or willful malfeasance or gross
negligence in a matter of material importance to the Corporation; or
(iii) Executive engages in other serious misconduct of such a nature
that the continued employment of Executive may reasonably be expected to
adversely affect the business or properties of the Corporation;
B. "Disability" shall mean Executive's inability to function effectively
as an employee of the Corporation due to illness or injury.
C. "Normal Retirement" shall mean age 65 or that age at which Executive
is entitled to full Social Security benefits under the law in effect at this
time, whichever is earlier; provided, however, SKZ and Executive may agree that
Normal Retirement shall begin at an age earlier than the above with respect to
Executive without regard to any other Participants in Plan III or the setting
of any kind of precedent for any other Participant in Plan III.
If Executive is terminated for "cause", Executive automatically
forfeits all rights in and to Plan III. SKZ shall have sole and uncontrolled
discretion with respect to the application of this provision, and such exercise
of discretion shall be conclusive and binding upon Executive, his heirs,
successors, assigns, personal representatives and beneficiaries and all other
persons with respect to termination for "cause".
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VII. VALUATION OF PERFORMANCE UNITS
For purposes of determining the value of Performance Units under Plan
III, the Net Worth shall be deemed to be $301,064,092 at January 1, 1995.
Future valuations of the Net Worth after January 1, 1995 will not include the
value of the Corporation's interests in Basic Holdings Limited, a Bahamian
corporation, The Magazine Press, Inc., a New York corporation, Pet City
Holdings PLC, a company incorporated in England and Wales, and United Park City
Mines Company, a Delaware corporation, owned by the Corporation as of December
31, 1994.
A third party, chosen by SKZ, shall determine the Net Worth of the
Corporation and the appreciation in value of certain assets of the SKZ Trust
after the third year of Plan III. Unless Net Worth reflects a cumulative
increase in the Net Worth after giving effect to the following paragraphs,
under which Net Worth must reach a threshold level of Rate of Return on
Investment ("ROI") (as hereinafter defined), no awards of Performance Units
shall occur during any accrual period during the Plan Term. Such calculation
will be made by the Corporation.
Any capital contributions made by SKZ to the Corporation and the
proceeds received by the Corporation from sales of Stock (as defined below)
owned by the Corporation as of December 31, 1994 (after giving effect to
contributions to the Rabbi Trust), shall be deducted from the calculation of
Net Worth, and any capital distribution (with respect to either) made to SKZ by
the Corporation shall be added back to the calculation of Net Worth for
purposes of Plan III. The threshold level of ROI shall be equal to the average
cost of commercial bank capital or other capital acquired similarly paid by the
Corporation for each year during Plan Term. If the Corporation has no
commercial bank debt during the Plan Term, the published Prime Rate of ▇▇▇▇▇▇
Guaranty Bank of New York City, New York will be used for this purpose.
In the event of additional capital contributions by SKZ or the
Corporation's receipt of proceeds from sales of Stock owned by the Corporation
as of December 31, 1994 (after giving effect to contributions to the Rabbi
Trust) or distributions to SKZ, the ROI calculation shall be prorated and
adjusted to reflect any such additional capital exchange, and the Corporation's
cost of capital shall be imputed from the date of such additional capital
exchange to the valuation date.
The cumulative increase in Net Worth of the Corporation and the
resulting Performance Unit values shall be computed after all adjustments have
been performed in accordance with this Article VII.
"Net Worth" at the end of the Plan Term in accordance with this
Agreement will consist of two separate component features:
A. Net worth less the value of the Corporation's interests in
investments acquired during the Plan Term in the stock, equity or other
non-liquid forms of ownership in other companies, entities or business
ventures owned by the Corporation that are agreed upon by SKZ and all
Participants (the "Stock").
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B. The value of Stock acquired by the Corporation during the Plan
Term.
For purposes of Plan III, Stock shall consist of acquisitions of Stock
during the Plan Term as agreed upon by SKZ and all Participants included in
Plan III.
VIII. PAYMENT FOR PERFORMANCE UNITS
At the end of the Plan Term, subject to the provisions of Articles VI
and VII, Executive shall be entitled to receive payment for his vested
percentage of Performance Units. Such Performance Units shall be valued
pursuant to Article VII and distributed to Executive by the method of payment
outlined in this Article VIII.
Payment to Executive of vested percentage of Performance Units shall
be made according to the following schedule:
Time Percent of Award
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September 15, 1998 50%
September 15, 1999 30%
September 15, 2000 20%
If, at the end of the Plan Term, Executive is entitled to be paid
under the provisions of Plan III, the payment for his Performance Units shall
be in cash and/or Stock as follows:
A. If the cumulative increase in Net Worth is attributable to
cash only, then the payment shall be in cash;
B. If the cumulative increase in Net Worth is attributable to
Stock only, then the payment shall be in Stock; and
C. If the cumulative increase in Net Worth is attributable to
cash and Stock, then the payment shall be in cash and Stock
proportionately to the value of cash and Stock represented in the
cumulative increase in Net Worth.
Ten percent (10%) of the shares of Stock acquired by the Corporation
during the Plan Term shall be available for distribution for payment of the
value of vested Performance Units. If, at a payment date, the Corporation has
not sold its interest in any Stock included in Plan III, then the payment to
Executive set forth in this Article shall be in cash and Stock so that the
value of the payment equals one hundred percent (100%) of the Performance
Unit's value vested in Executive. If, at the end of the Plan Term, Executive
is entitled to receive an interest in Stock acquired by the Corporation during
the
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Plan Term, his share of Stock will become subject to the provisions of that
certain Trust Agreement, dated as of October 15, 1992, between the Corporation
and ▇▇▇▇▇▇▇ ▇. Peak, Trustee (the "Rabbi Trust") as the same may be amended
from time to time. Executive will not receive a distribution from the Rabbi
Trust until the Stock in the Rabbi Trust is liquidated pursuant to the terms
thereof. At liquidation of any of the Stock, Executive shall be entitled to a
cash payment equal to one hundred percent (100%) of the Performance Units in
such Executive's account held by the Rabbi Trust attributable to such Stock.
Neither the creation nor maintenance of the Rabbi Trust shall empower
Executive, his heirs, successors, assigns, personal representatives or
beneficiaries to receive an interest in or right to any Stock held therein
until the occurrence of the event above.
IX. WITHHOLDING
Upon payment of the Performance Units with respect to which the
Corporation is required to withhold taxes, the Corporation may, in its
discretion, withhold the appropriate amount from compensation payable to
Executive; or, require that other arrangements be made to satisfy the
Corporation's withholding requirement.
X. ALIENATION
Any Performance Units granted to Executive pursuant to Plan III shall
not be transferable by Executive other than upon his death by his will or by
the laws of descent and distribution of the State of Texas, which Executive
represents and warrants to be his legal state of residence, or upon his
Disability to his duly appointed guardian or representative. Specifically, the
Performance Units may not be assigned, transferred (except as aforesaid),
pledged or hypothecated in any way, whether by operation of law or otherwise,
and shall not be subject to execution, attachment or similar process. Except
as set forth above, any attempted assignment, transfer, pledge, hypothecation
or other disposition of the Performance Units contrary to the provisions
hereof, or the levy of any attachment or similar process under the Performance
Units that would otherwise effect a change in the ownership of the Performance
Units, shall terminate such Performance Units affected and this Plan III shall
be void as to Executive.
XI. MISCELLANEOUS PROVISIONS
Executive and no other person shall have any claim or right to be
granted a Performance Unit under Plan III. Neither Plan III nor any action
taken hereunder shall be construed as giving Executive any right to be retained
in the employ of the Corporation.
Plan III shall at all times be entirely unfunded and no provisions
shall at any time be made with respect to segregating assets of the Corporation
for payment of any benefits hereunder.
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SKZ may alter or amend Plan III from time to time with the approval of
Executive. No amendment to Plan III may alter, impair or reduce the number of
Performance Units vested hereunder without prior written consent of Executive.
In the event the Corporation is sold, all Performance Units shall be
deemed vested and right to receive payment therefore will accelerate and
payment made as soon as practicable following the sale.
XII. SUCCESSIVE PLANS
On the termination of Plan III, a new plan shall be instituted which
shall be named successively Plan IV, Plan V, etc., which will be upon the same
terms and conditions of this Plan III and will commence on the termination of
the previous plan. The Net Worth of the Corporation for any subsequent plans
shall be the Net Worth determined at the end of the term of the preceding plan.
The shares of any Stock made subject to the Rabbi Trust for any Plan shall be
excluded from the Net Worth determination of all subsequent Plans.
EXECUTED as of this 15th day of December, 1995, but effective on
January 1, 1995.
ZILKHA ENERGY COMPANY
By:
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
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Executive
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